Zalma’s Insurance Fraud Letter – April 15, 2023
ZIFL – Volume 27, Issue 8
Barry Zalma
Apr 14, 2023
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Read the full article at https://lnkd.in/gsRNYMwf and see the full video at https://lnkd.in/gDas9K4s and at https://lnkd.in/ghVbnk-9 and at https://zalma.com/blog plus more than 4450 posts.
Obesity, Diabetes and Covid Not Basis For Compassionate Release
The US Congress, feeling sorry for federal prisoners, amended the law to create The First Step Act to allow a District Court to shorten a sentence when there exist extraordinary and compelling reasons to release the Prisoner. In United States Of America v. Earl Lee Planck, Jr., Criminal No. 5:20-CR-24-KKC-MAS-1, United States District Court, E.D. Kentucky, Central Division, Lexington (March 1, 2023) Earl Lee Planck, Jr moved the USDC for compassionate release under the statute.
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The Special Investigative Unit Investigator
Insurance companies now retain the services—either by employing them directly or by use of independent contractors—of investigators whose expertise relates exclusively to insurance claims and suspected insurance fraud. The experienced claims investigator is usually a part of, or vendor to, a Special Investigative Unit (SIU) set up to protect the insurer and mandated by most states as a means to reduce the amount of fraud perpetrated against insurers.
The fact that an insured is contacted by a claim investigator does not, however, mean that the insured is suspected of committing fraud. By virtue of his or her training and experience, the claim investigator is more skilled than the claim adjuster in discerning facts and evidence that can be used in a court of law if a fraud has been attempted.
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More McClenny Moseley & Associates Issues
This is ZIFL’s fourth installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana.
Chutzpah Defined
“Chutzpah” is a Yiddish term that has found its way into the English language. It is defined as “unmitigated gall” and is usually explained as a person convicted of murdering his parents who pleaded with the judge for mercy because he is an orphan. The latest actions by McClenny Moseley & Associates are a better definition of the term.
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Free Insurance Videos
Barry Zalma, Esq., CFE has published five days a week videos on insurance claims, insurance claims law, insurance fraud and insurance coverage matters at https://www.rumble.com/zalma.https://rumble.com/c/c-262921.
He 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 he practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 55 years in the insurance business. He is available at http://www.zalma.com and [email protected].
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The Problem with Different Degrees of Crime
Fraud by any Other Name is Still Fraud
Pursuant to the New Jersey Code of Criminal Justice (Code), one can be charged with the offense of insurance fraud for knowingly making a false or misleading statement of material fact in connection with an insurance claim. That third-degree offense may be elevated to the second degree by aggregating five “acts” of insurance fraud, the total value of which exceeds $1,000.
In State Of New Jersey v. Randi Fleischman, A-4 September Term 2006, Supreme Court of New Jersey (March 26, 2007) the Supreme Court of New Jersey was provided with its first opportunity to construe N.J.S.A. 2C:21-4.6’s penalizing of a false “statement” as an “act of insurance fraud” that can be accumulated to elevate insurance fraud to a second-degree offense.
The State indicted defendant Randi Fleischman for second-degree insurance fraud. The factual underpinnings for the charge were based on various items of false information contained in defendant’s statements to the police and to her automobile insurer in connection with a stolen car claim.
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Good News From the Coalition Against Insurance Fraud
A home healthcare company has paid $9M for allegedly submitting false claims. United Energy Workers Healthcare, Corp. and related entities settled a claim with several entities including Ohio, to the U.S. Department of Energy employees and its contractors. An investigation alleged: between January 2013 and March 2021, defendants submitted claims for payment for in-home healthcare services that were never provided or were medically unnecessary, in violation of the False Claims Act. Various of the violations included: billing for case management services not actually provided, instructing caregivers to charge for more time than actually spent with patients, providing and billing for services to beneficiaries that were not covered, and providing services without possessing required licenses. Plus many more convictions for fraud.
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OBLIGATION OF LAWYERS WHEN A CLIENT IS SUSPECTED OF FRAUDULENT CONDUCT
A lawyer who suspects that his or her client is lying about the facts to cover up fraudulent or criminal activity the lawyer is placed in a professional dilemma. The client may be faking injuries after an automobile accident or fabricating the cause of a fire at his or her home. Or the client provides the lawyer with intentionally vague information about their finances to avoid reporting the information to the IRS or other governmental agency.
In July 2021, the Colorado Bar Association Ethics Committee adopted Formal Opinion 142, addressing a lawyer’s duty to inquire when the lawyer knows a client is seeking advice on a transactional matter that may be criminal or fraudulent. Like the Model Rules of Professional Conduct counterpart, Colorado’s rule 1.2(d) provides that a lawyer “shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent . . .”
The opinion specifically discusses what happens when the lawyer suspects but does not actually know, that the client may be using the legal services to engage in criminal or fraudulent conduct. While the term “know” denotes “actual knowledge of the fact in question” under Colorado Rule 1.0(f), the Committee interpreted the actual knowledge standard to include “willful blindness.”
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Health Insurance Fraud Convictions
Santa Rosa Doctor Sentenced To 2.5 Years in Prison for Unlawfully Prescribing Controlled Substances
Thomas Keller, formerly a pain management doctor in Santa Rosa, was sentenced to 30 months in prison for distributing Schedule II and IV controlled substances outside the scope of his professional practice and without a legitimate medical need. The sentence was handed down by the Hon. Vince Chhabria, United States District Judge, after a jury found Keller was guilty of the crimes at trial in November 2022. Read about this and dozens more convictions.
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Other Insurance Fraud Convictions
Richfield Woman Sentenced To 10 Years Behind Bars for Insurance Fraud
The Department Of Insurance Became Aware That She Was Again Misappropriating Funds With The New Agency.
Charlotte Sheppard of Richfield, Idaho is headed to prison after committing insurance fraud. Sheppard allegedly stole her clients’ insurance premium to pay her personal and business bills and obligations.
She was sentenced to the Idaho Department of Corrections for 10 years, with five years fixed and five years indeterminate.
Sheppard was first prosecuted and found guilty in Blaine County for grand theft in 2020. But while awaiting criminal sentencing and administrative penalties, she took over the management of a second agency in Lincoln County. The Department of Insurance became aware that she was again misappropriating funds with the new agency. The DOI issued a cease-and-desist order on March 18, 2020, and revoked her license two days later. Also many more reports of convictions.
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Barry Zalma
Over the last 55 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455; Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; I publish daily articles 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 https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ to consider more than 50 volumes written by Barry Zalma on insurance and insurance claims handling.
Read the full issue of ZIFL-04-15-2023 Read the full issue of ZIFL https://lnkd.in/g7Q9iuVd
Subscribe to Zalma on Insurance at locals.com
Go to the Insurance Claims Library – https://lnkd.in/gKCTg53
Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gV9QJYH; Go to the Insurance Claims Library – https://lnkd.in/gFKp5WhW consider more than 50 volumes written by Barry Zalma on insurance and insurance claims handling.
Read the full issue of Zalma's Insurance Fraud Letter at https://lnkd.in/g7Q9iuVd
The Largest Residential Burglary of All Time
Post 5407
Fraud & the Fear of Bad Faith Suits
Posted on July 22, 2026 by Barry Zalma
See the full video at https://lnkd.in/gWQQEySW and at https://lnkd.in/gyhdK6wv
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help 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.
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help 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.
After ...
Chutzpah is not Enough
Post 5397
Posted on July 20, 2026 by Barry Zalma
See the video and at https://lnkd.in/gNUs2XzT and at https://lnkd.in/g2MawyzX
Magistrate Issues a Search Warrant if there is a Fair Probability that Contraband or Evidence of a Crime will be Found in a Particular Place.
In United States Of America v. Frank Suess, et al., CRIMINAL No. 3:24-308, United States District Court, M.D. Pennsylvania (July 16, 2026) a federal grand jury indicted Frank Suess, Melissa Driscoll, and others in a 55-count health care fraud and anti-kickback prosecution arising from an alleged scheme involving medically unnecessary prescription “foot baths.”
As part of the investigation, the FBI obtained an August 19, 2022 warrant to search Driscoll’s Sterling Pharmacy Yahoo email account for emails from January 1, 2018 through December 31, 2020. Driscoll moved to suppress the resulting evidence, arguing that the warrant lacked probable cause, was overbroad, and rested on material misstatements and omissions.
LAW:
The ...
Fraud Shouldn’t Pay
Post 5396
See the video and at https://rumble.com/v7ctgmq-the-great-jewel-theft.html at https://youtu.be/aRbQ2sJfGwA
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help 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.
The Insured purchased, for the first time in his life, a policy of Personal Articles Floater Insurance (PAF) scheduling $125,000 worth of ladies jewelry. He advised the insurer that the jewelry was always kept in a class E safe at his residence. He also told the insurer that he was employed full time as the owner of a gasoline service station and that he had never been canceled or suffered a previous loss.
One month after the policy was ...
Day Care Owner Loses Subsidies Because She Criticized State
Post 5421
Posted on August 11, 2026 by Barry Zalma
First Amendment Right Will be Allowed to Go to Trial
In Betsey J. Grant v. Maine State Department Of Heath And Human Services, No. 1:25-cv-00490-JAW, United States District Court, D. Maine (August 6, 2026), Betsey J. Grant, a licensed childcare provider and operator of Tiny Tikes Daycare in Trenton, Maine, sued Maine DHHS and several employees after she publicly criticized DHHS before Maine’s Government Oversight Committee and alleged that officials retaliated against her.
She claimed DHHS imposed and extended a conditional license, published stigmatizing information, interfered with subsidies and program funding, removed her from a food program, rescinded an expansion grant, and used biased or falsified evidence in licensing proceedings. Following the March 10, 2023, GOC testimony, Ms. Grant alleges that foster children's subsidies (approximately $30,000) were withheld; she was removed from the ...
Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units. After an underlying personal injury action was filed, Union Mutual determined that the property actually contained three apartment units and rescinded the policies on the ground that the defendants had made a material misrepresentation in the applications.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true ...
Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true facts been disclosed. To establish materiality as a matter of law, the insurer must submit documentation of its underwriting practices, such as manuals, guidelines, bulletins, or rules addressing similar risks.
DISCUSSION/ANALYSIS:
As a result, the...
