It seems to me that buying the insurance is not fraud. The fraud would occur if there were claims filed based on actions which happened prior to the insurance purchase. Were such claims made?
I am not associated with the insurance industry in any way and so can only offer unreliable opinions.
Or future acts that continued the pattern of illegality for which coverage was sought.
I can only answer your question under NY Insurance law. The simple response is that "It depends." Under NY law, a misrepresentation may void the insurance contract if it is material -- that is the misrepresentation is to such a degree that the insurer would not have issued the policy if it had known the true facts. Although an "intentional" misrepresentation of a material fact is required to void certain types of polices, for professional malpractice polices, intent is irrelevant.
With that said, a failure to disclose (as opposed to an affirmative misrepresentation of a material fact) will not void the insurance contract. In other words, the insured has no duty to disclose unless asked during the application process.
Also, most professional liability insurance contracts only cover losses attributable to negligence and will not cover intentional acts that are unlawful (although the insurer may still need to defend under a reservation of rights until a court determines whether the claim is covered under the policy).
Lastly, most professional liability insurance contracts only cover claims made by the professional's client or patient -- as opposed to third-parties. In other words, the policy only covers claims asserted by a person to whom the professional owes a duty of care, and in the legal profession, an attorney only owes a duty of care to his or her client.
In most types of insurance sold...if you did something which might lead to a future claim when you were buying the insurance...then it won’t click in and pay the cost. An audit guy will come by and ask questions...then your scheme falls apart.
These government guys are royally screwed. I’d walk in, tell them everything they want and point out the bosses responsible and just hope I dump enough to save my own skin.
I think that all the people that rushed out to purchase insurance is tantamount to an admission that they knew they were engaged in wrongdoing.
“buying the insurance is not fraud.”
If the incident occurred pre-purchase, and the insured was aware, how could it NOT be fraud?
I am not associated with the insurance industry in any way and so can only offer unreliable opinions."
I've been an insurance fraud investigator for 20 years. IMHO, the author has a point, but it's a tenuous one. Much of it would depend on the questions on the policy application and the responses provided. I'm not sure, as the title suggests, it would constitute an admission of insurance fraud.
Application fraud aka Premium Fraud is very real. The policy purchaser is making deliberate misrepresentations during the policy purchase in order to keep their premiums low. A common example would be a driver with multiple accidents or DUIs denying such on an auto policy application. A common one I have seen with worker's compensation policies is a tree trimming company (high risk) misrepresenting itself as a landscaping service (relatively low risk). In both cases, even though no claim has been filed, the insurance company is still being ripped off because they are providing coverage for a high(er) risk, while only collecting premiums for a low(er) risk.
If you had a fender bender in May and got a dent in your front quarter panel and have been driving around with it for months, there would be nothing illegal about going online or into an insurance agency on October 1st and buying a policy for your car. What would be illegal would be, either making a declaration on the policy application that the vehicle was undamaged (knowing and deliberate misrepresentation on the application) or, filing a claim and stating the damage occurred on October 2nd (knowingly falsifying the circumstances of the loss) once coverage for the policy was in force.
If the parties in the Flynn action committed misconduct, and then bought professional liability insurance afterwards, that in, and of itself would not be fraudulent. If the policy application had specific questions about past incidents that they knowingly denied, or if a claim should arise, and they misrepresented the date of the misconduct to fall within the coverage period, then that would be fraud.
Above and beyond that, most policies will exclude intentional acts. You can't take a key to your car and scratch the hell out of it, and then file a vandalism claim hoping to get a new paint job. If it could be established that the professional liability issues in handling the Flynn case were deliberate and intentional, I doubt most carriers would cover the claim, even though they may not aggressively pursue it as fraud. In proving the intentionality of the act, the insurance company would generally be held to the same standard of proof (preponderance of evidence) as in any civil trial. They would not need to prove beyond a reasonable doubt that the act was deliberate, only that it was more likely than not, for the claim to be denied.