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| | Zenith Insurance Should Be Commended For Taking On Workers' Compensation Insured In Pennsylvania State Court. Insured Lied To Zenith About Its Farm Operation.
By Barry Zalma - September 16, 2013
Zenith Insurance Company ("Zenith") sued defendants Glasbern, Inc. and Albert Granger ("Granger"), its owner and the operator of a related business, for negligent misrepresentation and violation of the Pennsylvania Insurance Fraud Act, in connection with Zenith's issuance of a workers compensation insurance policy to defendants. Both defendants were insureds under the policy.
A jury trial was held in June, 2013. In Zenith Insurance Co. v. Glasbern, Inc., Civil Action 10-5433 (E.D.Pa. 08/23/2013) the jury found Glasbern, Inc. and Granger had violated the Pennsylvania Insurance Fraud Act "in connection with failing to disclose the farming operations of Glasbern, Inc. to Wells Fargo and/or Zenith so as to cause Zenith to renew the worker's [sic] compensation insurance policy for the year 2010."
On June 11, 2010, Jason Angstadt ("Angstadt"), an employee of Glasbern, Inc., sustained serious injuries in the course and scope of his employment when he was struck by a 1200-pound cow from Glasbern Inc.'s herd of Devon cattle. As a result of the injuries, Angstadt is now a paraplegic. Zenith seeks reimbursement from Glasbern, Inc. and Granger for the amounts it has paid as well as all future payments it must make on the ground that Glasbern, Inc. and Granger committed fraud in connection with the issuance of the workers compensation policy by not disclosing Glasbern, Inc.'s farm operations.
When faced with a sizable loss such as that of Angstadt, Zenith engages a company called Paradigm which specializes in managing catastrophic claims. At some point Zenith hired Paradigm and paid it a flat fee of $832,964 in exchange for handling and paying Angstadt's medical bills related to his injury at Glasbern, Inc. Although Paradigm was responsible for the decision whether to pay the medical bills or challenge them through the Workers' Compensation Bureau utilization review process, Zenith continued to receive copies of the bills and review them. Zenith's claim examiners did not challenge any payments made by Paradigm. Paradigm's obligations ended when Angstadt's condition was stabilized, in April 2011. Thereafter, Zenith used its regular bill review and payment procedures to handle the Angstadt claim.
As of June 24, 2013, Zenith has proven that it paid a total of $1,076,382.37 to or on behalf of Angstadt, including $71,100 in indemnity payments, $994,084.54 in medical payments, and $11,197.83 in administrative fees. The medical payments include the payment of $832,964 to Paradigm. Zenith is entitled to a judgment against Glasbern, Inc. and Granger, jointly and severally, in the amount of $1,076,382.37 to compensate it for the fraud of Glasbern, Inc. and Granger in failing to disclose the farming operations of Glasbern when the workers compensation policy was being renewed in 2010.
As Angstadt's condition is permanent, Zenith will be required to make payments after June 24, 2013. The court declares that Glasbern, Inc. and Granger, jointly and severally, must reimburse Zenith for all reasonable medical and other payments made to or on behalf of Angstadt after that date as required under the Zenith Workers Compensation and Employers Liability Insurance Policy No. Z070128302.
JUDGMENT
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Judgment was entered in favor of plaintiff Zenith Insurance Company and against defendants Glasbern, Inc. and Albert Granger, jointly and severally, in the amount of $1,076,382.37 on plaintiff's claim under the Pennsylvania Insurance Fraud Act; and
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Judgment was entered in favor of plaintiff Zenith Insurance Company and against defendants Glasbern, Inc. and Albert Granger, jointly and severally, on plaintiff's claim under the Pennsylvania Insurance Fraud Act, declaring that Glasbern, Inc. and Albert Granger, jointly and severally, are liable to indemnify plaintiff Zenith Insurance Company for all reasonable medical and other payments made to or on behalf of Jason Angstadt after June 24, 2013 and continuing during his lifetime, pursuant to Zenith Insurance Company Workers Compensation and Employers Liability Insurance Policy No. Z070128302.
ZALMA OPINION
Insurance fraud comes in various forms. Employers attempt to avoid some of the workers' compensation premiums they are obligated to pay by not disclosing all of their operations or the categories of employees working for the employer-insured. In this case the employer lied to the insurer by not disclosing the existence of their farming operation. By so doing they saved a few thousand dollars in premium and, because the fraud was discovered, will pay Zenith more than one million dollars and reimburse it for each payment it must make in the future to the injured employee. Not a bargain.
In some states, like California, the lies told could also result in a criminal conviction. Zenith prefers the payment to the parties being jailed and unable to pay the judgment.
Zenith should be commended for refusing to allow the defendants in this case to profit from their fraud. Other insurers should take note and, if defrauded by an insured in Pennsylvania, they should consider seeking redress from the state courts for the damages resulting from the fraud.
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Barry Zalma is an attorney, a CFE (Certified Fraud Examiner), and an expert witness for myriad types of insurance fraud. His website is at www.zalma.com. To read his blog, go to www.zalma.com/blog.
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copyright © Barry Zalma; published with permission by adjustercom.
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