No, Insurance Companies Don't Commit Fraud Do They?

When you throw around the word, fraud, you should be very careful.  Fraud or fraudulent at law is different than saying so-and-so is a fraud, or "that's fraudulent."  If you can easily see that something is fraud, by definition it isn't.  Admittedly, when we think about and talk about fraud we think and talk about precisely the same thing, something phony.

For something phony to be legal fraud there must be:  a material misrepresentation by words or conduct through active holding out or through concealment (of something that should have been revealed), which deceives and is intended to deceive another so that they reasonably rely and act upon the misrepresentation to their legal detriment.  My experience is that when clients have sought my assistance in redressing "fraud" the laying out of the elements has usually deterred further action.  The carnival midway is not a place where fraud is found, . . . fools, but not fraud.  Fraud in a generic sense covers all sorts of human sin where one takes advantage of another without rising to the level of "actionable fraud."  The defrauded in general are usually co-conspirators in their own injury, via the full panoply of psychic impulse including envy, denial, gluttony, pride, you get the picture.  Fraud is an alibi, an excuse when we get burned again.

My Cleveland friend, Patrick Perotti, has created a lucrative law practice out of bringing actions against insurance companies, title companies, banks, and businesses who engage in the real deal.  Real fraud happens all the time and it is often intended to surreptitiously scam nickels on top of legitimate profit margins or genuine cost.  Let me give you an example, Grange Mutual Insurance Company (yes, we name names when it suits us) charged a legitimate premium for a certain type of coverage under family auto insurance policies that they offered; but some bright executive at the company decided that the amount they collecting could be double, triple, and more than the law allowed. While the amounts involved were minuscule per family the net effect was millions and millions of dollars for Grange's bottom line without incurring any commensurate risk.  Patrick Perotti figured out how this scam worked and  brought a lawsuit.   After a two day trial a jury near Cleveland awarded $48 million in compensatory damages.  Punitive damages were pending submission to the same jury when Grange agreed to pay $51 million in settlement.

Mercury Insurance of Illinois just got hit by a demand for punitive damages for courthouse fraud.  According to the news account Steven Thomas Kirk was struck by a truck driven by  Mercury's "insured," Enver Hamiti. Kirk.  Hamiti fled the scene, even though " [Kirk's] leg was detached by the accident." Get this gothic detail, somebody walks by and steals a diamond stud earring from Kirk's earlobe as he lay inert at the scene. Kirk sued Hamiti in Madison County, seeking damages.  Apparently Kirk had been drinking, but Kirk's use of alcohol did not play a role in the accident, the jury found Mercury's insured Hamiti fully responsible for causing the accident awarding $1.37 million to Kirk.  


Attorney Chris Kolker is asking the Court to award an additional $500,000. directly against Mercury Insurance Company because he suspects the Mercury Insurance adjuster, claims people and although it doesn't say so, I suspect the defense attorney invented a eyewitness who at trial testified that Steven Kirk was driving his motorcycle erratically, weaving in and out of traffic.  This testimony was offered and intended by Mercury to be relied upon by the jury to the detriment of Steven Kirk.  The only problem with this eyewitness, she testified to seeing the accident happen from her apartment window--she didn't live in the apartment according to lease documents until six months after the accident.   Hmmmmmmm?  Sure sounds like fraud, or at least attempted fraud.  


Bear with me for a sec, reading between the lines it may be that the fraud claim is about "collecting."  Unless Mr. Hamiti was driving a commercial truck, it'improbable that Hamiti's Mercury Insurance policy carried million dollars worth of insurance.  In fact it's probable that the amount of insurance available to pay the jury verdict awarded to Mr. Kirk is in the tens-of-thousands so the only prayer Mr. Kirk has of collecting against Mercury is if the court imposes a direct sanction for fraud against the insurance company and it's claims people.  Other obstacles make it unlikely that Mr. Kirk and his counsel are going to succeed, including jurisdiction of the court to impose such a sanction.  I've talked about the concept of jurisdiction, before in the purest sense--jurisdiction refers to the power of a court, either geographically defined or over the subject matter of an action.  In the motorcycle-car crash the court's jurisdiction is over the parties, Mr. Stevens and Mr. Hamiti and any company Mr. Hamiti was working for at the time of the accident. It will be a matter of Missouri law whether Mr. Steven's fraud claim against Mercury can be heard as part of the underlying lawsuit.  Typically, Mr. Stevens has no claim against Mercury because he has no contract of insurance with them, his remedy is to sue Mr. Hamiti which he did.  Mercury's liability to Mr. Stevens is only for the amount of coverage purchased by Mr. Hamiti.  If Mercury only covered Mr. Hamiti to the tune of $12,500 which is not unheard of--that's all Stevens and his attorney will collect from Mercury.  The balance of the $1.37 million verdict comes out of Mr. Hamiti's pocket, if Mr. Hamiti is like most folks, Mr. Stevens is out of luck.  


Good luck on that fraud claim.  For more:


http://columbus.bizjournals.com/columbus/stories/2007/09/03/daily12.html


http://www.bnd.com/372/story/1028154.html