Insurer’s $7,870,557.89 Judgment Against Fraudster Stands

Proactive Insurer Has to Fight to Renew Judgment Against Convicted Fraudster

Sep 30, 2021

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Posted on September 30, 2021 by Barry Zalma

Insurer May Collect on Default Judgment Against Fraudster

In People Of The State Of California, ex rel. Interinsurance Exchange Of The Automobile Club Of Southern California v. Alex Semyon Mirsky, B297321, California Court of Appeals, Second District, Seventh Division (September 21, 2021) Alex Semyon Mirsky appealed from the superior court’s denial of a motion to vacate a 2013 renewal of a default judgment and the underlying default judgment.

In 2003 the superior court entered a default judgment of over $7.8 million against Mirsky. Interinsurance Exchange of the Automobile Club of Southern California (Interinsurance Exchange) renewed the judgment in 2013, and in 2018 it mailed notice of the renewal to Mirsky at an address Interinsurance Exchange claimed was Mirsky’s last known address. Mirsky filed a motion to vacate the renewal of judgment, or, in the alterative, vacate the default judgment under Code of Civil Procedure section 473, subdivision (d). The trial court denied the motion, concluding Mirsky’s motion to vacate the renewal of judgment was untimely and Mirsky failed to meet his burden to show the default judgment was void.

FACTUAL BACKGROUND

The Criminal Actions for Fraud and Conspiracy

Mirsky was charged in an information filed in federal court with three counts of mail fraud and conspiracy “to defraud and to obtain money and property from various insurance carriers by means of false and fraudulent pretenses, representations and promises.” Mirsky allegedly invested in a Texas law office and used the office to prepare and submit fraudulent medical and property damage insurance claims made by individuals who engaged in staged or fabricated automobile accidents.

Mirsky was charged in a felony complaint that alleged Mirsky committed insurance fraud. Mirsky entered into a negotiated plea of guilty to the charges in the federal and state actions. Mirsky was sentenced to only five years formal probation on the condition he serve a year in state prison (to run concurrent with his federal prison sentence) and to pay $20,000 in restitution. On July 12, 1999 the federal court sentenced Mirsky to 21 months in federal prison.

The Civil Action and Default Judgment

Interinsurance Exchange filed a qui tam action on behalf of the State of California against Mirsky and 26 other defendants for violation of the Insurance Fraud Prevention Act. The complaint alleged the ring knowingly and intentionally caused approximately 475 alleged automobile collisions to be reported to The Exchange as incidents which caused bodily injury. These collisions involved approximately 855 separate claimants. Interinsurance Exchange sought damages in an amount equal to three times the amount of each claim for compensation by the defendants, plus a civil penalty of $10,000 for each violation of California Insurance Code § 1871.1. Interinsurance Exchange filed a statement of damages seeking $15,674,374.50 from Mirsky.

Mirsky did not respond to the complaint. Later Interinsurance Exchange filed its first amended complaint. Mirsky was served with the first amended complaint by mail at the Fuller Avenue address and later the Interinsurance Exchange filed a second amended complaint, which generally contained the same allegations and prayer for relief, but it attached 27 exhibits identifying each of “the claims submitted to the Exchange for which a defendant is individually liable to the Exchange.” The second amended complaint was also served by mail on Mirsky at his Fuller Avenue address.

Interinsurance Exchange served Mirsky with a request for default by mail at the federal prison in Nevada. On February 20, 2001 the superior court clerk entered Mirsky’s default. Mirsky, representing himself, filed and served Interinsurance Exchange with an application for order extending time to answer.

Entry of Default Judgment

After a hearing the trial court (Judge Carolyn B. Kuhl) granted Interinsurance Exchange’s request for a default judgment against Mirsky and others. Mirsky did not appear at the hearing. On February 20 the court entered a default judgment against Mirsky in the amount of $7,131,333.99 in penalties under Insurance Code section 1871.7, plus attorneys’ fees of $739,223.90, for a total of $7,870,557.89. Interinsurance Exchange served Mirsky with notice of entry of court judgment by first-class mail at his Fuller Avenue address.

Judgment Debtor Examination of Mirsky

On August 16, 2018 the superior court ordered Mirsky to appear for a judgment debtor examination on October 19. Eventually Mirsky appeared in court for his examination. The trial court, over Mirsky’s objection, ordered the examination to go forward. Mirsky invoked his Fifth Amendment privilege against self-incrimination.

The superior court denied Mirsky’s motion to vacate the renewal of judgment as untimely. The trial court denied Mirsky’s motion, explaining,

DISCUSSION

Before the 1982 enactment of the Enforcement of Judgments Law (§ 680.010 et seq.), the sole method by which a judgment creditor could extend the enforcement period of a money judgment was by obtaining a new judgment against the judgment debtor in an independent action based on the judgment. Under the Enforcement of Judgments Law, a money judgment is enforceable for 10 years from the date it is entered. The law created a summary procedure for renewal of the judgment by the creditor by filing an application for renewal with the clerk of the court before expiration of the 10 year period.

The renewal process is simple. The judgment debtor bears the burden of proving, by a preponderance of the evidence, that he or she is entitled to relief under section 683.170.

It is undisputed that the renewal of judgment was entered and notice was mailed to Mirsky. Thus, if service was proper, Mirsky’s filing of a motion to vacate the renewal of the judgment under section 683.170 on January 22, 2019-over seven months later-was untimely.

The Superior Court Did Not Abuse Its Discretion In Denying The Motion To Vacate The Renewal Of Judgment

There is no statutory requirement that the notice of renewal be served on the judgment debtor in order for the renewal to be effective. There is no specified time period within which the renewal of judgment must be served on the judgment debtor

The Trial Court Did Not Err in Finding the Default Judgment Was Not Void and Denying Mirsky’s Motion To Vacate the Judgment

After a defendant’s default has been entered, if a complaint is amended in matter of substance as distinguished from mere matter of form, the amendment opens the default, and unless the amended pleading be served on the defaulting defendant, no judgment can properly be entered on the default”’ and any judgment is thus void.

In this case, the second amended complaint did not increase the amount of damages sought against Mirsky, add or change a cause of action based on different facts or legal theory, or indicate the existence of any defenses or grounds for avoiding liability that were not already reasonably apparent from the facts set forth in the initial complaint.

Although the second amended complaint provided additional specificity on which fraudulent claims were made as to which defendants for purposes of pleading the fraud claim, the unfair business claim was found to be sufficient. And the allegations as to Mirsky’s leadership of a ring to commit insurance fraud remained the same. Further, Mirsky was well aware from the allegations in the initial complaint (and the prior criminal actions) what constituted the alleged fraudulent conduct for which Interinsurance Exchange sought damages and penalties. Moreover, Mirsky was served with the second amended complaint and conceded that he had received it. T

DISPOSITION

The order denying Mirsky’s motion to vacate the renewal of judgment or the default judgment is affirmed. Interinsurance Exchange is entitled to recover its costs on appeal.

ZALMA OPINION

Insurance fraud is estimated to take from the insurance industry between $80 and $300 billion every year. No one really knows. Mr. Mirsky was a major player in fraudulent insurance schemes and was convicted of crimes relating to the fraud in both state and Federal Court. The Interinsurance Exchange, a major victim of his crime spree filed a qui tam suit and obtained a judgment of almost $8 million and has been adding interest to that judgment since it was entered. Since he was in prison attempts to execute on the judgment was delayed and the court renewed the judgment only to find Mirsky – attempting to avoid paying the judgment – fought in trial and the appellate court. The court properly held him to the judgment and allowed the Interinsurance Exchange to work to collect the judgment on behalf of the state.

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. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com

and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at https://www.rumble.com/zalma ; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4