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Insurance Law Blog
Fraud by Insurers
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White and Williams
06-18-2009 | 02:03 PM
Fraud by Insurers
Culver City CA – The vast majority of insurance fraud is perpetrated against insurance companies. However, as the economy becomes weaker and it becomes more difficult for insurers to make a profit, insurance fraud by insurers is increasing.
Fly-by-night insurers open, charge low premiums, collect a few million dollars and disappear. Those who bought the inexpensive policies were left without protection. New off-shore insurers continue to appear. The insurance buyer should be aware that if the premium appears too good to be true it probably is not true and should be avoided.
Insurance is, by tradition, a contract of the utmost good faith. That means that the insurer will treat the insured with the utmost good faith and will provide the protection promised.
Ostensibly legitimate insurers are attempting to limit their exposure by giving a policy a common name like “homeowners” that leads the insured to believe that liability coverage is provided for defense and indemnity of an accident, including continuous or repeated exposure to substantially the same general harmful conditions that occur within the policy period, as provided by the standard ISO homeowners policy. Then, with an endorsement hidden in the back of the policy in small print without any warning, the endorsement changes the definition of “occurrence” to words that eliminate most coverage unless it happens within and is reported to the insurer during policy period. It is, in effect, selling the insured a bowl of sweet and healthy blueberries and delivering, in a sealed package, toxic mushrooms.
In an editorial in the June 15, 2009 issue of Zalma’s Insurance Fraud Letter, internationally recognized insurance coverage lawyer and expert, Barry Zalma says: “insurance sellers, buyers, counsel, and claims staff must refuse to attempt to enforce such policy provisions unless the following questions are answered in the affirmative:
Is the new wording conspicuous and clear?
Was it called to the attention of the prospective insured?
Was the insured asked to acknowledge in writing that the coverage provided is less than that provided by the standard ISO CGL form?
Was the insurance agent or broker warned, in writing, of the modification of the form and the fact that it provides less coverage than an ISO CGL?
Was the insured and the agent or broker asked to acknowledge and have the insured acknowledge in writing that they understand and accept the modification?
Was the premium significantly reduced in light of the reduction in coverage?
Mr. Zalma warns that “The insurer that acts to deceive, unlike the insured who acts to deceive, can be held to pay extracontractual damages for the tort of bad faith while the insurer can only collect contract damages from a deceptive insured.”
In addition the June 15, 2009 issue of ZIFL reports on the Health Care Fraud Prevention and Enforcement Action Team created by the Federal Judgment; a new Texas Insurance Fraud statute; an arson-for-profit trial that ends in acquittal for the accused; reports of convictions from the Coalition Against Insurance Fraud; and Reports of convictions for insurance fraud across the country.
The June 1 and June 15, 2009 issues of Zalma’s Insurance Fraud Letter (ZIFL) are available FREE on line at
Zalma’s Insurance Fraud Letter (ZIFL) continues its thirteenth year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool. It is provided free to clients and friends of the Law Offices of Barry Zalma, Inc., clients of Zalma Insurance Consultants and anyone who subscribes at
. Mr. Zalma also writes Zalma on Insurance where you can multiple articles on insurance issues and the ZIFL archives at
Mr. Zalma is an internationally recognized insurance coverage and insurance claims handling expert witness or consultant. Mr. Zalma’s law practice is limited to the representation of insurers and those in the business of insurance. He is available to provide advice and counsel concerning insurance fraud, first and third party insurance coverage issues, bad faith and first party insurance appraisals.
To be on the FREE mailing list as a subscriber to ZIFL please go to
and insert your e-mail address in the box indicated and you will be automatically subscribed to the text version of ZIFL. ZIFL will be posted for a full month in pdf and full color FREE at
If you need additional information contact Barry Zalma at 310-390-4455.
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