Insurers’ Attorneys Demanding Reimbursement for Baseless Lawsuits

McClenny Moseley & Associates cast a wide net in search of hurricane victims to sign on as clients. Soon, the Houston-based law firm may start paying to clean up some of the detritus that it caught.

Attorneys who represent United National Insurance Co. filed motions last week asking a US District Court judge to order MMA to pay a total of $23,710.35 as reimbursement for the cost of responding to eight baseless lawsuits that MMA had filed against the carrier.

Last month, another federal judge ordered MMA to pay $15,914 to another insurance defense attorney for the cost of responding to a bogus lawsuit.

“You sued an insurance company that didn’t issue a policy without doing any investigation into whether there was a policy,” Judge David C. Joseph, with the US District Court for Western Louisiana, told an MMA lawyer during a Dec. 28 hearing.

Another Judge Eyeing Sanctions Against Law Firm for Filing Frivolous Lawsuits

As the Claims Journal previously reported, US District Court Judge James D. Cain called the managing attorney of MMA’s New Orleans office, R. William Huye III, into his courtroom on Dec. 13 for an explanation after he found 43 lawsuits that appeared to duplicate other filings, were filed against the wrong insurer, or made specious claims, such as hurricane damage to a property that wasn’t in the path of the named storm. Cain compared attorneys for the law firm to “bottom feeders” for filing 1,642 hurricane lawsuits over the course of four days. He threatened to sanction the law firm $200 for each baseless lawsuit he finds.

Since then, Cain has ordered $200 sanctions in two separate cases after MMA filed motions to dismiss the lawsuits. More than 40 other questionable cases remain pending, including the eight suits that were filed against United National.

Huye has attended three separate court hearings in the past four months to explain how his law firm had botched so many court filings. The hearing held Dec. 28 before Judge Joseph revealed some new details.

Attorney Matthew D. Monson, representing Allied Trust Insurance Co., told Judge Joseph that a marketing company called Velawcity ID is referring potential clients to MMA. He said his own wife received an unsolicited text message from Velawcity telling her that she qualifies for Hurricane Ida claim dollars.

Another insurance defense attorney, William B. Collum in Tampa, said in a LinkedIn post that his deceased father also received a marketing message from McClenny Moseley. The firm mailed a letter in his father’s name, but addressed to Collum’s residence in Fort Myers. Collum said his father lived with him during the last year of his life, before dying seven years ago.

“He’s interred in Michigan, far outside Hurricane Ian’s path,” the LinkedIn post says.

At the court hearing, Monson said Velawcity’s name appears on intake forms that MMA uses to sign up clients.

“Velawcity is the reason why McClenny Moseley has 15,000 claims when nobody else has 1,000,” he said.

Judge Poised to Sanction Law Firm that Filed Hundreds of La. Hurricane Lawsuits

One of those intake forms gave a name and address for Bobby Dyer, a Shreveport property owner who sued Monson’s client, Allied Trust. Dyer attended the Dec. 28 hearing and told the judge that actually his property was insured by Allstate.

Joseph said MMA seemed to rely exclusively on the information provided by Velawcity. He said the company was “essentially a runner,” a term of a person who illegally recruits insurance claimants.

On Jan. 17, Joseph dismissed Dyer’s lawsuit with prejudice and ordered MMA to pay Monson $15,914 for the cost of responding to the baseless lawsuit.

The Degan, Blanchard & Nash law firm in New Orleans is also seeking reimbursement for the cost of responding to eight lawsuits that were filed against United National by property owners who were not insured with the carrier. The law firm listed is costs in eight separate motions, with fees ranging from about $1,500 to $2,000 in each case and “internal costs” of $1,250 per claim. Altogether, the law firm is asking for $23,710.35.

In a telephone interview on Friday, Huye acknowledged that his law firm had filed some lawsuits even though it did not have the insurance policy or declaration page in hand. But he said Louisiana’s strict two-year statute of limitations puts plaintiffs attorneys in a difficult position. If he did not file a claim, hurricane victims who have valid claims against their insurers would lose their right to collect any payout.

“You have a limited amount of time to file your lawsuits you lose your insurance,” he said.

Huye said any comparison of Velawcity to an insurance claim “runner” is “absolutely false.” He said the company does advertising for his law firm and helps reach out to potential hurricane victims. He said MMA operates a call center staffed my non-attorneys who are given scripted answers to caller’s questions, but all legal work is conducted by licensed attorneys.

Huye said some mistakes are made because of the large volume. He said he is well aware that some insurance defense attorneys will demand reimbursement for their costs.

“That is something that we will have to deal with,” he said. “We have to act reasonably.”