Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
January 23, 2023
Imposter Not a Customer

Theft by Fraud, Trick or Device Not Covered
Barry Zalma

Read the full article at https://lnkd.in/g_PhERmx and see the full video at https://lnkd.in/gwrrrmrM and at https://lnkd.in/gJrCfE9A and at https://zalma.com/blog plus more than 4400 posts.

In Civitas-IT, LLC v. Auto-Owners Insurance Company, No. 359731, Court of Appeals of Michigan (January 12, 2023) dealt with a claim for loss by fraud.

BASIC FACTS

Plaintiff, a company that provides information technology services, brought suit against defendant for breach of contract and bad-faith denial of a claim under MCL 500.2006 after defendant denied plaintiff’s insurance claim for computer equipment that was fraudulently procured by an imposter.

In July 2020, plaintiff received an inquiry from an individual purporting to be from the purchasing department for Macomb County. The individual stated that Macomb County was interested in purchasing new computer equipment and asked plaintiff to facilitate the transaction. Plaintiff did so only to later discover that Macomb County never ordered the equipment. Plaintiff submitted a claim for the loss to defendant for $165,195, which defendant denied.

In the trial court, defendant moved for summary disposition asserting that the insurance policy did not cover plaintiff’s loss because the policy explicitly excluded any loss that was the result of “[v]oluntary parting with any property by you to anyone else to whom you have entrusted the property if induced to do so by any fraudulent scheme, trick, device or false pretense.” Plaintiff argued that the loss was covered by the “accounts receivable” endorsement, which stated defendant would cover “[a]ll amounts your customers owe you that you cannot collect ….” In response, defendant asserted that the imposter that obtained the computer equipment was not a “customer” and, therefore, the endorsement did not apply.

The trial court concluded that the policy did not cover the loss because the account was not an “account receivable.” Thus, the court granted defendant’s motion for summary disposition. This appeal followed.

DISCUSSION

An insurance policy is read as a whole, and meaning should be attributed to all terms. Unambiguous insurance policy language must be enforced as written.

In the accounts receivable endorsement, defendant agreed to cover “[a]ll amounts your customers owe you that you cannot collect” and “[o]ther expenses you reasonably incur to reestablish your records which result from direct physical loss of or damage to your records of accounts receivable.” Thus, contrary to plaintiff’s argument, the term “accounts receivable” is more than just a label on the endorsement, it is a term itself in the language of the policy. For its part, the trial court defined the term as involving “a bill/statement, repeated billings followed by informal and friendly inquiries, and then stronger language and efforts.”

Under the trial court’s formulation, the account was an account receivable because plaintiff did record a statement for the transaction in its accounts, and made efforts to collect the money, at first with friendly inquiries and ultimately culminating in involving law enforcement and filing this lawsuit. Even though the account itself was an account receivable it was not an account receivable with a “customer.”

The question of whether the imposter was a “customer” under the policy required the Court of Appeal to address three questions.

If the insurance policy is not rendered ambiguous simply because the term “customer” is undefined.

If the relevant question is whether the policy, when read fairly and as a whole, permits differing interpretations as to whether coverage is afforded.

If the policy, in general, does not cover losses that are the result of fraud.

Specifically, in the exclusions for covered losses, the parties agreed that defendant would not be responsible to pay for losses that were the result of “[v]oluntary parting with any property by you or anyone else to whom you have entrusted the property if induced to do so by any fraudulent scheme, trick, device, or false pretense.” Plaintiff contends it negotiated around this provision by incorporating the accounts receivable endorsement, essentially arguing that because a customer can cause plaintiff to have a loss on an account by failing to pay, and because an imposter can be a customer, the imposter, by defrauding plaintiff, can cause the loss which must be covered by defendant. This is not a fair reading of the entire policy because an imposter is not a customer.

The term “customer” is defined in Black’s Law Dictionary (11th ed) as “[a] buyer or purchaser of goods or services; esp., the frequent or occasional patron of a business establishment.” The relevant terms in this definition are “buyer” and “purchaser,” both of which imply the exchange of money from the customer for goods or services from the business. In this case, not only was there not an exchange of money, but it is also clear that there never was an intent by the imposter to ever pay for the computer equipment. Thus, under the dictionary definition, the term “customer” does not encompass the imposter that defrauded plaintiff in this case.

Defendant issued the policy to plaintiff under which the parties agreed that defendant would not cover losses that resulted from any fraudulent scheme, trick, device, or false pretense.

ZALMA OPINION

Insurance is a contract designed to indemnify an insured against fortuitous losses. However, even if a fraudster obtains product by tricking the insured into believing they were selling to a City, it was defrauded and that person was not a “customer” because he or she never intended to purchase the computer equipment. The “fraudulent scheme, trick, device, or false pretense” exclusion is hoary with age and fits the facts of this claim perfectly.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://lnkd.in/gfFKUaTf.

Go to substack at https://lnkd.in/gEEnV7Dd Consider subscribing to my publications at substack at https://lnkd.in/gEEnV7Dd

Barry Zalma, Esq., CFE is available at http://www.zalma.com and [email protected]

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://lnkd.in/gWVSBde

00:08:37
Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
20 hours ago
Allegations That Establish Breach of a Condition Defeats Suit

Notice of Claim Later than 60 Days After Expiration is Too Late

Post 5089

Injury at Massage Causes Suit Against Therapist

Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.

Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.

In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.

FACTUAL BACKGROUND

Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...

00:08:31
June 02, 2025
Zalma’s Insurance Fraud Letter – June 1, 2025

ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma

Post 5087

See the full video at and at

Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf

Zalma’s Insurance Fraud Letter – June 1, 2025

See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.

ZIFL – Volume 29, Issue 11

The Source for the Insurance Fraud Professional

Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...

00:08:42
placeholder
May 30, 2025
Plain Language of Policy Enforced

No Coverage if Home Vacant for More Than 60 Days

Failure to Respond To Counterclaim is an Admission of All Allegations

Post 5085

See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.

In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.

BACKGROUND

On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.

Plaintiff filed suit ...

00:06:50
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals