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Insurance won't cover costs of UPenn lawsuit brought on by $2.4M fake invoice scheme

PENNSYLVANIA RECORD

Sunday, November 24, 2024

Insurance won't cover costs of UPenn lawsuit brought on by $2.4M fake invoice scheme

State Court
Stevens

Stevens

PHILADELPHIA - On April 3, the Superior Court ruled that Gemini Insurance’s policy doesn’t cover a lawsuit from the University of Pennsylvania against management company Meyer Jabara Hotels, LLC.

President Judge Emeritus, Correale F. Stevens wrote the opinion while Judges Victor P. Stabile and Megan McCarthy King concurred.

One of Meyer Jabara’s clients is Sheraton University City Hotel, owned by the University of Pennsylvania. Sheraton Hotel’s general manager, Kenneth Kapikian, and its chief engineer, Dennis Gagliardi, were accused of conspiracy and money laundering, among other things, when they developed the company Cold Wash to send invoices to Sheraton Hotel without actually performing any services, to make money. 

They sent $2,328,977 in fake invoices. They pleaded guilty and the university informed Meyer Jabara about the money issues and told it to reach out to its insurance company. Meyer Jabara had an agreement that Gemini would send $975,000 for an indemnity payment via the insurance policy to help pay Meyer Jabara’s settlement with the University of Pennsylvania.

But Gemini later filed a suit, questioning if it had to defend Meyer Jabara in the University’s lawsuit.

Gemini Insurance initially filed a declaration in the Court of Common Pleas of Philadelphia County’s Civil Division in an attempt to show that a $975,000 settlement in the university’s lawsuit isn’t included in coverage, so Meyer Jabara has to pay up, not including the amount that Gemini received from third-party companies.

Meyer Jabara argued that two men at the center of the university’s lawsuit weren’t actually Meyer Jabara workers, but instead worked at MJ Employment, so they weren’t considered insured and Meyer Jabara shouldn’t face penalties for their actions. 

The Superior Court judges pointed out that the lower court’s definition of an employee aligns with Pennsylvania regulations and doesn’t have to be someone who was paid, had benefits and a W-2 from Meyer Jabara.

Meyer Jabara also claims that the two workers weren’t “rendering professional services on behalf of the named insured,” when they conducted the scheme against the hotel in question, which is owned by the university that filed the lawsuit. 

But the judges also said there’s no “genuine issue of material fact” that the men weren’t outside of their scope of employment when they carried out the scam. They were fulfilling duties like retaining vendors and greenlighting payments.

The judges also disagreed with Meyer Jabara’s argument that Gemini can’t deny coverage because it received a settlement related to the case.

“We disagree,” wrote Judge Stevens.“There is no indication the settlement agreement between Gemini and the third-party torfeasors limited or waived Gemini’s rights to continue disputing coverage with Meyer Jabara.”

In its appeal, Meyer Jabara also took issue with the lower court ruling that it wasn’t entitled to fiduciary duty from another set of broker defendants. Still, the judges said that general law states that brokers don’t have a responsibility to counsel customers about insurance.

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