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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Insured May Intervene to Assert Bad Faith Claim Not Assigned
Post 5203
See the full video at https://rumble.com/v7013x8-insured-cant-assign-bad-faith-claim.html and at https://youtu.be/e8OApzn6YZs, and at https://zalma.com/blog plus more than 5200 posts.
Judge Requires Conflict Between Different District Courts in Louisiana Requires Conflict to be Resolved on Appeal
In Allstate Construction, Inc. v. Ohio Security Insurance Company, Civil Action No. 23-01295-BAJ-SDJ, United States District Court, M.D. Louisiana (September 30, 2025) Vina Cleaners, the insured, assigned its claim against Ohio Security to Allstate Construction but did not assign its rights to sue for the tort of bad faith so it intervened in Allstate Construction’s suit.
Background and Procedural History:
In an insurance dispute following damage caused by Hurricane Ida to Vina Cleaners’ property. Vina Cleaners was insured under a commercial policy with the Defendant, Ohio Security Insurance Company. Vina Cleaners assigned its rights ...
Willful and Malicious Injury by the Debtor to Another Entity is Nondischargeable
Intentional Conduct Causing Injury not Dischargeable in Bankruptcy
Post 5202
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In In re Niko T. Irizarry, Mark Riley v. Niko T. Irizarry, No. 2:24-bk-01261-FMD, Adv. No. 2:24-ap-00035-FMD, United States Bankruptcy Court, M.D. Florida, Fort Myers Division (September 30, 2025) established that fraudulent conduct is not dischargeable in Bankruptcy.
Background and Allegations:
Plaintiff Mark Riley filed a lawsuit against Defendant Niko Irizarry in federal district court, alleging claims for civil conspiracy under 42 U.S.C. § 1983, malicious prosecution, violation of his Fourteenth Amendment rights, common law false imprisonment or arrest, and intentional infliction of emotional distress. Riley’s claims are based on allegations with...
Claim Insurer Defrauded Insured Needs Evidentiary Allegations
Post 5201
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It Doesn’t Pay to Accuse an Insurer of Fraud Without Evidence
In Yarisleidy Suarez Rodriguez v. Safeco Insurance Company Of America, Civil Action No. 3:25-CV-00154-GNS, United States District Court, W.D. Kentucky, Louisville Division (September 30, 2025) an insured accused her insurer for fraud in not honoring underinsured motorist coverage.
Case Background:
Plaintiff Yarisleidy Suarez Rodriguez (the Insured) filed a claim for underinsured motorist (UIM) benefits with Defendant Safeco Insurance Company of Illinois, which was denied. Rodriguez alleged that her policy included UIM coverage, which Safeco fraudulently removed without her knowledge.
Legal ...
How a Need for Profit Led Health Care Providers to Crime
Post 5185
Posted on September 8, 2025 by Barry Zalma
See the full video at https://lnkd.in/gePN7rjm and at https://lnkd.in/gzPwr-9q
This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.
The Dishonest Chiropractor/Physician
How a Need for Profit Led Health Care Providers to Crime
See the full video at and at
This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help 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.
How Elderly Doctors Fund their ...
How a Need for Profit Led Health Care Providers to Crime
Post 5185
Posted on September 8, 2025 by Barry Zalma
See the full video at https://lnkd.in/gePN7rjm and at https://lnkd.in/gzPwr-9q
This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.
The Dishonest Chiropractor/Physician
How a Need for Profit Led Health Care Providers to Crime
See the full video at and at
This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help 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.
How Elderly Doctors Fund their ...
Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
