Insurer Found Liable for Fraud

On August 27, 2005, a drunk driver seriously injured two Bristol Township police officers, Michael Egan and Mark Buzby. Though most of our commentary centers around an insurer being defrauded, on this occasion, no one is claiming that the officers did anything wrong or are lying about their injuries. Instead, the insurance company handling the case has been found liable of fraud.

According to court records and phillyBurbs.com, Egan and Buzby were conducting a routine investigation for an accident that had occurred on Route 13 in Croydon when they were then suddenly hit by an uninsured driver. Records also show that the driver was drunk and speeding. The two officers were crushed against their own patrol car.

Egan, who had to have one leg amputated, and Buzby, who suffered permanent injuries to his legs, have already received $8 million in recoveries and benefits.

On Tuesday, a Philadelphia Court of Common Pleas found the insurance company, USI Midatlantic, liable for fraud in seeking to deprive insurance benefits owed to Buzby and Egan. According to a press release from the lawyers for the police officers, Mark W. Tanner and Peter M. Newman, and Gerald A. McHugh, Jr. and Daniel Bencivenga, a jury also rendered a verdict a week ago against USI, which is a member of Goldman Sachs Capital Partners.

“The jury found the company liable after eight days of testimony. The press release said the jury found USI liable to the injured police officers for fraud, breach of the duty of good faith and fair dealing and intentional interference with contract.”

After nearly three weeks the jury found that USI –along with its claims manager Robert Brown and assistant vice president Freda Batipps –engaged in fraudulent conduct and intentional interference with contract. The jury also found these defendants, in addition to Linda Magovern, a claims analyst for USI, liable for “breach of the duty of good faith and fair dealing,” which is owed by an insurance broker to the insured party.

“In their lawsuit, the officers alleged that before the accident, the USI defendants failed to obtain a written statutory waiver of uninsured motorist coverage as required by the Pennsylvania Motor Vehicle Financial Responsibility Law. The legal effect of this failure, the plaintiffs asserted, was to create an entitlement to benefits.”

The plaintiffs argued that the USI defendants, after recognizing their mistake, embarked on a year-long fraudulent scheme to get backdated waiver forms from Bristol Township. They said that the company would use those forms as a basis to deny insurance coverage to the officers.  Apparently the court agreed. 

In addition to the $8 million the two officers have already received, an additional $500,000 that was awarded to the officers, which is expected to be split between them, to compensate for “emotional distress and other damages” caused by USI’s wrongdoing, according to a press release.

According to Buzby and Egan, it has taken almost six years, but they say that they now feel some sort of closure from this ordeal.

“We have been fighting this in court and were told basically that we were making up our claims. The jury listened to the facts and had nothing to win or lose in this case, but found in our favor. I was on the stand testifying and told the truth. Yes, the compensatory damages are helpful, but what is more important is that we got out there that this company absolutely defrauded us and we wanted to make that  what happened to us, never happens to anyone ever again,” said Egan.