Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

I was thinking of this while reading the August issue of the Insurance Fraud Letter  by Barry Zalma. Zalma, like many in the insurance industry, takes great glee in publicizing when the well known consumer champions fall. I appreciate that those that make a living serving the insurance industry have an allegiance to it and a utilitarian need to pander to those that provide for their living. Still, those self righteous antidotes have worthy lessons and, within the rhetoric, there are often a few jewels. Zalma gave one in his recent newsletter:

"Without Insurance the economy of the world would collapse. No entrepreneur would dare invest money in a business if he could not spread the risk of loss of his property by insurance. No business would dare manufacture a product without the ability to spread the risk of suit from people injured by the product through insurance.

...Insurance is not supposed to be an adversarial relationship. That it has become so is obvious from the volume of suits filed by and against insurers faced with claims."

On a similar point, people often ask why our law firm is so busy. While we certainly have capable, dedicated attorneys and staff focused only on insurance law for policyholders, I think much of it has to do with the rise in litigation in that area of law and the war many insurance companies are waging on their own customers at the point of performance. While Zalma does not say who is to blame for the current "adversarial relationship," I agree with his observation. I find his candor refreshing and surprising because he has little to gain in the eyes of his masters that would rather keep this state of affairs from the general public.

Zalma's truthfulness needs to be highlighted and critically analyzed when considering public policy. As Zalma correctly indicates, insurance is crucial to the world economy. It is a product that touches our lives everyday, although consumers rarely think about it except at the point of sale. Who wants to think about impending doom? Yet, it is obvious that there is a tremendous need for insurance consumer protection at the point of performance because that is the only time the insurer is put to the test.

Some in the business of helping policyholders become upset even when I write anything negative about them or activities they undertake that do not seem to be in the policyholder's best interest. They dislike any publicity or reference to issues raised by the insurance industry that demonstrate a problem or issue casting negative implications upon their ability to make money in the insurance business or that would change the status quo. I suggest that the courage to listen to one's opponent, recognize valid criticism and act upon it is far superior to what is so common in modern culture--making up one's mind solely based upon the source of the message.

Barry Zalma wrote a comment worth sharing and pointing out my incorrect explanation of his law practice:

Thanks for the reference.

For your information, most of my work does not involve insurance fraud, it involves insurance coverage. I do write a twice monthly newsletter called "Zalma's Insurance Fraud Letter" because I saw a need. I am an insurance coverage lawyer and an insurance claims and coverage consultant and expert witness who testifies for any party who has a case against a party with whom I have no conflict. I also have written books that are available from my site or from the publishers that are useful to anyone interested in insurance.

In California "appraisal" is an arbitration whose result can be made into a judgment so impartiality -- or, at least, a lack of serious conflict must be shown.

Appraisal, in my opinion, should be used as a last resort. It is often less efficient than trial especially when the appraisers have little or no experience in valuing property or legal procedures.

Regards,

Barry Zalma

Harvey Goodman, a public adjuster from Goodman-Gable-Gould/Adjusters International, once told me that his firm rarely went to appraisal. He felt that they understood their client’s loss better than anybody else and should be able to explain and adjust it to resolution without having to risk third parties coming to a wrong conclusion. He wanted to keep control of the claim and suggested that many bitter disagreements regarding the value of a loss could be resolved through intensive good faith dialogue and negotiation with insurance company representatives. I know a number of prominent public adjusters who share that same philosophy, although most concede that appraisal is invoked much more often today than two decades ago--for a number of reasons.

Zalma’s opinion is not that different than Harvey Goodman’s. I agree that there are a number of case examples where appraisals take longer than litigation or can come out much worse for policyholders. On the whole though, I believe appraisals in most states usually reach resolution faster than litigation and at less cost.

One thing that is missing from the discussion is that the client policyholder should have a say and some legal advice whether the resolution should be through appraisal or litigation. A public adjuster should not unilaterally demand appraisal. The demand for appraisal and a suggestion that appraisal, rather than legal remedy, should be done is a legal decision with considerations of laws to the facts of a case. Adjusters who give advice as to one over the other in a given situation are giving advice that is commonly referred to as practicing law without a license. I am certain there will be a lot of public adjusters who claim that I am pointing this out because it is in my and other attorneys’ economic benefit to do so. On the other hand, it is illegal and a crime for public adjusters to practice law. Every public adjuster agrees to that, but I would suggest that a few do not want to adhere to that rule if it is not in their economic interest.

Indeed, I have met a few public adjusters in Texas who prepare their policyholder clients’ cases for settlements or litigation. They take the view that the Texas consumer protection statutes generally provide significant interest and other remedies that make most cases where an insurer offers an unfair settlement better resolved with attorney involvement. They always seek legal counsel for the client to help make the decision regarding appraisal or litigation.

The National Association of Public Insurance Adjusters, its general counsel, and officers have maintained my view and have warned against the unintentional practice of law by public adjusters for decades. There should be no question that only licensed lawyers should explain legal rights and actions to a client.. Many dedicated public adjusters are concerned that the legal bars of various states will question the licensing of public adjusting if public adjusters continually overstep their authority and provide legal, rather than adjustment, advice.

Zalma noted that when considering the qualifications of an appraiser, California courts have adopted the arbitration code for guidance:

California courts have concluded this adjudication must be conducted pursuant to the provisions of the California Arbitration Act, Code of Civil Procedure section 1280 et seq. (Arbitration Act).

Section 1281.9 of the Arbitration Act requires proposed neutral arbitrators to disclose to opposing parties the existence of any potential grounds for disqualification. If a party objects to the proposed neutral arbitrator, section 1281.91 requires the objecting party to serve a notice of disqualification within 15 days of receipt of the disclosure statement.

...

The key to disqualifying a party appointed appraiser is whether there is a "substantial" business relationship between the party appointed appraiser and a party to the appraisal, their counsel, or the umpire. Impartial arbitrators/appraisers must disclose to the parties any dealings that might "create an impression of possible bias." The test is whether a reasonable member of the public at large, aware of all of the facts, would fairly entertain doubts concerning the arbitrators/appraisers impartiality, the arbitrator/appraiser is not subject to disqualification.

This discussion is quite relevant to the ongoing debate about appraisal in Florida. One of the insurers’ contentions is that many policyholder appraisers are biased and interested. Insurers argue that appraisers who are compensated on a contingency fee system inherently try to raise the amount of awards because they have an incentive to do so.

A Florida case, Rios v. Tri-State Ins. Co., 714 So. 2d 547 (Fla. 3d DCA 1998), allows appraisers to work on a contingency basis, so long as it is disclosed to the panel. This is prohibited in Texas appraisals.

It will be interesting to see how all this resolves.

A public insurance adjuster asked that the following question be addressed at our September 11 Seminar, Hurricane Ike-What a Difference A Year Makes?:

When the insurer calls in the Engineer for an opinion and the insurer uses that opinion as an excuse to drag out a claim for several more months, is the insured and the insured’s public adjuster entitled to the engineer’s report? What is a reasonable time to wait for a report to be completed? We were told that we have no right to the report.

Instances such as this demonstrate why there is a strong need for laws that protect insurance consumers. Without fair claims laws, some insurers give into the temptation to cheat their own customers at the most opportunistic time—following a loss. Most insurance companies that are truly consumer oriented and honest have no trouble turning over these reports and even the drafts. For them, good faith is part of their company claims culture. Honesty requires transparency rather than one party to a contract advantageously keeping secrets. Does anybody disagree?

The Restatement (Second) of Contracts § 205, Duty Of Good Faith And Fair Dealing provides:

Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.

At comment d., the Restatement provides:

Subterfuges and evasions violate the obligation of good faith in performance even though the actor believes his conduct to be justified. But the obligation goes further: bad faith may be overt or may consist of inaction, and fair dealing may require more than honesty.

These are legal principals many would anticipate the law requires. The problem is that many of my colleagues and I fail to discuss them, and the insurance company attorneys are not about to do so, since they are trying to defend their client’s bad faith actions. It is their job to protect those types as much as it is my job to call them out.

Courts in states throughout the nation have concluded that all contracts-- including insurance policies--impose on each party an implied obligation to act fairly and in good faith. For example, in 1930, the Wisconsin Supreme Court stated that the rights of the insured “go deeper than the mere surface of the contract written for him by the defendant” and implied obligations are imposed “based upon those principles of fair dealing which enter into every contract.” The New Jersey Supreme Court's decision in Bowler v. Fidelity & Casualty Co. of New York, which involved a time limitation on the right to sue under a disability insurance contract, provides an excellent summary of how some courts view this duty:

Insurance policies are contracts of the utmost good faith and must be administered and performed as such by the insurer. Good faith “demands that the insurer deal with laymen as laymen and not as experts in the subtleties of law and underwriting.” In all insurance contracts, particularly where the language expressing the extent of the coverage may be deceptive to the ordinary layman, there is an implied covenant of good faith and fair dealing that the insurer will not do anything to injure the right of its policyholder to receive the benefits of his contract.

So, the answer is that insurers should turn over those reports. They should make certain those engineers are working as fast as possible knowing that claims require promptness. They should not hire consultants that are overtaxed, given the nature of the promptness required of claims investigation and evaluation. My experience is that many consultants never get asked this question regarding the promptness of work, but instead have other criteria which seem to be more important to many claims departments.

To be fair, in situations where the insurer legitimately has reason to be concerned about fraud, the timing of turning over reports and information can be somewhat changed. A bad actor may be given additional opportunity to change or escape the scheme if the reports or information are promptly turned over. Many courts have recognized various “work product” protections in similar situations and especially when insurers have retained counsel to help protect them. I am certain that expert insurance fraud attorneys such as Barry Zalma and Sandy Burnette could provide much greater information on that topic.

State Farm gets bashed too often at times. In March 2007, I took the deposition of one of its Home Office Bloomington based claims consultants, Stephan Hinkle. He indicated that he expected all reports, including drafts before modifications, to be turned over to policyholders. As I recall his deposition, I felt he understood that honesty was important to State Farm’s customer although the final decision might not be favorable. The transparency of the logical basis for denial of a claim or part of it is extraordinarily significant and will usually be found in the information Hinkle expected would be turned over.

In my experience, many adjusters refuse to operate this way. Therefore, the question posed above is repeatedly asked.

While following up on Saturday's Post, "Fireworks are Loved by Americans--and Insurance Companies Seeking Not to Pay Fourth of July Fires," where I quoted Barry Zalma at length for the proposition that insurance companies often advertise one product but sell another, I came across a related article on the LexisNexis Insurance Law Center written by Stempel. His article, March Madness Makes It "Official: State Farm Embraces the Reasonable Expectations Doctrine and Rejects Linguistic Literalism, is a must read for those trying to prove that even the industry leader recognizes what it advertises is not what it sells. This is the point I was trying to make in my post, "Is the State Farm Policy Really Worth Anything?"

I felt the following paragraphs best sum up Stempel's points:

"...State Farm's television advertising has moved from warm-and-fuzzy image polishing to consistently more concrete promises that the company will provide insurance that meets the policyholder's reasonable expectations and will give the policyholder treatment that goes beyond mere fairness or accommodation. Although the company's marketing mavens probably never set foot in court or attended law school, they have in effect embraced the reasonable expectations concept as well as the standard of good faith and fair dealing that requires an insurer to give equal or better consideration of the policyholder's interests rather than favoring the insurer's interests. The company has now made these commitments to the world at large. It logically should have a hard time should it make contrary arguments in court.

...

...the State Farm ads go beyond the company in that they lay down a gauntlet for the entire insurance industry, one that suggests that insurers should not say one thing to market their products and then say inconsistent things when trying to avoid providing coverage or paying a claim. At the very least, lawyers, judges, and juries should not let them get away with it. Beyond this, it seems that insurers themselves recognize that they are not selling mere words on parchment. They are selling risk management products designed to accomplish a particular purpose. In light of this reality, one might expect to see at least a little restraint among insurers in their attempts to take a hyper-literal approach to policy text (particularly exclusions that are supposed to be strictly construed against insurers) when it serves their purpose. For example, perhaps State Farm may not want to push the envelope so much in arguing that the anti-concurrent causation clause in its policies allows it to escape a considerable amount of responsibility for hurricane-related damage to policyholder property."

I hope the jurists and their clerks faced with deciding insurance coverage cases read Stempel's article and contemplate how the insurance industry is using the "letter of the contract" to defeat the promise they sell.

Another great lesson from one of our country's finest teachers of insurance law. I suggest every attorney have two books of Stempel's in their library: Litigation Road: The Story of Campbell v. State Farm (West 2008), and Stempel on Insurance Contracts, Third Edition (Aspen Publishers).

So, it should come as no surprise to find an old insurance coverage case, Heron v. Phoenix Mut. Fire Ins. Co., 180 Pa. 257 (Pa. 1897) where a fire insurance policy sold to Fred Heron in the late 19th Century had the following exclusionary language:

"This entire policy...shall be void. . . if the hazard be increased by any means within the control or knowledge of the insured, . . . or if (any usage or custom of trade or manufacture to the contrary notwithstanding) there be kept, used or allowed on the above described premises, benzine, benzole, dynamite, ether, fireworks, gasoline, greek fire, gunpowder exceeding twenty-five pounds in quantity, naphtha, nitroglycerine, or other explosives, phosphorus, or petroleum or any of its products of greater inflammability than kerosene oil of the United States standard (which last may be used for lights and kept for sale according to law, but in quantities not exceeding five barrels, provided it be drawn and lamps filled by daylight or at a distance not less than ten feet from artificial light)."

I would wager that poor old Fred was just like the rest of us today. My bet would be he never read that insurance policy or thought about how those rascally insurance scriveners would find ways not to pay for a fire loss if one occurred. I suspect Fred Heron was more concerned about his Fourth of July celebration. The devastating facts were recited by the Court:

"For the purpose of celebrating the 4th of July of that year, plaintiff bought a lot of assorted fireworks which were delivered at his residence on the morning of the 3d, and were shortly afterwards, with his knowledge and approbation, placed in the parlor for use on the following evening. In some unexplained way they took fire on the afternoon of the same day, and caused the damages for which this suit was brought."

It is clear that over a hundred years ago the judges would consider not enforcing unfair language in insurance contracts if they could find a logical way to do so. Avoiding forfeiture of a valid contract after purchase has been a major theme of our jurisprudence. Insurers have every incentive to sell insurance with agents promising security and then write fine print substantially reducing the benefits the consumer thought he or she purchased.

I strongly suggest reading Barry Zalma's "Fraud By Insurers" published on the Lexis Insurance Law Center. Zalma, an insurance defense lawyer, apparently agrees with me on this point when he wrote:

"Ostensibly legitimate insurers are attempting to limit their exposure by giving a policy a common name like “homeowners” that leads the insured to believe that liability coverage is provided for defense and indemnity of an accident, including continuous or repeated exposure to substantially the same general harmful conditions that occur within the policy period, as provided by the standard ISO homeowners policy. Then, with an endorsement hidden in the back of the policy in small print without any warning, the endorsement changes the definition of “occurrence” to words that eliminate most coverage unless it happens within and is reported to the insurer during policy period. It is, in effect, selling the insured a bowl of sweet and healthy blueberries and delivering, in a sealed package, toxic mushrooms.

In an editorial in the June 15, 2009, issue of Zalma’s Insurance Fraud Letter...Barry Zalma writes: “insurance sellers, buyers, counsel, and claims staff must refuse to attempt to enforce such policy provisions unless the following questions are answered in the affirmative:

• Is the new wording conspicuous and clear?

• Was it called to the attention of the prospective insured?

• Was the insured asked to acknowledge in writing that the coverage provided is less than that provided by the standard ISO CGL form?

• Was the insurance agent or broker warned, in writing, of the modification of the form and the fact that it provides less coverage than an ISO CGL?

• Was the insured and the agent or broker asked to acknowledge and have the insured acknowledge in writing that they understand and accept the modification?

• Was the premium significantly reduced in light of the reduction in coverage?"

Mr. Zalma warns that “The insurer that acts to deceive, unlike the insured who acts to deceive, can be held to pay extracontractual damages for the tort of bad faith while the insurer can only collect contract damages from a deceptive insured.” Sandy Burnette and members of the Defense Research Institute must be upset that an insurance colleague recognizes that insurers commit fraud everyday when denying claims based on devious small print exclusions and that they should be held accountable for extracontractual damages when doing so.

Turning back to the legal discussion in the old insurance case, we find that the concerns of judges long ago are not that different than of today:

"We have never gone to the length that other courts have in construing away express provisions or stipulations as to forfeiture. While some hold that it is permissible to use the articles prohibited by the general printed clause, provided they are such as naturally pertain to the stock of goods or property described in the written part of the policy, this court has refused to go so far. In Birmingham Fire Ins. Co. v. Kroegher, 83 Pa. 66, where petroleum was kept for sale in a country store in violation of a printed clause very similar to that above quoted, this court said: "If the question were whether this kind of oil was an article of merchandise ordinarily included in the stock of a country store, or if it were only an inquiry as to the increase of risk, it might well be referred to the jury. But it is nothing of the kind: it is an express stipulation that petroleum or its products shall not be kept on the premises, and if it be so kept the policy is void. It matters not that it was part of a customary stock of goods, for by express contract it was excluded." ...In Birmingham Fire Ins. Co. v. Kroegher...a qualification was suggested ...which the learned trial judge in this case sought to carry to a length not warranted by any of our cases. It was there said by Mr. Justice GORDON: "It is probable that this provision would not apply to the oil used in lighting the premises, for such a use has, in these days, become a necessity for all buildings in the country in which light is required during the night." ...our Brother DEAN, speaking for the court, said: "If the fact were that the use were a necessary one in conducting the business, then it must be presumed the intent of the parties was to insure the subject of the contract as it then was, and as it would continue to be during the life of the policy, notwithstanding the printed condition."

Unfortunately for the Fourth of July reveler, Fred Heron, this court was not sympathetically inclined:

"...These cases rest on the necessary and contemplated use of the property, and cannot be supported on any other ground. They furnish no warrant for the advanced position taken by the plaintiff in this case. There is no ground for a presumption that the parties here contemplated even the temporary presence of fireworks in the insured building in the face of an express contract to the contrary."

So, how many of you waiting to celebrate tonight with fireworks know for certain whether there is an "increase of hazard" provision in your insurance policy that may exclude a fire loss?

Bill Gross is the most famous philatelist of United States stamps. He was supposed to be there as well, but he was pulled away to a last minute meeting with Alan Greenspan and Treasury Secretary Geithner on an allegedly more important endeavor--how to save the economy.

I know that collecting stamps seems a bit nerdy. But, when you consider that I also study insurance policies and read how obscure insurance clauses are legally interpreted, it makes a little more sense. As an adult, it is now a hobby usually done in solitude with a lot of study. Similarly, I find that most good lawyers spend a lot of time studying their area of practice in quiet reflection.

At this weekend's gathering, I met Dan Walker, treasurer of the American Philatelic Association. When he learned what I do for a living, he shared an experience he had when he owned an insurance company that specialized in insuring collectibles.

A collector insured Civil War items for approximately $2.5 million. He reported a burglary of his entire collection, and Dan felt something was wrong. He hired an attorney and a SIU (fraud) adjuster just to check out the circumstances. Apparently, the collector had recently suffered a severe medical setback with diabetes. They learned that he had approached several dealers trying to sell his collection. When those dealers heard the collection was stolen, they suggested that it might be a fraud because they found most of the items to be forgeries. The SIU investigator tracked down a storage facility that rented space to the collector just before the alleged burglary.

Eventually, the insurance case became a criminal matter, and the collector was convicted of insurance fraud.

Dan said it was a very desperate and sad story of a person being "duped" into purchasing allegedly valuable collectibles without doing enough investigation to determine the authenticity of the items. Collectibles insurance does not cover the loss of market value if one purchases a forgery.

Collectors should always get an independent appraisal and expertization before purchasing from a dealer or at auction. Some dealers and auctioneers advertise and promote items which are not authentic, damaged or altered. Dealers often make expert repairs which are difficult to detect and make the item appear pristine. Such alterations subtract significantly from value. Items sold on eBay are notorious for this.

So always follow this rule:

When buying something of value, get the expertization from a true expert not affiliated with the dealer or seller.

Sandy Burnette and Barry Zelma would be happy to hear that Dan’s SIU team did such a great job. There is a need for such trained attorneys and adjusters. My sense from Dan Walker was that this was a very unique situation. He indicated that it was the only time he ever had to go into a courtroom in his twenty-two year insurance career.

I wonder why an insurer like State Farm would spend so much money on advertising fraud detection. It cannot be to get people to buy State Farm policies. When you consider how few of their customers ever commit fraud, why would State Farm spend money on an advertising campaign about fraud?

For example, State Farm advertised that it provided arson dogs to investigators. I cannot imagine somebody reading that advertisement and saying, "Edna, let's go buy some State Farm insurance because they are out to get their customers that are arsonists." What is the real purpose of that advertising campaign?

Some may suggest that State Farm and others in the insurance fraud industry make up such advertisements and statistics to raise suspicion of everybody that makes a claim. Of course, those who determine the purpose of the advertising and make up the statistics are not about to reveal their motives. Consumers should question such insurance advertisements and the potential impact upon those receiving the message.

Still, none of those concerns and thoughts mean that there is not a significant need for the hard and important work of those that investigate and detect fraudulent insurance claims. It also does not mean that we need to consider every claimant a potential crook.

Barry Zalma noted the unfairness when some do not pay for breaking the law in Mercy to Insurance Criminals Aids & Abets The Crime: 

“We, as insurance fraud professionals must inveigh against those “merciful” judges and prosecutors who insist that a “white collar criminal” should not go to jail. The prosecutors and judges must know that insurance criminals are as more [sic] vicious and damaging to society than the armed robber who holds up a convenience store and is punished to the full extent of the law without mercy.”

I agree with Zalma that insurance criminals need to be punished.

But, I wonder what insurance companies would say if they had to pay more severe penalties for delaying claims payments or applying wrongful schemes to underpay claims?

I was at a conference some time ago in Philadelphia when insurance industry attorney, Steve Cozen was talking about the possible unconstitutionality of insurance companies having to pay punitive damages after breaking the rules of claims handling. I suggested that since they are stealing from the policyholders, if the rules were that the claims executives went to jail instead of paying punitive damages, there probably would be a lot less cheating against policyholders and the punitive damages argument would be moot. The insurance defense attorneys smiled and shook their heads at me---they knew I had a point.

From the policyholders view, the insurance company that fails to pay on time and denies benefits for various unfair reasons is not that much different from the bank robber or internet thief that takes money in a different manner. It is quite ironic that the insurance industry lawyers and spokespeople are not publicly calling for greater penalties for those acts by claims executive "white collar criminals." Maybe they think accountability works only one way.

This was exactly my point of my blog---the insurance industry has only a few examples of fraud it can prove, yet it claims a significant number of all its customers are crooks. Zalma's logic and that of the insurance industry is similar to the logic of McCarthyism prevalent in the 1940's and 1950's. Then, thousands of Americans were accused of being Communists or communist sympathizers. They became the subject of aggressive investigations and questioning before government or private-industry panels, committees and agencies. The suspicions were often given credence despite inconclusive or questionable evidence. Here, the insurance industry cites some specific examples of wrongdoing and then somehow extrapolates those very few examples to justify ridiculous statistics. Zalma claims that most successful frauds are never recognized.  Thus, the industry then makes up "suspicious" claims which others, such as Zalma, cite to be actual fraud:

I don't know, nor does anyone know, how much insurance fraud costs the insurance industry since most fraud perpetrators succeed. Everyone who puts out numbers bases it upon scientific studies like that recently reported by the Insurance Research Council (IRC) that estimates that claim fraud and buildup added between $4.8 billion and $6.8 billion in excess payments to auto injury insurance claims closed with payment in 2007.

Our firm does not have the IRC study cited by Zalma, but it is being ordered. The study has nothing to do with homeowners or commercial property insurance claims, only automobile claims. The Insurance Research Council is made up of large insurance companies. Their website lists its 2008 members as follows:  Allstate Insurance Company American Family Insurance Group Farmers Insurance Group The Hartford Financial Services Group, Inc. Liberty Mutual Group National Association of Mutual Insurance Companies (NAMIC) Property Casualty Insurance Association of American (PCI) Safeco Insurance Companies State Farm Insurance Companies United Services Automobile Association These large insurance companies are often responsible for the propaganda I criticize. They use these statistics in the hope that nobody will actually question their accuracy. They hope those figures can be asserted as fact to influence cultural public policy in a similar manner that others have used propaganda (like that spewed in the McCarthy era) to influence public perception and legislation. Each of these carriers is not acting alone. They are in concert, sharing information and strategies, to influence perceptions that will help them be more profitable. One must question why this type of activity is not being investigated as collusion among competitors.

Again, insurance fraud is wrong. It exists and is a problem for all of us. Barry Zalma and other insurance defense attorneys that do this very specialized practice of law should be applauded for teaching methods of fraud detection. I believe there is a very real need for SIU departments and fraud investigators within the insurance industry because fraud, by the nature of it being a hidden scheme, can be difficult to detect. Heck, we have terminated clients because of fraudulent activity. The bottom line is that I believe insurance fraud is very rare compared to the large number of legitimate claims, and the insurance industry is making up these statistics for propaganda. Indeed, if one were to define "insurance fraud" as the underpayment of an insurance claim, most would agree that the insurance industry would be found guilty substantially more than its customers.