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The insurer must always demand reimbursement of all expenses incurred to avoid insurance fraud



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STORING GOODS A STUPID WAY TO REQUEST INSURANCE FRAUD AND PROFIT FOR PROMOTION

After a jury convicted Patrick Elliot Lee (Lee) of eight counts of insurance fraud under section 550 of the Penal Code, subsections (a) (1) and (b) (1), the trial court ordered him to pay damages to the insurance companies he had defrauded.

IN The People v. Patrick Elliot LeeA158225, A159872, California Court of Appeals, First District, Second Division (June 24, 2022), the convicted felon tried several arguments to avoid imprisonment and restitution.

BACKGROUND

On February 10, 2015, San Pablo police responded to Matthew Brown at the scene of a reported burglary, where Lee’s wife told him she had returned home to find all of Lee’s property missing. Lee then filed a theft claim under his tenant’s insurance with Homesite Insurance (Homesite), telling the insurer that the alleged stolen property exceeded $ 50,000 in value and that Lee had hired a lawyer to help him with the claim.

Informed by Brown of his suspicion, the California Department of Insurance, Detective Herndon discovered that Lee had communicated with Officer Brown via email from a Gmail account. When Lee rented a storage device eight days before the reported burglary, he used the Gmail address. After moving the property from that storage unit, he rented a second unit near his new home in Menlo Park, again using the Gmail address.

Detective Herndon’s investigation also revealed a car insurance claim that Lee had made on October 9, 2014 according to his policy with Progressive Insurance (Progressive). On June 16, 2015, Herndon requested a search warrant for Lee’s Gmail address for the date range of November 12, 2014 through June 16, 2015 (the Gmail order) covering the two claims.

A Contra Costa County Supreme Court judge signed the Gmail decision on June 16, 2015. Items discovered in the decision matched photographs of items that Lee had reported stolen in his home insurance claim.

PROCEEDINGS AND JUDGMENT

In their first case, the people examined Loan Craig, the progressive claims representative who dealt with Lee’s claim on October 9, 2014 regarding rope damage to his Porsche. Craig testified that Lee’s insurance gave him the right to a rental car benefit while his Porsche was being repaired. After hearing from Lee that he would take the Porsche to be repaired in Colorado, Craig approved a payment of $ 720 to give Lee a rental car for 18 days. When Craig was asked to see photographs of the Porsche taken after Lee’s rental car had been returned, she testified that they depicted the same rope damage that Lee had probably repaired.

The people cross-examined Lee about his finances. As a commercial pilot, Lee moved from Colorado to California in 2014 to work for Air Methods, which led Lee to believe that he would make more money in California than he did in the end. The prosecutor showed Lee an e-mail on November 12, 2014 in which Lee complained about his compensation to the management at Air Methods. Referring to the e-mail, Lee testified that at the time he sent the e-mail, he had earned $ 37,000 so far this year, an income he described as “quite pathetic.” As an argument, prosecutor told Lee’s financial problems and told the jury that “money was scarce”, so Lee “invented an insurance claim.”

The jury found both Lee and his wife guilty according to the indictment.

ORDER OF RESTORATION

On December 20, 2019, the court ordered Lee to pay damages to his victims. In addition to the money Lee owed Progressive, Lee was ordered to pay Homesite $ 18,000 for the financial loss caused by Lee’s fraudulent theft claims, as well as $ 64,280.03 in legal fees. The trial court rejected Lee’s argument that the terms of his previous settlement with Homesite in March 2018 prevented the court from ordering Lee to pay legal fees.

DISCUSSION

The house search certificate met the requirement of “probable cause”.

The Fourth Amendment to the United States Constitution provides that “no warrants shall be issued, except for probable cause, by oath or confirmation.” Probable cause was determined in abundance by a confirmation sworn in by Detective Herndon, a California Department of Insurance detective, certified public accountant and certified fraud investigator. In the certificate, Herndon describes the origin and course of his investigation of the theft claim that Lee made against his tenant’s insurance with Homesite. Herndon then talks about the facts behind his suspicion that the theft claim was fraudulent.

The certificate provided more than a substantial basis for concluding that there was a reasonable probability that a search would reveal an error. The court concluded that it was entirely reasonable to draw conclusions from the facts that Detective Herndon told Lee that he moved his property to storage, filed a theft report to Homesite and then removed the property from storage once Homesite had resolved the claim and Lee believed the danger with any investigation had passed. In short, the affidavit establishes probable cause to believe that Lee committed insurance fraud.

Sufficient evidence supports paragraphs 8 and 9.

A jury found beyond a reasonable doubt that Lee had deceived Progressive by using a rental car under false pretenses. The people’s evidence was sufficient to show that Lee violated section 550 of the Penal Code. The jury resolved that conflict in favor of the people’s evidence and that solution will not be disturbed by an appeal.

There was no abuse of discretion in the court’s decision on repayment.

As part of the repayment decision adopted following Lee’s conviction, he was ordered to repay Homesite the $ 18,000 it had paid him to settle the fraudulent theft claim against Lee’s tenant’s insurance. In addition, Lee was ordered to pay Homesite $ 64,280.03 in legal fees.

In May 2015, Homesite Lee settled a $ 18,000 theft claim. Nearly three years later, in March 2018, Lee agreed to pay Homesite $ 18,000 to resolve any civil lawsuits related to the theft claim, with “each side bearing its own attorney’s fees and costs.” According to Lee, the court should have “held [Homesite] to the terms ”of that settlement agreement and declined to order the reimbursement of attorneys’ fees.

When the repayment decision was issued on December 20, 2019, Lee had still not paid Homesite the $ 18,000 he owed under the March 2018 settlement agreement. And a restitution decision is “enforceable as a civil judgment.” (People v. Guardado (1995) 40 Cal.App.4th 757, 762.)

By assisting in the prosecution of Lee’s criminal case, Homesite’s lawyers assisted in securing a conviction and, in turn, a restoration decision with the same effect as a civil judgment. Thanks to these efforts, Homesite’s lawyers put Homesite in a better position to collect the $ 18,000 it already owed. For that reason, their charges were “reasonable… Costs of recovery” according to section 1202.4, subsection (f) (3) (H).

They determined.

Insurance fraud is a serious crime in California and the charter allows the insured who has been deceived to claim compensation from the criminal. In this case, failure to pay the ordered refund may either invalidate a probation order or add a penalty. Any insurer that, as a victim of an offense of insurance fraud, should demand reimbursement including reimbursement of attorney’s fees incurred to offset the fraudulent claim.

(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 a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

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