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August 16, 2024
Victims of Bankrupt Insured Collect Nothing

Keeping Clients Funds Without Right Excluded Professional Service

Profit, Remuneration, or Advantage When Insured Not Legally Entitled Excluded

Post 4856

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In USCC Services, LLC, et al., The Pep Boys - Manny, Moe & Jack v. Young America, LLC, Endurance Risk Solutions Assurance Co., No. A23-1982, Court of Appeals of Minnesota (August 5, 2024) resolved an insurance dispute.

Appellants each obtained a judgment against an insured defendant in separate district court proceedings for breach of fiduciary duty based on the defendant mishandling funds that it held in trust for appellants. Since the insured was bankrupt and without assets the judgment creditors sought to collect from the defendants insurer 'swith a garnishment proceeding. They failed in the trial court and appealed to the Court of Appeals of Minnesota.

FACTS

Prelitigation Events

USCC Services LLC, through its affiliate U.S. Cellular, provides cellular telephone and internet services. Appellant Motorola Mobility LLC provides mobile products and services. The defendant in the underlying actions, Young America LLC, was a marketing-services company that provided a wide variety of services to its clients, which included appellants. Young America administered programs and services, including rebates, refunds, incentives, and prepaid-product programs, that involved remitting payments to its clients' customers.

In 2020, Young America became insolvent and ceased business operations. At that time, Young America should have had $493,757.19 in program funds from Motorola and $1,020,669.25 in program funds from USCC, but it did not.

Appellants' Underlying Lawsuits Against Young America

Appellants brought individual lawsuits against Young America. Young America did not answer the complaints.  Endurance did not defend Young America against appellants' lawsuits and appellants obtained judgments for USCC in the amount of $1,020,669.25  and Motorola for $493,757.19 to repay the funds that Young America failed to hold in trust.

Appellants' Lawsuits Against Endurance

Appellants initiated this action as a garnishment proceedings against Endurance to collect on the judgments based on Endurance's insurance policy with Young America. Endurance did not provide coverage for appellants' judgments because they were excluded by three separate provisions of the insurance policy: the contractual-liability exclusion, the conduct-and-illegal-profit exclusion, and the professional-services exclusion. The district court determined that each of Young America's three wrongful acts fell within one or more of the exclusions. The district court  granted summary judgment to Endurance concluding that the Endurance policy did not cover appellants' judgments.

DECISION

Summary judgment is appropriate when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.

The Concurrent-Cause Doctrine Does Not Apply.

The Appellants posited that concurrent-cause doctrine allowed coverage. The Doctrine provides that damages resulting from concurrent causes are covered so long as the covered cause is a direct cause of the damage even though an excluded cause may also have contributed to the loss.

The Court of Appeals concluded  that the concurrent-cause doctrine did not apply because there is only one cause of appellants' damages: Young America's wrongful use of the program funds-and the individual wrongful acts.

Young America's acts of commingling program funds, making preferential payments, and canceling the Lloyd's policy were not independent causes of appellants' damages and the concurrent-cause doctrine could not apply.

Endurance Met Its Burden To Show That The Policy Exclusions Apply

The conduct-and-illegal-profit exclusion provides, in relevant part: “The Insurer shall not be liable for Loss on account of any Claim based upon, arising from, or attributable to . . . an Insured having gained any profit, remuneration, or advantage to which such Insured was not legally entitled[] if established by a final and non-appealable judgment or adjudication adverse to such Insured.” Since Young America kept funds that belonged to appellants it gained a profit, remuneration, or advantage. The exclusion applies.

The professional-services exclusion provides, in relevant part: “Professional Services means any service performed by an Insured. ... The Insurer shall not be liable for Loss on account of any Claim made against a Company based upon, arising from, or attributable to the performance of or failure to perform Professional Services.”

Young America's duty to protect the funds were activities that were incidental or ancillary to the performance of Young America's core professional service of administering rebate programs. Because the conduct-and-illegal-profit exclusion and the professional-services exclusion apply to appellants' claims, the insurance policy does not cover appellants' judgments against Young America.

ZALMA OPINION

The plaintiffs were the victims of a business they trusted - the believed they could trust a company called Young America - and gave it money to hold only to find it wasted the money it held in trust. The plaintiffs sued Young Americas insurer for the money either stolen or just lost. The insurer refused because its policy had three exclusions that applied. The key to risk management is to be diligent when giving money to a company to hold and disburse. The due diligence failed and the plaintiffs have judgments that can only be framed, put on a wall, and wish they never heard of Young America.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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00:09:59
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21 hours ago
Allegations That Establish Breach of a Condition Defeats Suit

Notice of Claim Later than 60 Days After Expiration is Too Late

Post 5089

Injury at Massage Causes Suit Against Therapist

Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.

Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.

In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.

FACTUAL BACKGROUND

Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...

00:08:31
June 02, 2025
Zalma’s Insurance Fraud Letter – June 1, 2025

ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma

Post 5087

See the full video at and at

Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf

Zalma’s Insurance Fraud Letter – June 1, 2025

See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.

ZIFL – Volume 29, Issue 11

The Source for the Insurance Fraud Professional

Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF

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 ...

00:08:42
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May 30, 2025
Plain Language of Policy Enforced

No Coverage if Home Vacant for More Than 60 Days

Failure to Respond To Counterclaim is an Admission of All Allegations

Post 5085

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In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.

BACKGROUND

On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.

Plaintiff filed suit ...

00:06:50
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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