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April 07, 2025
Fairly Debatable Attempt to Rescind Not Bad Faith

Rescission of Life Insurance Policy Fails
Post 5039

Read the full article at https://lnkd.in/gdW5iHgV and at https://zalma.com/blog plus more than 5000 posts.

USAA Life Insurance Company’s moved the USDC Dismiss Plaintiff’s Third Amended Complaint and Motion to Strike.

In Ronda G. Williams v. USAA Life Insurance Company, No. 1:24-cv-00301-BLW, United States District Court, D. Idaho (April 1, 2025) the USDC eliminated the bad faith cause of action and allowed the breach of contract case.

BACKGROUND

Ronda Williams alleged her husband, Burton Williams, applied for a 20-year term life insurance policy for $750,000.00 from USAA on December 1, 2021. Shortly thereafter, USAA issued a life insurance policy with an effective date of February 15, 2022. As a part of his application, Mr. Williams signed an agreement that he would “.. .notify USAA Life Insurance Company if, after signing the statement but before the delivery of the policy, I seek medical consultation for any reason…”

Mrs. Williams alleged that Mr. Williams received a neurological exam in January 2022 after feeling lightheaded and dizzy at the gym. The exam was benign, he was treated for dehydration and sent home. He then followed up with his primary care physician on February 2, 2022, who did not have any concerns about his medical condition but scheduled an MRI for February 17, 2022. On February 18, 2022, Mr. Williams received the results of the MRI, which indicated he had a brain tumor.

About a year later, in June 2023, Mr. Williams died.

Mrs. Williams, as the beneficiary, notified USAA of his death and made a claim on his insurance policy. On December 26, 2023, USAA sent Mrs. Williams a letter stating that it was rescinding the insurance policy from the date of inception based upon material misrepresentations made in Mr. Williams’ application. Mrs. Williams sued. Mrs. Williams filed her Third Amended Complaint alleging a single claim for breach of contract and insurance bad faith. USAA again moved to dismiss the operative complaint for failure to state a claim.

ANALYSIS

Breach of Contract Claim.

Mrs. Williams alleged USAA breached its contract when it failed to pay her the amount due under the life insurance policy. USAA argued that Mrs. Williams cannot show any breach of contract because it rescinded the life insurance policy within the two-year statutory contestability period.

The rescission fell within the two-year contestability period.

Even considering USAA’s affirmative defense, it does not require dismissal of Mrs. Williams’ complaint at this stage of the litigation. To rescind the policy, USAA would first need to prove Mr. Williams made an incorrect statement on his application. Then the company would have to prove it would not have issued the policy had it known the “true facts.”

USAA contends Mr. Williams’ responses to several questions on his application were incorrect. Mr. Williams answered “no” to each of these questions. While these responses may have been rendered inaccurate in light of his hospital visit and follow up visit with his primary care provider, these inaccuracies do not necessarily mean rescission is appropriate.

To rescind, USAA must show it would not have issued the policy had the statements been accurate. There is nothing on the face of the Third Amended Complaint or in the material incorporated by reference that permits the Court to conclude on a motion to dismiss that the misrepresentations were material.

An insurer may establish materiality as a matter of law by presenting documentation concerning its underwriting practices. Absent similarly conclusive facts in the Third Amended Complaint or incorporated by reference, the Court cannot conclude the misrepresentations, as a matter of law, were material. Accordingly, USAA’s motion to dismiss the breach of contract claim is denied.

Insurance Bad Faith Claim.

To demonstrate bad faith under Idaho law, a plaintiff must show:

1. the insurer intentionally and unreasonably denied or withheld payment;
2. the claim was not fairly debatable;
3. the denial or failure to pay was not the result of a good faith mistake; and
4. the resulting harm is not fully compensable by contract damages.

An insurer does not act in bad faith by challenging the validity of a “fairly debatable” claim, or when delay results from honest mistakes.

Mrs. Williams did not adequately allege an insurance bad faith claim. The denial of an insurance claim and a claimant’s disagreement with the decision does not automatically equate to bad faith. Accordingly, the Court dismissed Mrs. Williams’s bad faith claim.

The Court will dismiss the bad faith insurance claim without leave to amend.

ZALMA OPINION

Rescission is an equitable remedy that requires, rather than a money judgment, fairness. If an insurance contract is acquired by a material misrepresentation or the concealment of a material fact, the court will order the contract rescinded and both parties would be placed in the same position they were in before the contract was issued. USAA failed to include in its motion to dismiss evidence that established that the misrepresentations were material. The court dismissed the bad faith cause of action because the issue was fairly debatable and at trial USAA may bring the underwriters to prove materiality and if they don’t they will pay Mrs. Williams.

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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00:09:43
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July 18, 2025
Solomon Like Decision: No Duty to Defend – Potential Duty to Indemnify

Concurrent Cause Doctrine Does Not Apply When all Causes are Excluded
Post 5119

Death by Drug Overdose is Excluded

See the full video at https://lnkd.in/geQtybUJ and at https://lnkd.in/g_WNfMCZ, and at https://zalma.com/blog plus more than 5100 posts.

Southern Insurance Company Of Virginia v. Justin D. Mitchell, et al., No. 3:24-cv-00198, United States District Court, M.D. Tennessee, Nashville Division (October 10, 2024) Southern Insurance Company of Virginia sought a declaratory judgment regarding its duty to defend William Mitchell in a wrongful death case pending in California state court.

KEY POINTS

1. Motion for Judgment on the Pleadings: The Plaintiff moved for judgment on the pleadings, which was granted in part and denied in part.
2. Duty to Defend: The court found that the Plaintiff has no duty to defend William Mitchell in the California case due to a specific exclusion in the insurance policy.
3. Duty to Indemnify: The court could not determine at this stage whether the Plaintiff had a duty to ...

00:08:21
July 17, 2025
No Good Deed Goes Unpunished

GEICO Sued Fraudulent Health Care Providers Under RICO and Settled with the Defendants Who Failed to Pay Settlement

See the full video at https://lnkd.in/gDpGzdR9 and at https://lnkd.in/gbDfikRG, and at https://zalma.com/blog plus more than 5100 posts.

Post 5119

Default of Settlement Agreement Reduced to Judgment

In Government Employees Insurance Company, Geico Indemnity Company, Geico General Insurance Company, and Geico Casualty Company v. Dominic Emeka Onyema, M.D., DEO Medical Services, P.C., and Healthwise Medical Associates, P.C., No. 24-CV-5287 (PKC) (JAM), United States District Court, E.D. New York (July 9, 2025)

Plaintiffs Government Employees Insurance Company and other GEICO companies (“GEICO”) sued Defendants Dominic Emeka Onyema, M.D. (“Onyema”), et al (collectively, “Defendants”) alleging breach of a settlement agreement entered into by the parties to resolve a previous, fraud-related lawsuit (the “Settlement Agreement”). GEICO moved the court for default judgment against ...

00:07:38
July 15, 2025
Zalma’s Insurance Fraud Letter – July 15, 2025

ZIFL – Volume 29, Issue 14
Post 5118

See the full video at https://lnkd.in/geddcnHj and at https://lnkd.in/g_rB9_th, and at https://zalma.com/blog plus more than 5100 posts.

You can read the full 20 page issue of the July 15, 2025 issue at https://lnkd.in/giaSdH29

THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL

This issue contains the following articles about insurance fraud:

The Historical Basis of Punitive Damages

It is axiomatic that when a claim is denied for fraud that the fraudster will sue for breach of contract and the tort of bad faith and seek punitive damages.

The award of punitive-type damages was common in early legal systems and was mentioned in religious law as early as the Book of Exodus. Punitive-type damages were provided for in Babylonian law nearly 4000 years ago in the Code of Hammurabi.

You can read this article and the full 20 page issue of the July 15, 2025 issue at https://zalma.com/blog/wp-content/uploads/2025/07/ZIFL-07-15-2025.pdf

Insurer Refuses to Submit to No Fault Insurance Fraud

...

00:08:27
July 16, 2025
There is no Tort of Negligent Claims handling in Alaska

Rulings on Motions Reduced the Issues to be Presented at Trial

Read the full article at https://lnkd.in/gwJKZnCP and at https://zalma/blog plus more than 5100 posts.

CASE OVERVIEW

In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.

FACTS

Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.

Prior to trial Bernier had three remaining claims against State Farm:

1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.

Both Bernier and State Farm dispositive motions before ...

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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 ...

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