Never Lie or Conceal Potential Claims From Insurer
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Post 4823
Plaintiff CMGK, LLC, doing business as Massage Envy, appealed from an order granting summary-judgment to defendant Certain Underwriters at Lloyd’s, London Subscribing to Policy Number ME10XXXX, and dismissing with prejudice plaintiff’s claims. Plaintiff sought coverage under a Sexual Acts Liability Endorsement of a claims-made-and-reported policy issued by Lloyd’s to plaintiff. The court found plaintiff was not entitled to coverage and granted the motion.
In CMGK, LLC d/b/a Massage Envy v. Certain Underwriters At Lloyd’s, London Subscribing To Policy Number ME10XXXX, No. A-1836-22, Superior Court of New Jersey, Appellate Division (June 13, 2024) the appeal was considered based on the facts established by the motions.
FACTS
CMGK operated a Massage Envy Spa franchise located in Mays Landing. Emad Gus Khalifa was the sole member of plaintiff and was familiar with its operations. In 2013, plaintiff hired April Pippin as a general manager to assist Khalifa with the day-to-day management of the facility. Pippin and Khalifa performed management functions for plaintiff.
The Application for Insurance
Khalifa executed on behalf of plaintiff an application for the policy at issue. “This Claims Made policy applies only to those claims arising from covered incidents which occur on or after the stated retroactive date. In addition, the claim must first be made and reported to the company during the policy period or applicable extended reporting period.” (Emphasis in the policy).
The Policy
Defendant issued its Specified Medical Professions Professional Liability Insurance Policy to plaintiff for the policy period March 9, 2018, to March 9, 2019, and subject to a Retroactive Date of March 9, 2014. The policy included a Sexual Acts Liability Endorsement.
The Sexual Acts Liability Endorsement. Prior to the effective date of the policy, the Insured represented that it had no knowledge of a Sexual Act or any fact, circumstance, situation or incident involving a Sexual Act which may result in a Claim under this policy.
In 2016, plaintiff hired Steffon Davis as a massage therapist. According to plaintiff’s client M.N., Davis sexually assaulted her during a massage he performed on her on September 23, 2017. Two days later, M.N. reported the alleged assault to Pippin. On September 26, 2017, M.N. went to the Township of Hamilton police station and told a police officer about the incident. According to the officer, M.N. told her “[Davis had] placed his finger between her vagina lips and cupped her breast during a massage.”
M.N. eventually sued. On September 5, 2018, plaintiff tendered the suit to defendant for coverage who refused to defend or indemnify the Plaintiff who sued Lloyd’s claiming Lloyd’s had breached the policy and seeking a judgment declaring M.N.’s claims fell within the coverage provided by Lloyd’s.
Finding the language of the prior-knowledge clause to be “clear and unambiguous,” the trial court rejected plaintiff’s attempt to interpret it in a manner where an honest belief in the futility of a claim negates actual knowledge of allegations of wrongdoing. The court found the police decision not to file criminal charges does not support a reasonable belief that M.N. would not file a civil lawsuit.
Khalifa’s assumption or hope, purportedly based on the officer’s decision not to file a criminal complaint or M.N.’s decision not to file a civil complaint sooner, that M.N. wouldn’t file a claim is not enough to defeat summary judgment. Adopting plaintiff’s interpretation of the policy language would have the effect of rendering meaningless the prior-knowledge clause. To avoid the application of the clause, an insured could simply assert it did not believe – in the face of all evidence to the contrary – a claim might be filed.
The reasonableness of excluding claims based on prior conduct that the insured could reasonably have foreseen might serve as the basis for a future claim was apparent to the appellate court as it would be to anyone involved in the business of insurance. The Appellate Division, therefore, affirmed the order granting defendant’s summary-judgment motion.
ZALMA OPINION
An application for insurance is a request to an insurer to make an offer of insurance. The insurer relies on the good faith of the proposed insured to accurately respond to all the inquires including any information available to the insured at the time the application is presented, of any acts that could result in a claim. Such an act, sexual abuse of a customer by a massage therapist, known to the insured but not yet grown into an actual suit must be disclosed to allow the insurer to make a well reasoned decision to offer to insure the proposed insured.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Rescission Appropriate When Insured Lies on Application
Read the full article at https://lnkd.in/gU2gHyfv, see the full video at https://lnkd.in/gYpWwNrw and at https://lnkd.in/gTm--tTM and https://zalma.com/blog plus more than 4800 posts.
Post 4827
Progressive Michigan Insurance Company (Progressive) appealed the order denying its motion for summary disposition and ordering reformation of plaintiff's, Janice Sherman's, automobile insurance policy even when reformation was not requested by Sherman.
In Janice Sherman v. Progressive Michigan Insurance Company and JOHN DOE, No. 364393, Court of Appeals of Michigan (June 20, 2024) the Court of Appeals explained the importance of the equitable remedy of rescission.
BACKGROUND FACTS
On November 12, 2020, Sherman applied to Progressive for a no-fault insurance policy for two vehicles-a 2006 Cadillac DTS sedan and a 1993 Chrysler New Yorker sedan. In the application, she identified her address as 16845 Tremlett Drive, Clinton Township, MI 48035, and confirmed that the ...
More Prosecution is Needed to Deter Insurance Fraud
Post 4826
Read the full article at https://lnkd.in/gVw4MFZZ, see the full video at https://lnkd.in/gghQy4N9 and at https://lnkd.in/ggpJh3vy and at https://zalma.com/blog plus more than 4800 posts.
Thomas Orville McLaughlin II was convicted of committing a fraudulent insurance act, making a false information, and interfering with law enforcement. He appealed claiming several of the State’s exhibits were improperly admitted and that a defense witness was improperly excluded.
In State of Kansas v. Thomas Orville McLaughlin II, No. 124,221, Court of Appeals of Kansas (June 21, 2024) McLaughlin sought relief from his conviction for insurance fraud.
MCLAUGHLIN REPORTS A HOME BURGLARY AND IS LATER CONVICTED
On August 2, 2016, Thomas McLaughlin reported a burglary. He contacted law enforcement and later spoke to Officer Travis Debarge about the burglary. McLaughlin advised the officer that his storage container had been robbed and three ATVs were missing. The...
How Insurance is Treated in Mass Tort Cases in Bankruptcy Court
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Post 4825
Between 1999 and 2019, approximately 247,000 people in the United States died from prescription-opioid overdoses. Respondent Purdue Pharma sits at the center of that crisis. Owned and controlled by the Sackler family, Purdue began marketing OxyContin, an opioid prescription pain reliever, in the mid-1990s. After Purdue earned billions of dollars in sales on the drug, in 2007 one of its affiliates pleaded guilty to a federal felony for misbranding OxyContin as a less-addictive, less-abusable alternative to other pain medications. Thousands of lawsuits followed. Purdue Pharma filed for bankruptcy and attempted to protect the Sackler family from individual tort actions.
Fearful that the litigation would eventually impact them directly, the Sacklers initiated a ...
The Duties of the Public Adjuster
An article on the Duties of Public Adjusters where you can read a part of the article and if you subscribe to Excellence in Claims Handling you can read the full article.
Chutzpah From Convicted Dentist
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Post 4817
THE LICENSE REVOCATION
The Board of Dental Examiners revoked Seth Lookhart’s dental license after he was convicted of dozens of crimes perpetrated in furtherance of a fraudulent scheme of staggering proportions that jeopardized the health and safety of his patients. Lookhart appealed the Board’s revocation of his license, arguing that his punishment was inconsistent with past Board decisions. On appeal, the superior court concluded that the Board properly exercised its discretion by revoking Lookhart’s dental license.
In a case of Chutzpah (unmitigated gall) called Seth Lookhart v. State Of Alaska, Division Of Corporations, Business, & Professional Licensing, Board Of Dental Examiners, No. S-18466, No. 7702, Supreme Court of Alaska (May 24, 2024) he asked for his license to practice dentistry from jail, the time of the Supreme Court was ...
Liars Never Prosper
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Failure to Tell the Truth on an Insurance Application Voids Entire Policy as if it Never Existed
Post 4814
Ms. Stephens demanded that Defendant Great American Assurance Company (“Great American”) provide legal representation for her under an insurance policy (the “Policy”).
In Accent Consulting Group, Incorporated, Brenda Marie Stephens v. Great American Assurance Company – Great American Assurance Company v. Accent Consulting Group, Incorporated, Brenda Marie Stephens, No. 1:22-cv-01767-JMS-CSW, United States District Court, S.D. Indiana, Indianapolis Division (May 20, 2024) resolved the dispute.
The Consumer Complaint
During the first Policy period, in October 2020, Ms. Stephens did a “desktop appraisal” of an Indiana single-family home (the “Property“). A “desktop appraisal” is ...
