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July 19, 2023
Denying Letter Seeking an Arson Fire is Frau

Lie to Your Insurer and You Will Lose

Barry Zalma
Jul 19, 2023

Read the full article at https://lnkd.in/gCiyqPV5 and see the full video at https://lnkd.in/gex-BuXW and at https://lnkd.in/gDmQTwN4 and at https://zalma.com/blog plus more than 4550 posts.

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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00:11:08
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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.

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Read the full article at https://lnkd.in/gbcTYSNa, see the full video at https://lnkd.in/ggmDyTnT and at https://lnkd.in/gZ-uZPh7, and at https://zalma.com/blog plus more than 5100 posts.

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.
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00:08:22
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Four Corners of Suit Allows Refusal to Defend

Exclusion Establishes that There is No Duty to Defend Off Site Injuries

Post 5103

Read the full article at https://lnkd.in/geje73Gh, see the full video at https://lnkd.in/gnQp4X-f and at https://lnkd.in/gPPrB47p, and at https://zalma.com/blog plus more than 5100 posts.

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.

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00:08:29
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

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
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 ...

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CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

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:

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Post 5062

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Immigrant Criminals Attempt to Profit From Insurance Fraud

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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...

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