WASHINGTON, D.C. – The U.S. Consumer Product Safety Commission (CPSC) announced today that Gree Electric Appliances Inc., of Zhuhai, China; Hong Kong Gree Electric Appliances Sales Co. Ltd., of Hong Kong; and Gree USA Sales Ltd., of City of Industry, Calif., have agreed to pay a $15.45 million civil penalty to the government.
The penalty settles charges that Gree:
Barber v. State
Georgia Court of Appeals, Criminal Case (10/26/2012, 11/5/2012) A12A1624
CRIMINAL PRACTICE: Arson, Accident, Jury Charges, Intent, Insurance Fraud
Alert: The statute defining first degree arson, OCGA § 16-7-60 (a) (3), does not require that the accused set the fire with the intent to defraud the insurer, only that the accused knowingly damage[d] by fire or explosive any insured dwelling without the insured's consent.
Headnote: The Court of Appeals affirmed Kelvin D. Barber Jr.'s conviction for first degree arson, as the evidence supported it. The Court held that the trial court did not erred in failing to charge the jury on Barber's sole defense of accident. Barber argued that he did not have the requisite intent under OCGA § 16-7-60 (a) (3) because he set the fire in order to commit suicide, not to burn or damage the house or cause loss to the insurer. He further argued that the evidence was insufficient to show that he set the fire knowing it would spread to or cause damage to other parts of the house. But the Court explained that § 16-7-60 (a) (3) does not require that the accused set the fire with the intent to defraud the insurer, only that the accused knowingly damage[d] any insured dwelling without the insured's consent by fire or explosive. Here, the evidence, including Barber's statement to the fire investigators, showed that Barber: poured gasoline and lighter fluid throughout the house and garage, and not just on his person, ripped up books and papers and spread them throughout the upper levels of the house as well, and told investigators that he intended for the house to burn, in addition to the vehicle he was inside. Barber also argued that the trial court should have charged the jury on his sole defense of accident, arguing that there was at least slight evidence to warrant the charge. But the Court found that the trial court's charge, given pursuant to Barber's request at trial, included the accident theory of defense.
From Out of the Abyss...
This week's article is from the June 1950 Vol V, No. 5 issue of the California Conference of Arson Investigators newsletter and was written by Lowell W. Bradford.
Physical Evidence Aspects of Fire Investigation
Bugatti is recalling certain model year 2006-208 Veyron vehicles manufactured October 3, 2006, to December 22, 2006. In the affected vehicles, the positive battery (B+) cable and the connection to the alternator may corrode.
The corrosion may result in the battery positive cable overheating, increasing the risk of a fire.
Click here for details.
This recall involves Ryobi 40-Volt Brushless Snow Blowers. Item number RY40802 is printed on the data label on the back of the blowers. The snow blowers are black and green with two LED lights located on the front of the unit and are approximately 22 inches wide by 43 inches tall. “RYOBI” is printed on the front of the snow blowers. The models included in this recall are RY40802, RY40802A and RY40822. The model numbers are printed on the packaging. “40 V” is printed on each side of the snow blowers.
Go to CPSC for more details.
Jaguar Land Rover North America, LLC (Jaguar) is recalling certain model year 2010 Jaguar XF vehicles manufactured December 17, 2008, to April 15, 2009. The affected vehicles have a fuel tank with an outlet flange that may crack, allowing fuel to leak onto the ground.
A fuel leak in the presence of an ignition source may increase the risk of a fire.
by: Larry Arnold
Faced with growing losses, insurance companies are focusing on fraud management and implementing risk mitigation controls, while at the same time remaining cognizant of their duty of good faith to policyholders. So what happens when an insurer makes good faith payments on legitimate elements of an insurance claim but subsequently uncovers fraud in other elements of the claim? Is the insurer entitled to recover all monies paid as part of the claim? Or only the amount paid in reliance on the insured's misrepresentations?
Previously, there was no clear answer. It was safe to assume that an insurer could recover monies paid on a claim under the right circumstances – the difficulty occurred when trying to recover payments made prior to the established fraud date. For example, in California, the insurance code states, “If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false.”
Recent trial court rulings in favor of insurance companies, however, are changing the claims landscape. These rulings will impact the way insurance companies handle genuine claims that are subsequently tainted by fraud, encouraging them to be proactive in recouping good faith payments.
Steps for Recouping
What options do insurance companies have to recoup these payments? There are several avenues available.
Deny the Claim. When the SIU has completed a claims investigation and determined that an insured has breached the policy by materially misrepresenting facts, the claim can be denied – even the legitimate part. Appropriate cases should be referred to law enforcement for prosecution. In addition, the insured has a duty to present and prove the merits of the claim. Failure to cooperate with insurance company representatives can independently result in denial of the claim. This includes an examination under oath (EUO), which plays a key role in obtaining information. Typically, the named insured (or others, as dictated by the policy) is required to submit to an EUO as a precondition for claims settlement. Failure to do so can result in denial of the claim.
Void the Policy. An insurer may void or cancel its policy in the event of material misrepresentation or concealment of facts by the insured. This includes fraudulent claims.
Litigation. If a policy is voided for fraudulent claims, insurers must then decide whether to sue the insured to recoup payments - even legitimate ones. One advantage with litigation is that it allows for pretrial discovery process, including depositions and the ability to subpoena documents previously unavailable during the claims process.
A Case in Point
A recent case illustrates that insurance companies are entitled to recoup good faith payments when fraud is uncovered. Here is some background on the case.
An insurer issued a fire insurance policy to the owner of a dry cleaning business located in Southern California. A fire destroyed the business, so the owner submitted claims for replacement equipment, debris removal, damage to customer goods and loss of business income. Based on these claims, the insurance company paid the owner $527,000.
However, during the insurance company’s investigation of additional claims, a forensic accountant uncovered inconsistencies in a laundry services contract submitted as part of the owner’s claim for loss of business income. As a result, the owner was asked to sit for an EUO. The owner declined and withdrew his pending claim. The insurer then declined the claim, rescinded the policy and sued the business owner to recoup all loss payments.
At trial, evidence and witness testimony was presented that showed the owner had falsified the laundry contract and also inflated amounts paid for replacement equipment, debris removal, and payroll, among other items. Attorneys argued that the insurer was entitled to full recovery (payments made before the fraud occurred) for several novel reasons, including:
Though portions of the claim were legitimate, the judge ruled in favor of the insurer and its decision to rescind the fire insurance policy. The insured was ordered to repay $452,064, which represented all payments less monies paid to customers who lost clothing in the fire and the policy premium.
Implications for Insurers
This decision is important as it reinforces the rights of insurance companies not only to decline a claim when fraud is uncovered but also to rescind a policy and sue the insured to collect good faith payments. Previously, the law was not clear about what happens to monies paid as part of a legitimate claim, when fraud is discovered in a separate area. It is now clear that fraud in part of a claim translates to fraud in the entire claim.
Claims managers should have an open discussion with claims adjusters and SIU team members, with the goal of establishing a claims review protocol that outlines what to look for and what to do if fraud is suspected. This is critical, as claim adjusters are the first line of defense against fraud. Once fraud is uncovered, insurance companies should not hesitate to consult with an attorney and pursue the insured in order to recover monies already paid. In the end, both insurance companies and policyholders will benefit by reducing the high cost of fraud.
Larry M. Arnold, P.C., is a senior partner at Cummins & White, LLP. He can be reached at (949) 852-1800,
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