ZIFL - Volume 27, Issue 3
Barry Zalma
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The Source for Every Insurance Fraud Professional
In this, the third issue of the 27th year of publication ZIFL provides the following articles:
Soft Fraud
No Less a Fraud than so-called Hard Fraud
For reasons known only to governmental entities some insist on categorizing fraud into both “hard” and “soft” fraud. By so doing the governmental entities that so categorize fraud make one type of fraud less heinous and less criminal than the other. Fraud, whether categorized “soft” or “hard,” are criminal and if a person is tried and convicted of fraud both can be sent to jail for the same amount of time.
The types of insurance fraud some call “soft fraud” is found in every type of claim presented to an insurer.
Soft fraud, which is sometimes called opportunity fraud, occurs when a policyholder or claimant exaggerates a legitimate claim.... According to the Insurance Research Council, soft fraud “Is far more frequent than hard fraud… Because of the frequency of soft fraud, it adds more to overall claims cost than hard fraud does.” [Article by the Idaho Fraud Bureau at http://www.idfbins.com/tips-safe-living/soft-fraud; report of the Coalition Against Insurance Fraud at http://www.insurancefraud.org/learn_about_fraud.htm; article by Arkansas Department of Insurance at http://www.fightfraud.arkansas.gov
Soft fraud occurs when a policyholder exaggerates an otherwise legitimate claim or when an individual applies for an insurance policy and lies about certain conditions or circumstances to lower the policy’s premium.
The reality is that Soft Fraud is a criminal violation and a breach of a material condition of the policy. It contributes to increased insurance costs. As a result of increased insurance costs, millions of Americans cannot afford sufficient insurance coverage. One cannot commit an innocent or partial fraud any more than one can be partially dead. Once fraud is committed the contract of insurance is violated and voidable and the crime has been committed.
Read the full ZIFL AT http://zalma.com/.../uploads/2023/01/ZIFL-02-01-2023.pdfost people do not understand how hard it is to set fire to a house that will destroy the entire dwelling and its contents. Most residences simply do not have sufficient combustibles in the right place to allow for a sustained fire. Many homes, especially the more modern ones, have fail-safe devices everywhere that make accidental fires a thing of the past.
An Insured decided that the only possible means of escaping his mortgage was to burn down his house. Being a rather imaginative fellow, he decided to also make the fire look like an accident.
On leaving his house in the afternoon, he opened the gas jets on the stove, blew out the pilot on his gas dryer and water heater, and set the thermostat on his electronically ignited furnace to 80 degrees Fahrenheit. It was a hot Summer day, but he assumed it would eventually cool off a little, the thermostat would kick on the furnace, and the electronic starter would cause a gas explosion that would destroy the entire house. What he did not count on was Southern California’s Santa Ana Winds that brought heat from the desert and kept the outside temperature in the hundreds all day and into the night. The Insured was shocked that a nosey neighbor with clear sinuses would smell the gas, turn it off at the meter, and save the house.
Of course, when the Insured returned home, he had to hide his disappointment that the house was still there. Undaunted, however, he tried again the next week. This time he took no chances. He went to the hardware store and bought a case of Coleman cooking fuel and spread it throughout the house. Then he tore up a book of paper matches so that there was no cover, only matches. He lit a cigarette and placed it low between the matches and left the house confident that when the cigarette burned down it would ignite the match heads and burn down the house. He was again sorely disappointed when he returned home to find the house still there.
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Imposter not a Customer
Theft by Fraud, Trick or Device Not Covered\
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.
Good News from The Coalition Against Insurance Fraud
A chiro lied he had a medical license while inflating patients’ medical conditions for his cut of more than $3.5M of federal and private disability payments. Despite lacking a license, Thomas G. Hobbs bought and dispensed prescription meds, gave injections and dispensed meds intravenously to patients. The Arnold, Mo. man also fraudulently helped patients receive disability money. He charged patients between $2K-$8.6K to prepare disability forms. He also coached them to lie that they couldn’t perform basic activities such as lifting, standing, walking, sitting, remembering and taking care of personal needs. And Hobbs used a fake medical license number so his medical opinions had more weight than federal and private insurance medical experts. He even forged medical reports to give the appearance he had a long history with the patients. Many of his claimed services were phantom, unneeded or provided by unqualified persons to make it seem patients were disabled. The procedures included MRIs, CT scans and heart tests. Hobbs also submitted numerous claims for office visits when he hadn’t provided the required face-to-face patient evaluation and case management. Hobbs pled federally guilty and will be sentenced April 19.
Plus many more reports.
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Heath Insurance Fraud Convictions
Donald Booker of Charlotte, North Carolina, was convicted of conspiracy to commit health care fraud, multiple violations of the Anti-Kickback Statute, money laundering conspiracy, and money laundering.
Booker owned United Diagnostics Laboratories (UDL), a urine toxicology testing laboratory, and United Youth Care Services (UYCS), a mental health and substance abuse treatment services provider. Booker’s co-defendant, Delores Jordan, pleaded guilty to health care fraud conspiracy and money laundering conspiracy in December and owned Legacy Housing, a housing provider.
From January 2016 to August 2019, Booker and his co-conspirators defrauded the North Carolina Medicaid program of more than $11 million. Jordan would recruit people who were Medicaid eligible for housing and other programs and services. They would require beneficiaries to submit urine samples when they enrolled in the program, and they provided the samples to Booker and UDL for testing that wasn’t medically necessary. Booker paid illegal kickbacks to Jordan and others in exchange for these urine samples. Booker and Jordan also laundered the proceeds to conceal and disguise the nature and source of the illegal kickback payments. Plus dozens more reports of convictions.
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Eleventh Circuit Allows Retrial of Esformes
In United States Of America v. Philip Esformes, Nos. 19-13838, 19-14874, United States Court of Appeals, Eleventh Circuit (January 6, 2023) Philip Esformes challenged his convictions of healthcare fraud, illegal kickbacks, and money laundering and the related restitution award and forfeiture judgment. After Esformes filed this appeal, President Trump commuted his sentence of imprisonment and rendered any challenge to it moot.
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Other Insurance Fraud Convictions
Mark Biegler, a Helena, Montana-based commercial insurance broker has been sentenced to 90 days in jail, given a 10-year suspended prison sentence and ordered to pay $150,000 in restitution for insurance fraud.
Biegler pled guilty to six felony charges of insurance fraud and theft, according to the state’s Commissioner of Securities and Insurance, Office of the Montana State Auditor.
Mr. Biegler previously worked at Hub International Ltd., but he was terminated by Hub in 2017, a spokeswoman for the brokerage said in an email. The charges relate Premier Insurance LLC, an agency he established, she said.
According to court papers filed in state court in 2020, between September 2018 and September 2020, Mr. Biegler, who held insurance and surplus lines insurance producer licenses, was charged with criminal insurance fraud and theft of insurance premium against five businesses.
He was also charged with fraud for filing false written statements to State Farm Mutual Insurance Co. in May 2017.
The specifics of the fraud allegations vary, but in one case he was charged with having a business pay a premium directly to him instead of to an insurer and altering a declaration by falsely stating the business had insurance coverage.
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Motion About McClenny, Moseley & Associates
Lawyer Matthew D. Monson of The Monson Law Firm, LLC filed the following motion, a complete copy of which is available at https://www.claimsjournal.com/.../Franatovich-Filing40.pdf, on behalf of Allied Trust Insurance Company. I have excerpted from the Motion to bring out its essence.
Read the full ZIFL AT http://zalma.com/.../uploads/2023/01/ZIFL-02-01-2023.pdf
212 Years in Prison for Fraud
Insurance Fraud by Killing Children & Attempted Killing of Wife Affirmed
United States Of America v. Ali F. Elmezayen, AKA Ali F. Elmeza Yen, AKA Ali Fathelelah Elmezayen, AKA Ali Fathellah Elmezayen, AKA Ali Sayed, AKA Ali Fathelehah Sayed, No. 21-50057, United States Court of Appeals, Ninth Circuit (January 19, 2023) Ali Elmezayen appealed the district court’s judgment entered upon a jury verdict that found him guilty of four counts of mail fraud under 18 U.S.C. § 1341, four counts of wire fraud under 18 U.S.C. § 1343, aggravated identity theft under 18 U.S.C. § 1028A(a)(1), and four counts of money laundering under 18 U.S.C. § 1957.
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(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected]
Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com.
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Barry Zalma, Esq., CFE is available at http://www.zalma.com and [email protected]
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Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105
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Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.
In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
BACKGROUND
Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....
Failure to Name a Party as an Additional Insured Defeats Claim
Post 5104
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Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy
In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.
The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS
Parties Involved:
CAEA is insured by Associated Industries Insurance Company, Inc. ...
Exclusion Establishes that There is No Duty to Defend Off Site Injuries
Post 5103
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Attack by Vicious Dog Excluded
In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)
Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that
1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.
Presently before the Court are two ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
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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 ...
Professional Health Care Services Exclusion Effective
Post 5073
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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 ...
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...
