Was Insurance Fraud Attempted to Avoid Paying Child Support

No Matter How Contentious Divorce Seldom Charges the Parties with Fraud

Post number 5358

In Katherine Jane Macdonald v. Bryce Inglis Macdonald v. Mckenzie Cronk, LLC, and Denison Cronk, LLC, No. COA24-759, Court of Appeals of North Carolina (May 6, 2026) a wife appealed a trial court order in a domestic case involving equitable distribution, sanctions, and child support after separation from Husband.

The marital estate included multiple real properties, safe deposit boxes, insurance proceeds, rental income, retirement accounts, and two LLCs — Denison Cronk, LLC and McKenzie Cronk, LLC (Patio Playground).

The trial court found that the wife had diverted rental proceeds, failed to account for insurance proceeds, obstructed discovery, and underreported business income. It awarded Husband a distributive award, imposed sanctions against Wife, and ordered Wife to pay retroactive and prospective child support.

FACTS

The court concluded that Wife’s actions “were undertaken knowingly and voluntarily to conceal income for the Patio Playground and in an effort to conceal potential insurance fraud.” As a sanction, the court required Wife to reimburse Husband $34,437.50 for the cost of retaining an expert to locate the information Wife refused to provide.

[Husband] testified credibly that the insurance proceeds received had not been used to repair damage to the roof of the property, which was the reason that [Wife] refused to sign the insurance check provided to repair the roof following Hurricane Isaias. [Wife] also admitted to [the] same.

On the insurance proceeds, she claimed that because the checks were deposited into marital accounts, the court could not find she personally “received” them. The trial court’s findings, however, rest on her inability to account credibly for how the funds were spent, not merely on the initial deposit. The court ultimately concluded that Wife’s “actions were undertaken knowingly and voluntarily to conceal income for the Patio Playground and in an effort to conceal potential insurance fraud.”

Law

• Equitable distribution orders are reviewed to determine whether the findings are supported by competent evidence and whether those findings support the judgment; the actual distribution is reviewed for abuse of discretion.
• Unchallenged findings are binding on appeal.
• Stipulations in a final pretrial order are binding on the parties and the court.
• Under N.C. Gen. Stat. § 50-21(e), a trial court may impose sanctions for willful obstruction or unreasonable delay in equitable distribution proceedings.
• Child support findings must be supported by competent evidence, and determinations of gross income are reviewed de novo.

Analysis

The Court of Appeals held that the trial court’s detailed findings regarding safe deposit box cash, insurance proceeds, diverted rental income, business goodwill, real property values, retirement account valuation, and the Camaro valuation were supported by competent evidence or binding stipulations. Many of Wife’s appellate arguments merely challenged how the trial court weighed conflicting evidence and witness credibility, which is not reweighed on appeal. The court also upheld the sanctions award because the trial court made detailed findings that Wife obstructed discovery, concealed records, and caused Husband to incur expert costs, and she had sufficient notice that expert fees could later be apportioned against her.

On child support, however, the court found that two components of Husband’s income—his Social Security amount and 401(k) withdrawal amount—were not supported by evidence in the record. Because those figures were used to calculate child support, the court vacated that portion of the child support ruling and remanded for recalculation.

Discussion

This case emphasizes the deference appellate courts give trial judges in equitable distribution disputes, especially where credibility is central and the record contains substantial factual findings. It also underscores the importance of binding stipulations in pretrial orders: a party cannot agree to valuations below and then attack those same figures on appeal.

The opinion further clarified that sanctions under § 50-21(e) are distinct from expert-witness costs taxed as court costs and do not require a subpoena. Finally, it shows that even in a largely affirmed domestic order, a child support award cannot stand unless the income findings are grounded in evidence actually in the record.

Conclusion

The Court of Appeals affirmed the equitable distribution and sanctions portions of the trial court’s order, but vacated in part and remanded the child support order because the findings concerning Husband’s Social Security and 401(k) income were unsupported by the record.

ZALMA OPINION

When I was a new lawyer I was assigned to deal with several divorce cases before I changed to an insurance law firm. The work was not pleasant and the parties were often at each others throats. This case showed that the parties to the divorce did not like each other at all, charged insurance fraud providing the wife with sufficient income to pay child support. If the court believed insurance fraud was attempted the judges in the Court of Appeals should have reported their findings to the appropriate prosecutor.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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