Zalma’s Insurance Fraud Letter March 1, 2022

Efforts to Deter Insurance Fraud Continue

Mar 01, 2022

THOROUGH INVESTIGATION DEFEATS FRAUD

Over the last 54 years in the insurance business, I have faced people with insurance claims who had, shortly before their claim, sworn to a bankruptcy court that they only had $500 in jewelry and minimal amounts of personal property to avoid losing their assets to their creditors. One even testified that he lied on his bankruptcy proceedings because he didn’t want his creditors to get his airplane. (He, by the way, went to jail for bankruptcy fraud and recovered nothing on his insurance claim). It is hard to answer when a person is asked which under oath statement is true: the bankruptcy filing or the claim. I always insist that a thorough investigation requires a review of bankruptcy filings.

In Rick Merechka v. Vigilant Insurance Company, a foreign corporation; Rick Merechka v. Vigilant Insurance Company, a foreign corporation, Nos. 19-3427, 19-3497, United States Court of Appeals, Eighth Circuit (February 16, 2022) the Eighth Circuit was faced with just such a situation and assumed that the statement made in the bankruptcy filing was true.

ZIFL OPINION

Merechka was patibulated in his own gibbet: he could not admit to his insurer or the court that he had lied in his bankruptcy petition since, to do so, would open him up to a federal felony; rather he had to lie to his insurer that he acquired all of his personal property after his bankruptcy – a financial impossibility. Vigilant is subrogated to the rights of the lender and can foreclose on the property and sell the land to regain its payments to the lender. The case will go back to the trial court and it should grant Vigilant’s motion for a judgment in subrogation.

False Swearing About ALE Defeats Entire Claim

When One Lies About an Insurance Claim He Will Never Prosper

John Ruiz, proceeding pro se, sued Liberty Mutual Fire Insurance Company (“Liberty Mutual”), asserting that Liberty Mutual breached two homeowner’s insurance policies by failing to pay plaintiff’s water damage claims. Liberty Mutual asserts two counterclaims, seeking to recover money it paid to plaintiff pursuant to those policies and to investigate plaintiff’s claims. In John Ruiz v. Liberty Mutual Fire Insurance Company, No. 19 CV 4399 (VB), United States District Court, S.D. New York (February 14, 2022) the pro se plaintiff proved the old saw that he had an idiot for a client.

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Man Bites Dog Story: GEICO Obtains Stay of Arbitrations from Pharmacy’s Fraudulent Billing

GEICO Proactive in Fight Against Millions of Dollars of Fraudulent No Fault Claims

No-Fault Insurance a Temptation to Fraudsters

The plaintiffs (GEICO) sued accusing the defendants of submitting fraudulent insurance claims for expensive, medically unnecessary topical pain products prescribed to people with soft tissue injuries, whom the plaintiffs insured. The defendants filed approximately 467 individual arbitrations through the American Arbitration Association and 48 individual lawsuits in New York state courts to collect on the same claims. Many of those actions are pending. GEICO moved to stay the arbitrations and enjoin the defendants from bringing any new arbitrations or lawsuits.

ZIFL OPINION

No-fault insurance was designed to save the public and insurers money. However, as this suit establishes, it also seems to have encouraged fraud by causing treatment for soft tissue injuries that are often cured with aspirin and heating pads by prescribing very expensive compound creams. Since each claim is small it takes a stay to resolve the issues and the USDC recognized that the fraud needs to stop to protect the parties and the intent of the statute that established no fault claims.

Insurance Fraud in Other Countries

The Extent of Insurance Fraud in New Zealand

Insurance Fraud is universal. Even at the other end of the earth, insurance fraud exists on the beautiful islands that make up New Zealand.

An Insurance Council of New Zealand survey in 2007 found that insurance claims fraud was approximately $150 million per annum. International surveys suggest that insurance fraud in most countries is somewhere around 10% of total premiums, which in New Zealand would make it around $450 million.

Somewhere between these 2 figures is a true level of insurance fraud in New Zealand. Obviously, no one is going to admit to a claim being fraudulent for statistical purposes, so any estimate must inevitably be quite subjective.

Health Insurance Fraud Convictions

Massachusetts Hospital Pays $14.6m For Over Billing for Overlapping Surgeries

Massachusetts General Hospital will pay $14.6 million to settle a lawsuit that alleged overbilling for double-booked surgeries that were simultaneously overseen by the same surgeon. It’s the third time since 2019 that the Harvard-affiliated teaching hospital agreed to pay millions to resolve a claim stemming from the same controversial practice.

The three out-of-court settlements reportedly totaled $32.7 million.

Massachusetts health insurers will share in the settlement money according to Attorney General Maura Healey, whose office approved the settlement.

The case stemmed from a whistleblower who said five orthopedic surgeons kept patients under anesthesia longer than necessary because they were juggling procedures in dual operating rooms. Dr. Lisa Wollman, an anesthesiologist, alleged the hospital violated Medicare and Medicaid rules that require surgeons to be present for critical parts of operations and also failed to designate a backup surgeon for trainees who might need immediate help.

The lawsuit alleged government insurance programs were overbilled for anesthesia services because procedures were prolonged by surgeons moving back and forth between operating rooms. Dr. Wollman reportedly said that her career but that she feels she did the right thing by speaking up.

Attempts by Government to Compel Ethical Behavior

Other Insurance Fraud Convictions

Louisiana Department of Insurance Issues Regulatory Actions Against Four Agents

Brandi Crawford was issued a Cease-and-Desist Order and License Suspension for allegedly collecting at least $4,152.64 in policyholder premiums that was not deposited with the insurer. Louisiana Department of Insurance (LDI) records showed Crawford was issued an insurance producer license for Life, Accident and Health or Sickness, and Industrial Fire on Oct. 15, 2019.

Houston Thomas was issued a Cease-and-Desist Order and License Suspension for allegedly creating a fraudulent flood insurance policy declarations page and submitting the fraudulent document to a lender. LDI records showed that Thomas was issued an insurance producer license on Sept. 17, 2016.

Lucas King was issued a Cease-and-Desist Order and License Suspension for allegedly misappropriating over $7,000 in premiums. LDI records showed that King held a non-resident individual producer license in Louisiana effective May 31, 2019, until Aug. 30, 2022.

Wendy Fox-Breaux, an individual producer and owner of Fox Insurance Agency, was issued a License Revocation and $5,000 Fine Notice following several complaints. These alleged violations included collecting policyholder premiums that were not deposited with insurers and failing to return unearned commissions or premiums. LDI records showed that Fox-Breaux was issued a producer license on Nov. 18, 2019, and Fox Insurance Agency, LLC has been a producer agency since Feb. 20, 2013.

All producers listed above have 30 days from the time of service to request an administrative appeal or the actions will become final.

True Crime Stories of Insurance Fraud

There are now available at https://rumble.com/zalma 26 Video True Crime Stories of insurance fraud. The latest is called “Life Insurance Can Be Hazardous to Your Health”.

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 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.

Subscribe to “Zalma on Insurance” at https://zalmaoninsurance.locals.com/subscribe and “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome.

You can contact Mr. Zalma at https://www.zalma.com, https://www.claimschool.com, zalma@claimschool.com and zalma@zalma.com . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

You may find interesting the podcast “Zalma On Insurance” at https://anchor.fm/barry-zalma; you can follow Mr. Zalma on Twitter at; you should see Barry Zalma’s videos on https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/featured; or videos on https://rumble.com/zalma. 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/