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May 27, 2024
Arson-for-Profit Scheme Fails

Innocent Co-Insureds Have no Rights to Proceeds When Fraud Committed on Their Behalf

Read the full article at https://lnkd.in/gs8-VjBt, see the full video at https://lnkd.in/gSNZ_nQi and at https://lnkd.in/gEztt62b, and https://zalma.com/blog plus more than 4800 posts.

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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00:09:34
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14 hours ago
Ambiguity in Insurance Contract Resolved by Jury

Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105

See the full video at https://lnkd.in/gPa6Vpg8 and at https://lnkd.in/ghgiZNBN, and at https://zalma.com/blog plus more than 5100 posts.

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.

BACKGROUND

Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....

00:07:02
June 23, 2025
The Clear Language Of The Insurance Contract Controls

Failure to Name a Party as an Additional Insured Defeats Claim
Post 5104

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.
KEY POINTS

Parties Involved:

CAEA is insured by Associated Industries Insurance Company, Inc. ...

00:08:22
June 20, 2025
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.

Presently before the Court are two ...

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 ...

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...

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