Full Faith and Credit Act Controlled
Read the full article at https://lnkd.in/evHXiiFE and at https://zalma.com/blog.
Posted on June 9, 2026 by Barry Zalma
Post number 5368
Posted on June 9, 2026 by Barry Zalma
In Prime Insurance Company, Inc. v. Medicab Transportation, LLC, Jason Rhodes, and Dale Johnson v. Prime Insurance Company, Inc and Prime Property & Casualty Insurance, Inc. No. 2:24-cv-421-SPC-KRH, United States District Court, M.D. Florida, Fort Myers Division (June 3, 2026) Medicab, a paratransit company, bought two policies in 2021: a Business Auto Policy from PPCI and a Commercial Liability Policy from Prime. Both policies, as originally written, appeared to cover injuries arising from loading and unloading patients from Medicab vans.
After a patient, Margaret St. Aubin, fell while being unloaded from a van and suffered injuries, her Estate made a $1 million demand. Prime and its claims administrator concluded that the Commercial Policy’s loading/unloading language had been included by mutual mistake, because the parties allegedly intended only the Auto Policy to cover such automobile-related risks.
Prime then amended the Commercial Policy and filed a declaratory action in Utah seeking reformation of the Commercial Policy. Medicab did not appear, and the Utah court entered a default judgment reforming the policy and declaring no Commercial Policy coverage.
Later, the Estate obtained a $412,440.71 judgment against Medicab and its employees in Florida, exceeding the Auto Policy’s $100,000 limit. Prime then filed this federal action in Florida, while Medicab counterclaimed for breach of contract, bad faith, fiduciary breach, and misrepresentation.
LAW
Under the Full Faith and Credit Act, 28 U.S.C. § 1738, a federal court must give a state-court judgment the same preclusive effect it would receive in the rendering state. Applying Utah preclusion law, the court distinguished between claim preclusion and issue preclusion (collateral estoppel). Issue preclusion applies when:
1. the issue is identical to one decided previously,
2. there was a final judgment on the merits,
3. the issue was fully and fairly litigated, and
4. the party to be estopped was a party or in privity with a party in the earlier action.
Utah law also recognizes that a default judgment counts as a judgment on the merits, and that an insurer-insured relationship may create fiduciary duties in the third-party insurance context. Fraudulent and negligent misrepresentation claims require falsity, reliance, causation, and damages.
For collateral estoppel to bar a subsequent claim, four elements must be satisfied: (1) the issue challenged must be identical in the previous action and in the present case; (2) the issue must have been decided in a final judgment on the merits in the previous action; (3) the issue must have been competently, fully, and fairly litigated in the previous action; and (4) the party against whom collateral estoppel is invoked in the current action must have been either a party or privy to a party in the previous action.
DISCUSSION
The court held that the Utah default judgment had substantial preclusive effect. Medicab was a party to the Utah action. That preclusion barred Medicab’s contract claims, declaratory claim, and good-faith claim, because the Utah judgment had already determined that the Commercial Policy must be reformed, provided no coverage for the accident, and imposed no duty on Prime to defend or indemnify.
Utah law clearly indicates that default judgment is a judgment on the merits.
ANALYSIS
The case turns almost entirely on issue preclusion. The Florida federal court treated the Utah default judgment as binding not only on Medicab, but also on Medicab’s employees, because their rights depended on the same policy language and coverage position. When federal courts are asked to give res judicata effect to a state court judgment, it must apply the res judicata principles of the law of the state whose decision is set up as a bar to further litigation.
The court was also careful to separate claims that truly overlapped with the Utah adjudication from those that did not.
CONCLUSION
The Court declined Medicab Defendants’ invitation to set aside the Utah judgment. The court held that the Utah judgment precluded Medicab from relitigating whether the Commercial Policy covered the accident or whether Prime had a duty to defend or indemnify. Accordingly, Medicab’s claims for breach of contract, breach of good faith, declaratory relief, and breach of fiduciary duty failed, and PPCI was dismissed entirely.
ZALMA OPINION
Allowing a court to enter a default judgment against a plaintiff is a serious error. Once the judgment is entered it becomes final and all other courts, including federal courts, must give credit to the judgment regardless of claims providing to the judgment. The claims of bad faith died because of the default judgment.
(c) 2026 Barry Zalma & ClaimSchool, Inc.
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Post 5407
Fraud & the Fear of Bad Faith Suits
Posted on July 22, 2026 by Barry Zalma
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.
After ...
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Post 5397
Posted on July 20, 2026 by Barry Zalma
See the video and at https://lnkd.in/gNUs2XzT and at https://lnkd.in/g2MawyzX
Magistrate Issues a Search Warrant if there is a Fair Probability that Contraband or Evidence of a Crime will be Found in a Particular Place.
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As part of the investigation, the FBI obtained an August 19, 2022 warrant to search Driscoll’s Sterling Pharmacy Yahoo email account for emails from January 1, 2018 through December 31, 2020. Driscoll moved to suppress the resulting evidence, arguing that the warrant lacked probable cause, was overbroad, and rested on material misstatements and omissions.
LAW:
The ...
Fraud Shouldn’t Pay
Post 5396
See the video and at https://rumble.com/v7ctgmq-the-great-jewel-theft.html at https://youtu.be/aRbQ2sJfGwA
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.
The Insured purchased, for the first time in his life, a policy of Personal Articles Floater Insurance (PAF) scheduling $125,000 worth of ladies jewelry. He advised the insurer that the jewelry was always kept in a class E safe at his residence. He also told the insurer that he was employed full time as the owner of a gasoline service station and that he had never been canceled or suffered a previous loss.
One month after the policy was ...
Day Care Owner Loses Subsidies Because She Criticized State
Post 5421
Posted on August 11, 2026 by Barry Zalma
First Amendment Right Will be Allowed to Go to Trial
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Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units. After an underlying personal injury action was filed, Union Mutual determined that the property actually contained three apartment units and rescinded the policies on the ground that the defendants had made a material misrepresentation in the applications.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true ...
Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true facts been disclosed. To establish materiality as a matter of law, the insurer must submit documentation of its underwriting practices, such as manuals, guidelines, bulletins, or rules addressing similar risks.
DISCUSSION/ANALYSIS:
As a result, the...
