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cosmos-lighting-1-1024026-m.jpgInsurance fraud, how it’s committed and how it’s solved, always is an interesting topic. It’s like a crime drama. Whether it’s Castle, The Mentalist, or NCIS, you get to see the end result and then figure out how it happened; and you inevitably learn about a couple of mistakes that help it along and a few more that eventually bring it to an end. Real-life examples are not always as compelling as highly-rated TV shows but they do illustrate the problem and show what investigators should, and should not, do to bring it to an end. The ones we will be talking about in this post are Rental Car Fraud, a smart-phone app, and, once again, the Target Data Breach. They have a lot more in common than you might think.

Rental Car Fraud, a subset of the ever-popular Auto Fraud, is growing at an alarming rate, according to an article in the March 12, 2014 edition of the Claims Journal by Denise Johnson. The concept is simple: rent a series of cars; use them to commit crimes and then dump, and maybe even burn, them when you’re done; and conceal your identity by using fake or stolen ID. The cars are hard to trace and the connections between them even more difficult to figure out. According to Kraig Palmer, an investigator with the California Highway Patrol who recently spoke at the Combined Claims Conference in Orange County, Calif., stolen ID’s are not hard to come by and can be relatively cheap at about $50 each. The fraud is not easy to solve. According to the article, Palmer said he worked on one case that involved 103 vehicles, which resulted in 72 arrests. Another involved 3 main suspects who rented 42 cars from 2 different rental agencies. One of the suspects was a preferred customer, which evidently made it easier for him to rent the cars and harder for the companies to trace him. Those incentive programs reportedly often allow a customer to register on-line without even having to set foot in the rental agency.

There are certain things a claims adjuster or SIU rep should look for when faced with an auto claim for property damage or bodily injury that involves a rental car. Kraig Palmer, according to the Claims Journal story, suggested they look for unusual patterns, such as whether one person rented more than one vehicle involved in the occurrence. Howard J. Hirsch added a few more, which appeared in the January/February 2011 edition of Auto Rental News; though he referred the tips to auto rental counter agents, fraud investigators might be able to use them as well:

  • The customer owned a vehicle, but it is not being serviced or repaired [at the time he rents the car].
  • The customer inquires about extra insurance before it is offered.
  • The customer is a walk-in and does not own a vehicle.
  • The customer has a local address and an out of state license.
  • The customer only requests a one-day rental.
  • The customer pays in cash.
  • The customer pays for the rental with someone else’s credit card.
  • The customer presents a foreign driver’s license with no passport.

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out-of-the-park-842657-m.jpgA recent news story caught my eye because it shows the importance of a win-win negotiation strategy and the need to accurately assess your BATNA, or best alternative to a negotiated agreement. Though it deals with personal injury claims in Kansas, it can teach a lot to businesses in New York and across the country.

The state legislature in Kansas is considering a few important changes to personal injury litigation: increasing the cap on non-economic damages while at the same time changing the rules of evidence to allow a jury to hear whether a plaintiff has had losses covered by other, or collateral, sources including insurance, and to make it more difficult to use questionable expert testimony. To put it another way, the proposed rule changes would allow personal injury plaintiffs to collect more for pain and suffering while arguably making those harder to prove.

According to the story in the February 28, 2014, Claims Journal, Kansas has not raised its cap on damages for pain and suffering since the 1980’s. Though the cap was found constitutional by the state’s highest court in 2012, the decision disapprovingly noted the long delay in raising the cap. The warning evidently was heard loud and clear. The story notes that the chairman of the state senate judiciary committee, Jeff King, considers it only a matter of time before the current cap, of $250,000, is overturned as being too low. That is why the current bill would increase the cap, in stages, to $350,000.
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Marsh.12.28.13.jpgThere’s an awful lot of data out there in the great big digital universe, and, as everyone should know by now, it can create a record of people’s activities that they may not always fully appreciate. We’ve previously written about how metadata, when used the right way, can help investigate insurance fraud. As recent news stories point out, however, when used the wrong way by the wrong people, it can be used to steal and defraud innocent people and companies.

Everyone, every time they go online, leaves a digital footprint. Whether it’s social media, where you just have to post your latest thought for all to see; e-commerce, where you browse, select and pay for everything on-line; or even shopping at the local brick and mortar store where you pay by credit card, there’s a record created and information left behind. Cyber-security, which is just another name for at least trying to keep that digital information safe, was much in the news this Christmas Season. Unfortunately, for shoppers, retailers and broadcasters, alike, cyber-security often seems to be more of a goal than a reality.

By now, the security breach at Target stores may seem like old news, but it’s not. On Friday, January 10, 2014, Target said that 70 million people had their names, addresses, and telephone numbers taken by cyber-thieves. This is in addition to the 40 million people who had their credit and debit card information, including Personal Identification Numbers, or PIN’s, hacked from Target’s servers. Thankfully, a lot of the information, including the PIN’s, evidently was encrypted, which at least means it has to be cracked open before a thief can get at it. Whether that will be enough to protect the stolen information is something only time will tell. Unfortunately, even the loss of seemingly benign personal information, like your address, email address, and telephone number, can make you more susceptible to identity theft.

Neiman Marcus, just this past Saturday, January 11, 2014, announced that it, too, had been a victim of a cyber-security attack, in which thieves stole some of its customers’ credit card information and made unauthorized purchases during the holiday season.

On December 25, 2013, the BBC was hacked. Just so you don’t think that retail customers are the only targets, or that retail sales are the only source of ill-gotten gains, communications companies, even staid government-run ones like the British Broadcasting Corporation, are vulnerable. The story broke because someone saw the thief trying to sell access to the BBC servers, online. That would be kind of like coming home from work and not realizing your house was broken into until you see a commercial trying to sell your heirloom jewelry on TV.

The supposed thief, according the BBC story, is a notorious Russian hacker known by the names “”HASH” and “Rev0lver”. From the sound of it, it’s not the first time he’s done this, and it won’t be the last time he’ll try. He attempted to sell access on underground, which is another word for clandestine, marketplaces on the web. It was first noticed by the Milwaukee based cyber-security firm Hold Security LLC, which reportedly makes a practice of monitoring such sites to locate people who try to deal in stolen information like this. HASH tried to convince buyers he had something worthwhile by showing them files which only someone with access to the servers would be able to get at.

Now you might think to yourself, what’s the big deal about the BBC? After all, it’s just information. It’s not like anyone stole money directly out of your pocket.
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SB.dunes.left.Shrunk.jpgInformation and investigations go hand in hand. Whatever you investigate, whether it’s insurance fraud; where that priceless, uninsured, artwork went after two rogues in police clothing strolled in late one night and took it from Boston’s Gardner Museum; or who the one-armed man really was; you need information, lots of information, to figure it out. But does information always help?

When you investigate insurance fraud, you need information to confirm coverage for a given claim; to determine whether the claim really happened the way the insured said; to establish whether the insured submitted a fraudulent and/or exaggerated claim. You take his recorded statement and examination under oath. You interview witnesses and get corroborating documents. You get … information.

Can you ever have too much information, though? Can an investigator, in effect, be buried in an avalanche of so many facts, have so much information, that she doesn’t know what she has and misses the answer? At least according to an article in Thursday’s Wall Street Journal, the answer is an emphatic yes.

The article, on the front page of the December 26, 2013 Wall Street Journal, is about the NSA. Yes, it mentions Edward Snowden, but it really isn’t about him. It features William Binney, a former NSA analyst who’s been retired for a dozen years. It really is about Mr. Binney’s claims that the NSA’s spying, the collection of all the metadata, the who-to’s and the where-froms, of all of the calls of all of the people the NSA is supposedly collecting, hurts more than helps. Not that it hurts me or you directly, but that it hurts the NSA itself and keeps it from completing its mission: tracking down the bad guys and preventing terrorist attacks.

The most telling line in the whole story is when it eloquently sums up Mr. Binney’s complaints about the NSA: “It knows so much, he says, that it can’t understand what it has.” And that, to put it mildly, can be a problem. Any votes on what would be worse: not being able to figure it out because you don’t know enough or because you know too much but don’t realize what you have? It seems like a tie: either way you lose; you still don’t have the answer.
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night sky.jpgOur last post was about how sometimes it’s easier to tell a lie than others; scientific research suggests it depends upon what you’re lying about. Well, there’s another new study that says sometimes, just sometimes, people are honest about their lying. In other words, they’ll admit it; not always, not under every condition, and definitely not everyone, but definitely sometimes.

Lying has been in the news a lot recently. For sports fans, there’s the old tried and true theme of performance enhancing drugs: did he or didn’t he use them? Think of Lance Armstrong. He long said he didn’t and then admitted that he did. For news junkies, there’s Bashar al-Assad. The Syrian president said he didn’t use chemical weapons, then the United States said he did, and he’s now giving up his chemical weapons stockpile, if only someone will find a suitable place to destroy it. It’s hard to say you didn’t use chemical weapons if you’re giving them up so you can never use them again. Wouldn’t it be a whole lot easier if the world could know, before things get out of hand, who’s telling the truth and who is lying? Truth detection is more of an art than a science but, there is some science to help the effort along the way.
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thread-spool-1378256-m.jpgLying and Insurance Fraud go together. Cheat, steal, get caught, admit it; which one doesn’t belong? Better yet, be honest when you cheat. No, that doesn’t work either. Most every time someone tries to get away with something he shouldn’t, chances are he’s going to lie about it somewhere along the line. Investigators need to know how to ask questions, elicit answers, and get at the truth; so, chances are, they should all know a good lie when they hear one.

Detecting, and exposing, lies also is a big part of trial work. A trial attorney wants to make certain that the jury at least will doubt, if not see right through, slanted testimony; will see the inconsistencies, understand the contradictions, and punish the lies; or even scoff at the willful forgetfulness. Cross-examination, impeachment in general, and artful closing arguments all can accomplish this. Knowing a lie is essential to ensuring that everyone else does, too.

Everyone thinks they know a lie when they hear one. They believe they can tell the difference between a deliberate falsehood and an innocent mistake. That’s probably one reason lying is the focus of so much comedy. Think of the Jon Lovitz character from Saturday Night Live, with his blatant lies getting cackles from the studio audience. Then compare him to poor little Emily Litella who seemed to spend most of her time trapped in an endless game of telephone, never getting things quite right, wondering what all the commotion was about violins on TV. Or think about how funny it was to see Jim Carrey playing a slick attorney in the movie Liar Liar, who, for 24 hours straight, had to tell the truth and nothing but the truth. Some lawyers, I mean every lawyer, thought that was funny; yeah, that’s the ticket.
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odd-sunrise-669835-m.jpgIf you ever wondered what money can make people do, all you have to do is look in the news and you’ll see it, even in the most unlikely places. The last time, we spoke about Auto Thefts and Insurance Fraud and how money motivates both. Everyone wants a dollar and some don’t want to work for it; they’d rather steal it, though a lot of time and effort can go in to the theft. This time, the news comes from a more unlikely source: the Deepwater Horizon oil spill and the BP settlement. They again show that when there is a big pot of money lying around, people will find creative ways to take it.

Everyone remembers the Gulf Oil Spill; it happened only a couple of years ago, on April 20, 2010. It dumped a tremendous amount of crude into the Gulf; between 103 million and 176 million gallons. It polluted the Gulf; fouled its waters and shores; and devastated the economy in the area. Most people can still see the pictures of oil-covered birds being hand cleaned; the fireball and smoke coming out of the crippled rig, with streams of water pouring in from surrounding boats trying to put it all out; and the frantic efforts to cap the well. If you notice, the ads urging you to come back to the Gulf are still running, all this time later. It all points out just how bad it was. It seems only right that people and businesses should be compensated for the money they lost through no fault of their own, because of the spill.

British Petroleum, or BP, has a problem with settlement proceeds going to those they consider undeserving. Their biggest complaint seems to be that businesses are being paid even though they cannot trace any loss back directly to the spill. There’s even a report in the London Evening Standard that lawyers are advertising in the Gulf area by claiming “there is no need to provide proof that BP caused your loss.” According to those same reports, BP believes it already has been forced to hand over $500 million to firms who suffered no actual losses from the tragedy.
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old-ships-8-1261209-m.jpgThere are a few things, when you look around today, that most people probably can agree on: Auto theft is a large problem; Insurance Fraud is a large problem; and both involve a lot of money. Neither is going to go away anytime soon; not in New York; not in the U.S.; and not anywhere else you can think of where money speaks louder than words. A recent news story brought this home in a big way.

The stats are impressive: In 2012, according to the FBI, there were 721,053 motor vehicle thefts nationwide, with 47,658 in the Los Angeles metropolitan area, 24,660 in the New York metropolitan area, and 24,218 in the Chicago metropolitan area. The money is substantial: the average dollar loss per stolen vehicle was $6,019; and the total loss, nationwide, was more than $4.3 billion. Just because a car is reported stolen doesn’t mean that Insurance Fraud is involved, though sometimes the theft is faked. Even where there is no fraud involved, however, it still has a big impact on the Insurance Industry, including those who provide the coverage and those who pay to be covered; i.e., just about everyone.
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nuke-fire-1427306-m.jpgArson is only one of many types of Insurance Fraud. Unfortunately, it is one of the most dangerous; and it just never goes away. As we previously mentioned, whenever a big pot of money is available, people will try to find a way to take it, or at least grab a big share of it; making a fraudulent insurance claim is just one way. Intentionally setting a fire to defraud an insurance company, though, is something different; it’s inherently dangerous in a way most other types of Insurance Fraud are not. You never know what’s going to happen once the flames begin to catch. People, whether running to escape or rushing to the rescue, often will get hurt; they simply are hard to put back together.

Unfortunately, there have been many examples of intentionally set fires in the New York area. Most recently, three 19 year olds were arrested for allegedly setting fire to a convent on Staten Island. They reportedly broke into it to see what they could steal and one allegedly set the fire when he lit two religious candles and dropped one on a closet floor and one on an upper floor. As always, not everyone made it out safely. One of the two nuns who were sleeping in the convent escaped, apparently without harm. When the second nun had to jump out a second floor window to get away from the fire, though, she broke her back and reportedly will have to learn how to walk again.

Sometimes, insureds set fire to their own houses in order to collect the policy proceeds. Not that long ago, a mother and her adult daughter were arrested in Connecticut for allegedly setting fire to the mother’s house in Stratford. This evidently involved a first-party property claim; the mother allegedly recovered $337,000.00 for damage the fire caused to her house and personal property and the daughter recovered almost $2,000.00 for damage to her car that had been parked in the mother’s garage at the time of the fire.

Reportedly, the mother and the daughter originally said that they were nowhere near the mother’s house; they were at the daughter’s house miles away and didn’t learn about the fire until the next day. The police, however, first grew suspicious when they found valuables and food from the mother’s refrigerator in the daughter’s car. Evidently, neither the mother nor the daughter had a good explanation for why two televisions, frozen food, a digital camera, jewelry, and four cellphones from the house, were inside the daughter’s car. It didn’t help that the fire reportedly was started by gasoline that was poured throughout the house.

The unnamed insurance companies in the Connecticut case paid the insureds’ claims; a total of almost $340,000.00 worth. There’s also no indication whether the carriers investigated the claims or, if they did, what their investigations consisted of. But it’s fair to ask whether, based on the facts the police reportedly developed, the insurance companies would have been able to deny the mother’s and daughter’s insurance claims and make those denials stand up in court.

In New York, a carrier has to establish the affirmative defense of arson by clear and convincing evidence. See Van Nevius v. Preferred Mut. Ins. Co., 280 A.D.2d 947, 721 N.Y.S.2d 210 (4th Dept. 2001). This is the same burden of proof as for fraud. See Rudman v. Cowles Commc’ns, Inc., 30 N.Y.2d 1, 10, 280 N.E.2d 867, 871 (1972). It’s no easy task, however. The carrier has to do more than merely show that the evidence makes it more likely than not that the insured caused the fire; it must show that the evidence makes it highly probable that the insured caused the fire.
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usa-dollar-bills-1431130-m.jpgIf anyone wants to know how prevalent Insurance Fraud is, all they have to do is take a look at the recent arrests and convictions for it in New York, as reported by the state. Nothing much has changed since the last time we looked at them. Some schemes are dangerous; some are complex; some are straightforward; and some, simply, are silly. That people will go to great lengths to steal money is no surprise; it’s always been that way. The really surprising thing is that people think they can get away with some of this; greed doesn’t just cloud good judgement, it can blind it. Insurance Fraud Investigators, however, can use these examples to learn how to better spot Insurance Fraud and, maybe, carriers can use them to better learn how to prevent it.

One of the most dangerous, and hard to prove, Insurance Fraud schemes is back in the news. Eight people were arrested in May 2013, for their alleged involvement in staged accidents, where they allegedly caused accidents for money. Their idea was simple: rent U-Haul trucks and either intentionally strike another car or have another car strike them. The only saving grace was that, reportedly, the only people they hit, or that hit them, were co-conspirators. Many times unsuspecting people are targeted; cars will stop short in front of them or fail to stop behind them. Here, apparently, no innocent victims were involved, just paid participants.

The 8 people arrested allegedly made more than $2 million of claims, to recover for phony injuries, to insurers, including U-Haul’s insurer; the insurers paid out more than $1 million for treatment of non-existing injuries. As always, it looks like it took a lot of work to crack the scheme and bring the charges; fitting the pieces together, connecting the various people and accidents, through the car registrations, rental records, medical providers, and insurance companies, is no easy task. The fact that the claimants used rental vehicles with the rental company’s insurance, rather than their own, probably made it even more difficult. The large number of agencies involved in the investigation shows just how hard it is to uncover this type of fraud. The arrests were the result of a joint investigation by the U.S. Attorney for the Eastern District of New York, the New York City Police Department, the United States Postal Inspection Service, and the New York Insurance Frauds Bureau.

One of the most straightforward types of Insurance Fraud is also perhaps one of the least well thought out. A New York City Transit worker was arrested in May 2013 because he allegedly faked a disability. He was hurt in a car accident in February 2011 and claimed he couldn’t work until May 2012. It seems that if he couldn’t work he had a credit disability insurance policy that would pay his loans. Evidently the policy did what it was supposed to: it made $4,335.50 of loan payments for him. The only problem was that he allegedly did work, and worse, there were records of it. He evidently forgot that there was a record of every time he got paid for being a subway conductor, and those same records showed that he worked when he said he couldn’t. The investigator remembered, though, and the conductor was arrested. Paper trails and fraud do not mix.

Sometimes, even when you alter the records, you still get caught. A man was arrested in May 2013 after he submitted nine claims to recover medical benefits for services he said he received at four different hospitals. He even submitted statements from the hospitals showing they performed, and charged him for, the services. The statements were legitimate, at least when he first received them back in 2005. The only problem was that he tried to pass them off as being recent, and allegedly altered the documents in order to do it. Evidently the investigator from the Insurance Frauds Bureau didn’t accept the documents at face value, did a little legwork, and discovered they were phony. After all, the hospitals probably had the original billing statements or at least records of the original treatment. Sometimes all you have to do is remember to ask. Good record keeping is always difficult to get around.
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