Never Lie or Conceal Potential Claims From Insurer
Read the full article at https://lnkd.in/gJkzeXBc, shttps://lnkd.in/gJkzeXBc and at https://zalma.com/blog plus more than 4800 posts.
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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The Professional Claims Handler
Post 5218
Read the full article at https://www.linkedin.com/pulse/zalma-philosophy-claims-handling-part-8-barry-zalma-esq-cfe-zdwsc, see the full video at https://rumble.com/v70zl4s-the-zalma-philosophy-of-claims-handling-part-8.html and at https://youtu.be/MIYcF71ffRQ, and at https://zalma.com/blog plus more than 5200 posts.
Claims Commandment X – Thou Shall Not Pretend to be a Lawyer
Some experienced and professional claims people know the law in their area of expertise better than most lawyers.
Adjusters should be adjusters and leave lawyering to lawyers. Similarly, lawyers should be lawyers and never try to be adjusters.
Claims Commandment XI – Thou Shall Empathize With the Claimant
Everyone presenting a claim is unhappy, disturbed, shocked, injured and needs help.
Empathy is identification with and understanding of another’s situation, feelings, and motives. It is the ability to understand another person’s circumstances, point of view, thoughts, and feelings....
HOW TO CREATE AN EXCELLENCE IN CLAIMS HANDLING PROGRAM
See the full video at https://rumble.com/v70wb2i-the-zalma-philosophy-of-claims-handling-part-6.html and at https://youtu.be/tL5nDKPEs40 and at https://zalma.com/blog plus more than 5200 posts.
Post 5217
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry.
An Excellence in Claims Handling program begins with a statement in the insurer’s claims manual or statement of professionalism that it is dedicated to providing excellence in claims handling to every insured who presents a claim.
The excellence in claims handling program should include, at a minimum:
A series of lectures supported by text materials explaining:
A definition of insurance.
How to read and understand an insurance policy.
How to interview an insured, witness, or claimant.
How to assist an insured in the insured’s obligation to ...
The Professional Claims Handler
Post 5216
Read the full article at https://www.linkedin.com/pulse/zalma-philosophy-claims-handling-part-5-barry-zalma-esq-cfe-jde8c, see the full video at https://rumble.com/v70q4x8-the-zalma-philosophy-of-claims-handling-part-5.html and at https://youtu.be/6b9tZQsEkB4, and at https://zalma.com/blog plus more than 5200 posts.
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry.
Standards to be a Professional Claims Adjuster
The Insurance claims professional should be a person who:
1. Can read and understand the insurance policies issued by the insurer.
2. Understands the promises made by the policy.
3. Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
4. Are competent investigators.
5. Have empathy and recognize the difference between empathy and sympathy.
6. ...
The Professional Claims Handler
Post 5219
Posted on October 31, 2025 by Barry Zalma
An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
How to Create Claims Professionals
To avoid fraudulent claims, claims of breach of contract, bad faith, punitive damages, unresolved losses, and to make a profit, insurers ...
The History Behind the Creation of a Claims Handling Expert
The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
The History Behind the Creation of a Claims Handling Expert
The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
