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 Allied rescinded the policy stating that Palma’s misrepresentation rendered the policy void and that it would not have insured Palma had Palma disclosed his prior insurance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 Allied answered and asserted the defense that it rescinded the policy because of Palma’s “material misrepresentation” among other affirmative defenses.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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Insurer’s Exclusion for Claims of Assault & Battery is Effective
Post 5250
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Bar Fight With Security is an Excluded Assault & Battery
In The Cincinnati Specialty Underwriters Insurance Company v. Mainline Private Security, LLC, et al., Civil Action No. 24-3871, United States District Court, E.D. Pennsylvania (December 16, 2025) two violent attacks occurred in Philadelphia involving young men, Eric Pope (who died) and Rishabh Abhyankar (who suffered catastrophic injuries). Both incidents involved security guards provided by Mainline Private Security, LLC (“Mainline”) at local bars. The estates of the victims sued the attackers, the bars, and Mainline for negligence and assault/battery. The insurer exhausted a special limit and then denied defense or indemnity to Mainline Private Security.
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Marine Insurer May Dispose of Vessel to Avoid Waste
Post 5249
Read the full article at https://lnkd.in/gfn_UHdp, see the video at https://lnkd.in/gDWVccnr and at https://lnkd.in/gv9nsBqk, and https://zalma.com/blog plus more than 5200 posts.
In Western World Insurance Company v. The Estate Of Shawn Arsenault, No. 25-cv-13413-PGL, United States District Court, D. Massachusetts (December 17, 2025) the USDC was asked to resolve a marine insurance dispute after the sinking of the F/V Seahorse, a commercial fishing vessel, off Cape Cod on June 8, 2025. The vessel’s owner and operator, Shawn Arsenault, died in the incident.
Western World Insurance Company issued a hull insurance policy for the vessel. With no personal representative yet appointed for the estate, the insurer cannot determine the proper payee for the insurance proceeds.
The insurer paid for the vessel’s recovery and removal, and the vessel is now with a salvage company, incurring substantial storage fees. The insurer determined the loss is covered under the ...
Marine Insurer May Dispose of Vessel to Avoid Waste
Post 5249
Read the full article at https://lnkd.in/gfn_UHdp, see the video at https://lnkd.in/gDWVccnr and at https://lnkd.in/gv9nsBqk, and https://zalma.com/blog plus more than 5200 posts.
In Western World Insurance Company v. The Estate Of Shawn Arsenault, No. 25-cv-13413-PGL, United States District Court, D. Massachusetts (December 17, 2025) the USDC was asked to resolve a marine insurance dispute after the sinking of the F/V Seahorse, a commercial fishing vessel, off Cape Cod on June 8, 2025. The vessel’s owner and operator, Shawn Arsenault, died in the incident.
Western World Insurance Company issued a hull insurance policy for the vessel. With no personal representative yet appointed for the estate, the insurer cannot determine the proper payee for the insurance proceeds.
The insurer paid for the vessel’s recovery and removal, and the vessel is now with a salvage company, incurring substantial storage fees. The insurer determined the loss is covered under the ...
Zalma’s Insurance Fraud Letter
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ZIFL Volume 29, Issue 24
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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/
Zalma’s Insurance Fraud Letter
Merry Christmas & Happy Hannukah
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The Professional Claims Handler
Post 5219
Posted on October 31, 2025 by Barry Zalma
An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
How to Create Claims Professionals
To avoid fraudulent claims, claims of breach of contract, bad faith, punitive damages, unresolved losses, and to make a profit, insurers ...
The History Behind the Creation of a Claims Handling Expert
The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
