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Up For Interpretation

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Senior Director of Strategic Alliances
LexisNexis Risk Solutions - Government

Rhode Island is coming in with fists up and fighting! On March 2020, in response to the outbreak of the COVID-19 pandemic, the federal government provided additional funding to all states to supplement unemployment benefits that had been exhausted and to provide benefits to individuals who would have otherwise not qualified. Because these were uncertain times and the government being the government, the Rhode Island Department of Labor and Training took out two “Government Crime” policies for $180,000 with the Fidelity & Deposit Co. of Maryland. Two policies that should insure up to $40 million against financial losses from burglary and robbery of government funds. It has been said that if Moses had gone to Harvard Law School and spent three years working on the Hill, he would have written the Ten Commandments with three exceptions and a saving clause. It looks like Fidelity & Deposit Co. put a lot more than that into these Government Crime policies without Rhode Island realizing it. And now it is all up for interpretation.

In total, according to the latest DLT report, the state lost $120 million to unemployment fraud. DLT decided to seek the maximum of the policy limits, $40 million. But on July 8, 2022, the company denied Rhode Island’s total claims asserting that there was no provable set of facts under which Rhode Island could establish that their claims were covered under the policy because the losses resulted from alleged use of another person’s confidential information. Meaning that Rhode Island was going to have to fight for what they insured.

On May 3, 2023, Superior Court Judge Brian P. Stern declined to rule on the merits of the exclusion provision. But it did find the terms of the policy “ambiguous” and “reasonably susceptible of different constructions,” setting the stage for discovery proceedings and a possible trial if the matter in not settled out of court.” Unless the insurance company can settle with the State of Rhode Island, there will be a court case to battle how the English language should be interpreted. Either way, there will be no real winners in this case.

Today’s Fraud Of The Day is based on article “State in legal fight with insurer over $40M fraud payout” published by Providence Business News on May 11, 2023.

The state is in a legal battle with an insurer over efforts to recoup $40 million lost in fraudulent unemployment claims during the pandemic.

The insurer, Fidelity & Deposit Co. of Maryland, insists it doesn’t owe the state anything. The Illinois-based company says the state’s losses are not covered under its policy because the fraud was initiated through stolen third-party information. Fidelity & Deposit is a subsidiary of the Swiss insurance company Zurich Insurance Group.

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