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I received a copy of the facts and conclusions of law in a case filed with the U.S. District Court for the Central District of California entitled CIGNA Property and Casualty Insurance Company v. Polaris Pictures Corporation, US Inbanco, Ltd., Continental Pictures Corporation, Paul Ebeling, Kendall Earl Capps, Adrien Wirz and Jacob Wizman where documented as case number CV 93-2259 JSL.
On February 20, 1997, U.S. District Judge J. Spencer Letts found that a lawyer and others had committed fraud and purchased a life insurance policy for the sole purpose of sinking a boat. The results of Judge Letts read better than I could ever imagine. Here are some of what Judge Letts concluded:
The evidence presented to the court… convinces the court that, in view of the overwhelming weight of the evidence, the defendants Polaris Pictures Corp. (“Polaris”) and US Inbanco Ltd. (‘Inbanco’),… conspired with at least one of the named defendants in this action, and a non-party lawyer (the ‘lawyer conspirator’), to engage in a highly sophisticated fraud to collect insurance income from the plaintiff, Cigna Property and Casualty Insurance Company (“Cigna”), a marine insurer.
In essence, the fraud intentionally concealed from Cigna the essential fact that the conspirator’s purpose in purchasing the insurance from Cigna was not to protect himself against the risk of an unknown future event, but rather to provoke an accident that would enable them to collect on it. . . As a result, a judgment of revocation of [the policy] Issued to Polaris and Inbanco is eligible.
On June 9, 1992, the lawyer’s conspirator signed a contract to buy a brand new 76 ‘Azimut motor yacht for $ 1.9 million.
Prior to June 1992, the lawyer’s conspirator had incurred three total losses on yachts which he either owned or owned. Each of these previous yacht losses was insured and each previous yacht loss was paid in full by the respective insurer.
The lawyer’s conspirator then arranged for Continental to “sell” the yacht to Polaris. The Continental-Polaris transaction was a share transaction between a company for which little evidence was presented (Continental) and a company with virtually no assets (Polaris).
Polaris was formed by the legal conspirator and was completely controlled by him at all relevant times. It was also located at the same address as the lawyer’s conspirator’s residence.
The evidence showed that Polaris never did business of any kind or substance. In addition, the evidence showed that Polaris was placed among the perpetrators of this fraud as a diversion in order to conceal the identity of the person who would receive the money in the event of a loss – namely the legal conspirator.[T]the court finds that the defendants’ fraudulent scheme consisted in part in the use of the insurance proceeds to pay to Inbanco, as a “creditor”, the apparent “debt” secured by the ship … [T]the court finds … a deliberate plan to defraud Cigna by temporarily distancing the lawyer’s conspirator from Polaris until the insurance income had been paid. … “All the apparent transactions discussed above, with the exception of the purchase of the boat, were among all the parties. [T]the reason why the lawyer conspirator took such extensive measures to distance himself from these companies and transactions was to divert attention from his own personal loss history of sinking ships …
Polaris and Inbanco eventually bought marine insurance for the yacht, called “Principe Di Pictor”, from Cigna … Application [for the insurance] also failed to state the essential fact that Polaris and Inbanco’s purpose in purchasing this insurance was to collect on it, and that a planned event for the destruction of the yacht and the collection of the insurance would soon and certainly occur. …
The yacht crashed on November 7, 1992 [two weeks after the policy was issued] off the coast of Italy during her maiden voyage. The Lawyer Conspirator … [was] on board at that time …
The story of the lawyer’s conspiracy… was that the yacht, which is alleged to be worth 3.5 or 3.62 million dollars, and the lives and bodies of the people on it, were entrusted to a person who met for the first time in a restaurant by the quay in Naples. This person, whose documents were written in a foreign language, took with him two other people who did not know English and six black duffel bags with secret contents. The three foreign men were alleged to have been applicants for the jobs of captain and crew.
The court finds the defendants’ claim… completely outdated. The court finds the account of the shooting so incredible that it alone would raise serious questions about whether the boat was deliberately overturned …[P]Buying insurance, not for the purpose of insuring a risk, but rather for the purpose of collecting the insurance for an event that is planned, is a very essential fact that should be communicated to the insurer …
The lawyer conspirator was without credibility as a witness, and he looked, acted and sounded very much like a conspirator in a dishonest plane. … The lawyer’s conspirator’s testimony was not convincing and his financial actions were very difficult to follow.
The news report did not name the lawyer conspirator. I had dealt with him several times regarding fraudulent insurance claims so I called the lawyer and just asked:
“Is the lawyer’s conspirator’s name Rex?
Trial lawyer Neil S. Lerner was shocked. “How did you know?”
I explained my story to lawyer Rex and wanted to thank Mr Lerner and all the lawyers at Sands Narwitz Forgie Leonard & Lerner who tried the case on behalf of CIGNA, because they finally defeated a fraudulent claim presented by Rex, a longtime enemy of the California insurance industry. .
I would also like to thank Judge Letts for reviewing insurance fraud and realizing that an insurance company can be exposed to an insured person. Under the direction of Judge Letts, the lawyer – Rex DeGeorge – was prosecuted by the American prosecutor and convicted of fraud with mail and transfer.
He is now serving a long sentence in federal prison.
This case is important and unusual, as it confirmed a termination scheme based on obvious fraud to obtain insurance that enabled the insurer, CIGNA, to cancel the insurance from its inception. This is more important because Judge Letts referred to the American prosecutor the conspirator who was arrested, tried, convicted and sentenced to federal prison for fraud. Although I was hoping that other judges would emulate Judge Letts, but I have been disappointed.
(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 bad faith 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 email@example.com.
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