Lie to Your Insurer and You Will Lose
Barry Zalma
Jul 19, 2023
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Plaintiffs Richard Converse and Stephanie Converse own the property. Defendant State Farm Fire and Casualty Company (“State Farm”) insured the property at the relevant time. After a fire on December 8, 2019, Plaintiffs sought coverage under the insurance policy. Plaintiffs brought this action when Defendant denied coverage for much of the claim. In Richard Converse, and Stephanie Converse v. State Farm Fire And Casualty Company, No. 5:21-CV-457 (TJM/ATB), United States District Court, N.D. New York (July 12, 2023) the USDC was asked to rule on cross-motions for summary judgment.
BACKGROUND
State Farm insured the Converses against the risk of loss to a rental property under a homeowners policy.
The parties agree that Plaintiff Stephanie Converse sent a letter to Joseph Pelton on or about November 8, 2019 that stated: “Joe, … Having issues with my house again. Need help this time! I will pay $5,000 cash when I get the insurance. The back door will be unlocked and open to the basement. That’s where the access to utilities are. Make look like electrical. I will come up after it happens so I will meet up with you. … It’s a mint green house with garage. Love you, See you soon. Stephanie.”
While Plaintiffs admit that Stephanie Converse mailed the letter, they “deny any implication or allegation that Stephanie Converse committed insurance fraud, paid anyone to commit arson on the property, or was in any way involved in the fire that caused the loss on the property.”
Stephanie Converse filed a claim on December 8, 2019 for the loss caused by the fire. State Farm mailed Stephanie Converse a blank Sworn Statement in Proof of Loss and a return envelope. The cover letter stated that the Sworn Statement should be returned by February 17, 2020. State Farm Counsel Roy Mura reminded Stephanie Converse that she had to return the sworn statement. That letter warned that “a failure . . . to timely complete and return the Sworn Statement in Proof of Loss form for the reported loss may result in loss [of] your rights under the . . . policy.”
Stephanie Converse appeared for an examination under oath (“EUO”) in connection with her insurance claim on March 13, 2020. Stephanie Converse affirmed during the examination that “everything as far as you can recall [was] truthful about what you told Mr. Loarca[.]” Converse further testified that she could not “recall asking anybody to burn . . . I mean I can’t remember. I don’t know if I did, or I didn’t.” She further testified that she could not “recall” whether she had offered “to pay anybody money to” burn the property down.
Defendant denied Stephanie Converse’s claim on October 7, 2020 and Plaintiffs sued.
ANALYSIS
Defendant first argues that State Farm has no obligation to provide coverage under the policy because Stephanie Converse breached the insurance contract by making material misrepresentations in reference to her claim. The materiality requirement is satisfied if the false statement concerns a subject relevant and germane to the insurer’s investigation as it was then proceeding.
Plaintiffs deny that Stephanie Converse willfully made any material misrepresentations. Plaintiffs do not seriously dispute that Stephanie Converse made misrepresentations to State Farm during the course of the investigation. They could not. The undisputed evidence before the Court indicated, Stephanie Converse told an investigator that she had made no such request.
Defendant does not argue that Plaintiff dissembled about the cause of the fire at the home, committed arson herself, or paid Joseph Pelton to set the home on fire. The Court found that as a matter of law Plaintiff made these misrepresentations willfully. Taken as a whole, the Court concluded that Plaintiff Stephanie Converse’s statements represented a continuing attempt to conceal from State Farm that she had contacted Pelton and offered him money to burn down the insured property. The Court concluded that a reasonable juror could not find that such contradictory statements were the result of mistake or misunderstanding, but that the differences between what Plaintiff told various investigators were intentional.
“The purpose” of procedures like examinations under oath and other investigative measures is to enable the insurance company to acquire knowledge or information that may aid it in its further investigation or that may otherwise be significant to the company in determining its liability under the policy and the position it should take with respect to the claim. A reasonable juror could only find that her misleading conduct was material.
Stephanie Converse made material misrepresentations to insurance investigators as a matter of law and breached the insurance contract and Defendant is entitled to summary judgment in this respect.
Failure to Cooperate
Testifying falsely can also breach the condition of cooperation. Stephanie Converse admitted to Lee County Sheriff’s Office investigators that she had written the letter she had denied to State Farm. Converse thus made misrepresentations about facts material to State Farm’s investigation.
Given the inconsistencies in Stephanie Converse’s stories to various parties and her clear misrepresentation to State Farm about her knowledge of the letter to Pelton, no reasonable juror could find that Converse’s misrepresentations were not willful.
Proof of Loss
When an insurer gives its insured written notice of its desire that proof of loss under a policy of fire insurance be furnished and provides a suitable form for such proof, failure of the insured to file proof of loss within 60 days after receipt of such notice, or within any longer period specified in the notice, is an absolute defense to an action on the policy.
There is no dispute that the Plaintiff did not return a sworn statement of proof of loss until March 12, 2020, well after the date specified by State Farm in correspondence to Stephanie Converse. Defendant has an absolute defense to Plaintiffs’ claims.
Defendant’s motion for summary judgment, was granted and Plaintiffs’ motion for summary judgment was denied.
ZALMA OPINION
An insured who seeks to hire a person to set fire to her house for a fee paid from insurance proceeds is offering to pay for a felonious act. If the person refuses to set the fire, has an alibi when an arson fire actually occurred, performed by a person unknown, and the insured lies about her offer to burn her house, the lie is sufficient to deny the claim in accordance with the terms and conditions of the policy. This case proved the old saw that “liars never prosper.”
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Notice of Claim Later than 60 Days After Expiration is Too Late
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Injury at Massage Causes Suit Against Therapist
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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 ...
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
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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 ...
No Coverage if Home Vacant for More Than 60 Days
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Post 5085
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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 ...
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
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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:
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Post 5062
Posted on April 30, 2025 by Barry Zalma
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