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Posted on September 4, 2026 by Barry Zalma

Post 5486

FCA’s Qui Tam Provisions do not Violate the Appointments Clause.

In United States Of America, Clarissa Zafirov, ex rel; Dr. v. Florida Medical Associates, LLC, d.b.a. Vipcare, Physician Partners, LLC, Anion Technologies, LLC, Freedom Health, Inc., Optimum Healthcare, Inc., Physician Partners Specialty Services, LLC, et al., No. 24-13581, United States Court of Appeals, Eleventh Circuit (September 1, 2026).

The False Claims Act (“FCA”) allows the Attorney General to bring civil suits against perpetrators of fraud against the government. This case involves another portion of the FCA-the qui tam provisions-which allow people, called relators, who have knowledge about fraud against the government to pursue a case against the perpetrator of the fraud.

Dr. Clarissa Zafirov filed a qui tam action under the False Claims Act on behalf of the United States against Florida Medical Associates, LLC, doing business as VipCare, and related entities. She alleged that the defendants knowingly submitted false diagnosis codes to Medicare to obtain payments greater than those to which they were entitled. After years of litigation, the defendants moved for judgment on the pleadings or dismissal, arguing that the FCA’s qui tam provisions violated Article II of the Constitution.

LAW:

The Appointments Clause requires presidential appointment, with Senate confirmation unless otherwise provided, for “Officers of the United States.” Under Supreme Court precedent, a person is an officer only if the person occupies a continuing position established by law and exercises significant authority pursuant to federal law.

ANALYSIS:

The Eleventh Circuit disagreed with the district court’s conclusion that FCA relators are officers of the United States. The court held that relators do not occupy a continuing position because their role is tied to a single case, is intermittent and temporary, provides no continuing compensation, and involves duties that are personal to the relator rather than duties that continue when the individual changes.

DISCUSSION:

The court rejected the defendants’ argument that the FCA creates a continuous “office of relator.” It reasoned that the term does not appear in the FCA and that the proper inquiry is whether the individual relator occupies a continuing position, not whether multiple private parties may file qui tam suits at different times. The court also distinguished relators from independent counsel because independent counsel could be replaced, received compensation from public funds, and held duties that continued beyond the individual officeholder. Relators, by contrast, pursue personal claims based on case-specific knowledge and cannot be replaced by another relator if they abandon the case.

CONCLUSION:

The Eleventh Circuit held that FCA relators are not officers of the United States because they do not occupy a continuing position established by law. Therefore, the FCA’s qui tam provisions do not violate the Appointments Clause. The court vacated the district court’s dismissal and remanded for consideration of the defendants’ remaining Take Care Clause and Vesting Clause arguments.

Relators are not officers of the United States because they do not occupy a continuing position established by law. Accordingly, we join our sister circuits that have addressed this issue and hold that the qui tam provisions of the FCA do not violate the Appointments Clause. Therefore, the Eleventh Circuit vacated the district court’s order dismissing this case and remand for the district court to evaluate the defendants’ remaining constitutional arguments.

Zafirov and the United States are correct that relators do not hold a continuing position, which is sufficient to determine that relators are not officers who must be presidentially appointed. Accordingly, the Eleventh Circuit had no need to reach any of their remaining arguments.

Because the Eleventh Circuit concluded that relators are not officers of the United States subject to the Appointments Clause the case must continue.

CONCLUSION

The qui tam provisions of the FCA do not violate the Appointments Clause. Accordingly, the Eleventh Circuit vacated the district court’s order dismissing this case and remand for the district court to evaluate the defendants’ Take Care Clause and Vesting Clause arguments.

ZALMA OPINION

The False Claims Act is a serious weapon used against people defrauding units of the United States like Medicare, Medicaid, National Flood Insurance Program and Crop Insurance. From the inside they see the fraud and give the DOJ the right to join. Whatever the Relator obtains for the United States he or she gets a percentage. The fraudsters don’t like it and tried to argue that Dr. Clarissa Zafirov was a officer of the US and not able to bring her qui tam claim. The attempt failed because relators do not hold a continuing position sufficient to determine that relators are not officers and the action must continue.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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You Only Get One Chance to Sue

Post 5484

In David Cromp v. Johnny Harkrider, Monique Harkrider, and their Marital Community, dba Able Plumbing Plus, No. 61678-5-II, Court of Appeals of Washington, Division 2 (August 25, 2026) David Cromp hired Able Plumbing Plus in 2018 to install plumbing, including two toilets, at his residence. In 2019, both toilets allegedly leaked, causing damage. Insurance claims were submitted through Able’s contractor policy, but the insurer eventually denied the claims.

Cromp sued Able in 2022 for breach of contract based on the allegedly defective toilet installation. During that case, Cromp attempted to add claims related to Able’s conduct during the insurance claim process, including fraud, bad faith, tortious conduct, and bond-related claims, but the superior court denied leave to amend. The 2022 breach-of-contract claim was later dismissed with prejudice on summary judgment as time-barred.

On the same day the 2022 case was dismissed, Cromp filed a new 2024 lawsuit against Able asserting claims arising from both the defective installation and Able’s alleged conduct during the insurance claim process. The superior court dismissed the 2024 case on summary judgment based on res judicata and collateral estoppel and struck Cromp’s motion to compel discovery as moot.

LAW

The key doctrine was res judicata, also known as claim preclusion. Under Washington law, res judicata bars a later lawsuit when there has been a final judgment on the merits and the later case shares identity with the prior case in:

1. subject matter,
2. cause of action,
3. persons and parties, and
4. the quality of the persons for or against whom the claim is made.

Res judicata also bars claim splitting, meaning a plaintiff may not bring separate lawsuits based on the same transaction or occurrence when the claims could have been litigated in the earlier action.

DISCUSSION

The court concluded that Cromp’s 2022 case ended in a final judgment on the merits because the breach-of-contract claim was dismissed with prejudice on summary judgment, even though the dismissal was based on the statute of limitations.

The court then found all four res judicata elements satisfied. The 2022 and 2024 lawsuits involved the same subject matter because both arose from Able’s toilet installation and related events. The causes of action were sufficiently identical because they arose from the same transactional nucleus of facts: the plumbing contract, the alleged leaking toilets, and Able’s conduct after the leaks were discovered. Although Cromp framed the 2024 claims as fraud, negligence, bad faith, insurance fraud, and emotional distress, the court emphasized that res judicata bars not only claims actually litigated but also claims that could have been brought with reasonable diligence in the earlier case. The court also found identity of parties and quality of parties because Cromp and Able were parties in both lawsuits in the same capacities.

The superior court therefore did not abuse its discretion by striking the motion as moot.

ANALYSIS

The court’s reasoning turned less on the labels Cromp attached to his later claims and more on the factual basis underlying both lawsuits. Cromp knew of the alleged insurance-related misconduct during the 2022 case and even attempted to add similar claims by amendment. Because those claims arose out of the same contractual relationship and sequence of events, he was required to pursue them in the original action rather than filing a second lawsuit after the first case was dismissed.

Washington law prohibits filing two separate lawsuits based on the same event or claim splitting. As a threshold requirement of res judicata, there must be a final judgment on the merits in the prior suit. If claim splitting were permitted, the practice would lead to multiple suits and force a defendant to incur the cost and effort of defending multiple suits. The prohibition on claim splitting generally arises under the doctrine of res judicata, also commonly known as claim preclusion. We review de novo whether res judicata bars an action.

Even a plaintiff who later pleads different legal theories cannot avoid res judicata if the later claims arise from the same factual transaction and could have been litigated previously. The ruling also shows that a dismissal with prejudice on statute-of-limitations grounds can have preclusive effect.

Res judicata rests upon the ground that a matter which has been litigated, or on which there has been an opportunity to litigate, in a former action in a court of competent jurisdiction, should not be permitted to be litigated again. It puts an end to strife, produces certainty as to individual rights, and gives dignity and respect to judicial proceedings.

CONCLUSION

The Court of Appeals affirmed the superior court. It held that Cromp’s 2024 lawsuit was barred by res judicata because it constituted impermissible claim splitting following the final judgment in his 2022 case. The court also affirmed the order striking Cromp’s motion to compel discovery as moot.

The Court of Appeals held that Able was entitled to judgment as a matter of law because Cromp’s 2024 lawsuit constituted impermissible claim splitting barred by res judicata. Accordingly, it affirmed the superior court’s summary judgment dismissal of Cromp’s claims and its decision to strike Cromp’s motion to compel discovery as moot.

ZALMA OPINION

Litigation is a win or lose proposition. You sue, you win or you lose. And when you lose a lawsuit you cannot sue again to get another chance to win. Cromp lost. He tried suing again using different legal concepts. The Court of Appeals put an end to the strife betweem the homeowner and the contractor. Res Judicata produced certainty as to individual rights, and gave dignity and respect to the judicial proceedings.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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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 § 1226(c) because he was admitted into the United States. The government conceded the point and acknowledged Judge Mazza’s decision is legally incorrect.

The Government argued that Palomino-Crespo is not subject to mandatory detention under § 1226(c).

The parties agree that as a noncitizen detained under § 1226(a), Palomino-Crespo has a right to an individualized bond hearing. They disagree on whether he already received one.

The USDC found he did not.

Palomino-Crespo has not received the individualized, merit-based bond hearing he is entitled to.

The Court will thus order the respondents to either bring Palomino-Crespo before an immigration judge for an individualized bond hearing within ten days or release him.

If the respondents are unable to ensure Palomino-Crespo receives a bond hearing that complies with this Order within ten days, they must release him.
Accordingly, Hernan Guillermo Palomino-Crespo’s Petition for Writ of Habeas Corpus is granted.

ZALMA OPINION

Although rare, in this case Habeas was granted. Insurance fraud is a serious crime and is, in my experience, conducted by people of every race, religion, national origin or gender. Since Palomino-Crespo was on a Visa since 2017 the detention was probably correct for overstaying a Visa.

He had been charged with insurance fraud, but not yet tried or otherwise resolved, and was innocent of the crime until proven guilty. Since the government failed to fulfill its obligation for Palomino-Crespo to receive a bond hearing the court ordered the government to provide the hearing or release him immediately.

(c) 2026 Barry Zalma & ClaimSchool, Inc.
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Zalma’s Insurance Fraud Letter –September 1, 2026

ZIFL Volume 30, Issue 17

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 http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-09-01-2026.pdf

AI-Enabled Fraud Tops List Of Emerging Claim Severity Risks, Survey Finds

AI-enabled fraud and data authenticity is the factor most likely to increase claim severity over the next three to five years, according to nearly a third, or 32%, of attendees surveyed at the 2026 RIMS conference by CorVel.

Read the rest of the article and the full issue of ZIFL http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-09-01-2026.pdf.

Department of Justice Announces Launch of National Fraud Detection Center

NFDC Opens with Widespread Collaboration with Inspectors General and Law Enforcement Agencies

Today, August 26, 2026, the U.S. Department of Justice announced the launch of the National Fraud Detection Center (NFDC), a prosecutor-led, multi-agency team designed to investigate the most harmful actors defrauding federal government programs, including illicit actors overseas and those operating fraud schemes across federal programs.

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

Health Insurance Fraud Convictions

Justice Department’s Fraud Division Announces Unprecedented Fraud Enforcement Actions

Press Release: Thursday, July 30, 2026

VP Vance’s Anti-Fraud Efforts are Going Strong: On April 7, the Department of Justice announced the creation of the National Fraud Enforcement Division (Fraud Division).

Read the rest of the article and the full issue of ZIFL http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-09-01-2026.pdf

A 23rd Person Has Been Sentenced To Prison for the $250 Million Feeding Our Future Scandal.

Abdinasir Mahamed Abshir, 34, of Lakeville, Minnesota, was sentenced to 78 months in prison for his role in a $250 million fraud scheme that exploited

Read the rest of the article and the full issue of ZIFL http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-09-01-2026.pdf.

Outstanding Refugee’ Award Winner Charged With Medicaid Fraud

Salman Ahmed Elmi, a Somali refugee who received Minnesota’s 2021 Outstanding Refugee Award for Entrepreneurship, has been charged with eight felonies tied to the operation of Reva Health.

Read the rest of the article and the full issue of ZIFL http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-09-01-2026.pdf

Phantom Pets, Real Fraud

On August 21, 2028 the City of London Police reported that it had arrested a man who fraudulently claimed more than £31,000 from multiple insurers by repeatedly reporting dogs as dead has been convicted following an investigation by the City of London Police’s Insurance Fraud Enforcement Department (IFED).

Robert Daniel Cretu, 40 from Liverpool was found guilty of fraud by 30 separate fraudulent pet insurance claims submitted to a number of insurers.

Read the rest of the article and the full issue of ZIFL http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-09-01-2026.pdf

Other Than Health Insurance Fraud Cases

Mississippi Man Pleads Guilty to Evading $2M in Taxes

Eric Brian Rosenberg, a Mississippi man, pleaded guilty August 19, 2026 to evading the payment of more than $2 million in federal income taxes.

Read the rest of the article and the full issue of ZIFL http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-09-01-2026.pdf

Auto Insurance Fraud Conviction Stands

Habeas Relief from an Insurance Fraud Conviction Based on an Incorrect Factual Determination Unavailable

In Bryce A. Nickelson v. Secretary, Department Of Corrections, No. 8:23-cv-1081-KKM-SPF, United States District Court, M.D. Florida, Tampa Division (August 17, 2026) Bryce Nickelson, a Florida prisoner, was convicted by a state jury of making a false and fraudulent insurance claim and sentenced to 92.55 months in prison.

Read the rest of the article and the full issue of ZIFL http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-09-01-2026.pdf

Department of Justice Announces Launch of National Fraud Detection Center

NFDC Opens with Widespread Collaboration with Inspectors General and Law Enforcement Agencies

Monday, August 24, 2026 a Press Release from the Office of Public Affairs

Read the rest of the article and the full issue of ZIFL http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-09-01-2026.pdf

Barry Zalma

Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

Read the full issue of ZIFL http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-09-01-2026.pdf

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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), Consumer Protection Act (CPA), insurance bad faith, and negligent claims handling. Allstate also sought to bar recovery of attorney’s fees.

LAW

The USDC applied the summary judgment standard: summary judgment is proper only where there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law.

For the IFCA claim, Washington law permits suit where an insurer unreasonably denies coverage or payment of benefits. The USDC rejected an expanded “constructive denial” theory.

For the CPA claim, the plaintiffs had to show an unfair or deceptive act, trade or commerce, public interest impact, injury, and causation. Violations of certain insurance regulations can constitute per se unfair or deceptive acts.

For bad faith, plaintiffs had to show unreasonable conduct by the insurer. Summary judgment is improper if material facts remain disputed regarding the reasonableness of the insurer’s actions. Fees are available in coverage disputes, not merely disputes over claim valuation or damages.

DISCUSSION / ANALYSIS

Where the insurer pays or offers to pay a paltry amount that is not in line with the losses claimed, is not based on a reasoned evaluation of the facts (as known or, in some cases, as would have been known had the insurer adequately investigated the claim), and would not compensate the insured for the loss at issue, the benefits promised in the policy are effectively denied.

The court dismissed the IFCA claim because Allstate had not denied coverage or benefits. The court concluded that Washington law does not recognize a constructive denial theory under IFCA where the insurer made substantial payment but disputed the amount owed.

The CPA claim survived in part. The court dismissed CPA theories based on failure to adopt investigation standards, failure to affirm or deny coverage, failure to acknowledge communications, and settlement standards because plaintiffs failed to identify sufficient supporting facts. However, CPA theories based on allegedly unreasonable investigation and alleged underpayment sufficient to compel litigation survived because factual disputes remained.

The bad faith and negligent claims handling claims also survived. Plaintiffs presented enough evidence to create a factual dispute over whether Allstate’s investigation and valuation were reasonable, including the lack of an in-person adjuster inspection and handling of the heating-system damage.

The court rejected fees because the dispute concerned claim valuation and damages, not coverage. Allstate acknowledged coverage. The disagreement was over the extent and value of the loss.

CONCLUSION

Allstate’s motion for partial summary judgment was granted in part and denied in part. The IFCA claim was dismissed with prejudice. CPA claims based on WAC 284-30-330(4) and (7) remained. The plaintiffs’ breach of contract, bad faith, declaratory judgment, and negligent claims handling claims remained pending.

The USDC concluded that as to the IFCA claims, no issue of genuine factual dispute exists, consequently summary judgment is appropriate. Plaintiff also presented a genuine issue of fact regarding the Bad Faith and Negligent Claims Handing claim. Lastly, the USDC found fees do not apply.

ZALMA OPINION

Bad faith is a tort that requires a finding of unreasonable conduct by the insurer. The facts to prove that tort was not proved but the plaintiff presented sufficient evidence to raise a genuine issue of fact regarding the Bad Faith and Negligent Claims Handing claim. Whether they proved the torts at trial will be established by a jury.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Post 5436

Every person that acquires a policy of insurance, whether designed to protect a dwelling, a commercial property, agriculture, crops from destruction by the actions of nature, or from liability arising from claims of torts, or cyber-attacks, must read and understand the policy before it is acquired to determine whether it provides the coverage requested. If a loss that could be subject to insurance it must be read again before making a claim to an insurer.

A majority of the courts that have been called upon to interpret an insurance policy require that the person seeking insurance must read the insurance contract or B at the very least B have, a lawyer or insurance professional read, understand and explain the policy to the person acquiring the insurance.

For the last 58 years I have asked people making claims on an insurance policy whether they have read and understood their insurance policy. Most just laughed and claimed they never tried. Two, in my career, answered Ayes@ only to find after further questioning it became obvious that both lied since they knew nothing about the terms or conditions of the policy, they claimed they had read and understood. These facts horrify me as an insurance coverage lawyer, a consultant and an expert witness testifying in courts across the United States about the purchase and sale of insurance contracts and insurance claims handling.

My career, starting as a trainee adjuster in 1967 and later as an insurance coverage lawyer required that I read, understand and apply insurance policies issued by my clients to individuals and businesses. I have written, edited or revised, policies of insurance on behalf of insurer clients. I even read insurance policies I acquire to protect my property and protect me against tort liability before I order the policy. I know I am unusual, but I should not be. My practice should be the norm. Before beginning to read an insurance policy you seek you must first understand what insurance is.

What is Insurance?

Many states have different definitions of the word Ainsurance@ but each have the same essential elements:

1. It must be a written contract.

2. One party (the insurer) must agree with the other (the insured) as to the insurance provided.

3. The insurer, for consideration (payment of a premium) agrees to indemnify the insured against a contingent or unknown event.

4. The promise to indemnify is limited to certain identified risks of loss arising from a fortuitous, contingent or unknown events.

Insurance is a contract like all other contracts. Lawyers and judges believe no one should enter into a contract ignorant of its terms and conditions. Many people would never sign a lease without reading it. No businessperson will sign a lease until he or she has been advised by a lawyer representing the businessperson alone, of its terms, conditions, limitations, and whether it is favorable to the person seeking to lease commercial property. No one should agree to the terms of a mortgage without reading the contract.

Insurance contracts, however, are almost universally not read by the person insured. Some are not read by the agent, broker or underwriter who sell the insurance, nor the lawyers retained to enforce it. Yet hundreds of hours of the work of insurance professionals are involved in the writing of policies of insurance.

Modern insurance policies, as a result of state statutes, are required to be written in plain language or easy to read language sufficient for anyone with a fourth‑grade education to understand. I describe the modern language of insurance policies as ASesame Street English.@ There is no reasonable excuse available for not reading an insurance policy.

Why, then, do people fail to read their insurance policy?

Insurance policies have a bad reputation. People believe insurance policies are impossible to understand. Courts in the past have encouraged this belief. Policies are believed by the common person to be confusing and complicated. Sections of the contract are frequently cross‑referenced to other sections of the policy, often in a convoluted way.

Insurance companies strive to make their policies as clear as possible because when coverage is subject to a legal challenge, ambiguity in the language will always be interpreted in a way that favors the insured, not the insurer.

For example, in Insurance Company of North America v. Electronic Purification Company, 67 Cal. 2d 679, 689, 63 Cal. Rptr. 382, 433 (1967) the California Supreme Court noted:

[T]he insurance company gave the insured coverage in relatively simple language easily understood by the common man in the marketplace but attempted to take away a portion of this same coverage in paragraphs and language which even a lawyer, be he from Philadelphia or Bungy, would find difficult to comprehend.

Courts, called upon to interpret or enforce a contract of insurance, will always conclude that if an insurance contract is neither ambiguous nor difficult to comprehend, it will be enforced as written. [Sharbono v. Universal Underwriters Ins. Co., 139 Wash. App. 383, 394 (2007)]

If twenty‑first century judges want to make better sense of the insurance area of law, they should start by understanding and admitting that:

1. Almost nobody reads everything he or she signs;

2. Almost nobody is able to read everything he or she signs;

3. What drafters do want is to be able to treat those insured as if he or she had read everything.

4. Drafters of insurance policies do not care if, in fact, he or she has not C and, indeed, in many cases would prefer that he or she did not.

5. Do not create a duty to read the policy. That just adds insult to injury.

However, it is black letter law that one who knowingly and voluntarily assents to a contract whose terms are contained in a writing should be held legally responsible for his or her actions by being held to those terms, in the absence of fraud, mistake, or other excusing cause.

A party cannot negotiate, enter into and perform under a contract, only to later claim that it objected to some provision of the contract and thus retained a mental reservation to the terms of the agreement. Such a holding creates the risk that any disgruntled party may belatedly assert a lack of “voluntary” assent to a contract that it executed and performed. [DJ Mortg., LLC v. Synovus Bank, 750 S.E.2d 797, 325 Ga.App. 382 (Ga. App. 2013)]

Whether almost no one reads their insurance policies B and my experience seems to establish the fact, that fact does not make them less effective and enforceable contracts. An adhesion contract only means the person offering the contract gives the person to whom it is offered only two choices:

1. accept the contract or

2. reject the contract.

If accepted the contract is enforceable even if the insured had not read the policy.

Plain Language Policies

The need for Aplain language@ in an insurance policy was first described in the United States in the early 1950s. The Federal Government=s most recent plain‑language initiative began in 1998, when President Clinton issued a Memorandum on Plain Language in Government Writing to the heads of executive departments and agencies. He said:

We are determined to make the Government more responsive, accessible, and understandable in its communications with the public. By using plain language, we send a clear message about what the Government is doing, what it requires, and what services it offers. Plain language saves the Government and the private sector time, effort, and money. [President Clinton. Memorandum for the Heads of Executive Departments and Agencies on Plain Language in Government Writing. June 1, 1998.

There is no one generally accepted definition of plain language or plain English. But most people agree that a plain‑language document is one in which people can:

1. Find what they need,

2. Understand what they find, and

3. Act appropriately on that understanding.

Key elements of plain language are to:

1. Organize information so the most important behavioral or action points come first;

2. Break complex information into understandable chunks;

3. Use simple language or define technical terms; and

4. Provide ample white space so pages look easy to read.

In addition to the key elements, there are dozens of plain‑language guidelines and techniques such as using short sentences and active voice when possible. Document design principles highlight the importance of organization and format and enhance the impact of plain language.

Good document design required bringing together prose, graphics and typography for purposes of instruction, information, or persuasion. Plain language does not require the writer of an insurance policy to Adumb down@ the policy or eliminate the required precision necessary to make a contract enforceable.

Sometimes, insurance professionals are concerned that using plain language will oversimplify information to the point where it is inaccurate or worthless. Plain language is not anti‑intellectual, unsophisticated, drab, or inadequate. Plain language has to do with clear and effective communication C and should be considered nothing more nor less.

It is the style of Abraham Lincoln, Mark Twain, and Winston Churchill. Plain language is not just about vocabulary or grade level. Writing to a certain grade level does not necessarily ensure that the message is in plain language or understood by the intended audience. All materials, all terms and all conditions, especially in an insurance policy, should be evaluated for understanding with the intended users, regardless of grade‑level score.

States followed the direction set by the federal government and required insurers to modify their insurance policies to be written in plain language. In doing so, the plain language insurance policies took away the argument that the policy was too hard to understand and, for that reason, should not be enforced to the detriment of the insurer.

So, why, with the new, easy to read, plain language policies, do people fail to read the insurance policy? There is no logical answer. Perhaps it is the imbedded prejudice that makes some people believe they could never understand a policy even if they tried to read it. More likely it is simply the fact that most people trust the insurance agent or broker who obtained the policy for them and trust – often, without cause – the agent or broker to get the coverages they needed.

From my 58‑years= reading and interpreting insurance contracts I can only say that those people who did not read their policy get very upset when their insurance agent or broker tells them they acquired the best available policy and that it covers almost everything. However, in fact, it does not mean the policy covered every possible contingency.

When an adjuster or lawyer points out that there is no available coverage for their claim, they contend they were deceived. Had the insured read the policy before it was acquired, he or she would know that no insurance policy covers every possible risk of loss faced by a person or business. Some risks of loss are difficult, if not impossible, to insure. Consider the risk of loss by war, atomic attack, earthquake, flood, etc. can be insured but only for extremely high premium and deductibles or self‑insured retentions so expensive to make such coverages unsaleable.

Most insurance policies, as a result, exclude B in clear and unambiguous language B coverage for those extreme risks. The person insured who does not read the policy will be upset when his property is destroyed by a flood or earthquake. Had he read the policy and wanted coverage for earthquake or flood he or she would have been directed to a specialty insurer who is in business to issue a policy B probably expensive B that provides that coverage.

“[C]ourts cannot read policy provisions to be meaningless.” [The Travelers Indem. Co. of Conn. v. Pac. Indem. Co., 25 Civ. 6308 (PAE) (S.D. N.Y. Jul 24, 2026). A court should accord contract language its plain meaning giving due consideration to the surrounding circumstances and apparent purpose which the parties sought to accomplish. Courts should read policy provisions to avoid ambiguities, if possible, and not torture the language to create them. [J.D. Eckman, Inc. v. Starr Indem. & Liab. Co., 23-2759 (3rd Cir. Dec 12, 2025)]

The duty to read a policy appears in multiple jurisdictions. For example: In Georgia, the insured has a duty to read and understand the policy. [Cotton States Mut. Ins. Co. v. Coleman, 530 S.E.2d 229, 231 (Ga. Ct. App. 2000)] An insured who can read is required to read the policy and is presumed to have understood its contents. The law provides that an insured has a duty to read policy language. Hofeld v. Nationwide Life Insurance Co., 59 Ill.2d 522, 322 N.E.2d 454 (1975). A review of the express language of the UIM endorsement and the general purpose of such policies reveals that such an expectation was unreasonable.

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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 declarations page confirming the applicable limits.

Wood later refused to complete the settlement documentation after reviewing Archer’s asset declaration and discovering possible additional assets.

Wood filed suit against Archer, and Farmers separately sued Wood for breach of contract, declaratory relief, and specific performance.

LAW

A settlement agreement is governed by ordinary contract principles.

Contract formation requires mutual consent to lawful terms, generally shown through an offer and an acceptance. Mutual assent is evaluated objectively by the parties’ outward manifestations, not by undisclosed subjective intent.

ANALYSIS

The Court of Appeal concluded that Wood’s July 30, 2021 letter objectively offered to settle her bodily injury claim for the available policy limits if Farmers accepted in writing by the stated deadline and provided the declarations page. Farmers satisfied those conditions by timely tendering the $15,000 per-person limit and supplying policy documentation.

Because the demand letter expressly converted the $100,000 figure into a policy-limits demand if the policy limits were lower, Farmers’ $15,000 acceptance was not a counteroffer but was an acceptance with consideration.

The Court of Appeals rejected Wood’s argument that Archer’s asset declaration altered or defeated the settlement. Wood’s demand did not condition settlement on a satisfactory asset declaration, and Farmers’ later inclusion of such a declaration did not create a novation (a new contract) noR rescind the agreement, nor add a new material term.

The enforceable agreement was formed when Farmers accepted the policy-limits demand on August 25, 2021.

DISCUSSION

The decision emphasizes that policy-limits settlement demands are interpreted according to their objective wording. An insurer may accept by tendering the actual policy limit.

Post-acceptance paperwork generally does not undo an otherwise formed settlement unless the original offer made that paperwork a condition of acceptance or the parties clearly agreed to substitute new obligations.

Enforcement of clear pre-litigation settlement communications discourages parties from avoiding settlement based on later dissatisfaction with collateral information not made a condition of the offer.

BENEFIT TO INSURERS

For insurers, the case reinforces the importance of timely written acceptance and complete compliance with the demand’s stated conditions.

FOR CLAIMANTS

The decision highlights the need to expressly include any asset-disclosure or additional documentation requirements as conditions of settlement if they are intended to affect contract formation.

CONCLUSION

The Court of Appeal granted Farmers’ writ petition and directed the trial court to vacate its order denying summary judgment or summary adjudication and to enter a new order granting summary adjudication on Farmers’ declaratory relief cause of action.

The court held that Farmers’ August 25, 2021 response created a binding settlement agreement resolving Wood’s bodily injury claim against Archer for the $15,000 policy limit.

ZALMA OPINION

Claimants, hoping to create a bad faith case against an insurer often make immediate policy limits demands before litigation. In this case the Plaintiff made a $100,000 demand or a policy limits demand if the limit is less than $100,000. Farmers accepted and paid and the Plaintiff refused to honor the acceptance of the demand. Basic contract law was applied, the plaintiff made an offer, Farmers accepted the offer and paid consideration. The contract was confirmed and the settlement was enforced.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Post 5433

Posted on August 25, 2026 by Barry Zalma

In Joseph Russell Falasco v. USAA Casualty Insurance Company, No. 25-2632, United States Court of Appeals, Eighth Circuit (August 18, 2026) Joseph Russell Falasco insured a restored 1974 Porsche 911S through USAA. After the Porsche caught fire in August 2023, Falasco reported the loss and initially believed the vehicle was a total loss. USAA investigated the origin and cause of the fire, sent a reservation-of-rights letter, retained an appraiser, and referred the claim to its special investigations unit after questions arose about whether the fire was accidental.

The investigation ultimately indicated the fire likely resulted from deteriorated fuel lines rather than intentional conduct.

USAA offered $46,106.75 based on a CCC valuation using two comparable Porsche vehicles. Falasco disputed the valuation, argued the comparables were inappropriate, and proposed higher-value comparables from Bring a Trailer.

USAA declined to use those comparables, later obtained a Sotheby’s appraisal valuing the Porsche at about $65,000, and paid the difference between that appraisal and its prior payment.

A jury later awarded Falasco damages on his breach-of-contract claim, but the district court granted summary judgment to USAA on Falasco’s bad-faith and unfair-settlement-practices claims.

LAW

Under Arkansas law, an insurer commits the tort of bad faith only when it engages in affirmative misconduct that is dishonest, malicious, or oppressive. The required state of mind must reflect hatred, ill will, or a spirit of revenge. Mere negligence, poor judgment, delay, inadequate investigation, valuation disagreement, or an honest mistake does not establish bad faith.

DISCUSSION

Falasco argued that USAA acted in bad faith by undervaluing the Porsche, conducting a fraud or arson investigation to pressure him, misrepresenting policy terms and claims procedures, and repeatedly seeking title to the vehicle before settlement. The Eighth Circuit rejected each theory. It reasoned that valuation is inherently subjective, USAA could rely on CCC’s third-party appraisal, USAA responded to Falasco’s proposed comparables, and USAA later obtained and paid based on a higher Sotheby’s appraisal. The Eighth Circuit also held that USAA was entitled to investigate a fire of unknown origin, especially because no report identified the cause of the fire when Falasco submitted the claim.

The Eighth Circuit further concluded that USAA’s inaccurate statements about an appraisal clause, “arbitration law,” fire-report requirements, policy access, and automated settlement emails were mistakes or miscommunications rather than evidence of malicious or oppressive conduct. It also found no conversion or bad-faith title procurement because Falasco initially consented to USAA’s possession of the Porsche, USAA had contractual inspection rights, and the repeated title requests appeared to result from communications problems involving USAA and Copart.

ANALYSIS

The majority treated Falasco’s evidence as showing, at most, disputed valuation, delay, investigation, and negligent or mistaken claim handling. Because Arkansas bad-faith law sets a demanding threshold, the court separated each alleged act and found none showed affirmative misconduct carried out with the required culpable state of mind. The fact that USAA substantially paid the claim after further appraisal and that only a relatively small additional amount remained after trial supported the majority’s view that USAA reasonably attempted to discharge its contractual obligations.

CONCLUSION

The Eighth Circuit affirmed the district court’s grant of partial summary judgment for USAA on Falasco’s bad-faith claim. The undisputed facts did not show dishonest, malicious, or oppressive conduct under Arkansas law.

Judge Grasz dissented, concluding that a reasonable jury could infer bad faith from the totality of the circumstances and that the claim should have proceeded further.

ZALMA OPINION

Many people, and lawyers, believe that the refusal to pay an insured what he wants to resolve a claim is sufficient to prove the tort of Bad Faith. Although a 1974 Porsche might be considered antique or highly valuable it is just a car that, like any other product, can be valued. USAA used CCC, a valuation organization to value the car and later, when Sotheby’s showed it was worth more than the CCC evaluation it paid it. The investigation and adjustment was less than perfect but there was none of the dishonest, malicious or oppressive conduct required to prove the tort. Just being wrong is not bad faith.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Post 5432

Posted on August 24, 2026 by Barry Zalma

New Mexico State Lawsuits Cannot be Confused with a Federal Declaratory Relief Action

In Old Guard Insurance Co. v. Rudolfo Rodriguez; Emilio Pinon; et al, The City Of Albuquerque; Mayor Tim Keller; Jesse Valdez; And Consolidated Builders Of New Mexico et al., No. 1:26-cv-00073-MIS-JMR, United States District Court, D. New Mexico (August 18, 2026), Old Guard Insurance sought a federal declaratory judgment that it owed no duty to defend or indemnify Consolidated Builders and related defendants in asbestos-related New Mexico state lawsuits arising from renovation work at Albuquerque’s Gibson Health Hub/Gateway Center.

FACTS

On January 15, 2026, Old Guard filed the instant lawsuit seeking a declaration that there is no coverage for various asbestos-related claims under the Policy

Old Guard initially denied coverage to Consolidated Builders when the underlying state suits were filed, but reversed its denial of coverage on May 19, 2025, and began supporting Consolidated in all of the personal injury suits and the City’s breach of contract suit.

The district court declined to exercise jurisdiction under the Declaratory Judgment Act and the Tenth Circuit’s precedent, concluding that the state proceedings were the better forum because the federal action would not fully resolve the parties’ coverage dispute, could create friction with ongoing state litigation, and involved duty-to-defend and duty-to-indemnify issues better resolved in the consolidated state actions.

Old Guard issued commercial general liability and umbrella policies to Consolidated Builders, which performed renovation work at the Gibson Health Hub/Gateway Center. Multiple state-court plaintiffs alleged they were exposed to asbestos and other hazardous materials during the project. The City also sued Consolidated Builders for contractual defense and indemnity, later adding Old Guard. Old Guard filed this federal declaratory judgment action seeking a ruling that asbestos-related claims were excluded from coverage.

LAW:

Under the Declaratory Judgment Act, federal courts may declare parties’ rights but are not required to do so. The court considered whether the declaratory action would settle the controversy, clarify legal relations, constitute procedural fencing, increase friction with state courts, and whether a better alternative remedy existed. New Mexico law also treats the duty to defend as broader than and distinct from the duty to indemnify, with doubts about potential coverage resolved in favor of the insured at the defense stage.

Discussion/Analysis:

The court found that a federal declaration focused on the asbestos exclusion would not fully settle the parties’ dispute because the underlying complaints also referenced other hazardous substances and theories that might implicate coverage outside the asbestos exclusion. Although the court found insufficient evidence of procedural fencing, it concluded that exercising jurisdiction would risk friction with New Mexico courts because the state actions were already consolidated, involved overlapping facts, and could resolve coverage-related issues more effectively. The court emphasized New Mexico’s preference for resolving exclusion and duty-to-defend issues in the primary litigation when factual development may be necessary.

CONCLUSION:

Here, given the consolidation of the tort cases, the significant time that has already been spent in the litigation process, and the fact that the same judge presides over all the consolidated tort cases and the City’s action against Consolidated and Old Guard, the Court found that refraining from exercising jurisdiction is appropriate at this juncture and the best remedy rests with the state court actions. Even if the Court were to declare Old Guard had no duty to defend or indemnify with respect to the asbestos policy, there are other facts mentioned in the underlying complaints that potentially fall outside asbestos exclusion provision.

As such the declaratory judgment action at issue here would still leave controversy and not resolve all potential claims, nor does it place the Court in a position to fully clarify the legal relations at issue. The federal court granted defendants’ motions to dismiss, declined to proceed with Old Guard’s declaratory judgment action, and closed the case.

ZALMA OPINION

Federal Courts refuse to screw with state court actions. The case brought to federal court covered many of the issues pending in New Mexico State Court and that is why the USDC dismissed the federal action to avoid contradictory judgments and to accept the fact that the state court was capable of dealing with the insurance issues. The USDC found that exercising jurisdiction would risk friction with New Mexico courts because the state actions were already consolidated, involved overlapping facts, and could resolve coverage-related issues more effectively.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Post 5431

Posted on August 21, 2026 by Barry Zalma

A Prisoner Seeking A Writ Of Habeas Corpus Has No Absolute Entitlement To Appeal A District Court’s Denial Of His Petition.

In Bryce A. Nickelson v. Secretary, Department Of Corrections, No. 8:23-cv-1081-KKM-SPF, USDC, M.D. Florida, Tampa Division (August 17, 2026) Bryce Nickelson, a Florida prisoner, was convicted by a state jury of making a false and fraudulent insurance claim and sentenced to 92.55 months in prison.

The evidence showed that Nickelson’s Dodge Durango had been damaged before he obtained comprehensive coverage from Progressive.

Progressive denied the claim for misrepresentation, and Nickelson later admitted he had not been truthful when initiating the claim.

A state court’s findings of fact are presumed correct, and a petitioner can rebut the presumption of correctness afforded to a state court’s factual findings only by clear and convincing evidence.

LAW:

Federal habeas relief under 28 U.S.C. § 2254 is limited and may be granted only when a state-court merits decision is contrary to, or an unreasonable application of, clearly established Supreme Court precedent, or is based on an unreasonable factual determination.

DISCUSSION:

Nickelson raised four habeas grounds. Grounds One and Three alleged ineffective assistance of appellate counsel for failing to challenge the denial of a continuance and limits on testimony from Tiffany Cartwright.

ANALYSIS:

The court held that the state appellate court reasonably rejected the ineffective-assistance-of-appellate-counsel claims. The continuance issue lacked a clear adverse ruling, appeared unpreserved, and did not show fundamental error or appellate prejudice.

CONCLUSION:

The district court denied Nickelson’s § 2254 petition in full, denied a certificate of appealability, denied leave to appeal in forma pauperis, directed entry of judgment for the respondent, and ordered the case closed.

A prisoner seeking a writ of habeas corpus has no absolute entitlement to appeal a district court’s denial of his petition.

ZALMA OPINION

In my experience the 92.55 months prison sentence is unusual and probably shocked Mr. Nickelson. His only opportunity to avoid a long prison sentence was the attempt to obtain habeas relief and the USDC saw through the attempt and he will serve the full sentence. The decision needs to be publicized since the rather severe sentence will, if made public, deter others who thought they would profit from insurance fraud.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Post 5428

In Koble Investments v. Elicia Marquardt v. James Miller, Intervenor-Appellant, Supreme Court, 420 Wis.2d 304, No. 2022AP182 (June 5, 2026.) (Reversing 412 Wis. 2d 1, 7 N.W.3d 915.) 2026 WI 19, 420 Wis.2d 308 Koble Investments served tenant Elicia Marquardt with an eviction notice for nonpayment of rent during Governor Tony Evers’s COVID-19 eviction moratorium.

Marquardt counterclaimed, alleging Koble violated the Wisconsin Consumer Act by attempting to collect a debt or enforce a right it knew or should have known did not exist. She also claimed the residential lease was void and unenforceable because it permitted termination for crime-related conduct but omitted statutory domestic abuse protections required by Wisconsin landlord-tenant law.

The circuit court dismissed Koble’s eviction claim and rejected Marquardt’s counterclaims. Her former attorney, James Miller, sought to intervene to recover statutory attorney fees. The court denied fee recovery but later allowed Miller to intervene solely to appeal the statutory-fee issues.

The court of appeals reversed, holding that the Wisconsin Consumer Act applied to the lease, that Koble violated the Act, and that Marquardt and Miller could recover damages, costs, and attorney fees.

The Supreme Court disagreed.

LAW

The principal statutes were the Wisconsin Consumer Act, which regulates debt-collection conduct arising from consumer credit transactions or other consumer transactions involving an agreement to defer payment which permits attorney-fee recovery when a customer prevails under the WCA; and Wis., which address prohibited residential lease provisions; which requires notice of domestic abuse protections; and which allows double damages and attorney fees for pecuniary loss caused by violations of certain consumer-protection orders.

DISCUSSION AND ANALYSIS

The Wisconsin Supreme Court held that Wis. Stat. § 427.104 does not apply to a residential lease under which rent is payable monthly because such a lease is not an “agreement to defer payment.” Rent under a typical residential lease accrues month by month; the tenant does not owe all future rent at the moment the lease is signed. Because future rent obligations do not yet exist, they cannot be deferred.

The court rejected the court of appeals’ creative view that a one-year lease payable in monthly installments resembles an installment contract.

The Supreme Court also reasoned that Wisconsin landlord-tenant statutes and regulations confirm this interpretation. Wisconsin law treats rent as maturing when due, limits prepaid rent, restricts acceleration of rent, and requires landlords to mitigate damages after default. These rules are inconsistent with treating a residential lease as a deferred-payment arrangement.

On the damages issue, the court did not decide whether the lease was void for omitting domestic abuse protections. Instead, it assumed for purposes of analysis that the lease might be void and held that Marquardt still failed to prove a recoverable pecuniary loss.

She received occupancy in exchange for rent, and there was no evidence she actually paid the claimed late fees or filing fee. Because she did not show a causal connection between the alleged statutory violation and any financial loss, neither she nor Miller could recover damages, costs, or attorney fees.

CONCLUSION

Because Koble served Marquardt with an eviction notice during the COVID-19 eviction moratorium, the court concluded Koble violated the Wisconsin statutes. The court also declared the lease void and unenforceable under Wisconsin statutes because Koble omitted the notice of domestic abuse protections. Accordingly, the court held that Wis. Stat. § 100.20(5) entitled Marquardt to recover double the damages caused by Koble’s violation of § 704.44(10) and § ATPC 134.08(10), and Attorney Miller could recover reasonable attorney fees and costs under § 100.20(5) and Wis. Stat. § 425.308(1). Id., ¶¶ 32, 50.

In Wisconsin, a landlord is entitled to recover rent as it matures, not before. Logically, an obligation that does not yet exist cannot be deferred.

The Supreme Court recognized that a tenant’s obligation to pay rent under a typical residential lease accrues on a monthly basis. Because a tenant is not obligated to pay — upfront — all rent that will become due during the entire lease term, the obligation to pay rent each month is best understood as “a contemporaneous exchange of consideration” — one month of rent for one more month of occupancy.

A residential lease is not an installment contract. The lease obligated Marquardt to pay rent only on a monthly basis, in exchange for which Marquardt received the exclusive right to occupy the property during the month for which she paid.

No court has applied the WCA to residential leases in the fifty-four years after its enactment despite residential leases being frequently litigated.

CONCLUSION

The decision of the court of appeals was reversed.

ZALMA OPINION

This interesting case is not an insurance case as is my usual but deserves to learn that signing a lease does not require payment of all rent that will become due during the entire lease term, the obligation to pay rent each month is best understood as “a contemporaneous exchange of consideration” — one month of rent for one more month of occupancy. Laws created by the Covid Pandemic did not change contract law.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Post 5430

In Daniel E. Carpenter v. United States Of America, No. 3:21-cv-1485(RNC), United States District Court, D. Connecticut (August 17, 2026) Daniel Carpenter was convicted after a bench trial of mail fraud, wire fraud, and money laundering offenses arising from a stranger-originated life insurance scheme involving stranger-originated life insurance (“STOLI”) and his attempt to avoid the conviction by a motion pursuant to 28 U.S.C. § 2255 to set aside all the convictions.. Robert N. Chatigny, United States District Judge resolved the issues raised from Carpenter’s leadership role in an insurance fraud scheme.

Carpenter caused life insurers to issue 84 STOLI policies through Charter Oak Trust, an entity he controlled, with an aggregate face value of approximately $450 million. The insurers allegedly issued policies they would not have issued but for false statements in applications and related materials concerning insureds’ finances, premium funding, resale intent, and life expectancy reports. Carpenter-controlled entities funded premiums and received more than $12 million in commissions.

LAW

A § 2255 movant generally may not relitigate claims already raised and rejected on direct appeal or raise claims that could have been raised on direct appeal, unless he shows cause and actual prejudice or actual innocence. The right-to-control theory alone cannot support a fraud conviction because deprivation of information, standing alone, is not deprivation of “property.”

The prosecution relied in part on the right-to-control theory of fraud, which applies to schemes to deprive victims of information they need to make informed decisions regarding the use of their assets. After Carpenter’s convictions were affirmed on appeal, the Supreme Court held that depriving a victim of information in contravention of the right-to-control theory cannot provide the sole basis for a fraud conviction because mere information is not a form of “property” as the term is used in the fraud statutes.

However, a fraudulent-inducement scheme may satisfy the mail and wire fraud statutes when false statements induce a victim to part with money or property, even if the victim receives something of equal value and even absent net pecuniary loss.

DISCUSSION / ANALYSIS

The court denied Carpenter’s § 2255 motion. It held that his claims were procedurally barred because many were not raised on direct appeal and others had already been rejected. The court concluded that Carpenter failed to show cause for not challenging the right-to-control theory on appeal, as that argument was reasonably available.

The court also rejected actual innocence, finding that the indictment and trial proof established a traditional fraudulent-inducement property-fraud theory. Carpenter used material misrepresentations to induce insurers to issue valuable policies, pay commissions, and assume death-benefit obligations.

The Government’s reliance on the right-to-control theory did not create a miscarriage of justice because the convictions rested on sufficient traditional property-fraud grounds.

The actual innocence exception does not apply because the scheme alleged in the superseding indictment and proven beyond a reasonable doubt at trial was a prototypical fraudulent-inducement scheme which plainly satisfies each of the statutory elements of mail and wire fraud.

Under the fraudulent-inducement theory a defendant is guilty if he:

devises a scheme;
to induce the victim into a contract to obtain her money or property and
by means of false or fraudulent pretenses.. (quoting 18 U.S.C. § 1343).

In this case, the superseding indictment alleged and the evidence proved that:

1. Carpenter devised a scheme
2. to induce the insurance companies into contracts to obtain STOLI policies obligating them to pay commissions and death benefits by means of false or fraudulent misrepresentations in applications and related documents.

Two tests of materiality are potentially available. Under the traditional common law standard, a misrepresentation is material if a reasonable person would attach importance to it in deciding how to proceed, of if the defendant knew (or should have known) that the recipient would likely deem it important.

Both tests were satisfied. here. The superseding indictment alleged and the Government proved that Carpenter and his co-conspirators falsified insurance applications to avoid raising red flags related to STOLI policies. To that end, they misrepresented the insured’s financial situation and motivation for procuring the policy and provided false answers to questions about third-party funding of premiums, the possibility of the sale of the policy and the performance of life expectancy reports. As explained in the Verdict and Special Findings, these misrepresentations were the mechanism by which Carpenter and his co-conspirators were able to defeat the insurers’ underwriting safeguards against STOLI business. The misrepresentations went directly to the essence of the bargain because Carpenter knew the companies would refuse to issue policies if they suspected the policies were being procured for sale to investors with no insurable interest in the life of the insured. The insurers testified and Judge Chatigny credited their testimony.

The motion was denied without an evidentiary hearing, no certificate of appealability issued, and the case was ordered closed, and Carpenter must serve his sentence in full.

ZALMA OPINION

STOLI is a means of defrauding life insurance companies that is easy to do and difficult to discover. The conviction for mail fraud, wire fraud, and money laundering offenses stands and the attempt to avoid jail failed.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Lie to a Judge to Avoid a Fine Can Find You in Jail

Posted on August 18, 2026 by Barry Zalma

Post 5427

In United States Of America v. Gary Rains, Criminal No. 1:26po25, United States District Court, W.D. Virginia, Abingdon Division (August 14, 2026) Gary Rains, (“Rains”), appeared before the court for an initial appearance on a petty offense violation on April 1, 2026.

At that time, Rains pleaded guilty to a violation of 36 C.F.R. § 4.2(b), incorporating Kentucky Revised Statute § 304.99-060, for having no vehicle insurance at the time of a traffic stop on December 21, 2025.

The USDC convicted Rains of the offense and imposed a fine of $500.00 and a mandatory special assessment of $10.00. Rains moved to Vacate Judgment.

In his Motion, Rains states that he now has found his insurance card showing that he did, in fact, have insurance coverage on the date the violation notice was issued. In support of his Motion, Rains attached a State Farm Mutual Automobile Insurance Company, insurance card.

Brooks provided Ranger Shepherd information showing that Rains had automobile insurance on a 2004 Toyota Prerunner with an inception date of August 29, 2025. However, Brooks provided further information that this insurance was subsequently terminated on November 27, 2025.

Given Rains’s action of purchasing insurance on the same vehicle with a different insurance company, which would overlap the State Farm policy by approximately two months, the court was unable to find credible Rains’s claim that he had insurance with State Farm on the date of the violation.

Based on Rains’s knowing and voluntary guilty plea, the information provided by State Farm representative Brooks that Rains’s coverage was terminated on November 27, 2025.

It was ORDERED that Rains’s Motion to Vacate Judgment, was DENIED.

ZALMA OPINION

This is not a major case. That it was reported at all was amazing. To avoid a $500.00 fine Mr. Raines created false insurance records to set aside the $500 fine to which he had pleaded guilty. What he did was attempt a fraud on the court. That attempt was a criminal act and should have been referred to the DOJ. States require people to have automobile insurance to operate on the roads. Raines failed to do so, was cited, convicted and fined. He then created false documents to reverse the judgment and with false documents. The judge recognized the fraud and denied his motion.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Posted on August 17, 2026 by Barry Zalma

Subscribe to ZIFL Here

THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL

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:

New Charges and Rewards Announced for the Capture and/or Conviction of Senior Leaders of Notorious Mexican Cartel

More than $100 Million Offered for Information Leading to the Arrests and/or Convictions of Eight CJNG Fugitives

Reward some photos below were taken from wanted posters of the eight CJNG fugitives that can be found here

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-08-15-2026.pdf

Health Insurance Fraud Convictions

New Mexico Woman Pleads Guilty to $4M Medicaid Fraud

Dorothea Irving, 47, of Farmington, New Mexico, woman pleaded guilty to working with a non-emergency medical transport (NEMT) company to submit millions of dollars in false and fraudulent claims to New Mexico Medicaid for ineligible and non-existent trips to medical appointments.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-08-15-2026.pdf

Bad Faith Suit Fails After Insurer Declares Policy Void

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.

Plaintiff reported that burglars entered through a kitchen window while he and his family were away, claimed stolen property totaling more than $83,000, and submitted proof-of-loss materials, inventory lists, photos, alarm records, phone records, and later appeared for an examination under oath.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-08-15-2026.pdf

Guilty of Misprison of a Felony Admitted by Owner of Insurers

Second Trial of Coram Nobis Relief Fails

Coram Nobis is an Extraordinary Remedy

In United States Of America v. David Judd Disiere, Criminal Action No. 99-151-SDD-SDJ, United States District Court, M.D. Louisiana (August 10, 2026 David Judd Disiere was convicted in 2000 after pleading guilty to misprision of a felony under 18 U.S.C. § 4 in connection with allegations involving a scheme to influence the resolution of an investigation into insurance companies he owned.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-08-15-2026.pdf

Other Than Health Insurance Fraud Cases

Canadian Man Pleads Guilty to Hacking U.S. Cloud Storage Provider and Extorting Its Customers for Millions

Connor Riley Moucka, 26, of Kitchener, Ontario, pleaded guilty to a widespread computer hacking conspiracy that resulted in the compromise of over 165 victim organizations, the theft of billions of sensitive customer records and the extortion of numerous victims.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-08-15-2026.pdf

It Doesn’t Pay to Lie in an Application for Insurance

Rescission for Material Misrepresentation

An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.

In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units. After an underlying personal injury action was filed, Union Mutual determined that the property actually contained three apartment units and rescinded the policies on the ground that the defendants had made a material misrepresentation in the applications.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2026/08/ZIFL-08-15-2026.pdf

Barry Zalma

Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

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Posted on August 14, 2026 by Barry Zalma

Post 5424

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.

Plaintiff reported that burglars entered through a kitchen window while he and his family were away, claimed stolen property totaling more than $83,000, and submitted proof-of-loss materials, inventory lists, photos, alarm records, phone records, and later appeared for an examination under oath.

State Farm assigned the claim to its special investigative unit, questioned the timing and duration of the reported burglary, requested additional documents and records, identified discrepancies between the police report, inventory, receipts, and plaintiff’s testimony, and ultimately denied the claim based on alleged breaches of post-loss duties and alleged concealment or misrepresentation.

On February 20, 2024, State Farm took a recorded statement from plaintiff. Plaintiff reported that on the night of the burglary, his oldest son, Gregor, immediately left the party they were at and arrived at the Property a couple of minutes before plaintiff.

THE POLICY

The State Farm policy provided: “This policy is void as to [the insured] ... if [the insured] ... has intentionally concealed or misrepresented any material fact or circumstance relating to this insurance, whether before or after a loss.”

LAW:

Summary judgment is proper only when there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law. Under California law, breach of contract requires a contract, plaintiff’s performance or excuse for nonperformance, defendant’s breach, and damages. California recognizes substantial compliance where the insured performs enough of the required obligations and does not completely fail to comply.

Breach of the Implied Covenant of Good Faith

State Farm argued that plaintiff s second claim for breach of the implied covenant of good faith and fair dealing fails because State Farm did not wrongfully withhold benefits due under the Policy. State Farm’s denial of benefits was reasonable because State Fann’s reasonably concluded that plaintiff breached the Policy. State Farm denial of the Claim was objectively reasonable.

DISCUSSION:

State Farm argued that plaintiff could not recover because he failed to satisfy policy conditions, including prompt notice, production of supporting records, preservation or exhibition of damaged property, production of his son’s phone records, and production of household members for examinations under oath.

ANALYSIS:

The Court held that factual disputes precluded summary judgment on the breach of contract claim, including disputes over substantial compliance, materiality of requested documents, timing of notice, and whether plaintiff could compel family members to appear for examinations. The same genuine dispute and the claim discrepancies gave State Farm an objectively reasonable basis to deny the claim, defeating the bad faith and negligent misrepresentation claims.

CONCLUSIONS:

State Farm’s motion for summary judgment was denied as to plaintiff’s breach of contract claim but granted as to breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, and punitive damages.

the Court DENIED State Farm’s motion for summary judgment on plaintiff s breach of contract claim, GRANTSED State Farm’s motion for summary judgment on plaintiffs claim for breach of the implied covenant of good faith and fair dealing, GRANTED State Farm’s motion for summary judgment on plaintiffs claim for negligent misrepresentation and GRANTED State Farm’s motion for summary judgment on plaintiff s claim for punitive damages.

ZALMA OPINION

State Farm with a factual basis for concluding that its insured had committed fraud and denied the claim for breach of material conditions and for fraud was relieved of most of the lawsuit except breach of contract because the court applied the doctrine of “substantial compliance” although the reasons for its conclusion of fraud were obvious.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Post 5423

Posted on August 13, 2026 by Barry Zalma

In Fox Paine & Company, LLC, et al. v. Twin City Fire Insurance Company et al., S287404, Supreme Court of California (July 27, 2026) Fox Paine & Company, LLC, Saul Fox, and related entities sued excess insurers after a long-running dispute between the Fox and Paine factions generated substantial litigation costs.

FACTS

The issue arises here after a dispute between former colleagues at an investment firm led to lengthy — and expensive — litigation.

Insurance is sometimes procured in a series of layers, with an insured acquiring a primary insurance policy that provides an initial layer of coverage. The insurance tower included a $10 million primary policy followed by four $10 million excess layers.

Plaintiffs allege that:

1. they suffered a loss;
2. the loss is covered by specific policy provisions described in the complaint;
3. they submitted “virtually all of their invoices” to defendants, seeking reimbursement; but
4. defendants have failed to reimburse them for these losses.

LAW

In the insurance context, the implied covenant of good faith and fair dealing prevents an insurer from impairing the insured’s right to receive policy benefits.

DISCUSSION

Although there is a categorical rule requiring an insured to plead actual exhaustion of all underlying insurance before seeking declaratory relief against excess insurers the Court reasoned that insurance coverage disputes often involve contingencies, and the mere existence of an exhaustion contingency does not make the dispute hypothetical.

Requiring insureds to litigate sequentially through each layer of an excess tower would create hardship, inefficiency, and a risk of inconsistent rulings, particularly where follow-form policies require interpretation of common coverage language.

ANALYSIS

The Court’s decision draws a distinction between attachment for payment and justiciability for adjudication. Actual exhaustion remains relevant to whether an excess insurer must presently pay benefits, but it is not an absolute prerequisite to adjudicating coverage obligations or bad-faith claims.

CONCLUSION

On remand, the Court of Appeal must determine whether plaintiffs adequately pleaded covered losses sufficient to create an actual controversy as to each excess policy and whether the bad-faith allegations satisfy the proper standard.

If the pleadings are deficient but curable, plaintiffs should be given leave to amend.

The Supreme Court reversed the Court of Appeal and remanded. It held that lack of actual exhaustion is not, by itself, fatal to claims for declaratory relief or tortious breach of the implied covenant of good faith and fair dealing against excess insurers.

The Supreme Court concluded that plaintiffs’ inability to allege the exhaustion of all coverage underlying the St. Paul and Liberty Mutual policies is not by itself fatal to their claims for declaratory relief against these insurers.

The Supreme Court remanded the case to the Court of Appeal to reevaluate the adequacy of plaintiffs’ allegations as they bear upon the existence of an actual controversy. Once the appropriate standard has been identified that court shall determine whether it has been met.

BAD FAITH

It has long been recognized in California that ‘[t]here is an implied covenant of good faith and fair dealing in every contract that neither party will do anything which will injure the right of the other to receive the benefits of the agreement. An insurer’s denial of or delay in paying benefits gives rise to tort damages, but only if the insured shows the denial or delay was unreasonable. Because the duty attaches at the inception of the insurance agreement, wrongful conduct by the insurer from that point forward can support a claim for bad faith.

Allegations that an excess insurer paid rival claimants a disproportionate share of the benefits available under its policy prior to the insureds’ exhaustion of the primary policy stated a viable claim for bad faith.

Plaintiffs Need Not Plead Prior Exhaustion Of All Underlying Insurance To State A Claim For Bad Faith

Plaintiffs inability to plead that all underlying insurance has already been exhausted is not by itself fatal to their claims for bad faith.

But an insurer may breach the implied covenant of good faith and fair dealing while remaining in technical compliance with the express terms of its policy; indeed, that is the very reason for the implied covenant’s existence.

ZALMA OPINION

When no insurer is willing to take on the entire risks of loss faced by an insured the insured buys a primary policy and a tower of excess insurance policies from multiple insurers all of whom promise to respond after each layer of insurance is exhausted by payment of claims or claims and defense clauses. When the excess insurers did not respond in accordance with their policies they claimed no coverage because the other insurers had not exhausted their limits. The California Supreme Court disagreed and allowed the declaratory relief action to go forward creating a new way to get to excess insurers without exhausting the primary and other insurers limits to seek declaratory relief.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Posted on August 12, 2026 by Barry Zalma

Post 5422

Coram Nobis is an Extraordinary Remedy

In United States Of America v. David Judd Disiere, Criminal Action No. 99-151-SDD-SDJ, United States District Court, M.D. Louisiana (August 10, 2026 David Judd Disiere was convicted in 2000 after pleading guilty to misprision of a felony under 18 U.S.C. § 4 in connection with allegations involving a scheme to influence the resolution of an investigation into insurance companies he owned.

He was sentenced to probation and a fine, did not directly appeal, and completed probation in 2003. After an earlier unsuccessful postconviction challenge, Disiere filed a second petition for writ of error coram nobis in 2024, claiming his plea was coerced by prosecutors’ threats relating to an employee allegation, that those threats were concealed from the court, that his counsel was ineffective, and that the factual basis did not establish the elements of misprision.

This is Disiere’s second attempt at obtaining coram nobis relief. His first Writ of Error Coram Nobis was filed on April 9, 2001, and challenged his conviction on the ground that “the factual basis he helped draft was insufficient to support the misprision charge.”

LAW:

Coram nobis is an extraordinary remedy available only to correct fundamental errors resulting in a complete miscarriage of justice when the petitioner is no longer in custody and no other remedy is available.

DISCUSSION:

The government argued that the petition was untimely because Disiere knew, or should have known, the facts underlying his claims at the time of his plea or shortly thereafter.

ANALYSIS:

The court focused on timeliness rather than reaching the merits of whether the conviction involved fundamental error.

CONCLUSION:

The court denied Disiere’s petition for writ of error coram nobis. Because he failed to provide sound and justifiable reasons for waiting nearly two decades to seek relief on claims available much earlier, the petition was untimely and the court did not need to decide whether the alleged errors were fundamental.

ZALMA OPINION

Disiere’s failure to present sound and justifiable reason for his nearly twenty year delay in seeking coram nobis relief, or any other form of post conviction remedy, was fatal to the to his second try. Insurance criminals do as much as possible to avoid jail. He plead guilty to a crime where he failed to report a crime, that gave him only probation. Then, even after he completed the probation he tried a second coram nobis attempt only to be properly rejected by the court.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Post 5421

Posted on August 11, 2026 by Barry Zalma

First Amendment Right Will be Allowed to Go to Trial

In Betsey J. Grant v. Maine State Department Of Heath And Human Services, No. 1:25-cv-00490-JAW, United States District Court, D. Maine (August 6, 2026), Betsey J. Grant, a licensed childcare provider and operator of Tiny Tikes Daycare in Trenton, Maine, sued Maine DHHS and several employees after she publicly criticized DHHS before Maine’s Government Oversight Committee and alleged that officials retaliated against her.

She claimed DHHS imposed and extended a conditional license, published stigmatizing information, interfered with subsidies and program funding, removed her from a food program, rescinded an expansion grant, and used biased or falsified evidence in licensing proceedings. Following the March 10, 2023, GOC testimony, Ms. Grant alleges that foster children’s subsidies (approximately $30,000) were withheld; she was removed from the federal food program (loss approximating $230,496); and her approved $74,000 expansion grant was rescinded due to the unlawful license sanction.

Ms. Grant claims that Defendants also engaged in arbitrary, capricious, and conscience shocking conduct by intentionally misrepresenting compliance status, manipulating licensing and funding mechanisms to punish protected speech, and weaponizing adjudicative proceedings infected by bias and retaliation.

LAW:

The court applied Rule 12(b)(6) plausibility standards, Eleventh Amendment sovereign immunity, exception for prospective relief against appropriate state officials, First Amendment retaliation doctrine, procedural and substantive due process standards, and the Maine Tort Claims Act notice requirements.

DISCUSSION/ANALYSIS:

The court held that DHHS and the employees sued in their official capacities were not proper defendants for damages or broad injunctive relief, and that Grant had not sued an official with authority to implement the requested prospective relief. The court found the First Amendment retaliation claim plausibly pleaded against the individual employees because Grant’s legislative testimony was protected speech and the alleged retaliatory licensing actions followed closely enough to permit an inference of causation at the pleading stage.

The State Defendants note that nowhere in the Complaint does Ms. Grant allege any continuing violations of federal law by the individual State Defendants, nor does she seek to enjoin any of them from violating federal law. As such, the demand for injunctive relief, which is made against DHHS, must be dismissed as violative of the Eleventh Amendment, and the claims against the individual Defendants must also be dismissed because she does not allege any continuing violations.

The due process claims failed because Grant received notice, a hearing, and available appellate procedures, and her allegations did not show conscience-shocking conduct. The state tort claims failed because Grant did not show compliance with the Maine Tort Claims Act’s notice-of-claim requirements.

CONCLUSION:

The motion to dismiss was granted in part and denied in part.

1. DHHS was dismissed; the official-capacity claims against the individual defendants were dismissed;

2. the procedural and substantive due process claims were dismissed;

3. the state-law defamation and tortious-interference claims were dismissed for lack of subject matter jurisdiction.

4. The First Amendment retaliation claim survived against the individual defendants in their personal capacities.

ZALMA OPINION

A licensed childcare provider publicly criticized state agencies. She claimed she was retaliated against by the state agencies she criticized which cost her about $300,000 in subsidies that supported her work. The charges were not made appropriately and most of her complaint was not appropriate and not viable and left her with a claim of retaliation for exercising her First Amendment right and will be allowed to go trial.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Post 5418

Posted on August 5, 2026 by Barry Zalma

An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.

In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units.

LAW:

A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true facts been disclosed. To establish materiality as a matter of law, the insurer must submit documentation of its underwriting practices, such as manuals, guidelines, bulletins, or rules addressing similar risks.

DISCUSSION/ANALYSIS:

As a result, the Supreme Court erred in denying Union Mutual’s motion for summary judgment and in granting the defendants’ cross-motion dismissing the complaint.

CONCLUSION:

The order was reversed. Union Mutual was entitled to summary judgment declaring that the policies were void ab initio and that it had no duty to defend or indemnify the defendants in the underlying personal injury action.

An insurance company has a right to rescind an insurance policy if the applicant makes a material misrepresentation on the insurance application

Accordingly, the trial court: Supreme Court should have granted the plaintiff’s motion for summary judgment on the complaint and denied the defendants’ cross-motion for summary judgment dismissing the complaint.

Since this is a declaratory judgment action, the appellate court remitted the matter to the Supreme Court, Nassau County, for the entry of a judgment, among other things, declaring that the subject insurance policies are void ab initio and that the plaintiff is not obligated to defend or indemnify the defendants in the underlying.

ZALMA OPINION

Insurance is a contract of good faith and fair dealing. An insurance application is a statement of facts presented to an insurance company as a request for insurance and must be presented fairly, completely and in good faith. When the insurer failed to tell the truth by telling the insurer it was insuring a two unit apartment when it was really three. That was a material misrepresentation and grounds for rescission.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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Murder of Witness to Staged Auto Accident is Inadmissible in Fraud Case

Posted on August 4, 2026 by Barry Zalma

Post 5416

In United States Of America v. Ryan Harris, et al., Criminal Action No. 24-105, United States District Court, E.D. Louisiana (July 23, 2026) the defendants were charged in connection with an alleged staged-automobile-collision insurance fraud scheme in the New Orleans area and later crimes arising from the murder of cooperating witness Cornelius Garrison.

LAW:

Federal Rule of Evidence 404(b) generally bars other-act evidence offered to prove propensity but allows such evidence for non-character purposes if admissible.

DISCUSSION/ANALYSIS:

The Court held that Alfortish’s disbarment was intrinsic because it explained why he allegedly funneled staged-accident clients to Vanessa Motta rather than litigating the cases himself, thereby illuminating the structure of the mail-and-wire-fraud conspiracy.

CONCLUSION:

The Court ruled that evidence of Alfortish’s 2011 conviction and Parker’s 2010 arrest for a 2005 murder and arson is not admissible at trial.

Applying the same law as above, the Court agreed. The Court found that evidence of Alfortish’s disbarment is intrinsic to the charged offenses because it explains why Alfortish did not litigate the staged collision cases and instead gave them to his fiancé and co-conspirator, Vanessa Motta. It is “part and parcel” with the conspiracy.

For the foregoing reasons evidence regarding Sean Alfortish’s 2011 conviction and evidence regarding Parker’s 2010 arrest for a 2005 murder and arson are not admissible at trial as intrinsic evidence while that evidence regarding Alfortish’s disbarment and evidence that Leon Parker physically abused the mother of co-conspirator, Ryan Harris, are admissible at trial as intrinsic evidence.

ZALMA OPINION

I am disgusted by people who claim insurance fraud is not a violent crime. It is, and this case makes it clear, that to protect their staged accident scheme the criminal participants in the scheme conspired to a murdered a witness. The intrinsic evidence of the staged accident crime is admissible as it the murder, a crime that is the most violent of all crimes in the penal codes and should be prosecuted separately rather than as part of an insurance fraud case.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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