The Progress of this case will be followed from a
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
BRYSON CITY DIVISION
WILLIAM C. HAMMEL, |
ALAN J. BELLAMENTE, |
et al., | MEMORANDUM ON
| THE EXTORTION SCHEME
Plaintiffs | AND
| THE HOBBS' ACT
vs. | (Attachment 3)
STATE FARM MUTUAL AUTOMOBILE |
INSURANCE CO., | No. 2:99:CV-44-T
STATE FARM INDEMNITY COMPANY, |
et al. |
MEMORANDUM ON THE THE EXTORTION SCHEME and THE HOBBS ACT
The core of Hobbs, 18 USC 1951(a) is:
Whoever in any way or degree obstructs, delays, or affects
commerce or the movement of any article or commodity in commerce,
by robbery or extortion or attempts or conspires so to do, or
commits or threatens physical violence to any person or property
in furtherance of a plan or purpose to do anything in violation of
this section shall be fined under this title or imprisoned not
more than twenty years, or both.
The statement of the alternative, appropriate to insurers, of
those acts implied to be unlawful in this paragraph is:
Whoever in any way or degree obstructs, delays, or affects
commerce by robbery or extortion or attempts or conspires so to do,
... shall be fined ....
First, the meanings of the words of paragraph (a) above examined,
then how the unlawful acts can be applied to an insurer is examined
taking into account the special relationship that exists between
insurer and the insured; how these acts will affect commerce
generally is examined, and finally, how the facts of this case
fit the legal model are examined and alleged in detail.
In 18 USC 1951(b)(2) - (Hobbs), "Extortion" is defined as,
"the obtaining of property from another, with his consent,
induced by wrongful use of actual or threatened force,
violence or fear, or under color of official right."
The inclusion of the element of simple fear is important; it
is that which distinguishes the extortion as defined by Hobbs
from "blackmail", where a well defined fear of a definite action
is required to have been communicated. From the statutory language,
it would appear that fear alone should be considered as sufficient
inducement; and, in Evans v. US 504 US, 255 (1992)
the Court reconstructs the ambiguous wording and grammar of the
statute on the basis of Congressional intent and the principle
of lenity, saying:
The more natural construction is that the verb
"induced" applies to both types of extortion described
in the statute. Thus, the unstated "either" belongs
after "induced": "The term `extortion' means the
obtaining of property from another, with his consent,
induced either  by wrongful use of actual or
threatened force, violence, or fear, or  under color
of official right." This construction comports with
correct grammar and standard usage by setting up a
parallel between two prepositional phrases, the first
beginning with "by"; the second with "under."
Thus, fear itself is still sufficient to induce the victim to
relinquish property willingly to the extortioner. Whether or
not the victim's fear is causally related to acts or intentions
of the extortioner, is not required to be known or proven.
Though this may seem too broad a sufficient condition, it
directly allows more subtle, and more pernicious forms of
extortion that would, in fact, prevent or hamper due process.
Intent, when not directly expressed, must be inferred. Since
the mind is not directly available for observation, a finder
of fact is left free to consider a body of evidence which may
or may not be consistent, to an appropriate degree of belief,
with the proposition that the extortioner has in some way
caused, or even exploited, any known or obvious fear possessed
by the victim.
The word "wrongful", in 18 USC 1951(b)(2), means that the
extortioner has no lawful claim to the property obtained.
In attempted extortion, where the property in point has not
actually been taken, intent is an important element, Carbo
v. US, 314 F 2d 718 (9th Cic. 1983).
I. APPLYING HOBBS TO AUTOMOBILE INSURANCE
Automobile Insurance is an agreement between two parties, the
insurer and the insured, with the necessary elements of contract,
whereby the insurer agrees to indemnify the insured against one
or more kinds of loss associated with the use of an automobile
in return for periodic payments of premiums.
The insured enters into such an agreement with a reasonable
expectation, and indeed trust, that when the conditions of the
policy as contract are met, that the insurer will meet its
obligations under the contract with honor and integrity.
The insurer owes a policy holder a fiduciary duty to perform,
both traditionally and logically.
"A relationship requiring the highest duty of care and
arising between parties usually in one of four situations:
(1) when one person places trust in the faithful integrity
of another, who as a result gains superiority or influence
over the first, (2) when one person assumes control and
responsibility over another, (3) when one person has a
duty to act for or give advise to another on matters
falling within the scope of the relationship, or (4) when
there is a specific relationship that has traditionally
ben recognized as involving fiduciary duties, as with a
lawyer and a client or a stockbroker and a customer."
-- Black's Law Dictionary
An insured enters into agreement with an insurer by instrument
of a policy precisely because the losses against which the insured
is supposed to be indemnified are of a catastrophic nature to
the insured; else, the indemnification is absent in the case
of willful premeditated fraud on the part of the insured.
If the situations under which a fiduciary relationship exists,
as cited above, are examined, it follows:
Under situation (1), when an insurer has collected premiums over
a substantial period of time, taking money from the insured, it
gains financial superiority and influence by being the holder of
purse strings in the event of a loss covered by the policy.
Under situation (3), an insurer has the duty to act (to indemnify)
the insured for losses covered under the policy which is the
instrument of the relationship between insured and insurer.
Under situation (4), traditionally, an insurer does have a
fiduciary duty to its insureds.
When an insured, satisfies the conditions of policy, and the
the insurer refuses to act in accordance with the policy in
a manner consistent with its fiduciary duty it has breached its
fiduciary duty, as well as the contract. Such refusal is not
only fear inducing, but is the possibly deliberate induction
of fear in the insured of sustaining his losses.
There may also be induced fear to continue paying premiums to
the insurer in a desperate placation of the insurer to reinstate
the benefits of a policy, which the insurer had withheld.
It is almost tautological reality that any catastrophic loss begets
yet more loss, that is, until all is lost. This is a fact that
is, or certainly should be known to any insurer. An insurer's
refusal to act while having evidence of the severity of losses,
thus induces further fear of consequent additional losses.
As the denial of benefits is systematically prolonged through
an additional scheme of delaying tactics, compounding the
initial breaches of contract and fiduciary duty, the induced
fear in the insured naturally increases.
When the insurer has evidence of catastrophic losses that will
likely have further losses that are permanent and debilitating,
this is a malicious and deliberate endangerment of the insured's
business, property, and personal well being, in all aspects of
Whether or not an insurer may, by its decisions regarding medical
benefits, be practicing medicine without a license, if the evidence
in the insurer's possession indicates the reality of damages by
competent medical opinion, and reasonable consequences of losses,
it must be presumed to have investigated in accordance with its
fiduciary duty to have discovered that evidence of potential
threats of further, and/or permanent losses exists.
By denying necessary medical benefits, in particular, in the
face of evidence of serious injury with potential for further
permanent injury, the insurer is most certainly inducing an
egregious amount of fear and anxiety in the insured, and it
does this with malice, calculation and deliberation.
Under this condition of extreme fear, the insured can be induced
to sign documents that he would otherwise not have signed, which
inure to the benefit of the insurer by depriving the insured
of the actual property as money that he would have been entitled
to under the limits of the policy.
Under such a condition of extreme fear, and losses continuing, the
insured is naturally induced to engage an attorney willingly,
thus depriving the insured, in principle, of approximately One
Third (1/3) of the policy limits for which he has paid.
While an insurer is deliberately using its improper denials of
benefits, inducing fear in the insured which it can then exploit,
it is also earning interest on money that should rightfully belong
to the insured. It is depriving the insured of that use and/or
When there are medical people and healthcare givers not being
paid by the insurer, fear is induced in these people also. Out
of fear of litigation and its expenses arising from nonpayment,
they too become willing to accept less than their billed amount,
and allow that the insurer earn and keep interest on money that
is rightfully theirs.
Most people do not live in the atmosphere of court rooms and
judges, and the law. Yet these people, who do not, are the
majority of those insured. There is quite reasonably a fear
in these people of that atmosphere, if only because it is not
familiar, but often because it is not understood. This fear,
insurers are, or should be aware of, and exploit in
denying a valid claim. Many valid claims are not taken to
litigation, some because they are small; and, the insurer keeps
what is rightfully their insureds' by exploiting the insureds'
fear so that they simply give up.
THEREFORE: a wrongful denial or termination of benefits by an
insurer is not only a breach of various aspects of the
relationship between insurer and insured, but is also the
instrument of fear induction, by which the insurer seeks to
gain property which rightfully belongs to the insured in many
ways, some of which are described above. When property of
the insured is relinquished or given to the insurer out of
deliberately induced fear, or any such fear is exploited for
profit, this is extortion, actionable under Hobbs.
When the property is taken or withheld without the insured's
consent and with this element of fear and intimidation, it is
outright Robbery, 18 USC 1951(a)(1), also actionable under
When in addition to property or business losses, such Robbery
inflicts bodily harm upon the insured, the insurer has committed
Aggravated Robbery as commonly defined in Black's Law Dictionary.
When an insurer unlawfully denies or terminates the benefits to
which an insured is entitled under policy, by virtue of the
special relationship between insurer and insured and also by
virtue of the special meaning and catastrophic consequences
that should be known by the insurer, the insurer is attempting
to extort the insured, as well as robbing the insured. The
extortion being attempted arises from the naturally induced
fear of further losses being exploited to induce the insured
to accept offers and settlements which he would otherwise not
When an insurer succeeds in unlawfully obtaining property that
rightfully belongs to the insured, by settlement of less than
what rightfully belongs to him, through the naturally induced
fear of further losses of property or harm to his person or
others, the insurer is extorting the the insured. At the same
time, by unlawfully taking what rightfully belongs to the
insured before that, having control and use of the insured's
property, without his consent, thereby unjustly enriching itself,
the insurer is also robbing the insured of that enrichment
and use which would otherwise have been his.
II. CONSPIRACIES, HOBBS & RICO
Conspiracy to commit any act requires at least two persons.
Individual persons who are agents, servants or employees of
an insurer may participate in a conspiracy, as may an insurer
together with a wholly owned, incorporated subsidiary of that
insurer. Both these last entities possess "personhood" by
virtue of their legally recognized incorporation.
When an insurer conspires with a physician to produce an
Independent Medical Examination that is a fabrication whose
purpose is as an instrument wrongfully to deny the insured that
which is rightfully his, these two persons have committed
a Conspiracy to Commit Robbery.
If the either the insurer or the physician are aware of the
possibility of physical harm ensuing as a result of the
conspiracy which actually results in the robbery itself,
these two persons have committed a Conspiracy to Commit
Aggravated Robbery, actionable under Hobbs.
18 USC 1951(b)(3) defines commerce by:
The term "commerce" means commerce within the District
of Columbia, or any Territory or Possession of the United
States; all commerce between any point in a State,
Territory, Possession, or the District of Columbia and any
point outside thereof; all commerce between points within
the same State through any place outside such State; and
all other commerce over which the United States has
Leaving the simple meaning of commerce, "the exchange of goods
and services", to be understood. There is no indication in the
statutory language that the underlying simple meaning of
"commerce" or that specifically defined in paragraph (b)(3)
should be necessarily be construed on a large scale.
Yet, when an insurer is involved, these methods are employed
as part of its "business practices" it is difficult to see
how commerce is not routinely obstructed, delayed and affected.
Reference is made to the quoted findings of the Honorable
William B. Bohling in Campbell v. State Farm Mutual Automobile
Insurance Co., No. 890905231, slip op. at 53
(Third Judicial Dist., Salt Lake City, Utah, Aug. 3, 1998),
upon which Plaintiffs have written an accompanying Memorandum
on the Racketeering Nature of the Misconduct of State Farm
Mutual Automobile Insurance Company, where the relevant finding
is quoted, from paragraphs 82 and 83, of the Campbell Court's
When violations of Hobbs are used as instantiations of the
prohibited acts of 18 USC 1961 (RICO), the word "affects"
is used in both Statutes, and in both cases, it should be
reasonable and logical to construe this usage to mean,
"affects deleteriously"; a salubrious effect would hardly
contribute to the criminality of the violations.
When violations of Hobbs are used as instantiations of the
prohibited acts of 18 USC 1961 (RICO), the meanings ascribed
to the words "person", and "commerce" must be reconciled.
Unless otherwise defined in Hobbs, when Hobbs is used as a
defining predicate act of RICO, word meanings in Hobbs should
be inherited from statutory language and case law of RICO.
THEREFORE, when violations of Hobbs 18 USC 1951 are used as
predicate acts in allegations of RICO violations, when the
defendants' acts involve an insured and insurer, the above
should reasonably apply.
William C. Hammel Alan J. Bellamente
A-11 Moose Branch Road, A-11 Moose Branch Road,
Sweetwater Apartments 1A, Sweetwater Apartments 8A,
Robbinsville, NC 28771 Robbinsville, NC 28771
(828) 479-1547 (828) 479-1547
William C. Hammel Alan J. Bellamente
DATE: February 4, 2000 DATE: February 4, 2000
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Created: February 4, 2000
Last Updated: May 28, 2000