See the full video at https://youtu.be/KLdjNyXnae0  A waiver of the privilege can also occur when the carrier is sued for infidelity and / or fraud. For example, the California Evidence Code, section 956, provides: "there is no privilege under this article if the attorney's services were sought or obtained to enable or assist anyone to commit or plan to commit a crime or fraud." Even without a charter, the license to practice law is not a license to commit a crime.
A federal court ruled that the allegation of infidelity does not involve fraud is insufficient to trigger the exemption. In the Freedom Trust the insured claimed that the privilege had been waived because the insurer refused coverage in bad faith. The court acknowledged that the lawyer "does not need to be aware of the fraud for the criminal fraud exception to apply" and that the fraud exemption includes civil fraud. The court noted a fragmentation of authority nationally over whether a bad faith claim triggers the exemption from criminal fraud. ] Poor denial of insurance coverage simply means that the insurer has breached an implied contractual agreement to act loyally to an agreed common purpose that is consistent with the other party's reasonably justified expectations. … This does not have to mean false or misleading statements from the insurer. For example, an insurance company may act in bad faith if it simply denies coverage without any explanation. The gravame of deception, however, is falsehood. Thus, denial of incredible insurance coverage is not in itself similar to fraud.
This decision was not intended to imply that an insurer could not engage in activities involving both undue denial of coverage and fraud. Rather, it means that simple evil faith is not per se within criminal deception. In many circumstances, an insurer's bad faith involves fraud or allegations of fraud. Conduct that violates the implied agreement of good faith and fair trade is often treated as fraudulent conduct. California courts have noted that "conduct of bad faith, with fraud, has often been considered fraudulent." If a carrier denied coverage for a claim that it knows is covered, it may have committed fraud.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to services as an insurance consultant specializing in insurance coverage, insurance claims management, insurance operations and insurance fraud almost equal for insurers . He also acts 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 lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.
For the past 52 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following libraries with books and other materials to enable insurers and their claims staff to become insured.
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