IT DOESN’T PAY TO TRY TO CHEAT YOUR INSURANCE COMPANY
Barry Zalma
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Legitimate Claim Destroyed by Creating Fake Invoices
Sigismondi Foreign Car Specialists, Inc. appealed the U. S. District Court's summary judgment in favor of State Auto Property and Casualty Insurance Company on State Auto's declaratory judgment action and statutory insurance fraud claim.
In State Auto Property And Casualty Insurance Company v. Sigismondi Foreign Car Specialists, Inc., No. 21-2435, United States Court of Appeals, Third Circuit (November 18, 2022) the Third Circuit Court of Appeal dealt with the allegations of the insurer that Sigismondi attempted insurance fraud.
FACTS
State Auto issued a commercial insurance policy that provided coverage for Sigismondi's car repair shop. Sigismondi requested an insurance payment for water damage, but State Auto denied the claim, citing fraud.
The misrepresentations asserted as a defense by State Auto occurred during the claims-adjustment process. Sigismondi and State Auto retained adjusters to value the damaged inventory. The adjusters first created a joint inventory-a list of all the damaged items for which Sigismondi sought insurance proceeds. State Auto's adjuster, Chad Foster, then researched prices of the same or similar products to determine either a "replacement value" (if Sigismondi replaced the item) or an "actual cash value" (if not). Sigismondi's adjusters, or Sigismondi itself, likewise valued the items.
Sigismondi valued certain items higher than Foster estimated or could verify. Sigismondi presented what appeared to be original invoices from various vendors trying to convince State Auto to pay more than its adjuster calculated.
In truth, a Sigismondi employee had scanned at least some of the invoices into the computer and then used editing software to change the items and prices listed by the vendors. After Foster alerted State Auto to this issue, State Auto sent Sigismondi a reservation of rights letter, requesting further documentation and highlighting a policy provision stating the policy would be void if any insureds "intentionally conceal or misrepresent a material fact concerning . . . [a] claim under this policy."
State Auto subsequently sued after further investigation confirmed the alterations. It sought a declaratory judgment that the policy was void. It also requested damages for statutory insurance fraud. Sigismondi counterclaimed for statutory bad faith. At the summary judgment stage, Sigismondi initially claimed its misrepresentations were not material. The District Court determined the misrepresentations were material and granted summary judgment to State Auto on its declaratory judgment action and statutory insurance fraud claim.
ARGUMENTS ON APPEAL
Sigismondi contended that it did not knowingly or in bad faith provide false or misleading information by submitting the altered invoices, and that the invoices themselves were not in fact misleading. The company argued it submitted the invoices only to allow the adjusters to identify items and vendors-not prices. Sigismondi insists this should have been clear because the invoices were dated after the water-damage incident.
It was hard to imagine how the invoices-which were doctored to include prices that did not come from the vendor-were anything but knowingly made to include false or misleading information. A fabricated receipt created by a consumer and presented as an official document from a retailer, without the retailer's knowledge, constitutes false or misleading information.
Sigismondi also argued that any misrepresentations were not material because the invoices would not be the final word on value-Foster would conduct his own inquiry into prices based on the items and vendors. Sigismondi provided the altered invoices in response to a request for "invoice support" or other "documentation for the value claimed." Its argument that the invoices, to which it added prices, were relevant only for information about items and vendors is contradicted by undisputed evidence. Because this exchange of information was part of an effort to determine the value of the insured items, the falsified invoices that indicated prices charged by vendors were undoubtedly material.
CONCLUSIONS
Reviewing the record in the light most favorable to Sigismondi the Third Circuit concluded that the altered invoices were material.
The affirmance of the declaratory relief in favor of State Auto doomed Sigismondi's counterclaim for statutory bad faith. Because the policy was void, it did not cover Sigismondi's damaged inventory. It followed, therefore, that State Auto cannot be liable for bad faith denial of the claim.
The Judgment was affirmed.
ZALMA OPINION
Insurance fraud like that attempted by Sigismondi is fairly easy to prove. Since the invoices and receipts presented were not originals the insurer merely had to have its adjuster or SIU investigator visit the various vendors to either affirm the authenticity of the invoices or establish that they were prepared in an effort to defraud. State Auto did just that and proved to the court and the Third Circuit that fraud was attempted. Although Sigismondi had incurred a proper loss it recovered nothing because it tried to cheat and when caught argued it really didn’t intend to defraud. The Third Circuit looked through the specious arguments and ruled against Sigismondi and in favor of the insurer.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected].
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Interpleader Protects All Claimants Against Life Policy and the Insurer
Who’s on First to Get Life Insurance Proceeds
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Interpleader Protects All Claimants Against Life Policy and the Insurer
In Metropolitan Life Insurance Company v. Selena Sanchez, et al, No. 2:24-cv-03278-TLN-CSK, United States District Court, E.D. California (September 3, 2025) the USDC applied interpleader law.
Case Overview
This case involves an interpleader action brought by the Metropolitan Life Insurance Company (Plaintiff-in-Interpleader) against Selena Sanchez and other defendants (Defendants-in-Interpleader).
Key Points
Plaintiff-in-Interpleader’s Application:
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A Claim by Any Other Name is not a Claim
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It is Imperative that Insured Report Potential Claim to Insurers
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In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
A Claim by Any Other Name is not a Claim
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It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive and became a consultant and expert witness for lawyers representing insurers and lawyers ...
APPRAISAL AWARD SETS AMOUNT OF DAMAGES RECOVERED FROM INSURER
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It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
Evidence Required to Prove Breach of Contract
Read the full article at https://www.linkedin.com/pulse/evidence-required-prove-breach-contract-barry-zalma-esq-cfe-rfelc, see the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.
It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
In Debbie Beaty and Jonathan Hayes v. Homeowners Of America Insurance Company, No. 01-23-00844-CV, Court of Appeals of Texas, First District (August 26, 2025) Debbie Beaty and Jonathan Hayes filed a claim under their homeowner’s insurance policy with Homeowners of ...