Criminal Investigation of Insurance Fraud Without Indictment Not Grounds for Stay of Civil Action
Post 4828
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Defendant Kith Furniture, LLC’s moved to stay the proceedings brought by Liberty Mutual in Liberty Mutual Fire Insurance Company v. Kith Furniture, LLC, No. 6:23-cv-01130-LSC, United States District Court, N.D. Alabama, Jasper Division (July 1, 2024) and the District Court resolved the dispute.
BACKGROUND
Defendant Kith Furniture, LLC’s moved to stay the proceedings brought by Liberty Mutual in Liberty Mutual Fire Insurance Company v. Kith Furniture, LLC, No. 6:23-cv-01130-LSC, United States District Court, N.D. Alabama, Jasper Division (July 1, 2024) and the District Court resolved the dispute.
BACKGROUND
Kith’s furniture plant and inventory were allegedly damaged in a tornado. While investigating Kith’s insurance claim, Plaintiff Liberty Mutual Fire Insurance Company learned information that called Kith’s claim into question and warranted further investigation. Kith insisted that Liberty continue making payments under the policy “during the pendency of this investigation.”
Liberty sued seeking a declaration that it need not continue making payments until it concludes its investigation. Simultaneously the Alabama Department of Insurance, Fraud Bureau opened an investigation into Kith’s insurance claim.
Liberty amended its complaint to add a new claim alleging fraud and Liberty alleged that Kith employees “intentionally damaged” “almost $500,000 worth” of “furniture that [Kith] could no longer sell to make it look like it had been damaged in the tornado.” Kith asked the Court to stay all proceedings in this action pending the Alabama Department of Insurance’s criminal investigation.
DISCUSSION
Kith contended that it will be substantially prejudiced by having to defend itself in this action while simultaneously facing a parallel criminal investigation. Liberty countered that, if this Court stays this action, Liberty will be substantially prejudiced by the very real risk that evidence would be lost and memories would fade.
This Case Significantly Overlaps The Related Criminal Investigation.
The Alabama Department of Insurance opened its criminal investigation on the very insurance claim at issue here. Kith asserted that the investigation and this case “involve the same legal theories and alleged conduct by Kith,” and are “practically identical.” Liberty dismissed Kith’s assertions as “entirely speculative,” emails exchanged between Liberty and a criminal investigator tend to corroborate Kith’s assertions.
Kith Has No Fifth Amendment Rights.
The Fifth Amendment privilege against self-incrimination does not extend to non-natural entities. Courts routinely hold parallel criminal proceedings and do not entitle corporate defendants to a stay of civil proceedings.
There Are No Pending Criminal Proceedings.
Among Liberty’s attempts to distinguish this case from those cited by Kith, one fact stands out: here, there are no pending or imminent criminal proceedings. The record does not indicate that anyone has been indicted, charged, or arrested for any crime related to this insurance dispute. The lack of pending or imminent criminal proceedings makes any potential avoidance of prejudice to Kith or any potential conservation of judicial resources by granting a stay entirely speculative.
Liberty Faces Potential Prejudice From Delayed Proceedings.
Liberty argued that staying this case would be putting Liberty’s civil action on the shelf to grow cold without the benefit of a criminal prosecution against Kith.
Although Alabama’s ongoing investigation somewhat mitigates the risk that evidence will be lost and memories will fade, the current absence of any arrests or criminal charges failed to assure the Court that Alabama’s investigation will be sufficiently “brief” and “exhaustive” to shield Liberty from all prejudice. This factor weighs heavily in Liberty’s favor. Therefore, Defendant Kith Furniture, LLC’s motion to stay proceedings was denied.
ZALMA OPINION
Liberty found evidence of fraud and needed to move forward with its action before evidence became lost or forgotten. A criminal investigation without an arrest or indictment is nothing more than that: an investigation. There was no reason for a stay of the civil action. My experience makes clear that state investigations into insurance fraud seldom result in arrest or trial while a civil action asserting fraud can be brought to trial quickly without the need a criminal investigation has to prove the fraud beyond a reasonable doubt.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Anti-Public Adjuster Clause Is Effective in New York
Post number 5301
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Insurers May Contractually Prevent an Insured from Hiring a Public Adjuster
In Peter Barbato & North Jersey Public Adjusters Inc. v. Interstate Fire & Casualty Company, et al, No. 25-cv-5312 (JGK), United States District Court, S.D. New York (December 15, 2025) the plaintiffs, Peter Barbato and North Jersey Public Adjusters, Inc. (“NJPA”), filed suit against several insurance companies, including Interstate Fire & Casualty Company, Independent Specialty Insurance Company, and certain Underwriters at Lloyd’s of London.
FACTS
NJPA is a New Jersey-based public adjusting firm licensed in New York. The dispute centers on ...
Anti-Public Adjuster Clause Is Effective in New York
Post number 5301
Read the full article at https://www.linkedin.com/pulse/public-adjusters-attempt-represent-insured-subject-zalma-esq-cfe-rubfc, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
Insurers May Contractually Prevent an Insured from Hiring a Public Adjuster
In Peter Barbato & North Jersey Public Adjusters Inc. v. Interstate Fire & Casualty Company, et al, No. 25-cv-5312 (JGK), United States District Court, S.D. New York (December 15, 2025) the plaintiffs, Peter Barbato and North Jersey Public Adjusters, Inc. (“NJPA”), filed suit against several insurance companies, including Interstate Fire & Casualty Company, Independent Specialty Insurance Company, and certain Underwriters at Lloyd’s of London.
FACTS
NJPA is a New Jersey-based public adjusting firm licensed in New York. The dispute centers on ...
Proof of Highly Contaminated Water is Required for Extra Payments
Post number 5300
Read the full article at https://www.linkedin.com/pulse/acting-your-own-lawyer-foolish-barry-zalma-esq-cfe-mbg0c, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
Acting as Your Own Lawyer is Foolish
Evidence of Breach of Contract Survives Dismissal of All Other Charges
In Lee Lifeng Hsu and Jane Yuchen Hsu v. State Farm Fire And Casualty Company, C. A. No. N24C-09-020 CLS, Superior Court of Delaware (February 27, 2026) a claim to State Farm who paid approximately $61,000 after assessments but denied coverage for additional items including ceramic tiles, the kitchen floor ceiling, underlayment plywood, and numerous personal property items resulted in suit by the Hsu’s acting in pro per.
Facts
Lee Lifeng Hsu and Jane Yuchen Hsu (“Plaintiffs”) purchased a homeowners’ insurance policy from State Farm Fire...
Insurance Condition Requires Following the Intent of the Parties
Post number 5307
Principles of Contract Interpretation Compels Reading Contract as Written
Read the full article at https://www.linkedin.com/pulse/portable-storage-containers-buildings-barry-zalma-esq-cfe-fkg1c and at https://zalma.com/blog.
In Eastside Floor Supplies, Ltd. v. SCS Agency, Inc., Hanover Insurance Company, et al., No. 2024-01501, Index No. 609883/19, 2026 NY Slip Op 01488, Supreme Court of New York, Second Department (March 18, 2026)
In May 2019, a fire damaged business personal property belonging to the plaintiffs, which was stored in portable storage containers at their Manhattan premises. At the time of the fire, the plaintiffs were insured under a businessowners insurance policy (BOP) issued by the defendant Hanover Insurance Company which provided general coverage for business personal property, and which included a specific extension for “Business Personal Property Temporarily in Portable Storage Units” (the portable storage ...
ERISA Saves Fraudulent Claims Suit
Post number 5306
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Allegations of Fraudulent Insurance Billing Must be Pleaded with Specificity
In Genesis Laboratory Management LLC v. United Healthcare Services, Inc. and Oxford Health Plans, Inc., No. 21cv12057 (EP) (JSA), United States District Court, D. New Jersey (March 13, 2026) Genesis Laboratory Management LLC (“Genesis”), a New Jersey-based molecular diagnostic and anatomic pathology laboratory, provided COVID-19 related testing services and submitted claims for reimbursement as an out-of-network provider to United Healthcare Services, Inc. (“United”) and Oxford Health Insurance, Inc. (“Oxford”). Metropolitan Healthcare Billing, LLC (“Metropolitan”), owned by the same individual as Genesis, handled the billing for Genesis.
FACTUAL BACKGROUND
United and Oxford, who administer both ERISA and ...
ERISA Saves Fraudulent Claims Suit
Post number 5306
Read the full article at https://www.linkedin.com/pulse/failure-provide-well-pled-facts-defeats-most-action-zalma-esq-cfe-b4zuc and at https://zalma.com/blog plus more than 5300 posts.
Allegations of Fraudulent Insurance Billing Must be Pleaded with Specificity
In Genesis Laboratory Management LLC v. United Healthcare Services, Inc. and Oxford Health Plans, Inc., No. 21cv12057 (EP) (JSA), United States District Court, D. New Jersey (March 13, 2026) Genesis Laboratory Management LLC (“Genesis”), a New Jersey-based molecular diagnostic and anatomic pathology laboratory, provided COVID-19 related testing services and submitted claims for reimbursement as an out-of-network provider to United Healthcare Services, Inc. (“United”) and Oxford Health Insurance, Inc. (“Oxford”). Metropolitan Healthcare Billing, LLC (“Metropolitan”), owned by the same individual as Genesis, handled the billing for Genesis.
FACTUAL BACKGROUND
United and Oxford, who administer both ERISA and ...
