Transcript How Utmost Good Faith Put Rex DeGeorge, the “King of

How Utmost Good Faith Put Rex DeGeorge, the
“King of Insurance Fraud,” in Jail.
By Neil S. Lerner
(Los Angeles Times, page one, Dec. 4, 1999)
Synopsis
Rex DeGeorge, a Beverly Hills attorney, has
the remarkable experience of having owned
several yachts, which have been lost at sea.
Each vessel was adequately insured against
such loss, and except for the yacht that sank
in this case, DeGeorge collected the
insurance proceeds on every one of them.
(Cigna v. Polaris, (9th Cir. )
How?
This Boat
Exhibit #39
Scuttled in November 1992
Slide 18
Photo 2
Exhibit #100D
Off the Coast of Italy
Exhibit #12
To Collect on the Insurance
Exhibit #27
The $3.75 Million Set-Up of
Cigna Begins
First letter, dated December 29,1992, asks:
“With reference to our letter of November 11,
1992, we are awaiting your response.”
Why Earlier Letter Not
Responded to
• Cigna never received the November 11th
letter.
• The letter was never sent.
• But it was attached to the December 29th
letter.
The November 11th Letter
“On November 7, 1992, yacht “Principe di Pictor”
was overtaken by three persons posing as captain
and crew, who without our knowledge were
carrying contraband. They scuttled the yacht to
avoid interception by military.
The authorities are salvaging the yacht.
Advise…”
So What?
790.03. The following are hereby defined as unfair
and deceptive acts in the business of insurance.
(2) Failing to acknowledge and act reasonably
promptly upon communications with respect to
claims arising under insurance policies.
(4) Failing to affirm or deny coverage of claims
within a reasonable time.
So What Else?
(b) Upon receiving any communication from a claimant,
regarding a claim, that reasonably suggests that a response is
expected, every licensee shall immediately, but in no event
more than fifteen (15) calendar days after receipt of that
communication, furnish the claimant with a complete response
based on the facts as then known by the licensee.
There’s More.
Upon receiving notice of claim, every insurer, shall
immediately, but in no event more than fifteen
(15) calendar days later, do the following unless
the notice of claim received is a notice of legal
action:
(1) acknowledge receipt of such notice to the
claimant unless payment is made within that
period of time.
The Insurance Premium
Cigna determined that the premium had not been
paid.
Promptly sent DeGeorge a cancellation letter.
But, premium had been paid, in part.
How Premium “Paid.”
DeGeorge wire transferred funds into the New York
branch of his Florida insurance agent’s bank.
DeGeorge’s Response to Cancellation
DeGeorge responded with a letter that accused Cigna
of fabricating issues to avoid paying the claim,
and of canceling his policy following a notice of
loss.
Premium Letter
“It is apparent that someone had notice and
was eager to cancel flat and make the
insureds look bad, and you heroes. Upon
learning of the loss, at the convenient time,
you cancelled flat and returned the
premiums paid.”
Cigna’s Response
Cigna begrudgingly conceded the premium
issue, which made DeGeorge
uncomfortable.
DeGeorge’s Response
“We do not feel comfortable not paying at
this time the earned premium of $4,610.00,
therefore, we are returning the check back
to the agent as payment of the earned
premium.”
The Set-up Continues: The
Letters
“You have clearly established your bad faith in the
most classic and despicable style. We demand that
you abstain from dirty tricks and be sure that even
if we die here, the stockholders and the estates will
avenge justice.”
More Letters
“ It appears either your company has totally
mishandled this policy and service to the
same, or someone is play a big ‘Sadaam
Hussein’ on us…Do not try to undermine
the suspicions created against us party due
to INA’s record.”
Even More Letters
“ You people will go to any extreme to forfeit
your insured. It is apparent that some of
you, and more, gathered together and had a
brain storm on how you could cancel the
policy, avoid liability, deny the increase in
the Breach of Warranty and the hell with the
insured and the loss payee, and the people
who invested their life savings in this
venture and everybody else.”
Still More Letters
“ Every time I read your letters and each time I have
to respond to your machinations I feel hurt as a
man, hurt because I am forced to expose your
doings. I feel a human embarrassment. We
understand ‘lost.’ Destroyed, therefore, is
something other than lost. It means that the vessel
remains in its entirety or part of it, but it is still
‘destroyed.’ Like in: The cleanser destroyed my
sweater. His personality was destroyed by his big
brother.”
Impact of Letters
“The last thing I do before I leave at night is
write a letter to these guys and the first
thing I do in the morning is read a letter
from them. In between, I have nightmares.”
Response of Cigna to the Set-Up:
Utmost Good Faith
• Letters disclosed more about the risk than
had previously been disclosed.
• Lawyer told me that if you pursue the
“story,” it is a trap and you will lose.
• Lloyd’s underwriter kept file on desk for
almost 20 years.
Lessons from Security Chief
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Criminal Mind
No scam too small
Cannot tell the truth, even the truth is a lie.
Be careful.
No Scam too Small.
Investigation Results
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4 Prior vessel sinkings and claims.
Other forms of insurance claims.
Wealthy lifestyle (14 Ferrari’s, 2 Villas)
Powerful attorney
Movie Producer
Great Stories
Personable and nasty.
Civil Case and Appeal to the US
Supreme Court
• Filed action for rescission in federal court.
• 5 years later prevailed.
• Judge rescinds policy and awards Cigna
attorney’s fees against DeGeorge
personally.
• Case upheld on Appeal
Threats and hate mail
Q. And did Mr. Falco also advise you that Mr. DeGeorge stated that Mr.
Lerner should also be killed?
A. Yes.
Q. And Mr. Lerner was the civil attorney who represented Cigna in the
civil litigation before Judge Letts, correct?
A. That’s correct.
Q. After you received the information about that threat from Mr. Falco,
did you advise Mr. Lerner about that threat?
A. He was advised, yes.
Q. How did he react?
A. He was scared.
Q. And has he told you that he takes the threat seriously.
A. He does.
Movie Roles and Bribes
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Movies
Watches
Pens
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Aftermath of the Civil Case and
the beginning of the Criminal
Case
Attorney’s fees
Greece
Bankruptcy
Indictment
FBI
Criminal Case
The Indictment
Conspiracy – Count 1
Mail Fraud – Counts 2-4
Wire Fraud – Counts 5-11
Perjury – Counts 12-16
Arrest, Bail, filing of Bankruptcy
and Unfiling of Bankruptcy
• First Creditors meeting
• I need my money
• Unfile Bankruptcy
How to Unfile?
“At the time I signed my bankruptcy petition,
I was being treated with various
experimental psychotropic medications
prescribed by doctors in Greece and which I
had never taken before. The affect of those
mediations deprived me of the capacity to
fully understand and appreciate the meaning
of the bankruptcy filing.”
Criminal Conviction and
Sentencing
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7.5 years in federal prison
Restitution award of $2.8 million
No insurance claims without prior approval
No remorse
Disability Trial: Lessons Not
Learned
“We knew that he was a sleazebag and that he was
getting away with something. But we had no
choice. Based on the evidence and based on the
court's instructions on the law, we had no choice
but to give him the money," says the jury foreman.
“Lawyer-Felon Wins Judgment, Vows To Fight to
Keep All of It.”
“Jailed Beverly Hills Lawyer Wins Insurance Fraud
Case.”
Prison and Appeal
• In prison.
• Appeal heard but no decision yet.
Judge Judy TV Show.
Ebeling
No scam too small
Questions