ZALMA’S INSURANCE FRAUD LETTER

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Quote of the Issue -- “I refuse to join any club that would have me as a member.” - Groucho Marx  

The Covenant of Good Faith Applies Equally to the Insured

Presenting a False Application Allows Insurer to Rescind Policy

Much is written about the tort of bad faith. Usually claiming an insurer did something improperly to deprive an insured of the benefits of an insurance policy. Almost never reported is when an insured acts to deprive an insurer of the benefits of the insurance policy since the public is never told that the duty to deal fairly and in good faith applies equally to both parties to the policy of insurance.

In Hanover Insurance Company v. Aramount Financial Services, d/b/a Tax Tiger; Partricial Lanning; Ramil Abratique; Caryl Griffith-Abratique; Charlotte Hancey; Stephanie Hurst; Robert Kleeman Jr.; Law Ofice Of Michael E. Cain L.L.C.; Brian Michaud; Scott Reed; Laura Reed; Catherine Repp; Rafael Rodriguez; David Sanders Marsha Sanders; Roger Scott; Stephen Strong; Shari Strong; Particia Taylor; and Ronaldwoodcock, Civil Action No 18-cv-02149-RBJ, United States District Court For The District Of Colorado (January 28, 2020) Hanover Insurance Company sought rescission of an Accountants Professional Liability Insurance Policy that it had issued to Paramount Financial Solutions. Hanover moved for summary judgment in order to obtain a judicial ruling that the policy is void.

BACKGROUND

On June 5, 2017 defendant Patricia Lanning, as Chief Financial Officer of Paramount Financial Solutions Inc., d/b/a Tax Tiger, executed a renewal application for an Accountants Professional Liability Insurance policy for the period June 25, 2017 to June 25, 2018. Among other things Ms. Lanning represented that after inquiry of all owners, partners, officers and professionals of the firm and affiliates, she had no knowledge of any incidents or circumstances that might result in a claim being made against Tax Tiger.

In reliance on the representations made in the application Hanover issued the policy. The Plaintiff proved that Ms. Lanning began accepting upfront fees for services from clients but not performing any professional services for those clients. In February 2018 Ms. Lanning caused Tax Tiger to cease conducting the business of Tax Tiger and closed the office location. Since that time Hanover received notices of claims from various clients of Tax Tiger who contend that they paid Tax Tiger fees for tax services that were never performed.

Hanover sued claiming that it is entitled to rescind the policy due to the misrepresentations and omissions in the application. Alternatively, it seeks a declaration that it has no obligation to defend or indemnify the insured against any of the clients’ claims.

FINDINGS AND CONCLUSIONS

No defendant has disputed the fact that Ms. Lanning, on behalf of Tax Tiger, knowingly and intentionally misrepresented material facts and omitted to disclose material facts in the application to renew the policy, i.e., that, she was taking payments from clients but was not providing professional services to them.

The court concluded that Hanover properly rescinded the policy and that even if the policy was not voided by the insured’s conduct, that conduct would eliminate coverage under the policy for claims based on that conduct.

ZALMA OPINION

When an insured obtains a policy of insurance based upon a knowing misrepresentation of a material fact – and I can’t think of anything more material than an accountant who takes fees and fails or refuses to do the work – allows for rescission. The business of insurance is a business of utmost good faith. Obtaining a policy based upon one or more material lies is fraud and allows the insurer to declare that the policy never existed.

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The Need to Report Potential Fraud to The Insurer and The State

The adjuster’s captioned report must explain facts that lead to the suspicion of fraud.

It should state whether reports have been made of a potential fraud to the local police, the Fraud Division or Bureau of Fraudulent claims if the adjuster’s state has one, or other official agency for the reporting of crimes.

A report of a suspected fraudulent claim is mandated by the Model Insurance Fraud Act of the Coalition Against Insurance Fraud, and various state statutes regarding the reporting of crimes.

Fraud Unit or Bureau Statutes have been enacted in almost every state. The adjuster should be familiar with the statutes and regulations in the jurisdiction where the adjuster works and where the claim occurred.

The adjuster must also report to management whether demands for documents have been made to the adjuster by arson investigators or police authorities. Cooperation with such demands is mandated by the Model Insurance Fraud Act, and various state statutes regarding the reporting of crimes. The adjuster must establish the requirements in the particular jurisdiction in which he or she works. Note that more states have adopted the arson reporting statutes than statutes concerning other types of insurance fraud.

The adjuster must also report whether a report has been filed with the Property Insurance Loss Register (PILR) — a type of “Index Bureau” for property losses where subscribing companies can obtain a report on other losses reported by the insured as reported by other insurers, the National Insurance Crime Bureau (NICB), the INDEX System or the ISO All Claims Database that includes a data base of property losses. It is not complete, but it can provide useful information.

Adapted from my book, The Compact Book of Adjusting Property Insurance Claims – Second Edition Available as a Kindle book and as a paperback from Amazon.com.

Barry Zalma

Barry Zalma is the principal of Barry Zalma, Inc. He is available for consultation on any and all insurance issues faced by you or your clients.

Barry Zalma founded the firm to help resolve every insurance claim problem faced by you or your clients. His experience and skill as a consultant can make the difference before a jury or other trier of fact. For more than 45 years as a claims person and insurance coverage attorney, Barry Zalma has represented insurers, advised insurers on claims handling, interpreted coverages and testified as an insurance coverage, insurance bad faith, insurance claims handling and insurance fraud expert on behalf of insurers and policy holders’ suing insurers.                                                                                                                                                                     

Mr. Zalma has been rated “AV Preeminent” and is an internationally recognized expert on insurance, insurance claims handling, insurance coverage, insurance fraud, and insurance bad faith. Barry Zalma will promptly review your file materials and advise you about the viability of your decision to sue or your defenses. He can help you narrow the scope of discovery.

Consultation with Mr. Zalma can save you or your client thousands of dollars in the defense or prosecution of an insurance dispute. Mr. Zalma will assist you in the effort to find a solution to an insurance claims dispute that is fair, intelligent, beneficial and economical.

He is available to provide expert advice to individuals and their counsel.

Mr. Zalma’s rates are all inclusive. Mr. Zalma’s hourly fee of $600 per hour, portal to portal, takes account of all incidentals from telephone calls to postage.

Wisdom

“I have the feeling that I’ve seen everything, but failed to notice the elephants.” – Anton Chekhov

“I was smart enough to go through any door that opened.” – Joan Rivers

”A bureaucrat is the most despicable of men, though he is needed as vultures are needed, but one hardly admires vultures whom bureaucrats so strangely resemble. I have yet to meet a bureaucrat who was not petty, dull, almost witless, crafty or stupid, an oppressor or a thief, a holder of little authority in which he delights, as a boy delights in possessing a vicious dog. Who can trust such creatures?” —Marcus Tullius Cicero

“How are children supposed to learn to act like adults, when so much of what they see on television shows adults acting like children?” – Thomas Sowell

“The first duty of a newspaper is to be accurate. If it is accurate, it follows that it is fair.” —Herbert B. Swop

“Powers once assumed are never relinquished, just as bureaucracies, once created, never die.” — Charley Reese

“Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.” —John Adams

“Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children and our children’s children what it was once like in the United States where men were free.” —Ronald Reagan

“Class is an aura of confidence that is being sure without being cocky. Class has nothing to do with money. Class never runs scared. It is self-discipline and self-knowledge. It’s the sure footedness that comes with having proved you can meet life.” — Ann Landers

“I can say what most conductors cant’t say – I never ran my train off the track and I never lost a passenger.” – Harriet Tubman

”Men of energy of character must have enemies; because there are two sides to every question, and taking one with decision, and acting on it with effect, those who take the other will of course be hostile in proportion as they feel that effect.” —Thomas Jefferson

Insurance Fraud Is Epidemic

Insurance fraud continually takes more money each year than it did the last from the insurance buying public. There is no certain number. Most attempts at insurance fraud succeed. Estimates of the extent of insurance fraud in the United States range from $87 billion to more than $300 billion every year.

Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of sufficient investigation and prosecution of insurance criminals is endemic. Most insurance fraud criminals are not detected. Those that are detected do so because they became greedy, sloppy and unprofessional so that the attempted fraud becomes so obvious it cannot be ignored.

The National Insurance Crime Bureau (NICB) estimates that almost 25% of the bodily injury claims related to auto crashes are bogus. Property and casualty claims against auto insurance are not much better, coming in at around a 10% fraud rate.

A person commits the offense of insurance fraud by knowingly and with the intent to defraud any insurer presents or causes to be presented to any insurer any statement forming a part of, or in support of, a claim that contains any false, incomplete or misleading information concerning any fact or thing material to the claim. [18 Pa.C.S.A. § 4117(a)(2).] A person acts “knowingly” when he or she is aware that it is practically certain that his or her conduct will cause such a result. Likewise, a person acts “intentionally” when “it is his or her conscious object to engage in conduct of that nature or to cause such a result.

In Illinois insurance fraud is a creature of statute. Section 17-10.5(a)(1) of the Illinois Criminal Code of 2012 defines insurance fraud in the following manner:

A person commits insurance fraud when he or she knowingly obtains, attempts to obtain, or causes to be obtained, by deception, control over the property of an insurance company or self-insured entity by the making of a false claim or by causing a false claim to be made on any policy of insurance issued by an insurance company or by the making of a false claim or by causing a false claim to be made to a self-insured entity, intending to deprive an insurance company or self-insured entity permanently of the use and benefit of that property.” 720 ILCS 5/17-10.5(a)(1) (West 2016). [Hale v. Travelers Indem. Co., 2019 IL App (1st) 18-2707-U (Ill. App., 2019)]

The National Heath Care Anti-Fraud Association estimates conservatively that health care fraud costs the nation about $68 billion annually — about 3 percent of the nation’s $2.26 trillion in health care spending. Other estimates range as high as 10 percent of annual health care expenditure, or $230 billion. Add that to the property and casualty fraud estimate and the total number becomes egregious.

No one will ever be able to place an exact number on the amount lost to insurance fraud. Everyone who has looked at the issue knows – whether based on their heart, their gut or empirical fact determined from convictions for the crime of insurance fraud – that the number is enormous.

When insurers and governments put on a serious effort to reduce the amount of insurance fraud the number of claims presented to insurers and the pseudo-government-based or funded insurers drops logarithmically.

Insurance fraud is not limited to the US. In Britain fraud costs the British economy amounts estimated in billions of British pounds. Since the amount of fraud actually detected is a small portion of what was actually found, the estimates published are little more than an educated guess.

As the industry attempts to keep pace with fraudsters’ varied, ever-shifting tactics, it must deploy more innovative, effective anti-fraud technologies or risk dire losses. Vendors and organizations include the Coalition Against Insurance Fraud (CAIF), CSC, Detica NetReveal, Equifax, Experian, FICO, IBM, Innovation Group, Insurance Bureau of Canada (IBC), ISO/Verisk, KPMG, LexisNexis, Mattersight, Mitchell, the National Insurance Crime Bureau (NICB), SAP, SAS, and TransUnion.

Insurers must also generate a close relationship with the state insurance department’s fraud division or fraud bureau, local police agencies, the FBI, the ATF, the Postal Investigation Service, the local fire department’s arson unit, local prosecutors, and the local U.S. Attorneys if they are to have any chance to reduce the effect of insurance fraud. Insurers should also work to make the general public, state legislators, state governors, congress members and U.S. Senators, and the Attorney General of the United States aware of the effect insurance fraud has on the public at large and the insurance industry.

Wherever insurance is written insurance fraud exists. It is an equal opportunity fraud committed by people of every race, religion or national origin.

Insurers who do not exercise serious anti-fraud efforts often complain that the local district attorneys and police agencies give a low priority to the crime of insurance fraud. No matter how seriously the insurers work to prove fraud the authorities often ignore them. In response, police and prosecutors complain that the insurers do nothing that police and prosecutors can use to prosecute the crime of insurance fraud while insurers complain that prosecutors ignore them when they present evidence of a fraud. There is truth in both complaints. Insurers, although compelled by statute to investigate potential insurance fraud and to present the results of their investigations to prosecutors, they are not trained as police officers.

This book is written to make it clear to insurers, police and prosecutors that it is necessary to stop complaining and start working together to reduce the extent of insurance fraud. If they do not work together the crime will continue to metastasize until it will be impossible to write insurance at a profit or for a price anyone can afford.

The logarithmic growth of fraud against insurers and government based programs like Medicare and Medicaid, will eat away any chance insurers – and their shareholders – can operate successfully. In addition, medical fraud perpetrated on federal and state agencies, will increase the tax burden of those who pay taxes to support Medicare, Medicaid and the so-called “Affordable Care Act” or Obamacare, will be insufferable.

In fact, insurers are almost universally ignored by police agencies when the insurer victim reports the crime. When insurance criminals are caught in the act they are seldom arrested, even less often prosecuted and almost never punished seriously. In addition to educating police and prosecutors insurers must work to educate the judiciary that the crime of insurance fraud is a serious crime that often causes injury or death to the innocents who are the conduit used by the fraud perpetrators to reach the deep pockets of the insurance companies or the state or federal governments.

Police and prosecutors must deal with insurers who are not equipped to perform an adequate criminal investigation. Insurer employees seldom have police or prosecutorial experience. They are in business to provide to those who buy insurance the benefits promised by the policy.

When faced with fraud employees of insurers are only qualified to conduct the investigation necessary to protect the insurer from civil litigation by a fraud perpetrator. In addition, the implied in law covenant of good faith and fair dealing and state fair claims settlement practices acts, impose on insurers an obligation to make every effort to pay claims fairly, promptly and without unnecessary delay.

If prosecution of insurance fraud is to be successful it is necessary that insurers, prosecutors and police agencies work together as a team dedicated to defeat the crime of insurance fraud. To do so the insurers must train their staff to recognize the elements of both the crime of insurance fraud and the elements of the civil tort of insurance fraud. If well trained, insurance personnel collecting information about a potential insurance fraud, will know the type and quality of information that either a prosecutor or a civil defense lawyer will need to prove fraud was attempted.

Some estimates indicate that more money goes out fighting fraud than is saved. Others show that every dollar spent by insurers to defeat fraud save the insurer as much as seven dollars in fraudulent claims. Although insurance fraud is a crime in almost every jurisdiction in the United States, it is the only crime where the victim is required to perform the investigation from its funds and to pay special taxes to support investigation and prosecution by public agencies of crimes committed against it. The Departments of Insurance across the country continue to add taxes on insurers and the insurance buying public to pay for the state’s portion of the fight against insurance fraud.

Insurers are compelled by statute and Regulation to maintain Special Fraud Investigation Units, publish and fulfill a detailed anti-fraud program and train all of their anti-fraud personnel. Compliance by insurers is less than constant across the industry. Some have effective fraud units while others simply identify one employee as its anti-fraud director although his or her work is almost totally adjusting claims and not investigating fraud. The expense of staffing and pursuing the anti-fraud efforts required by statute and regulation reduces the profits earned by the insurer and is believed to be offset by the lack of payment to fraud perpetrators. Of course, these efforts are also made difficult by the imposition of fair claims settlement practices regulations that require quick, complete, thorough investigations and fair treatment and prompt payment of insureds even when fraud is suspected. The two opposing sets of laws create a Catch-22 from which insurers find difficulty complying with both.

The Departments of Insurance audit insurers regularly to be sure that each insurer works hard to train its people to investigate and seek prosecution of the crime of insurance fraud. Failure to do so sufficiently allows the state Department of Insurance to fine the insurer for not doing the work traditionally the duty of the state to investigate and prosecute crime.

In addition, adding insult to the injury, courts and juries assess tort and punitive and exemplary damages against insurers who under the compulsion of the Departments of Insurance to defeat fraudulent claims and, as required, accuse their insured’s of fraud. If the insurer fails to prove the fraud and the police agencies, including the Departments of Insurance, fail to prosecute following the direction of the Departments of Insurance are dangerous.

Similar businesses in the financial sector, who are also regular victims of fraud and other crimes, are not taxed or compelled to investigate crimes committed against them. No state agency or person demands that a local or national bank pay for prosecuting embezzlers or armed robbers. No state agency or person demands that convenience store owners pay for prosecuting people who hold up 7-11 stores. No Regulator requires stockbrokers to investigate money laundering or fraudulent transactions.

The imposition upon the insurance industry – and the attendant cost passed to the insurance consumer – is unique. Insurers are treated differently than all other businesses in the United States. George Orwell was right when, to paraphrase what he had a character in “Animal Farm” say, “all businesses are equal, some are more equal than others.”

Clearly, insurers are less equal with regard to crimes perpetrated against them than are other businesses. They are the only business required to pay for special investigators and prosecutors to investigate crimes against them. They are the only business required, by statute, to investigate crimes against them and produce the evidence to the prosecutors. Without the power and immunity available to police agencies insurers are damned and fined if they don’t comply and are damned with tort and punitive damages plus the cost of defending bad faith suits if they comply with the statutes and regulations.

Good News From the

* A Chicago rapper wanted fame and riches. So, he had his mother killed for life insurance to flaunt more wealth. Young QC (real name Qaw’mane Wilson) was Yolanda Holmes’ only child. She brought him a Camaro, jewelry, designer clothes, and even helped him find steady work. Yet Wilson wanted to boost his new rap career by showing over-the-top wealth. So he hired Eugene Spencer to kill Yolanda. Spencer rode with Wilson’s girlfriend to Yolanda’s apartment and shot her as she slept in her bed. Spencer called Wilson who told him, “Make sure the b— is dead.” Spencer stabbed Holmes moments later. Check out his YouTube video — Wilson withdraws $20,000 from a bank. He later went to a local nightclub and threw money in the air for friends and fans to collect. “I just want to say, nobody loved my mother more than me. She was all I had. That’s it,” Wilson told the judge. Wilson received 99 years in prison, and Spencer 100 years.

* Trisha A. Wiehl must face up to her crimes. The Smith Center, Kans. agent filed bogus claims against clients’ policies and kept at least $100,000 of payouts. She also stole premiums without buying coverage. Among the victims were the board of the Smith County Fair, the city of Smith Center and a local business. Smith also forged signatures — including the signature of the Smith Center City Clerk — to take out loans in the names of clients. She used the stolen loan money to pay their premiums. Smith must pay a $3,000 fine and serve 36 months probation. The Kansas insurance department and AG’s office teamed on the investigation and conviction.

* Six spent .22 shell casings laid on the ground next to Donald Bachman Jr.’s body. He bled from the right side of his head. The Wilkes Barre-area, Pa. man’s stepdaughter Kendra L. Dias paid a hitman $1,500 to kill Donald so she could score a life-insurance payout. She’d approached 2 others for the hit. They declined. Dias finally carried out the hit. The 2 guys told police after seeing TV news stories that Bachman finally was killed. They met Dias and expressed surprise that Dias found someone to kill Bachman without having any money. She leaned into their vehicle and laughed. Dias pled guilty and will serve up to 12 years in state prison.

* A celebrity cosmetic surgeon blithely invented medical diagnoses he knew insurers would pay for — falsely billing $50 million for trumped-up surgeries in Rancho Mirage, Calif. David Morrow billed nose jobs as fixing deviated septums. Tummy tucks magically became hernia repairs or abdominal reconstructions. Breast lifts were surgeries for “tuberous breast deformities.” Morrow forged test results, medical notes and surgical records to back up his fantasy world. He even covered up the text of records for a patient’s “abdominoplasty” (tummy tuck): He hand-wrote “umbilical & ventral hernias” on top of the original wording. Morrow also stole patient names, medical info and signatures to secretly charge insurers for surgeries he never bothered performing. Morrow and his wife sold their Beverly Hills mansion for $9.45 million, and fled to Israel in 2017. Morrow was extradited back to the U.S., and begins serving his 20-year federal sentence.

* Two cases from the Arkansas insurance department: A family’s home was wrecked by fire in Faulkner County. The unnamed resident submitted a lease agreement for $2,000 a month. The insurer adjuster looked into the matter, and discovered the listed rental owner didn’t own the home. It was owned by Harding Crafton Management. The resident actually signed a lease for $1,300 per month. The resident received 3 years of supervised probation. … Terrion Barnes used a fake auto-insurance card to try and register his vehicle in Little Rock, Ark. The clerk noticed the listed insurer was an agency instead of a company. The clerk called the agency to confirm the coverage, and was told the policy was bogus. The state fraud bureau contacted Barnes, who said he bought the insurance card for $55 from a stranger in Little Rock. He could give no further explanation. He was handed 4 years of supervised probation and must pay a $1,000 fine.

* An online health-record firm will pay $145 million for seeking and receiving kickbacks from drug companies to use its software to influence physicians prescribing opioid pain meds. Vermont-based Practice Fusion got kickbacks from pharma firms to implement clinical-decision alerts in its records software to increase scripts for their opioids. Practice Fusion’s software wrote numerous scripts after receiving alerts that pharma firms helped design. The alerts caused docs to write more scripts for extended-release opioids than were medically necessary. The drug firms chose the guidelines used to develop the alerts, set the criteria to decide when med providers receive alerts, and even helped draft language used in the alerts. The alerts didn’t always reflect accepted medical standards. Practice Fusion also touted the money the pharma companies would make from increased sales of opioids resulting from the alerts.

* More fallout amid defrocked agent Kelsey Ketron’s premium-scam charges … The well-connected Tennessee politico who’s also an insurance agent ran an agency in Murfreesboro. She allegedly stole clients’ homeowner premiums. Ketron allegedly led a couple to believe they were insured. In fact, they had no coverage when a frozen pipe burst inside their home, officials say. The incident caused $127,230 of uninsured damage. Another client, Wade T. Hellemn, filed a complaint after his home sustained water damage. He says he paid $4,000 for a homeowner policy, then discovered he had no coverage when he filed a claim. Now for the latest fallout: The insurance department fined Ketron $23,000 and yanked her license. Ketron also stepped down from her 4-year term representing her home district on the state GOP leadership body. She still must deal with 56 criminal counts.

Health care, workers’ compensation and auto insurance are believed to be the sectors most affected by insurance fraud. However, insurance fraud comes in all shapes and sizes. They include:

·                    Staged Auto Accidents.

·                     Arson-for-profit.

·                    Health Insurance Fraud (corporate).

·                    Health Insurance Fraud (individual).

·                    Faked Death.

·                    Murder for Insurance.

·                    Insurer Fraud.

·                    Faked thefts.

·                    Murder for life insurance proceeds.

·                    Workers’ Compensation fraud.

Some insurance professionals divide insurance fraud by the intent of the deceiver. They segregate insurance fraud into “hard” and “soft” fraud about which we will deal in detail below.

Health Insurance Fraud Convictions

Seven and a Half Years for Medicaid Fraud

Ryan Sheridan, 39, of Leetonia, apologized before his sentencing Wednesday in Youngstown. He pleaded guilty in October to 60 counts that included conspiracy, health-care fraud, operating a drug premises and money laundering charges.

Sheridan, the owner of two closed substance abuse treatment centers in Ohio was sentenced to 7 1/2 years in prison for what federal authorities proved was a massive Medicaid fraud scheme.

According to prosecutors, Sheridan’s Braking Point Recovery Services treatment centers outside Youngstown and Columbus submitted nearly 135,000 claims totaling $48.5 million from May 2015 to October 2017. Medicaid paid Braking Point $31 million based on those claims.

 Minnesota Attorney Pleads Guilty in Insurance Fraud Scheme

William Sutor III, a personal injury attorney in Minnesota’s Twin Cities, pleaded guilty to defrauding auto insurance companies by making false health care claims.

On February 3 Sutor entered the plea to one count of conspiracy to commit health care fraud as part of an agreement with federal prosecutors. Sutor was accused of working with chiropractors to bill insurance companies for treatments that he knew the patient never received.

In June 2015, a so-called runner brought Sutor a prospective client. The following April, Sutor submitted a letter to the insurance company falsely stating the client, who was actually an undercover agent, had received chiropractic treatment totaling $24,000 to settle a bodily injury claim, the Star Tribune reported.

The plea deal has prosecutors asking for 10 to 16 months, plus up to $55,000 in fines and $14,600 in restitution.

Washington Woman Pleads Guilty After Filing 27 Fake Injury Claims

Rebecca Tabares Garza, of Yakima, Wash., pleaded guilty in Yakima County Superior Court to first-degree theft and filing a false insurance claim for 27 injuries she said occurred to herself and her family.

Garza was sentenced to two months of home detention, six months of community custody and was ordered to pay $5,175 in restitution and $600 in court fees.

Officials charged Garza with three counts each of filing a false insurance claim, forgery and second-degree theft in March 2019 after an investigation by Washington Insurance Commissioner Mike Kreidler’s Criminal Investigations Unit.

According to the investigation, Garza purchased an accident-only policy for herself and her family from American Fidelity Insurance in 2013. The policy provides coverage for injury or death as a result of an accident.

From 2013 until 2017, Garza submitted 27 injury claims. Based on the number of claims, American Fidelity opened an investigation into Garza. The insurer identified three claims in 2017 totaling $5,175 for herself and her adult children that she substantiated with falsified medical documentation. American Fidelity canceled Garza’s policy and referred the case to Kreidler’s CIU.

Four Detroit-Area Physicians Found Guilty of Health Care Fraud Charges for Role in Over $150 Million Health Care Fraud Scheme

Spilios Pappas, 62, of Lucas County, Ohio, Joseph Betro, 59, of Oakland County, Michigan, Tariq Omar, 62, of Oakland County, Michigan, and Mohammed Zahoor, 53, of Oakland County, Michigan, were each found guilty of one count of conspiracy to commit health care fraud and wire fraud, and one count of health care fraud. A federal jury found the four Detroit-area physicians guilty February 4, 2020 of health care fraud charges for their roles in a scheme to administer unnecessary back injections to patients in exchange for prescriptions of over 6.6 million doses of medically unnecessary opioids. Patients were required to get the injections in order to get the prescriptions, some of which were resold on the street by drug dealers, the evidence at trial showed.

Seventeen other defendants, including eight other doctors, previously pled guilty in connection with the investigation. 

According to evidence presented at trial, from 2008 to 2016, Pappas, Betro, Omar and Zahoor worked at numerous medical clinics in Michigan and Ohio, which were operated under the name of the Tri-County Group (Tri-County) and owned by co-conspirator Mashiyat Rashid. While the defendants worked at Tri-County, they engaged in a scheme to defraud Medicare of over $150 million by billing for medically unnecessary facet joint injections, unnecessary urinary drug screens, home health and a myriad of other unneeded ancillary services. The evidence showed that patients, some of whom were suffering from legitimate pain and others of whom were drug dealers or opioid addicts, were offered prescriptions of oxycodone 30 mg by the defendants, but were forced to submit to unnecessary facet injections in exchange for the prescriptions. 

Testimony at trial established that the patients experienced more pain from the shots, in some case, than from the pain they had purportedly come to have treated, and that some patients developed adverse conditions, including open holes in their back. Patients, including patients who were addicted to opioids, who told the doctors that they did not want, need or benefit from the injections, were denied medication by the defendants and their co-conspirators until they agreed to submit to the expensive and unnecessary injections.

The evidence further established that the defendants repeatedly performed these unnecessary injections on patients, as Tri-County was paid more for facet joint injections than any other medical clinic in the United States. The four defendants were all ranked in the top 25 doctors for dollars paid by Medicare for facet joint injections, even though they only worked a few hours a week. The defendants practice was described during trial as an assembly line, where the four defendants earned anywhere from $1,100 to $3,500 an hour for performing the same injections on nearly every patient.

In addition to the unnecessary injections, the defendants signed a standing order for urine tests for each patient and for every visit to be sent to National Laboratories, also owned by Rashid, in exchange for tens of thousands of dollars in illegal kickbacks, the evidence showed. The evidence further established that the physicians performed a quantitative test for 56 different drugs for every patient at every visit, regardless of whether the patients presented any reason for the test.

The evidence further established that the physicians provided prescriptions for narcotics, including opioids and benzodiazepines, as an incentive to patients who received the injections. Moreover, the evidence established that the dosage of opioids being provided to patients was suitable only for terminally ill cancer patients. Evidence from Michigan Automated Prescription System showed that the four defendants were among some of the top prescribers of oxycodone 30mg in the state of Michigan. 

In 2015, Pappas was the number seven prescriber of oxycodone 30mg in the state of Michigan; Betro 18; Omar 16; and Zahoor 38 the evidence showed. At trial, oxycodone 30mg was described as the “gold standard” of drugs diverted to illegal purposes on the street. Evidence showed that all four defendants were in the top 40 out of 50,000 Michigan prescribers even though they had conspired with Rashid to “stay under the radar” of the U.S. Drug Enforcement Administration by working only a few hours a week. The doctors would see anywhere from 15-25 patients in a two to four hour shift, and then bill Medicare for office visits and procedure codes suggesting that they spent as much as two hours and 22 minutes with each patient. Every piece of the fraud was consistently implemented and applied to over 94 percent of the patients in the clinic.

Aleksandr Pikus, 44, who managed medical clinics in Brooklyn and Queens, was convicted on Friday of money laundering, conspiring to rip off the federal government and conspiring to receive health care kickbacks.

Two guilty of Medicaid Fraud in Kansas

Gretta Elaine Smith, 52, of Wichita, pleaded guilty February 11, 2020 in Sedgwick County District Court to one felony count of Medicaid fraud. The case stemmed from an investigation by the Attorney General’s Office Medicaid Fraud and Abuse Division, which revealed that between March 2018 and May 2018, Smith submitted false claims to the Medicaid program asserting that she provided in-home personal care attendant services to beneficiary Joe Ross Mitchell, 65, of Wichita, while Mitchell was in fact incarcerated on unrelated charges. Upon being paid by the Medicaid program for the false claims, Smith then put some or all of the $2,794.44 on Mitchell’s jail commissary account, which Mitchell spent on discretionary items.

District Judge Bruce Brown accepted Smith’s plea and scheduled sentencing for March 23.

Mitchell pleaded guilty in January in Sedgwick County District Court to one felony count of Medicaid fraud in connection with the crimes. District Judge Jeffrey Syrios accepted Mitchell’s guilty plea and scheduled sentencing for March 4.

Both cases are being prosecuted by Assistant Attorney General Ed Brancart of Schmidt’s office. 

Counseling Agency Sentenced for Health Care Fraud

Nancy Ludwig, 64, was sentenced to 42 months in prison and three years of supervised release. Ludwig also was ordered to pay $660,902 in restitution to MaineCare. A jury had found Ludwig guilty of nine counts of health care fraud on June 14, 2019, after a five-day trial. Ludwig, a Lewiston, Maine woman was sentenced February 12, 2020 in federal court in Portland for conspiring to commit health care fraud, U.S. Attorney Halsey B. Frank announced.

According to testimony at trial, Ludwig was the owner of Facing Change, a mental health and substance abuse counseling agency in Lewiston. Abdirashid Ahmed was a Somali interpreter. From about November 2015 until May 2018, Ludwig conspired with Ahmed and others to commit health care fraud. The evidence showed that beginning in February 2015, Ludwig agreed to pay Ahmed a kickback in return for Ahmed bringing MaineCare beneficiaries to Facing Change.

Ludwig, Ahmed and other employees at Facing Change then submitted false claims to MaineCare for counseling and interpreter services. In 2016, in response to a MaineCare regulatory change, Ludwig and Ahmed conspired to change the diagnosis of many of those clients to schizophrenia so they could remain eligible to receive MaineCare reimbursement for services at Facing Change. In the fall of 2016, auditors with the MaineCare Program Integrity Unit audited Facing Change. Ludwig and many of her employees conspired to manufacture false records in an attempt to deceive the auditor. The fraud continued until May 1, 2018, when federal and state agents executed search warrants at Facing Change and Ahmed’s business.

Tenet Healthcare to Pay $1.41 Million To Settle False Claims Act Allegations

Tenet Healthcare Corporation and its affiliated hospital Desert Regional Medical Center (DRMC), a general medical and surgical hospital located in Palm Springs, California, have agreed to pay $1.41 million to resolve allegations that they violated the False Claims Act by knowingly charging Medicare for implanting unnecessary cardiac monitors, the Justice Department announced on February 11, 2020.

Medicare only reimburses services and treatments that are reasonable and medically necessary. This settlement resolves allegations that DRMC knowingly charged Medicare for unnecessary cardiac monitors (often called loop recorders) that DRMC cardiologists implanted in beneficiaries from 2014 to 2017.

The settlement resolves allegations filed in a lawsuit by Michael Grace, a former DRMC employee, under the qui tam provisions of the False Claims Act, which permit private individuals to sue for false claims on behalf of the government and to share in any recovery. The civil lawsuit is docketed in the Central District of California and is captioned United States ex rel. Grace v. Tenet HealthCare Corp.; St. Francis Hospital-Memphis; Desert Regional Medical Center; and Apollo MD, Case No. 17-CV-1481. As part of this settlement, Grace will receive $240,789 as his share of the government’s recovery. 

The resolution of this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act.

Federal Jury Convicts Doctor on Fraud Charges for Approving Medically Unnecessary Tests

Dr. Omar Garcia authorized percutaneous allergen tests for numerous Medicare beneficiaries, knowing that the tests were not medically necessary. A federal jury in Chicago convicted Dr. Garcia on fraud charges for approving medically unnecessary tests that were billed to Medicare.

While working for Chicago-based Grand Medical Clinic Inc., in most instances, Dr. Garcia issued his approval after the tests had already been completed. Dr. Garcia submitted or caused to be submitted fraudulent claims to Medicare for payment of the unnecessary tests.

The jury in federal court in Chicago on February 10, 2020 convicted Dr. Garcia, 52, of Ocala, Fla., and formerly of Wilmington, Ill., on all six counts of health care fraud. Each count is punishable by a maximum sentence of ten years in prison. U.S. District Judge Matthew F. Kennelly set sentencing for May 6, 2020.

Evidence at the five-day trial revealed that Dr. Darcia’s fraud scheme began in 2011 and continued until 2015. Dr. Garcia and others submitted the fraudulent bills from grand medical and other medical entities in an attempt to reduce the volume of billing by any single company and minimize scrutiny from Medicare.

Patient Recruiter Sentenced to Prison for Role in More Than $1 Million Illegal Kickback Conspiracy

Dominic Trumbo, 45, of Lexington, Kentucky, was sentenced by Chief U.S. District Judge Denise Page Hood of the Eastern District of Michigan, who also ordered Trumbo to pay $1,010,552 in restitution and forfeit $203,300. In July 2019, after a four-day trial, a federal jury found Trumbo guilty of one count of conspiracy to pay and receive health care kickbacks and three counts of solicitation or receipt of kickbacks in connection with a federal health care program.

Trumbo, a patient recruiter was sentenced to 60 months in prison February 5, 2020 for receiving more than $1 million in illegal kickback payments from numerous home health agencies from around the country in exchange for providing information on Medicare beneficiaries to home health agencies, who then used that information to submit fraudulent claims to Medicare.

According to the evidence presented at trial, Trumbo, owner of Trumbo Consulting Agency of Stafford, Virginia, recruited, or paid others to recruit, more than 4,000 Medicare beneficiaries for multiple home health companies across the country. The evidence showed that Trumbo instructed his employees to cold call Medicare beneficiaries and offer incentives to induce them to sign up for home health care. Trumbo then sold the Medicare beneficiary information to home health agencies in exchange for illegal kickback payments. The evidence at trial further showed that Trumbo and his co-conspirators created sham contracts and fake invoices in an attempt to conceal their scheme to defraud Medicare.

Returned Fugitive Sentenced To 2? Years in Federal Prison for Role in Medicare Fraud Scheme Featuring Bogus Physical Therapy Claims

David Y. Kim, 57, who previously lived in the Arlington Heights district of Los Angeles, was sentenced by United States District Judge David O. Carter to two and one half years in prison to pay $690,519 in restitution to Medicare.

A former chiropractor who was on a federal “Most Wanted” list of fugitives was sentenced February 4, 2020 to 30 months in federal prison for his role in a $15 million Medicare fraud scheme in which claims were submitted for physical therapy services that either were not reimbursable or were not provided.

Kim pleaded guilty in September 2019 to one count of health care fraud and one count of receiving illegal kickbacks in exchange for Medicare referrals. In 2015, after meeting with federal law enforcement agents for an interview, Kim fled the United States for South Korea. The U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG) later included Kim on its public list of Most Wanted Fugitives.

In February 2019, Kim was found to be residing in Vietnam and he was apprehended in Ho Chi Minh City pursuant to an Interpol Red Notice. FBI agents then brought Kim back to the United States, where he has remained in federal custody.

According to his plea agreement, between March 2012 and January 2014, Kim owned and operated New Hope Clinic, a Koreatown-based sole proprietorship where he caused fraudulent claims to be submitted to Medicare for physical therapy services that were not provided to patients. Kim received approximately 55 percent of the illegal Medicare proceeds. During the course of the scheme, Medicare paid $690,519 on the fraudulent claims from Kim’s clinic. Kim personally received illegal proceeds totaling $379,785.

Co-defendants Joseff Sales, 42, of Buena Park, Danniel Goyena, 42, also of Buena Park, the owners and operators of several companies involved in the scheme, paid New Hope for Kim’s referral of Medicare beneficiaries to their business. Sales, Goyena and Marlon Songco, 43, of Sylmar, hired licensed physical therapists to occasionally supervise Kim’s unlicensed staff, who performed services that were not reimbursable under Medicare guidelines.

While at New Hope, Medicare beneficiaries often received only a massage and acupuncture – services that Kim knew that Medicare did not cover – from individuals not licensed to provide physical therapy. Kim and his co-conspirators then caused fraudulent claims for physical therapy to be submitted to Medicare.

Sales, Goyena and Songco each pleaded guilty to federal criminal charges in this matter and were given prison sentences. Sales and Goyena were held jointly liable for $7,896,007 in restitution.

Arson for Profit

Arson-For-Profit is sometimes more difficult to prove than the case against Ms. Gonzalez. Insurers should never limit their defense to a claim presented by a person who started a fire to profit from insurance to proof of the crime. Other defenses are available and must be considered.

By definition a homeowners insurance policy insures the owner against the risk of loss of the dwelling where the insured resides. It should not insure the named insured who does not live in the dwelling. When the insured does not reside at the residence premises the insuring agreement of a homeowners policy appears to be incapable of being met,

The Michigan Court of Appeal in Banks v. Auto Club Group Ins. Co., Not Reported in N.W.2d, 2015 WL 3797729 (Mich.App., 6/18/2015) was called upon to resolve a claim of coverage after a fire by the named insured who did not reside in the dwelling and spent 95% of his time in another dwelling in Detroit. The trial court granted the insurer’s motion for summary judgment and the insured appealed.

In 2004, plaintiff Gilbert Banks purchased a residential home located at 16234 Timberview in Clinton Township. Gilbert purchased a homeowner’s insurance policy for the home from defendant, issued by defendant’s affiliate MemberSelect Insurance Company. The home was destroyed by a fire in 2006. It appears from the record that defendant provided coverage for the damages and Gilbert rebuilt the home.

Following the 2006 fire, Gilbert and Vernetta Banks’ son Myron Banks and Myron’s wife Tamika Banks lived at the Clinton Township residence with their children while Gilbert and Vernetta lived in Detroit with Gilbert’s elderly mother.

On January 28, 2009, another fire caused damage to the Clinton Township home. The Clinton Township Fire Department and defendant’s investigator determined that arson was the cause of the fire. Myron later pleaded no-contest to arson of a dwelling. After defendant denied coverage, plaintiffs commenced this lawsuit alleging breach of contract.

Defendant moved for summary arguing that there was no coverage under the policy because Gilbert did not reside at the Clinton Township residence at the time of the fire and therefore the residence was not his “residence premises” as required by the contract.

Defendant also argued that Myron and Tamika’s personal effects were not covered under the policy because they were not members of Gilbert’s household as Gilbert was residing in Detroit at the time of the fire. Finally, defendant argued that summary disposition was proper because plaintiffs failed to submit proof of loss in a timely manner.

The trial court granted summary disposition in favor of defendant. The court concluded that reasonable minds could not differ as to whether Gilbert was residing at his mother’s home at the time of the fire. Because Gilbert was not residing at the premises, there was no coverage under the policy and Myron and Tamika were not “resident relatives” of Gilbert. The court also found that plaintiffs failed to timely submit proof of loss.

Where the language in an insurance policy is clear, courts are bound by the specific language set forth in the agreement. The policy provided coverage for “your Dwelling … at the residence premises … The Dwelling must be used principally as a private residence. “Residence premises” was defined as the “premises, described on the Declaration Certificate, used as a private residence by you that is [either] a one-, two-, three-, or four-family Dwelling building … or that portion of any other building you occupy as a residence.” As defined in the policy, “you” or “your” refers to Gilbert and his spouse Vernetta.

Coverage for the insured’s dwelling required proof that the dwelling be at the “residence premises,” which, in turn, required showing that the dwelling be at the premises (1) described on the Declaration Certificate, (2) that the premises be used as a private residence by Gilbert or Vernetta, and (3) the premises be a one, two, three, or four-family dwelling building or other building occupied by Gilbert and Vernetta as a residence.

In McGrath v. Allstate Ins Co, 290 Mich.App 434, 440; 802 NW2d 619 (2010) the issue was whether the phrase “where you reside” required the insured to physically live at the single-family home listed on the Policy Declarations. The phrase is not merely descriptive of the insured premises, but rather constituted a statement of coverage that required the insured to reside at the home and use the home as a private residence at the time of loss.

In the context of the insurance policy, the definition of the term “reside” is not synonymous with the legal definition of the term “domicile,” which may have a legal or technical meaning beyond mere physical presence, including ‘the intent to live at that location at some time in the future. Rather the term “reside” requires “that the insured actually live at the property.” (Emphasis added).

In this case the phrase “used as a private residence” required that the insured actually live at the property at the time of loss. Combining these definitions, “private residence” in the context of the insurance policy means a private house or place of shelter where the named insured actually lives and occupies that is not merely a place of temporary sojourn. It is not akin to one’s domicile.

In short, there was no genuine issue of fact as to whether Gilbert or Vernetta used the Clinton Township home as their private residence where the evidence showed that they lived in Detroit at the time of the fire. Accordingly, the trial court did not err in granting summary disposition on this issue.

Similarly, the trial court did not err in granting summary disposition as to Myron and Tamika’s personal property claims. Although Myron and Tamika were related to Gilbert by blood and marriage, they were not “residents” of Gilbert’s “household.” Myron and Tamika lived at the Clinton Township home, and, as discussed above, Gilbert did not live there, but rather lived in Detroit. Therefore, Myron and Tamika were not “resident relatives” under the terms of the policy and the trial court did not err in granting summary disposition on this issue.

In addition, claims based on an arson-for-profit, are based upon the lack of intelligence or ability of the arsonist.

Arson is probably the dumbest form of insurance fraud. With modern municipal fire departments arson fires seldom totally destroy the premises, evidence is always left for arson investigators to review, and firefighters and the public are exposed to danger of injury and death and, as a result, judges have little mercy for an arsonist. Arsonists hoping to make a profit from a fire seldom sit back and accept their punishment when they are convicted.

Insurance fraud is a serious crime and a felony in most states. Arson is more serious and akin to attempted murder. The sentence Jones received was appropriate and could have been longer.  [Adapted from my book, “Insurance Fraud” available as a paperback or a Kindle book at amazon.com.

 Other Insurance Fraud Convictions

Guilty of Attempt to Cover Uninsured Car After Wreck Gets Community Service Only

Byron Mounce, of Puyallup, Washington, pleaded guilty in Pierce County Superior Court to one count of third-degree theft after an investigation showed he was trying to defraud his auto insurer by acquiring the insurance after the car was damaged in an accident.

An investigation by Washington Insurance Commissioner Mike Kreidler’s Criminal Investigations Unit showed Mounce bought an Esurance policy for his 2000 Mercedes sedan on Oct. 31, 2018. The same day, he filed a claim for more than $3,500 in damage to his car and injuries to his passengers. He said the collision occurred in Tacoma earlier that day when he was run off the freeway by another driver and hit a concrete wall.

While he was on the phone with the insurance adjuster, he was overheard telling the tow truck driver that a steering issue with the car caused him to hit the wall. Washington State Patrol records showed the Mercedes had been impounded two days earlier after a collision on Interstate 90 in King County.

Esurance denied the claim, which it had determined to be a total loss, and referred the case to Kreidler’s investigators.

Mounce was sentenced to serve 80 hours of community service and probation, to pay a $500 crime victim compensation penalty and restitution to be determined at a future court date.

Trego County Farmer Sentenced for Crop Insurance Fraud

Kevin W. Struss, 63, Wakeeney, Kan., pleaded guilty to one count of defrauding the U.S. Department of Agriculture’s crop insurance program, which provides government insurance against unavoidable crop losses. He made false statements in which he under-reported his total 2015 corn crop by approximately 23,524 bushels, and his total sorghum/milo crop by 31,208 bushels.

Struss, a Kansas farmer was sentenced February 10, 2020 to 30 months for federal crop insurance fraud and bankruptcy fraud, according to U.S. Attorney Stephen McAllister. In addition, the defendant was ordered to pay $604,303 in restitution.

He also pleaded guilty to one count of bankruptcy fraud. He falsely answered “no” to a question in his bankruptcy filing about whether he had transferred property to anyone else recently. In fact, he made two transfers of $150,000 and $320,000 to another person in 2018.

Three Guilty of Arson for Profit Scheme

Tyler Chen, 49 (sentenced to 13 years in prison), his wife, Kim Chen, 47 (one year in county jail) and Ha Nguyen, 64 (sentenced to eight years in prison), all sentenced in an insurance fraud scheme and ordered to pay $582,506.36 in restitution.

Mr. Chen was sentenced for multiple counts of arson and insurance fraud. Nguyen was sentenced on similar charges, and Mrs. Chen was sentenced in the county jail for a count of insurance fraud.

In an investigation into insurance claims involving Nguyen and Mr. Chen, the California Department of Insurance investigators found a pattern of claims involving house fires due to leaving chicken unattended on the stove. The pair was also linked to claims related to water damages at warehouses after fires. Court records show more than $4 million in insurance claims were paid out for properties in San Joaquin, Santa Clara and Fresno Counties.

According to court records, Nguyen met with Public Adjuster Tony Astone in October 2013 about an insurance claim at a warehouse. During the meeting, Nguyen gave Astone a ledger with addresses and dates of properties purposely set on fire for insurance claims. Astone said he had helped Nguyen and Mr. Chen with the claims on the ledger.

Three months later, the Stockton Fire Department received a tip about a string of fires between Dec. 2011 and Sept. 2013 as well as the exact address of the alleged next house fire. In June 2014, the department responded to a house fire caused by a frying chicken that was left unattended on the 5100 block of Pier Drive.

5 Of 8 Suspects in Staged Accidents That Cost Insurance Customers Plead Guilty

Lucinda Thomas, 63, Mary Wade, 55, Judy Williams, 59, Dashontae Young, 25 and Larry Williams, admitted they were involved in staged accidents with a trucks. Two were drivers and three passengers in a pair of separate accidents with 18-wheelers. The five pleaded guilty to conspiracy and wire fraud before U.S. District Judge Eldon Fallon

The guilty pleas leave three defendants awaiting trial, including alleged ringleaders Damian Labeaud and Mario Solomon. A third defendant, Genetta Israel was in the vehicle with Larry Williams.

In addition to naming Labeaud as calling the shots in the two accidents named in the indictment, the U.S. Attorney’s office spells out much broader allegations against him.

In particular, Labeaud is described by the prosecutors as being in regular contact with “Attorney A” before and after the accidents. Both the accidents in the indictment were followed by lawsuits filed on behalf of the passengers by New Orleans attorney Daniel Patrick Keating.

The U.S. Attorney’s office spells out that “Attorney A and Labeaud met at a restaurant in New Orleans. During their meeting, Attorney A and Labeaud agreed that Attorney A would pay Labeaud $1,000 per passenger for staged and legitimate accidents with tractor-trailers.”

In a press release accompanying the superseding indictment, the U.S. Attorney’s office wrote, “Attorney A knew Labeaud was staging accident and Attorney A paid Labeaud for at least forty illegally staged automobile accidents. In addition, Labeaud and Attorney A would discuss the staging of accidents before they happened.” Labeaud is free on bail, while Solomon is in jail in an unrelated case.

Hurricane Fraud Case Ends with 20 to 33 Month Prison Sentence

Tracy Shoffner of Columbia, North Carolina entered a guilty plea to a charge arising out of post-Hurricane Florence fraud upon a church. District Attorney Scott Thomas announced that, in Carteret County Superior Court, 56-year-old Shoffner offered to conduct repairs on a local church, and after providing what appeared to be a contract, the church administration paid him $ 7500.00 to begin work.

When Shoffner received the check, he ceased all communication with the church, which had used part of its insurance payments to pay him.

Shoffner was sentenced to prison to a prison term of 20 to 33 months, and all restitution he owed to the church was entered as a civil judgement against him.

District Attorney Scott Thomas said, “We are aggressively prosecuting hurricane fraud cases as we warned we would. We are seeking active prison time and restitution. Fraudsters should know they will face investigation and prosecution in our district.”

Florida Woman Pleads Guilty to Hurricane Irma Disaster Assistance Fraud

Deannajo White, 39, pleaded guilty in Jacksonville federal court Friday to one count of disaster assistance fraud, according to court records. She faces up to 30 years in prison, as well as paying restitution.

White, a Florida woman has pleaded guilty to lying about damage caused by Hurricane Irma. White made an application for disaster assistance benefits to the Federal Emergency Management Agency over the internet in September 2017, according to court documents. She claimed that a tree fell through the roof of her Branford home during Hurricane Irma, forcing her to stay in a nearby rental property.

White later reported that she had moved to a different rental property with a higher rent, adding receipts, leases and letters to her application. Law enforcement agents said White repeatedly lied to them during an August 2019 interview about her disaster assistance application. When confronted with evidence showing that she had lied, White admitted to making false statements and submitting false documents to FEMA.

Barry Zalma, Inc. Provides the Following Services to its Clients

Consultation with insurers and insureds on claims handling issues; Training on insurance and insurance law for all insurers; Litigation advice to defense or plaintiffs’ counsel; and testimony as an expert witness.

Consultation from Barry Zalma, Inc. can save you or your client thousands of dollars in the defense or prosecution of an insurance dispute. Barry Zalma, Inc. will find a solution to your insurance claims dispute that is fair, intelligent, beneficial and Economical.

Services are billed at $600.00 per hour, portal to portal.

Advice from Barry Zalma, Inc. is indispensable to the resolution of insurance disputes. Consultation from Barry Zalma, Inc. can save you, your counsel or client hundreds of hours of investigative and legal work. Call Barry Zalma at 310-390-4455 or e-mail at [email protected].

Legal Disclaimer

ZIFL is made available by the publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using ZIFL you understand that there is no attorney client relationship between you and the publisher. ZIFL should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

Consider Books to Show Your Appreciation to Your Insurer Clients or Claims Employees

Many insurers refuse to allow their employees to receive gifts from vendors.

If you wish to thank your insurance company clients for allowing you to represent their interest or if you wish to honor your claims personnel it is time to give them something that will be useful to them throughout the coming year and that will not offend insurer’s rules to avoid attempts to extort clients for business from insurer employees.

The Insurance Claims Library

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it for insurers and their claims staff to become insurance claims professionals.

Consider the Insurance Claims Library where, for a small investment you can provide each claims office – rather than individual adjusters – a group of insurance books that will help them throughout the year.

By providing clients, claims departments, or claims personnel with any one or more of the books offered by the Insurance Claims Library. By so doing you can add to the insurance claims professionalism of your clients, employees and claims personnel. With delivery handled by Amazon.com any one or more of the following books, all available from amazon.com and https://zalma.com/blog/insurance-claims-library/, will gain the respect and gratitude from each recipient and their employers.

Books Available from the Insurance Claims Library

The Homeowners Insurance Policy – How to Buy an Appropriate Homeowners Policy and Successfully Make a Claim to the Insurer; Zalma on Insurance Claims – Second Edition – Ten volumes providing a Comprehensive Review of insurance, insurance claims, the law of insurance and policy interpretation Paperback; Construction Defects and Insurance; Mold Claims; The Law of Unintended Consequences and the Tort of Bad Faith; Insurance Fraud – Volume I & Volume II; The Compact Book of Adjusting Property Insurance Claims – Second Edition; The Compact Book on Adjusting Liability Claims, Second Edition; California Fair Claims Settlement Practices Regulations; California SIU Regulations; Ethics for the Insurance Professional; Rescission of Insurance – 2nd Edition; The Insurance Examination Under Oath; and six Fictionalized True Insurance Crime Books. Available at https://zalma.com/blog/insurance-claims-library.

Books from Full Court Press

“Zalma on Property and Casualty Insurance”, “Insurance Law Deskbook”, “California Insurance Law Deskbook”, and “Insurance Bad Faith and Punitive Damages Deskbook”

Learn Everything You and Your People Need to Know About Insurance at reduced prices now only $95.00.

Insurers must bring a new crop of graduates into the insurance profession. Since most insurer-based insurance training departments have been eliminated there is a need for other means to train a new generation of claims professionals. All available at fastcase.com.

Information needed by every claims person and insured. They are available on amazon.com and at https://zalma.com/blog/insurance-claims-library/ or the individual links at each described book. Web based training is available at experfy.com and illumeo.com or you can have Barry Zalma present the training live to your personnel.

Read more about Barry Zalma, Inc. at https://www.zalma.comThe earnings of almost every civil lawyer in the United States are funded by the insurance industry. Insurance can best be described as the mother’s milk of the law profession. The civil defense lawyer is paid by an insurer for each hour he or she works. The civil plaintiffs’ lawyer is usually paid by taking a percentage of any judgment entered in favor of the plaintiff, which judgment is usually paid by the defendant’s insurer.

In almost every situation in which a civil lawyer practices law the funds for that work come, either directly or indirectly, from insurance. Consequently, lawyers must use their wits and energies to avoid or to pursue litigation to the benefit of the client. Both sides understand that an insurer will eventually pay one or both sides in the dispute. Insurance is important to every civil dispute and even some that fall within the criminal courts.

Every lawyer retained to prosecute or defend a civil suit should begin the representation with a serious effort to find insurance coverage for the benefit of the client or the defendant the client is suing. Without that knowledge, the lawyer will find he or she is litigating with duct tape firmly self-placed across his or her mouth.

Books from the American Bar Association

“The Commercial Property Insurance Policy Deskbook By Barry Zalma

“How to Acquire a Commercial Property Policy and Present and Collect a First-Party Property Insurance Claim

The Commercial Property Insurance Policy Deskbook is a comprehensive resource on acquiring a commercial property policy and presenting and collecting first-party property insurance claims. The book looks at the fundamentals of insurance and a wealth of topics including rules of construction of a policy of commercial property insurance, the commercial first party property insurance policy, different types of property losses, conditions and limitations, specific and blanket cover.” Available here.

The Insurance Fraud Deskbook”

Author: Barry Zalma

ISBN: 978-1-62722-676-9

Product Code: 5190506

2014, 638 pages, 7 x 10

This book is written for individuals who are focused on the effort to reduce expensive and pervasive occurrences of insurance fraud. Lawyers who represent insurers, claims personnel, prosecutors and their investigators can all benefit from this exhaustive resource.

The Insurance Fraud Deskbook is a valuable resource for those who are engaged in the effort to reduce expensive and pervasive occurrences of insurance fraud. It explains the elements of the crime and the tort to claims personnel, and it provides information for lawyers who represent insurers, so they can adequately advise their clients. Prosecutors and their investigators can use this book to determine what is required to prove the crime and win their case.

The full text of decisions from courts of appeal and supreme courts across the country are provided so the reader can understand what happens after the investigation is completed and can apply that information to undertake their own thorough investigations. It allows claims personnel and their lawyers to understand what errors would cause a defeat or a not-guilty verdict.

The effort to reduce insurance fraud requires the assistance of both civil and criminal courts. The Insurance Fraud Deskbook can help the prudent fraud investigator, insurance adjuster, insurance attorney, insurance Special Investigation Unit, and insurance company management to attain the information needed to deal with state investigators and prosecutors.

Available from the American Bar Association at: https://shop.americanbar.org/eBus/Default.aspx?TabID=251&productId=214624; or [email protected], or 800-285-2221.

“Diminution in Value Damages”

How to Determine the Proper Measure of Damage to Real and Personal Property

ISBN: 978-1-63425-295-8

Product Code: 5190524

2015, 235 pages, 7 x 10, Paperback

Available from Thomson Reuters

“Property Investigation Checklists Uncovering Insurance Fraud, 12th Edition”

This edition has been totally rewritten and expanded, providing the most extensive and detailed coverage of the issue and a thorough explanation of how to apply diminution in value damages to losses to property. Property Investigation Checklists: Uncovering Insurance Fraud provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims. The book also examines recent developments in areas such as arson investigation procedures, bad faith, and extracontractual damages. The appendix includes the NAIC Insurance Information and Privacy Protection Model Act. Also included are five appendixes of forms, letters, and other documents.

Available here

New and Now Available from the Zalma Insurance Claims Library

The Insurance Examination Under Oath Second Edition

A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud

A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud.

The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by the agreement of the insurer, when he, she or it acquires a policy of insurance, to submit to a condition of the insurance contract that compels the insured to appear and give sworn testimony at the demand of the insurer. Failure to appear and testify is considered a breach of a material condition.

The EUO is conducted before a notary and a certified shorthand reporter who is present to give the oath to the person interviewed. The reporter will record the entire conversation and prepare a transcript to be read, reviewed, corrected and signed by the witness under penalty of perjury or by an oath taken before a notary or judge.

The EUO is a tool only sparingly used by insurers in the United States. A professional insurer will only require an insured to submit to an EUO when a thorough claims investigation raises questions: About the application of the coverage to the facts of the loss, the potentiality that a fraud is being attempted, or to assist the insured in the obligation to prove to the insurer the cause and amount of loss.

Although seldom used the EUO is an important tool needed by insurers when there is a question of coverage, destruction of evidence needed to prove a compensable loss or the amount of loss or evidence indicating the potential that a fraud is being attempted. The EUO and Legal Action provisions in an insurance policy are conditions precedent to an insured’s ability to file suit, and that since the insured failed to substantially comply with the terms of those provisions, the appropriate remedy is dismissal without prejudice. The insured’s failure to comply with these conditions does not bar his ability to bring suit to recover, but merely suspends his ability to bring suit until he has fully complied with those conditions.

Available as a paperback here or Available as a Kindle book here

The Little Book on Ethics for the American Lawyer

by Barry Zalma (Author)

The practice of law demands more than knowledge of statutory and case law. It requires more than technical proficiency in the nuts and bolts of legal practice. A lawyer is an officer of the legal system whose conduct should conform to the requirements of the law, both in professional service to clients and in the lawyer’s business and personal affairs.

The practice of law requires that every lawyer treat each client, each adversary, and the court ethically and in good faith.

The practice of law is different from other professions because it requires that the lawyer act for his or her client, not him or herself, only if the actions for the client are ethical and in good faith.

What is Ethical Behavior?

The concept of ethical behavior refers to well-founded standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues, all of which are essential to the lawyer.

Ethics also refers to the study and development of one’s standards of conduct. Feelings, laws, and social norms can deviate from what is ethical. It is necessary, especially to people involved in the practice of law, to constantly examine one’s standards to ensure that they are reasonable and well-founded conduct that ethically treats a client, an adversary, and the court with the utmost good faith.

There is no single answer to the question of what is ethical behavior by a lawyer. Ethical behavior is subjective and fact dependent.

“Arson-For-Profit Fire at the Cowboy Bar & Grill”

A true crime novel based on the experience of the author, Barry Zalma, who for more than 51 years has acted for insurers who were faced with arson-for-profit, one of the most dangerous insurance fraud schemes. The book explains how an insurance claims adjuster, working with a fire cause and origin expert, a forensic accountant and insurance coverage lawyer, were able to defeat an arson-for-profit scheme and obtain a judgment requiring the perpetrator to take nothing and repay the insurer all of its expenses in defeating the claim.

Available as a paperback. Available as a Kindle book.

”The Insurance Examination Under Oath”

The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by a condition of the insurance contract that compels the insured to appear and give sworn testimony on the demand of the insurer or find his, her or it claim rejected for breach of a condition. A notary and a certified shorthand reporter are always present to give the oath to the person interviewed and record the entire conversation.

Available as a Kindle book. Available as a paperback.

“Rescission of Insurance”

Rescission is an equitable remedy as ancient as the common law of Britain. When the United States was conceived in 1776 the founders were concerned with protecting their rights under British common law. They adopted it as the law of the new United States of America modified only by the limitations placed on the central government by the U.S. Constitution approved in 1789. The viability and ability to enforce contracts was recognized as essential to commerce. Courts of law were charged with enforcing legitimate contracts. Courts of equity were charged with protecting contracting parties from mistake, fraud, misrepresentation and concealment since enforcing a contract based on mistake, fraud, misrepresentation or concealment would not be fair. The common law developed rules that courts could follow to refuse to enforce the terms of a contract that was entered into because of mutual mistake of material fact, a unilateral mistake of material fact, the breach of warranty (a presumptively material promise to do or not do something), a material concealment, or a material misrepresentation. The remedy – called rescission – created a method to apply fairness to the insurance contract and allow an insurer to void a contract and allowed courts to refuse to enforce such a contract entered into by misrepresentation or concealment of material facts.

Available as a paperback. Available as a Kindle book.

The Law of Unintended Consequences and the Tort of Bad Faith

The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence.

Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. Insurance is controlled by the courts, through appellate decisions, and by governmental agencies, through statute and regulation. Compliance with the appellate decisions, statutes, and regulations—different in the various states—is exceedingly difficult and expensive.

The business of insurance is, unfortunately, subject to the law of unintended consequences as if it were on steroids.

Available as a paperback Available as a Kindle book

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

“Construction Defects and Insurance”

The Structure, The Construction Contract, and Construction Defect Insurance Barry Zalma has updated and re-edited his seminal work Construction Defects Coverage Guide into is the latest addition to Barry Zalma’s insurance claims series of books and articles that will form the most thorough, up-to-date, expert-authored insurance claims guide available today eight Kindle or Paperback Volumes at reasonable prices.

Thorough, yet practical, this series of books form the ideal guide for any professional who works in or frequently interacts with the insurance industry.

Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit greatly from the ten-volume guide. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law.

The Eight volumes include:

Volume One: The Structure, The Construction Contract, and Construction Defect Insurance

Volume Two: The Defects and understanding Insurance and Underwriting 

Volume Three: Construction Defect Policies 

Volume Four: Liability Insurance

Volume Five: The Tort of Bad Faith and Construction Defects 

Volume Six: Construction Defect Suits

Volume Seven: Tort Defenses and the Trial of a Construction Defect Case

Volume Eight: Evaluation and Settlement & Alternative Dispute Resolution

”HEADS I WIN, TAILS YOU LOSE”

A collection of columns originally published in the magazines “Insurance Journal,” “Insurance Week,” and “The John Cooke Insurance Fraud Report” insurance trade publications serving the insurance community in the United States that have been updated and revised.

The title, “Heads I Win, Tails You Lose” is meant to describe insurance fraud as it works in the Unites States. It means that whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser.

“Insurance Fraud”

How Lawyers & Claims People Defeat Insurance Fraud

In Two Volumes

Insurance fraud continually takes more money each year than it did the last from the insurance buying public. No one knows the actual amount with any certainty because most attempts at insurance fraud succeed. Estimates of the extent of insurance fraud in the United States range from $87 billion to more than $300 billion every year. No one will ever be able to place an exact number on the amount lost to insurance fraud. Everyone who has looked at the issue knows – whether based on their heart, their gut or empirical fact determined from convictions for the crime of insurance fraud – that the number is enormous.

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback

“The Compact Book of Adjusting Property Insurance Claims – Second Edition”

A Manual for the First Party Property Insurance Adjuster

The insurance adjuster is not mentioned in a policy of insurance. The obligation to investigate and prove a claim falls on the insured. Standard first party property insurance policies, based upon the New York Standard Fire Insurance policy, contain conditions that require the insured to, within sixty days of the loss, submit a sworn proof of loss to prove to the insurer the facts and amount of loss.

The Compact Book of Adjusting Property Claims – Second Edition: A Primer for The First Party Property Claims Adjuster.

The Second edition adds new material from 2018 and 2019, is easier to use and more compact than the original.

Available as a Kindle book. Available as a paperback.

“The Compact Book on Adjusting Liability Claims, Second Edition”

A Handbook for the Liability Claims Adjuster

This Compact Book of Adjusting Liability Claims Second Edition: A Handbook for the Liability Claims Adjuster provides the new adjuster with a basic grounding in what is needed to become a competent and effective insurance adjuster. It is also available as a refresher for the experienced adjuster. Available as a Kindle book Available as a paperback.

Read about these and other insurance books by Barry Zalma at https://zalma.com/blog/insurance-claims-library/

Excellence in Claims Handling Courses From Experfy.com

The Excellence in Claims Handling program provides everything a person or entity presenting a claim needs to effectively present the claim and provides the insurance claims person with everything he or she needs to properly represent the insurer.

The insured, risk manager, or corporate counsel will be able to present a first party property claim - whether a fire, theft, or windstorm or some other insured against cause - with little difficulty and professionalism and present a sworn proof of loss acceptable to an insurer.

The insurance claims person completing the course will be able to conduct a thorough investigation of the policy and claim. The insurance claims person will also be able to assist an insured to fulfill all of the promises made by the insured to the insurer and the insurer to provide the indemnity promised by the insurance policy.

The series of courses was designed so that the student can obtain the needed information easily while he or she sits down in the morning for a first cup of coffee or any other time in the day in short, easy to consume lessons. For instance, “Insurance and Claims” is made up of three modules and 27 lectures while “Investigating the Property Claim” is made up of four modules and 65 lectures. You can review each course, each module and each lecture at the links below.

Each person completing the course will be able to claim that he or she is a professional first party property claims person ready to provide excellence in claims handling and be ready to resolve any claims problem that arises for the benefit of the insurer and the policy holder.

A key to every insurance claim is the thorough investigation required by law where the insurer’s adjuster or claims person works with the insured or his, her or its representative, to gather sufficient facts to determine the cause and origin of the claimed loss, whether the loss was due to a cause, the risk of loss of which was insured, and if so to determine the extent of the loss and the indemnity owed by the insurer to the insured.

https://www.experfy.com/training/coursesWhat will students need to know or do before starting this course?

That they want to know how to understand insurance and how the law applies to insurance contracts.

The course is capable of providing information needed without the assistance of material or software. However, it can be supplemented by books written by the author and available at https://www.zalma.com/blog/insurance-claims-library/ with materials like The Homeowners Insurance Policy, Zalma on Insurance Claims - ten Volumes, Construction Defects and Insurance, Mold Claims, and “Insurance Fraud & Weapons to Defeat Insurance Fraud,” The Compact Book of Adjusting Property Insurance Claims-Second Edition; Construction Defects and Insurance (eight volumes); Mold Claims (four volumes); Ethics for the Insurance Professional; Rescission of Insurance; The Insurance Examination Under Oath; Zalma on Property and Casualty Insurance; Insurance Law Deskbook; Insurance Bad Faith and Punitive Damages Deskbook; The Commercial Property Insurance Policy Deskbook; The Insurance Fraud Deskbook; Diminution in Value Damages; and Property Investigation Checklists Uncovering Insurance Fraud, 12th Edition.

 Who should take this course? Who should not?

The course should be taken by risk managers, corporate counsel, insurance claims management, insurance claims executives, insurance claims adjusters, insurance claims representatives, insurance special investigation unit investigators, public insurance adjusters, insurance coverage lawyers, insurance paralegals, and claims personnel of insurance agencies or insurance brokerages.

Insurance and Claims:

 https://www.experfy.com/training/courses/insurance-and-claims

   Investigating the Property Claims:

 https://www.experfy.com/training/courses/investigating-the-property-claim

   Insurance Law:

 https://www.experfy.com/training/courses/insurance-law

   Solving Claims Problems:

 https://www.experfy.com/training/courses/solving-claims-problems

Corporate Liability Insurance Certification

A Comprehensive Corporate Liability Insurance Certification Program From Illumeo.com.

Why get a Corporate Liability or Property Insurance Certification?

Everyone involved in insurance – either as an insurer or as an insured – requires excellence in liability claims handling. Businesses need to deal with insurers who have an excellent claims-handling mandate. Insurers who wish to profit need an excellent liability claims-handling program. Everyone in business needs an insurer who has an excellent liability claims-handling program in effect.

Keeping a professional claims staff dedicated to excellence in liability claims handling is cost-effective over long periods of time. The business that must present claims for defense and indemnity of suits brought against it needs experts in corporate liability insurance to obtain the benefits promised by the policy and protect the assets of the business, and this Corporate Liability Insurance certification program fits that bill. 15 Courses available here. 16 Property Courses Available here.