Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
May 02, 2024
Lies on Insurance Application Expensive

False Statement on Application Requires Rescission

Read the full article at https://lnkd.in/g-JBTWtm and see the full video at https://lnkd.in/gJmUHyK9 and at https://lnkd.in/ghZ5ZkCn and at https://zalma.com/blog plus more than 4750 posts.

Post 4792

Plaintiff Kimberli Orr obtained no-fault automobile insurance from defendant USA Underwriters and was involved in an automobile collision. Defendant denied plaintiff's claim for benefits because it discovered that plaintiff made material misrepresentations on her application for insurance. Defendant argued that it was entitled to rescind and void plaintiff's insurance policy, and the trial court granted defendant summary disposition

In Kimberli Orr v. USA Underwriters, No. 363452, Court of Appeals of Michigan (April 25, 2024) the Court of Appeals resolved the dispute.

THE APPLICATION

In plaintiff's application for no-fault insurance from defendant, plaintiff Misrepresented that all drivers who might operate her vehicle, including residents of her household, were listed on the application, and that her driver's license had been suspended or revoked anytime in the three-year period before she applied for the insurance. Defendant issued the policy and, unfortunately, on the next day, plaintiff was involved in an automobile collision.

THE INVESTIGATION

Plaintiff made a claim for insurance benefits for the damages she sustained in the collision. During defendant's investigation of plaintiff's claim, defendant discovered that plaintiff's grandmother lived with her, but she was not listed on the insurance application. Thus, defendant refused to pay plaintiff any benefits, voided plaintiff's policy, and sent her a check for the premiums she had paid. Plaintiff cashed the check essentially accepting the insurer’s rescission then changed her mind and sued defendant. During discovery, defendant learned that plaintiff's license had been suspended for three-days within the three years before plaintiff sought insurance from defendant.

THE MOTION FOR SUMMARY JUDGMENT

Defendant moved for summary disposition because, it argued, plaintiff made material misrepresentations on her insurance application that entitled defendant to rescind and void her insurance policy. In addition to evidence of the grandmother's residence, defendant also submitted plaintiff's driving record confirming that her license had been suspended for three-days within the three-year period before she applied for the insurance. Defendant further submitted affidavits from its underwriters that confirmed that it would not have issued plaintiff an insurance policy if it had known of the misrepresentations.

The trial court found that plaintiff made a reckless and material misrepresentation on her insurance application regarding her license, and that defendant relied upon that misrepresentation when it issued plaintiff the insurance policy. The trial court granted defendant summary disposition.

ANALYSIS

Summary disposition is appropriate if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law. The trial court focused on plaintiff's driving record, rather than the grandmother's residence, and the Court of Appeals did the same. As a result, an insurance policy is subject to common law contract defenses, including fraud, because the no-fault act does not prohibit an insurer from such defenses. Generally, fraud in the inducement to enter a contract renders the contract voidable at the option of the insurer. To establish fraudulent action, an insurer showed:

1. that plaintiff made a material representation;
2. that it was false;
3. that when plaintiff made it, she knew it was false, or made it recklessly,
4. without any knowledge of its truth and as a positive assertion;
5. that she made it with the intention that it should be acted on by defendant;
6. that defendant acted in reliance upon it; and
that defendant thereby suffered injury.

A misrepresentation is material when an insurer would not have issued a policy if the misrepresentation had been known to the insurer. Plaintiff argued that her misrepresentation with regard to her driving record was not made knowingly or recklessly because she did not receive notice of the license suspension. Plaintiff's argument is misplaced, however, because the law requires her to know her driving status, i.e., whether or not she is a licensed driver, because only a licensed driver may drive.

Rescission is justified without regard to the intentional nature of the misrepresentation, as long as it is relied upon by the insurer. In this case, defendant provided affidavits that demonstrated that it relied on plaintiff's misrepresentations because it would have offered plaintiff's policy at a different price, or not at all, if it had known that plaintiff's license had recently been suspended.

Rescission is an equitable remedy. An insurer is not precluded from availing itself of traditional legal and equitable remedies to avoid liability under an insurance policy on the ground of fraud in the application for insurance, even when the fraud was easily ascertainable and the claimant is a third party.

Fraud in the procurement of an insurance policy essentially taints the entire policy and all claims submitted under it, thereby invalidating the policy in a manner that suggests no policy ever existed.

ZALMA OPINION

Although an accident the day after a policy comes into effect is a classic red flag of fraud there was no need to prove the accident was less than honest since it was easily established the insured lied on her application for insurance. A material misrepresentation on an application even if unintentional is a basis for rescission in most states and specifically in Michigan. Whatever Ms. Orr would have collected from her no-fault insurer was lost because she lied.

(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/subscribe

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.

Subscribe to my substack at https://lnkd.in/gmmzUVBy

Go to X @bzalma; Go to the Insurance Claims Library – https://lnkd.in/gwEYk.

00:08:39
Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
21 hours ago
Allegations That Establish Breach of a Condition Defeats Suit

Notice of Claim Later than 60 Days After Expiration is Too Late

Post 5089

Injury at Massage Causes Suit Against Therapist

Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.

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 ...

00:08:31
June 02, 2025
Zalma’s Insurance Fraud Letter – June 1, 2025

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

See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.

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 ...

00:08:42
placeholder
May 30, 2025
Plain Language of Policy Enforced

No Coverage if Home Vacant for More Than 60 Days

Failure to Respond To Counterclaim is an Admission of All Allegations

Post 5085

See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.

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 ...

00:06:50
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 ...

May 15, 2025
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:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone 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."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

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...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals