La. Insurance Commissioner Accuses Hurricane Claim Law Firm of Fraud

Louisiana Insurance Commissioner Jim Donelon announced Friday that his department issued a cease-and-desist order to McClenny, Moseley & Associates, a Houston-based law firm that filed more than 1,500 hurricane-damage lawsuits in the state — many which duplicated filings made by other attorneys.

“The size and scope of McClenny, Moseley & Associates’ illegal insurance scheme is like nothing I’ve seen before,” Donelon said in a press release. “It’s rare for the department to issue regulatory actions against entities we don’t regulate, but in this case, the order is necessary to protect policyholders from the firm’s fraudulent insurance activity.”

Donelon said MMA made more than 850 misrepresentations to insurance companies, stating that policyholders had retained the law firm even though that wasn’t true. The law firm actually represented Apex Roofing and Restoration, an Alabama-based storm restoration company that solicited customers by walking door to door in hurricane-damaged neighborhoods, according to witness testimony.

Steve Badger, an insurance defense attorney for the Zelle law firm in Dallas, said it is significant that Donelon characterized MMA’s action as “fraudulent insurance activity.”

“That finding might interest a local prosecutor in considering bringing criminal felony insurance fraud charges,” Badger said. “Eight hundred fifty-six counts in fact, one for each time they told an insurance company they represented its insured instead of Apex Roofing.”

Donelon said during a telephone interview that he and his staff have been watching closely proceedings before US District Judge James D. Cain Jr. in Lake Charles, who last October called McClenny Moseley into his courtroom to explain how it had come to file more than 1,600 lawsuits in the Western Louisiana District over the course of several days. Many of those suits duplicated filings made by other attorneys and some contained blatant fact errors, such as misstating the name of the storm that had caused the alleged damage.

Magistrate Judge Michael B. North in the Eastern Louisiana District noted a similar large volume of lawsuits and duplicate filings and ordered the law firm to appear before him to explain.

“My suspicion is that it is victimizing both policyholders and insurers so this is a double-rare situation,” Donelon said.

Deputy Commissioner Nathan Strebeck said the department can levy penalties of up to $25,000 for each violation, for a total of up to $500,000. He said MMA has 20 days to respond to the Insurance Department’s allegations. He said he will recommend an appropriate penalty to the commissioner after hearing the law firm’s explanation.

Donelon said he is prohibited by state law from commenting on whether he will refer the McClenny law firm for criminal prosecution, but noted that the department partners with Louisiana State Police to investigate suspected insurance fraud.

As reported by the Claims Journal on Thursday, MMA submitted documents to the U.S. District Court for Eastern Louisiana that showed it had sent 856 letters of representation on behalf of insureds in cases where it actually represented Apex or other restoration contractors.

MMA submitted the documents under an order by North, the magistrate judge in New Orleans. They also showed that MMA had agreed to pay $13.9 million to Velawcity, a marketing firm, for 4,268 “prescreened client leads.”

The documents showed that MMA had filed one lawsuit and settled 11 claims on behalf of insureds without the insureds’ knowledge or consent, the cease-and-desist order states.

The order, signed by Strebeck, says that MMA falsely stated that the firm had been retained by Michael and Holly Caffarel to represent the couple on a claim for damages caused by Hurricane Laura. The order says the Insurance Department learned about the misrepresentation via a complaint filed by the Caffarel’s actual attorney, who said that his clients learned about the fraudulent claim representation when Chase Bank, the mortgage holder and a payee named on the settlement check, endorsed the check and sent it to the Caffarels.

The order says a transcript of a Dec. 13 hearing before US District Judge James D. Cain Jr. revealed that MMA had also signed the name of a private mortgage holder, Accord Services, on an insurance settlement check without the permission of the owner of the mortgage company, Kermith Sonnier. William R. Huye III, managing attorney of MMA’s Louisiana office, did not refute that his law firm deposited the check and retained the money for nearly six months.

Donolen declared MMA’s actions to be unfair trade practices and proposes to take action against the law firm, Huye and founding partners John “Zach” Moseley and James McClenny. The department’s order states that MMA’s actions warrant an emergency action and direct the law firm to stop violating state insurance laws.

Normally, attorneys are regulated by the Louisiana State Bar or the Louisiana Attorney Disciplinary Counsel. MMA founding partner Zach Moseley said during a Feb. 1 court hearing that insurance defense attorney Matthew Monson has made allegations against his firm with the State Bar, but no disciplinary action has been announced.

William B. Gibbons, a defense attorney that MMA hired earlier this month, declined to comment on the allegations.

Top photo: In this Aug. 27, 2020, file photo, buildings and homes are flooded in the aftermath of Hurricane Laura near Lake Charles, La. (AP Photo/David J. Phillip, File)