Insurer Awarded Damages For Fraud

Insured's Suit for Fire Insurance Benefits Defeated by Qui Tam Claim by Insurer

In Lisa A. McCullough v. Metlife Auto & Home, No. 4:20-CV-01807, United States District Court, M.D. Pennsylvania (September 30, 2022) McCullough sued seeking to force MetLife to pay Plaintiff for an insurance policy on the McCullough's home, which was destroyed in a fire in 2019.

BACKGROUND

MetLife moved the case to the USDC and filed an answer to complaint, along with a counterclaim against Plaintiff for insurance fraud. MetLife served the counterclaim on Plaintiff's attorney that same month, alleging insurance fraud under Pennsylvania law.  Plaintiff failed to respond to the counterclaim. In March 2021, MetLife moved for entry of default against Plaintiff, and default was subsequently entered by the Clerk of Court.

MetLife moved for a default judgment. In January 2022, this Court granted MetLife's motion and requested briefing and evidence of any damages sought by MetLife. MetLife has submitted a brief and evidence listing its damages. MetLife has additionally moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). For the following reasons, MetLife's Rule 12(c) motion will be granted and its motion for a default judgment will be granted in part and denied in part.

DISCUSSION

When considering a motion for judgment on the pleadings a court assumes the truth of all factual allegations in the plaintiff's complaint and draws all inferences in favor of that party. It does not, however, assume the truth of any of the complaint's legal conclusions

Pennsylvania law provides that an individual commits the offense of insurance fraud if she “[k]nowingly and with the intent to defraud any insurer or self-insured, presents or causes to be presented to any insurer or self-insured any statement forming a part of, or in support of, a claim that contains any false, incomplete or misleading information concerning any fact or thing material to the claim.”

Although these elements are set forth in a criminal statute, the statute further allows aggrieved insurers to file a civil action against violators of the statute “to recover compensatory damages, which may include reasonable investigation expenses, costs of suit and attorney fees.”

Additional facts indicated that Plaintiff set the fire, such as her relocation of important documents before the fire and the discovery of newly purchased gas cans with residual gasoline in them at her home, after the fire. Plaintiff “submitted a claim to Defendant for the alleged loss as a result of the fire,” thereby presenting “false, incomplete and/or misleading information concerning the claim and the cause of the fire.”

As Plaintiff has not appeared before the Court, the Court, by rule of practice, must conclude that there are no disputed material facts. MetLife's factual allegations lead to a reasonable inference that Plaintiff committed insurance fraud. Accordingly, MetLife's motion under Rule 12(c) was granted.

MetLife's Damages

Having found that MetLife has satisfactorily alleged a civil claim for insurance fraud, the Court now considers its damages. MetLife seeks $26,069.01 in “pre-suit investigation costs.” It has provided the Court with invoices for the firms hired to investigate the fire in McCullough's home to support its request for pre-suit costs. The Court found this evidence sufficient to award the pre-suit costs without an evidentiary hearing.

MetLife also sought “$29,998.04 in litigation costs of suit and attorney fees” for a total of $56,067.05.

Here, the invoices MetLife submitted do not indicate if multiple attorneys worked on this matter or only William J. McPartland, Esq. Additionally, the invoices do not explain how many hours were billed for or the hourly rates for Mr. McPartland and any other attorneys working on the matter. Nor are there affidavits to substantiate those hourly rates as the prevailing market rates in the community. Without this information, the Court cannot determine a reasonable fee for counsel's efforts.

Accordingly, MetLife's motion for a default judgment is granted in part and denied in part with respect to the damages it seeks and the court offered to reconsider if provided sufficient detail concerning the attorneys fees sought.

ZALMA OPINION

Insurance fraud, especially an arson for profit, are both crimes and defenses to breach of contract claims by the insured arsonist. When Met Life filed its cross-claim the insured and her counsel saw the writing on the wall and refused to participate. As a result the insurer obtained a judgment against the insured which may or may not be collectible. The judge, with a finding of fraud, should have referred the case to the local U.S. Attorney for prosecution.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

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