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Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
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July 05, 2024
Insurer Not Required to Take on the Burden of the Insured's Fraud

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 vehicles were garaged at this address. The application also failed to disclose the total number of resident relatives, 14 years of age or older, and "all regular drivers" of her vehicles then residing in her household.

Progressive's litigation underwriting specialist, Janeen Copic, submitted an affidavit stating that Progressive would have charged a 7.7% higher premium had Sherman accurately disclosed the number of drivers and resident-relatives at the reported address, and a 75.5% increased premium had Sherman disclosed her permanent Detroit residence.

THE ACCIDENT

On July 14, 2021, Sherman was a passenger in one of the vehicles when it was hit from behind by John Doe. She was injured in this accident and asked Progressive for personal protection insurance (PIP) benefits. Progressive refused while rescinding the policy ab initio because of misrepresentations in her application. Sherman lied about the location where the cars were garaged and other individuals resided with her who she did not list on her application. Progressive estimated that, had Sherman included this additional information, it would have increased her premium by 83.2%.

THE SUIT

Sherman then sued Doe and Progressive claiming it unlawfully refused to pay PIP benefits and had breached her insurance contract. Sherman claimed the remedy should be tailored to the equities of the situation and needed to produce a fair result for all parties. The trial ordered that the policy be reformed to reflect the "insurance premium that [Progressive] believes it would have been entitled to had the insured listed Detroit as the residence.".

SUMMARY DISPOSITION

Summary disposition is appropriate if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law.

An insurer has a reasonable right to expect honesty in the application for insurance. Indeed, it is well settled that an insurer is entitled to rescind a policy ab initio on the basis of a material misrepresentation made in an application for no-fault insurance. A misrepresentation is material if the insurer would have rejected the risk or charged an increased premium and would not have issued the same contract had it been given the correct information.

Even if fraud is not established rescission is justified in cases of innocent misrepresentation if a party relies upon the misstatement, because otherwise the party responsible for the misstatement would be unjustly enriched if he were not held accountable for his misrepresentation.

There was no reason in law or policy for the burden of such a risk to be placed on the insurer in preference to the insured who made the intentional material misrepresentations. The trial court's balance of the equities should have revealed misconduct by Sherman, but none by Progressive.

The Court of Appeals concluded that the trial court erred by failing to recognize this distinction.  By ordering the policy reformed, the trial court placed the financial burden of paying PIP benefits on Progressive, notwithstanding the fact that Sherman obtained those very same benefits by way of fraud. The trial court erred when it ordered reformation, rather than rescission and its order was reversed.

ZALMA OPINION

Rescission is an ancient equitable remedy that exists because it would be unfair to allow one party to a contract to profit from fraud in the obtaining of a contract of insurance. Sherman lied in the application  requesting an offer of insurance about the location and available drivers which, had she told the truth, would have resulted in much higher premiums.  The trial court trying to be fair wrongfully refused rescission but used another equitable remedy: reformation to require the victim of Sherman's fraud, Progressive, with the medical expenses. Neither Ms. Sherman nor anyone should be allowed to profit from their fraud.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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00:09:03
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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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