Statute Limited to Acts of Insured Cannot be Used Against Insurer
Barry Zalma
Mar 21, 2024
Read the full article at https://lnkd.in/gdxBjKHh and see the full video at https://lnkd.in/gfssd7FU and at https://lnkd.in/gwFRXJGS and at https://zalma.com/blog plus more than 4750 posts.
Insured Seeks to Impose Damages on Insurer under the Fraud Act
Post 4759
Losses claimed under a policy of insurance issued to Plaintiff Volunteer Management & Development Company (“Volunteer”) by Defendant State Auto Property & Casualty Insurance Co. (“State Auto”) resulted in a suit where Volunteer claims breach of contract and insurance fraud against State Auto and filed a petition to compel appraisal and appoint umpire. State Auto moved to dismiss the claims under the Insurance Fraud Act, “agency,” and punitive damages.
In Volunteer Management & Development Company, Inc. v. State Auto Property & Casualty Insurance Co., No. 1:23-cv-00041, United States District Court, M.D. Tennessee, Columbia Division (March 7, 2024) resolved the claims.
BACKGROUND
To survive a motion to dismiss, a complaint must contain sufficient factual allegations, accepted as true, to state a claim for relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads facts that allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.
When a court reviews a motion to dismiss, the court construes the complaint in the light most favorable to the plaintiff, accepts its allegations as true, and draws all reasonable inferences in favor of the plaintiff. Thus, dismissal is appropriate only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.
ANALYSIS
Plaintiff asserted a claim for insurance fraud under Tenn. Code Ann. § 56-53-103(a)(1). Defendant seeks dismissal of that claim because the cited statute applies only to actions of “an insured.” Defendant, as the insurer, contends it cannot violate that statutory provision.
PLAINTIFF MAY NOT MISLEAD COURT BY IGNORING LIMITATION IN STATUTE
In response, Plaintiff quoted the same statute, but omits the operative phrase, “by or on behalf of an insured,” effectively changing the scope of that statute so that its claim is cognizable.
The Court began, as it must, with the plain language of the statute. In this narrow respect, Plaintiff’s Response is correct. Clear and unambiguous statutes will be enforced according to their clear terms. As Plaintiff also acknowledges, but fails to actually do in its response, that every word of the statute will be given effect. The statute only applies to insureds and cannot apply to an insurer.
With regard to an award of punitive damages, Defendant is correct that punitive damages are generally not available in a breach of contract case.
Defendant’s Motion to Dismiss was granted as to the claim for insurance fraud under Tenn. Code Ann. § 56-53-103(a)(1).
ZALMA OPINION
A plaintiff should never lie to a court. When the insured acknowledged that the statute only applies to fraud by insureds on appeal it tried to sneak into a fraud case against State Auto by not fully quoting the statute. It didn’t work. The fraud statute is limited to fraud by insureds and there is no way it could be applied against an insurer. This was not even a good try, it was an attempt to defraud the court.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://barryzalma.substack.com/publish/post/107007808
Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg.
Go to the Insurance Claims Library – https://lnkd.in/gwEYk
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://lnkd.in/gcZKhG6g
Go to X @bzalma; Go to Newsbreak.com https://lnkd.in/g8azKc34; Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gV9QJYH; Go to Barry Zalma on YouTube- https://lnkd.in/g2hGv88.
Go to the Insurance Claims Library – https://lnkd.in/gwEYk
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...
