Innocent Co-Insureds Have no Rights to Proceeds When Fraud Committed on Their Behalf
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Post 4808
Plaintiffs Timeless Bar, Inc. and Horseshoe Club, LLC sued their insurer Illinois Casualty Company, claiming the latter breached the parties’ insurance agreement. Specifically, the Plaintiffs allege that even though the fire that destroyed their property was intentionally set by an officer of the corporation and a member of the LLC, the insurer was obligated under the policy and Minnesota law to pay for the loss.
In Timeless Bar, Inc., doing business as The Press Bar and Parlor, and Horseshoe Club, LLC v. Illinois Casualty Company, No. 22-cv-1685 (KMM/LIB), United States District Court, D. Minnesota (May 21, 2024) the USDC, in a lengthy opinion resolved the issues of who was responsible for the fraud.
BACKGROUND
In April 2016, while still a married couple, Andrew Welsh and Jessie Welsh purchased a bar in St. Cloud, Minnesota. The couple opened the business as The Press Bar and Parlor and operated it through a corporation, Timeless Bar, Inc. (“Timeless Bar”). They also set up a real estate holding company, Horseshoe Club, LLC (“Horseshoe Club”), and arranged the building purchase through that company. On February 17, 2020 a fire that destroyed the bar. The Defendant and law enforcement later discovered that Andrew intentionally set the fire.
Illinois Casualty Company (“ICC”) insured The Horseshoe Club against the risk of loss by fire and covered as an additional named insured – “building owner” – for certain losses associated with the building itself under the Policy.
The Arson and Plaintiffs’ Insurance Claims
On February 17, 2020, Andrew Welsh burned down the bar. The following day, Andrew executed a Non-Waiver Agreement with ICC as the authorized representative of Timeless Bar as a named insured under the Policy. On February 26, 2020, Timeless Bar and the Horseshoe Club submitted the initial insurance claim to ICC via a “Proof of Loss” seeking approximately $1.4M in proceeds. The initial claim sought the policy limits for the building and other amounts. The claim states that the fire was of “unknown origin.” Further, the sworn proof of loss states: That said loss did not originate by any act, design or procurement on the part of your insured, or as affiant; nothing has been done by or with the privity or consent of your insured or this affiant, to violate the conditions of the policy, or render it void. Andrew and Jessie both signed that proof of loss on behalf of the businesses. There is no dispute that in the proof of loss, Andrew falsely stated that the fire was of unknown origin and that the loss did not originate by any act, design, or procurement of his own. Nor is there any dispute that his submission of the false claim as an affiant on behalf of the insured was an effort to defraud ICC.
DISCUSSION
The crux of the dispute in this case is whether Andrew Welsh’s conduct-burning down the bar and later lying about it in the insurance claims-allows ICC to deny coverage to Timeless Bar and Horseshoe Club. ICC argued that Andrew’s conduct is imputable to the Plaintiffs for purposes of all three exclusions at issue: his submission of fraudulent insurance claims precludes coverage for the Plaintiffs under the Misrepresentation and Dishonesty Exclusions, and his arson precludes coverage under the Intentional Acts Exclusion.
As explained below, the Court found that there is no genuine dispute that Andrew filed fraudulent claims on behalf of both Timeless Bar and Horseshoe Club. Because he did so, no reasonable jury could find that ICC breached the Policy by denying coverage under either the Misrepresentation Exclusion or the Dishonesty Exclusion.
Misrepresentation and Dishonesty Exclusions
ICC is entitled to judgment as a matter of law because the Policy provides no coverage. He filed a fraudulent claim when he signed the original Proof of Loss on February 26, 2020, and the May 15, 2020 amended Proof of Loss. No reasonable jury could conclude otherwise based on this record.
“Innocent Insureds”
Minn. Stat. § 65A.01, subd. 3, provided that the entire policy was void if, either before or after a loss, “the insured has willfully and with intent to defraud, concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof or the interests of the insured therein.” (emphasis in the original)
The Court found that, even viewed in the light most favorable to Plaintiffs, Andrew’s false statements in the proofs of loss submitted to ICC were dishonest acts and were made with intent to defraud ICC, and his actions are properly imputed to Timeless Bar and Horseshoe Club for purposes of applying the Misrepresentation and Dishonesty Exclusions.
Andrew’s actions are imputed to the Plaintiffs, the Misrepresentation Exclusion and the Dishonesty Exclusion preclude coverage as a matter of law, and ICC is entitled to summary judgment.
ZALMA OPINION
Arson-for-Profit is a serious crime. An arson fire is a specifically peril, the risk of loss of which, is insured by a fire policy. There is no “arson” exclusion in a fire insurance policy. The named insured may go to jail for the crime but that does not effect the insurance claim. Where Welsh went wrong was in signing under oath a false claim as a result of the fire. The fraud voided coverage and no one had the right to recover even his innocent wife and the innocent corporations who owned the building where the bar was located.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
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
Failure to Respond To Counterclaim is an Admission of All Allegations
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
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 ...
Professional Health Care Services Exclusion Effective
Post 5073
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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 ...
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...