Aug. 29--As furniture makers move to phase out toxic, ineffective flame retardants, the chemical industry is waging an aggressive last-ditch campaign to preserve a lucrative market that reaches into virtually every American home.
One of the world's leading manufacturers of flame retardants is suing California to block a new flammability standard that starting next year will allow furniture manufacturers to eliminate the chemicals from new upholstered sofas and chairs sold nationwide. The lawsuit, scheduled to be argued Friday in a Sacramento courtroom, is backed by the American Chemistry Council, the industry's chief trade group.
Report Receipt Date: JUL 02, 2014 NHTSA Campaign Number: 14V402000 Potential Number of Units Affected: 175
Manufacturer: Ford Motor Company
Ford Motor Company (Ford) is recalling certain model year 2014 Ford Fiesta vehicles manufactured October 25, 2013, to February 27, 2014. Due to a manufacturing error, the fuel tank may leak.
Read the full details at NHTSA
Recall date: August 26, 2014
This recall involves Hewlett-Packard’s LS-15 AC power cord. The power cords were distributed with HP and Compaq notebook and mini notebook computers and with AC adapter-powered accessories such as docking stations. The power cords are black in color and have an “LS-15” molded mark on the AC adapter end of the power cord.
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.
The recall involves Amana, Century, Comfort-Aire, Goodman and York International-branded Packaged Terminal Air Conditioners and Heat Pumps. The units are rated 230/208 volt, 3.5 kW and are most often installed in walls of hotels, motels, apartment buildings and commercial spaces to provide room climate control. The recalled units are beige with serial numbers ranging from 0701009633 through 0804272329. The brand name is located on the unit’s front cover. The serial number is located on the control board plate found by lifting the unit’s front cover.
A series of fire tests were conducted to characterize the potential hazard from ignition of an upholstered chair. The particular chair was selected as part of a fire investigation being conducted by the U.S. Department of Treasury’s Bureau of Alcohol, Tobacco, and Firearms.
Heat release rate was determined as a function of time from ignition using the oxygen depletion principle. Two tests were conducted with the chairs placed in the open under large calorimeters.
The third test was conducted with the chair located in a room. Peak heat release rates obtained during the tests ranged from approximately 1 MW to 2.5 MW.
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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