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How/Should I become invovled with this insurance company w/o getting into legal trouble?

I was invovled in a deal between myself, an investor and an accountant. The investor was a friend of mine who needed money, so he sold a house to me, and he was suppposed to give me 50% of the profits and help pay the mortgage, neither of which he has done (it is complicated explaining how he profited from all this, but he did--he got 40,000 dollars out of the house).

I am suing the accountant (and the other party, who actually "stole" the money, but let's focus on the accountant in this question) over his role in this real estate deal that went wrong. I already wrote a letter to the accountant in which I said I was suing him for 1. Giving me bad advice which harmed me financially, 2--conflict of interest since he represented the other party, but also gave advice to me,(numerous e-mails), and 3. finally for being involved (and invovling me) in an illegal deal (it was an FHA loan, but the house was rented, which is illegal--I should have been living there--but they told me they would take care of the mortgage and evict the tentant--neither of which they did, so I (unwisely?) kept the tentant instead of going into foreclosure).

I am asking that he (or his insurance co.) pay me the 8,000 I lost for the down payment and for which I was not reimbursed, 5,000 for the closing costs on the house so I can get sell it, and 5,000 in lost income from the tenant who is being evicted for non-payment of the rent (I had really bad luck).

Now he has turned the matter over to his insurance company which handles malpractice suits. They are asking me to give them an accounting of the story; I know how to write a letter to them which includes how he harmed me and the conflict of interest part; however, I'm not sure how I should handle the illegalities of it all since I was also involved. I suppose since the investigator probably has the original letter I sent, in which I mentioned the illegal FHA deal, so it is probably water under the bridge (the original intent of the letter was to scare him since I know a friend of his who told me the accountant is very worried about a lawsuit, and even though I would harm myself by taking him to court over an illegal deal in which I myself was involved, he has so much more to lose in terms of money spent defending himself and in the possible loss of his license that he would settle out of court).

Note: The house is in Texas, but the two parties were in California.


1. If either party was involved in an illegal deal, will it automatically be rejected by the claims dept?

2. Shall I simply not mention the illegal transaction in my letter?

3. Could I get in more trouble by persuing this, or is it already too late (like could the insurance company counter-sue me or report me to the district attorney or the state prosecuter for being involved in an illegal deal myself?)

4. My case is flimsy since none of this was in writing (although there is a vast history of e-mails that took place between the accountant myself and the other party), however, won't the threat of going to court and having to pay a large amount on this relativey small sum encourage the insurance company to pay me off; or if they don't, won't the accountant want to pay me off since defending himself in court will cost him far more?

2 Answers

  • 1 decade ago
    Favorite Answer

    Ok, his insurance doesn't cover his illegal act. So let's just get that clear up front.

    1. You bought a house. You lied on the loan papers, to get an FHA loan. How in the WORLD are you going to prove, your word against his, that the accountant was an accomplice in this? The only clear cut, provable illegal act here, was on YOUR part.

    1a, yes, insurance doesn't cover deliberate illegal acts. If he has errors and ommissions coverage, it might pay his defense costs, but not the judgement. You're going to have a TON of out of pocket expenses, because I do NOT think you're going to get an attorney to sue this guy on a contingency basis. And, you can't file a claim on his insurance - you have to sue him.

    2. I certainly don't see how the illegal transaction helps you.

    3. The insurance company isn't going to do anything about this - but the judge who hears the lawsuit might. It's flat out loan fraud - on your part.

    4. No. Because the insurance company isn't EVER going to pay the judgement amount anyway - it's not covered. And frankly, this guy probably doesn't have errors and ommissions coverage in the first place. And you'll likely be paying your attorney way more than the $8,000, to take it to court. The attorney defending himself isn't going to cost him any more than an attorney prosecuting it, is going to cost you. And HE'S got the stronger case.

    Bottom line: You bought the house. You own the rental house. Period.

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  • 1 decade ago

    How did you lose 8,000 for the down payment? How did you lose 5,000 for the closing costs? Do you have any paper work that shows that your friend or even the "accountant" who was involved in this deal, made a promise to reimburse you for your costs? You're saying here that you were aware that this deal involved a sale using FHA, which provides for Owner Occupied homes, to qualify for a loan, but just because the house was rented didn't mean that the deal was illegal. It is presumed that when the mortgage is taken oven, that the owner will evict the tenant, and take up residence. So there is no "illegality" - and you need a real paper trail (not emails - they won't stand up in court or with insurance companies) Your case is weak, and you should just get over it and live with the fact that somebody lied and cheated you.

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