Punitive Damages Must Be Added to Gross Income for Tax Purposes
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A TASTE OF EXCELLENCE IN CLAIMS HANDLING
The stated purpose of punitive damages is to punish a wrongdoer civilly to deter the wrongdoer and others from acting wrongfully. Insurance Bad Faith litigants dream of large punitive damage awards as a bonus and revenge upon the insurer that did not treat them fairly.
Punitive damages may be awarded where there is substantial harm and where there is none. [Restatement (First) of Torts § 908 cmt. c (Am. L. Inst. 1939); see also Smith, 461 U.S. at 54–55, 103 S. Ct. at 1639] Society has an interest in deterring and punishing all intentional or reckless invasions of the rights of others, even though it sometimes chooses not to impose any liability for lesser degrees of fault.
What Does the Insured Get to Keep of a Punitive Damages Award?
Consider an insurance bad faith judgment where the jury awards the plaintiffs (for ease of calculation) $1,000,000 in compensatory damages and $9,000,000 in punitive damages. The Plaintiffs’ lawyer, in a standard contingency fee agreement, takes 40% of the gross award or $4,000,000 and expenses of $500,000 for experts and other litigation expenses.
The plaintiffs’ share of the recovery is $5,500,000. If the Plaintiffs live in California or New York they will pay approximately 39% federal income tax and approximately 10% state income tax on their gross earnings in that year. Assuming the Plaintiffs earned nothing in the year of the judgment they are responsible to pay taxes on the $9,000,000 punitive damage award or slightly less than $4,500,000. In essence they receive none of the punitive damage award and the lawyer pays taxes on his $4,000,000 recovery of legal fees. If the plaintiff attempts to avoid paying tax on the punitive damage award they may be assessed a 20% penalty.
A Taste of What Subscribers Get
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(c) 2025 Barry Zalma & ClaimSchool, Inc.
Insurance Expert May Not Testify to Speculative and Contains Unsupported Conclusions.
Posted on September 18, 2026 by Barry Zalma
See the full video at and at https://rumble.com/v7fmifw-expert-may-only-testify-to-what-experience-supports.html
In Michele A. Over, and The Estate Of Paul R. Over v. State Farm Mutual Automobile Insurance Company, and State Farm Fire And Casualty Company, Civil Action No. 23-cv-02243-PAB-STV, United States District Court, D. Colorado (September 14, 2026) Michele and Paul Over sued State Farm Fire and State Farm Auto over hail-damage and stolen-vehicle claims.
The operative dispute concerned State Farm Auto’s motion to exclude or limit opinions from plaintiffs’ insurance-industry expert, Aaron Castillo. Castillo.
Law
The proponent of expert testimony must establish by a preponderance of the evidence that an expert is qualified and that the opinions are helpful, sufficiently grounded, and reliably derived and applied. Experience-based opinions must explain how the...
150 Months in Prison for Tax Fraud
Post 4846
Posted on September 17, 2026 by Barry Zalma
See the full video at https://lnkd.in/g8rh3JBX and https://lnkd.in/gmkdy-9C, In United States Of America v. Thomas Addaquay, Nos. 25-10609, 25-10611, United States Court of Appeals, Eleventh Circuit (September 9, 2026) the Eleventh Circuit affirmed all challenged convictions, the 150-month aggregate sentence, and the challenged $4,123,474.55 restitution award.
FACTS
In United States Of America v. Thomas Addaquay, United States Of America v. Thomas Addaquay, Nos. 25-10609, 25-10611, United States Court of Appeals, Eleventh Circuit (September 9, 2026) the Eleventh Circuit affirmed all challenged convictions, the 150-month aggregate sentence, and the challenged $4,123,474.55 restitution award.
FACTS
Thomas Addaquay controlled United Consolidated Accounting and Business Services (UC), nominally a check-cashing business.
The government proved a three-stage tax-refund scheme that converted the resulting refund checks into usable funds through ...
Major Fraud Perpetrator Asserts Fifth Amendment Privilege to Avoid Prosecution
Post 5489
Posted on September 14, 2026 by Barry Zalma
Fraudster Refuses to Answer Questions About His Alleged Fraud
See the full video at https://lnkd.in/gvicAMDr and at https://lnkd.in/gvicAMDr
In Great American Insurance Co. v. Gemstone Property Management, LLC, et al., No. 23-cv-9100 (LJL), United States District Court, S.D. New York (September 8, 2026) Great American Insurance Company alleged that it was defrauded through a scheme in which Subin Associates, LLP recruited individuals to stage construction-site injuries, arranged unnecessary medical treatment and litigation funding, and pursued fraudulent personal-injury claims.
Luis Manuel Garcia Salcedo, resulted in a $6 million settlement. Non-party Jose Hernandez allegedly worked as an assistant manager at Subin, operated Hernandez Associates, and owned litigation-funding companies that shared office space with Subin and provided services to its clients.
After Great American ...
Plaintiff Must Allege the Who, What, When, Where, and How requirements of Federal Rule of Civil Procedure
Post 4573
Posted on October 30, 2026 by Barry Zalma
In Texoma Cowboy Church, Inc v. Church Mutual Insurance Company, S.I., Civil Action No. 7:26-CV-00062-O, United States District Court, N.D. Texas, Wichita Falls Division (October 22, 2026) Plaintiff Texoma Cowboy Church, Inc. was insured by Defendant Church Mutual Insurance Company, S.I. under a policy covering its property at 919 U.S. Hwy 281, Wichita Falls, Texas, from May 28, 2024, to May 28, 2025. The policy carried a $309,250.50 deductible for windstorm and/or hail coverage.
FACTS
On or about April 5, 2025, a hail and windstorm allegedly damaged the property. ProNet confirmed hail impact on April 5, 2025, producing dents and panel separations on the roofing, but found that water intrusion and interior damage predated the storm. Defendant also obtained a third-party contractor bid.
After deductible and depreciation, it paid $626,607.67. Plaintiff contended the estimate and ...
In the Prudential Insurance Company Of America v. Carol Gardina and George Gardina, No. 6:23-cv-1125-JSS-DCI, United States District Court, M.D. Florida, Orlando Division (October 22, 2026) Plaintiff sued Defendants for numerous causes of action stemming from its allegations that Defendants fraudulently collected benefits under their long-term care insurance policies.
Plaintiff's case proceeded to a nine-day jury trial, after which the jury found Defendants liable for fraudulent misrepresentation, fraudulent concealment, and civil conspiracy. The jury found Defendant Carol Gardina liable to Plaintiff for $1,930,129 in compensatory damages and Defendant George Gardina liable to Plaintiff for $12,496 in compensatory damages and $20 in punitive damages. Thereafter, the court entered judgment in Plaintiff's favor and awarded Plaintiff $1,930,129 in compensatory damages from Defendant Carol Gardina and $12,496 in compensatory damages and $20 in punitive damages from Defendant George Gardina.
THE APPEAL
Defendants ...
Plaintiff Must Allege the Who, What, When, Where, and How requirements of Federal Rule of Civil Procedure
Post 4573
Posted on October 30, 2026 by Barry Zalma
In Texoma Cowboy Church, Inc v. Church Mutual Insurance Company, S.I., Civil Action No. 7:26-CV-00062-O, United States District Court, N.D. Texas, Wichita Falls Division (October 22, 2026) Plaintiff Texoma Cowboy Church, Inc. was insured by Defendant Church Mutual Insurance Company, S.I. under a policy covering its property at 919 U.S. Hwy 281, Wichita Falls, Texas, from May 28, 2024, to May 28, 2025. The policy carried a $309,250.50 deductible for windstorm and/or hail coverage.
FACTS
On or about April 5, 2025, a hail and windstorm allegedly damaged the property. ProNet confirmed hail impact on April 5, 2025, producing dents and panel separations on the roofing, but found that water intrusion and interior damage predated the storm. Defendant also obtained a third-party contractor bid.
After deductible and depreciation, it paid $626,607.67. Plaintiff contended the estimate and ...
