Panel Rehearing Denied by Ninth Circuit
Barry Zalma
May 12, 2023
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Readers of Zalma on Insurance read a digest of the earlier version of this case at http://zalma.com/blog/?s=BERNAL. That decision was amended by the Ninth Circuit to state that “The district court shall enter judgment for MBIC.” Appellee’s petition for panel rehearing was otherwise denied. No further petitions for rehearing will be accepted.
In Massachusetts Bay Insurance Company v. Neuropathy Solutions, Inc., dba Superior Health Centers, and Rigoberto Bernal, an individual; et al., No. 22-55272, United States Court of Appeals, Ninth Circuit (May 5, 2023) the Ninth Circuit refused rehearing and reiterated its decision allowing the insurer to recover from its insured money paid under a reservation of rights.
Decision
In this diversity action under California law, Massachusetts Bay Insurance Company (MBIC) sought reimbursement of $2 million that it paid under a reservation of rights to settle litigation brought against its insured, Neuropathy Solutions, Inc. (Neuropathy).
To the extent that the underlying Bernal action falls within the coverage provisions of the insurance policy (i.e., to the extent Neuropathy’s liability arose out of an accidental “occurrence”), coverage is excluded under the policy’s “Professional Services” exclusion.
Based on California case law, the insurance policy’s text, and the operative complaint in the Bernal action, Neuropathy’s liability in Bernal fell within the “Professional Services” exclusion. Starting from the very first sentence of the Bernal complaint, it is evident that Neuropathy incurred liability as a result of the professional services it provided.
The “Professional Services” exclusion extends to wrongdoing in the supervision and monitoring of others in the provision of professional services, and Neuropathy incurred liability because of its provision of professional advertising and medical services, not inadequate record keeping or poor customer service. Finally, the complaint’s allegation that Neuropathy engaged in discriminatory “marketing techniques and high-pressure sales tactics” falls within the “Professional Services” exclusion for advertising services and health advice or instruction.
Neuropathy’s liability in the Bernal action was thus excluded from coverage, and MBIC is entitled to reimbursement of the $2 million it paid to settle that lawsuit. The district court shall enter judgment for MBIC.
ZALMA OPINION
The Ninth Circuit, for the second time, reiterated that an insurer that paid a settlement under a reservation of rights and established that there was no coverage for the loss alleged because of a clear and unambiguous exclusion, was entitled to reimbursement of the funds it spent to settle the law suit. The Insured, Neuropathy owes $2 million plus interest to MBIC.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
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Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
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Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://lnkd.in/gSwXaUhz; 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 Barry Zalma on YouTube- https://lnkd.in/g2hGv88; https://lnkd.in/gYqJ_JcC to the Insurance Claims Library – https://lnkd.in/gWVSBde.
Happy Law Day
ZIFL – Volume 30, Issue 9 – May 1, 2026
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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
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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
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
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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 ...
