0001
 1            IN THE UNITED STATES DISTRICT COURT
 2                FOR THE DISTRICT OF MARYLAND
 3   ----------------------------X
 4   WAYNE L. SIMMS, et al.      :
 5             Plaintiffs        :
 6        v.                     :  Civil Action
 7   MUTUAL BENEFIT INSURANCE CO.:  H 02-1261
 8             Defendant         :
 9   ----------------------------:
10               Deposition of MARK E. RUSSELL
11                   Owings Mills, Maryland
12                  Friday, January 3, 2003
13                         10:18 a.m.
14   Job No.:  1-8801
15   Pages 1 - 254
16   Reported by:  Beatriz D. Fefel, RPR
17   
18   
19   
20   
21   
22   
0002
 1              Deposition of MARK E. RUSSELL held at the
 2   law offices of:
 3   
 4             KRAMER & CONNOLLY
 5             500 Redland Court
 6             Suite 211
 7             Owings Mills, Maryland  21117
 8             (410) 581-0070
 9   
10   
11             Pursuant to agreement, before Beatriz D.
12   Fefel, Registered Professional Reporter and Notary
13   Public of the State of Maryland.
14   
15   
16   
17   
18   
19   
20   
21   
22   
0003
 1                   A P P E A R A N C E S
 2   
 3        ON BEHALF OF THE PLAINTIFFS:
 4             IRWIN R. KRAMER, ESQUIRE
 5             KRAMER & CONNOLLY
 6             500 Redland Court
 7             Suite 211
 8             Owings Mills, Maryland  21117
 9             (410) 581-0070
10   AND
11             LAWRENCE S. GREENBERG, ESQUIRE
12             GREENBERG LAW OFFICE
13             6 East Biddle Street
14             Baltimore, Maryland  21202
15             (410) 539-5250
16   
17        ON BEHALF OF THE DEFENDANT:
18             WILLIAM CARLOS PARLER, JR., ESQUIRE
19             PARLER & WOBBER, L.L.P.
20             406 East Joppa Road
21             Towson, Maryland  21286
22             (410) 832-1800
0004
 1                      C O N T E N T S
 2   EXAMINATION OF MARK E. RUSSELL                 PAGE:
 3        By Mr. Kramer                                9
 4                      E X H I B I T S
 5                   (Retained by counsel)
 6   RUSSELL DEPOSITION EXHIBITS:                   PAGE:
 7        1    Notice of Deposition, Russell           5
 8        2    Notice of Deposition, Snare             5
 9        3    Mutual Benefit Group Property
10             Loss Statement                         91
11        4    Mutual Inspection Bureau report       115
12        5    Underwriting file correspondence      138
13        6    Large Claim Memorandum, 11/7/01       170
14        7    Homeowner application                 206
15        8    Simms homeowners policy               232
16        9    Computerized log sheets               239
17       10    Handwritten activity sheets           241
18   11 & 12   Handwritten notes                     241
19       13    Maryland Insurance Fraud
20             Division referral form                245
21   
22   
0005
 1                   P R O C E E D I N G S
 2             (Deposition Exhibit Nos. 1 & 2 were
 3   premarked for identification and were retained by
 4   counsel.)
 5             (The following is a conference call that
 6   occurred with Judge Alexander Harvey, II, via
 7   telephone.)
 8             JUDGE HARVEY:  Hello.
 9             MR. KRAMER:  Hi, Your Honor.  Irwin Kramer.
10   How are you?
11             JUDGE HARVEY:  Yes.  And is Mr. Parler on
12   the line?
13             MR. KRAMER:  Yes.
14             MR. PARLER:  Yes, Your Honor.
15             MR. KRAMER:  All counsel are present as well
16   as our court reporter, Mark Russell, who is the Vice
17   President of Claims and corporate designee of Mutual
18   Benefit, as well as Michael Snare who is the Claims
19   Supervisor in Mr. Russell's department.
20             Here's the problem, Your Honor.  We noted
21   Mr. Russell's deposition for ten o'clock and
22   Mr. Snare's deposition for two p.m. today.  Mr.
0006
 1   Russell has been represented to this court and also
 2   has represented in two separate sets of
 3   Interrogatories which he has signed under oath as the,
 4   quote, corporate designee of Mutual Benefit Insurance
 5   Company.  So our approach was, of course, to depose
 6   Mr. Russell first, alone in the room, and then, so as
 7   not to have his testimony colored by what Mr. Russell
 8   has to say, we would proceed with that of Michael
 9   Snare.
10             What has happened is this morning at ten
11   o'clock Mr. Parler has insisted that Michael Snare
12   remain in the deposition room to hear Mr. Russell's
13   entire testimony, and contrary to their Answers to
14   Interrogatories Mr. Parler now says, oh, Michael Snare
15   is the corporate designee.  I said, well, I don't
16   think that's true from the discovery that you've
17   provided and the representations that you've provided,
18   but if we want to get through this why don't we just
19   take Mike Snare first and then we'll take Mr. Russell.
20   He says, no, you noted Mr. Snare's deposition for two
21   p.m. and that's the way it is.
22             JUDGE HARVEY:  Okay.  I understand your
0007
 1   position.  How about it, Mr. Parler?
 2             MR. PARLER:  Your Honor, neither one of
 3   these depositions were noted as 30(b)6 depositions,
 4   they've been noted as individual witnesses.  However,
 5   although we have not received a 30(b)6 notice, if this
 6   case is tried Mr. Snare and Mr. Russell are both
 7   corporate designees and we intend to have them both at
 8   trial with leave of the court.  That's why we took the
 9   position that Mike Snare is a corporate designee, a
10   corporate representative, has an absolute right as a
11   representative of the corporation to sit in on Mr.
12   Russell's deposition.
13             JUDGE HARVEY:  My understanding from prior
14   proceedings is that Mark Russell is the corporate
15   designee.
16             MR. PARLER:  Certainly one of them, Your
17   Honor.  But this deposition this morning, I have the
18   Notices which have been marked, Mark Russell has been,
19   his deposition as an individual fact witness --
20             JUDGE HARVEY:  We're not going to fool
21   around with that.  We'll assume it's 30(b)6.  Why do
22   we have to have these details, little arguments by
0008
 1   you?  They make no sense whatsoever.
 2             MR. PARLER:  That's fine.
 3             JUDGE HARVEY:  Here's the ruling.  We're not
 4   going to spend more time on it.  Go ahead with Mark
 5   Russell's deposition first as the corporate designee.
 6   Mr. Snare may not sit in on this deposition.  Counsel
 7   have the right to depose them separately, one this
 8   morning, one at two o'clock this afternoon.  And let's
 9   don't get into these picayune type of disagreements or
10   else we're going to have some sanctions.  Let's be
11   realistic.
12             Any problem about that now?
13             MR. PARLER:  No, Your Honor.
14             JUDGE HARVEY:  Go ahead on that basis.  And
15   I hope you're not going to be calling me all day on
16   every little thing that comes up, because we've had
17   too much of that in this case.  And we'll go ahead
18   with the depositions as stated and see what happens.
19   Okay?
20             MR. PARLER:  Very well, Your Honor.
21             MR. KRAMER:  Thank you, Your Honor.
22             MR. PARLER:  Mike --
0009
 1             MR. GREENBERG:  In all seriousness --
 2             MR. KRAMER:  Off the record now.
 3             (Discussion off the record.)
 4                        -----------
 5                      MARK E. RUSSELL
 6        having been duly sworn, testified as follows:
 7         EXAMINATION BY COUNSEL FOR THE PLAINTIFFS
 8   BY MR. KRAMER:
 9        Q    As Judge Harvey indicated, this is the
10   deposition of the Vice President and corporate
11   designee of Mutual Benefit Insurance Company, Mark
12   Russell.
13             Mr. Russell, my name is Irwin Kramer.
14             MR. PARLER:  Let me put something on the
15   record.  I've marked as Deposition Exhibits 1 and 2,
16   and your representations to Judge Harvey aside, this
17   is not a 30(b)6 deposition.
18             MR. KRAMER:  Well, I think that I will trust
19   the representations of Judge Harvey before you,
20   Mr. Parler, with all due respect.
21        Q    Mr. Russell, my name is Irwin Kramer and
22   it's my job this morning to ask you several questions
0010
 1   relating to the lawsuit at issue.  If at any time you
 2   do not understand a question that I ask you, will you
 3   please let me know so that before answering each
 4   question we can be sure you fully understand it?
 5        A    Yes.
 6        Q    It's important in answering any question
 7   that you not speculate or guess as to the answer.  If
 8   you don't know an answer or don't remember an answer
 9   to the question, will you tell me that as well?
10        A    Yes.
11        Q    Because we're typing everything you have to
12   say, will you make certain that all of your responses
13   be verbal as opposed to a nonverbal response?
14        A    Yes.
15        Q    Where do you live, sir?
16        A    10804 Jill, J-I-L-L, Drive, Huntingdon,
17   H-U-N-T-I-N-G-D-O-N, Pennsylvania, 16652.
18        Q    Thank you.  Your date of birth?
19        A    1/2/62.
20        Q    Are you married?
21        A    Yes.
22        Q    To whom?
0011
 1        A    Tammy Houts, H-O-U-T-S, Russell.
 2        Q    Any children?
 3        A    Yes.
 4        Q    How many?
 5        A    Two.
 6        Q    Can you summarize your educational
 7   background, please?
 8        A    Would you give me a time frame, please?
 9        Q    Where did you attend high school?
10        A    I graduated high school from Cedar Crest
11   High School.
12        Q    Where is that located?
13        A    Lebanon, L-E-B-A-N-O-N, Pennsylvania.
14        Q    In what year?
15        A    1978 to '80.
16        Q    Thereafter did you continue your formal
17   education?
18        A    I did.
19        Q    Where?
20        A    I attended West Virginia University.
21        Q    Did you graduate?
22        A    Yes.
0012
 1        Q    In what year?
 2        A    1984.
 3        Q    With what type of degree?
 4        A    A Bachelor in Science, Business
 5   Administration.
 6        Q    Did you continue formal education
 7   thereafter?
 8        A    Yes.  I attended part-time graduate school
 9   at Lebanon Valley College pursuing an MBA.  However, I
10   was three classes, I believe three classes short.
11        Q    And with only three classes to go for an
12   MBA, why did you leave?
13        A    I moved to Huntingdon, Pennsylvania.
14        Q    And when did you discontinue studies at
15   Lebanon Valley College?
16        A    It probably would have been approximately in
17   1996.
18        Q    What professional designations or licenses
19   do you hold?
20        A    I hold a CPCU, an AIC, and an ARe
21   designations.
22        Q    Tell me what CPCU stands for.
0013
 1        A    Chartered property casualty underwriter.
 2        Q    And what type of training goes into
 3   attaining the designation CPCU?
 4        A    You must complete, I believe it's a ten-part
 5   series of tests and exams to get a CPCU designation.
 6        Q    How many years did it take you to attain
 7   that designation?
 8        A    Four and a half to five.
 9        Q    When did you attain that designation?
10        A    Oh, boy.  Don't hold me to it.  1992, maybe.
11   '93.
12        Q    And why did you pursue that designation?
13        A    I pursued it to help me and educate me as
14   well as it would make me a better insurance person.
15        Q    Better insurance person in what way?
16        A    It gives you -- it's very comprehensive.  It
17   gives you all aspects of insurance, not just
18   particularly claims, which is what I'm in.
19        Q    Including underwriting?
20        A    Underwriting, yes.
21        Q    What else?
22        A    Accounting, economics, management.
0014
 1        Q    And you have an associate in claims --
 2        A    Yes.
 3        Q    -- designation?  What is that?
 4        A    Again, it's a series of exams that you take
 5   that are specifically oriented toward claims.
 6        Q    And when did you attain that designation?
 7        A    Approximately the same time I did my CPCU.
 8   So I would probably have completed that in '92, '93,
 9   in that same time frame.
10        Q    How does the AIC differ from the CPCU?
11        A    It's not as many exams.  There's, I think,
12   four series of exams versus ten.
13        Q    Do those exams test the same subject matter
14   as the CPCU?
15        A    No, they're more specific.
16        Q    In what way?
17        A    They're more specific toward claims.
18        Q    And what is an ARe?
19        A    It's an associate in reinsurance.
20        Q    Now, when did you attain that designation?
21        A    A couple of years, I think, after my CPCU,
22   '94, '95 somewhere.
0015
 1        Q    Okay.  What is involved in attaining that
 2   designation?
 3        A    I think it's passing two exams, and I think
 4   there's a requirement you must have already passed -
 5   and please don't hold me to this - I believe it's the
 6   accounting part of the CPCU, you must have that part
 7   as well as the other two exams.  I believe it's that
 8   series.
 9        Q    Okay.  Do these designations entitle you in
10   your current position to do anything different than
11   you'd be able to do without those designations?
12        A    Not really.
13        Q    How long have you worked in the insurance
14   field in any capacity?
15        A    Since 1984.
16        Q    Can you do me a favor and summarize your
17   work history within the field since 1984?
18        A    I can, but please don't hold me to the dates
19   or time frames or anything.
20        Q    I might interject with some questions --
21        A    That's perfectly fine.
22        Q    -- just for efficiency.
0016
 1        A    I began my career in insurance in the Fall
 2   of '84 with Crawford and Company in Reading,
 3   Pennsylvania.  Then took a promotion the following
 4   year, again with Crawford and Company, became an
 5   adjustor-in-charge in Lancaster, Pennsylvania.  In
 6   19 -- I believe 1986 I took a position as a claims
 7   adjustor with Millers Mutual Insurance Company, was
 8   subsequently promoted to claim manager, and ultimately
 9   vice president.  I left Millers Mutual Insurance
10   Company in 1995, I believe, '94 or '95, and was
11   assistant vice president with Aegis, that's A-E-G-I-S,
12   Insurance Company.  And left Aegis to take the
13   position I currently hold with Mutual Benefit in, I
14   think it was, October 1996.
15        Q    Let me start with your position of adjustor-
16   in-charge in the Lancaster office of Crawford and
17   Company.  What were your responsibilities there?
18        A    I would investigate various types of claims
19   for our clients.  I was responsible for the office,
20   therefore, my additional responsibilities, they're
21   different than what I had in Reading.  I was required
22   to market clients, visit clients, visit agents, trying
0017
 1   to secure business in order to do their investigative
 2   work.
 3        Q    What was your title in Reading,
 4   Pennsylvania?
 5        A    It was called an adjustor-in-charge.
 6        Q    In Reading as opposed to Lancaster?
 7        A    Oh, no.  I was just a claims adjustor in
 8   Reading.
 9        Q    What were your responsibilities as a claims
10   adjustor in Reading, Pennsylvania?
11        A    To investigate various types of claims for
12   clients.
13        Q    Why do they call them claims adjustors?
14        A    I don't know.
15        Q    And at Millers Mutual as claims manager and
16   ultimately vice president, what were your
17   responsibilities?
18        A    The roles were really not different, it was
19   just basically a title change.  But I was responsible
20   for handling the claims in the department.  I had some
21   supervisory responsibilities to clerical support, and
22   I think I had one adjustor also, but the rest was
0018
 1   clerical support.  So I guess I gathered the
 2   administrative duties when I became manager, but when
 3   I became vice president my job responsibilities really
 4   did not change.
 5        Q    At Millers Mutual, did you have authority in
 6   determining whether to honor, adjust, or deny claims?
 7        A    Yes.
 8        Q    And in doing so, was it your responsibility
 9   to ensure that the company acted in accordance with
10   its policies?
11        A    Yes.
12        Q    You went to Aegis Insurance, I believe you
13   said, in 1994?
14        A    That sounds about right.
15        Q    What was your title there?
16        A    Assistant Vice President.
17        Q    And why did you leave Millers Mutual as Vice
18   President to become an Assistant Vice President of
19   Aegis Insurance?
20        A    I felt it was a better career opportunity.
21        Q    In what way?
22        A    Felt there were more people to be
0019
 1   responsible for, as well as I felt the company was,
 2   had a better direction than Millers Mutual was.
 3        Q    Okay.  What were your responsibilities as
 4   Assistant Vice President of Aegis Insurance?
 5        A    Pretty much to oversee the claims operations
 6   of the company.
 7        Q    Like Millers Mutual, were you responsible
 8   for making decisions regarding whether to honor,
 9   adjust, or deny claims?
10        A    Yes.
11        Q    And you had to act in accordance with the
12   company's policy to ensure compliance with its terms?
13        A    Yes.
14        Q    Then in October 1996 you were hired by
15   Mutual Benefit Insurance Company?
16        A    Actually, Irwin, I want to make sure you
17   understand.  Mutual Benefit Insurance Company, when I
18   was actually employed in 1996, my employer is Swigart
19   Associates.  I believe you are somewhat familiar with
20   our group of companies, so I guess I ought to clarify
21   that.
22             We over the years, since Mutual Benefit
0020
 1   Insurance Company purchased Swigart Associates and
 2   they owned a hundred percent of the stock, that we
 3   kind of used Mutual Benefit Group as our title, but
 4   actually I am technically an employee of Swigart
 5   Associates which is owned by Mutual Benefit Insurance
 6   Company.
 7        Q    Thank you for pointing that out, and maybe
 8   you can help in giving me the basic corporate
 9   landscape tour of what the relationship is between
10   Swigart Associates, Mutual Benefit Group, Mutual
11   Benefit Insurance Company, and any other companies
12   that I failed to mention in that list.
13        A    I will give you my best understanding of the
14   group of umbrella companies.
15             Mutual Benefit Group is composed of Mutual
16   Benefit Insurance Company.
17        Q    Okay.
18        A    It is composed of Select Risk Insurance
19   Company.  It is composed of Carriage House Insurance.
20        Q    Okay.
21        A    I believe also they have an entity, The
22   Credit Club, and Swigart Associates.
0021
 1        Q    Okay.  So it's your understanding that
 2   Mutual Benefit Group is sort of a holding company?
 3             MR. PARLER:  Objection to the form of the
 4   question.  You may answer, sir.
 5        A    I'm not sure if there's a holding company.
 6   There may be -- somebody holds the stock in that, but
 7   Mutual Benefit Group, I believe, is really a
 8   fictitious name, and that Mutual Benefit Insurance
 9   Company has a holding company which owns and holds the
10   stock, a hundred percent stock of Select Risk -- or
11   not a hundred percent, but the majority stock of
12   Select Risk Insurance Company and Swigart Associates,
13   and Carriage House somewhere fits in there.  I'm not
14   quite sure of the. . .
15        Q    Have you ever worked for Carriage House?
16        A    No.
17        Q    Have you ever worked for Credit Club?
18        A    No.
19        Q    Have you ever worked for Select Risk?
20        A    Not technically, no.  We handle Select Risk
21   claims, Swigart Associates.
22        Q    Okay.  What is Swigart Associates, then?
0022
 1        A    Swigart Associates was a family-run
 2   operation that acted basically as a managing general
 3   agency.  To give you an example, they underwrote and
 4   marketed Harleysville Insurance Company's business in
 5   Pennsylvania and Maryland.  There was a perpetual
 6   management agreement set up wherein they earned money
 7   by doing that type of work.  They also, I guess,
 8   underwrote some business for Mutual Benefit and at
 9   some point Select Risk Mutual Insurance Company, so
10   they did a little bit of that also.  But Mutual
11   Benefit Insurance Company purchased Swigart Associates
12   in approximately 1997, I believe, or '98.
13        Q    So when you were hired in October 1996 to
14   work for Swigart, would I be correct, then, in
15   understanding that you were involved in the adjustment
16   and management of claims on behalf of Mutual Benefit
17   Insurance Company as well?
18        A    Mutual Benefit Insurance Company, Select
19   Risk Mutual Insurance Company at that time, which
20   ultimately became Select Risk Insurance, and we also
21   had a couple third-party accounts.  The Shawnee
22   account was an account we handled some claims for.
0023
 1        Q    And what was your title when you were hired
 2   by Swigart?
 3        A    Vice President of Claims.
 4        Q    And that's still your title today, correct?
 5        A    Correct.
 6        Q    Only today your employer is actually Mutual
 7   Benefit Insurance Company?
 8        A    No, technically I still get a paycheck that
 9   says Swigart Associates.
10        Q    Okay.  Does the distinction between Swigart
11   and Mutual Benefit Insurance Company in any respect
12   affect your duties?
13             MR. PARLER:  Objection.
14        Q    To your knowledge?
15             MR. PARLER:  Objection.  You may answer,
16   sir.
17        A    No.
18        Q    Who hired you?
19        A    Swigart Associates.
20        Q    Was there a particular official within
21   Swigart Associates that extended the job?
22        A    I can't remember if it was the Vice
0024
 1   President of Human Resources or the Chief Operating
 2   Officer.
 3        Q    And for that reason you moved to Huntingdon?
 4        A    I did.
 5        Q    Why did you accept the job?
 6        A    It was a career opportunity.
 7        Q    How did the opportunity with Swigart
 8   Associates differ from other opportunities that you
 9   had in the past?
10        A    This was a, in my opinion, a step to work
11   for a larger company, a conservative company that I
12   believe my values fit better with.  It was moving from
13   a department of six or seven to maybe twenty, twenty-
14   five people at that point.  So I felt it was a good
15   opportunity.
16        Q    Did your responsibilities as Vice President
17   of Claims with Swigart Associates differ in any way
18   from responsibilities in the prior positions that
19   you've testified to?
20        A    Yes.
21        Q    In what way?
22        A    My responsibilities now are much broader,
0025
 1   much more administrative, much more strategic, less
 2   hands-on involvement of day-to-day activities,
 3   involved in other aspects beyond claims, such as
 4   different committees that I sit on at the company.
 5        Q    What are your responsibilities as far as the
 6   Claims Department and management of claims are
 7   concerned?
 8        A    I'm responsible mainly to set the strategic
 9   initiatives for the department and to implement and
10   monitor them.  I'm responsible for ensuring that we're
11   providing service and trying to provide good claim
12   handling to the claims at a broad level.
13        Q    Responsible for ensuring that your claims
14   staff act in accordance with company policy and the
15   terms of its insurance policies?
16        A    They should always try to adhere to those,
17   yes.
18        Q    And do you have ultimate authority in
19   deciding whether to pay, adjust, or deny claims?
20        A    I have a level of authority in which then I
21   must seek authority above a certain amount to pay a
22   claim, and also -- depending on the case, but
0026
 1   ultimately I would have the decision to either pay or
 2   deny a claim.
 3        Q    And in deciding whether to pay or deny a
 4   claim, are you responsible for acting in conformance
 5   with the policy?
 6        A    What policy?
 7        Q    The insurance policy at issue.
 8        A    Yes.
 9        Q    Do your responsibilities require that you
10   are fully familiar with your company's insurance
11   policies, company policies and procedures?
12        A    Yes.
13        Q    And do you oversee the adjustment of claims?
14        A    Not on a day-to-day basis, no.
15        Q    In what way do you oversee the adjustment of
16   claims?
17        A    I may have involvement in particular cases,
18   depending on the complexity and the exposure to the
19   company.
20        Q    Would I then understand from your testimony
21   that your involvement increases when the amounts of
22   the claim increase?
0027
 1        A    Not always, that's not always the case.  It
 2   could be a factor.
 3        Q    What are the factors that dictate the extent
 4   of your involvement in a particular claim?
 5        A    I think it depends on the complexity of the
 6   case, the type of case, all factors.  It may also
 7   depend on my availability and time, of what's going on
 8   in that time or particular year.
 9        Q    You mentioned earlier that you have a
10   certain amount of authority to resolve claims.  Is
11   that limited by a dollar amount?
12        A    Yes.
13        Q    What is that dollar amount?
14        A    One hundred thousand dollars.
15        Q    In claims presenting values in excess of one
16   hundred thousand dollars, do you have to seek
17   authority from someone else within the company?
18        A    Yes.
19        Q    Who is that person?
20        A    John Coursen.
21        Q    C-O-U-R-S-E-N?
22        A    Correct.
0028
 1        Q    And what is Mr. Coursen's title?
 2        A    I believe he's Executive Vice President and
 3   Chief Operating Officer.
 4        Q    Of what company?
 5        A    He may actually be that in two companies.  I
 6   believe it may be Mutual Benefit Insurance Company and
 7   Swigart Associates, but I'm not positive.
 8        Q    Okay.  But that's the person that you have
 9   to go to for decisions on claims exceeding one hundred
10   thousand dollars?
11        A    Correct.
12        Q    Help me out, then, with the hierarchy of
13   your company.  Is Mr. Coursen your immediate superior?
14        A    Yes.
15        Q    Do you have other individuals that you're
16   required to answer to within the corporate ladder?
17        A    I think if the Chief Executive Officer needs
18   some information, I would answer to him also.
19        Q    Who is that?
20        A    Steve Sliver, S-L-I-V-E-R.
21        Q    Are there others that rank higher than you
22   at the company beyond Mr. Coursen and Mr. Sliver?
0029
 1        A    No.
 2        Q    I'm sorry?
 3        A    No.
 4        Q    Are there others within the company that
 5   hold a parallel position to yours?
 6        A    Yes.
 7        Q    And who are they and what are their
 8   responsibilities briefly?
 9        A    Let's see.  Joe Sloan is Executive Vice
10   President/CFO.  Steve Gildea, G-I-L-D-E-A, is Chief
11   Information Officer.  Bob Korsan, K-O-R-S-A-N, is Vice
12   President of Commercial Lines.  Donna Patterson is
13   Vice President of Personal Lines.  Jim Bookhammer is
14   Vice President of Research and Development.  Bob
15   Phillips is Vice President of Human Resources.  I
16   believe I've gotten everybody.
17        Q    You testified previously that you supervise
18   a claims staff of approximately twenty to twenty-five
19   people?
20        A    That's when I began employment.
21        Q    How large is it now?
22        A    Thirty-eight, approximately.
0030
 1        Q    Okay.  And can you explain for me the
 2   hierarchy of your Claims Department?
 3        A    Bill Wilson is the director of Workers'
 4   Compensation.  Frank Benedek is the claim manager.
 5        Q    Spelled B-E-N-E-D-E-K?
 6        A    Correct.  Patsy Shoemaker - just like it
 7   sounds - is the Subrogation Salvage Manager.  Below
 8   that there is Mike Snare, Claims Supervisor; Jim
 9   Jacobs, Claims Supervisor; Pat Gilsbach is the Claims
10   Support Supervisor.  And I believe that includes all
11   the management.
12        Q    Below the supervisor level, what are the
13   different types of personnel that you have within your
14   department?
15        A    We have different levels of claims
16   adjustors, senior adjustors and claims adjustors.  In
17   the Workers' Comp Unit we would have senior comp
18   adjustors, senior Workers' Comp adjustors, and also
19   some, I believe they're called Workers' Comp
20   specialists, they handle simple medical-only type
21   claims.  We have what we call a Fast Track Unit
22   composed of adjustors who would handle simple first-
0031
 1   party type cases.
 2        Q    How many claims adjustors and senior claims
 3   adjustors in total do you employ?
 4        A    I don't know offhand.  I'd have to think
 5   about that for a little bit.  Approximately twenty to
 6   twenty-two maybe.
 7        Q    Does the job description of a claims
 8   adjustor differ from that of a senior claims adjustor?
 9        A    I believe it does.
10        Q    What is the job description of a claims
11   adjustor?
12        A    I don't remember the particulars.
13        Q    Well, would you describe the
14   responsibilities of a claims adjustor?
15        A    A claims adjustor who works out of the home
16   office will handle a certain complexity of claim by
17   using the mail and telephone.  We have outside claims
18   adjustors who will do the same; however, they will
19   often need to do outside field investigation such as
20   actually meet with people, take statements, photograph
21   a car, anything that would require some outside work.
22   And, of course, the Workers' Comp adjustors would
0032
 1   handle Workers' Comp claims, senior Workers' Comp
 2   adjustors would handle more complex Workers' Comp
 3   claims.
 4        Q    And senior claims adjustors in the
 5   non-Workers' Comp setting, would I understand that
 6   those in the home office handle claims of greater
 7   complexity than the lower ranking claims adjustors?
 8        A    I'm trying to think if we have actually any
 9   senior claims adjustors other than Workers' Comp and
10   home office, and I do -- I think we may only have one
11   part-time person who may hold that title, and I'm not
12   even a hundred percent sure about that.
13        Q    When you say the home office adjustors
14   handle claims of a certain complexity, what is their
15   responsibility in handling claims?  What do they do?
16        A    Well, they would confirm coverage on the
17   claim, make contact with the people that they need to
18   on the claim, gather the facts of the claim in order
19   to make a decision either to -- if there's coverage,
20   they would decide the amount to pay the claim, if
21   there's no coverage then they would advise the insured
22   and/or the claimant of why they wouldn't be paying it.
0033
 1        Q    So they have to determine, based on your
 2   testimony, A, if there is coverage; and, B, if there
 3   is coverage in place, the proper amount to pay?
 4        A    Or to deny the claim, yes, that would be
 5   correct.
 6        Q    So one of their responsibilities is to
 7   determine if coverage is due and owing, what the
 8   proper amount to pay would be?
 9        A    Correct.
10        Q    And I take it there are times when they
11   don't pay the full amount that is claimed but pay some
12   lesser amount that is determined by the company to be
13   the appropriate, accurate figure?
14        A    That's possible.
15        Q    That would be part of their responsibility?
16        A    Yes.
17        Q    Tell me what a claims supervisor is
18   responsible for.
19        A    Claims supervisors are to supervise the
20   adjustors, and they may have -- the adjustor may have
21   to get authority from a supervisor to assist them with
22   technical questions or file handling questions.
0034
 1   They're also required to do closed file audits of the
 2   adjustors.  They have certain files that they are to
 3   try to keep on diary to monitor the progress of
 4   particular claims.
 5        Q    Do supervisors occasionally adjust claims
 6   themselves?
 7        A    It can, depending on the situation and also
 8   the complexity or the particular circumstances of the
 9   claim.  Yes, that is possible.
10        Q    Under what types of circumstances would a
11   claims supervisor actually participate in the
12   adjustment of a claim?
13        A    A good example is when an independent is
14   used on a larger loss where the independent can report
15   directly to a supervisor versus the independent
16   reporting to a field adjustor.
17        Q    Would that be the kind of situation in which
18   Michael Snare was involved in this particular claim
19   where Pat Bonanni was used?
20        A    I believe it is one of the situations, yes.
21        Q    Under what circumstances would your company
22   utilize the services of an independent outside
0035
 1   adjustor like a Pat Bonanni and have a supervisor like
 2   Michael Snare work with that person?
 3        A    There are different situations.  Many times
 4   if we get a volume of claims that are in a particular
 5   area that we're unable to handle with our own staff we
 6   may use independents to assist us with that.  If
 7   somebody's on vacation, we may use that.  In the
 8   situation of Pat Bonanni, we may use Pat on a large
 9   property loss due to his -- because it does require, I
10   think, a different level of expertise that Pat
11   possesses.
12        Q    What type of different level of expertise
13   would a large property loss of that kind require?
14        A    They have a lot of experience in handling
15   large, complex property losses.
16        Q    Of which the Simms claim was one?
17        A    Yes.
18        Q    Is that why Pat Bonanni was used by Mutual
19   Benefit?
20        A    I believe it was.  Another reason that I
21   advocate the use of independents is that in a large
22   property loss, that the amount of time that is spent
0036
 1   early on in the case can be extremely time-consuming
 2   and what it does is it backs up the flow of claims,
 3   the normal flow of claims to that particular area or
 4   field adjustor.  So that's another reason why I
 5   advocate the use of qualified independent adjustors on
 6   large, complex losses.
 7        Q    How many members of your staff are
 8   experienced in the handling of homeowners claims?
 9        A    To what degree?
10        Q    Well, I guess I'll let you answer that
11   question.
12        A    I think all of them have been exposed to
13   handle smaller, less complex property losses.  Medium
14   size losses of, whether it may be fifty to seventy-
15   five thousand dollars, we may have, maybe three, three
16   adjustors who I believe possess pretty good skills in
17   handling those types of losses.  When they get into
18   the hundreds of thousands of dollars I believe that I
19   would probably have maybe one adjustor who has that
20   kind of expertise.
21        Q    How many members of your claims staff, be
22   they adjustors, supervisors, or any other title, have
0037
 1   what you consider to be sufficient expertise in large,
 2   as you say, complex property losses similar to those
 3   of the Simmses?
 4        A    Well, if I answer that question, if it
 5   entails doing the actual very technical aspect of
 6   writing estimates, calculating business interruption
 7   claims, doing inventory reconciliation, I think we
 8   have maybe one person that might have that complexity,
 9   or capabilities.
10        Q    Who is that?
11        A    That would probably be Gene Newman.
12        Q    How do you spell her name?
13        A    Gene is a man, G-E-N-E, Newman, N-E-W-M-A-N.
14        Q    Okay.  And you mentioned three adjustors
15   have expertise in very large property losses.  Would
16   that include Mr. Newman?
17        A    Please define what you mean by very large.
18   I think I had testified that it was, you know, thirty
19   to fifty thousand, maybe to a hundred, I had maybe
20   three adjustors.
21        Q    And who are they?
22        A    I would probably put Art Pelka in that
0038
 1   category, and Phil Hynes, and, of course, Gene Newman.
 2        Q    Okay.  Was Mr. Newman involved in any
 3   respect in the handling of the Simms claims?
 4        A    I don't believe so.
 5        Q    Why not?
 6        A    Because we decided to use an independent.
 7        Q    Would you say that Mr. Newman would have
 8   greater expertise than Mr. Snare in the handling of
 9   property losses into the hundreds of thousands of
10   dollars on homeowner claims?
11        A    No.
12        Q    How would you compare their expertise?
13        A    Again, I think you need to differentiate
14   exactly what Gene Newman would do.  Gene would go out
15   and write an estimate and possibly do that aspect of
16   the claim, which I would believe he does probably have
17   better expertise than Mike Snare, but I don't know if
18   Gene really has better coverage knowledge and
19   decision-making capabilities than Gene (sic) does.
20        Q    Are your expectations of independent outside
21   adjustors any different from your expectations and the
22   responsibilities of those who work directly for you
0039
 1   and your company?
 2        A    It would depend on the type of claim.
 3        Q    Do your expectations of outside independent
 4   claims adjustors like a Pat Bonanni differ in any
 5   respect from those who are actually under your employ
 6   in connection with claims similar to those of the
 7   Simmses?
 8        A    Yes.  The Pat Bonannis of the world have
 9   very good technical expertise of handling in their
10   experience of handling probably hundreds of these
11   types of losses over their careers, where I would
12   think that most of our employees don't, or have not
13   ever had to handle on a, from a front -- from the
14   beginning to the end handling of the claim.
15        Q    Do you require your independent outside
16   adjustors to work with your policyholders to assist
17   them in compiling their claims?
18        A    Yes.
19        Q    Do you require the same of people who work
20   under your direct employ?
21        A    Yes.
22        Q    What do you require of independent outside
0040
 1   adjustors in terms of the manner in which they are to
 2   work in cooperation with your policyholders in
 3   assisting them in compiling their claims?
 4        A    Would you repeat that, please?
 5        Q    Yes.  What specifically do you require of
 6   independent outside adjustors like Pat Bonanni in
 7   working with your policyholders?
 8        A    Well, with an independent I would -- I
 9   expect them to know what they are to do to process the
10   claim and what directions they are to give the
11   policyholder.  I would expect the same of our outside
12   adjustors -- or our adjustors also, to explain what is
13   needed from them to begin the claim process.
14        Q    Anything else in terms of your expectations?
15        A    Well, I think the independent adjustors,
16   especially in an example of Pat Bonanni, I have higher
17   expectations of their technical expertise, of
18   estimates and reviewing estimates and the processing
19   of those situations, where I don't believe our staff
20   is very experienced in the very technical hands-on
21   day-to-day responsibilities of handling a type of loss
22   such as the Simmses', for example.
0041
 1        Q    What do you expect your independent outside
 2   adjustors to do in the compilation of a policyholder's
 3   claim?
 4        A    You know, it varies on a case-by-case
 5   situation.  That's a little difficult to answer.  At
 6   times we expect them to write their own estimates.  At
 7   times we ask them to, to bring in somebody with that
 8   expertise to assist them in putting whatever numbers
 9   need to be put together to try to process the claim.
10   So it is on a case-by-case situation.
11        Q    Would I understand correctly that there are
12   times when you have the policyholders themselves come
13   up with the information?
14        A    They are given direction on -- and many
15   times the policyholders are actually the only people
16   who can give us the information, so the information
17   must come from them in order to process the claim.
18        Q    And there are other times when Mutual
19   Benefit will actually retain someone who can actually
20   perform that function?
21        A    At times.  I would differential like a
22   commercial loss versus a personal lines loss.
0042
 1        Q    Well, under what circumstances would Mutual
 2   Benefit retain someone to actually work to compile the
 3   claim at issue?
 4        A    If there's salvage involved in a commercial
 5   loss, we may bring in a professional salver to do the
 6   inventory.  That would be an example.
 7        Q    Are there any other examples?
 8        A    Not that I can think of right now.
 9        Q    Are there any instances in which Mutual
10   Benefit will retain someone to help compile the
11   homeowner's actual claim for contents loss and other
12   property loss?
13        A    I can't remember specific times that I have
14   ever done that.
15        Q    Is that a function that you expect of your
16   independent outside adjustors?
17        A    I expect the outside adjustor to provide
18   direction to our policyholder to compile.  I don't
19   expect the independent to actually physically compile
20   the inventory list.  No, I would not expect them to do
21   that.
22        Q    Once the inventory list is compiled by the
0043
 1   homeowner, what do you expect the independent outside
 2   adjustor to do with that information?
 3        A    To review it for its accuracy and to report
 4   to us what his thoughts and recommendations might be
 5   after reviewing the inventory.
 6             I do want to go back and answer one of the
 7   questions.  I did think of an example where we may
 8   bring in an outside person.  In the event you had, for
 9   an example, a smoke loss, sometimes we will bring in a
10   cleaning firm and they will actually do an inventory
11   of what can be cleaned and what can't be cleaned, and
12   at times we'll do that when there's a partial loss in
13   which the inventory can be cleaned or repaired.  That
14   would be an example.
15        Q    In reviewing a claim or inventory for
16   accuracy, what specifically do you expect your outside
17   adjustors to do?
18        A    I actually leave it up to the independent
19   adjustors.  I mean, the independent adjustors we use
20   are very experienced.  You'll have to ask them that.
21   But I assume they'll look at the purchase date, the
22   detailed description, the amount that they placed on
0044
 1   the inventory list, and look at those to -- since
 2   they've looked at so many and they have an idea, we
 3   rely on their expertise to review those.
 4        Q    And where inaccuracies are found, what
 5   services do outside independent adjustors like Pat
 6   Bonanni provide to you?
 7        A    At times they'll provide us with their
 8   thoughts and recommendations.  They may follow up for
 9   additional information.  They may report to us and ask
10   us what we want to do.
11        Q    Does Mutual Benefit's procedure in handling
12   claims vary with the amount of the claims themselves?
13        A    I believe we would tend to try as
14   consistently as we can to ask for the same
15   information, trying to be consistent.  If, for
16   example, we have one item stolen, a receipt may be
17   sufficient for our purposes to pay that claim versus
18   filling out an inventory sheet of where there may be a
19   large list of items where we would need to look at
20   them more carefully.  So there are times where you
21   would not handle a very simple, straightforward claim
22   in the same way you would handle a large loss.
0045
 1        Q    One with greater complexity?
 2        A    Complexity, and the amount of items and
 3   material that must be sorted through, they would be
 4   handled slightly differently.
 5        Q    And that would be the type of claim the
 6   Simmses have presented to Mutual Benefit?
 7        A    I believe that would be a difference, than,
 8   for example, somebody's bicycle was stolen where we
 9   just may need a receipt or something of that nature,
10   where we could process the claim quickly.
11        Q    Can you take me through the basic process of
12   Mutual Benefit's claims handling in a larger, more
13   complex loss such as that of the Simmses?
14        A    Well, normally we'd use a very good
15   independent adjustor, somebody who we have past
16   experience with that has the technical expertise to
17   handle the claim properly.  Depending -- most always
18   we will bring in, in a fire loss, an expert, or if
19   there was some other damage, if we needed an expert,
20   we will bring in an expert.  Early on we would bring
21   in counsel to look for subrogation possibilities.
22             Again, you've got to look at each case and
0046
 1   try to make decisions as it unfolds in particular
 2   situations and so forth.  So they're never always
 3   handled -- you can't put them in a cookie cutter.
 4   They all have their own different flavor to them.  You
 5   have to make day-to-day decisions based upon the
 6   merits of the case.
 7        Q    What does Mutual Benefit do upon being
 8   initially notified of a large fire loss such as that
 9   of the Simmses?
10        A    Well, we have a Direct Reporting Unit to
11   which either the agents or a policyholder can call it
12   in; they will try to assign the loss.  And you have to
13   understand, too, that many times, that the first
14   notices, and I have personal experiences, they're not
15   accurate.  I can have a situation where it's been
16   reported as a very bad loss and we get out and it's a
17   very minor loss.  I've also been told that it's not a
18   big loss and find out it's a major loss.  So my
19   practice is until we get somebody to eyeball it,
20   actually physically see it and to give us a report,
21   that may or may not dictate what we do in a case, in
22   particular to the Simms loss.
0047
 1             In a large loss, too, the Direct Reporting
 2   should be notifying the supervisor of that particular
 3   adjustor who it may have been assigned to.  They would
 4   also email myself and Frank Benedek so we're aware of
 5   the situation.
 6        Q    Frank Benedek, you testified, is the claims
 7   manager?
 8        A    Correct.
 9        Q    What is Mr. Benedek's role as claims
10   manager?
11        A    Frank mainly oversees the, a lot of the
12   day-to-day operations, with the exception of Workers'
13   Compensation.  He works closely with Michael and Jim
14   to provide them -- to develop their supervisory skills
15   from personnel administrative matters, to give
16   technical advice and direction on particular files.
17   Mike and Jim may have to come to him to get authority
18   to settle cases, to discuss what may be on the case.
19   So Frank's involved in the day to day.  Frank's also
20   been involved in a lot of our, the handling of our
21   litigation, and is still involved in somewhat complex
22   cases.
0048
 1        Q    Are there any other individuals specifically
 2   assigned to the handling of litigation on behalf of
 3   Mutual Benefit?
 4        A    Yes.  We have a litigation specialist, a
 5   gentleman, Maurice Delenne is overseeing most of the
 6   litigation.
 7        Q    How do you spell that?
 8        A    Maurice, M-A-U-R-I-C-E, Delenne,
 9   D-E-L-E-N-N-E, I believe.
10        Q    He works underneath of Frank Benedek?
11        A    Yes.
12        Q    Did you ever have, in addition to your title
13   as Vice President, the title of claims manager?
14        A    Was your question did I?
15        Q    Yes.
16        A    No.
17        Q    After being notified of a large, complex
18   fire loss such as that of the Simmses, what does
19   Mutual Benefit do in terms of its communication with
20   policyholders?
21        A    Most, if not all, the communication is done
22   with the independent adjustor, that's what we hire him
0049
 1   to do, especially if it's a full assignment.
 2        Q    What is a full assignment?
 3        A    It's, contrary to a partial assignment where
 4   we may ask him to do part of the investigation or part
 5   of handling the claim, we would ask him to pretty much
 6   go out and investigate and put the claim together and
 7   report back to us.
 8        Q    Is that also called a full adjustment?
 9        A    It may be, yes.
10        Q    And in terms of putting the claim together
11   in a full assignment, as you've testified, what is
12   expected of your independent outside adjustor?
13        A    Well, they should handle -- you know, if
14   there's a contents and building loss, they'll handle
15   both.  If there's a business interruption, they will
16   handle that.  If there's decisions to be made, they
17   will report back to us to get authority to make
18   certain decisions on the loss.
19        Q    When you have assigned a full adjustment or
20   a full assignment to an independent outside adjustor,
21   do I understand your testimony correctly that that
22   person would communicate with the claims supervisor
0050
 1   assigned to the file?
 2        A    It may, it may not.  It just depends on the
 3   particular case.  At times we have the independents
 4   report to an adjustor.  It just depends on where,
 5   when, what the circumstances are.  There's no set
 6   ironclad rule on that particular situation.
 7        Q    When there is a full assignment to an
 8   independent outside adjustor, what do personnel within
 9   Mutual Benefit do in connection with the claim?
10        A    Again, I think it varies on the particular
11   case, and we may end up contacting the independent
12   adjustor, determining the facts early on, may want to
13   contact the independent to determine whether
14   particular experts are needed on the case.  At times
15   there is no contact whatsoever, we may not hear back
16   until we get a verbal or a written report from the
17   independent adjustor.  It varies from case to case.
18        Q    Okay.  In connection with complex property
19   losses of the type submitted by the Simmses, what does
20   Mutual Benefit do to assist its policyholders in the
21   compilation of the claims?
22        A    We assign an independent who has the
0051
 1   expertise to assist the policyholder in compilation of
 2   the claim.
 3        Q    You understand that in most cases the
 4   policyholders themselves don't have that expertise; is
 5   that correct?
 6        A    I don't believe that's always the case, but
 7   it can be.
 8        Q    Indeed, as I think you've testified, within
 9   Mutual Benefit itself you believe there really is only
10   one individual, Gene Newman, who would have that
11   degree of expertise; is that correct?
12             MR. PARLER:  Degree of -- I'm going to
13   object.  Degree of expertise to do what?
14        Q    Well, did you not understand the question?
15        A    I, I don't understand the question.  I think
16   I did go through what I believe Gene would have the
17   expertise.  I think I did testify relevant to why we
18   use an independent adjustor.  But I believe an
19   independent adjustor has the skills to perform the
20   adjusting for Mutual Benefit Insurance Company and the
21   policyholder.
22        Q    You believe that a Pat Bonanni would have
0052
 1   the same level of expertise as a Gene Newman?
 2        A    I did not say that.  I do not believe
 3   Gene -- Gene might be able to handle a loss of this
 4   size, but he is not a Pat Bonanni.
 5        Q    In what way do they differ?
 6        A    Different levels of education, different
 7   levels of experience, of the types of claims they've
 8   handled over their years of experience.  I think Pat
 9   holds the title of a national, or an executive general
10   adjustor, and that is a very high level to reach at a
11   GAB.  In my twenty years experience I've never come
12   across an executive general adjustor or GAB who was
13   not very, very technically competent.
14        Q    To handle all of the details of a complex
15   property loss --
16        A    Of all types of loss.
17        Q    -- like that of the Simmses?
18        A    The large property losses, correct.
19        Q    Would I be correct, then, in understanding
20   your testimony that the type of claims, claim
21   presented by the Simmses in terms of its complexity
22   would not be the type of claim that you would assign
0053
 1   to a Gene Newman?
 2        A    I would not assign that to Gene Newman, no,
 3   that is correct.
 4        Q    And you would not assign that to Gene Newman
 5   because you don't believe that he has sufficient
 6   expertise to handle a claim of that enormity and
 7   complexity?
 8        A    I believe he's not handled enough to give me
 9   a level of confidence of his ability to do that.  In
10   addition, as I testified earlier, I think it would be
11   too time-consuming for Gene to take two, three, four
12   days out of his week, because the other losses that
13   Gene would need to be handling would not be being
14   handled because he would be handling this large
15   property loss.  My experience is early on in a large
16   property loss it can be a very time-consuming process
17   for the adjustor, and that's one of the main reasons
18   we will use an independent on large property losses.
19        Q    Okay.  And you believe that Pat Bonanni has
20   sufficient expertise to work with these policyholders
21   in the compilation of their claims?
22        A    Yes.
0054
 1        Q    And that's why you assigned him to handle
 2   this?
 3        A    Yes.
 4        Q    I would then understand correctly that you
 5   would not have assigned the Simmses' claim due to its
 6   complexity and the time-consuming nature of compiling
 7   the claim to anyone that actually worked directly
 8   within your employ?
 9        A    To -- that would be correct to do what I
10   would refer to as the day-to-day adjusting of the
11   claim.  It doesn't mean that they wouldn't -- we
12   wouldn't have a Mike Snare or somebody like myself
13   supervising the direction of the file.  We don't
14   abandon the file, but we will have somebody overseeing
15   the direction of the file and they need somebody to
16   report to to get questions answered and therefore and
17   so forth.  But I don't want my testimony to indicate
18   that we just abandon it to an independent adjustor.
19             They are to do the day-to-day early-on
20   technical aspects of preparing a, maybe preparing and
21   reviewing a detailed estimate, to reviewing a detailed
22   inventory, to calculating a business interruption
0055
 1   claim, handling a salver, handling an expert, those
 2   types of activities, bringing in a restoration company
 3   to oversee restoration activities to minimize the
 4   damage and the loss to the insured.  So all those
 5   things we would not most likely use an independent to
 6   help us.
 7        Q    Working with the extensive details of the
 8   large inventory, that type of thing?
 9        A    That would be one example, yes.
10        Q    How much time do you expect an independent
11   outside adjustor to devote to a claim of the kind the
12   Simmses presented?
13        A    It depends on the case.
14        Q    And you review their invoices, correct?
15        A    I can't say that I personally review their
16   invoices, not on all cases.
17        Q    Your department reviews it?
18        A    Somebody reviews it and pays it, yes.  I
19   hope they review it.
20        Q    And just like with lawyers, you want to make
21   sure their time is reasonable?
22        A    We would hope that it would be accurate,
0056
 1   yes.
 2        Q    In a claim that entails the complexity of
 3   that involving the Simmses, you would anticipate a
 4   rather substantial amount of time devoted by your
 5   independent outside adjustor?
 6        A    It's been my experience, yes.
 7        Q    Now, you say that in a claim of that kind,
 8   Mutual Benefit doesn't just abandon the claim.  What
 9   does Mutual Benefit do in connection with a claim that
10   has been assigned to an independent outside adjustor?
11        A    Again, I think it has to go to a case-by-
12   case.  Some cases go very, very quickly and don't
13   require a lot of involvement.  For example, an
14   independent adjustor doesn't have the right to secure
15   experts without our authorization, so they may need to
16   have the ability to call somebody at Mutual Benefit to
17   seek that authorization.  There are day-to-day
18   decisions that may have to be made that they will make
19   contact and give us a recommendation and get our
20   permission to do certain things.  So, again, it varies
21   on a case-by-case situation.
22        Q    Do independent outside adjustors have the
0057
 1   authority to pay portions of a claim without approval
 2   of Mutual Benefit?
 3        A    No, we don't have that, that ability.  There
 4   are times in a situation where I've had an independent
 5   firm that has had a longstanding relationship, that on
 6   a very small claim it turned out to be nothing, pretty
 7   much got the information processed and we approved it,
 8   but it was a very small, clear-cut type situation.
 9   But they should try to get us a report, but it was
10   usually not a problem.
11        Q    So one of the things that an independent
12   outside adjustor has to do is to communicate with your
13   staff in order to get approval for certain payments?
14        A    Payments or certain things that need to be
15   done on the particular claim, yes.
16        Q    Retaining salvers, retaining other vendors,
17   that type of thing?
18        A    It could be all of that, yes.
19             MR. GREENBERG:  Can we go off the record for
20   one second?
21             (A short recess was taken.)
22                        ------------
0058
 1   BY MR. KRAMER:
 2        Q    We have just come back from a recess during
 3   which, Mr. Russell, you went out in the hallway to
 4   speak with your attorney, Mr. Parler; is that correct?
 5        A    That's correct.
 6        Q    And while you were out in the hallway with
 7   Mr. Parler, did you discuss any aspect of this
 8   deposition?
 9        A    No.  I was expressing my concern of how long
10   this may take, and also the ability to get home
11   tonight due to the snow situation, because it's
12   getting -- with Mike Snare and me today, it could be a
13   very late night and very dangerous situation getting
14   home.  And you've been to Huntingdon, it's not a very
15   easy route to get to, so I was expressing some concern
16   of how long this may take.
17        Q    Okay.  But you didn't receive any direction
18   on how to handle questions, did you?
19        A    I did not.
20        Q    Okay.  Let me ask you this.  What type of
21   training do you provide for your claims personnel in
22   how to handle large, complex losses of the type
0059
 1   presented by the Simmses?
 2        A    The training would not be anything formal.
 3   It's pretty much they would learn hands-on situation.
 4   An example is the Simmses' loss, Mike's handled,
 5   supervised losses aside.  But, honestly, I had a lot
 6   of involvement because I do have a lot of expertise on
 7   handling large property losses.
 8        Q    Are there specific training programs that
 9   you provide for your claims staff in general?
10        A    We do send our adjustors to various
11   educational seminars.  We've had lawyers come up and
12   talk to us, as you have, before.  We've sent them
13   to -- there are schools to send them for like small
14   property estimating type schools.  So depending on the
15   individual, the circumstances, and the particular
16   budget and so forth, we do provide ongoing education.
17        Q    Do you have any type of training manual
18   presented to your staff?
19        A    No.
20        Q    Is there any type of manual or other written
21   material provided to your staff which discusses the
22   manner in which they are to perform their
0060
 1   responsibilities or handle claims?
 2        A    Not on specifics to a large homeowner's
 3   loss, no.
 4        Q    You're saying there is such material in a
 5   general claims context?
 6        A    In a very generic sense as far as
 7   guidelines, and understanding that they're guidelines,
 8   that we try to ask that they stand by, where they may
 9   be required to report.  And when I say report, I mean
10   put something into the system or into the file, and
11   follow authority, may need to -- we call them
12   expectations, minimum expectations we want the
13   adjustors to try to do their best to adhere to.  But
14   they're very generic, very brief.
15        Q    And what documents embody what you've
16   described as these guidelines or expectations?
17        A    I believe it's a page, page and a half of a
18   typed correspondence.
19        Q    Of typed correspondence, you said?
20        A    Of a typed, typed.  Not a type, but typed
21   correspondence.
22        Q    Is there a title of that document?
0061
 1        A    I can't remember if there is or not.
 2             MR. KRAMER:  Now, Mr. Parler, if I may
 3   request that that be produced to us.
 4             MR. PARLER:  We'll consider your request.
 5        Q    All right.  Do you have that with you today,
 6   sir?
 7        A    No.
 8             MR. PARLER:  And, Mr. Kramer, just so
 9   there's no confusion about what you're asking, could
10   you put your request following today's deposition in
11   the form of a letter to me and send it?
12             MR. KRAMER:  I'll be pleased to do that,
13   but -- well, we'll get later to the documents that you
14   were to bring, Mr. Russell, as well.  But I'll be
15   happy to provide a letter to you to that effect,
16   Mr. Parler, as well.
17             MR. PARLER:  Thank you.
18   BY MR. KRAMER:
19        Q    You have full access to that document, am I
20   correct, Mr. Russell?
21        A    I believe I can find it, yes.
22        Q    And it's a document that would be presented
0062
 1   to all members of your staff, sir?
 2        A    Probably with the exception of Workers'
 3   Compensation people.
 4        Q    Beyond a page to a page and a half of
 5   typewritten correspondence, are there any other
 6   documents that you provide to your claims staff to
 7   guide them in the process of handling claims in
 8   general or large property losses in particular?
 9        A    No.
10        Q    So there's no training manual?
11        A    No.
12        Q    There is no manual on how to do their jobs?
13        A    No.
14        Q    Are there any guidelines that are prepared
15   in writing by Mutual Benefit to provide its staff or
16   to provide outside independent adjustors with guidance
17   on dealing with policyholders?
18        A    No.
19        Q    Has Mutual Benefit prepared anything in
20   writing to provide any type of guidance on claims to
21   independent outside adjustors?
22        A    No.
0063
 1        Q    Has Mutual Benefit ever done anything to
 2   assist in the training of independent outside
 3   adjustors?
 4        A    No.
 5        Q    Has Mutual Benefit ever done anything to
 6   communicate to independent outside adjustors what its
 7   general expectations are in handling claims or dealing
 8   with policyholders?
 9        A    Not in a formal sense.  I think, for
10   example, Pat Bonanni has worked with us and me long
11   enough to know, as well as I know, what GAB's
12   expectations are, at least I have an idea of their
13   requirements as far as contacts and those type of
14   requirements.  Because I used to work for Crawford and
15   Company, which was a competitor of GAB, and we had
16   certain guidelines that we must fulfill, so I know GAB
17   has very stringent requirements that they try to meet.
18        Q    How long has Pat Bonanni worked with Mutual
19   Benefit?
20        A    Probably since I've been there.
21        Q    Since October 1996?
22        A    Yeah, probably thereafter.
0064
 1        Q    Prior to your joining Swigart Associates,
 2   did you ever work with Pat Bonanni?
 3        A    Yes.
 4        Q    When did you first begin to work with Pat
 5   Bonanni?
 6        A    Probably sometime during my career at
 7   Millers Mutual.
 8        Q    That would have started around when?
 9        A    1986, I believe is when I joined.
10        Q    Would it be accurate to understand that
11   you've been working with Mr. Bonanni in excess of
12   fifteen years?
13        A    Within that.  It's probably -- it might be a
14   little less than that, but somewhere around that.
15        Q    And would the same also be true of GAB
16   Robbins in general?
17        A    I have a long history with GAB Robbins.
18        Q    How long is your history with GAB Robbins?
19        A    Probably since 1986.
20        Q    So sixteen, going on seventeen years?
21        A    Correct.
22        Q    Is one of your department's functions in
0065
 1   handling claims to set reserves?
 2        A    Yes.
 3        Q    What are reserves?
 4        A    Reserves are financial transactions that are
 5   put aside of what the potential payout on that claim
 6   is.  So on an asset sheet it is considered a liability
 7   once we establish a reserve.
 8        Q    And what does your department do to set
 9   reserves?
10        A    Well, in the course of handling the claim
11   they will try to determine what the potential payout
12   of that claim will be and try to set the reserve
13   accordingly, to reflect that as accurately as they
14   can.
15        Q    How is the potential payout determined?
16        A    It depends -- it can change during the
17   course of the claim.  Some claims reserves are set low
18   and grow higher, others could be set high and end up
19   lower.  It just depends on the particular case, and
20   it's on a case-by-case situation.
21        Q    And what is actually done when reserves are
22   set?
0066
 1        A    Well, depending on the amount, certain
 2   authority may need to be get to or to be run up
 3   through the chain of command, which I've testified to,
 4   to set the reserve, except it is set, it goes as high
 5   as me, it does not go any higher than me to set
 6   reserves.
 7        Q    Are monies actually reserved for the purpose
 8   of paying a claim?  Are there actually funds set aside
 9   for that?
10        A    No.
11        Q    So it's something that's reflected on --
12        A    It's a financial transaction.  There's no
13   money -- it doesn't reflect the amount of monies that
14   are sitting in a bank to pay the claim.  That's not
15   the way an insurance company operates.
16        Q    What, then, is the purpose for setting
17   reserves?
18        A    We're required under regulatory accounting
19   to establish a case reserve in order that the
20   regulators can look at to determine that, what our
21   potential liabilities are to determine our ability to
22   pay claims.  That's how we are rated as an insurance
0067
 1   industry and make sure that we don't go insolvent.
 2        Q    So the reserve is designed to reflect as
 3   accurately as you are able the company's exposure or
 4   potential liability in a claim?
 5             MR. PARLER:  Objection.  That's, that
 6   mischaracterizes the testimony.
 7             MR. KRAMER:  Well, I'm asking it as a
 8   question.
 9        A    Could you repeat it, please?
10             MR. KRAMER:  Could you repeat it, please?
11             (Question was read by the Reporter.)
12             MR. PARLER:  And I objected.
13        Q    Okay.  You may answer.
14        A    Yes.  The potential payout of a claim, yes.
15        Q    And, therefore, the setting of reserves are
16   based on your company's review of the facts and merits
17   of a claim?
18        A    Those are, on the case reserves, yes, that's
19   correct.
20        Q    What procedures does Mutual Benefit follow
21   in the investigation of claims?
22        A    Again, it goes on a case-by-case situation.
0068
 1   They would try to gather the pertinent facts of the
 2   claim in order to make a decision.  They would
 3   determine whether there was coverage, of course,
 4   appropriately, and apply the policy terms and
 5   conditions and try to determine the appropriate payout
 6   due.
 7        Q    Does Mutual Benefit use sworn statements and
 8   proof of loss in large property claims?
 9        A    In most circumstances, yes.
10        Q    Under what circumstances does Mutual Benefit
11   utilize the sworn statement and proof of loss?
12        A    Well, again, I think it depends on a case-
13   by-case.  If there were -- if it's a large case or
14   involves potential subrogation, we would use a proof
15   of loss subrogation.  Sometimes a dollar amount we'll
16   like to have a proof of loss.  If there were unusual
17   circumstances or potential, what we refer to as red
18   flags of potential fraud, we may require proof of
19   loss.  But on small, simple losses, which is the
20   majority of the claims, we would not require our
21   insured to fill out a sworn statement/proof of loss.
22        Q    What is a sworn statement and proof of loss?
0069
 1        A    It's the insured swearing that the
 2   information contained on the proof of loss is true,
 3   accurate.
 4        Q    And why do you use the sworn statement and
 5   proof of loss?
 6        A    Because it is a requirement and duty of the
 7   insured if requested by us to complete it as part of
 8   the claim process.
 9        Q    All right.  But I guess my question is why
10   would Mutual Benefit want the insured to file a sworn
11   statement and proof of loss swearing that the facts in
12   the claims as submitted are true?
13             MR. PARLER:  Objection; asked and answered.
14   You can answer.
15        A    Yeah, I think I did answer that.  I think I
16   indicated that they swear the presentation of their
17   claim is true and accurate.
18        Q    I'm asking why it is you want an insured, a
19   policyholder of Mutual Benefit to do that?
20        A    It's a requirement of theirs, if we request
21   them to do that.  It's a duty.
22        Q    But my question is why would you request it?
0070
 1        A    It depends on a case-by-case situation, or
 2   there are too many circumstances for me to point out
 3   every single particular situation when we would do
 4   that.
 5        Q    What are the various purposes for which
 6   Mutual Benefit would request and therefore require its
 7   policyholder to complete a sworn statement and proof
 8   of loss?
 9        A    If it's a large loss, we would require it.
10   If there's subrogation potential, we would require it.
11   If there were, as I referred to and as I testified
12   earlier, red flags, we may have the insured refer to
13   it.  But they are complex -- or larger losses that we
14   usually require it.  If they are simple,
15   straightforward losses we usually don't require our
16   insured to fulfill that.  And, again, it's at our
17   request, we can ask for that information.
18        Q    Why do you normally request that in a large
19   loss?
20        A    Because of the dollars involved and we're
21   going to pay a lot of dollars out, many times our
22   auditors like to see it.  I like to see it in the
0071
 1   file, that would document that the amount of loss is,
 2   is -- that the insured's swore to it that it was true
 3   and accurate and fair.
 4        Q    And how does having that in a large loss
 5   assist Mutual Benefit in its claims handling?
 6        A    It's a presentation of their claim.  A
 7   request for a sworn statement/proof of loss is a
 8   request of the insured to present their claim to us
 9   and that it's fair and accurate.
10        Q    So that is essentially the embodiment of
11   what their claim truly encompasses?
12        A    That is correct.
13        Q    And you also mentioned that it's done in the
14   case, in cases involving, your terminology, red flags?
15        A    Potential indicators of fraud.  We would
16   want the insured to, again, swear under oath that this
17   is a -- and it is a requirement of the insured to do
18   that, to submit the claim.  So we're asking them just
19   to say under oath, a sworn statement, that this is
20   fair and accurate, true and accurate.
21        Q    When you say red flags, what do you mean?
22        A    Oh, boy.  Things that we have learned as
0072
 1   claims adjustors over the years that are potential
 2   fraud indicators.
 3        Q    Can you give me some examples?
 4        A    Sure.  Exaggerated losses, circumstances or
 5   unusual circumstances that can't be explained of how
 6   the loss happened.  You may have a suspicious fire.
 7   You may have items that don't fit the particular
 8   lifestyle of an insured.  You may have
 9   overdocumentation of the claim, is a potential red
10   flag.  And you can't look at each one of these and do
11   it, it's just an indicator that it may warrant some
12   further investigation, and that's an adjustor's job,
13   is to rule that out or to rule it in as something
14   that's going to be critical to the claim.  And a
15   single indicator or red flag may or may not warrant or
16   justify that it's a fraudulent claim, it's just an
17   indicator that it may warrant further necessary steps
18   to investigate the claim.  That is the responsibility
19   of what we do.
20        Q    So a red flag is something that, based upon
21   your experience and expertise, you spot as meriting
22   further investigation?
0073
 1        A    That's a -- yeah, that's why they call them
 2   flags, it's something that is unusual that we may want
 3   to look at further, and most times it can be explained
 4   away rationally.  Other times it can't be and it may
 5   warrant particular steps on the part of the adjustor
 6   or the company to, to further investigate it.
 7        Q    And as part of that further investigation
 8   where there are red flags, that's something that might
 9   prompt you to do or require a sworn statement/proof of
10   loss?
11        A    Sworn statement, examination under oath,
12   other investigation, running down witnesses, or
13   whatever it may be.  Again, each case is so unique and
14   different.
15        Q    You mentioned an examination under oath.
16   That's not something that you seek in all cases?
17        A    No.
18        Q    Would I be correct in understanding that's
19   something that you only seek in a rather small
20   percentage of cases?
21        A    That's a fair statement.
22        Q    How do you determine whether you want to
0074
 1   pursue an examination under oath of a policyholder?
 2        A    It's usually a situation where we are
 3   concerned regarding the viability of the claim and
 4   that we would -- in most cases we will actually refer
 5   this to our counsel to do an initial, and then
 6   oftentimes we'll ask our counsel to provide us a
 7   recommendation of whether they want us to pursue an
 8   EUO.  Many times they say they don't justify it, but
 9   if they do, we would ask that the attorney proceed
10   with the examination under oath.
11        Q    Are examinations under oath only done
12   through referrals to legal counsel?
13        A    Yes.
14        Q    Does a substantial amount of investigation
15   typically precede an examination under oath?
16        A    It depends.
17        Q    On what?
18        A    It depends when we felt that there is a need
19   for an EUO.  Sometimes there's a lot of investigation
20   done prior to the EUO, sometimes there's a lot of
21   investigation done after the EUO, sometimes both.
22        Q    The Large Claim Memorandum, is there a
0075
 1   procedure at Mutual Benefit which provides for the
 2   writing of a Large Claim Memorandum?
 3        A    Yes.
 4        Q    What is that procedure?
 5        A    A reserve change of fifty thousand dollars
 6   or greater would generate it.  And there are
 7   exceptions.  For example, I would not do -- we would
 8   not require a Large Claim Memo on a seventy-thousand-
 9   dollar total loss to a Mercedes Benz; if it's a
10   straightforward auto, physical damage loss, or
11   something like that, we might not require that.  But
12   any other reserve changes of fifty thousand dollars or
13   greater we prepare a Large Claim Memorandum -- let me
14   back up, actually.  That's not correct.  Twenty-five
15   thousand dollars is the threshold which generates the
16   Large Claim Memorandum.
17        Q    And if you set -- is a Large Claim
18   Memorandum done upon the setting of a reserve?
19        A    Sometimes they're set before the Large Claim
20   Memorandum and sometimes they're set immediately after
21   I look at it or it's initialed because of the
22   authority that an adjustor may get.  I may have to
0076
 1   initial it or somebody may have to initial it before
 2   that reserve gets up.  I usually require it because I
 3   need to know what reserves are going up and/or Frank
 4   or Mike might need to know what reserves are going up,
 5   when they're going up, and why they're going up.  And,
 6   also, it may trigger that they might want to put that
 7   particular file in their diary.
 8        Q    What type of information is typically
 9   included in a Large Claim Memorandum at Mutual
10   Benefit?
11        A    The insured; the agent; the date of loss; a
12   short description of what happened; what the reserve
13   is; have we paid anything on it; what the reserve
14   change is.  I think the memo pretty much speaks for
15   itself.
16        Q    Who is the memorandum -- well, who is
17   responsible for preparation of the Large Claim
18   Memorandum?
19        A    Again, it depends, it varies.  It's usually
20   the file handler, but sometimes the supervisor will
21   write it, sometimes Frank will write it.  I've written
22   a few on occasion.
0077
 1        Q    And who is the Large Claim Memorandum
 2   submitted to?
 3        A    Well, again, it would go to the particular
 4   supervisor or manager or to me.  It's either -- it
 5   usually goes to the claims secretary at times to be
 6   typed up and is distributed as the twenty-five
 7   thousand dollars or over.
 8        Q    Distributed to whom?
 9        A    Various people within the organization.
10        Q    And why is a large -- to what people within
11   the organization?
12        A    Various people, various management.  Anybody
13   who wants to be on the list can be put on the list.
14        Q    So there is the ability to opt into a list
15   where one would receive the Large Claim Memoranda?
16        A    Sure.
17        Q    And why would an individual want to be on
18   the list to receive the Large Claim Memoranda?
19        A    Because our purpose of circulating the
20   memorandum is to share the information as a learning
21   process, education process.  An underwriter may want
22   to look at it in order to determine these are the
0078
 1   types of claims I see on this particular thing.  They
 2   may want to go look at that particular underwriting
 3   file, to look at it, to learn from it, to process it,
 4   is this something I should have seen, is this
 5   something I could have foreseen this happening, was
 6   there something -- you know, it's a learning,
 7   educational process.  It's just for people, it's for
 8   their information.
 9        Q    Are there large claim committee meetings
10   that are conducted at Mutual Benefit?
11        A    Yes.
12        Q    What are they?
13        A    They are monthly meetings which I schedule.
14   I began those when I began with the company.  Again,
15   it's just an ability to discuss claims at the
16   committee in order -- as a sharing of information.
17   The underwriters at times will have some input, like
18   who the agent was, how long we've been on the account,
19   have we had any prior claims of this nature, has this
20   been a problem before, is this something we should
21   have recognized as an exposure to this particular
22   risk.  Those types of questions or input.  It's just a
0079
 1   sharing of information.
 2        Q    Are Minutes kept of those meetings?
 3        A    Yes.  Normally, yes.
 4        Q    Who keeps the Minutes of these monthly
 5   claims committee meetings?
 6        A    The claims secretary would normally, if
 7   she's there during the meeting, would take notes.
 8        Q    Who is the current claims secretary?
 9        A    Brandi, B-R-A-N-D-I, Corbin, C-O-R-B-I-N.
10        Q    How long has she been in that capacity?
11        A    June/July of 2002.
12        Q    Prior to that, who was in that position?
13        A    Phyllis Benson.
14        Q    B-E-N-S-O-N?
15        A    Correct.
16        Q    And where are the Minutes of these claim
17   committee meetings kept?
18        A    I personally have no knowledge of where
19   they're kept.
20        Q    But when Minutes are prepared, are they
21   circulate to the attendees of the meeting?
22        A    No.
0080
 1        Q    When Minutes are prepared, do you review
 2   them?
 3        A    No.
 4        Q    But you've seen Minutes kept of these
 5   meetings?
 6        A    Early on in the process I would see the
 7   Minutes, but normally they're done and filed away with
 8   the -- by the secretary.
 9        Q    So in order for you to determine where the
10   Minutes are kept, you would have to speak with, as of
11   today, claims secretary Brandi Corbin?
12        A    She may know where some of the Minutes are,
13   yeah, that might be.  I don't know where they actually
14   physically store them.
15        Q    Is Phyllis Benson still with your company?
16        A    She is.
17        Q    So you could speak with her as to any of the
18   Minutes which would have been created prior to
19   Brandi's assumption of the claims secretary position?
20        A    Yes.
21        Q    What is Phyllis Benson's current position?
22        A    I think, I think her title is Workers' Comp
0081
 1   Specialist.  It's a fairly new position so I'm not
 2   totally sure of the title.
 3        Q    Beyond Minutes of large claim committee
 4   meetings, what other records does Mutual Benefit keep
 5   in the ordinary course of its business in handling
 6   claims?
 7        A    Can you be more specific?  We're an
 8   insurance company; we keep all kinds of records.  I
 9   could be here all day answering that question.  Could
10   you be more specific, please?
11        Q    Sure.  There are certain notes that are kept
12   about the status of claims; am I correct?
13        A    Are you referring to things such as file
14   notes, file activity notes?
15        Q    I guess I'm asking you a very general
16   question.  There are, for example, computer note pads
17   for claims; am I correct?
18        A    Correct.
19        Q    There are also handwritten file activity
20   sheets; am I right?
21        A    Sometimes, yes.  Less of that, but yes.
22        Q    A claims file is maintained by Mutual
0082
 1   Benefit on all claims; am I correct?
 2        A    Correct.
 3        Q    Can you tell me in the ordinary course of
 4   your claims activity what types of records are
 5   maintained within a claims file?
 6        A    Well, that's a very broad question.  What
 7   can be contained in a claim file would be information
 8   gathered in the course of a claim, estimates,
 9   appraisals, bills, attorneys' reports, doctors'
10   reports.  The list goes on and on and on.
11        Q    In terms of written materials that would
12   have been prepared by Mutual Benefit itself as opposed
13   to compiled through other sources, what types of
14   documents are created?
15        A    Well, we would prepare letters and
16   correspondence.  Things that we prepare.  There may be
17   authorization sheets requesting payments, and
18   authority to settle a case, or we may have to initial
19   a particular case.  At times we'll dictate what I
20   would refer to as a full caption report sometimes,
21   depending on the circumstances.
22        Q    What's a full caption report?
0083
 1        A    A report that would kind of give a scenario,
 2   and that may not actually be found in a report.  We
 3   would also allow that to be put into our electronic
 4   note pad.
 5        Q    What type of information is contained within
 6   a full caption report?
 7        A    We would want to make sure that the adjustor
 8   confirmed the coverages and maybe the circumstances of
 9   what happened in the loss, the potential exposure on
10   the loss.  And these are mainly done in casualty
11   losses.  Liability, maybe some reserve
12   recommendations, further investigation that may be
13   required.
14        Q    So it contains some type of narrative
15   summary about the claim?
16        A    Correct.
17        Q    A distillation of the facts?
18        A    Yes.
19        Q    And that would either be kept within the
20   physical claims file or on computer?
21        A    Yes.
22        Q    What other types of documents does Mutual
0084
 1   Benefit create in its claims activity?
 2        A    Contained within the claim file?
 3        Q    Contained either within the claims file or
 4   elsewhere.
 5        A    Well, I generate various management reports,
 6   but those are very numerous, and, as any company, we
 7   have certain reports that we keep in order that we can
 8   measure the progress or not so good progress of the
 9   company.  So, you know, those are numerous.
10        Q    Do your management reports reference
11   specific claims?
12        A    I have two reports that would reflect -- and
13   they're basically taken from the Large Claim
14   Memorandum.  On a monthly basis I generate reports of
15   the large claim summary of cases of twenty-five
16   thousand dollars and over.  I also track a report
17   based upon accident year basis of losses thirty-five
18   thousand dollars and over.
19        Q    So your monthly reports to management would
20   contain summaries of the status of large property
21   losses similar to those submitted by the Simmses?
22        A    No.  My testimony was it doesn't provide
0085
 1   statuses, it provides certain particular facts of
 2   that.  It doesn't provide ongoing statuses.  It may
 3   establish --
 4        Q    Let me rephrase the question.
 5             So your monthly reports to management would
 6   contain details or facts relating to claims involving
 7   large property losses such as those submitted by the
 8   Simmses?
 9        A    Very brief facts.  In fact, the Large Claim
10   Memorandum which you have been provided provides the
11   greatest detail of that loss.  The other reports
12   generate a very brief summary and it's just to
13   summarize the large claims we had during a particular
14   month and/or what accident year did they affect.  But
15   it may be claim number so we can reference back,
16   policy number, the insured's name, the reserve, and
17   the paid amount, if there was a paid amount at that
18   point, and that's about it.
19        Q    Why do you provide that type of information
20   in monthly reports to management?
21        A    Because large losses impact the financial
22   situation of the company on a monthly basis, so it's
0086
 1   important that we track, as any insurance does, or any
 2   business does, you need to track the impact of what
 3   affects your bottom line.  So we can look back and say
 4   why was, for example, 1998 a bad year; well, we had
 5   three four-million-dollar losses.  So you have a
 6   report that you can refer back to.  Every insurance
 7   company -- most insurance companies, I should say,
 8   ninety-nine percent of insurance companies have
 9   various types of manager reports that they track in
10   order to manage your business.
11        Q    So when it comes to large losses such as
12   those submitted by the Simmses, management has an
13   interest in the risk that that presents to the
14   financial stability of the company?
15        A    When we establish a reserve of seven
16   hundred, eight hundred, a million dollars or fifty
17   thousand dollars, management would want to know about
18   that, yes.  But it's just that they know that there's
19   a claim and what it was, and that's about it.
20        Q    And so management -- this is your way of
21   keeping management apprised of what's going on in the
22   company?
0087
 1        A    It's a communication of what's happening in
 2   claims that's having an impact on the company, because
 3   it influences reinsurance rates, it influences our
 4   pricing.  There's a lot of factors that are involved
 5   in how claims, all claims impact us.  That's, you
 6   know, whether we make or not make money.
 7        Q    Who receives those monthly reports?
 8        A    I don't know off the top of my head, but I
 9   would think a lot of the management does.  But anybody
10   who would want to receive a copy of the report, all
11   they have to do is ask.  We don't withhold it from
12   anybody who would want to know about it.
13        Q    Anyone within the company?
14        A    If anybody asked for it, I have never said
15   no.
16        Q    Do you address your management reports to a
17   particular individual?
18        A    Address?  No, they're just circulated.
19        Q    Is it, for example, a memo from Mark Russell
20   to someone?
21        A    No.  The report is just a report.
22        Q    We spoke briefly that there are records
0088
 1   maintained by Mutual Benefit regarding claims that are
 2   maintained on computer.
 3        A    Yes.
 4        Q    What records and what type of information is
 5   recorded in a computer regarding claims?
 6        A    Well, many of our adjustors, I can't say all
 7   of them because they've had a difficult time going to,
 8   adjusting to the new technology, but the adjustors
 9   will keep their notes and so forth on an electronic
10   note pad which is on a computer, the reserves are in
11   the computer, the underwriting information.  It's an
12   integrated policy management software system which
13   contains the information for us to know that
14   information.
15        Q    And what do you expect your claims personnel
16   to do in connection with computerized information?
17   What types of information do you expect them to put in
18   the computer?
19        A    Most of our adjustors are experienced and we
20   ask them that the file should speak for itself.  I
21   mean, they're experienced to know what information
22   that we like to see, either physically in the file or
0089
 1   in a note pad, I really don't care as long as the file
 2   speaks for itself.  But it's basically a lot of the
 3   activities that, you know, especially the important
 4   activities that are done on the file.  So if somebody
 5   looked at it they can kind of follow through the claim
 6   and determine what happened.
 7        Q    So it would have details and facts regarding
 8   a claim?
 9        A    Yes.  It varies from case to case or claim
10   to claim on the detail.
11        Q    Right.  Is the detail different in a case in
12   which an outside independent adjustor is used?
13        A    I would think so.
14        Q    In what way?
15        A    Because there's no reason for us to
16   regurgitate what is contained in an independent
17   adjustor's report into a computer screen.  If you need
18   to look at it you can just read the adjustor's report.
19        Q    So some of the information is kept on what
20   you call a note pad for claim on the computer,
21   correct?
22        A    Correct.
0090
 1        Q    And there are also, as we mentioned,
 2   handwritten file activity sheets?
 3        A    At times.  It varies from adjustor to
 4   adjustor, yes.
 5        Q    When are those used as opposed to the
 6   computerized note pad?
 7        A    It depends on the individual.  As I say, we
 8   really don't mandate one way or the other.  We have
 9   some very seasoned adjustors who have had a difficult
10   time transitioning from written, the way we were
11   trained to do it, with handwritten notes, to typing it
12   into a computer, and we don't -- we aren't real
13   stringent on that because as long as the files are
14   handwritten or whether they're typed in is really not
15   important as long as the information is there.
16        Q    What are property loss notices?
17        A    Do you have an example to show me?  Because
18   I don't know if you're referring to the acord property
19   loss notice.
20        Q    Are there different types of documents that
21   bear the title Property Loss Notice?
22        A    When you mentioned that I was thinking of an
0091
 1   acord notice.  But I -- you know, there could be other
 2   forms that could also fit that description.
 3        Q    What forms would fit that description, in
 4   your understanding?
 5        A    Well, I referred to the acord notice.
 6   Property loss notice, which is something usually sent
 7   by the agent to us.  Our Direct Reporting Center,
 8   which is -- could generate a report like that.  I'm
 9   not a hundred percent positive what it says on that.
10   It's very similar to an acord notice.
11             (Deposition Exhibit No. 3 was marked for
12   identification and was retained by counsel.)
13             MR. PARLER:  Do you have a copy?
14             MR. KRAMER:  I'll make you a copy after the
15   deposition.
16             MR. PARLER:  Well, I'm going to want to look
17   at it during the deposition.
18             MR. KRAMER:  By all means, Mr. Parler.
19   BY MR. KRAMER:
20        Q    Handing you what has been marked as Russell
21   Deposition Exhibit No. 3, is that a type of property
22   loss notice that is created by Mutual Benefit?
0092
 1        A    Yes.
 2        Q    What is it?  What does it do, essentially,
 3   in general terms?
 4        A    This is taken when the claim is reported to
 5   us where we will take basic information, which is
 6   outlined on the form, in order to start the claim
 7   process.
 8        Q    Thank you.
 9             Beyond what you've testified to, can you
10   think of any other types of documents or standardized
11   records created by Mutual Benefit regarding claims?
12        A    We may generate reports to reinsurers,
13   notifying them of a potential claim.
14        Q    Who are reinsurers?
15             MR. PARLER:  I'm going to object and
16   instruct him not to answer.  We have an Order from
17   Judge Harvey indicating that there are two areas that
18   are not discoverable, reinsurance and premium rate-
19   making, I believe.
20             MR. KRAMER:  Well, Judge Harvey has not
21   ruled that I cannot inquire into reinsurers or what
22   types of reports generally are provided to them, and
0093
 1   he in fact has indicated expressly that I may speak
 2   with Mr. Russell, who you represented to be the
 3   custodian of records for Mutual Benefit in this
 4   context, as the person to whom I may direct such
 5   inquiries.
 6             MR. PARLER:  That's not my recollection of
 7   his Order.  If you have it with you, I'd be happy to
 8   review it, if you want to take a break.
 9             MR. KRAMER:  Well, you are instructing him
10   not to answer the question of what types of -- of who
11   are reinsurers?  You will not let him answer the
12   question of what reinsurers are?
13             MR. PARLER:  He can answer that question.
14   But if you get into any of the specifics, anything
15   more specific than that, or the specific reinsurers
16   for the Simmses, then I'm going to object and instruct
17   him not to answer.
18   BY MR. KRAMER:
19        Q    What are reinsurers, sir?
20        A    Reinsurers are insurance companies for
21   insurance companies.
22        Q    They undertake a portion of the loss that
0094
 1   would be sustained if a payment were required?
 2        A    Sometimes.
 3        Q    Over a certain amount?
 4        A    Sometimes.
 5        Q    Depending on the reinsurance treaty or the
 6   agreement with the reinsurer?
 7        A    Yes.
 8        Q    And one of Mutual Benefit's obligations is
 9   to report to its reinsurers the status of claims?
10        A    Sometimes.
11        Q    Under what circumstances must Mutual Benefit
12   report the status of claims to reinsurers?
13        A    It depends on the terms of the treaty.
14        Q    In cases similar to those presented by the
15   Simmses, what is Mutual Benefit's obligation for
16   reporting to reinsurers?
17             MR. PARLER:  Objection to the question.  At
18   this point I'm going to instruct him not to answer
19   that question.
20             MR. KRAMER:  On what basis?
21             MR. PARLER:  Judge Harvey's Order on the
22   discoverability of information related to reinsurance
0095
 1   and premium rate-making.
 2             MR. KRAMER:  I'd like you to, the reporter
 3   to certify the question, and by that I'd like the
 4   question, any response and objection to be recorded
 5   separately so we may take the issue up with Judge
 6   Harvey.
 7             THE WITNESS:  May I speak with my counsel?
 8             MR. PARLER:  Yeah, we can, because --
 9             MR. KRAMER:  Well, no, I would prefer that
10   you don't.
11             MR. PARLER:  Come on.
12             MR. KRAMER:  Let me ask you this.  What do
13   you want to discuss?
14             THE WITNESS:  Are we off the record?
15             MR. KRAMER:  Excuse me, but we're not off
16   the record.  We're on the record right now.
17             MR. PARLER:  Okay.  Come on, let's talk.
18             MR. KRAMER:  I would like to say on the
19   record that this is an individual under oath and that
20   discussions with counsel pertaining to questions in a
21   deposition are improper.  And I am not agreeing that
22   such a discussion can or should take place in
0096
 1   connection with pending depositions --
 2             MR. PARLER:  Mr. Kramer --
 3             MR. KRAMER:  -- pending deposition
 4   questions.
 5             MR. PARLER:  Mr. Kramer, I'm within my
 6   rights to consult with my client -- the corporate
 7   designee for my client, as you reminded us several
 8   times this morning, on, among other issues, whether or
 9   not it's proper to assert a privilege.  That's what
10   we're doing.  Thank you.
11             (Thereupon, Mr. Parler and the witness left
12   the room and thereafter returned.)
13             (Question was read by the Reporter.)
14             MR. PARLER:  You may answer, sir.
15        A    From the Claims Department there actually is
16   no reporting requirement.
17   BY MR. KRAMER:
18        Q    Who has the obligation?
19        A    Well, I'm not even sure that there is
20   reinsurance on this loss.  I would not know.  It's
21   done internally through our software system, but
22   it's -- if there were reinsurance on this, it is a,
0097
 1   what we refer to as an accounting bordereau.  I'm not
 2   indicating I'm an expert in this, but basically it's a
 3   monthly paper document that would go to the reinsurer
 4   indicating that there is a reserve, or what their
 5   portion of the exposure may be, it depends on the
 6   treaty.  And that is sent to the reinsurer and the
 7   reinsurer broker, and that's it.
 8        Q    And you do not know whether there is
 9   reinsurance in connection with the Simms loss?
10        A    I can't remember whether there is or there
11   isn't on this loss.
12        Q    Do you recall whether you reported in
13   connection with the Simms loss to any reinsurer?
14        A    As I testified just a second ago, I did not,
15   nor anybody in claims, report this to a reinsurer.
16        Q    Okay.  Does Mutual Benefit have a document
17   retention or destruction policy?
18             MR. PARLER:  Objection.  You can answer the
19   question.
20        A    Yes.
21        Q    What is it?
22        A    I don't remember the particulars.  Closed
0098
 1   claim files are closed after a certain number of
 2   years.  I'm not, I'm not particular to those numbers
 3   of years.
 4        Q    Does Mutual Benefit have any policy
 5   regarding the destruction of documents on pending
 6   claims?
 7        A    No, we don't destruct documents on pending
 8   claims.
 9        Q    You would agree that the Simmses' claims are
10   pending?
11        A    Yes.
12        Q    Has Mutual Benefit, to your knowledge,
13   destroyed or disposed of any documents involved in the
14   Simmses' claim?
15        A    No.
16        Q    In deciding whether to honor, adjust, or
17   deny a claim as part of Mutual Benefit's file
18   handling, does Mutual Benefit investigate the terms of
19   coverage?
20        A    The terms and conditions, yes.
21        Q    And the exclusions, correct?
22        A    Correct.
0099
 1        Q    To ensure that its handling of every claim
 2   is done in accordance with the terms of the insurance
 3   policy?
 4        A    Yes.  I will say on occasion we pay claims
 5   that shouldn't have been paid, but that would be
 6   inadvertent.
 7        Q    Are there times when you don't pay claims
 8   you should?
 9        A    No.
10        Q    Has that ever happened?
11             MR. PARLER:  Objection.  You may answer,
12   sir.  Has that ever happened in the history of the
13   company?  He's only been there since '96.
14        Q    To your knowledge, sir.
15        A    Have we ever -- I'm not aware of any claim.
16   There are times when we will end up compromising
17   setting the losses.  But when we deny a loss, we
18   believe we have a reasonable basis to deny the claim.
19        Q    And how do you determine whether you have a
20   reasonable basis to deny a claim?
21        A    We look at the policy to determine whether
22   there's coverage, and that may -- whether it's
0100
 1   excluded or whether it's not covered property.
 2   There's various aspects we will look at to make a
 3   determination if any or maybe just part of the loss is
 4   covered.
 5        Q    And certain of the bases on which Mutual
 6   Benefit denies claims are based upon what are called
 7   exclusions within the policy?
 8        A    That's part, yes, correct.
 9        Q    And that requires that you read the policy
10   language and apply the terms of the policy to the
11   facts of a claim as you have investigated it?
12        A    The facts as we know them at that time,
13   that's correct.
14        Q    One of those exclusions is known as a fraud
15   exclusion, correct?
16        A    I don't know if I'd refer to that as an
17   exclusion.  I don't know if it's listed under
18   exclusions.  I'd have to look at a policy.  There is a
19   fraud provision in the policy.
20        Q    Mutual Benefit may determine that a claim
21   will be denied based upon what it believes is fraud
22   committed by its policyholder?
0101
 1        A    That very well could preclude payment of the
 2   claim, yes.
 3        Q    Under what circumstances would Mutual
 4   Benefit deny a claim based upon fraud?
 5        A    Based upon the facts in the investigation of
 6   that particular claim.
 7        Q    How does Mutual Benefit determine that fraud
 8   has been committed by a policyholder?
 9        A    We investigate the claim, and based upon the
10   merits of what we find from those facts.
11        Q    Well, what factors does Mutual Benefit
12   consider in determining whether fraud has been
13   committed by a policyholder?
14        A    It, again, would depend.  Every case is
15   different, and that whether we believe that there was
16   an intent, intentional intent to defraud us.
17        Q    What is an intent to defraud Mutual Benefit
18   in your understanding?
19        A    Where someone has intentionally misled or
20   committed fraud in the presentation of the claim.  It
21   may also involve, could also involve, even before the
22   claim is generated, the application could also be a
0102
 1   factor.
 2        Q    The application for insurance?
 3        A    Correct.
 4        Q    So would I understand correctly that the
 5   mere submission of inaccurate information by a
 6   policyholder would not, in your understanding,
 7   constitute fraud?
 8        A    An example is if the insured gave us one
 9   number on their VIN number that was inadvertently
10   wrong, we would not refer to as information that would
11   constitute us to deny the claim.
12        Q    That would be an honest mistake?
13        A    That's a mistake.
14        Q    What is the distinction in your
15   understanding between a mistake and fraud?
16        A    You'd have to look at the particular
17   circumstances of whether that would commonly be a
18   mistake or whether there was just -- the situation is
19   beyond any degree of reasonableness that it had to be
20   intentional.
21        Q    When is something beyond any degree of
22   reasonableness that it had to be intentional in your
0103
 1   understanding?
 2             MR. PARLER:  I note an objection to the
 3   question.  You may answer, sir.
 4        A    I think it would depend on, again, the
 5   circumstances of the individual merits of the case.
 6   It depends on that particular case.
 7        Q    Would I be correct in understanding based on
 8   your experience with large complex homeowners claims
 9   and substantial inventories and content losses, that
10   you would anticipate a policyholder providing the
11   company with information that would contain more
12   mistakes than you would otherwise expect in a very
13   simple claim?
14        A    I don't know if I would call them mistakes.
15   I think when you're dealing with one item, it's very
16   specific, and depending on that particular item your
17   memory or recollection of that item could be much more
18   clearer and precise and easier to document.  When
19   you're dealing with numerous items a lot of times
20   there is judgment needed based upon your particular
21   memory that, you know, to give us a fair and
22   reasonable.  At times it is considered a guess in
0104
 1   doing it, especially on the smaller items and so
 2   forth.  But, again, you've got to look at the totality
 3   of the claim and maybe not just individual particular
 4   items.
 5        Q    Do you expect more mistakes in large,
 6   complex claims than in what you've previously
 7   described as smaller, simpler, more straightforward
 8   claims?
 9        A    I wouldn't categorize them as mistakes.
10   What's a mistake?
11        Q    Well, sir, I think you made reference to,
12   for example, a mistake in VIN number and I think your
13   response was, quote, that is a mistake, unquote.  Do
14   you recall that response, sir?
15        A    Yes.
16        Q    So given that you used the term mistake,
17   what do you understand the term mistake to mean?
18             MR. PARLER:  Objection.  You may answer.
19        Q    You may answer.
20        A    A mistake is something that was a minor
21   judgment.  An example is if, you know, to remember
22   what a particular item cost you fifteen years ago
0105
 1   requires some judgment.  I think larger purchased
 2   items and newer purchased items, there's probably less
 3   room for error on that because it should be more clear
 4   in your mind.  Most people remember large items that
 5   they purchased, for example, where they purchased it
 6   and when they purchased them, approximately, and
 7   approximately how much they paid for them.
 8        Q    And that's something that a homeowner is not
 9   able to make a mistake about?
10        A    I think they are to give us a fair and
11   reasonable, their best guess of what they believe that
12   is.
13        Q    You expect a homeowner to provide their best
14   guess as to what type of information?
15        A    Yes, to the best of their ability.  And,
16   again, I think it depends on the item and the
17   situation you're looking at.
18        Q    So it's your expectation that a policyholder
19   of Mutual Benefit will provide their best guess as to
20   the nature, quantity, and values of contents that are
21   lost?
22        A    Right.  And if they have records they can
0106
 1   actually go back and look at records and try to
 2   reconcile it that way.  There are things -- and,
 3   again, it depends on every case.  It depends.  I mean,
 4   because some people are good recordkeepers, some
 5   aren't, but there should be bank records, there should
 6   be other records, too, especially with the larger
 7   ticket items, you know.  Whether you have five pair of
 8   socks or six pair of socks in your drawer, I wouldn't
 9   expect somebody to know that.  I don't think that's
10   reasonable.  I may expect them to know where they
11   purchased their new refrigerator or a piece of high-
12   priced furniture and approximately what they paid for
13   it, and there should be a record of that at some
14   point.
15        Q    But if in providing their best guess as to
16   information regarding an extensive property loss claim
17   such as that submitted by the Simmses, a homeowner
18   guesses wrong, does Mutual Benefit automatically
19   conclude that fraud has been committed?
20        A    If we believe it was a guess and just a
21   mistake, no, we would not consider that fraud.
22        Q    Then tell me, sir, under what circumstances
0107
 1   you would conclude that inaccurate information
 2   submitted in the course of the claims process is more
 3   than a mistake and rises to the level of fraud that
 4   would provide the company with grounds for denying the
 5   claim?
 6             MR. PARLER:  I'm going to object.  This
 7   gentleman said repeatedly it depends on a case-by-case
 8   basis.
 9             MR. KRAMER:  I do not want speaking
10   objections, sir.  You may answer the question.
11             MR. PARLER:  Well, it's a speaking objection
12   based on the testimony in the past.
13             MR. KRAMER:  We usher the witness out of the
14   room if we're going to have speaking objections.  You
15   know the procedure, Mr. Parler.
16   BY MR. KRAMER:
17        Q    You may answer, sir.
18        A    Again, I think it would depend on the case.
19   We would look at the totality of the claim.  We have
20   to look at all aspects of that particular claim to
21   determine whether we felt that the issue at hand was
22   reasonable or unreasonable, could it have been a
0108
 1   mistake or was it the other situation, you know.  And
 2   in situations where claims are grossly exaggerated, we
 3   have a difficult time believing, if at all, that that
 4   was a mere mistake.
 5        Q    In determining whether to honor or deny
 6   claims on the basis of fraud or any other basis,
 7   Mutual Benefit as an insurance carrier has an
 8   obligation to act in a consistent manner with all of
 9   its insureds; am I correct about that?
10        A    Yes.
11        Q    And to ensure consistency, one of your roles
12   as the Vice President of Claims is to set policy for
13   determining whether something may be denied on the
14   basis of fraud or other grounds and whether it should
15   not be, correct?
16             MR. PARLER:  Objection to the form of the
17   question.  You may answer, sir.
18        A    Correct.  I would say that ninety-nine
19   percent of the time where we would deny a claim on
20   fraud we would seek legal advice also.
21        Q    All right.
22        A    And we would rely heavily on that
0109
 1   recommendation also.
 2        Q    Ultimately the decision is that of the
 3   carrier, Mutual Benefit, correct?
 4        A    That's correct.
 5        Q    All right.  So what I'm asking you is in
 6   establishing a consistent policy for Mutual Benefit,
 7   whether Mutual Benefit has a policy in place that
 8   permits it to distinguish between wrong guesses or
 9   what we've called mistakes by a policyholder and what
10   Mutual Benefit would conclude to be the type of fraud
11   that would justify a denial of the claim?
12        A    I will go back to I think that just depends
13   on the particular merits of the case.
14        Q    So it depends on the particular merits of
15   the case and there is no specific policy for how one
16   determines whether fraud has or hasn't been committed?
17        A    There can't be any specifics because each
18   case has too many factors that may be involved.
19        Q    Ultimately it's a judgment call by Mutual
20   Benefit?
21        A    I don't know any other way but to do it
22   based upon judgment.
0110
 1        Q    And judgment, like other human endeavors, is
 2   subject to errors and mistakes as well, correct?
 3             MR. PARLER:  Objection.
 4        Q    You may answer.
 5        A    Yes.
 6        Q    So you hope in denying a claim on the basis
 7   of fraud or any other ground that you're exercising
 8   proper and correct judgment?
 9        A    Yes.  I think we do look at each case and we
10   make reasonable, sound decisions of when we deny a
11   claim based upon fraud because we are not in the
12   practice of denying claims that are valid, that would
13   not be something that I as Vice President would set as
14   a policy.
15        Q    But there's no specific policy for
16   determining how to exercise the judgment that fraud
17   has been committed?
18        A    I'm not aware of any policy in the industry
19   that would be able to assist us in that.
20        Q    What insurance policies did Mutual Benefit
21   issue to the Simmses which were effective on November
22   5, 2001?
0111
 1        A    I think there was a homeowners policy, a
 2   commercial policy, and I believe an umbrella policy.
 3        Q    And are you familiar with the Simmses'
 4   homeowners insurance policy?
 5        A    Yes.
 6        Q    In the course of your investigation of the
 7   Simmses' claims, did you review facts surrounding the
 8   issuance of the insurance policy to the Simmses?
 9        A    I can't remember.
10        Q    Do you know whether Mutual Benefit inspected
11   the Simms home before issuing a homeowners insurance
12   policy, or engaged someone to inspect that home?
13        A    I believe there is an inspection report in
14   the file, yes.
15        Q    And what types of information does Mutual
16   Benefit obtain in a home inspection prior to issuing a
17   homeowners policy?
18        A    Oh, gee.  I'm not in the Underwriting
19   Department so I cannot testify to all again what their
20   policy/procedures are.  I can, if you could show me
21   what you're referring to in the underwriting file, I
22   might be able to speak to that.  But, for example,
0112
 1   they may do a replacement cost estimate which was done
 2   to determine the value, or establish if there's
 3   adequate value on that particular dwelling or too much
 4   value on that dwelling.  I don't know if they do other
 5   reports of, you know, what they see and do.  I don't
 6   know.  I'm not that familiar with that side of the
 7   operations.
 8        Q    But part of your claims handling would
 9   require that you look into the circumstances
10   surrounding the application for insurance and the
11   issuance of the policy; am I correct about that?
12        A    It can.  Again, it's on a case-by-case
13   situation.
14        Q    Did you in investigating the Simmses' claims
15   and all the issues surrounding it look into the
16   underwriting of the Simmses' policy and what happened
17   in connection with their application process?
18        A    I have looked at the underwriting file on
19   the Simmses' case.  I don't know if I understand your
20   question that did I look into the underwriting of it,
21   because I did not look into how they underwrote it.  I
22   did and have reviewed their underwriting file.
0113
 1        Q    And the underwriting file contains what type
 2   of information, sir?
 3        A    I think their dec sheet, and it could
 4   contain an inspection report, the premium notices or
 5   cancellations.  I don't know what's in particular with
 6   the Simmses.  I know there's an application, the
 7   replacement cost estimate, correspondence from the
 8   agent, and other miscellaneous documents in it.
 9        Q    Now, why did you look at the underwriting
10   file, sir?
11        A    I can't remember particularly, but many
12   times I may want to see a picture of the house,
13   because in this particular case there was no house.
14   At times I will look at the information on the
15   application to determine that does it accurately
16   reflect what our investigation says, you know, the
17   type of house, the size of the house, those things, to
18   be able to do that.  In this case I believe I looked
19   at the replacement cost estimate in there to determine
20   the value on that.  So at times it is a factor that
21   may be involved in the claim handling.
22        Q    And it was a factor that you considered in
0114
 1   making decisions in connection with the Simmses'
 2   claims; am I correct?
 3        A    I think there was information in the
 4   underwriting file that, that made our decision much
 5   more clear.
 6        Q    Well, what information was that, sir?
 7        A    For example, we believe the estimate
 8   provided by the Simmses is grossly exaggerated, and
 9   based upon the value that was originally placed on the
10   policy, and that the replacement cost estimator was
11   also within a reasonable degree of a range, that we
12   felt that the value on the house was much, much closer
13   to the original application and the replacement cost
14   and not what the claim that was submitted by the
15   Simmses.
16        Q    And to determine that the estimate provided
17   by the Simmses was, as you say, grossly exaggerated,
18   one of the things that you looked at in the
19   underwriting file was the inspection report on the
20   house, correct?
21        A    If that included the estimator.  I don't
22   remember the particulars, if there was an inspection
0115
 1   report, a narrative report.  I don't sit here today
 2   and have any specific knowledge of looking at that.
 3   It very well could be in the file and I just don't
 4   remember it.
 5        Q    As part of the inspection of the Simmses'
 6   home, did Mutual Benefit determine the square footage
 7   of that home?
 8        A    I, I doubt it, but I don't know the answer
 9   to that.
10        Q    Do you know if the underwriting file gave
11   you, Mark Russell, information as to the square
12   footage of the home insured by Mutual Benefit?
13        A    I can't remember without reviewing that
14   document to determine that.
15             THE WITNESS:  And while you're looking for
16   that, I'm going to take a restroom break.
17             MR. KRAMER:  Please.
18             (A short recess was taken.)
19             (Deposition Exhibit No. 4 was marked for
20   identification and was retained by counsel.)
21   BY MR. KRAMER:
22        Q    Let me show you and your counsel what has
0116
 1   been marked as Russell Deposition Exhibit No. 4 which
 2   is a report from Mutual Inspection Bureau, Inc.
 3   (handing).  Mr. Russell, what is the Mutual Inspection
 4   Bureau, Inc.?
 5        A    I think it's a company that does
 6   inspections.
 7        Q    And is that a company that does inspections
 8   on behalf of Mutual Benefit?
 9        A    It's one of probably many independents.
10        Q    In the course of investigating the Simmses'
11   claims and in determining that their home estimate was
12   grossly exaggerated, did you review the report marked
13   as Russell Deposition Exhibit No. 4?
14        A    I believe I did.
15        Q    And did that report provide you with
16   information as to the square footage of the Simmses'
17   home?
18        A    I don't remember looking particularly at the
19   square footage.  I believe I looked at the, the last
20   page in particular of the, what they presented the
21   value was.
22        Q    So when you looked at Exhibit No. 4, the
0117
 1   only thing you looked at was the conclusion drawn by
 2   Mutual Inspection Bureau, Inc., as to the replacement
 3   cost of the home at the time the inspection was done?
 4        A    That's all I can remember looking at, yes.
 5        Q    And when was the inspection performed?
 6        A    I don't know.
 7        Q    Did you recall looking at when the
 8   replacement cost was estimated as a factor in your
 9   investigation of the Simmses' claim?
10        A    I just know it was soon after the inception
11   of the policy.
12        Q    When was the inception of the policy, sir?
13        A    You'd have to give me a copy of the
14   declaration sheet.  Sometime in 1999, I believe.
15        Q    Do you think that determining when the home
16   was inspected and the replacement value estimated
17   would be an important factor in determining whether a
18   present-day estimation of replacement value is
19   exaggerated?
20        A    We would take into consideration the date
21   that it was done and the time lapse of it done, but
22   there's usually in a policy, an inflationary cost, a
0118
 1   percentage cost inflation automatically built in the
 2   policy.  So every year the amount of insurance should
 3   go up annually on a homeowners to help protect there
 4   being a gap in the value of the dwelling and what it,
 5   you know, the worth is today.  So there's an
 6   inflationary factor that's built into the policy.
 7        Q    It's your understanding, sir, that the value
 8   of homes has risen greatly in excess of inflation in
 9   the last few years?
10        A    I don't know that to be a fact, and you --
11   and I want to make sure that I am not considering the
12   market value.  I am looking at a replacement cost of
13   what it would cost to rebuild the house, not the
14   market value.
15        Q    And so the only thing that you considered as
16   part of Deposition Exhibit No. 4 in your conclusion
17   that the Simmses presented a grossly exaggerated claim
18   for replacement of their home was the dollar figure at
19   the conclusion of that report?
20        A    That's all I can remember looking at.
21        Q    Do you know whether Mutual Inspection
22   Bureau, Inc., calculated the square footage of the
0119
 1   Simmses' home?
 2        A    I do not know that.
 3        Q    Why was it unimportant for you to determine
 4   the square footage of the home?
 5             MR. PARLER:  Objection.  You can answer.
 6        A    I just -- I may have looked at it.  I don't
 7   remember looking at it.  I can assume that what was on
 8   there may or may not be accurate.  I don't know how
 9   they get that information.  So I don't know.
10        Q    In looking at Russell Deposition Exhibit No.
11   4, can you tell me whether you are able to determine
12   the square footage reported by Mutual Inspection
13   Bureau, Inc., to Mutual Benefit regarding the Simmses'
14   home?
15             MR. PARLER:  You're asking him whether or
16   not it's in the report that you've marked as an
17   exhibit?  Is that necessary?  I'll object.  You can
18   answer.
19        A    It is in the report.
20        Q    And what does it say?
21        A    Five thousand, six hundred and ninety-two.
22        Q    Square feet, sir?
0120
 1        A    Yes.
 2        Q    And you do not recall taking that figure
 3   into consideration in determining the propriety of the
 4   Simmses' claim?
 5        A    I don't remember it being a factor at that
 6   time.  I know as we sit here today that that number is
 7   high.
 8        Q    You say that that number on square footage
 9   is high?
10        A    Yes.
11        Q    On what do you base that statement?
12        A    I believe based upon the testimony of Tracey
13   Simms that the square footage on the home was actually
14   reduced and that the better calculation on square
15   footage would be approximately forty-eight to five
16   thousand square feet, not fifty-six or fifty-seven
17   hundred square feet.
18        Q    So, actually, your policyholder, Tracey
19   Simms, gave you a lower figure than the Mutual
20   Inspection Bureau gave to Mutual Benefit?
21        A    Could you ask that again, please?
22             (Question was read by the Reporter.)
0121
 1        Q    And by that I mean a lower figure in terms
 2   of square footage.
 3        A    I think at the time of our examination under
 4   oath she gave us that information, but prior to the
 5   claim she did not give us that information, that I'm
 6   aware of.
 7        Q    Do you know whether others than your
 8   policyholders relied upon the figures contained in
 9   Mutual Inspection Bureau's report in determining the
10   replacement cost of the home?
11        A    I believe as a result of this report we
12   actually recommended that the Simmses were
13   underinsured and we felt that the original application
14   of three-seventy-some - don't hold me to that - needed
15   to be raised to, closer to the four-seventeen figure.
16        Q    And, in fact, that's what Mutual Benefit
17   did, correct?
18        A    That's what Tracey Simms did.  We
19   recommended it, she did it.
20        Q    And she had to pay a higher premium to get
21   it, correct?
22        A    She did.
0122
 1        Q    So Tracey Simms paid premiums to Mutual
 2   Benefit in order to insure a home with a square
 3   footage that your contractor reported to Mutual
 4   Benefit as five thousand, six hundred ninety-two
 5   square feet, correct?
 6        A    Well, the premium's not based upon the
 7   square footage.  The premium's based upon the value.
 8   You do use this -- the report speaks for itself.  The
 9   report in the case as we sit here today is an
10   incorrect number of fifty-six hundred which gave the
11   bottom value of the four-seventeen.
12        Q    And that would be a mistake in Mutual
13   Inspection Bureau's report to Mutual Benefit?
14        A    I don't know whose mistake it is.
15        Q    Did you look into whose mistake it was as to
16   square footage, sir?
17        A    No.
18        Q    When you concluded that the Simmses
19   presented a grossly exaggerated figure as to the
20   replacement value of their home, did you look into who
21   made the mistake as to the square footage figure?
22        A    No.
0123
 1        Q    And it is your understanding that the square
 2   footage figure does affect the replacement value of
 3   the home; is that correct?
 4        A    It's one factor in calculating it, yes.
 5        Q    Generally speaking, your understanding is
 6   that the higher the square footage, the higher the
 7   replacement cost?
 8        A    That's usually the case, yes.
 9        Q    And that higher the replacement cost, the
10   higher the premium that Mutual Benefit would charge to
11   insure it, correct?
12        A    That's correct.
13        Q    And it is your understanding that Tracey
14   Simms prior to the fire paid a higher premium based
15   upon a higher replacement cost value?
16             MR. PARLER:  Higher than what?
17             MR. KRAMER:  Higher than the original
18   replacement cost estimate.
19        A    Yes.
20        Q    Correct?
21             And those were values that were, and
22   premiums that were determined on the basis of
0124
 1   information such as contained in Russell Exhibit No.
 2   4, correct?
 3        A    I believe it was recommended and accepted by
 4   Tracey Simms to increase the value of the home, yes.
 5        Q    Do you have any facts that you have obtained
 6   during the course of your investigation or are
 7   otherwise aware of as to why Tracey Simms would want
 8   to pay a higher homeowners insurance premium on this
 9   house?
10        A    I have -- I would assume Tracey Simms would
11   want to have -- pay premium for adequate coverage to
12   protect her assets.
13        Q    But not more than would be necessary,
14   correct?
15        A    I don't think I've indicated she's paid more
16   than what was necessary.
17        Q    Okay.  In extending an insurance policy to
18   people like the Simmses, does Mutual Benefit require
19   that they provide the carrier with an inventory of the
20   contents of their home?
21        A    I don't believe so.
22        Q    Is a policyholder required to submit to
0125
 1   Mutual Benefit an inventory or other notification when
 2   they acquire property?
 3        A    No.
 4        Q    Prior to a loss, is there any requirement
 5   that any policyholder of Mutual Benefit under a
 6   homeowners policy provide to Mutual Benefit an
 7   accounting of what the contents of their home happen
 8   to be?
 9        A    No.
10        Q    So following a loss, would I understand
11   correctly the only thing a homeowner can do is to use,
12   as you've testified before, their best guess as to
13   what was in the home and to the best of their ability
14   provide some type of inventory on which a claim may be
15   based?
16             MR. PARLER:  Objection; mischaracterizes
17   prior testimony.  You may answer, sir.
18        A    I believe the insured is the only person
19   that can give us that information.
20        Q    So you agree with the statement contained in
21   my question, sir?
22        A    Yes.
0126
 1        Q    Under the Simmses' homeowners insurance
 2   policy, does Mutual Benefit provide coverage for
 3   replacement cost of the dwelling?
 4        A    Yes.
 5        Q    Must your policyholders under the terms of
 6   their policy actually replace their home in order to
 7   obtain the replacement cost of their dwelling?
 8        A    Yes, they would.
 9        Q    And then Mutual Benefit would reimburse them
10   the cost of replacing the home?
11        A    In practice we would get an agreement of
12   what that would be prior to the replacement.  But
13   then, yes, they -- in the normal course we may
14   withhold a certain amount until the home was
15   completed, and then they would get that.
16        Q    All right.  So you would enter into an
17   agreement with your policyholder as to what the cost
18   of replacing the home would be before you would
19   authorize that the home be rebuilt?
20        A    Correct.
21        Q    That's the practice?
22        A    Correct.
0127
 1        Q    And, naturally, while you want your insureds
 2   to be placed in the same position they were prior to
 3   the loss, it would be in Mutual Benefit's best
 4   interest to engage a contractor that would replace the
 5   home at a reasonable cost, correct?
 6             MR. PARLER:  Objection.  Can you read that
 7   question back?
 8             (Question was read by the Reporter.)
 9             MR. PARLER:  You may answer, sir.
10        A    I don't think we would always require that
11   we would engage a contractor.  The insured is to
12   engage a contractor, because we don't sign the
13   contract.  This is between the insured and the
14   contractor.  What we will require is that -- is we
15   will look at the estimate and determine whether we
16   think it's fair and reasonable.  If there are
17   differences of opinion we may bring in another
18   contractor to determine if it's reasonable.
19        Q    And then ultimately it is Mutual Benefit's
20   practice to negotiate an acceptable deal for
21   rebuilding the house?
22        A    That would be our practice.  I can sit here
0128
 1   today and I do not believe we've ever had a total
 2   loss, in my six years, where there is a replacement
 3   cost on a home.  But in practice I think we would try
 4   to reach an agreement of a price to replace of like,
 5   kind and quality of that particular home.
 6        Q    So that it would be Mutual Benefit's
 7   practice if it got a very high estimate, to bring in
 8   another contractor and see if that house can't be
 9   rebuilt at a more reasonable cost, or what Mutual
10   Benefit regards as a more reasonable cost?
11        A    In most cases we would be using, as I
12   testified earlier, an independent, and a lot of times
13   an independent would have a say in that decision of
14   whether -- because, you know, they're more technically
15   inept (sic) to determine if the original estimate, if
16   they think it may be high or may not be reasonable,
17   may not be detailed enough.  There's other
18   circumstances that, yeah, there may be a
19   recommendation to bring in another contractor for an
20   estimate.
21        Q    Okay.  And you considered the estimate
22   submitted by the Simmses to be very high?
0129
 1        A    Grossly high.
 2        Q    I think you said that it was -- right,
 3   grossly high or, as you've testified, grossly
 4   exaggerated?
 5        A    Correct.
 6        Q    So in that case it would be the practice of
 7   Mutual Benefit to engage another contractor and see if
 8   that house can't be rebuilt at a more reasonable cost?
 9        A    That can be our practice.  I felt in the
10   Simmses case that there was such a difference between
11   the value we had on a new home and looking at the --
12   when we wrote the application, and considering things
13   such as inflationary factors, that, you know, to me it
14   was obvious that it was very, very high.
15        Q    Well, why didn't you follow Mutual Benefit's
16   practice of engaging another contractor and working
17   with the insureds to see if this couldn't be rebuilt
18   for a lower cost?
19        A    Because I believe that this was beyond any
20   degree of reasonableness.  This was several hundreds
21   of thousands of dollars over what I think that the
22   value to replace this home was, and at that point red
0130
 1   flags began to surface on the Simms case.  So it was
 2   not only the building loss, there were other
 3   circumstances that we took into consideration.
 4        Q    So instead of working with your
 5   policyholders, the Simmses, to determine whether the
 6   house could be rebuilt at a lower cost than the Spamer
 7   estimate that was submitted to Mutual Benefit, you
 8   used that as a basis for ultimately denying their
 9   claim entirely?
10        A    That is part of the reason we denied the
11   claim, yes.
12        Q    Did you ever try to work with the Simmses to
13   negotiate a more, what you regarded as a more
14   reasonable agreement to rebuild their house?
15        A    No, I don't believe at that point we did.  I
16   think we were, again, looking at other aspects of the
17   claim, and at that point we also felt that there was
18   further investigation needed to be done such as the
19   examinations under oath.  And then they would have the
20   ability to explain to us under oath their position on
21   the claim.
22        Q    How many estimates did the Simmses submit to
0131
 1   Mutual Benefit?
 2        A    On what aspect?
 3        Q    I apologize.  My question now is how many
 4   estimates for rebuilding of the home did the Simmses
 5   submit to Mutual Benefit?
 6        A    I'm only aware of the one.
 7        Q    And what was the amount of that estimate,
 8   sir?
 9        A    Please don't hold me to it.  I believe it
10   was six hundred and forty thousand dollars.  If you
11   could show me the document, I'm sure I could confirm
12   that.
13        Q    Versus what was your understanding of the
14   replacement value of the home?
15        A    I believe it should have been in the range
16   of higher than four-seventeen, maybe four-thirty-five.
17   I think the underwriting file reflects a
18   recommendation to actually take it to four thirty-
19   five.  Again, we're dealing with a new home, newly
20   constructed, which the values that were established
21   and what was -- we were told what was put into the
22   home by the Simmses, that, you know, it was somewhere
0132
 1   within that range.
 2        Q    Did Mutual Benefit insure the home to a
 3   replacement cost of four hundred and thirty-five
 4   thousand dollars?
 5        A    No, I believe it was refused.
 6        Q    Refused by whom, sir?
 7        A    I don't know.
 8        Q    Did Mutual Benefit ever issue a policy to
 9   the Simmses for a replacement cost on that home of
10   four hundred thirty-five thousand dollars?
11        A    I believe the policy may have been issued,
12   and then it was asked to be reverted back to the four-
13   seventeen.
14        Q    And did Mutual Benefit lower the amount of
15   insurance coverage on the home to a replacement cost
16   of four hundred seventeen thousand dollars from four
17   hundred thirty-five thousand?
18        A    I believe that may have occurred, yes.
19        Q    You believe it may have occurred, or do you
20   know?
21        A    I believe that may have occurred.  I'm not a
22   hundred percent positive.
0133
 1        Q    What do you base your belief on?
 2        A    I know that it was recommended, because,
 3   see, again, every year the policy is to go up by an
 4   inflationary factor, and you will note that in this
 5   policy term it never went up from the prior policy
 6   period.
 7        Q    And what do you base that statement on, sir?
 8        A    All our homeowners policies have an
 9   inflationary factor; they are automatically increased
10   every year.  In addition, I believe there are
11   documents either I have reviewed - I don't know if
12   it's in the underwriting file or the agent's file -
13   which would reflect a request that it was supposed to
14   go to four thirty-five.  I think there's a note in the
15   underwriting file that said four-thirty-five and then
16   we were told to back it down to four-seventeen.
17        Q    What is the most Mutual Benefit ever insured
18   the house for?
19        A    I believe four-seventeen, but don't hold me
20   to these numbers.  I believe it's four-seventeen.
21   There's a lot of facts and figures that are in this
22   particular case, and I'm not real good with numbers,
0134
 1   but I believe it's four hundred and seventeen
 2   thousand.
 3        Q    And that's a figure that never increased, is
 4   that your understanding?
 5        A    That was my understanding at the time of the
 6   loss, it had never --
 7        Q    And that was your understanding when making
 8   the decision to deny the Simmses' claim?
 9        A    That was part of my basis for the position.
10        Q    That was your understanding when making the
11   decision to deny their claim?
12        A    Yes, that the value of the home was closer
13   to the four-seventeen, not six-forty.
14        Q    You've testified previously that your
15   policyholders refused an increase in their replacement
16   cost coverage on the home.
17        A    I do not know that as fact.  I know that the
18   agent told us that, to back it down to four-seventeen,
19   and I can only assume -- you'll have to talk to the
20   agent, what her communication was with the Simmses.
21        Q    Have you ever seen any documentation to that
22   effect, sir?
0135
 1        A    There's a note in our file, underwriting
 2   file that indicates that.
 3        Q    And describe the note for me, sir.
 4        A    I think it's a handwritten note.  There's a
 5   sticky note which -- something about the value, and
 6   then it looks like the underwriter followed up and
 7   they agreed, because I guess the issue was they just
 8   made the insured take the increase from the three-
 9   seventy to the four-seventeen, and then on the renewal
10   term when it went up --
11             THE WITNESS:  Bill, do we have those
12   documents?
13             MR. PARLER:  I think we do.  Would you like
14   us to find the document, or --
15             MR. KRAMER:  Please, Mr. Parler.  I
16   appreciate your help.
17   BY MR. KRAMER:
18        Q    While Mr. Parler is searching for that, let
19   me follow up with another question.
20             If Mutual Benefit were to insure --
21   understanding your testimony that Mutual Benefit
22   insured the home to a value, a replacement cost of
0136
 1   four hundred and thirty-five thousand dollars, what
 2   would be required in terms of documentation to then
 3   reduce that coverage back down to four hundred and
 4   seventeen thousand dollars?
 5        A    I think ultimately that's the policyholder's
 6   decision.
 7        Q    Well, what documentation would implement a
 8   change that would reduce the amount of coverage?
 9        A    Well, we would need a request from the
10   insured to reduce; only the insured can reduce
11   coverage.
12        Q    Would that request have to be in writing?
13        A    No, not necessarily.
14        Q    Once a request is made by the insured to
15   reduce the replacement cost coverage on a home, what
16   documentation internally by Mutual Benefit would
17   implement that change?
18        A    You'd have to ask one of the underwriters
19   what their documentation is.  It may just be a note,
20   and they just renew it as is and put a note in the
21   file.
22        Q    With a reduction in premium?
0137
 1        A    The premium is calculated based on the
 2   coverage and the value yes.
 3        Q    If Mutual Benefit is providing a replacement
 4   cost policy on a home, is it truly the insured's
 5   decision to insure the house for less than Mutual
 6   Benefit wants to insure it?
 7        A    If it -- I can't speak for the underwriting
 8   guidelines, you'll have to ask an underwriter, but if
 9   it's, if it's not within a degree of reasonableness,
10   it may not qualify for this particular Promark account
11   which is a lesser rate, it's cheaper, and it's for
12   newer homes, it may have to go into a standard rating
13   which may require to pay higher premiums.  So, but I
14   don't know.  I'm not an underwriter, therefore I don't
15   know the particulars of that, but, again, this is a
16   newly constructed home, and truly the insured takes
17   the risk by reducing the coverage.
18        Q    Mr. Russell, would --
19             MR. PARLER:  Do you want him to assist in
20   locating this document, or not?
21             MR. KRAMER:  I have a couple questions
22   first.
0138
 1        Q    Would Mutual Benefit --
 2             MR. PARLER:  There you go.  It's Bates No.
 3   3778 (handing).
 4             (Witness handing.)
 5             (Discussion off the record.)
 6             (Deposition Exhibit No. 5 was marked for
 7   identification and was retained by counsel.)
 8   BY MR. KRAMER:
 9        Q    Showing you what your counsel has provided
10   to us as Russell Deposition Exhibit No. 5, let me ask
11   if you recognize this document, sir (handing)?
12        A    I do.
13        Q    What is it?
14        A    It's a piece of correspondence I believe was
15   in our underwriting file.
16        Q    And what information did Russell Exhibit No.
17   5 provide to you in connection with the claim or the
18   insurance at issue?
19        A    Well, it was relevant to the building
20   coverage on the Simmses' loss and, you know, it speaks
21   that apparently there is an inquiry of why the jump in
22   Coverage A, because it had recently been increased at
0139
 1   our request based upon the inspection report, which I
 2   testified earlier to, which raised it from three
 3   seventy-four to four-seventeen, and I believe it was
 4   going to go up to four thirty-five, which is the
 5   inflationary factor which is built into our policies.
 6   And it looks like that we were asked to not increase
 7   it to the four thirty-five on the renewal and that it
 8   should remain at four hundred and seventeen thousand
 9   (indicating).
10        Q    You're referring to a Post-it that
11   apparently was copied as a part of Exhibit No. 5,
12   correct?
13        A    Yes.
14        Q    And it says, for the record:  "Why the jump
15   in Coverage A, question mark?  Just increased it at
16   our request last year.  Can we change it back,
17   question mark?"  Is that the Post-it you're referring
18   to, sir?
19        A    Yes.
20        Q    Did Mutual Benefit ever respond to the
21   questions posed in that Post-it?
22        A    You'll have to ask the person who did this.
0140
 1   But based upon what I'm looking at, it would look to
 2   me that they did and that the note generated the sheet
 3   it's attached to, which after reviewing file, four-
 4   seventeen is okay for 2000-2001 period.  After
 5   reviewing file, felt four-seventeen is okay for 2000-
 6   2001 period, three seventy-four to four-seventeen,
 7   June '99, effective 4/30/2000, decrease Coverage A to
 8   four hundred and seventeen thousand dollars.  So I'm
 9   assuming this note generated this activity in the
10   file.
11        Q    Okay.  What was the date of loss on this?
12             MR. PARLER:  November 5th, 2001.
13        A    November 5th, 2001.
14        Q    So given that the date of loss was November
15   5, 2001, does coverage from April 30, 2000 to April
16   30, 2001 have any bearing on the issues relating to
17   this claim?
18        A    The renewal process takes place prior to
19   that.  The renewal process with communication with the
20   agent and insured takes place prior to the expiration
21   of the policy.  There may be policy changes, and,
22   again, the coverages were going to go up, and I assume
0141
 1   this was in the, in that renewal process that this
 2   action took place.
 3        Q    Renewal process for April 30, 2000 to April
 4   30, 2001?
 5        A    I have to assume it had to be on the renewal
 6   that this was taking place.
 7        Q    And April 30, 2000 to April 30, 2001 would
 8   not be the policy period that encompassed the fire
 9   loss at issue in this case, correct?
10        A    I'd have to look at the dec sheet to
11   determine.  I don't remember the effective dates of
12   the policy.
13        Q    But you do recall that the fire loss at
14   issue in this case did not occur between the dates
15   4/30/2000 and 4/30/2001, correct?
16        A    That's correct.
17        Q    And Deposition Exhibit 5, the note that --
18   or the sheet that surrounds the Post-it was written by
19   a Susan Hannah of Ashbrook Insurance?
20        A    I don't know who wrote that.  I doubt it.
21        Q    Do you have any idea as to who wrote it?
22        A    I don't.  I can only assume it was a message
0142
 1   from the agent for this underwriter.
 2        Q    Have you ever spoken to the agent in the
 3   course of your investigation, sir?
 4        A    I have not.
 5        Q    Do you know if anyone on your behalf did?
 6             MR. PARLER:  I'm going to instruct him not
 7   to answer to the extent that that answer would involve
 8   communications with counsel.
 9        Q    Beyond your attorney, do you know if anyone
10   acting on behalf of Mutual Benefit spoke with the
11   insurance agent?
12        A    I mean, I have spoken to the insurance
13   agent.
14        Q    In connection with this issue, sir.
15        A    Just regarding some statuses in there.  But
16   nothing relevant to what we're discussing here, no.
17        Q    Okay.  Thank you.
18             You said that in your experience at Mutual
19   Benefit you had not seen a total loss of a home on
20   which there was a replacement cost policy; is that
21   correct?
22        A    I cannot recollect any.
0143
 1        Q    This is the first claim of its kind and only
 2   one that you recall?
 3        A    Yes.
 4        Q    And am I correct that a replacement cost
 5   policy would present a higher exposure to Mutual
 6   Benefit than one for actual cash value?
 7        A    In most cases, yes.
 8        Q    Can you recall any case in which that would
 9   not be true?
10        A    Well, as I testified, the insured would need
11   to rebuild.  The insured would have a right, I
12   believe, to take the actual cash value of the home and
13   rebuild a different home, but they would need to --
14   unless they exceeded the actual cash value, they're
15   not guaranteed the replacement cost.  So there are
16   circumstances where that could happen.
17        Q    But it would be rare, you would agree?
18        A    This is the only claim I've had, so I guess
19   from our standpoint it is rare.
20        Q    What is the difference between a replacement
21   cost policy and a policy providing actual cash value
22   or ACV of the home?
0144
 1        A    From the insurance industry standpoint
 2   actual cash value would take into physical
 3   depreciation.
 4        Q    And there wouldn't be such depreciation in
 5   connection with a replacement cost policy, correct?
 6        A    Well, it is, it is a factor because we would
 7   not pay out more than our actual cash value until the
 8   actual replacement is done.
 9        Q    Now, let me ask you about -- are you
10   familiar with the term guaranteed replacement cost?
11        A    Somewhat.
12        Q    What does that mean?
13        A    You're not limited by the Coverage A, that
14   if the cost of that would go higher than that, it
15   would, it would assure that they'd replace a home of
16   like, kind and quality.
17        Q    Meaning that if Mutual Benefit insured to a
18   replacement cost of four hundred seventeen thousand
19   dollars or four hundred thirty-five thousand dollars
20   but it actually cost more to rebuild, that would be
21   what Mutual Benefit would reimburse to its insureds
22   for rebuilding the house?
0145
 1        A    Yeah.  But I believe that it's a requirement
 2   that the insured must carry a hundred percent of what
 3   they believe that replacement cost value is, so, you
 4   know, but to get it close.
 5        Q    Did the Simmses have a guaranteed
 6   replacement cost policy?
 7        A    I believe they did.
 8        Q    In that case, would it be true that the
 9   Simmses could dictate less than one hundred percent of
10   the replacement cost value of the house?
11        A    They need to be within a, a fair range, and
12   the Simmses should be in a better position to know
13   that value than we do.  But if we know that the
14   replacement cost in a fictitious example is five
15   hundred thousand, the insured would not be able to get
16   the replacement cost carrying a value of two hundred
17   and fifty.  I don't know the particular guidelines for
18   that, but you could see that we would not be getting
19   adequate premium for our exposure.  The insured would
20   be paying cheap insurance for the ability to collect
21   more than what they're paying for.
22        Q    Right.  So when you have guaranteed
0146
 1   replacement cost policy, as you do in connection with
 2   the Simmses' home, that's the reason that there is a
 3   requirement that one hundred percent of that
 4   replacement cost be insured for, correct?
 5        A    And that was our basis of why we recommended
 6   to the Simmses that three seventy-four was not
 7   adequate, four-seventeen was more adequate.  Okay?
 8   And also that the inflationary guard in that, the
 9   Simmses refused that.
10        Q    But it wouldn't be true, then, that the
11   Simmses could dictate to Mutual Benefit, no, we want
12   less than a hundred percent of the value, correct?
13             MR. PARLER:  Excuse me, can you read that
14   question back?
15             (Question was read by the Reporter.)
16             MR. PARLER:  Objection to the form of the
17   question, which has either a triple or quadruple
18   negative.  But you can answer it if you understand it.
19             MR. KRAMER:  I'll rephrase it.
20   BY MR. KRAMER:
21        Q    If Mutual Benefit requires that the Simmses
22   insure to one hundred percent of the replacement cost,
0147
 1   is it your understanding that the Simmses could vary
 2   from that requirement and insure for less than that
 3   amount?
 4        A    They might be able to.  It would be on a
 5   case-by-case situation.  I think you could as long as
 6   it's within a fair, reasonable range.  Remember, this
 7   house was built in 1999.  The Simmses knew what the
 8   house should be worth to rebuild it, they just built
 9   it.  All right?  We just put forty thousand dollars,
10   which we felt that they needed, that they were not
11   protected, in that, so when the inflationary factor
12   took place, raising it to four thirty-five, that four
13   thirty-five and four-seventeen are close enough versus
14   six hundred and forty thousand dollars.
15             If it gets to a point where an underwriter's
16   not comfortable, they would not qualify, we would not
17   give them guaranteed replacement costs and they may
18   not qualify for the Promark tracking tier which is a
19   premiere, it's a cheaper rate.  They may have to go
20   into a standard tier or some other type tier.  And I'm
21   not intimate with that and how that works.  That's an
22   underwriting function.
0148
 1        Q    Is it your understanding that the Simmses
 2   have any particular expertise in home appraisal or
 3   replacement cost estimating?
 4        A    Well, knowing that her father built the
 5   house and they knew what he built it for and they just
 6   built it, I think one would know what they just built
 7   the house for.
 8        Q    Does -- well --
 9        A    I don't think you need any expertise --
10        Q    One would know --
11        A    -- to know what you built a new house for.
12        Q    Well, you understand that the Simmses built
13   this house through the assistance of Tracey's father,
14   correct?
15        A    Correct.
16        Q    And that Tracey's father was not acting in
17   the capacity of an arm's length real estate contractor
18   or developer when undertaking that project, correct?
19        A    I don't know what his involvement.  I know
20   he was the general contractor on the home.
21        Q    You understood, didn't you, that he was
22   helping his daughter and son-in-law out by building
0149
 1   the house at a low cost to them, correct?
 2        A    I don't know what he built it at.  I know
 3   what he had in labor and I know what he had in
 4   materials.
 5        Q    Did you ever do anything to determine
 6   whether the cost of building the Simmses' home
 7   initially was below what one could ordinarily build a
 8   house for under fair market conditions?
 9             MR. PARLER:  Objection to the form of the
10   question.  You can answer if you understand it.
11        A    Well, if my memory serves me right, they had
12   two hundred and eighty-some thousand material and
13   labor into the home, and if you would ask a general
14   contractor the normal percentage of overhead and
15   profit, that my experience tells me they'd be entitled
16   to about twenty-five percent.  And clearly the Simmses
17   knew that because they didn't insure it for two
18   hundred and eighty-six thousand, they insured it for
19   three hundred and seventy-four thousand.  So I assume
20   that when they established the value they took into
21   consideration the impact of their father doing it
22   cheaply the first time.
0150
 1        Q    Did you take into account the impact of
 2   their father using subcontractors who were personal
 3   family friends that were doing and performing labor at
 4   cost?
 5        A    No.
 6        Q    And when Mutual Benefit is insuring the
 7   replacement cost of a home, would I be correct in
 8   understanding that that replacement cost would be the
 9   cost that a contractor in an arm's length fair market
10   value transaction would charge to rebuild?
11        A    Correct.
12        Q    Not what a loving father might charge in
13   terms of a deal that was done at cost to help out his
14   kids?
15        A    Correct.
16        Q    There is also a -- this policy of homeowners
17   insurance also provides the Simmses with replacement
18   cost of their contents, correct?
19        A    Correct.
20        Q    And in order for the Simmses to take
21   advantage of replacement cost for those contents as
22   opposed to the actual cash value of contents, they are
0151
 1   required under the policy to actually replace the
 2   contents at issue, correct?
 3        A    Spend those dollars toward contents, yes.
 4        Q    Okay.  So Mutual Benefit is only going to
 5   reimburse the Simmses for the contents -- Mutual
 6   Benefit will only incur the replacement cost of an
 7   item once it has actually been replaced and the
 8   Simmses actually spent those dollars?
 9        A    That's correct.
10        Q    So even if the Simmses submit what Mutual
11   Benefit would regard as an inflated replacement cost
12   estimate on a given item, Mutual Benefit would only
13   incur what dollars are actually spent to replace the
14   item, correct?
15        A    That's not quite accurate.  The starting
16   point to determine actual cash value is actually the
17   price to replace it.  Therefore, an overinflated price
18   on the item would generate a higher actual cash value,
19   which is not the intent of the policy.
20        Q    Well, did you determine whether the Simmses
21   intended to replace the contents of their house?
22        A    Can I have that question back to me, please?
0152
 1             (Question was read by the Reporter.)
 2             MR. PARLER:  I'm going to object to the form
 3   of the question.  You mean at some future date?
 4             MR. KRAMER:  Well, hold on a second.  All
 5   right.  Let me start with a question.
 6             MR. PARLER:  So you're withdrawing that
 7   question?
 8             MR. KRAMER:  I'll withdraw that question and
 9   I'll ask you this.
10   BY MR. KRAMER:
11        Q    Under the terms of the policy, are the
12   Simmses required to replace the contents of their home
13   within a given period in order to obtain replacement
14   costs?
15        A    I believe there is a time limitation in the
16   policy.
17        Q    What is it?
18        A    It refers to a hundred and eighty days, but
19   it would be a hundred and eighty days, and at times
20   when we're requested, that is something that is
21   extended for the inability to do it.  A lot of people
22   when there's a total loss, we would assume they are
0153
 1   going to replace their contents or a portion of that.
 2   But the adjusting process, to answer your question,
 3   starts at the replacement cost, on the replacement
 4   cost, that's how we determine actual cash value.
 5        Q    The adjusting process but not the payment
 6   process, correct?
 7        A    We can't get to the payment without knowing
 8   the replacement cost.
 9        Q    And you only really know what replacement
10   cost you must pay once replacement has been made,
11   correct?
12        A    We would get an agreement with the insured
13   that this is what we agreed to as the replacement cost
14   of your contents.  They would subsequently receive a
15   lesser payment.  As they get above that payment, we
16   would then reimburse them up to the agreement.
17        Q    So the first step is you ask the
18   policyholder to provide an itemization of the contents
19   of their home, correct?
20        A    Correct.
21        Q    And what information do you have your
22   outside independent adjustor obtain from insureds like
0154
 1   the Simmses in connection with their contents?
 2        A    Well, normally they would hand out, you
 3   know, their inventory sheets and would ask them to
 4   complete various sections of that.
 5        Q    And what information do you require from
 6   your policyholders?
 7        A    Some independents will get more information
 8   than others, but normally we'd like to know the
 9   quantity, the brand name of what it is, when it was
10   purchased, and do you have documentation, a receipt, a
11   bill, something to proof of ownership, something of
12   that nature, and what it would cost to replace it of
13   like, kind and quality.
14        Q    And when you are asking -- and so you're
15   asking for them to obtain -- to go to retailers,
16   right, and obtain the sales prices of certain goods so
17   that a replacement cost can be estimated, correct?
18        A    That's not always done on a homeowners loss,
19   and I guess independents may instruct our
20   policyholders to do various things based upon the
21   circumstances.  Some people don't need to do that;
22   some people find it helpful to do that.  So there may
0155
 1   be alternative ways.  I know it depends on the
 2   particular case.
 3        Q    You would agree with me, Mr. Russell, that
 4   the process of compiling an inventory, particularly
 5   one as extensive as that of the contents of the
 6   Simmses' home, is not an exact science, is it?
 7        A    No, but it should be fairly accurate.
 8        Q    When one is determining the quantity of
 9   socks, as I think you've indicated, it's certainly
10   easy to have the precise figures wrong?
11        A    Those are difficult to know, the exact
12   numbers of those types of items.
13        Q    And, similarly, when one doesn't have actual
14   receipts for purchasing certain goods and one wants to
15   determine what the replacement cost would be, it's
16   reasonable to go to retailers or other dealers to
17   determine how much they could buy it for?
18        A    They can do that.  You could call people,
19   you can look in catalogues to, to look and see what
20   might be reasonable and fair.  I think different
21   insurers do it different ways in ability to do that.
22   High-ticket items, most people have an idea and they
0156
 1   may want to go back because they remember where they
 2   purchased it and how much they paid for it, and, you
 3   know, most people may be able to make a phone call and
 4   be able to establish that within a degree of
 5   reasonableness.
 6        Q    When you say within a degree of
 7   reasonableness, you're also saying, are you not, that
 8   figures can vary from one place to another, one source
 9   to another?
10        A    Within reason.
11        Q    Was there a percentage, sir, that you have
12   that determines what's within reason?
13        A    No.  It would be on an item-to-item
14   judgment, decision.
15        Q    When providing estimates of replacement
16   costs, are your policyholders required to get for you
17   the very best possible discount sales price?
18        A    I'm sure insureds do that.  I think they're
19   going to give us a price that, what they could
20   purchase it for.
21        Q    And if they go to a retailer establishment
22   and obtain estimates for replacement cost of certain
0157
 1   items, are they to obtain retail values?
 2        A    They should ask for price, what is it going
 3   to cost them if they buy it.
 4        Q    And if an establishment were to provide a
 5   written estimate on the cost of an item, is it
 6   unreasonable or improper for your policyholder to
 7   submit that information to Mutual Benefit?
 8        A    I believe it would be improper for a
 9   policyholder to provide an estimate from a retailer
10   knowing that that is not the price you would normally
11   pay for those items.
12        Q    So your policyholder has to determine
13   whether the retailer is telling the truth in providing
14   an estimate; is that your testimony?
15        A    I believe the insureds should ask what is it
16   going to cost me to replace this, and knowing that you
17   would not pay, in many times, the suggested
18   manufacturer retail price.
19        Q    If an insured submits an estimate that is
20   based upon full retail value but later purchases that
21   item for less, which figure is Mutual Benefit required
22   to pay, the list price for full retail value, or what
0158
 1   the insured actually paid to replace it?
 2        A    We would have paid them the actual cash
 3   value, and they can buy it or not buy it.  That's the
 4   value of the property.  If they only spent the actual
 5   cash value because they were able to get it at that
 6   price, we are not obligated to pay any monies.  That
 7   would be putting dollars in the insured's pocket, and
 8   we are trying to make them whole.  So if they're made
 9   whole and they got what they had for that price,
10   that's all they're entitled to.  But if they didn't
11   expend the monies, we're not going to give it to them.
12        Q    If there is an item for which a policyholder
13   submits a manufacturer's suggested retail price of ten
14   thousand dollars but the insured replaces it for six
15   thousand dollars, what figure is Mutual Benefit
16   obligated to pay its insured in connection with that
17   item?
18        A    Six thousand dollars.
19        Q    So under that scenario, the insured would
20   not personally benefit from submitting a ten-thousand-
21   dollar estimate; is that correct?
22        A    Unless the item could have been purchased
0159
 1   for six thousand and they were only entitled to three
 2   thousand actual cash value.  Therefore, they could
 3   have collected the six and never spent the money;
 4   therefore, the six would have been an exaggeration of
 5   the actual cash value.
 6        Q    But, sir, to pay -- you're only obligated to
 7   pay replacement costs for items that are actually
 8   replaced; am I correct?
 9        A    Right.  But if the original replacement cost
10   is high, the actual cash value will be high and not be
11   a correct figure.  Therefore, in your situation, if
12   the figure should have been six, the actual cash value
13   should have been three.
14        Q    In connection with contents, what is the
15   distinction between actual cash value, or as it's
16   sometimes referred to, ACV, and the replacement cost
17   of that item?
18             MR. PARLER:  Objection.  That's been asked
19   and answered about four or five times.
20             MR. KRAMER:  Only in connection with real
21   estate, sir.
22        Q    What is the distinction?
0160
 1             MR. PARLER:  He answered that.  You can
 2   answer it again.
 3        A    I think I did testify to that.  You would
 4   take the replacement cost of what you could get that
 5   item and then you would back out physical
 6   depreciation.  And sometimes obsolescence.  Certain
 7   things, for example, computers will depreciate faster
 8   than other items versus a table, where it may not
 9   depreciate.  So you look at different things and apply
10   different depreciation on different categories of
11   personal inventory.
12        Q    As to any of the items contained on the
13   Simmses' inventory, did the Simmses ever notify Mutual
14   Benefit that it wanted actual cash value payment as
15   opposed to ultimate reimbursement for replacing those
16   items?
17        A    No.
18        Q    Did you ever ask the Simmses what their
19   intentions were with respect to their contents?
20        A    No.
21        Q    Why not?
22        A    It's not a normal course of our procedure.
0161
 1   We're going to pay them the actual cash value.  They
 2   understand they have replacement cost.  We will
 3   explain the procedure to them.  If they elect to
 4   replace it, they've been instructed what to do.  If
 5   they elect not to replace it, it's over.
 6        Q    When determining actual cash value, does
 7   Mutual Benefit always just take the insured's word for
 8   it, or do they do some type of independent analysis to
 9   determine what the ACV really ought to be?
10        A    We will -- the insured is obligated to
11   provide us with a fair and reasonable estimate of
12   their contents, and we may or may not challenge
13   particular items or quantities or circumstances, but
14   we don't do that until we get an opportunity to review
15   their inventory.
16        Q    Okay.  And if you review an inventory
17   submitted by one of your policyholders and find that
18   inventory to be high, inflated, or in excess of what
19   you believe to be the proper value for the items,
20   would the process of insurance adjustment require that
21   you offer less money to the insureds?
22        A    No, it more likely may warrant a more
0162
 1   intensive investigation.
 2        Q    Have you ever resolved claims submitted by
 3   homeowners for a lower value than the homeowners have
 4   submitted?
 5        A    Yes.
 6        Q    In the process of insurance adjustment, have
 7   you or your staff ever adjusted the values that were
 8   submitted by the policyholders in a downward direction
 9   to pay what Mutual Benefit determined to be the
10   appropriate value?
11        A    There are cases like that, yes.
12        Q    In fact, that is in many respects a very
13   fundamental function of what is called insurance
14   adjustment, adjusting the claim, correct?
15        A    Yes, it can be.
16        Q    And one of the things that insurance
17   professionals such as yourself and your staff adjust
18   would be the value of a claim, correct?
19        A    Yes.
20        Q    Did Mutual Benefit or anyone acting on
21   behalf of Mutual Benefit do anything to work with the
22   Simmses to adjust the value of their contents loss to
0163
 1   be more in line with what Mutual Benefit believed to
 2   be an appropriate and fair value?
 3        A    No.
 4        Q    Why not?
 5        A    It was our belief that the inventory was so
 6   grossly exaggerated in conjunction with the building
 7   loss, in conjunction with the financial status of the
 8   insureds, that this particular fire warranted further
 9   investigation.  Therefore, we undertook having an
10   accountant look at the particular records to provide
11   us, we hired legal counsel to conduct examinations
12   under oath, to provide us with an opinion of the facts
13   of this case.
14        Q    Is it your understanding that the Simmses
15   lost their home in the fire of November 5, 2001?
16        A    Yes.
17        Q    Is it your understanding that that home was
18   totally destroyed?
19        A    Yes.
20        Q    Is it your understanding that all of the
21   contents of that home were totally destroyed?
22        A    Yes.
0164
 1        Q    So you would agree that the Simmses
 2   sustained a very substantial property loss of their
 3   home and its contents on November 5, 2001?
 4        A    Yes.
 5        Q    You would agree that the Simmses sustained
 6   very significant monetary losses by virtue of losing
 7   all of their property and belongings?
 8        A    Yes.
 9        Q    But rather than work with the Simmses to
10   negotiate an appropriate, what you believe to be,
11   reasonable cost to replace their contents and replace
12   their home, Mutual Benefit decided to step up its
13   investigation for purposes of determining whether
14   fraud was committed; is that correct?
15             MR. PARLER:  Objection to the form of the
16   question.
17             MR. KRAMER:  No speaking objections.
18             MR. PARLER:  You asked --
19             MR. KRAMER:  We'll usher him out before you
20   give a speaking objection.
21             MR. PARLER:  Mr. Kramer, calm down.
22             MR. KRAMER:  If you have a speaking
0165
 1   objection, we'll usher him out.
 2             MR. PARLER:  The question is argumentative.
 3             MR. KRAMER:  Fine.  Well --
 4             MR. PARLER:  And I'm objecting on that
 5   basis.  It's something better suited for a jury.
 6             MR. KRAMER:  Well, That is fine.
 7             MR. PARLER:  Mr. Russell --
 8             MR. KRAMER:  I'm glad it persuades you.
 9             MR. PARLER:  -- if you want to answer the
10   question.
11             MR. KRAMER:  But your objection is noted.
12   BY MR. KRAMER:
13        Q    What is your answer, sir?
14        A    I can't remember the question.
15        Q    I'll repeat it.
16             Although you understood that the Simmses
17   sustained very substantial monetary losses on November
18   5, 2001, Mutual Benefit opted to heighten its
19   investigation of its policyholders rather than work
20   with the Simmses to negotiate a reasonable cost for
21   replacing their home and its contents; is that
22   correct?
0166
 1             MR. PARLER:  Same objection.  You may
 2   answer, sir.
 3        A    Mr. Kramer, this claim, in my opinion, was
 4   so grossly exaggerated, it warranted an investigation.
 5   It is my responsibility as Vice President of Claims to
 6   do that.  It is my responsibility to not pay
 7   fraudulent claims.  It is my responsibility to protect
 8   my other policyholders.  So it was my duty and
 9   obligation to undertake further investigation in order
10   that we could make a determination of whether we
11   wanted to enter into negotiation with the Simmses or
12   whether we were going to deny their claims based on
13   insurance fraud.
14        Q    And you have denied their claim entirely; is
15   that correct?
16        A    We have.
17        Q    So that you are not -- although you know
18   that the Simmses sustained substantial monetary losses
19   by virtue of losing all of their property and their
20   home on November 5, 2001, Mutual Benefit does not wish
21   to pay the Simmses one penny?
22        A    The policy is very clear.
0167
 1        Q    What's the answer, sir?
 2        A    The answer is no, we will not pay a penny.
 3        Q    And rather than deny their claim entirely,
 4   one of Mutual Benefit's options was to work with its
 5   policyholders and determine a reasonable value for
 6   replacing the home and its belongings?
 7        A    That was not an option considered in this
 8   case.
 9        Q    Why did you not consider that option, sir?
10        A    Because of the circumstances, that we felt
11   that the Simmses intentionally tried to defraud Mutual
12   Benefit Insurance Company, and the policy language is
13   very clear that when fraud is committed there is no
14   payment on any part of the claim.
15        Q    So as a result, Mutual Benefit is now
16   seeking -- well, let me ask you this.  Coverage was
17   effective and in place to replace the Simmses' home
18   and its contents, correct?
19        A    At what point in time?
20        Q    As of November 5, 2001, sir.
21        A    Prior to the fire?
22        Q    Yes.
0168
 1        A    Yes.
 2        Q    So by virtue of your decision to deny their
 3   claim and not pay them anything on it, Mutual Benefit
 4   is saving hundreds of thousands of dollars; is that
 5   correct?
 6        A    We are not paying a fraudulent claim, which
 7   is required.
 8        Q    By virtue of that decision to not honor any
 9   aspect of the Simmses' claim, you are saving your
10   company hundreds of thousands of dollars; is that
11   correct?
12        A    I am not allowed to pay the Simmses
13   anything.
14        Q    And who told you that you're not allowed to
15   pay the Simmses anything, sir?
16        A    The terms and conditions of the policy.
17        Q    What about the terms and conditions of the
18   policy indicate that you are not allowed to pay the
19   Simmses one penny?
20        A    The --
21             MR. PARLER:  I'm going to object.  That's
22   argumentative.  Don't answer the question.
0169
 1             MR. KRAMER:  I'm asking -- wait.  How can
 2   you instruct a witness not to answer a question --
 3             MR. PARLER:  Can you read back the question
 4   and maybe I can instruct him.
 5             MR. KRAMER:  Why don't you read back his
 6   prior response as well?
 7             (Record was read by the reporter.)
 8        Q    You may answer, sir.
 9             MR. PARLER:  I'm going to object.  Again,
10   it's argumentative, borders on harassment.  You may
11   answer, sir.
12        A    The policy states -- and I would like to
13   actually look at the policy language.  But it
14   basically says if fraud is committed, we're not going
15   to pay the claim, and there's a basis and a logic
16   behind that.  The logic behind that is that there has
17   to be a penalty or a down side to a policyholder
18   committing insurance fraud.  Because I think Maryland
19   case is very clear on that, that if you only take out
20   that part of it which is fraudulent, where is the
21   deterrent for anybody submitting fraudulent upon
22   fraudulent claim to an insurance company with the
0170
 1   understanding that if we catch you, we won't pay you,
 2   but if you get by with it, you pay it.  It's very
 3   clear, it's industry standard, and it's in the policy.
 4        Q    Umh-humh.
 5             MR. GREENBERG:  Do you want take a little
 6   break for lunch?
 7             THE WITNESS:  No, let's keep on.
 8             MR. PARLER:  I'll put on the record there's
 9   a snowstorm in Pennsylvania.
10             THE WITNESS:  I do need to take a restroom
11   break.
12             (A short recess was taken.)
13   BY MR. KRAMER:
14        Q    Did you set reserves in the Simmses case?
15        A    Yes.
16        Q    What are they?
17        A    I don't remember.  If I could have the Large
18   Claim Memorandum, I could tell you.
19             (Deposition Exhibit No. 6 was marked for
20   identification and was retained by counsel.)
21   BY MR. KRAMER:
22        Q    Showing you what has been marked Russell
0171
 1   Deposition Exhibit No. 6, the Large Claim Memorandum,
 2   does that refresh your recollection as to what
 3   reserves were set?
 4        A    Yeah, this would be the approximate
 5   reserves.  The total reserve should be seven hundred
 6   and sixty thousand, three hundred, less -- I know we
 7   made additional payments, so it would be less any
 8   payments we paid to the Simmses.
 9        Q    When did Mutual Benefit first become
10   suspicious of possible fraud in connection with the
11   Simmses' claim?
12        A    Several weeks after the loss.  I think it
13   was either the -- upon presentation of the building,
14   the inventory.  I don't remember the particular days,
15   but it was several weeks after the loss, end of
16   November, beginning of December, something like that.
17        Q    And what caused any suspicion?
18        A    Well, again, I felt that the building
19   estimate was grossly inflated, the contents/inventory
20   was heavily inflated.  We felt the -- we had questions
21   regarding the debris removal at that time.
22        Q    Anything else?
0172
 1        A    That's probably initially what gave us some
 2   concerns.
 3        Q    And when you say the building estimate was
 4   inflated, you're referring to the initial estimate
 5   submitted by the Simmses which was prepared by a
 6   Robert Spamer?
 7        A    Correct.
 8        Q    For a replacement cost exceeding six hundred
 9   thousand dollars?
10        A    It was closer to six-forty, yes.
11        Q    And that is the only replacement cost
12   estimate that you are aware of the Simmses submitting
13   to Mutual Benefit?
14             MR. PARLER:  Objection; that was asked and
15   answered two hours ago.  You can answer it.
16        A    Yes.
17        Q    So in the course of your claims handling
18   you've never been apprised of a lower estimate
19   submitted by the Simmses for replacement cost of their
20   home?
21        A    No.
22        Q    And when you say the contents itemization
0173
 1   was inflated, are you referring to the first
 2   itemization submitted by the Simmses to Mutual
 3   Benefit?
 4        A    I'm not sure what you're referring to.
 5        Q    Well, how many itemizations of contents did
 6   the Simmses submit to Mutual Benefit, to your
 7   knowledge?
 8        A    I think there were subsequent revisions made
 9   during the examinations under oath, but at the time
10   our first concern was the original presentation, the
11   original contents/inventory list.  And I think Tracey
12   Simms subsequently submitted others.  Our contention
13   is that they're still grossly exaggerated.
14        Q    Is it improper for a policyholder to submit
15   revised information upon obtaining additional facts or
16   in response to questions or concerns raised by the
17   carrier as to the reasonableness of the initial
18   information?
19             MR. PARLER:  Objection.  You can answer.
20        A    I think it becomes a concern because I
21   believe that they're trying to -- they have realized
22   that they've been caught, therefore they are
0174
 1   submitting revisions in order to try to rectify the
 2   problem that they have created.
 3        Q    And what do you -- and it's your contention
 4   that the reason that the Simmses provided reduced
 5   itemizations of contents, that is, reduced values in
 6   connection with the contents that they've lost, was
 7   motivated by the fact that they had been caught in a
 8   lie; is that your contention?
 9        A    I believe that they may have had some
10   concerns, that could be a possibility, that they were
11   having some concerns regarding the submission of their
12   inventory.
13        Q    Is it also a possibility that they learned
14   through communication with those acting on behalf of
15   Mutual Benefit that they might be able to or should
16   revise the information in some way to improve the
17   accuracy of what they're submitting to the carrier?
18        A    I'm not aware of any such communication from
19   Mutual Benefit Insurance Company.  I think the insured
20   is obligated upon submission of the inventory,
21   especially some of the items that the Simmses
22   submitted, knowing that they, that the costs that were
0175
 1   submitted were, were grossly exaggerated.  I don't
 2   know how a reasonable person would believe that it was
 3   a mere mistake, because I think most people know what
 4   they pay for particular items, especially in light of
 5   the recent purchases of most of these items.
 6        Q    If items were received as a gift, would you
 7   still have to cover replacement cost of those items?
 8        A    Yes.
 9        Q    So there may be items that they never
10   purchased themselves but nonetheless would be covered
11   under your policy, correct?
12        A    That could be, yes.
13        Q    In connection with those items, would you
14   expect the Simmses to know what the actual value or
15   replacement cost would be without resorting to other
16   sources of information?
17        A    I would believe if it was a high-ticket
18   item, something that you may want to if you did not
19   have any knowledge, because you may be shortchanging
20   yourself in that, if it's an item that's unique or
21   different.  But if it was an item that somebody gave
22   me, a pair of slacks for my birthday, you know, that's
0176
 1   going to be that amount, I'm just going to submit it.
 2        Q    Was it improper for the Simms to rely upon
 3   documentation provided to them by retailers who deal
 4   in goods of the kind they lost?
 5        A    I think the Simmses have a responsibility
 6   regardless of where they get the information, that the
 7   information is accurate.
 8        Q    Well, if the Simmses receive inaccurate
 9   information from a retailer as to the cost of items,
10   are you saying that you hold the Simmses fully
11   responsible for the inaccuracy of a vendor?
12        A    If they knew that that truly wasn't the
13   cost, and it would be reasonable for that person to
14   know that's not a reasonable cost to pay for that.
15        Q    If the Simmses are requested to obtain full
16   retail prices and get what the manufacturers or
17   dealers list as full retail prices, is that improper?
18        A    If they know that that is not a common --
19   that you wouldn't pay that price if you went in off
20   the street to purchase it.
21        Q    If the Simmses are subsequently told,
22   perhaps even in an examination under oath and
0177
 1   significant questioning from your counsel, Mr. Parler
 2   here, that it is possible to get certain items for
 3   less, was it improper for the Simmses to present
 4   revisions which contained lower costs upon further
 5   review?
 6        A    I just think it's more evidence to support
 7   that the original inventory was grossly exaggerated
 8   and it was undoing -- trying to undo what was done.
 9        Q    Why don't you take that as more evidence
10   that the Simmses are trying to cooperate in the
11   presentation of an accurate claim?
12             MR. PARLER:  Objection; argumentative.
13        Q    You can answer.
14             MR. PARLER:  You can answer.
15        A    I believe even today, as we sit here today
16   that the contents, the lowest amount that the Simmses
17   submitted is still grossly exaggerated and they didn't
18   have the financial means to purchase that amount of
19   items.
20        Q    Well, I think you said earlier that they
21   didn't have to purchase the items, that they'd still
22   be covered.
0178
 1        A    They had to have purchased those items that
 2   they put on the contents list.  Right?  That's my
 3   statement.
 4        Q    Okay.  So it is your understanding that the
 5   only thing Mutual Benefit would cover in terms of the
 6   contents of the home would be contents that the
 7   Simmses actually purchased themselves?
 8             MR. PARLER:  Objection.  That's not what he
 9   said; that mischaracterizes prior testimony.
10        Q    Well, I'm asking the question, sir, because
11   I am confused by your testimony.
12        A    That is not what I stated.  What I stated
13   was that I believe that the final inventory submitted
14   by the Simmses, in my opinion, is still grossly
15   inflated.  And the reason for that, part of the reason
16   is they did not have, in our opinion, the financial
17   means to have purchased that amount of items based
18   upon their income.
19        Q    All right.  But you understand that they
20   don't have to purchase all of the items on their
21   inventory for them to be --
22        A    Their inventory should be reflective of what
0179
 1   they had in the home.
 2        Q    Are you saying that there are items on the
 3   inventory that were not in the home at the time of the
 4   fire?
 5        A    We are challenging that the total inventory,
 6   that they could not have had the financial means to
 7   purchase the items that they have on their inventory
 8   list.
 9        Q    Is it your conclusion, sir, and your finding
10   from your investigation that the Simmses' inventory of
11   contents of the home contained items that were not
12   actually present within the home at the time of the
13   November 5, 2001 fire?
14        A    I have no direct evidence of that.  The
15   circumstantial evidence is that they do not have the
16   financial ability to purchase the quantity of items
17   which they have listed over the time frame in which
18   they claim they purchased them.
19        Q    So it's your contention that they did not
20   have all of the -- that they did not own all of the
21   items that they placed in the inventory to Mutual
22   Benefit?
0180
 1        A    No, that was not my testimony.
 2        Q    Well, is that your contention, sir?
 3        A    No.
 4        Q    So it is your contention -- well, wait.  Let
 5   me try to understand this.
 6             You've obviously, you have dissatisfaction
 7   with the inventory submitted by the Simmses to Mutual
 8   Benefit, correct?
 9        A    Yes.
10        Q    And although the Simmses revised their
11   initial inventory as submitted to Mutual Benefit to
12   reflect what Mutual Benefit might regard as more
13   reasonable costs, you still find subsequent
14   inventories to be grossly inflated; is that correct?
15        A    Yes.
16        Q    Do you at least agree that all of the items
17   contained on the inventory submitted by the Simmses to
18   Mutual Benefit were items that the Simmses did own and
19   that were present in their home at the time of the
20   November 5, 2001 fire?
21             MR. PARLER:  Objection; asked and answered.
22   You can answer.
0181
 1        A    I have no direct evidence that any items of
 2   inventory wasn't in the home.  Our contention is that,
 3   assuming that the items they list in the home, and our
 4   basis is they could not have purchased those items, so
 5   therefore one can get to that they didn't have it.
 6        Q    Well, I guess I'm asking you, sir, what are
 7   you contending?  Are you contending that they did not
 8   have all of the items contained on the inventory
 9   submitted to Mutual Benefit?
10        A    They may not have had all the items, they
11   may not have had the quality of the items that they
12   listed.  It's very difficult for us to know.  I do
13   know and believe that they did not have the financial
14   ability to buy what they had.  So if they don't have
15   the financial ability to buy what they had, one could
16   assume, make the clear, reasonable, logic basis that
17   they didn't have it.
18        Q    Or assume that somebody gave them certain of
19   the items contained in the inventory?
20        A    I assume the items that people gave them are
21   listed on the inventory.  And they are listed, and
22   they are listed and identified as gifts, I believe.
0182
 1        Q    And certain of the replacement cost -- well,
 2   let me ask you this question.  If I buy a chair on
 3   clearance, getting it for an extremely low price, and
 4   that chair is lost in a fire, totally destroyed, would
 5   the replacement cost that I must submit to Mutual
 6   Benefit reflect my clearance price, or should it
 7   reflect what I could now buy it for at regular retail
 8   prices?
 9        A    It should be what you could actually go into
10   a store and purchase it for.  It doesn't mean that you
11   will pay what's listed on the chair, knowing that most
12   furniture stores will operate -- you know, it's like
13   buying, purchasing an automobile; you don't pay
14   sticker price for most automobiles, you know, it's
15   common knowledge that you know that there is a
16   discount.  Especially in light of, if you're in the
17   Simmses' particular situation, you're going to buy a
18   quantity of furniture because you lost your whole
19   house, you can assume that one would not go in and pay
20   the full suggested retail price.
21        Q    Are you aware that some people actually do
22   pay sticker prices for a car?
0183
 1             MR. PARLER:  Objection.  What's the purpose
 2   of that question?
 3             MR. KRAMER:  I'm following up on what your
 4   client said.
 5        A    I know that particular cars you do pay
 6   sticker, if it's in high demand.  But most people
 7   will -- it's fairly reasonable that most people
 8   understand, especially if you've already gone in and
 9   purchased similar items of similar nature, I don't
10   know many people that go in and purchase a car for
11   less than sticker, then will go pay for sticker the
12   following year.
13        Q    Are you aware that the Simmses are still in
14   the process of refining their inventory as they recall
15   additional items that they lost in the November 5,
16   2001 fire, perhaps looking for a certain tool or
17   household item that they recall, oops, I used to have
18   that as well?
19        A    No.
20        Q    Do you think that it is improper for the
21   Simmses -- well, let me ask you this.  Is it unusual
22   when one loses all of their belongings and their
0184
 1   entire home to over the course of a year or more
 2   following the loss continue to think of things that
 3   they've lost; is that unusual?
 4        A    I can't speak whether policyholders later
 5   determine.  I find it unusual that -- I've not seen it
 6   typical that once we end up paying or whatever, that
 7   the insured will come back.  It may happen.
 8        Q    But you haven't paid yet?
 9        A    That was not your question.  Your question
10   was is it unusual, and I can't speak for what a
11   policyholder does after a fire.  I've never had a fire
12   loss, so I don't know.  I think it would be reasonable
13   one could find that.  Do they submit it to the
14   insurance company?  I've had no experience where
15   they've done that, not to say it doesn't happen.
16        Q    Okay.  Do you have any information to
17   indicate that the Simmses had anything to do with the
18   cause of the November 5, 2001 fire?
19        A    I have no direct evidence.  I believe that
20   there is circumstantial evidence.
21        Q    Circumstantial evidence of what, sir?
22        A    That the fire could have possibly been set.
0185
 1        Q    And what circumstantial evidence are you
 2   referring to, sir?
 3        A    Opportunity.  There was definitely a
 4   financial motive because of the situation that the
 5   Simmses were in financially with their heavy debt.
 6   And then you have an overexaggeration of their claim
 7   presented to us would, in my opinion, be
 8   circumstantial evidence that it could be.
 9        Q    Did you engage a cause and origin or arson
10   investigator in connection with the Simmses' case?
11        A    We did.
12        Q    Would that be Lee McAdams, sir?
13        A    That would.
14        Q    And Mutual Benefit hired him to complete a
15   report in connection with the cause and origin of the
16   fire; is that correct?
17        A    I wouldn't phrase it that way.  We asked him
18   to do an investigation into the cause and origin of
19   the fire.
20        Q    Looking at the Large Claim Memorandum which
21   you've just looked at as Russell Deposition Exhibit
22   No. 6, can you read with me, sir, where it says:
0186
 1   "Cause and origin expert hired to complete a report"
 2   (indicating)?
 3        A    It says "report."  But what we usually --
 4   they would provide us with their findings.
 5        Q    Okay.  You agree that that's what it says,
 6   what I've just read?
 7        A    The report speaks for itself.
 8        Q    All right.  So while you wouldn't put it
 9   that way --
10        A    Report --
11        Q    -- your Claims Supervisor, Mr. Snare, would;
12   is that correct?
13        A    Well, you can ask Mr. Snare.  A report can
14   be verbal or written.
15        Q    In fact, Mr. McAdams was hired to provide a
16   written report initially; is that correct, sir?
17        A    That's not correct.  That's not my
18   understanding.
19        Q    Is it your understanding that Mutual Benefit
20   later told Mr. McAdams please do not put your findings
21   in writing?
22        A    I will often ask Mr. McAdams to not put a
0187
 1   report, a written report and finding depending on the
 2   circumstances.
 3        Q    Under what circumstances would you ask arson
 4   investigator Lee McAdams not to put his findings in
 5   writing?
 6        A    If there's counsel involved, then he should
 7   be speaking to counsel.  There may be -- further
 8   investigation may be warranted.  All I'm interested in
 9   is his initial findings at that point.  If there's
10   subrogation potential, subrogation counsel does not
11   want a report.  At that point they would want to put
12   the report later.
13        Q    How long have you worked with Lee McAdams?
14        A    Several years.
15        Q    More than five?
16        A    Yes.
17        Q    More than ten?
18        A    Maybe.
19        Q    Did you speak with Lee McAdams in connection
20   with the November 5, 2001 fire?
21        A    I have no specific recollection if I
22   personally talked to Lee or not.
0188
 1        Q    Do you recall learning about Mr. McAdams'
 2   findings in connection with his cause and origin
 3   investigation?
 4        A    I have, yes.
 5        Q    And what did you learn?
 6        A    I understand that the devastation was too
 7   great, that he had to call the fire undetermined.
 8        Q    And are you aware as to why it was requested
 9   that Mr. McAdams not place that finding or the results
10   of his investigation in writing?
11        A    I'm not sure of the particular reasons.
12   Many times one is I don't want to pay to generate a
13   report.  And two is if the investigation is going to
14   go further because of other circumstances for any
15   loss, we may wait until a later date to put the
16   report.  We understand his findings.
17        Q    So it would only pay for Mutual Benefit to
18   compensate Mr. McAdams in writing a report if they
19   were to find -- if he was to find that the Simmses
20   participated in arson; is that correct?
21             MR. PARLER:  Objection; that
22   mischaracterizes the testimony.
0189
 1        Q    Is that correct?  I'm asking the question,
 2   sir.
 3        A    We will paying for Mr. McAdams to prepare a
 4   report when the appropriate time is to put a report
 5   together.
 6        Q    Beyond Mr. McAdams' finding that the cause
 7   of the fire was undetermined, do you have any
 8   additional information or any information at all to
 9   indicate that the Simmses committed some type of act
10   of arson?
11             MR. PARLER:  Objection to the form of the
12   question.  You said any information at all --
13             MR. KRAMER:  That's all right.  I'll
14   withdraw it.  Chill out.  That was a bad question.
15   I'll ask a better one.
16        Q    Given Mr. McAdams' inability to implicate
17   the Simmses in causing the November 5, 2001 fire, what
18   information does Mutual Benefit have to indicate that
19   the Simmses participated in the cause of that fire?
20             MR. PARLER:  Objection; asked and answered.
21        Q    You can answer.
22             MR. PARLER:  You can answer it.
0190
 1        A    I did indicate that we had no direct
 2   evidence because the fire was undetermined, so
 3   therefore we cannot determine whether it was set or
 4   whether it was accidental.  But there are
 5   circumstantial facts surrounding other aspects of the
 6   investigation and the claim which could point to that
 7   it could have been an arson.  And I did articulate
 8   those earlier.
 9        Q    So is it your contention, sir, that Tracey
10   and Wayne Simms deliberately set the house that her
11   father built for them afire, destroying not only the
12   home, but all of its contents; is that your
13   contention?
14        A    I'm saying that that is a possibility.
15        Q    What I'm asking is whether that is the
16   contention of Mutual Benefit Insurance Company.
17        A    I believe, as I stated, that that's a
18   possibility, that the fire is undetermined, that we
19   can't rule that it's accidental, that there's a
20   possibility, and with the other factors that are
21   involved in this case, that it could have been a set
22   fire.
0191
 1        Q    What's a clue report?
 2        A    I'm guessing.  It's a report that
 3   underwriting uses that is a database of prior claims
 4   that would indicate that this particular insured may
 5   have had prior claims, or a prior claim history.
 6        Q    Did Mutual Benefit investigate subrogation
 7   possibilities in connection with the November 5, 2001
 8   fire?
 9        A    Yes.
10        Q    And what did Mutual Benefit do to
11   investigate the possibility of subrogation?
12        A    Well, we hired Lee McAdams.  We also hired
13   subrogation counsel.
14        Q    Cozen and O'Connor?
15        A    That's correct.
16        Q    An attorney by the last name of Duffy?
17        A    I can't remember who it was.
18        Q    What were the results of your subrogation
19   investigation?
20        A    That the fire was undetermined, therefore
21   subrogation was going nowhere.
22        Q    Previously you've identified Russell
0192
 1   Deposition Exhibit No. 6, the Large Claim Memorandum
 2   (handing).  And I can provide you another copy, sir,
 3   if it makes it easier (handing).
 4             Was this a memorandum authored by Mike
 5   Snare?
 6        A    I assume so, yes.
 7        Q    And there are several individuals shown at
 8   the top of the first page of this Large Claim
 9   Memorandum.  Do you see that?
10        A    Yes.
11        Q    Why was this Large Claim Memorandum copied
12   on so many individuals?
13        A    I believe I've asked and answered that
14   question, but I will do it again.  As I said, anybody
15   that wants to be part and get circulated to this, we
16   will add their name to it.
17        Q    And does the Large Claim Memorandum fairly
18   and accurately reflect the reserves and policy limits
19   as it existed at the time the memorandum was authored
20   on November 7, 2001?
21        A    It can.  It depends.  Sometimes we find
22   mistakes, because they are done by people.  People
0193
 1   make mistakes.
 2        Q    As you review Russell Deposition Exhibit No.
 3   6, do you find any mistakes on the Large Claim
 4   Memorandum?
 5        A    I haven't looked at it closely, but I assume
 6   you're looking at the dwelling contents of four
 7   thirty-four that I think is incorrect.
 8        Q    Is there anything else that you find
 9   incorrect, sir?
10        A    I'm looking, Mr. Kramer.
11             No, it looks okay to me, besides that.
12        Q    Beyond what you've already testified to, do
13   you have any additional facts which would indicate to
14   you, or any documentation which would indicate to you
15   that the Large Claim Memorandum inaccurately states
16   limits of four hundred and thirty-four thousand
17   dollars on the dwelling?
18        A    I believe that may be incorrect.  I believe
19   the limits are, I'm not sure, four thirty-four or
20   four-seventeen.  I'd have to look at the file and see.
21        Q    At this point you don't know whether the
22   dwelling was insured to four hundred seventeen
0194
 1   thousand dollars or four hundred thirty-four thousand?
 2        A    I personally don't.
 3        Q    Okay.  Now, help me out with the Large Claim
 4   Memorandum and who these people are.  Mike Stapleton,
 5   who is that?
 6        A    No longer with the company.
 7        Q    What did he do?
 8        A    He worked in the Accounting Department.
 9        Q    Any reason why he was on the cc?
10        A    Mr. Kramer, as I testified before, anybody
11   who would like to come to a large, it is an
12   educational forum, anybody within the company may
13   attend this meeting.  And if they want to learn more
14   about claims and more about, to broaden their
15   insurance background, they are more than welcome to do
16   this.  Many of these people are accounting people or
17   people that want to move into management or other
18   aspects of the company.  It's a sharing of
19   information, that's all.
20        Q    Okay.  Well, then I'll ask basically the
21   same question of each of these individuals, try to run
22   through them quickly, as to whether beyond just a
0195
 1   passing interest, as you've expressed, the individuals
 2   had anything specific to do with the handling of the
 3   Simmses' claim, any direct involvement?
 4        A    I will testify that none of these people had
 5   any direct involvement with the Simmses' loss.
 6        Q    I note that your name is in the cc, Mr.
 7   Russell.
 8        A    With the exception of me, Mr. Kramer.  If I
 9   don't have anything, then why the hell am I here?
10        Q    Frank Benedek's name is in the cc at the
11   very end, sir.
12        A    Yes.
13        Q    And you would agree that Mr. Benedek had
14   involvement in the handling of this claim?
15        A    Frank -- you're referring to the -- I need
16   to cut to the chase because, honestly, we have to
17   leave soon.  So I'm going to try to cut to where
18   you're going.
19             Frank had no decision-making process on
20   this.  By its nature, the size of the loss, Frank will
21   put it on his diary.  You'll see electronic note pads
22   with Frank.  But I will testify today Frank had no
0196
 1   direct involvement.  He may have had to answer some
 2   questions for Mike on a day-to-day basis; you're free
 3   to ask Mike on that.  The decision on the Simmses'
 4   case was my decision.
 5        Q    I'm not asking about the ultimate decision,
 6   sir.  I know the ultimate decision on denying the
 7   Simmses' claim was yours.  But Mr. Benedek as claims
 8   manager did have involvement in the process which
 9   preceded that decision.
10        A    And you've noted his deposition and you're
11   free to depose him, but I think you'll find that he
12   has very limited information.  Does he know about the
13   loss?  I think he will.  Does he know the particulars
14   and the details of the loss?  You'll have to ask him.
15   But ultimately it was Mike Snare and I who were in the
16   direct handling of this loss.
17        Q    Did you have any -- well, did all of these
18   people attend the large claim committee meeting?
19        A    I can't -- no, I don't know all who attended
20   the large claim meeting, because at the large claim
21   meeting underwriters and people who are not on this
22   may and feel free to attend.
0197
 1        Q    Would the Minutes reflect who attended the
 2   large claim committee meeting?
 3        A    Yes, I think they do.  I'm not a hundred
 4   percent sure.
 5        Q    Have you brought the Minutes of the large
 6   claim committee meeting with you, sir?
 7        A    We're unable to find those particular
 8   Minutes for that meeting.
 9        Q    When was the large claim committee meeting
10   held?
11        A    It would have been sometime in December of
12   '01.
13        Q    And on what do you base that December -- you
14   mean December of 2002?  I apologize.  December of
15   2001, sir?
16        A    Yes.
17        Q    And on what do you base that?
18        A    Because normally losses that happen in
19   November that are going to be taken to the committee
20   to discuss are done the following month.
21        Q    Do you recall anyone who attended the
22   December 2001 large claim committee meeting at which
0198
 1   the Simmses' claim was discussed?
 2        A    Well, there would be other people because
 3   there may have been other claims that were discussed,
 4   so therefore people involved in those claims may have
 5   been present.  I remember John Coursen specifically
 6   being there.  I have no other recollection of other
 7   people who may or may not have been there.
 8        Q    The only person you recall is John Coursen?
 9        A    Umh-humh.
10        Q    That's yes for the record, sir?
11        A    Pardon?
12        Q    That's yes for the record?
13        A    Yes.
14        Q    What do you recall was discussed in terms of
15   the Simmses' claim in the December 2001 committee
16   meeting?
17        A    It's pretty reflective right here in the
18   memo.  I think Mike probably presented this to talk
19   about this, so he would have talked pretty much of
20   what is in here.  Probably talked, said we have a
21   loss, we have a GAB adjustor there, and so forth.
22   Also, that I remember having some discussions with
0199
 1   John Coursen at that meeting.
 2             MR. PARLER:  Do you want more water?
 3             THE WITNESS:  I'm all right.
 4        Q    What do you recall about your discussion
 5   with John Coursen at the meeting?
 6        A    I remember John Coursen giving me somewhat
 7   of a difficult time on why I was establishing a --
 8   putting up the limits on the contents so early on in
 9   the case, i.e., we hadn't received the inventory.
10   Because his personal opinion was he felt that it would
11   be unusual for somebody to have that kind of value in
12   a home.
13        Q    And what did you say in response to his
14   objections?
15        A    I told him that we would wait to get the
16   inventory.  If it needed to be adjusted downward, it
17   could be.  That it was -- John does not, and nor was
18   he indicating, that I was to change the reserve.  He
19   was questioning my logic of why putting that.  I am
20   conservative by nature and our company is conservative
21   by nature; therefore, if we needed to take the reserve
22   down at a later date, we could do that.
0200
 1             Also that the guaranteed replacement cost
 2   would be a factor, that we had put up the limits per
 3   se that that was -- we didn't know that number quite,
 4   but we knew it was going to be close, so monies we
 5   didn't have in the contents reserve could be applied
 6   to the building reserve.  In addition, there's
 7   extension to coverage in the policy which may also
 8   increase the limits somewhat, such as debris removal
 9   and so forth.
10        Q    How many times have you discussed this claim
11   with Mr. Coursen?
12        A    I can't remember the number of times.  I
13   mean, he is aware of the loss because of the size of
14   the loss.  I did advise him that it was my
15   recommendation and my determination that we were going
16   to deny the loss and why, and I told him that we were
17   going to do that.
18        Q    When did you have that conversation with
19   Mr. Coursen?
20        A    Probably right before we issued the denial
21   letter.
22        Q    Beyond --
0201
 1        A    Understanding I was not seeking his
 2   approval, that I was informing him of that decision.
 3        Q    What was his response?
 4        A    He, he indicated he understood why and felt
 5   it was logical and let me do it.
 6        Q    So Mr. Coursen felt that your action in
 7   denying the Simmses' claim was logical?
 8             MR. PARLER:  That's what he just said.
 9        A    Followed my recommendation.
10        Q    The answer is yes?
11        A    Yes.
12        Q    Did you personally discuss this claim with
13   Mr. Bonanni?
14        A    I can't remember any specific conversations
15   with Pat.  I think he mainly dealt with Michael.
16        Q    On how many occasions did you discuss the
17   claim with Michael Snare?
18        A    Multiple times.
19        Q    Are his initials MTS?
20        A    I don't know.
21        Q    Would the initials MTS on computer notes
22   designate Michael Snare?
0202
 1        A    You need to ask him.  I assume it would be.
 2   We have a Marilyn Simm, so I don't know.
 3        Q    Well, did she have anything to do with this
 4   claim?
 5        A    Not that I'm aware of.
 6        Q    Frank Benedek, what are his initials?
 7        A    FB.
 8        Q    Does he have a middle initial J?
 9        A    I don't know.
10        Q    Okay.  Did you discuss the claim with him?
11        A    I think at times we'd have conversations
12   about it in a very general sense.
13        Q    On how many occasions?
14        A    I can't remember.
15        Q    What do you recall discussing with
16   Mr. Benedek?
17        A    Basically the course of the investigation
18   and where we were on a particular thing and the
19   problems that we were incurring on the loss.
20        Q    Such as?  What did you discuss with him
21   about that?
22        A    That there were potential problems on the
0203
 1   inventory and that we had to hire Mr. Parler to
 2   undertake further investigation, and I'm sure I've
 3   talked to him about that we were going to deny the
 4   claim and why.
 5        Q    Based upon your investigation of the
 6   Simmses' claims and their coverage, do you have any
 7   information to indicate that they committed any fraud
 8   or other intentional misrepresentation or omission in
 9   connection with their application for insurance?
10        A    My only concern would be that, because now
11   that they claim that the replacement cost value was
12   six-forty in lieu of the forty-seven, that if they
13   knew that, that would be very misleading information,
14   if they knew that at the time they took out the
15   application.
16        Q    In other words, if they knew that their
17   house was truly valued higher than that would, in your
18   mind, constitute an intentional misrepresentation in
19   the application for insurance?
20        A    It may.
21        Q    In the application for insurance did the
22   Simmses make a representation as to the replacement
0204
 1   cost of their home?
 2             MR. PARLER:  Do you have the application,
 3   counsel?
 4        Q    I'm asking you, sir, based on your
 5   investigation did you learn that they misrepresented
 6   any aspect of their home value or its replacement
 7   cost?
 8        A    I'd like to refer to the application.
 9        Q    Please.
10             MR. KRAMER:  Do you have it, counsel?
11             MR. PARLER:  I don't have it.  I know we've
12   produced it.
13        Q    So without referring to the application, you
14   don't know the answer to that question?
15        A    I think I'd be able to provide a better
16   answer with reviewing the application, a more accurate
17   answer.
18        Q    Do you believe that the Mutual Inspection
19   Bureau, Inc., that conducted an appraisal of the
20   replacement cost of the home prior to the inception of
21   the policy committed any type of misrepresentation to
22   Mutual Benefit?
0205
 1        A    I don't think there's anything at the time
 2   of the application up until we received the estimate
 3   that would give me some concern of now they're
 4   claiming the six-forty when they had reported to us
 5   that the original construction was three seventy-four.
 6   It's a large discrepancy.  I have no direct evidence
 7   that -- we don't believe that.  We believe that the
 8   four-seventeen to three-forty is a more accurate
 9   figure.
10        Q    So you don't believe that the Simmses
11   committed any type of fraud in their policy
12   application; is that correct?
13             MR. PARLER:  Objection.  Once again, if you
14   have the application he said he would be better able
15   to answer.
16             MR. KRAMER:  I'm asking --
17             MR. PARLER:  Can I finish, please, counsel?
18   He asked for the application so he can better respond
19   to that question.  If you don't have it, you don't
20   have it.
21             MR. KRAMER:  Off the record.
22             (Discussion off the record.)
0206
 1             (Deposition Exhibit No. 7 was marked for
 2   identification and was retained by counsel.)
 3   BY MR. KRAMER:
 4        Q    Let me show you the homeowner application
 5   which we've marked as Russell Exhibit No. 7 (handing).
 6   And because you've indicated that referring to the
 7   homeowner application would assist you in response to
 8   questions, let me ask you to take your time in
 9   reviewing it.
10        A    (Complying.)  Okay.
11        Q    Now that you've had an opportunity to review
12   the insurance application of the Simmses, can you tell
13   me whether Mutual Benefit contends that the Simmses
14   committed fraud in their application for insurance
15   with Mutual Benefit?
16        A    I think, as I testified previously, my
17   concern -- as I look at this and look at the
18   underwriting file, that on its surface I see nothing
19   here that would give me concern.  What does give me
20   some concern and pause out there is that we are now
21   faced with a presentation of the building claim by the
22   Simmses for six hundred and forty thousand dollars
0207
 1   versus just a couple years prior they reported to us
 2   that the value of the dwelling was three seventy-four;
 3   that's a difference of two hundred and seven thousand
 4   dollars.  So as I'm sitting here, if we would develop
 5   evidence or facts or circumstances would come to us or
 6   come that they knew that at the time of the
 7   application, that their house was really valued on a
 8   replacement cost basis at six-forty, I think there is
 9   a concern that there could be a misrepresentation on
10   the application.
11        Q    Do you have any information to indicate that
12   the Simmses falsified any documentation in connection
13   with this case?
14             MR. PARLER:  With regard to the claim, or
15   acquiring insurance, or both?
16             MR. KRAMER:  Both.
17        A    What was your question again?  Could you
18   read that back?  You said false?
19        Q    I'll say it again.
20        A    Okay.
21        Q    Do you have any information to indicate
22   whether the Simmses falsified any documentation in
0208
 1   connection with either their procurement of insurance
 2   or in connection with the claim itself?
 3        A    You'll need to define to me what you mean by
 4   falsified.  I believe they have falsified the value of
 5   their claim.  I'm not sure what you're referring to.
 6        Q    Okay.  Well, let me ask you a question.  Do
 7   you believe or have any information to indicate that
 8   the Simmses committed any type of forgery in
 9   connection with either the procurement of insurance or
10   the claim itself?
11        A    No.
12        Q    The Simmses submitted certain estimates and
13   gift letters from people.  Do you believe that the
14   Simmses forged or otherwise fabricated any of that
15   documentation?
16        A    I'm not aware of any evidence to that.
17        Q    Did you ever ask the Simmses to submit a
18   sworn statement and proof of loss in connection with
19   these claims?
20        A    Honestly, I can't remember without reviewing
21   the claim file if we did or not.
22        Q    Would it be unusual for you to refrain from
0209
 1   requesting that the Simmses submit a sworn statement
 2   and proof of loss in a case of this kind?
 3        A    Again, it would vary.  There are times we
 4   would ask for a sworn statement and proof of loss.
 5   Other times we may just go ahead and proceed with --
 6   depending on the information we have, we may proceed
 7   with an examination under oath.  Again, it is dictated
 8   by the merits of that particular case.  It may be
 9   dictated by the attorney we're using and their
10   preference of what we should do at that point.
11        Q    Are you aware of any reason as to why Mutual
12   Benefit would not have requested the Simmses to sign a
13   sworn statement and proof of loss?
14        A    Not any particular reason, no.
15        Q    If I understand your testimony correctly, at
16   bottom, Mutual Benefit Mutual Benefit contends that
17   the Simmses committed fraud in the submission of their
18   claims, correct?
19        A    Correct.
20        Q    When did the Simmses submit their claim?
21        A    The reporting of the claim, or the claim
22   documentation?
0210
 1        Q    Well, what I'm asking is -- well, the
 2   reporting of the claim came on the day of the fire,
 3   November 5, 2001; is that correct?
 4        A    Yes.
 5        Q    When did the Simmses submit their claim?
 6        A    Their claim?  Reporting the claim, or their
 7   claim submission?
 8        Q    How do you define claim?  What is the claim?
 9        A    I'm not sure I understand your question.
10        Q    Well, I'm trying to find out --
11        A    Be more specific, what they submitted, and
12   then I might be able to answer your question.
13        Q    You're contending that the Simmses committed
14   fraud in their submission of the claim, correct?
15        A    Correct.
16        Q    What's the claim?
17             MR. PARLER:  Objection.  I mean, can you be
18   more specific, counsel?
19             MR. KRAMER:  I'm asking the question.
20        A    The claims are the documentation that the
21   Simmses presented to us with the expectation of
22   getting paid for it.
0211
 1        Q    How far along in the process did Mutual
 2   Benefit get with the Simmses in terms of preparing for
 3   payment of the claim?
 4        A    Oh, we had made some earlier payments on
 5   particular things, but upon -- and I don't remember
 6   the time frame exactly, but upon the presentation of
 7   Spamer's building - I've already testified to this -
 8   upon presentation of the contents list, we were having
 9   problems with the debris removal and the validity of
10   that cost, that these were raising some red flags and
11   concerns on our part.  At that time we sought the
12   advice of counsel.
13        Q    Understanding that the Simmses submitted
14   multiple inventories to Mutual Benefit, how many
15   inventories are you aware of the Simmses submitting?
16             MR. PARLER:  I'm going to object because
17   this was covered an hour and a half ago.
18             MR. KRAMER:  I don't think so.
19        A    I did, I did, I already answered.
20        Q    I'll --
21        A    But I will.  There are three, to my
22   knowledge, the original and there were two revisions
0212
 1   sometime during the examinations under oath or some
 2   there part of.
 3        Q    Which of the three do you regard as the
 4   claim submitted by the Simmses?
 5        A    Mr. Kramer, I have testified that I felt the
 6   original claim was grossly exaggerated, and I think
 7   the lowest amount they claimed that sits here today is
 8   still grossly inflated.  The revisions on the
 9   inventory have not altered our opinion relevant to the
10   denial of this case.
11        Q    How much did the Simmses inflate their claim
12   for replacement of the home?
13        A    It is our belief that it is well in excess
14   of a hundred to a hundred and fifty thousand dollars,
15   maybe more.
16        Q    What do you base that on?
17        A    Based upon the original construction value,
18   or based upon the replacement cost estimator that we
19   had.  We also have an expert that has prepared us an
20   estimate in preparation for this litigation that would
21   confirm that.
22        Q    What does Mutual Benefit contend the proper
0213
 1   replacement cost of the home should be?
 2        A    In the range of four-seventeen, somewhere in
 3   there.
 4        Q    And what does Mutual Benefit base that
 5   contention on?
 6        A    Based upon an estimate we have received from
 7   a contractor.
 8        Q    How much did the Simmses inflate their
 9   contents loss claim?
10        A    That's a very difficult question.  I think
11   it is inflated beyond what I believe is a degree of
12   error, that it is so grossly inflated that it is
13   intentional.  I don't dispute that there were contents
14   in the house, so forth, I think there were.  I just
15   think that the estimate is grossly overestimated, and
16   that we had an accountant look at it and indicate that
17   they could not have the financial means to have
18   purchased the items they presented to us.
19        Q    What --
20        A    In dollar amounts, they could not have done
21   that.
22        Q    What does Mutual Benefit contend the
0214
 1   replacement cost of the Simmses' contents equals?
 2        A    I don't know.
 3        Q    What do you mean you don't know?
 4        A    I don't know the answer to that.
 5        Q    Did Mutual Benefit ever perform any
 6   calculation of the correct amount of the claim for
 7   lost contents?
 8        A    No.
 9        Q    If Mutual Benefit never performed any
10   calculation of the correct amount of the claim for
11   lost contents, how can you testify that the Simmses'
12   claim for lost contents was, in your words, grossly
13   exaggerated?
14        A    Because --
15             MR. PARLER:  Objection; that's been asked
16   and answered three or four times today.
17        Q    You may answer.
18        A    They have provided no documentation or proof
19   that they had the item via canceled checks, credit
20   card receipts to trace back.  They didn't have the
21   financial means, which I have repeatedly said, to
22   indicate they were able to purchase hundreds of
0215
 1   thousands of dollars of contents over a short period
 2   of time.
 3        Q    Would you agree that the Simmses -- or do
 4   you believe the Simmses were living above their
 5   financial means at the time of the fire?
 6        A    I think there are indicators that they were,
 7   yes.
 8        Q    Well, and you have indicated that that may
 9   be a motivating factor that would implicate them in
10   causing the fire?
11        A    Yes.
12        Q    Well, if they were living above their
13   financial means, would that explain why they had so
14   much by way of contents in comparison with their
15   income?
16        A    No, because I think that the, that their
17   debt was elsewhere.  Their business was losing money
18   or breaking even.  There is very little documentation
19   to support the items that they claim vis-a-vis a
20   canceled check to credit cards.  There's no doubt that
21   they were debt-ridden and therefore they were paying
22   taxes and payroll and expenses relevant to the
0216
 1   business and a high mortgage, other expenses, car
 2   payments.
 3        Q    Umh-humh.  Does Mutual Benefit contend that
 4   the Simmses in any respect failed to cooperate with
 5   the carrier?
 6        A    Well, I wouldn't consider submitting a
 7   fraudulent claim cooperative.  They have done what
 8   we've asked them to do, they submitted to the
 9   examinations under oath and so forth.  So from that
10   standpoint, yes.  But I wouldn't put that they
11   submitted a fraudulent claim as being cooperative.
12        Q    Right.  Well, you are not denying this claim
13   based on noncooperation of your policyholders?
14        A    I am not.
15        Q    And as you understand the requirement to
16   cooperate, it is your understanding that the Simmses
17   have fully cooperated with their carrier; is that
18   correct?
19        A    That's correct.
20        Q    And would an element of an insured's
21   cooperation be to provide additional information which
22   the insured obtains in connection with a claim?
0217
 1        A    I think there is a duty of an insured to do
 2   that.  I think what's important is to understand the
 3   motivation of the insured and why they did it.
 4        Q    You mentioned that term a number of times,
 5   the motivation of the insured.  You are an insurance
 6   professional, correct?
 7        A    Correct.
 8        Q    You are not a psychologist; am I correct
 9   about that?
10        A    Correct.
11        Q    You don't have any special training in the
12   field of psychology or psychiatry?
13        A    Correct.
14        Q    Or any other field in mental health; am I
15   right?
16        A    Correct.
17        Q    You are not a mind-reader?
18        A    Correct.
19        Q    How does Mark Russell as the Vice President
20   of Claims for Mutual Benefit Insurance Company discern
21   a policyholder's motivation?
22        A    Timing of the acts and the behavior of the
0218
 1   insured and the reason why, and what factors may cause
 2   this person to do so.
 3        Q    And what tells you that the Simmses'
 4   presentation of their claims or other acts toward
 5   Mutual Benefit were motivated by some type of
 6   dishonest intention?
 7             MR. PARLER:  Objection; asked and answered.
 8   You can answer again.
 9        A    First of all, I think the Simms had a
10   responsibility to determine that the inventory, the
11   original inventory was fair and accurate.  I think
12   there is such gross examples of where it's just -- I
13   don't believe a reasonable person would believe that
14   they could have overlooked these items.  And then
15   subsequent they get notice that Mr. Parler's involved
16   and that there's going to be an examination under
17   oath, and at which point then we started to see the
18   revisions.  It's judgment on my part that it very well
19   could be motivated that they are caught in what they
20   have already perpetrated in the submission of the
21   claim.
22        Q    What if your judgment is wrong, Mr. Russell?
0219
 1             MR. PARLER:  Objection; argumentative.
 2   Don't answer it.
 3        Q    Mr. Russell, if your judgment is inaccurate
 4   about the Simmses, does it trouble you that Mutual
 5   Benefit has totally denied their claims?
 6             MR. PARLER:  Objection; argumentative.
 7   Don't answer the question.
 8             MR. KRAMER:  On what basis are you
 9   instructing the witness not to answer?
10             MR. PARLER:  It's completely irrelevant to
11   any issue in this case.  And it's argumentative, it
12   borders on harassment.  We're here at three-owe-five
13   p.m.  You've asked the same questions four or five
14   times, counsel.  You've been advised this gentleman
15   has a snowstorm in Pennsylvania he's got to go
16   through.  I'd like to know why you're unnecessarily
17   dragging this out and now arguing with this gentleman.
18   Why don't you save these things for the jury, counsel?
19   Because that's where they're best suited.  They have
20   no place in a deposition setting.
21             MR. KRAMER:  You done, Mr. Parler?
22             MR. PARLER:  Yes.
0220
 1             MR. KRAMER:  Okay.
 2   BY MR. KRAMER:
 3        Q    Beyond what you've testified to,
 4   Mr. Russell, are there any other bases on which you
 5   have denied the Simmses' claim?
 6        A    Not that I can think of.
 7        Q    Are you aware that the Simmses had a
 8   mortgage on their home?
 9        A    Yes.
10        Q    A mortgage held by GMAC Mortgage Company?
11        A    I don't remember who.
12        Q    Has Mutual Benefit paid the mortgagee's
13   claim?
14        A    No.
15        Q    Why not?
16        A    We haven't been asked to.
17        Q    Does Mutual Benefit have any basis for
18   denying the claim of the mortgagee?
19        A    Not that I'm aware of today.
20        Q    What do you mean not that you're aware of
21   today?
22        A    Well, there's no facts as I sit here today
0221
 1   that would -- I can't -- I'm not a mind-reader, as you
 2   said, so I can't predict what might be the future.
 3   But as I sit here today, I'm not aware of any problems
 4   regarding that.
 5        Q    Has Mutual Benefit notified any governmental
 6   authorities of problems associated with the Simmses'
 7   claims?
 8        A    I'm not a hundred percent sure if we
 9   reported this to the Fraud Division of the Maryland
10   Insurance Department.  I'd have to ask Mr. Parler
11   that.
12        Q    Have you ever seen any documentation in
13   which a claim was submitted to the Maryland Insurance
14   Fraud Division in connection with the Simmses?
15        A    I can't remember.
16        Q    Are you aware of any other governmental
17   agencies notified about problems associated with the
18   Simmses' claims?
19        A    With the claim?
20        Q    Yes.
21        A    No.
22             MR. PARLER:  Could you read that question
0222
 1   back?
 2             (Question was read by the Reporter.)
 3             MR. PARLER:  All right.
 4        Q    Did Pat Bonanni advise Mutual Benefit of any
 5   problems regarding his ability to fully investigate
 6   the claim?
 7        A    No.
 8        Q    Do you know who advised the Simmses about
 9   alternate living arrangements during the time they
10   were displaced from their home?
11        A    Based upon reviewing the GAB reports I think
12   Pat and Mike had some discussions regarding the
13   additional living expenses.
14        Q    Do you recall what those were?
15        A    Not offhand.
16        Q    You mentioned an illegal dump or illegal
17   dumping of debris?
18        A    Umh-humh.
19        Q    What was your concern about that?
20        A    Our original concern became on the estimate
21   that was submitted relevant to the, the, the debris
22   removal/excavation.  My original -- and I have to -- I
0223
 1   can't remember exactly, but I think at the time I
 2   received the estimate the work was already done, but I
 3   had concern over the dollar amounts.  And then when we
 4   reviewed the estimate, when I first reviewed the
 5   estimate I was under the assumption that they were
 6   taking the debris to a landfill because there is a
 7   charge per load.  And I said, well, that should be
 8   easy because when you go to the landfill to take
 9   debris you usually get a ticket.  And we had asked --
10   or somebody asked Pat to follow up regarding the
11   accuracy of that, and then I guess Tracey Simms
12   advised us that this stuff was going to her father's
13   landfill (indicating).
14        Q    It bothered you that her father was involved
15   in this; is that correct?
16        A    No.
17        Q    What difference does it make to Mutual
18   Benefit where the debris was dumped just as long as it
19   was dumped?
20        A    I was concerned that there was -- if there
21   was a-hundred-and-fifty-dollar charge to get into a
22   legal landfill, I mean, we'd be happy to pay that.
0224
 1   But a hundred and fifty dollars to dump, to collect
 2   monies that weren't part of the cost troubled me.
 3        Q    If someone other than your policyholder
 4   dumps debris where he or she should not, why would
 5   that cause you concern as to your obligations to your
 6   policyholder?
 7             MR. PARLER:  Objection.
 8        Q    You may answer.
 9             MR. PARLER:  It's now been asked and
10   answered three times.
11             MR. KRAMER:  I've never asked that question,
12   Mr. Parler.
13             MR. PARLER:  You can answer, sir.
14        A    The concern is that with all the other
15   circumstances surrounding the loss, now you have her
16   father delivering, and what apparently is a charge to
17   us that they're asking reimbursement for, that there's
18   really no cost associated with it.  We have no problem
19   paying her father what's reasonable for his machinery
20   and his labor.  You know what?  He can have a profit
21   and overhead on top of that.  But to lead us to
22   believe that there was a charge for a landfilled load
0225
 1   when there is no charge, he is actually dumping it, I
 2   think is unfair.  And it adds to the other aspects of
 3   the claim regarding the building and regarding the
 4   contents.
 5        Q    Well, taken independently of other factors,
 6   would the -- let me ask you this question, I just want
 7   to understand this.  Independent of other factors,
 8   would concerns regarding Mr. Spamer's method of debris
 9   removal prompt Mutual Benefit to deny the claim?
10        A    It could.  I think that if, if there are
11   costs associated that were misleading and intentional,
12   to just get money out of us for the sake of getting
13   money out of us is fraud.  And this is Tracey Simms'
14   father and it is very close, they are father/daughter,
15   and it's very difficult to take sections of the claim
16   without taking the totality of the claim.
17        Q    If a member of an insured's immediate family
18   does something improper, on what basis does Mutual
19   Benefit hold the insured responsible for that?
20        A    We would want to know if there is potential
21   collusion between the two.  I mean, they are father/
22   daughter.  I have no problem paying a relative what it
0226
 1   would cost another independent contractor to do that.
 2        Q    Is it your understanding that Mr. Spamer was
 3   charging you more than another independent contractor
 4   would in connection with debris removal?
 5        A    Early on we had concerns.  In fact, I think
 6   I agreed to pay only half of it which I felt was for
 7   his machinery and the labor.  Our labor rate is well
 8   beyond what his true labor costs are, so I assume that
 9   his labor rate for the hours he has on the people
10   operating it -- he is not paying those guys thirty,
11   forty dollars an hour to provide me with the estimate.
12   And I have no problem paying, you know, twenty-five
13   percent above that for profit and overhead.
14             But it would appear to me and I have real
15   concerns over eight or nine thousand dollars of that
16   per-load charge to what we were -- what I believe
17   originally as being a legal landfill, which I know
18   that there are costs associated of taking debris to a
19   landfill.  But why would a father charge his daughter
20   eight thousand dollars that he didn't incur.
21        Q    Did Mutual Benefit encounter any problems in
22   dealing with the Ashbrook agency or anyone at the
0227
 1   Ashbrook agency in connection with the Simmses?
 2             MR. PARLER:  Can you be more specific,
 3   counsel?
 4             MR. KRAMER:  No, I can't.
 5        A    I don't know how to answer that.  I'm not
 6   aware -- I know that they were involved in the case.
 7   I had no personal problems with the Ashbrook agency.
 8        Q    Has Mutual Benefit worked with John Ellis in
 9   the past, beyond the claims involving the Simmses?
10        A    No, I don't believe so.
11        Q    How about Insurance Repair Specialists?
12        A    I'm not familiar with them.
13        Q    Martin King?
14        A    No, I never dealt with Martin King.
15        Q    Brad Ryden?
16        A    I have used Brad Ryden, yes.
17        Q    When did you begin using Brad Ryden in
18   connection with claims analysis?
19        A    For several years.
20        Q    More than ten?
21        A    No.
22        Q    More than five?
0228
 1        A    Maybe five.
 2        Q    Joseph Capezio?
 3        A    We may have used him before.
 4        Q    Do you recall when you first used
 5   Mr. Capezio?
 6        A    I don't.  I have not personally used him.
 7        Q    How often does Mutual Benefit use Brad Ryden
 8   in connection with claims?
 9        A    A couple times a year.
10        Q    And in what context does Brad Ryden work
11   with Mutual Benefit?
12        A    Anytime we need an accountant or a forensic
13   accountant, it could be a calculation of a business
14   interruption loss.  He was involved in a fidelity loss
15   of a million dollars he assisted us on.  He's helped
16   us with these particular situations relevant to
17   financial status of policyholders and so forth.
18   So. . .
19        Q    Have you ever used a Joseph Capezio?
20        A    You asked that question.
21        Q    Sorry.  You're right.
22             Jeff Barsky?
0229
 1        A    I don't remember that.
 2        Q    The name does not ring a bell?
 3        A    No.
 4        Q    Have you ever gotten a report from Joseph
 5   Capezio in connection with this claim?
 6        A    No.
 7        Q    Who is John Trout?
 8             MR. PARLER:  Objection.  You can answer.
 9        A    I think he's an investigator.
10        Q    With Organized Investigation Service?
11             MR. PARLER:  I'm going to object and at this
12   point instruct him not to answer.  There was an Order
13   entered by Judge Harvey indicating that investigatory
14   materials specifically from OIS were privileged.
15             MR. GREENBERG:  I didn't know that was who
16   it was.
17             MR. PARLER:  Yeah.
18             MR. GREENBERG:  Oh, okay.  We only knew the
19   other guy.
20             MR. PARLER:  Okay.
21        Q    I just want to ask if you've ever used
22   Mr. Trout prior to the Simmses' claim.
0230
 1             MR. PARLER:  Objection.  I'm going to
 2   instruct him not to answer based on Judge Harvey's
 3   Order.
 4        Q    The records needed to support or submit a
 5   claim, I think we've gone over, include receipts,
 6   estimates for replacement costs, gift letters.  Are
 7   there any others that you require of your
 8   policyholders?
 9        A    If the insured has the documentation that
10   they may have, they should submit it.  We ask them
11   that.  And it could be bank records we ask for,
12   cancelled checks, credit card records, or something to
13   help substantiate the ownership and the type of stuff
14   that they had and the cost.
15        Q    To your knowledge, have the Simms ever
16   refused to provide any documentation requested by
17   Mutual Benefit?
18        A    No.
19             MR. KRAMER:  Off the record.
20             (Discussion off the record.)
21   BY MR. KRAMER:
22        Q    Who is Sherry Reynolds?
0231
 1             MR. PARLER:  Objection.
 2        A    I think she's a former employee of ours.  I
 3   think, yeah.
 4        Q    Was she the supervisor of Personal Lines
 5   Underwriting Services?
 6        A    Oh, that Sherry.  I'm sorry.  I was
 7   confusing her with another Sherry.  Sherry Reynolds is
 8   still an employee of ours.  I think she's in charge
 9   of, in personal lines, the policy services, putting
10   the policies together or something, although -- that's
11   not correct, that's maybe her former position.  We
12   have changed that within our company.  She's a
13   supervisor of somebody in the Personal Lines
14   Department.
15        Q    Does she certify policies?
16        A    Yes.
17        Q    What does it mean to certify a policy?
18        A    It's trying to recreate the original policy
19   at the time it was in effect.  So they try to take the
20   declaration sheet at the time of the loss that we ask
21   them for and try to put the appropriate forms on it.
22        Q    Which would accurately reflect the terms of
0232
 1   coverage and other obligations?
 2        A    I'll admit there are times when mistakes are
 3   made; it's done manually and people make mistakes or
 4   miss things.  It's harder to recreate a policy than to
 5   generate a renewal or something, because it's out of
 6   their normal process.
 7             MR. KRAMER:  May I have this marked, please?
 8             (Deposition Exhibit No. 8 was marked for
 9   identification and was retained by counsel.)
10   BY MR. KRAMER:
11        Q    Let me show you and your counsel,
12   Mr. Russell, what has been marked as Russell
13   Deposition Exhibit No. 8.  And I ask if you recognize
14   this?
15        A    It looks like the Simmses' policy.
16        Q    I'm sorry?
17        A    It looks like the Simmses' homeowners
18   policy.
19        Q    Okay.  And the policy that would have been
20   in effect on November 5, 2001; am I correct?
21        A    Correct.
22        Q    As you review the forms contained in Exhibit
0233
 1   No. 8, is there anything that you notice as missing,
 2   any endorsements, other declarations, anything that
 3   strikes you as being problematic?
 4        A    It's very difficult for me to be able to
 5   tell you whether all the forms are here or whether all
 6   the pages are here.
 7        Q    I understand that.  I'm asking you to use
 8   your best efforts.  And take your time.
 9             (Witness complying.)
10        A    Do you want me to look through and check to
11   see if every form is here, Mr. Kramer, as listed?
12        Q    Well, the forms listed on the declaration
13   page would be the forms that would be applicable to
14   the policy at issue; is that correct?
15        A    That's correct, because that would be the
16   copy of the original, of the policy in effect.
17        Q    And the declaration pages begin actually on
18   the second page of Exhibit No. 8, correct?
19        A    Correct.
20        Q    Declarations pages provide what type of
21   information?
22        A    Well, it varies.  The policy number, the
0234
 1   named insured, the producer, the effective dates, the
 2   coverages, the premium, the deductible, the year of
 3   construction, type of construction, et cetera, the
 4   forms, the mortgagees.  Is there anything else?
 5        Q    I'm asking you, sir.
 6        A    Do you want me to read the whole thing?
 7             MR. PARLER:  Oh, come on.
 8             MR. KRAMER:  No.
 9             MR. PARLER:  The forms speaks for itself.
10   What's the purpose of this exercise, counsel?
11        Q    Do you see anything inaccurate about the
12   declarations page contained within the policy marked
13   as Exhibit No. 8, sir?
14        A    I don't.  I noticed that I had testified
15   earlier that the value may have been reduced back to
16   four-seventeen.  I state based upon this that the
17   dwelling value looks like it's four thirty-four, which
18   was what was originally put on it.  So I'd have to go
19   back and look at our system to see if this is correct
20   or not correct.  But we did originally set the claim
21   based upon this, and I think we need to verify that.
22   But I can't -- I only testify to what this says, and I
0235
 1   did testify earlier that I thought the Coverage A was
 2   four-seventeen.  If I erred in that, made a mistake,
 3   and if it's four thirty-four, then it's four
 4   thirty-four.
 5        Q    Mistakes happen, right?
 6        A    Right.
 7        Q    You weren't meaning to lie if you earlier
 8   said four hundred seventeen thousand dollars, correct?
 9        A    Correct.
10        Q    And if, in fact, it's determined that the
11   real figure is, what, four hundred thirty-four
12   thousand dollars, or -- if in fact it's determined
13   that the figure is really four hundred and thirty-four
14   thousand dollars as Coverage A amount, then that's
15   something that you would stand corrected on?
16        A    That's what the policy says, if we had
17   erred, or my earlier testimony was incorrect.  But you
18   have to understand, you've been asking me a lot of
19   questions involving a lot of issues, and it's tough to
20   recollect from memory to be a hundred percent
21   accurate.
22        Q    I understand it's an extensive claim.
0236
 1             Does Mutual Benefit contend that certain
 2   items on the Simmses' inventory are actually business
 3   related?
 4        A    I think there is, and there is coverage
 5   under the homeowners policy for business items.
 6        Q    Umh-humh.  Is there also a business policy
 7   that was issued to the Simmses?
 8        A    There's a commercial policy, but there's no
 9   coverage for this under that commercial policy.
10        Q    Why is that?
11        A    It's not -- it's property in another
12   building.  It's not property in the building that we
13   insured, unless it was within a hundred feet in the
14   open, it would not be covered.
15        Q    Are there any items that Mutual Benefit is
16   disclaiming coverage for because it is business
17   related?
18             MR. PARLER:  I'm going to object.  Mutual
19   Benefit, as this gentleman's made clear throughout,
20   has on the basis of fraud disclaimed the coverage for
21   any of the items.  So to ask him, you know, to select
22   certain items, the denial extends to all the items.
0237
 1             MR. KRAMER:  Thanks for your testimony,
 2   Mr. Parler.
 3        Q    But let me ask you this.  Independent of the
 4   other grounds for denial that you've testified to, is
 5   Mutual Benefit asserting as a basis for denial or
 6   nonpayment of any aspect of the claim the fact that
 7   certain items of inventory were business related?
 8        A    I am not convinced that -- I am aware that
 9   the Simmses have reported to us that certain items on
10   their inventory is business related.  There is
11   coverage under the homeowners policy, and I don't know
12   the specific limits, that will cover business personal
13   property, under the homeowners policy.  There is no
14   coverage under the commercial policy.
15        Q    Why is that?
16        A    As I have --
17             MR. PARLER:  Asked and answered.
18        A    -- answered, asked, you have asked and I
19   have answered, it is not business personal property
20   covered as if you read the definition of business
21   personal property.  This was submitted in its entirety
22   by the Simmses as part of their homeowners claim.
0238
 1             MR. KRAMER:  Excuse me for one moment.
 2             (Mr. Kramer and Mr. Greenberg left the room
 3   and thereafter returned.)
 4   BY MR. KRAMER:
 5        Q    Do I understand correctly that Mutual
 6   Benefit submitted a complaint to the Internal Revenue
 7   Service regarding the Simmses?
 8        A    I have no personal knowledge of that.
 9        Q    Well, beyond your personal knowledge, do you
10   have any knowledge of an IRS complaint against the
11   Simmses?
12        A    I have no knowledge of that.
13        Q    Did you ever ask someone to report them to
14   the IRS?
15        A    No.
16        Q    Do you have any basis to believe that it
17   would be -- that a complaint to the IRS would be
18   warranted by Mutual Benefit?
19        A    No.
20        Q    When denial letters are issued to
21   policyholders, are you generally the person that signs
22   those letters?
0239
 1        A    Not always.
 2        Q    When you don't sign the letter, who does?
 3        A    Sometimes it's somebody in our company,
 4   sometimes it's our counsel.  It depends.
 5        Q    Depends on what?
 6        A    On the merits of the case and who is
 7   involved in the case.  Counsel has different
 8   philosophies and principles.  I try not to tell our
 9   lawyers how to do their own business.
10             (Deposition Exhibit No. 9 was marked for
11   identification and was retained by counsel.)
12   BY MR. KRAMER:
13        Q    Let me show you what has been marked as
14   Russell Deposition Exhibit No. 9.  Let me ask you to
15   take a moment to flip through those pages which, if I
16   understand correctly, are computerized log sheets of
17   Mutual Benefit in connection with the Simmses' claim;
18   am I correct?
19        A    Correct.
20        Q    Can you tell me as you look through Exhibit
21   No. 9 whether there are any computer log notes
22   regarding the Simmses' claim beyond those which would
0240
 1   reflect conversations with counsel that are not
 2   contained within that exhibit?
 3        A    We have done our best to supply you with the
 4   requested documents of our note pad entries, and
 5   without going screen by screen I couldn't -- I didn't
 6   do an inventory, but we did print them all off.  They
 7   were sent to you with the exception of those that
 8   Mr. Parler would have removed as a result of attorney-
 9   client privilege.  So I can assume that these should
10   be all the notes.
11        Q    Right.
12        A    I don't know.
13        Q    Are you surprised that there are so few?
14        A    Not, not really.  There's a couple reasons
15   why.  One is you're using an independent adjustor.  I
16   testified earlier to that, that there's no reason to
17   regurgitate the findings in his report.  Mr. Parler
18   was retained early on in the case.  I know most, if
19   not all, of my discussions were with Mr. Parler.  I
20   think the decision was made fairly quickly, and since
21   then we've been involved in this litigation process.
22        Q    Thank you.
0241
 1             Oh.  The FJB at the first page of Exhibit 9,
 2   do you know who that is?
 3        A    I assume that's Frank.
 4        Q    Frank Benedek?
 5        A    Right.
 6        Q    Thanks.
 7             (Deposition Exhibit No. 10 was marked for
 8   identification and was retained by counsel.)
 9   BY MR. KRAMER:
10        Q    Showing you roughly Exhibit No. 10, do you
11   recognize the handwriting on those handwritten
12   activity sheets?
13        A    I'm not a hundred percent sure.  It looks
14   like it might be Mike Snare's.
15             MR. KRAMER:  Off the record a second.
16             (Discussion off the record.)
17             (Deposition Exhibit Nos. 11 & 12 were marked
18   for identification and were retained by counsel.)
19   BY MR. KRAMER:
20        Q    Let me show you Russell Deposition Exhibit
21   No. 11.  Is that your handwriting?
22        A    Yes.
0242
 1        Q    Do you recall when you created that
 2   document?
 3        A    I don't remember.
 4        Q    Can you recall why you created that
 5   document?
 6        A    It was probably generated as a result of a
 7   conversation, which I can't tell you who, it may have
 8   been Mr. Parler, regarding some red flags that were
 9   gener -- becoming -- were surfacing on the claim, two
10   new vehicles, red flags, Tahoe, dropped warranties in
11   October, combined income approximately a hundred and
12   ten, hyphen-lifestyle, leaves, takes off work for
13   wife's birthday, mortgage, two thousand a month, Tahoe
14   seven hundred a month, lien on land fifty-five
15   thousand.  These are probably notations I took at some
16   point, but I can't remember when.
17        Q    Or why?
18        A    I would assume it was precipitated by a
19   phone call, it might have been Mr. Parler and I
20   discussing it, but I can't be a hundred percent sure.
21        Q    Okay.  Showing you Russell Deposition
22   Exhibit No. 12, what's that?  That's your handwriting,
0243
 1   right?
 2        A    Yes.
 3        Q    What is it?
 4        A    Some more of my notes.
 5        Q    Now, it starts out, it says "John"?
 6        A    That may be John T., John Trout.
 7        Q    Okay.  And then there are a number of
 8   bullets?
 9        A    These are probably a conversation I had with
10   Mr. Parler regarding John Trout's involvement.
11        Q    Okay.  Do you know what it means, "common
12   for everyone by six-thirty"?
13        A    Yeah, I think that would be the normal
14   departure time of the Simmses on that particular day.
15        Q    "Five-thirty mother takes baby to sitter's,"
16   it's written.  What does that mean?
17        A    It means that at five-thirty the mother took
18   the baby to the sitter's.
19        Q    Okay.  "Son leaves and catches bus."  So
20   these are details surrounding the day of the fire?
21        A    You know what?  This doesn't pertain to the
22   Simmses' loss.  This is a, an arson loss around the
0244
 1   time of the Simmses.  I can't -- here in Maryland,
 2   what was his name?
 3             MR. PARLER:  Johns.
 4        A    Johns.
 5             MR. GREENBERG:  Jerome Johns?
 6        A    Jerome Johns, and that he -- I think John
 7   Trout was doing some investigation.  We had -- it was
 8   another case involving arson and insurance fraud.
 9   These are my notes relevant to the activities of
10   Mr. Johns.  It has nothing to do with the Simms.
11        Q    Any idea as to why it got mixed in there?
12        A    It inadvertently got filed, Mr. Kramer.
13             MR. PARLER:  I'm frankly not sure how you
14   guys got it, but obviously it's a misfiling.
15        A    I would like to look at the other one to
16   make sure before I testify, to make sure it is
17   appropriate, the earlier exhibit, to make sure that
18   that doesn't somehow flipflop into the Johns.  I don't
19   think it did, but I'd like to review it, please, that
20   exhibit.
21        Q    All right.  Handing you again Exhibit 11.
22        A    11.  Yes, this pertains to the Simmses'
0245
 1   loss.
 2             (Deposition Exhibit No. 13 was marked for
 3   identification and was retained by counsel.)
 4   BY MR. KRAMER:
 5        Q    Showing you what has been marked as Russell
 6   Deposition Exhibit No. 13.  Mr. Russell, take a moment
 7   to look at that document and please tell me what it is
 8   (handing).
 9        A    It looks like a form to the Maryland
10   Insurance Administration from Mr. Parler regarding the
11   Simmses.
12        Q    Is Exhibit 13 Mutual Benefit's referral of
13   this matter to the Maryland Insurance Fraud Division?
14        A    Yes.
15        Q    And was Exhibit 13 and the referral to the
16   Insurance Fraud Division done in accordance with
17   Mutual Benefit's wishes and instructions?
18        A    I did authorize it, yes.
19        Q    And, in fact, you are listed as the contact
20   person for Mutual Benefit; am I correct, sir?
21        A    Looks that way, yes.
22        Q    So that if the Insurance Fraud Division has
0246
 1   any questions relating to Exhibit 13 or the claims of
 2   the Simmses and the controversy at issue, they could
 3   call you and ask questions?
 4        A    I'm sure they can.
 5        Q    And as part of Exhibit No. 13, there was
 6   attached a summary of concerns with regard to the fire
 7   claim; is that correct?
 8        A    That's what it says, yes.
 9        Q    Did you review that summary, sir?
10        A    No.
11        Q    I'm sorry?
12        A    No, I didn't review it.
13        Q    Have you ever seen the summary?
14        A    I believe this is the first time I may have
15   seen this document.
16        Q    You've never seen Exhibit 13 before?
17        A    I have no recollection of seeing it before.
18        Q    Did you have any communication with Ronald
19   Sallow or anyone else at the Maryland Insurance Fraud
20   Division?
21        A    No.
22        Q    Do you know what happened as a result of the
0247
 1   submission of Russell Exhibit 13?
 2        A    No.
 3        Q    Do you know what the Maryland Insurance
 4   Fraud Division did in connection with the Simmses'
 5   claims?
 6        A    No.
 7        Q    Were you ever informed that the Maryland
 8   Insurance Fraud Division found insufficient evidence
 9   of fraud?
10        A    No.
11        Q    What did you do to find the meeting Minutes
12   of that large claim committee meeting?
13        A    I asked, I think it was Patty Mekesha,
14   M-E-K-E-S-H-A, Mekesha, to look in the -- we
15   understand that the documents would have been in the
16   basement, and they went to the basement to try to
17   locate them, and we can't find them.  We had
18   undertaken a cleaning of the basement sometime last
19   year, and unfortunately we felt that it's very
20   possible that these inadvertently got thrown out.
21        Q    And when would it have inadvertently been
22   thrown out?
0248
 1        A    At the time of the cleaning of the basement
 2   which was sometime last year; I don't know if it was
 3   spring, summer.  We actually, you know, got rid of
 4   several files and documents.
 5        Q    Did anyone in the large claim committee
 6   meeting discuss the manner in which Mutual Benefit
 7   could save money on the policy issued to the Simmses
 8   by not paying the value?
 9        A    At the time of the large claim meeting,
10   Mr. Kramer, there was absolutely no indication that
11   there was a problem with the claim or the claim
12   presentation.  That all evolved after the large claim
13   meeting.
14        Q    When did it evolve?
15        A    I don't remember the time frame
16   specifically.
17        Q    Where do you keep copies of monthly
18   management reports that would reference the Simmses'
19   claims?
20        A    Well, they're actually in my desk.
21        Q    In your desk?
22        A    In my desk.
0249
 1        Q    And in your desk do you have all of the
 2   management reports that would reference the Simmses'
 3   claims?
 4        A    If I have them back that far, yes, they
 5   could.
 6        Q    Do you ever throw away any of your
 7   management reports?
 8        A    I do throw them away after a period of
 9   years, if I go through a cleaning.
10        Q    Do you believe that you have destroyed any
11   of the management reports which reference the Simmses'
12   claims?
13        A    I don't know.
14        Q    Do you have any information to indicate that
15   you destroyed any of them?
16        A    I may have.  I don't know.  I can look for
17   you to see if we have them.
18        Q    Will you do that, please?
19        A    But I want to state on the record that these
20   reports contain some proprietary information that I am
21   not willing to give out.  You may have the information
22   relevant to the Simmses' claims, but relevant to our
0250
 1   other policyholders, relevant to the other
 2   information, this is an internal working document and
 3   it is what I would call proprietary.  I don't mind
 4   providing the report because it's going to basically
 5   regurgitate what's on the large claim meeting, if I
 6   can find it.
 7             MR. PARLER:  Mr. Kramer, Mr. Russell will
 8   undertake a search.  If there's anything related to
 9   the Simmses we'll copy and get to you.  Anything
10   unrelated to Simms we'll redact.
11        Q    One last question, Mr. Russell.  Have you
12   ever requested information relating to Mutual
13   Benefit's exposure for bad faith in connection with
14   its dealings with the Simmses?
15             MR. PARLER:  Of who?  Anybody -- I'm going
16   to object to the extent that question asks for
17   information that would relate to communications with
18   counsel.  Don't answer.  If you've had communications
19   with anybody other than counsel, you may answer the
20   question.
21        A    No one.
22             MR. KRAMER:  Thank you very much.
0251
 1             MR. PARLER:  We'll read and sign.  And do
 2   you want to talk for a second?  Mike's is going to
 3   have to be rescheduled.
 4             MR. KRAMER:  Obviously.
 5             (Signature having not been waived, the
 6   deposition of Mark E. Russell was concluded at 3:49
 7   p.m.)
 8                 ACKNOWLEDGMENT OF DEPONENT
 9             I, Mark E. Russell, do hereby acknowledge
10   that I have read and examined the foregoing testimony,
11   and the same is a true, correct and complete
12   transcription of the testimony given by me and any
13   corrections appear on the attached Errata sheet signed
14   by me.
15   
16   ________________________     ________________________
17          (DATE)                     (SIGNATURE)
18                        -----------
19   
20   
21   
22   
0252
 1     CERTIFICATE OF SHORTHAND REPORTER - NOTARY PUBLIC
 2             I, Beatriz D. Fefel, Registered Professional
 3   Reporter, the officer before whom the foregoing
 4   proceedings were taken, do hereby certify that the
 5   foregoing transcript is a true and correct record of
 6   the proceedings; that said proceedings were taken by
 7   me stenographically and thereafter reduced to
 8   typewriting under my supervision; and that I am
 9   neither counsel for, related to, nor employed by any
10   of the parties to this case and have no interest,
11   financial or otherwise, in its outcome.
12             IN WITNESS WHEREOF, I have hereunto set my
13   hand and affixed my notarial seal this 8th day of
14   January 2003.
15   My commission expires:
16   August 1, 2004
17   
18   ____________________________
19   NOTARY PUBLIC IN AND FOR THE
20   STATE OF MARYLAND
21                        -----------
22   
0253
 1                   E R R A T A  S H E E T
 2       IN RE:  Simms, et al. V. Mutual Benefit
 3   RETURN BY:
 4   PAGE     LINE            CORRECTION AND REASON
 5   ____    _____   _____________________________________
 6   ____    _____   _____________________________________
 7   ____    _____   _____________________________________
 8   ____    _____   _____________________________________
 9   ____    _____   _____________________________________
10   ____    _____   _____________________________________
11   ____    _____   _____________________________________
12   ____    _____   _____________________________________
13   ____    _____   _____________________________________
14   ____    _____   _____________________________________
15   ____    _____   _____________________________________
16   ____    _____   _____________________________________
17   ____    _____   _____________________________________
18   ____    _____   _____________________________________
19   ____    _____   _____________________________________
20   ____    _____   _____________________________________
21   _____________   _____________________________________
22      (DATE)                  (SIGNATURE)
0254
 1         E R R A T A  S H E E T (C O N T I N U E D)
 2       IN RE:  Simms, et al. V. Mutual Benefit
 3   RETURN BY:
 4   PAGE     LINE            CORRECTION AND REASON
 5   ____    _____   _____________________________________
 6   ____    _____   _____________________________________
 7   ____    _____   _____________________________________
 8   ____    _____   _____________________________________
 9   ____    _____   _____________________________________
10   ____    _____   _____________________________________
11   ____    _____   _____________________________________
12   ____    _____   _____________________________________
13   ____    _____   _____________________________________
14   ____    _____   _____________________________________
15   ____    _____   _____________________________________
16   ____    _____   _____________________________________
17   ____    _____   _____________________________________
18   ____    _____   _____________________________________
19   ____    _____   _____________________________________
20   _____________   _____________________________________
21   ____    _____   _____________________________________
22      (DATE)                  (SIGNATURE)