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“Chutzpah” is a Yiddish term meaning “unimproved bile” in which, for example, a defendant convicted of murdering his parents asks for mercy because he is an orphan.
Kevin Muir made a claim for underinsured motorist benefits after being injured in a car accident that fit the definition of Chutzpah. His insurance company denied the claim because Muir had previously made fraudulent statements in an attempt to obtain personal injury protection benefits related to the same accident and was convicted of a crime related to the claim. Although the policy, like all insurance policies, excluded claims related to fraud, Muir still sued the insurance company after it denied his claim. The insurer filed a claim for a summary judgment and the district court rejected Muir’s lawsuit.
IN Kevin Muir v. Cincinnati Insurance Company2022 UT App 80, no. 20210289-CA, Court of Appeals of Utah (June 24, 2022), the Court of Appeal found that the exclusion of fraud was clear and unambiguous.
Muir is listed as a “covered driver” under a car insurance policy (Police) issued to him by the Cincinnati Insurance Company (Cincinnati). The insurance provided several types of coverage, including liability, personal injury protection (PIP), uninsured / underinsured motorist (UIM) and collision.
In 2017, Muir was traveling as a passenger in a vehicle that was the rear end of another vehicle. Muir suffered damages and received $ 25,000 in damages from each of the two drivers’ insurance companies – amounts that represented the policy limits for these insurances. Cincinnati also paid out PIP benefits to Muir under the policy.
In his PIP statement, Muir said “that he did not work because of the injuries he sustained”, but this statement was false: Muir actually worked “as a self-employed truck driver.” As a result of his false statement, “Muir was criminally charged with insurance fraud and entered” no competition “to reduce Class A offenses.”
Muir then made a claim for UIM benefits according to the policy. Cincinnati, however, denied coverage and relied on the policy’s fraud exclusion, which reads:
“We” do not provide coverage to any “protected person” who has made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss for which coverage is sought under this policy.
Following this denial, Muir Cincinnati sued for breach of contract and breach of the duty of good faith and fair handling. The parties filed cross-motions for summary judgment on the question of whether the Policy’s exclusion of fraud excluded Muir’s claims for UIM benefits.
The district court upheld Cincinnati’s claim and denied Muirs.
Muir argued that the exclusion of the policy fraud was ambiguous and asked the court to interpret the ambiguity in his favor.
The Court of Appeal found that an insurance is only an agreement between the insured and the insurer and is interpreted according to the same rules that apply to ordinary agreements. An insurer can exclude certain losses from the coverage by using a language that clearly and unambiguously communicates to the insured the specific circumstances under which the expected coverage will not be provided.
The insurance contains an exemption from fraud that prevents coverage when an applicant makes a fraudulent statement in connection with an accident or loss for which coverage is sought. Muir acknowledged that he made fraudulent statements to secure PIP benefits in connection with the accident in question, but claimed that these fraudulent statements would not deny his claim for UIM benefits.
The exemption from fraud is found in the section “General provisions” of the insurance, not within any specific coverage provision, so the exemption applies to all types of insurance provided by the insurance. The inclusion of the word “accident” in the fraud clause links the misrepresentation to the accident in question, not only to the coverage sought, and makes Muir’s preferred reading of the provision unreasonable, especially given Muir’s admission that his “fraudulent conduct was indeed” linked to the accident. ” in question.
The accident for which Muir sought UIM coverage is the same accident for which he made fraudulent statements when he applied for PIP coverage. And the policy excludes coverage sought in connection with any accident for which a protected person has made fraudulent statements.
The Court of Appeal therefore agreed with the district court’s decision that Cincinnati, by law, was within its rights under the policy of rejecting Muir’s claim for UIM coverage.
This case teaches that there is no such thing as a petty or unimportant fraud. The language of fraud in the policy was clear and unambiguous because it applied to the entire policy. Muir fraudulently collected his PIP claim when he succeeded in his attempt to defraud Cincinnati and was convicted of the fraudulent attempt. His chutzpah in seeking UIM coverage under the same policy where he was, due to his fraud was incapable and not worthy of a trial let alone an appeal. In fact, Cincinnati should try to recover the money paid in PIP benefits as a refund.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his internship to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance misconduct and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an attorney for insurance coverage and claims management and more than 54 years in the insurance industry. He is available at http://www.zalma.com and firstname.lastname@example.org.
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