The same contractor that brought the RICO action against insurers allegedly “zeroing out” insurance claims before conducting investigations has filed a malicious prosecution lawsuit against a law firm that represented an insurer alleging fraud and misrepresentation committed by the contractor.1 The introduction to the malicious prosecution lawsuit filed this month states:

This is a case involving a coordinated and calculated effort by Defendants – a law firm and one of its equity partners – to file a meritless lawsuit… to inflict economic and emotional harm on Plaintiffs and destroy their businesses. This case also involves a plan by Defendants to challenge property damage claims by any means necessary….

Part of Defendants’ law practice is to defend insurance companies in property damage litigation. Instead of being satisfied with their insurance defense practice representing carriers when homeowners and their assignees commence litigation due to delay, underpayment, or nonpayment of claims, Defendants went further by falsely accusing Plaintiffs of participating in an insurance fraud scheme.

Defendants used American Capital Assurance Corp. (‘AmCap’) as the Plaintiff (an insurer now in receivership) to wrongfully accuse Plaintiffs of criminal acts and other misconduct. The goal was not only to prevent Plaintiffs from resolving claims, but to destroy Plaintiffs, their businesses, and extract more favorable claim resolutions on behalf of AmCap and other insurers Defendants represent.

Defendants did not advance the State Court Action in any material respect, and voluntarily dismissed it over a year after it was initially filed. During this time, Defendants used the State Court Action for illicit purposes, aimed to harm Plaintiffs businesses, and their ability to be paid for worked performed. Plaintiffs’ profits declined significantly, which was the desired chilling effect Defendants intended to achieve.

As I state in all cases, a lawsuit’s allegations are just allegations. Proving the truth of those allegations is another thing altogether. Further, many readers are going to note the plaintiff in the preceding case, American Capital, was suffering significant financial problems and may not have been in a position to fund or financially continue with the prior lawsuit, which substantially alleged price gouging of insurance claims. In other words, it could not pay to prove whether the lawsuit was meritorious or not. Further, the law firm representing American Capital is long on experience and a reputable law firm. The truthfulness of the prior lawsuit allegations regarding price gouging will again be at issue, as well as the motives for bringing the prior lawsuit.

Many of the current plaintiffs have uncovered facts about the insurance industry’s claims practices, as noted in Zeroed Out Hurricane Claims and Cheating Claims Practices—Why Are Our Florida Politicians Ignoring These Ongoing Claims Problems and Seemingly Protecting Cheating Insurance Companies? They are also involved in other “let me tell you the rest of the story litigation,” as noted in RICO Lawsuit Against United Property & Casualty Amended With More Allegations. The current lawsuit will be one to watch given the parties involved and the totality of the allegations.

In general, and only related to the prior cases because allegations of price gouging were raised, most business owners can charge whatever they want in the United States. People do not have to pay what is demanded. Yet, property insurance defense attorneys are often “quick to the draw” to claim fraud against their clients whenever any restoration contractor charges more than what the insurer deems is “fair.” There are many reasons for this, including appearing to be “macho lawyers” to their insurer clients. Everybody who was an insurance company attorney will tell you about this and knows exactly what I mean—because one way to get insurance company clients in the insurance defense business is to appear to be the alpha “dog on a leash” attorney against alleged insurance fraud. Seven years ago, I noted that CBS News caught on to this in Insurance Company Lawyers Called “Dogs on a Leash”.

My personal view is that insurance companies and their counsel many times wrongfully allege insurance fraud about the amount demanded. It is a common tactic because everybody is against insurance fraud. I discussed this and cases saying this is wrong in Insurance Company Attorneys Often Wrongfully Argue That a Fraud Occurs When Parties Only Have a Difference of Opinion:

A recent Florida case1 has a lengthy discussion about cases where changing valuations by the insured are then used by clever insurance company attorneys to argue that a post-loss fraud has occurred. This is now a common practice in litigation throughout the country as policyholders, public adjusters, and contractors make differing estimates of loss and have different opinions about what the measure of the loss should be.

These cases are not where a policyholder paid somebody a sum certain for a full and satisfactory replacement of property and then submitted changed invoices or intentionally misstated what was actually incurred. It also does not include the situation where a policyholder intentionally changes an estimate or obtains an invoice to make it knowingly higher to obtain ‘leverage’ with the insurance company to bargain the amount of the loss. Those types of intentional cases will get noted on Barry Zalma’s blog about insurance fraud.

There is rarely an exact price of loss for any damaged real or personal property. A reasonable amount of loss is a range, and it can vary quite a bit. When the scope and methods of how to repair or replace something are in disagreement, the ranges can be quite significant and still be good faith opinions and views of the amount of a loss. So, just looking at numbers and the differences is often not an indicator of intentional fraud by either the policyholder or the insurer.

The day insurance companies and restoration contractors stop fighting about one side offering to pay far too little and ripping everybody off while the other side is asking for too much is not going to happen in our lifetime. Yet, it makes for great debate in the adjustment field, courtrooms, and property insurance conferences, where many get up and pontificate about the topic for one motive or another.

Thought For The Day

Nothing good ever happens by itself – it is achieved through striving, though this sometimes bears a high price.
—Antonio Munoz Molina
1 SRF Services, LLC, v. Zinober, Diana & Monteverde, No. 22000511CAAXMX (Fla. Cir. Ct. (Martin Co.) Complaint filed June 13, 2022).