A when the district court ruled for the defendant insurance company on a counter-proposal for a summary judgment, and terminated the action, the plaintiff appealed that decision on a summary judgment. In Meat Town Inc. v. Sentinel Insurance Company, Case No. 19-2351, the United States Court of Appeals for the Sixth Circuit (March 30, 2021) was asked to find the fraud was not large enough. to prevent the insured from collecting the remainder of his loss.
INSURANCE POLICY INTERPRETATION
A basic principle of Michigan law is that unambiguous contracts must be executed as written according to their unambiguous terms as this respects the individual's freedom
While exclusion clauses in insurance are strictly interpreted in favor of the insured therefore hold an insurance company liable for a risk that it did not take, and thus clearly specific exceptions must be applied.
The insurance in this case invalidates all coverage if the insured hides or incorrectly presents material facts about his claim; commits e.g. fraud. To enforce such a provision under Michigan law, the insurer must prove that the claim was (1) knowingly false or made in ruthless violation of the truth, and (2) material, so that the insured intended to persuade the insurer to act in accordance with It. Furthermore, under Michigan law, it does not matter that the fraud was committed in connection with only part of the insurance claimed by an insured. ; rather, a lie is related to a single loss to invalidate the policy. In simple language, you can not be a little dead.
Meat Town Inc. was a butcher and grocery store in Detroit, Michigan. Meat Town was insured under a "Business Owner & # 39 ;s Policy" with Sentinel Insurance Company, Ltd., which insures against the risk of loss of property, fixtures and fittings, inventory and business interests due to, among other things, vandalism or fire.
On December 24, 2015, Meat Town filed a claim under this policy for losses due to burglary, robbery and vandalism that occurred on November 10, 2015, known as the "Vandalism Incident." On March 7, 2016, Meat Town filed a second , separate claim for losses due to a fire on December 19, 2015, known as the “fire.” On October 4, 2016, Meat Town President Pete Demopolis signed with notarization, a “Sworn Statement in Proof of Loss,” claiming 487,879 dollars in loss and damages from the vandalism incident.
Sentinel suspected that the allegations were fraudulent, and launched an investigation, which eventually turned these suspicions into beliefs that the allegations were fraudulent. a four-page letter denying both allegations, citing several policy provisions, the most relevant of which was misrepresentation, concealment or fraud. .
Just before 12 o'clock on the day of a large delivery, the electricity company Meat Towns closed electricity. Neither Meat Town's owner, Peter Demopolis, nor its manager, Alan Gluck, were in Meat Town when the electricity went out, but the floor manager called them and was told to "sit tight." After sitting in the dark for about 30 minutes, the floor manager locked the store, activated the security system and left with the other three employees.
According to the security company, Vandalism Event started at 17:25, when the vandals broke the front door and triggered the alarm. Meat Town never reopened to stores after the vandalism incident on November 10 and December 19, 2015, while Meat Town's landlord was in the process of deporting Meat Town from the property, a firefighter set fire to it. In the end, the Sentinel concluded that Meat Town's allegations were not only false or exaggerated, but were deliberate, indisputable and undeniably fraudulent.
As a clear example, Sentinel pointed to the delivery from the Cape on 10 November. Cape Townâ & # x20AC; & # x2122; s controller, Allen Cohn, certifies in a statement that these orders were canceled "without sale or delivery to Meat Town", so that Meat Town neither paid for nor received any of the products reflected on [ose] invoices. " In addition, among its claims of loss for meat thrown from its vandalized display cases and freezers, Meat Town claimed $ 8,739 for the meat from Quality Meats. Meat Town supported this claim with copies of four quality Meats tickets. It is significant that none of these bills were dated. Chairman / CEO of Quality Meats, Jeff Davis, certifies in a statement that Quality Meats did not sell or deliver any meat to Meat Town in November 2015. When Quality Meats produced its copies of the same four bills, each clearly depicted a date (three dated 12 September and one dated 3 October). A comparison of the respective copies revealed that Meat Town's copies had no visible dates but instead had an unmistakable white space where the date was on Quality Meats copies.
The district court found that Meat Town had made material misstatements in its claims to the Sentinel, that these misconceptions invalidated the policy, and that the Sentinel – and not Meat Town – was entitled to a summary judgment. Meat Town v . Sentinel Ins . Co ., Ltd ., 413 F. Supp. 3d 671, 671 (E.D. Mich. 2019).
Although the false Cape claims were sufficient to settle the case, the Court added the Quality Meats analysis to "strengthen" its conclusion. The false representation of Quality Meats was Meat Town's claim that it bought the meat on 7 and 10 November, when in fact Quality Meats had delivered the last of those orders on 3 October.
In the deliberate question, the district court considered Meat Town's argument that – even accepting that it did not receive Kapen's products – that its claims that it had received these products and seen them in its shattered display cabinets covered with glass and debris were not fraudulent but simply faulty due to the darkness and illegal condition of the store. In order to survive a summary assessment, Meat Town had to do more than assume that these may have been inaccuracies, inconsistencies or honest and innocent mistakes. Meat Town had to produce certain evidence such as an affidavit or other evidence permitted at trial, which could convince a reasonable juror that this was a mistake that did not rise to the level of ruthless disregard for the truth. Meat Town did not produce any evidence to challenge, let alone refute, this conclusion.
The first thing to admit here is that Sentinel's position was that Meat Town violated politics and Meat Town's whole theory or argument about small parts, even if it was accepted and analyzed by the district court, is completely irrelevant to Sixth Circuits' analysis. The Sentinel successfully claimed that the small sub-position in Meat Town had no basis in Michigan law. A statement is essential if it is reasonably relevant to the insurer's investigation of a claim. Under Michigan law, it does not matter that the fraud is made in connection with only part of the insurance claimed by an insured. In order to cancel the insurance, the insured is not obliged to lie about all his losses. rather, a lie related to a single loss works to invalidate the policy.
Nothing, in any case, that the Sixth Circuit identified in its research supported the claim that a knowledgeable, intentional and "clearly guilty" misrepresentation of the insured cannot satisfy an insurance fraud provision unless the jury finds the amount large enough.
The trial court found that Meat Town had not presented any evidence to prove that Kap & # 39 ;s had delivered the order and therefore the issue was not in dispute. The same goes for the Quality Meats bills of lading: Meat Town provided no evidence to explain how or why its copies lacked the dates, and thus failed in its unmistakable conclusion that Meat Town had removed them.
If the only consequence of a fraudulent misrepresentation is to reduce the amount paid under the insurance, there are all incentives for the insured to lie. If the lie is not discovered, the insured will have received excessive coverage for which he has not paid. If the lie is discovered, the insured will still get what he could have had if he had told the truth. In essence, the insured has everything to gain and nothing to lose by lying. The victims will be the honest insurers who tell the truth and whose premiums will rise in the long run to pay for excessive insurance income paid out as a result of undiscovered misrepresentations in fraudulent claims [ New York Life Ins. Co. v. Johnson 923 F.2d 279 (3d Cir. 01/15/1991)].
© 2021 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to employment as an insurance consultant specializing in insurance coverage, insurance claims handling, fraud and insurance fraud almost
for insurance companies alike. 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 email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.
For the past 53 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claims staff to become professional in insurance claims.
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