Prior Conviction for Insurance Fraud Material to Decision of Insurer
Post 4857
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Jose Palma appealed the trial court’s summary judgment in favor of Allied Trust Insurance Co that found a lie about a prior insurance fraud conviction was a material misrepresentation causing the insurer to rescind the policy.
In Jose Palma v. Allied Trust Insurance Co., No. 14-23-00063-CV, Court of Appeals of Texas, Fourteenth District (August 13, 2024) the Court of Appeals agreed with the insurer.
BACKGROUND
Palma purchased an insurance policy for his home with Allied. During the policy period, there was a fire at Palma’s home. Palma submitted an insurance claim under the policy only to be faced with the discover of a prior conviction for insurance fraud that was not disclosed on his application for insurance. Allied rescinded the policy stating that Palma’s misrepresentation rendered the policy void and that it would not have insured Palma had Palma disclosed his prior insurance fraud conviction.
Palma sued Allied for breach of contract, and a litany of bad faith charges. Allied answered and asserted the defense that it rescinded the policy because of Palma’s “material misrepresentation” among other affirmative defenses.
THE MOTION FOR SUMMARY JUDGMENT
Allied moved for summary judgment concluding that the policy issued to Palma is void due to Palma’s material misrepresentation in the policy application that he was never convicted of insurance fraud. Allied argued that Palma misrepresented material facts and in support of these elements, Allied submitted five exhibits: the policy application; the policy; the “DocuSign certification of completion;” correspondence with insurance agent; and Palma’s criminal conviction for insurance fraud.
The trial court rendered a final summary judgment in favor of Allied.
Misrepresentation in Insurance Application
Palma argued that whether a misrepresentation is material is a question of fact both under the Insurance Code and common law and, therefore, summary judgment was improper. Allied countered that there was ample, undisputed evidence in the record to show that Palma’s misrepresentation was material and no evidence to the contrary.
ANALYSIS
The policy application included a statement that Palma agreed the policy would be void “if such information is false or misleading in any way that would affect the premium charged or eligibility of the risk based on company underwriting guidelines.”
The purpose of a summary judgment is to provide a method of summarily terminating a case when it clearly appears that only a question of law is involved and that there is no genuine issue of fact. Various elements of claims may be a “question of fact” where there is an actual, genuine dispute between the parties about the facts. However, when no genuine issues of material facts exist, a court may properly grant summary judgment because there are no facts to find.
Allied submitted its undisputed evidence establishing its affirmative defense. Palma did not respond with evidence to dispute the facts as stated by Allied.
Put simply, the plain language of the statute indicates that a policy provision rendering the policy void or voidable for any false statement is a defense if the insurer demonstrates the misrepresentation was material to the risk or contributed to the contingency or event on which the policy became payable or due. None of these requirements obviates the insurer’s ability to obtain summary judgment on its defense when the facts are undisputed.
ZALMA OPINION
A convicted insurance criminal lied on an application for insurance, obtained a policy based on the lie, only to have his home catch fire and burn resulting in a major claim. The insurer learned of the conviction by searching public records and, based on the lie, rescinded the policy from its inception because of the material misrepresentation about the plaintiff’s criminal record and prior conviction for insurance fraud. The court affirmed the rescission.
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Post 5434
Posted on August 26, 2026 by Barry Zalma
See the full video at https://lnkd.in/g-ZtsSgK and at https://lnkd.in/ghMBdYWR
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Farmers timely responded in writing, agreed to pay Wood the $15,000 per-person policy limit, and provided the requested ...
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Post 5434
Posted on August 26, 2026 by Barry Zalma
See the full video at https://lnkd.in/g-ZtsSgK and at https://lnkd.in/ghMBdYWR
A Contingent Offer Accepted Ends the Dispute
In Farmers Insurance Exchange, a California Reciprocal Insurance Exchange, The Superior Court For The County Of San Bernardino, Kathleen Ann Wood, E087128, California Court of Appeals, (July 9, 2026) Farmers Insurance Exchange insured Doyle Archer under an automobile policy with bodily injury limits of $15,000 per person and $30,000 per accident.
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Archer rear-ended Kathleen Ann Wood at a red light, causing Wood to assert a bodily injury claim against him. Wood’s counsel sent Farmers a pre-litigation settlement demand offering to resolve Wood’s claim for the available policy limits, stating that if the $100,000 demand exceeded the policy, the offer was for the policy limits.
Farmers timely responded in writing, agreed to pay Wood the $15,000 per-person policy limit, and provided the requested ...
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See the full video at https://lnkd.in/gWQQEySW and at https://lnkd.in/gyhdK6wv
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection 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.
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection 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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CONVICTION
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Post 5485
Posted on September 8, 2026 by Barry Zalma
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The United States Court of Appeals for the Ninth Circuit certified the following question to this Court:
"Is damage to property a “fortuitous” loss when, based on the insured’s knowledge at the time the insurance policy issued, it was reasonably foreseeable that such damage was almost certain to occur if certain preventative measures were not taken?"
FACTUAL BACKGROUND
Mainspring owned commercial property leased to Star Fisheries for decades. Star Fisheries’ use of water and salt allegedly caused structural damage over time. In 2010, Mainspring learned of damage and made some repairs but did not implement all recommended preventive measures. In 2021–2022, additional similar structural damage was discovered, and ...
Insurance Requires Fortuity to be an Insured Risk
Post 5485
Posted on September 8, 2026 by Barry Zalma
In Industrial Park Center, LLC, doing business as Mainspring Capital Group v. Great Northern Insurance Company, a foreign insurer, No. CV-25-0330-CQ, Supreme Court of Arizona (September 1, 2026).
The United States Court of Appeals for the Ninth Circuit certified the following question to this Court:
"Is damage to property a “fortuitous” loss when, based on the insured’s knowledge at the time the insurance policy issued, it was reasonably foreseeable that such damage was almost certain to occur if certain preventative measures were not taken?"
FACTUAL BACKGROUND
Mainspring owned commercial property leased to Star Fisheries for decades. Star Fisheries’ use of water and salt allegedly caused structural damage over time. In 2010, Mainspring learned of damage and made some repairs but did not implement all recommended preventive measures. In 2021–2022, additional similar structural damage was discovered, and ...
