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Articles Tagged with “Insurance Fraud”

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the-maze-2-1008265-m.jpgFiguring out whether someone is lying or telling the truth isn’t easy, as we’ve previously written.

Investigating Insurance Fraud isn’t easy, either. Just ask anyone who works in SIU, and they’ll tell you about the legwork involved: the interviews to take; the documents to get and go over; the data to analyze. And it all comes down to one thing: Is the person who’s making the claim, telling the truth or lying? That, as we’ve previously written, probably is the hardest question for the fraud investigator to answer.

If the insured is lying about something important, something material and relevant to the investigation of the claim, chances are here in New York he won’t recover anything. If the insured claims he had a lot of expensive, scheduled, jewelry stolen, but it wasn’t, chances are he’s not going to recover anything under his policy. If the insured claims that, when his house burned down, he had a lot of costly new electronics and clothes destroyed, and he’s telling the truth, he’ll get what he’s entitled to under his homeowner’s policy. If he’s lying, though, chances are he won’t get a dime, even for the house.

It’s not always easy, though, to know when somebody’s lying. We’ve all heard the classic telltale signs: A person is lying when he blinks rapidly; looks away; looks up and to the side; has dry mouth. The only problem is, so has the liar. Ask yourself: is someone who is basically trying to steal money, and has to lie to get away with it, going to advertise that he’s lying?
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puzzles-1439091-2-m.jpgAs we just talked about in our last article, in order for an insurance company to deny a first-party property claim in New York because of arson, and make that denial stand up in court, it has to prove that the insured intentionally caused the fire, and it has to do so by clear and convincing evidence. That is not always an easy burden of proof to meet. There reportedly is an exciting new tool being developed that might make proving arson, i.e., that a fire was intentionally set, easier and help arson investigators become even more effective in determining who caused the fire.

Researchers from the University of Alberta and the Royal Canadian Mounted Police, working in tandem, have developed a new computer program that can pinpoint the presence of gasoline in debris taken from a fire scene. What makes this so important is that gasoline, according to the researchers, is the most common accelerant found in arson fires; evidently preferred by arsonists everywhere. By making it easier to detect, and confirm, the presence of gasoline, you stand a good chance of making arson easier to prove and less profitable to attempt.

What makes the new tool so helpful, is that it often is difficult to confirm the presence of an accelerant in debris taken from a fire scene. No two houses, buildings, or fire scenes, are exactly alike; they contain different mixes of materials. Different materials leave behind different chemical compounds when burned, and these can mask the presence of an accelerant such as gasoline. The researchers, in effect, developed a computer filter that can by-pass the background noise to pinpoint the tell-tale signs of gasoline. They developed their tool by examining data from 232 samples taken from fires across Canada; by using real-life debris rather than merely relying on simulations, the researchers say their tool is dependably accurate.

Currently, determining whether there are traces of an accelerant left behind at a fire scene is time-consuming work. According to the researchers, the Royal Canadian Mounted Police have two separate forensic scientists examine each sample to see if their findings agree; this can take several hours for each sample, and there normally are three to four samples per fire. The newly developed computer program shrinks this time substantially. The first scientist still will have to analyze the debris herself, but will be able to confirm her findings in seconds, rather than hours, by using the computer program. A second forensic scientist will not have to analyze the debris unless the computer program’s findings disagree with those of the first scientist.
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candle-light-burning-1437374-m.jpgIt takes a lot to deny a first-party property claim in New York because of arson. It is not much easier to make that denial hold up in court. As we’ve previously mentioned, when an insured seeks to recover for fire damage under his own policy of insurance, i.e., when he makes a first-party property claim, the burden of proof is on the insurer to establish the affirmative defense of arson, and it has to do so by clear and convincing evidence. Perhaps the best way to understand what that abstract legal rule means, though, is to see how it is applied to actual, real-life claims. There is a case, from not that long ago, Maier v. Allstate Ins. Co., 41 A.D.3d 1098, 838 N.Y.S.2d 715 (3rd Dept. 2007), that does a good job of showing just what type of evidence you need in order to establish an arson defense in a civil case.

The Plaintiff in Maier v Allstate, supra, owned a home in the Town of Sand Lake in Rensselaer County, in upstate New York. For a long time he lived half of the year in Sand Lake and the other half of the year he rented a home in Florida. The same day he was going to move to Florida permanently, a fire completely destroyed his Sand Lake house. The Insured tried to recover for the property damage under his homeowner’s policy of insurance with Allstate; he submitted a sworn statement in proof of loss, making claim to recover a total of $240,000.00 for damage to the house, personal property, and debris removal. The insurance carrier paid off the $92,000.00 remaining on his mortgage, pursuant to the standard mortgagee clause in the policy, but denied the Insured’s claim. When the Insured sued to recover under his policy, the insurance carrier asserted arson as an affirmative defense. After a bench trial, the carrier won and the complaint was dismissed. Not liking the verdict, the Insured appealed. The Appellate Division, Third Department, upheld the verdict. In other words, the carrier met its burden of establishing, by clear and convincing evidence, that the Insured intentionally caused the fire. The evidence the insurance company used, and the trial and appellate court relied on, shows how arson sometimes can be established through even conflicting, circumstantial evidence.

Arson means that the fire was intentionally set. One thing you normally look for to establish arson is the presence of an accelerant, which is a combustible material used to help start, or spread, the fire; think of a flammable liquid such as gasoline. If you find evidence that an accelerant was used, chances are the fire did not start accidentally. Here, there was conflicting evidence about whether or not an accelerant was used:

  • The County’s fire investigator used a specially trained dog to determine that traces of accelerant were found near the entrance to a bedroom that had a burnt-out mattress. The Insured argued the dog’s actions did not clearly confirm the presence of an accelerant; the court disagreed.
  • The insurance company’s origin and cause investigator, based on his own inspection, determined that the fire began in the same location, on the burnt-out mattress. Presumably he determined this from the burn patterns on the mattress.
  • The lab analysis of the mattress, however, found no traces of an accelerant.

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illustration-card-1441198-m.jpgJust in case anyone thinks that cybersecurity is nothing more than an esoteric exercise for computer geeks and technicians, of no importance to the average person or business, the Heartbleed bug has come along to show us all how wrong that is. It was only just discovered two weeks ago and its impact was felt around the world almost immediately.

According to an article in the April 9, 2014 Daily Mail, the Heartbleed bug bypasses the normal safety features of websites. It can affect many of those sites that you might have noticed, which begin with an “https://” in front of their internet address, and which often appear with the symbol of a lock, both of which are supposed to mean they are safe. The bug, though, makes them vulnerable. It reportedly could affect more than 500,000 websites
The bug reportedly allows hackers to bypass normal encryption safety measures to get at encrypted information, including the most profitable types such as credit card numbers, user names, and passwords. The unauthorized user can even obtain the digital keys to impersonate other servers or users and eavesdrop on communications.

It’s not considered malicious software or malware because it is more of programing flaw; but that really is not important. What is important is that the flaw, and the vulnerability, went undetected for more than two years until it recently was discovered, independently, by researchers at Google and the Finnish company Codenomicon. A fix is possible, and reportedly fairly easily applied. The problem seems to be that the fix has to be manually applied by the people who run each individual site. That, unfortunately, will take time.
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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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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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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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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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