Zalma on Insurance
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Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
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July 21, 2026
Commit Fraud and Suffer Consequences

Victims of Fraud Should Always Fight Back Proactively

Post 5398

Posted on July 21, 2026 by Barry Zalma

Cross-Claim Against Fraudsters Successful

In Dual Diagnosis Treatment Center, Inc., et al. v. Health Net, Inc., et al., Health Net Life Insurance Company, B331260, California Court of Appeals, Second District, Third Division (July 16, 2026) a trial verdict in favor of Health Net and against Sovereign, a network of mental health and substance use disorder treatment centers, and Health Net, Inc., Health Net of California, Inc., Health Net Life Insurance Company, and Managed Health Network, Inc. (collectively, Health Net) was appealed to the California Court of Appeals.

FACTUAL BACKGROUND

Between 2014 and 2016, Sovereign submitted claims to Health Net for medical care provided to more than 400 patients. Health Net paid some claims but rejected many others. Sovereign, as the patients' assignee, sued Health Net for breach of contract, insurance bad faith, and breach of the Employee Retirement Income Security Act of 1974 (ERISA).

Health Net cross-claimed for fraud, intentional interference with contractual relations, and unfair competition, among other things.

Health Net paid some claims but rejected many others. Health Net alleged Sovereign carried out a broad insurance-fraud scheme involving illegal patient referral fees, false residency information, premium payments and cost-sharing waivers concealed from Health Net, unnecessary services, falsified records, and inflated billing.

Before trial, the court found Sovereign had paid unlawful referral fees for more than 300 patients. After a seven-week jury trial and a later bench trial on equitable claims, judgment was entered for Health Net, including substantial damages and restitution against Sovereign and Dr. Sharma.

LAW:

The court applied California rules governing summary adjudication, the Unfair Competition Law (UCL), Insurance Code section 750, unclean hands, fraud, insurance bad faith damages, ERISA exhaustion principles, and appellate prejudice.  A UCL plaintiff must show economic injury and loss of money or property but need not prove a precise amount at the standing stage.

The UCL may reach unlawful, unfair, or fraudulent business practices. The unclean-hands doctrine may bar relief in legal and equitable actions when the plaintiff’s misconduct directly relates to the transaction at issue and makes recovery inequitable.

Civil judgments are not reversed for procedural, evidentiary, instructional, or damages-related error absent a showing of prejudice.

DISCUSSION:

On appeal, Sovereign challenged the pretrial UCL ruling, the summary adjudication of Health Net’s fraud and unclean-hands defenses, several jury instructions, exclusion of California Department of Insurance materials, the ruling limiting bad-faith damages, and the judgment on ERISA claims.

The Court of Appeal emphasized that Sovereign’s briefing failed to fairly summarize the extensive trial record, limiting appellate review. The court held that any possible error in the pretrial UCL ruling was harmless because the trial court later found, after trial, an independent basis for restitution under the unfair and fraudulent prongs of the UCL. It also concluded Sovereign failed to show error in the unclean-hands ruling, because the illegal referral payments directly related to the claims for payment arising from those same referred patients.

ANALYSIS:

The decision turned on Sovereign’s inability to show reversible prejudice. The appellate court repeatedly held that even if certain rulings were questionable, Sovereign did not demonstrate a reasonable probability of a more favorable result.

The unclean-hands holding is especially important because it allowed the court to bar recovery by the assignee based on the assignee’s own misconduct, even though the patients themselves were not alleged to have acted wrongfully.

The court also treated the trial findings of pervasive fraudulent business practices as supporting restitution beyond the patients obtained through illegal referral fees.

CONCLUSION

Sovereign admitted that it paid consultants for patient referrals, but contended that the practice was lawful and known to Health Net. Sovereign thus urged that Health Net was not harmed by the payment of referral fees because it would have been responsible for claims in the same amounts even if treatment had been rendered by other providers.

The Court of Appeal affirmed the judgment in full. Sovereign did not establish prejudicial error as to the UCL ruling, unclean-hands defense, jury instructions, evidentiary exclusions, Brandt-fee ruling, or ERISA claims. In addition  Respondents were awarded appellate costs.

ZALMA OPINION

People who have perpetrated insurance fraud and deceived their clients have the unmitigated gall to sue the clients they were defrauding. Usually, the victims will defend aggressively or seek to negotiate a settlement. Healthnet did not settle, did not negotiate, it cross-claimed and established the unlawful conduct, an action that worked and took the profit out of the fraud and attempted fraud.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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August 27, 2026
Offer Made and Accepted Creates Enforceable Contract

Policy Limits Demand Accepted Settles Claim

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.

FACTUAL BACKGROUND

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 ...

00:08:28
August 26, 2026
Offer Made and Accepted Creates Enforceable Contract

Policy Limits Demand Accepted Settles Claim

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.

FACTUAL BACKGROUND

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 ...

00:08:28
July 22, 2026
The Real Cost of Fraud

The Largest Residential Burglary of All Time
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 ...

00:12:33
10 hours ago
A Charge of Insurance Fraud is not Grounds for Deportation

Habeas Corpus Petition Granted

Post 5483

Posted on September 2, 2026 by Barry Zalma

Over Staying Visa & Charge of Insurance Fraud Still Entitled to Habeas Relief and a Bond Hearing

In Hernan Guillermo Palomino-Crespo v. Warden, Glades County Detention Center et al., No. 2:26-cv-02322-SPC-NPM, United States District Court, M.D. Florida, Fort Myers Division (August 26, 2026) Hernan Guillermo Palomino-Crespo’s Amended Petition for Writ of Habeas Corpus, the government’s response and Palomino-Crespo’s reply.

FACTUAL BACKGROUND

Palomino-Crespo is a native and citizen of Colombia who lawfully entered the United States on a B-2 non-immigrant visa on February 24, 2017. He resides in Miami, Florida with his wife and two minor children, owns and operates a residential restoration and remodeling business, and files U.S. tax returns.
On June 4, 2026, the State of Florida charged Palomino-Crespo with insurance fraud.

Palomino-Crespo claimeds he did not meet the requirements for mandatory detention under § ...

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September 01, 2026
Zalma’s Insurance Fraud Letter –September 1, 2026

ZIFL Volume 30, Issue 17

THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL

Posted on September 1, 2026 by Barry Zalma

Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in educing 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/

This issue contains the following articles about insurance fraud:

Bad Faith Suit Fails

State Farm Must Try Breach of Contract Claim Only

Breach of Condition is Ground to Deny Claim and Void Policy

In Arutyun Darakchyan v. State Fann General Insurance Company et al., No. 2:25-cv-03880-CAS-AJRx, United States District Court, C.D. California (August 11, 2026) Plaintiff Arutyun Darakchyan sued State Farm General Insurance Company after State Farm denied his homeowners burglary claim for losses allegedly sustained at his Tarzana residence.

Read the rest of the article and the full issue of ZIFL at ...

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August 28, 2026
A Factual Dispute is Enough to Require Trial

No Summary Judgment for Bad Faith for Lack of Evidence

Post 5437

Posted on August 28, 2026 by Barry Zalma

Genuine Dispute of Material Fact Avoids Summary Judgment

In Riley and Rebecca Ross v. Allstate Vehicle And Property Insurance Company, and Illinois Corporation, No. 2:25-CV-00006-JAG, United States District Court, E.D. Washington (August 18, 2026), Pending before the USDC was Defendant’s Motion for Partial Summary Judgment the plaintiffs brought claims against Allstate arising from its handling of an insurance claim. They alleged Allstate failed to make proper payment, adequately investigate the loss, retain an expert, respond to communications, and properly value damages including alternative living expenses and damage to a hydronic heating system.

Plaintiffs argued Defendant failed “to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies.”

ISSUES

Allstate sought dismissal of the plaintiffs’ claims under the Insurance Fair Conduct Act (IFCA), ...

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