La. Insurance Commissioner Fines Hurricane-Damage Law Firm $2 Million

Louisiana Insurance Commissioner James Donelon on Tuesday issued $2 million in fines against McClenny Moseley & Associates and three of its partners, the maximum amount allowed by law.

“The illegal insurance scheme perpetrated by McClenny Moseley & Associates is frankly one of the most egregious cases that has ever come through this department,” Donelon said in a prepared statement. “The $2 million in fines should put all bad actors on notice that fraudulent behavior will not be tolerated in Louisiana.”

Donelon said he issued $500,000 fines each against MMA founding partners James McClenny and John Zachary Moses, New Orleans office managing partner William Huye III and the law firm as a whole.

In a cease and desist order dated May 1, Donelon says MMA attorneys’ own admissions during hearings before federal court judges show that the law firm knowingly attempted to defraud Louisiana insurers. In 856 instances, MMA led insurers to believe it represented homeowners when in fact it represented Apex Roofing and Restoration or other contractors. MMA admitted that it settled 11 claims on behalf of insured property owners without the property owner’s knowledge or consent.

The law firm also deposited checks from insurers that were made out to mortgage holders in addition to the property owners. In one instance, someone with MMA stamped an endorsement on the back of a check made out to a mortgage holder, Accord Services, even though Accord was unaware that the check had been issued and had not received any part of the proceeds.

“MMA’s fraudulent behavior included presenting demands for payment pursuant to the consumer’s insurance policy, invoking the appraisal provision of the policy, and receiving and negotiating insurance settlement checks without the authority to do so from the policyholder,” the Insurance Department said in a press release.

Under Louisiana law, MMA and its attorneys have 30 days to file a request for an administrative hearing to appeal the fine, said Deputy Insurance Commissioner John Ford.

The insurance commissioner’s fines are just the latest in a long string of setbacks for MMA. The Louisiana Supreme Court on March 3 suspended indefinitely William Huye’s license to practice law. All of the other attorneys assigned to the New Orleans office have since left the firm.

MMA has acknowledged that it paid $13.9 million to an Arizona-based marketing firm, Tort Network, which does business as Velawcity, for “prescreened client leads.” But federal judges in the Western and Eastern Louisiana district courts have refused to allow the law firm to proceed with lawsuits filed on behalf of those clients.

A former MMA business partner has filed lawsuits that seek $13 million in compensation. Global Estimating Services says MMA owes it nearly $10 million for appraisals it performed on hurricane damaged homes. An affiliated company, Access Restoration Services, sued to recover a $3 million investment loan it made to MMA to finance the acquisition of new clients.

A New Orleans-based personal injury law firm added its own legal action to MMA’s challenges this week. Morris Bart filed a lawsuit in the US District Court for Eastern Louisiana seeking a temporary restraining order and an injunction barring MMA from communicating with former clients who fired the law firm and signed agreements with Morris Bart. The pleading also asks for a declaration to nullify any client engagements in Louisiana and an order to stop MMA from collecting attorney fees.

The lawsuit says former MMA clients have approached Morris Bart seeking representation after learning about MMA’s misrepresentations.

“In total, Morris Bart has now taken on the representation of over 900 former MMA clients and has dedicated at least 39 attorneys in its law firm to the work of pursuing these claims and cleaning up the mess MMA left in its wake,” the suit says.

New Orleans insurance defense attorney Matthew Monson, whose review of MMA’s mass court filings prompted the investigations by federal judges and the insurance commissioner, noted the Morris Bart lawsuit on his LinkedIn page Tuesday.

“Never before have the most aggressive insurance defense law firm (The Monson Law Firm, LLC) and the most successful plaintiff’s firm in Louisiana been so aligned on the issues,” Monson wrote.