Articles Posted in Insurance

Our 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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If 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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There 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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Arson 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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