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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Post 5196
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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
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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.
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© 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 ...
