Zalma’s Insurance Fraud Letter – April 15, 2023
ZIFL – Volume 27, Issue 8
Barry Zalma
Apr 14, 2023
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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
Happy Law Day
ZIFL – Volume 30, Issue 9 – May 1, 2026
Read the full article at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-may-1-2026-barry-zalma-esq-cfe-2tywc, see the video at at and at https://zalma.com/blog plus more than 5300 posts.
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
ZIFL – Volume 30, Issue 9 – May 1, 2026
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year and is written by Barry Zalma.
DOJ Creates National Fraud Enforcement Division
Will the Feds Take on Insurance Fraud? Possibly as Part of a National Anti-Fraud Effort
On April 7, 2026, the Acting Attorney General, Todd Blanche, issued a memorandum establishing the Department of Justice National Fraud Enforcement Division (NFED). The memo describes an ambitious, but perhaps redundant, vision for this ...
When Abalone Died As a Result of Multiple Causes The Efficient Proximate Cause Requires Payment
Post number 5345
Read the full article at https://www.linkedin.com/pulse/efficient-proximate-cause-doctrine-saves-claim-barry-zalma-esq-cfe-yndlc, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
In American Abalone Farms, LLC v. Star Insurance Company et al., H052643, California Court of Appeals, Sixth District (April 27, 2026) the Court of Appeals dealt with an insurance coverage issue that required application of the efficient proximate cause doctrine.
FACTS
American Abalone Farms, LLC ("American Abalone" ) operates an aquaculture farm in Santa Cruz County, California, raising abalone in tanks. In August 2020, the CZU Lightning Complex Fires led to a prolonged power outage and road closures near the farm. As a result, the farm’s water pumps failed, causing the death of most of the ...
Breach of a Specific Condition Precedent Is a Complete Defense
See the video at and at and at https://zalma.com/blog plus more than 5300 posts.
In United Services Automobile Association and State Farm Mutual Automobile Insurance Company v. Anthony Wenzell, 2026 CO 25 (Colo. Apr. 27, 2026) Anthony Wenzell was rear-ended in a car accident. He had a significant prior 2014 accident that required back surgery.
Wenzell claimed underinsured-motorist (UIM) benefits under three policies: (1) the tortfeasor’s liability policy, (2) his own primary UIM policy with State Farm, and (3) an excess UIM policy issued by USAA (under his brother’s policy, which contained an “other insurance” clause making USAA’s coverage excess over any collectible insurance).
After receiving the claims, both USAA and State Farm repeatedly requested that Wenzell execute comprehensive medical-release authorizations so they could obtain his full medical records and ...
It is Fraud to Make the Same Claim Twice
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Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
What Must be Done after Notice of a Claim is Received by the Insurer
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A first party property policy does not insure property: it insures a person, partnership, corporation or other entity against the risk of loss of the property. Before an insured can make a claim for indemnity under a policy of first party property insurance the insured must prove that there was damage to property the risk of loss of which was insured by the policy. The obligation imposed on the insured ...
