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DETROIT (WXYZ)

Kim Warner got the scare of her life behind the wheel of her Jeep Wrangler.  "I saw a flash under the hood," she remembers.  She says she was driving at a low speed when her brakes went out and the shifter jammed.  "I had both feet on the brake and my tires were spinning.  I noticed flames coming out the passenger side," she says.

Her boyfriend who was nearby ran, jumped in, and pulled her out of the SUV before it got worse.  "As I pulled her out that is when the flames came thru the dash," he said.

Chrysler sent an inspector, but the automaker said in a statement:  "The cause of the fire was deemed inconclusive by the investigator."

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This recall involves battery-operated night lights with an AC adapter included.  The night light collection includes a pink hedgehog, a blue bird, a yellow rocket, an orange dino egg, a white soccer ball and a green shark.  The model numbers are printed on the bottom side of the night lights.

 

Name Model Number
Color
Size
Hedgehog 060-02-1397 Pink 3.5”(h)x 5.5”(w) Bird 060-02-1398 Blue 4.0”(h)x6.5”(w) Rocket 060-02-1399 Yellow 6.0”(h)x4.75”(w) Dino Egg
060-02-1400 Orange 6.0”(h)x4.75”(w) Soccer Ball
060-02-1401 White 5.0”(h)x5.25”(w) Shark 060-02-1402 Green 3.5”(h)x6.9”(w)

Description:

This recall involves Polaris Youth RZR® 170 EFI recreational off-highway vehicles with model number R15YAV17AA/AF and VINs between RF3YAV170FT000076 and RF3YAV17XFT005141. To see the complete list, visit the firm’s website. The VIN is on the left-hand front frame tube. They were sold in both blue and red. The blue models have a “170 EFI” decal on the right and left side of the hood and an “RZR” decal on the right and left front fenders. The red models have a “170 EFI” decal on the right and left front fenders and a “RZR” decal on the right and left rear fenders.

See the full details at the Polaris website.

Description

This recall involves GreenWorks 12 amp electric blower/vacs. The blower/vacs have a green motor housing and a black blower tube and restrictor nozzle. They measure 12 inches high and 34 inches long. Recalled blower/vacs have model number 24022 with a serial number between GWS0350001 through GWS2280500 or model number 24072 with a serial number between GWR1310001 through GWS2281100. The model number, serial number,  “greenworks” and “ELECTRIC BLOWER/MULCHER WITH BAG” are printed on the side of the motor housing.  Model 24022 has a two-speed switch. Model 24072 has a variable speed switch.

 

Read the full details at CPSC

In the new issue of NFPA Journal®, President Jim Shannon said the Association will focus on the leading causes of home fires, including cooking. "We also need to continue to push hard for home fire sprinklers. That's still a large priority for NFPA, and we plan to work very aggressively in 2014 on our residential sprinkler initiative," he said.

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WASHINGTON, D.C.—The U.S. Consumer Product Safety Commission (CPSC) announced today that LG Electronics Tianjin Appliance Co., Ltd., and LG Electronics USA Inc. (LG), agreed to pay a maximum $1,825,000 civil penalty. The civil penalty agreement settles CPSC staff’s charges that LG knowingly failed to report to CPSC, as required by federal law, a defect and an unreasonable risk of serious injury with several models of dehumidifiers.  Fires caused by the defective dehumidifiers resulted in millions of dollars of property damage.

Read the full article at CPSC

The next CCAI Training Seminar will be held November 2 - 4, 2015

Practical Approaches for Recouping Good Faith Payments

Larry-Arnold-article

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:

  • The outcome in Perovich v. Glen Falls Insurance Co. (9th Cir. 1968), where the court ruled that an insurer “may recover money paid in reasonable reliance on its insured’s fraudulent claim.”  The court held that the insurer was entitled to recover the full payment made under the policy.
  • Compelling the insured to return only a portion of the money would circumvent the purpose of the fraud statutes and create bad public policy.  The insured’s fear of losing even the legitimate claim payments should deter him from committing fraud.  An insured who knew he could recover the “honest” claims would be incentivized to calculate the risk of getting caught into his claims submission, determining that some things are worth lying about.

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, This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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