Zalma's

Insurance Fraud Letter

Volume 12, Number 3-A

March  l5, 2008

A Resource For the Insurance Fraud Professional

© 2008 by Barry Zalma & ClaimSchool^™

Barry Zalma

Insurers in states where the tort of bad faith exists, like California, deny fraudulent insurance claims with fear and trembling. The specter of punitive damages has worked to make multimillionaires of many insurance criminals who convince insurers to settle rather than take a chance on trial. Insurers pay claims they believe they do not owe because they are fearful -- regardless of the merits of their position -- of being assessed punitive damages in a bad faith action. That fear will continue as long as there is not an effective means of defeating fraud and putting perpetrators in prison.

California, for example, collects many millions every year from the insurance industry to support the state’s Fraud Division and the prosecution of insurance criminals. It doles some of those funds out to local district attorneys to be used to prosecute fraud. The effectiveness of this system is less than exciting.

The lawyer for the Department of Insurance of each state, including California, is the state attorney general. A special unit should be established in the office of California’s attorney general, funded with the money taken from the insurance industry to support the state’s effort against insurance fraud, rather than splitting the funds among local prosecutors who are not interested in prosecuting the crime. This unit should be given a simple mandate: File and prosecute every insurance fraud brought to the unit by the Fraud Division that has better than a 50 percent chance of success.

The unit established by the attorney general should concentrate on prosecuting everyday insurance fraud, the frauds of opportunity that take 90 percent of the money paid to fraud perpetrators, in the range of $5,000 to $50,000 as well as the major fraud rings. Single counts should be prosecuted. Multiple counts and multiple defendants simply make the cases complex and cause the courts to impose settlements on the parties. Teeth must be put in the posters that say: Commit insurance fraud, go to jail.

The California Department of Insurance receives thousands of reports from insurers of potential fraudulent claims every month. The state does not have the staff, the ability or the desire to investigate and prosecute every case brought to them. If there was a dedicated unit of prosecutors, working directly with the investigative staff at the Department of Insurance that prosecuted only 5 percent of the suspected fraudulent claims reported to the state, the deterrent effect would be enormous.

The Department of Insurance and the Attorney General should issue press releases concerning every arrest and conviction. Newspapers should report daily that insurance criminals have been arrested and are going to trial or were convicted and are going to jail. Jail sentences should be made mandatory and the Legislature should remove from local judges the right to grant convicted felons probation or short jail sentences for what is, by statute, a major felony.

It is not enough for the state to say that the insurance companies must investigate and work to fight fraud. The state must also aggressively and vigorously fight insurance fraud. Today, a person perpetrating an insurance fraud need only be concerned that an aggressive fraud investigation might delay, or reduce, the amount he might recover from his crime. Criminal prosecution for the crime of insurance fraud is so minuscule in relation to the amount of fraud that it’s virtually nonexistent. It certainly does not act as a deterrent.

In conjunction with the formation of a special insurance fraud prosecution unit in the office of the attorney general, the Legislature should enact the following statute to protect insurers from frivolous bad faith lawsuits: "Any insurer that, without malice, reports to the Fraud Division, that it suspects it is the victim of the crime of fraud or has denied a claim on the ground of fraud may not be sued in any court of this state, for any tort cause of action. This section is not intended to eliminate the right of any insured to sue its insurer for breach of the insurance contract."

If the Legislature really wants insurers to fight insurance fraud, as it stated when it enacted the Insurance Frauds Prevention Act; if the Legislature wishes to keep strong and viable this important industry; if the Legislature wants to reduce the insurance premiums paid by their constituents, they must make practical the effort of insurers to avoid insurance fraud. As long as the tort of bad faith and the exposure of punitive damages hangs over insurance companies that accuse their insureds of fraud, the effort to stop insurance fraud will be one of attrition where no one will win except the criminals.

Insurance fraud is taking money out of the pockets of innocent and honest people who buy insurance. For every dollar taken by a fraud, an insurer must collect two dollars in premiums. Every person in the United States who does not commit fraud is paying to support those who do. A minimum of $20 for every $100 paid in premiums goes into the pockets of insurance criminals.

Every person in the country should be angry enough to write to his or her local district attorney, attorney general or U.S. attorney and let them know of their anger. If enough people complain, perhaps the prosecution levels will increase. If not, the fraud will continue, and the citizens of California will keep paying too much for insurance, and insurers will be forced to waste the funds they pay to support prosecution of insurance fraud.

Trust But Verify

 

Many insurers have no personnel in parts of the United States where they do business. They rely on Third Party Administrators and independent insurance adjusters to deal with their claims. In this scenario, the investigation and resolution of the claims are placed into the hands of individuals who are strangers to the insurer, based upon a belief in the utmost good faith and a tradition of trust. Sometimes the trust is well founded. Often it is not. Zalma Insurance Consultants will help insurers in their need to Trust but Verify their claims handling and avoid fraud.

 

 

If you like ZIFL you will love "Heads I Win, Tails You Lose" published by Barry Zalma as an e-book on http://www.Lulu.com the on-line marketplace for digital content.

"This book is an updated collection of columns I originally wrote and published in the magazines Insurance Journal, Insurance Week, and The John Cooke Insurance Fraud Report insurance trade publications serving the insurance community in the United States." Mr. Zalma explained that "The title, Heads I Win, Tails You Lose is meant to describe insurance fraud as it works in the Unites States. It means that whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser even if the perpetrator is caught and prosecuted."

Heads I Win, Tails You Lose is available for only $12.50 at http://www.lulu.com. Just type in search engine on the site the word "zalma".

According to Arizona law, only those benefits received as a result of the fraud must be forfeited, Arizona’s Division One Court of Appeals ruled on February 28, 2008 in the case of Alfonso L. Obregon vs. The Industrial Commission of Arizona.

Court records show Mr. Alfonso was receiving permanent partial disability benefits totaling $167.30 per month for a 2003 back injury. In May 2006, he was found guilty of making false statements to obtain temporary partial disability benefits, paid during 2004, for a different injury.

Following his conviction, Phoenix-based insurer SCF Arizona suspended all of his benefit payments, including those for the 2003 injury. When Mr. Alfonso protested the insurer’s action, an administrative law judge ruled that Arizona law required Mr. Alfonso to give up all workers comp benefits, both past and future.

The statute relied upon by the insurer, Section 23-1028(A), A.R.S., provides:

If in order to obtain any compensation, benefit or payment under the provisions of this chapter, either for himself or for another, any person knowingly makes a false statement or representation, such person is guilty of a class 6 felony, and, if the person is a claimant for compensation, benefit or payment, he shall in addition forfeit all right to such compensation, benefit or payment after conviction of the offense. (Emphasis added)

In an exercise in philology and sophistry the court concluded that "If the legislature had intended a complete and permanent forfeiture, it could have deleted the word "such." In so doing the court ignored the fact that "such compensation" modifies the words "any compensation" not just the compensation obtained by fraud. Since the court has difficulty parsing English sentences the Arizona Legislature should revise the statute and the Workers' Compensation court should consider the fact that he who presents a fraudulent claim once sufficiently to be convicted of a felony workers' compensation fraud would have no compunction about committing fraud a second time.

Similarly, the Colorado statute contains this broad language, the Supreme Court of Colorado concluded that only those benefits fraudulently obtained must be forfeited. Wolford v. Pinnacol Assurance, 107 P.3d 947, 955 (Colo. 2005) that held:

We give effect to all provisions in the Workers' Compensation Act and preserve the intent of the General Assembly, a conviction under section 8-43-402 only requires the forfeiture of the compensation that was obtained as a result of false statements."

 

If these holdings are correct, and I submit they are not, it appears that in the workers' compensation venue, even if you are caught, tried and convicted committing fraud you get to keep those benefits you obtained fraudulently that you were not caught committing or for which you were not convicted.

Workers' Compensation Insurance Fraud in Arizona and Colorado is a no-lose situation.

Because a thorough knowledge of insurance, insurance coverage and insurance claims handling are necessary to a successful anti-fraud program, North American Training Group, a national fraud training organization, announces the formation of a strategic alliance with ClaimSchool, a national provider of insurance claims training.

ClaimSchool for more than ten years has helped insurance professionals and insurance claims personnel meet state requirements by providing ongoing training paramount to the goals of effective claims handling and fraud reduction.

North American Training Group (NATG) exists to facilitate greater understanding and awareness of insurance fraud. NATG provides a high quality, engaging and user-friendly online curriculum that fosters greater success for all parties involved with the programs dedicated to fighting fraud.

Insurance and insurance claims handling are subjects that require continuous training and education. The law of insurance seems to change daily. The insurance claims professional needs to be familiar with new court decisions, laws, and regulations imposed upon them by the courts and by regulators from various states.

Details concerning course offerings and a sample of the computer based training, which will include ClaimsSchool, are available at https://fraudeducation.com/ or contact Fred Wharton, President of NATG Fwharton@fraudeducation.com.

Expert witnesses are citing a test designed to spot those who are faking their pain in hundreds of court cases, prompting debate about its reliability.

The so-called Fake Bad Scale was added to the Minnesota Multiphasic Personality Inventory last year, leading to its increasing use by expert witnesses in personal injury cases. The MMPI is often used to diagnose and treat patients at mental-health facilities. The 43-question test was created by psychologist Paul Lees-Haley, who often works as an expert witness for the defense. According to a story in the Wall Street Journal Lees-Haley tested the questionnaire on three groups: malingering personal-injury litigants, who had an average score of 27.6; people told to fake emotional distress, who had an average score of 25; and injured litigants, who had an average score of 15.7. He concluded that those who score 20 or above may be lying about their symptoms.

The plaintiff's bar and its experts believe that virtually everyone is a malingerer according to the scale designed by Lees-Haley. The test is helpful to insurance companies, but not great for the people who make claims. Those using it must consider it a tool, not the word from Mt. Olympus. It can, and should, lead to additional evidence and considered one of the many red flags of fraud.

Zalma's Insurance Fraud Letter (ZIFL) is published 12 months a year by ClaimSchool. It is provided free to clients, friends of the Law Offices of Barry Zalma, Inc., clients of Zalma Insurance Consultants and anyone who sends me an E-Mail requesting a FREE subscription.

The comments made are for information only and are not intended as legal advice. If you need legal advice, Barry Zalma practices law as the Law Offices of Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY, CA 90230 or at 310-390-4455, fax at 310-391-5614, Cell Phone: 310-738-6818 or E-Mail at zalma@zalma.com. Zalma's Insurance Fraud Letter can also be read on the web at http//www.zalma.com.

Mr. Zalma serves as an expert witness or consultant in insurance coverage, claims handling, insurance bad faith and fraud. 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.

Recipients of Zalma's Insurance Fraud Letter are authorized by ClaimSchool and Barry Zalma to make as many copies as needed to pass to your friends and staff as long as you do not copy for resale.

If this has been forwarded to you and you want to be on the FREE mailing list as a subscriber to ZIFL please send me an e-mail with your full name, your title, your company, your mailing address, your city, your state or province, you zip or postal code and your e-mail address to zalma@zalma.com or bzalma@earthlink.net and I will add you to the FREE e-mail list. If you want to be removed from the list please send me an e-mail and I will immediately remove you from the list.

It will be posted for a full month at http://www.zalma.com with graphics and can be read at your leisure.

Asbestos Fraud

According to an article in the Wall Street Journal, W.R. Grace, and its lead attorney, David Bernick, who has experience with the tobacco and breast-implant cases, is dealing with the Bankruptcy filings of his client. He has contended, properly, that federal rules of evidence apply in bankruptcy court. Arguing that the only way Judge Judith Fitzgerald can make a legitimate ruling on Grace's in its bankruptcy is for her to decide how many claims have scientific merit.

Judge Fitzgerald has allowed Grace to investigate those claims, and present her with its results. The stakes are enormous. At the end of this process, Judge Fitzgerald will make a finding on W.R. Grace's ultimate liability. The plaintiffs claims total as much as $6 billion, a figure that would make Grace insolvent.

The company claims the money necessary to cover legitimate claims is closer to $500 million, a number that would allow it to rejoin the land of the living.

On the evidence so far Grace's estimates are closer than those of the plaintiffs. The company entered Chapter 11 with some 120,000 pending claims. Judge Fitzgerald allowed it to send a medical questionnaire to all 120,000 plaintiffs and require a proof of a claim. 35,000 didn't bother to finish that process to submit a claim. Perhaps they are the same plaintiffs who filed silicosis claims in Judge Jack's court in Texas.

The judge has also seen a videotape of the "doctors" who diagnosed many of the remaining 85,000 claims. These are some of the same characters from the recent silicosis fraud about which ZIFL readers should be familiar. The court was treated to scenes of doctors recanting their diagnoses or invoking the "Fifth Amendment" to avoid answering questions. One doctor admitted that he charged $35 for a negative X-ray reading, but $70 for a positive one.

A retired epidemiologist from the Centers for Disease Control testified there were no more than 28,000 medically plausible cases of asbestosis in the U.S. male population between 1989 and 2001. Grace was hit with more than 200,000 claims over that period. Evidence presented by Grace showed that 807 X-rays from Grace claimant found evidence of asbestosis in about 80% of the X-rays. In a double-blind study in which doctors didn't know the purpose of the work, found evidence in only 7% of X-rays. What is finally being proved in federal court by a courageous victim of asbestos litigation is what should have been obvious from the beginning: Mos asbestos claims are fraudulent.

That decision now rests with Judge Fitzgerald. Comparisons are being made to federal Judge Janis Jack, who several years ago blew up bogus silicosis claims. But unlike the recent silica fraud, some Grace plaintiffs do have asbestos-related disease.

It is encouraging that courts are finally investigating and litigating sham asbestos and silicosis claims. Perhaps a settlement, even if agreed to by the defendant, is not the best result and it is time that mass claims be held to the standard of all other litigation, a preponderance of the evidence that the plaintiff was really injured by action of the defendant. That one defendant, Grace, can receive claims more than ten times the number of possible asbestosis victims or that Mississippi can have more than 100 times the number of possible silicosis claims should even wake up federal judges and might even give a hint to some prosecutors.

As ZIFL continues its tenth year of publication Zalma's Insurance Fraud Letter remains dedicated to reduce the ability of insurance criminals to succeed in their crime. For example, property-casualty insurers in the United States will pay out an estimated $300 billion net in claims (including case incurred losses and loss adjustment expenses) during 2006. That is more than 67¢ for each premium dollar written. Incurred losses are expected to approach $330 billion in 2007, on a calendar-year basis.

If insurance fraud takes, as most estimate, between ten to fifteen percent of that paid out in claims the crime is taking from property casualty insurers alone $30 billion to $45 billion a year. When health, life, and Medicare and Medicaid type insurance fraud is added in the crime of insurance fraud still takes more than $100 Billion from the insurance industry in the United Sates every year.

I created Zalma's Insurance Fraud Letter to help the Insurance Fraud Professional do what is necessary to defeat the crime with, or without, the assistance of criminal prosecution agencies. In future issues I will continue to inform you about methods to defeat insurance fraud, statutes enacted or proposed to help in the battle with insurance criminals, cases decided by the courts of appeal and some stories about how members of the profession have worked to defeat fraud.

Zalma's Insurance Fraud Letter's purpose is to provide practical information for those of you engaged in the war against insurance fraud.

Allstate filed a lawsuit against a Texas-based chiropractic group that seeks more than $10 million as payback for what is alleged was an elaborate fraud scheme in Texas, Ohio, Indiana and Alabama.

According to the suit, filed in federal court in the Northern District of Texas, the Northbrook, Ill.-based insurer alleges the 66 defendants violated the Federal Racketeer Influenced and Corrupt Organizations Act. The company seeks treble damages, court costs and attorneys fees as well as reimbursement Allstate (NYSE:ALL) said it paid on fraudulent claims made by the Chiropractic Strategies Group Inc.

Allstate also names as defendants the chiropractic group's owner, Michael Kent Plambeck, as well as attorneys, telemarketers, and law office management companies the insurer's Special Investigations Unit found to be involved in deceiving Allstate since at least 2002, according to the lawsuit.

The lawsuit alleges telemarketers, some who would misrepresent their identity as being with an insurance company, would solicit automobile accident victims by using public police reports and then recommend they go to one of as many as 30 Chiropractic Strategies Group clinics for a "10-point examination." Commissions were given to telemarketers who made these appointments, the lawsuit said.

The examinations were sometimes given by unlicensed chiropractic assistants, Allstate alleges, and then the patients were directed to get other treatments and X-rays. Allstate claims it was then billed for the services and other services that were not actually performed, the lawsuit said.

Employees of the chiropractic group would then recommend patients to attorneys with the "enterprise," Allstate said. Attorneys would allegedly also visit the clinic to sign up clients.

On March 14, 2008, Scruggs and Sidney Backstrom pleaded guilty to conspiracy to defraud the U.S. Mr. Scruggs's law partner and son, Zach, also is charged in the case but didn't enter a plea. Zach is expected to go to trial.

Prosecutors told the press that they would recommend five years in prison for Mr. Scruggs and 2 1/2 for Mr. Backstrom, penalties significantly lower than what they could have faced.

Judge Henry L. Lackey reported a bribe overture to the FBI and worked undercover. Two of the men who were indicted, attorney Timothy Balducci and former Mississippi State Auditor Steve Patterson, pleaded guilty and began working with the prosecution.

Richard Scruggs became famous in the 1990s, when he won settlements for shipyard workers in Pascagoula, Mississippi, who had been exposed to asbestos. In 1998 he pressured tobacco companies to agree to a $248 billion settlement. However, recently, his story descended into the realm of scandal when he and three others were indicted in his hometown of Oxford, Mississippi, for trying to bribe a judge to get a favorable ruling in a fee dispute.

In the 10 years since the tobacco settlement, Scruggs has taken on a series of losers. Although lionized in the press they shared two things: big enemies and bad results. The only major success he's seen in the last decade hasn't been for the underdog plaintiffs that he champions, but for a big corporation that he defended in a product liability case.

The tobacco settlement that made Scruggs so wealthy was in many ways an unusual. It was the first time that plaintiffs lawyers had the clout of a small army of 46 state attorneys general behind them. In addition, one tobacco company, Liggett Group LLC, did the unthinkable and broke ranks, agreeing to cooperate with the plaintiffs. This unprecedented alliance pressured the biggest tobacco companies to negotiate.

The total fees awarded, however, was approximately $13 billion in fees to all lawyers involved with the tobacco companies are paying over 20 years. As a pioneer of this litigation, Scruggs reportedly received one of the largest chunks. Like many lawyers who don't have to work, he couldn't stop working.

Scruggs' string of professional disappointments was joined by a personal one. In August 2005 Hurricane Katrina damaged his house in Pascagoula and harmed hundreds of thousands of others in his home state. The situation was tailor-made for a Scruggs' attack: hordes of sympathetic plaintiffs versus unsympathetic insurance companies.

Scruggs responded by forming the Scruggs Katrina Group in September 2005 with Barrett and three other Mississippi firms. The next month they filed a test homeowner suit against Nationwide Mutual Insurance Co. on behalf of Paul and Julie Leonard, a Pascagoula police lieutenant and his wife. The Leonards' house was inundated with five feet of water, and the couple claimed damages exceeding $130,000. Nationwide paid them only $1,661, the portion that the insurer said was due solely to wind. The plaintiffs' policy covered wind damage but excluded flood damage, and Scruggs accused the insurer of undervaluing the wind damage. He also claimed that Nationwide should be liable for damage caused jointly by wind and water.

The case was tried without a jury by senior federal district court Judge L.T. Senter Jr. in Gulfport, Miss. After an eight-day trial, Scruggs failed to get much more for the Leonards. Judge Senter awarded them just $1,228 in additional recovery. The Leonards' damages were disappointing but Scruggs did win a key point that could help him in other cases. Senter invalidated language in the Nationwide policy that appeared to prevent any recovery for damage caused jointly by wind and water; he held that the language was ambiguous and could not be enforced. That victory was short-lived. In August 2007 the 5th Circuit reversed and held that the language was enforceable.

Before the 5th Circuit issued its opinion, Scruggs settled other cases against Nationwide for a confidential amount. Scruggs also settled a slew of suits he had brought against Allstate Property and Casualty Insurance Co. and State Farm Fire and Casualty Co. Inc. As part of a settlement of 640 cases with State Farm, Scruggs and his co-counsel got $26.5 million in fees. The fee award prompted a suit by Scruggs' co-counsel, John Jones, who claimed Scruggs was denying him his portion of the fees. It was in this case that Scruggs is alleged to have bribed a Mississippi state court judge for a favorable ruling. Since his indictment, Scruggs has withdrawn from all Katrina litigation.

For a detailed history of Mr. Scruggs see the article at http://online.wsj.com/article/SB120543511884434181.html?mod=djemITP.

A Win for Scruggs

On February 29, 2008, U.S. District Judge Roger Vinson ruled that an Alabama court lacked jurisdiction to charge Scruggs with contempt for allegedly ignoring an order to turn over documents about insurance claims after Hurricane Katrina and dismissed the case. Vinson said Scruggs was protected from prosecution because he gave the papers to Mississippi's attorney general, Jim Hood, who was probing fraud allegations related to Katrina.

The court stated the basis for its decision:

For jurisdictional purposes, the undisputed facts are that Scruggs was not a party, nor was he an attorney-of-record or at any time make an appearance in, the Renfroe case. Subject to exceptions discussed infra, it is axiomatic that courts only have power and jurisdiction to enjoin parties before the court. See Scott v. Donald, 165 U.S. 107, 117, 17 S. Ct. 262, 41 L. Ed. 648 (1897)

In addition, assuming that Scruggs was bound by the injunction and, consequently, that there is jurisdiction over him, there is a "law enforcement exception" to the decree. The injunction stated that the documents could not be given to anyone "unless to law enforcement officials at their request." Since Hood is a law enforcement officer that is sufficient.

The decision is a clear victory for Scruggs and can be read at http://online.wsj.com/public/resources/documents/WSJ-20080229-scruggsorder.pdf

Judge Vinson is not a fan of Mr. Scruggs. He said:

The timing of these events and of Scruggs’s other cases involving State Farm (one of which was settled just 10 days before the Attorney General returned the documents to counsel for Renfroe) is another reason to be suspicious, as is Hood’s unusual letter to United States Attorney Martin, suggesting that Scruggs not be prosecuted for contempt because he was a "confidential informant."

 

* * *

The injunction specifically and precisely said the documents could be given "to law enforcement officials at their request." Regardless of the subjective intent that Hood may have had when he requested the documents, the undisputed fact is that he did make such a request. The objective language of the injunction expressly authorized the law enforcement exception, and it must be recognized here. Criminal contempt under such circumstances cannot be supported under the law.

Although Scruggs actions were contemptible they did not violate the order and he cannot be held in criminal contempt.

Scruggs & Hood

The Wall Street Journal reported that federal prosecutors are rolling out their bribery evidence against Scruggs, and the drama includes wiretaps, secret meetings and code words. Mississippi Attorney General Jim Hood is now appearing in the case.

The FBI notes allege Mr. Scruggs "agreed to pay Patterson Balducci $100,000 per month over five months..." to keep Hood from prosecuting State Farm. Mr. Hood recently admitted under oath that he had met with Balducci and Patterson. But he's denied he was influenced and last week insisted that "The decision on whether to indict State Farm Insurance Company was based solely on the advice of senior prosecutors in our office . . . I am too hardheaded to be influenced by outside forces -- I do what I think is right for the working people of Mississippi."

Mr. Hood's close ties to these characters nonetheless raise questions about his prosecutorial judgment on issues that go well beyond State Farm. The AG was asked recently why his office wasn't prosecuting the alleged bribers (including lawyer Joey Langston, who has pleaded guilty in a separate bribery case). He admitted that his connections to the accused meant that going after them would be "like prosecuting a relative."

Meanwhile, prosecutors released the Balducci wiretaps that led to the original bribery indictments. The wiretaps appear to show Balducci reporting to Mr. Scruggs about a legal ruling that Judge Lackey had yet to file, and giving Mr. Scruggs the opportunity to modify the judge's language. Balducci then appears to suggest that the judge wants a further $10,000 because he's "more exposed on the facts and the law," and Mr. Scruggs agrees to "take care of it."

Other Problems

According to an same indictment, Langston admitted that around January 2006, Scruggs, Langston and the other co-conspirators agreed that if the Wilson v. Scruggs case "was resolved in (Scruggs’) favor" that Langston, Patterson and DeLaughter’s "close personal friend" could split the savings Scruggs would earn as a result of the favorable ruling.

The indictment charges that Langston, Patterson and the "close personal friend"­which it identified as Ed Peters -- split $3 million saved by the case settlement between July 2006 and July 2007. It alleged:

"… Langston, working with Balducci and Steven A. Patterson, contacted and retained the services of Ed Peters, a close personal friend of Judge DeLaughter. For his services, Langston agreed to pay Peters $50,000 in cash. After paying the $50,000, the parties agreed that they would also divide any money over and above what Scruggs was willing to pay in the Wilson matter," the indictment states. "In the end, based on this reverse contingency fee, Peters received an additional $950,000 for his services."

As ZIFL enters its twelfth year of publication Zalma's Insurance Fraud Letter remains dedicated to reduce the ability of insurance criminals to succeed in their crime. For example, property-casualty insurers in the United States will pay out an estimated $300 billion net in claims (including case incurred losses and loss adjustment expenses) during 2006. That is more than 67¢ for each premium dollar written. Incurred losses are expected to approach $330 billion in 2007, on a calendar-year basis.

If insurance fraud takes, as most estimate, between ten to fifteen percent of that paid out in claims the crime is taking from property casualty insurers alone $30 billion to $45 billion a year. When health, life, and Medicare and Medicaid type insurance fraud is added in the crime of insurance fraud still takes more than $100 Billion from the insurance industry in the United Sates every year.

I created Zalma's Insurance Fraud Letter to help the Insurance Fraud Professional do what is necessary to defeat the crime with, or without, the assistance of criminal prosecution agencies. In future issues I will continue to inform you about methods to defeat insurance fraud, statutes enacted or proposed to help in the battle with insurance criminals, cases decided by the courts of appeal and some stories about how members of the profession have worked to defeat fraud.

Zalma's Insurance Fraud Letter's purpose is to provide practical information for those of you engaged in the war against insurance fraud.

"The American people will never knowingly adopt Socialism. But under the name of ‘liberalism’ they will adopt every fragment of the Socialist program, until one day America will be a Socialist nation, without knowing how it happened." -- Norman Thomas

"Liberals, it has been said, are generous with other peoples’ money, except when it comes to questions of national survival when they prefer to be generous with other people’s freedom and security." -- William F. Buckley, Jr.

"Trust, but look for the exits." -- Mason Cooley

"There's something horrible and undefeatable about people who have no life except the worship of power . . . people who don't want the meeting to end, the people who just are unstoppable, who only have one focus, no humanity, no character, nothing but the worship of money and power. They win in the end." -- Christopher Hitchens

"[T]he Constitution is not a living organism. It’s a legal document." -- Supreme Court Justice Antonin Scalia

Heads I Win, Tails You Lose

Barry Zalma who has been at the forefront of the fight against insurance fraud for more than 40 years has collected a series of true stories about the crime. He has published the book as an e-book on http://www.Lulu.com the online marketplace for digital content.

"This book is an updated collection of columns I originally wrote and published in the magazines Insurance Journal, Insurance Week, and The John Cooke Insurance Fraud Report insurance trade publications serving the insurance community in the United States." Mr. Zalma explained that "The title, Heads I Win, Tails You Lose is meant to describe insurance fraud as it works in the Unites States. It means that whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser even if the perpetrator is caught and prosecuted."

Heads I Win, Tails You Lose is available for only $12.50 at http://www.lulu.com. Just type in search engine on the site the words "Heads I Win".

Carolina Academic Press, announces the publication of "Insurance: Cases and Materials on Coverage, Claims, and Litigation". Order now and obtain a 10% Internet Discount

Every civil lawyer should understand that a major part of their law firm’s income comes, directly or indirectly, from insurance. Since insurance is so important to the funding of the success of a civil law practice, it is imperative that every lawyer have a basic understanding of the law of insurance. Similarly, prosecutors or criminal defense lawyers dealing with the crime of insurance fraud must understand the law of insurance to properly represent the state or the defendant. The lawyer who is ignorant of the law of insurance cannot adequately serve his or her clients.

The purpose of this book is to provide the law student, the practicing lawyer, the insurance lawyer, or professional claims personnel with the full text of insurance-related decisions of the United States Supreme Court, US District Courts of Appeal, State appellate courts and foreign courts that have molded the law that governs insurance transactions in the United States. Those who are new to the subject of insurance will find this book a resource and starting point for research. It can also be used as a basic training course for those who are just beginning in the practice of law, the claims business, or in representing insurers, representing those who are insured, or litigating against insurers.

Carolina Academic Press, announces the publication of an essential book for insurers who do insurance business in the state of California. California compels all who are involved in the claims process -- even if only tangentially -- to be trained with regard to, and comply with, the Fair Claims Practices Regulations (Regulations) and the Integral Anti-Fraud Personnel Regulations (SIU Regulations). The book should be used by insurers to effect compliance with the Regulations when training or assisting claims personnel. Those insurance people who are engaged in any way in the presentation, processing or negotiation of insurance claims in the state of California are required to be familiar with Regulations imposed by the state of California.

The Appendices include an outline for an insurance company staff member, trainer, or lawyer to use in providing a training class to all of the insurers integral anti-fraud personnel. Zalma provides insurers, and their staffs, the information needed to comply with the SIU Regulations and to offer the required training.

The books were written by Barry Zalma, Esq., CFE, a California insurance coverage attorney and an internationally recognized expert on insurance claims handling, insurance coverage, insurance bad faith and insurance fraud. A copy of the table of contents and introductory materials is available at http://www.cap-press.com/books and then search for Zalma.

The books are available for only $110.00 and $50.00 respectively from Carolina Academic Press, 700 Kent Street, Durham, NC 27701 or can be ordered directly from http://www.cap-press.com/books/1689, Phone: (919) 489-7486, Fax: (919) 493-5668 and web@cap-press.com.

Published by Matthew Bender & Company, Inc., a member of the LexisNexis Group this three volume work includes two chapters by Barry Zalma, entitled "Adjusting Property Insurance Claims" and "Adjusting Liability Insurance Claims". It is presently available on line on the Lexis service.

Other Books by Barry Zalma

Insurance Claims: A Comprehensive Guide

Mold: A Comprehensive Claims Guide

Construction Defects: Litigation and Claims

All are available from Specialty Technical Publishers, http://www.stpub.com or Call 800-251-0381

* The co-owner of a trucking firm tried to illegally reinstate lapsed liability coverage for a truck that crashed and killed four people, Connecticut prosecutors charge. A dump truck owned by David Wilcox and his firm American Crushing and Recycling lost its brakes while going down Avon Mountain in 2005. It smashed into vehicles parked at a stoplight at the bottom during morning rush hour. Three motorists plus the truck driver died, and 11 people were injured in the 20-vehicle pileup. David and his wife Donna called their insurance agent within 20 minutes after learning of the crash. They tried to buy coverage for the truck but didn't tell the agent about the crash. Jury selection for David’s trial began in March. He faces insurance-fraud and manslaughter charges. Donna pled guilty to insurance-related charges and will be sentenced April 30.

* One of the largest insurance swindles in Ohio history took 11 years to investigate and prosecute. But a judge took just seconds to slap chiro Paul Neumann with more than three years in federal prison On March 3, 2008. He and his brother Timothy installed doctors as straw owners of their MedBack clinics in Toledo and other Ohio cities, then tossed tens of thousands of fake treatment bills at more than 200 insurers. Timothy received nearly three years in February 2008.

On February 29, 2008, Donna Wilcox, the wife of a former truck owner whose truck was involved in a fatal crash on Connecticut's Avon Mountain nearly three years ago pleaded no contest to attempted insurance fraud. She faced a trial that was to start March 3 in Hartford Superior Court. The 42-year-old Wilcox also pleaded no contest to attempted first-degree larceny and conspiracy to commit first-degree larceny.

The state accused Wilcox of seeking to restore liability insurance coverage on the truck within 20 minutes of learning of the July 29, 2005, crash from her husband, David Wilcox. Three motorists and the truck driver were killed when the out-of-control dump truck descended Route 44 and slammed into a line of morning commuters, causing a fiery collision.

Prosecutors say that when calling an insurance agent to secure coverage she failed to disclose that the crash had just occurred. David Wilcox, 72, still faces the same insurance-related charges and four manslaughter charges.

Donna Wilcox is due to be sentenced April 30, 2008.

On March 3, 2008 it was reported that a Los Angeles Superior Court jury returned a special verdict of fraud and breach of the implied covenant of good faith and fair dealing against Mercury Casualty Co. and awarded compensatory damages of $170,000 and punitive damages of $3 million.

West Yorkshire Police charged three people in the ongoing inquiry into ‘cash for crash’ scams in conjunction with the Insurance Fraud Bureau (IFB). IFB Investigators worked closely with Keighley Police over the last ten months to investigate alleged false motor accident claims involving hundreds of thousands of pounds, known as Operation Pelican.

During the inquiry 22 people have been arrested. A 37 year old male from the Keighley area has been charged with conspiracy to defraud insurance companies, conspiracy to pervert the course of justice and the intimidation of witnesses. A 36 year old female from the Keighley area has been charged with conspiracy to defraud insurance companies, while a 57 year old self-employed vehicle examiner has been charged with conspiracy to pervert the course of justice and conspiracy to defraud insurance companies.

All three individuals were scheduled to appear at Bingley Magistrates Court on March 13th. A further 16 people have received police cautions for minor fraud offences and three individuals have been eliminated from inquiries.

On March 7, 2008, Kentucky Office of Insurance reported that Tanya K. Moodie was ordered to repay $69,414 after receiving and cashing disability benefit checks for almost four years after the insured's death.

According to Lyon Circuit Court records Moodie was named attorney-in-fact for Clara Ingram, a Kentucky Department of Corrections employee who received permanent partial disability benefits due to an injury covered under workers' compensation. KOI said. After Ingram's death on Nov. 28, 2000, Moodie collected and cashed her benefit checks until August 2004.

Following an investigation by the Kentucky Office of Insurance Fraud Investigation Division, Moodie was charged with one felony count of insurance fraud. She entered a guilty plea in February and spent 28 days in jail.

Earlier this week, Moodie received a two-year, suspended jail sentence and will remain on probation until full restitution is made.

On March 13, 2008, Texas Mutual Insurance Company reported that a Travis County court sentenced Donald Miller of Yoakum on workers' compensation fraud-related charges. Miller received one year of probation and was ordered to pay $2,132 in restitution to Texas Mutual, plus a $500 fine.

Miller reported a job-related injury while working as a carpenter for Orr & Zinke General Contractors, headquartered in Yoakum. He claimed he was unable to work as a result of the injuries, and Texas Mutual began paying him income benefits.

However, an investigation by Texas Mutual found evidence that Miller was working as a self-employed contractor remodeling a private residence while receiving income benefits.

Barry Zalma, Esq., C.F.E.

Law Office

Barry Zalma, Inc.

and

Zalma Insurance Consultants

4441 Sepulveda Boulevard

CULVER CITY CA 90230-4847

310-390-4455 Fax: 310-391-5614

zalma@zalma.com -- zalma@zic.bz

DETAILS AT

http://www.zalma.com or http://www.zic.bz

For Cases Involving Insurance Coverage, Insurance Claims Handling, Insurance Bad Faith, Insurance Fraud, Compliance with Fair Claims Regulations, Insurance Policy Wording, Insurance Education & Training

If you have testified as an expert in deposition or trial on three cases you are eligible to join the Forensic Expert Witness Association (FEWA). I have been a member of FEWA for several years now and serve on its Board of Directors.

The Organization

FEWA is a not-for-profit 501(c)6 professional association, founded in Orange County in 1993 and incorporated in California in 1996 originally as Forensic Consultants Association. The name changed to Forensic Expert Witness Association in 2003. The purpose of FEWA is to promote the development of forensic practice on a professional level, to assist its individual members in attaining and maintaining a professional standard of practice in forensics, and to assist its members in networking, which may lead to business development in the field of forensic practice. Los Angeles Chapter and San Francisco Chapters formed in 2002, San Diego Chapter in 2004 and Sacramento/Sierra in 2005.

For details contact FEWA at http://www.forensic.org or write to its director, Norma Fox, at nsfox@earthlink.net.

4441 Sepulveda Boulevard

CULVER CITY CA 90230-4844

310-390-1029 --  Fax: 310-391-5614 -- Cell: 310-738-6818

http://www.zalma.com and http://www.claimschool.com 

ClaimSchool publishes the ZIF, computer based training programs  and several books written by Barry Zalma.

Details concerning the publications available can be found at http://www.claimschool.com and  http://www.zalma.com.

Published March 15, 2008

(c) 2008, Barry Zalma & ClaimSchool 

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