INSURANCE FRAUD: A GROWING EPIDEMIC OR JUST ANOTHER REASON TO DENY

LISA A. SONGY Shannon Gracey Ratliff Miller, LLP 2500 Lincoln Plaza 500 North Akard Street Dallas, Texas 75201 214.245.3063 214.245.3090 Facsimile [email protected] www.shannongracey.com

State Bar of Texas ADVANCED INSURANCE LAW COURSE April 2-3, 2009 Dallas

CHAPTER 15

LISA A. SONGY SHANNON GRACEY RATLIFF & MILLER LLP 500 NORTH AKARD, SUITE 2500 DALLAS, TX 75201 214 245 3090 [email protected]

BACKGROUND, EDUCATION AND PRACTICE:

Lisa Songy is a Partner with Shannon Gracey Ratliff & Miller in their Dallas office. As a trial attorney, her practice includes First Party and general civil litigation as well as coverage opinions for insurance carriers on both personal and commercial line policies.

Before practicing law in Dallas, Lisa earned her Bachelor of Science in Political Science from Southern Methodist University and a J.D. from the University of Houston’s School of Law. Lisa practiced law in San Diego, California for the first four years of her practice and still maintains an active law license in California.

Lisa has tried lawsuits involving extra-contractual claims on both personal and commercial policies in state and federal courts. She represents both policy holders and carriers in coverage and bad faith litigation. She advises carriers on insurance coverage issues involving personal auto policies, business auto policies, commercial property and commercial liability policies and homeowner policies. She also regularly provides continuing education courses to carriers on first party coverage as well as courses on compliance with the Unfair Claims and Settlement Practices Act and Prompt Payment statutes. She is a frequent speaker at Insurance Law continuing education courses.

Lisa is licensed to practice in all courts in the State of Texas as well as California, the U.S. District Courts of the Northern, Eastern, Western and Southern Districts of Texas, the U.S. District Courts of the Southern District of California and the Ninth Circuit Court of Appeals. She is on the Board of Directors for Dallas Bar Association, Tort & Insurance Practice Section, and is a member of the Dallas Association of Young Lawyers and the Insurance Law Section of the State Bar of Texas.

Lisa is active in her church and is a former board member of the Mother’s Association at St. Aquinas Catholic Church. She is the mother of four children ranging in ages from 3 to 10 years old. In her spare time, she coaches Youth basketball and is an avid soccer mom.

Insurance Fraud: A Growing Epidemic or Just Another Reason to Deny Chapter 22

TABLE OF CONTENTS

INSURANCE FRAUD: A GROWING EPIDEMIC OR JUST ANOTHER REASON TO DENY...... 1

POLICY DEFENSES ...... 2

STATUTORY DEFENSES ...... 3

FRAUD INVESTIGATIONS ...... 5

THE INSURED’S OBLIGATIONS UNDER THE POLICY ...... 6

DOES FRAUD BY ONE VOID THE POLICY AS TO ALL INSUREDS? ...... 7

BURDENS OF PROOF ...... 7

Insurance Fraud: A Growing Epidemic Or Just Another Reason To Deny Chapter 15

INSURANCE FRAUD: fraud span the economic spectrum and include doctors, lawyers, chiropractor, and business managers as well as A GROWING EPIDEMIC blue collar workers. OR JUST ANOTHER REASON TO DENY1 According to the Insurance Research Council, fraudulent and abusive auto-injury claims added between $4.8 and Some people say statistics do not lie. If that is the case, $6.8 billion in excess payments to auto injury claims in there is a growing epidemic called insurance fraud. The 2007.5 Those numbers equate to a 13% to 18% increase surveys done indicate that most people view insurance in payments under private passenger auto policies from fraud as a “victimless” crime, after all the insurance 2002. 6 The Texas Department of Insurance estimates that companies all have a lot of money from those claims these types of abuses add on average approximately they wrongfully denied, right? As economic times get $1,000 to every insureds’ insurance premium a year. tougher, more people are inclined to pad their claim just a little, to be less than forthcoming with information on One in five U.S. Adults or approximately 45 million insurance applications and in some cases outright lie. people say it is acceptable to defraud insurance companies under certain circumstances.7 Consumer tolerance for The Texas Department of Insurance has a unit devoted insurance fraud has increased over the last ten years. to the investigation and prosecution of insurance fraud. There has been a decline in the number of Americans who Texas has begun prosecuting Insurance fraud in the think it is unethical to 1) misrepresent facts on their larger counties. The Fraud unit receives reports of insurance application to lower their premiums; 2) file a suspected insurance fraud from both insurers and the claim for damage that occurred before the damage was public. covered; 3) inflate a claim to cover the deductible; and 4) misrepresent an incident in order to be paid for an For the fiscal year 2008, the department received 9,939 uncovered loss.8 reports of suspected insurance fraud.2 Of those, only 379 cases were opened for investigation and 195 of So what is insurance fraud? On its website, the Texas those were referred for prosecution. Ultimately there Department of Insurance defines it very simply as were 144 indictments and restitution assessed by the “deception or misrepresentation for financial gain.” The courts of $3,732,046.40. Motor vehicle insurance fraud Texas Penal Code defines it as, “§ 35.02. Insurance Fraud increased by 7% from 2007. Those claims included staged accident, inflated claims as well as false stolen (a) …with intent to defraud or deceive an auto reports.3 Interestingly, the greatest percentages of insurer…in support of a claim for payment under referrals were those involving submission of false an insurance policy: statements as well as false claim documents. Dallas County had the most convictions for insurance fraud in (1) prepares or causes to be prepared… 2008, followed by Harris County and Travis County.4 Each of these counties has dedicated insurance fraud (A) the person knows contains false or prosecutors. misleading material information; and

The fraud reported by the carriers is not just fraud by (B) is presented to an insurer; or their insureds. Recent cases prosecuted in North Texas include a 10-year sentence and a multi-million dollar (2) presents or causes to be presented to an fine for a worker’s comp insurance adjuster who set up a insurer a statement that the person knows fake clinic as well as a bank account and over a ten year contains false or misleading material period had been paying herself just a little something at information the end of each claim. The individuals committing the The Texas Insurance Code does not specifically define insurance fraud but does set forth when a policyholder’s 1 Texas Department of Insurance FY 2008 Fraud Unit Annual Report, p. 4. 5 Coalition Against Insurance Fraud, “Go figure: fraud data” 2 The opinions expressed in this paper are those of the author only and not those of Shannon Gracey Ratliff & 6 Ibid Miller, L.L.P. 7 “Four Faces of Insurance Fraud,” Coalition Against Insurance 3 Ibid at p.6 Fraud, 2008

4 Ibid, p.10 8 Ibid

- 1 - Insurance Fraud: A Growing Epidemic Or Just Another Reason To Deny Chapter 15 misrepresentations may void a policy. Insurance Code d. the other party suffers injuries as a result of section 705.003 reads as follows: acting without knowledge of the undisclosed fact.

(a) An insurance policy provision that states that a “Misrepresentation” means a false statement of fact. misrepresentation , including a false statement, made in a proof of loss or death make the policy The Insurance Code does contain a mandatory void or voidable: reporting requirement of suspected insurance fraud. Pursuant to Texas Insurance Code 701 et seq., carriers (1) has no effect; and have an affirmative duty to report suspected insurance fraud within 30 days after they make the (2) is not a defense in a suit brought on the determination or reasonably suspect that a fraudulent policy. act has or is about to be committed. The report must be in writing and the adjuster and carrier are protected (b) Subsection (a) does not apply if it is shown at from civil liability as long as reporting is not done trial that the misrepresentation: with malice, bad faith or fraudulent intent.

(1) was fraudulently made; POLICY DEFENSES

(2) misrepresented a fact material to the Most policy contain a provision similar to the one of the question of the insurer’s liability under the following: policy; and The entire policy is void if, whether before or after a (3) misled the insurer and caused the insurer to loss, any Insured: waive or lose a valid defense to the policy. 1. Intentionally conceal or misrepresents any The Texas pattern jury charge defines fraud as follows: material fact or circumstance; or

Fraud occurs when: 2. Makes false statements or engages in fraudulent conduct, a. a party makes a material misrepresentation; relating to this insurance. b. the misrepresentation is made with knowledge of its falsity or made recklessly without any Or knowledge of the truth and as a positive assertion; Concealment or Fraud. With respect to all insureds, the entire policy will be void whether before or after the loss c. the misrepresentation is made with the intention any insured has: that it should be acted on by the other party; and a. intentionally concealed or misrepresented any d. the other party acts in reliance upon the material fact or circumstance; misrepresentation and thereby suffers injury. b. engaged in fraudulent conduct; or Fraud also occurs when: c. made false statement; a. a party fails to disclose a material fact within the knowledge of that party; relating to this insurance.

b. the party knows that the other party is ignorant Most jurisdictions have upheld the validity of these types of the fact and does not have an equal of provisions, including Texas. See McEwin v. Allstate opportunity to discover the truth; Texas Lloyds, 118 S.W.3d 811 (Tex. App.—Amarillo 2003, no pet.); Happy Hank Auction Co. v. American c. the party intends to induce the other party to Eagle Fire Ins. Co., 1955, 286 App. Div. 505, 145 take some action by failing to disclose the fact; N.Y.S.2d 206, modified, 1 N.Y.2d 534, 54 N.Y.S.2d 870, and 136 N.E.2d 842; Fowler v. Phoenix Ins. Co. of Hartford, Conn., 1899, 35 Or. 559, 57 P. 421; Henricksen v. Home Ins. Co., 1964, 237 Or. 539, 392 P.2d 324; Moore v. Virginia Fire & Marine Ins. Co., 1877, 28 Grat. 508, 26

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Am.Rep. 373; Moore v. Fireman's Fund Ins. Co., 1877, and the examination under oath. For instance, in McEwin 28 Grat. 524; Mosrie v. Automobile Ins. Co. of v. Allstate Texas Lloyds, 118 S.W.3d 811 (Tex.. App.— Hartford, Conn., 1928, 105 W.Va. 226, 141 S.E. 871; Amarillo 2003, no pet.), the court focused on the initial and Singleton v. Hartford Fire Ins. Co., 105 Cal. App. reporting of the fraudulent claim and subsequent conduct 320 (1930); Cummings v. Fire Ins. Exch., 202 Cal. which caused Allstate to incur investigation expenses it App.3d 1407 (1988). would not have incurred but for the false report by the insured. These type provisions are obviously subject to the rules of interpretation governing insurance contracts however, With regard to misrepresentations pre-loss, the carrier’s the plain language, which voids the policy for all appear to be bound by Section 705.004 if they seek to insureds if any insured commits fraud, leaves little to be void the policy. argued about. Courts have and do take a close look at allegations of fraud by an insured when considering a Sec. 705.004. POLICY PROVISION: carrier’s obligations under a policy of insurance regardless of whether or not it is a personal lines policy MISREPRESENTATION IN POLICY or a commercial policy. APPLICATION.

STATUTORY DEFENSES (a) An insurance policy provision that states that Texas Insurance Code Ch. 705 sets forth various false statements made in the application for the provisions regarding pre-loss and post loss policy or in the policy make the policy void or misrepresentations and their effects upon the policy of voidable: insurance. Sec. 705.003 states,” POLICY PROVISION: MISREPRESENTATION IN PROOF OF LOSS OR (1) has no effect; and DEATH. (a) An insurance policy provision that states that a misrepresentation, including a false statement, (2) is not a defense in a suit brought on the made in a proof of loss or death makes the policy void policy. or voidable: (b) Subsection (a) does not apply if it is shown at (1) has no effect; and trial that the matter misrepresented:

(2) is not a defense in a suit brought on the (1) was material to the risk; or policy. (2) contributed to the contingency or event on (b) Subsection (a) does not apply if it is which the policy became due and payable. shown at trial that the misrepresentation: (c) It is a question of fact whether a (1) was fraudulently made; misrepresentation made in the application for the policy or in the policy itself was material to the (2) misrepresented a fact material to the risk or contributed to the contingency or event on question of the insurer's liability under which the policy became due and payable. the policy; and Courts which have addressed the issue of pre-loss (3) misled the insurer and caused the misrepresentations focus on whether or not the insurer to waive or lose a valid defense misrepresentation was material to the risk of loss insured. to the policy. Thus, a misrepresentation that your car is blue when in fact it is purple will generally not be enough to void the This anti-technicality statute has not been directly policy. However, a misrepresentation that you have never addressed by any current case law and in fact has been been treated for e heart condition when you are currently explicitly ignored in the reported cases where the court’s taking blood pressure medication and/or have been found fraud by the insured and voided the policy. The diagnosed with a heart condition is a material courts have looked beyond any misrepresentations in misrepresentation that may permit the carrier to void the proofs of loss and taken a more practical approach. policy. Specifically the courts look to the conduct of reporting the false claim as well as the statements made during the However, in order to void a policy based upon a pre-loss adjustment process which occur outside the proof of loss misrepresentations, the carrier must follow the steps set

- 3 - Insurance Fraud: A Growing Epidemic Or Just Another Reason To Deny Chapter 15 forth in Section 705.005 of the Insurance code which (1) an insurance policy relevant to the fire loss under reads as follows: investigation and any application for a policy;

Sec. 705.005. NOTICE TO INSURED OF (2) policy premium payment records; MISREPRESENTATIONS. (3) the history of the insured's previous claims for (a) This section applies to any suit brought on an fire loss; and insurance policy issued or contracted for after June 29, 1903. (4) material relating to the investigation of the loss, including: (b) A defendant may use as a defense a misrepresentation made in the application for or (A) statements of any person; in obtaining an insurance policy only if the defendant shows at trial that before the 91st day (B) proof of loss; or after the date the defendant discovered the falsity of the representation, the defendant gave (C) other relevant evidence. notice that the defendant refused to be bound by the policy: (b) This section does not authorize a public official or agency to adopt or require any (1) to the insured, if living; or type of periodic report by an insurer.

(2) to the owners or beneficiaries of the (c) An insurer that has reason to suspect that insurance policy, if the insured was a fire loss to the property of a person deceased. insured by the insurer was caused by incendiary means and that receives a (c) This section does not: request for information under Subsection (a) shall: (1) make available as a defense an immaterial misrepresentation; or (1) notify the requesting official and provide the official with all relevant material acquired during (2) affect the provisions of Section 705.004. the insurer's investigation of the fire loss;

Thus, if no notice to the insured is given within 91 days (2) cooperate with and take any action requested of of discovering the alleged misrepresentation, a carrier the insurer by a law enforcement agency; and may waive their right to void the coverage. (3) permit a person ordered by a court to inspect any Insurance carriers are also required by law to cooperate of the insurer's records relating to the insurance with the authorities in the investigation of suspicious fire policy and the loss. losses. Insurance Code Article Sec. 2001.006.sets forth the obligation to report information relating to fire losses (d) In the absence of fraud or malice, an in excess of $1,000.00 The information may be insurer or a person who provided requested by The state fire marshal, a fire marshal of a information on the insurer's behalf is not political subdivision of this state, the chief of a fire liable for damages in a civil action or department in this state, or a peace officer in this state. subject to criminal prosecution for an An insurer investigating a fire loss of property in which oral or written statement made or any damages or losses exceed $1,000 can be required to other action taken that is necessary to release information in the insurer's possession relating to supply information required under this that loss. “The insurer shall release the requested section. information and cooperate with the official. Tex. Ins. Code 2001.006 (emphasis added) (e) An official or a department or agency employee who receives information The requested information may include only: under this section shall maintain the confidentiality of the information until the information is required to be released in a criminal or civil proceeding.

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(f) An official described by Subsection (a) a claim for payment is submitted under an may be required to testify as to any insurance policy. information in the official's possession regarding the fire loss of property in a Chapter 35 goes on to establish the level of the offense civil action in which a person seeks based on the value of the claim. “An offense under recovery for the loss from an insurer Subsection (a) or (b) is: under an insurance policy. (1) a Class C misdemeanor if the value of the claim (g) A person may not intentionally: is less than $50;

(1) refuse to release information requested under (2) a Class B misdemeanor if the value of the claim Subsection (a); is $50 or more but less than $500;

(2) refuse to notify the fire marshal of a fire loss (3) a Class A misdemeanor if the value of the claim required to be reported under Subsection (c); is $500 or more but less than $1,500;

(3) refuse to provide the fire marshal with relevant (4) a state jail felony if the value of the claim is information required to be provided under $1,500 or more but less than $20,000; Subsection (c); or (5) a felony of the third degree if the value of the (4) fail to maintain the confidentiality of claim is $20,000 or more but less than $100,000; information that is confidential under Subsection (e). (6) a felony of the second degree if the value of the claim is $100,000 or more but less than $200,000; Thus, an insurance carrier investigating a fire believed or to be of incendiary nature must cooperate with the authorities and such cooperation will not likely result in (7) a felony of the first degree if: any potential civil liability to the carrier. (A) the value of the claim is $200,000 or more; or Finally, Insurance fraud can be prosecuted criminally. The Texas Penal code Ch. 35 provides sentencing (B) an act committed in connection with the guidelines for both prison time and fines based upon the commission of the offense places a person at amount at issue. Ch 35.02 provides,” (a) A person risk of death or serious bodily injury. commits an offense if, with intent to defraud or deceive an insurer, the person, in support of a claim for payment under an insurance policy: (d) An offense under Subsection (a-1) is a state jail felony. (1) prepares or causes to be prepared a statement that: Thus not only are their civil ramifications to insurance fraud but there are substantial criminal penalties as well. (A) the person knows contains false or misleading material information; and FRAUD INVESTIGATIONS

(B) is presented to an insurer; or Most insurance claims investigations do not start out as fraud investigations. Typically insurance carriers have (2) presents or causes to be presented to an insurer various criteria a claim must meet before they will delve a statement that the person knows contains false deeper into the claim as most carriers do give their or misleading material information. insureds the benefit of the doubt at least initially for the primary reason that it is easier to pay a claim than to deny (b) A person commits an offense if, with one. Different insurance carriers have different methods intent to defraud or deceive an insurer, for additional investigation. Further just because a claim the person solicits, offers, pays, or is subjected to additional investigation does not mean that receives a benefit in connection with the the insured has committed fraud but rather is simply an furnishing of goods or services for which indication that more information is needed. Some insurance carriers have dedicated Special Investigative

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Units who are trained investigators. Others use outside Cooperate with us in the investigation or settlement of the investigative services who can get out in the field and claim. track down and speak with witnesses, take recorded statements, gather documents and photograph the scene. Frequently, carriers will send an initial request for information which seeks documentation on all types of The investigations also have become more sophisticated. coverage under which the insured may potentially seek The pervasive use of cell phones, PDAs and laptops reimbursement. Those document requests will likely provides detailed data on locations, timeline and include documentation supporting any contents losses, veracity of statements. Thus more often than not, losses to the structure and potentially documents to support carriers will request authorizations to secure cell phone business interruption losses, lost income and extra records and tower data as well as asking individuals and expenses incurred by the business to get the business back companies to preserve data on their computers. While up and running. Requests for business interruption this type of information can be used to show the insured coverage will include requests for information typically is less than truthful, it can also be used to confirm alibis available regarding normal ordinary operating expenses, and substantiate stories. loss profits, lost inventory and other necessary expenses. Records reflecting payment of state and federally Every adjuster, investigator and attorney should be mandated taxes may also be requested. However, the “Googling” their claimants. With the advent of documents request by the insurer will vary based upon the Facebook , MySpace, and Twitter as well as chat type of loss and the extent of loss. There is no set required groups and on-line e-mail groups, a wealth of document request as each claim should be investigated information exists about each one of us on the internet. based upon its own merits. The investigation by the carrier should be fair and even handed and reflect the good as well as the bad. A Further all policies include a provision permitting an thorough investigation will also assist the carrier in examination under oath to be taken in connection with the determining whether or not they need to report the claim claim such as the following: as a suspected fraudulent claim to the TDI. We may examine any insured under oath, while not in the Freedom of Information requests to government presence of any other insured, and at such times as may be agencies frequently provides insightful information reasonably required, that any matter relating to this regarding businesses as well as individuals. Criminal insurance or the claim, including and Insured’s books and background checks and other sources like records, in the event of an examination, an Insured’s Publicdata.com can also provide information regarding a answers must be signed. witness or the insured that has not been disclosed. However, caution should be used with all on-line The examination under oath may be requested at any time resources as sometimes the accuracy of the data may be and is not waived if not requested in the first 60 days. See flawed. Poteet v. Kaiser et.al., 2007 WL 4371359 (Tex. App. – Fort Worth December 13, 2007); and In re Foremost County Mut. Ins. Co., 172 S.W.3d 128, 132 (Tex.App.- THE INSURED’S OBLIGATIONS UNDER THE Beaumont 2005, orig. proceeding) (holding that an POLICY insurance company did not waive its right to an EUO by requesting it more than fifteen days from the initial claim). In all first party claims, the insured has an obligation to The policies in Texas generally do not set forth a time cooperate with the carrier in the investigation of the period during which an Examination under oath must be claim. The insured’s duties under the contract typically requested. include: The conditions under which an insurance company may As often as may be reasonably required, permit us to conduct an EUO are governed by the insurance contract. inspect the property, proving the loss or damage and See State Farm Gen. Ins. Co. v. Lawlis, 773 S.W.2d 948, examine your books or records. 949 (Tex.App.-Beaumont 1989, no writ). Insurance policy provisions requiring an insured to submit to an Also, permit us to take samples of damaged and EUO as a condition precedent are valid. Lawlis, 773 undamaged property for inspection, testing and analysis S.W.2d at 949. If an insured fails to submit to an and permit us to make copies from your books and examination under oath and instead files a lawsuit on the records. contract of insurance, courts will abate the matter until such time as the insured complies with the condition . . . . precedent. See In re Foremost County Mut. Ins. Co., 172 S.W.3d 128 (Tex.App- Beaumont 2005, no pet) and

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Lidawi v. Progressive County Mut., 112 S.W.3d 725 purchased as well as the ability to secure financial records (Tex. App. –Houston [14th Dist], 2003). to support the loss. Thus the insured should make sure to properly document their losses. The examination under oath is not completed until it is signed and returned to the carrier. Failure to sign and The only burden the carrier has is to prove the applicability return an examination under oath can be a breach of the of an exclusion or other affirmative defense. It is the contract and be a bar to recovery. See Perrotta v. carrier’s burden to prove that the concealment fraud Farmers Ins. Exchange, 47 S.W.3d 569 (Tex. App. – provisions apply as it is a policy avoidance provision. Houston [1st Dist.], 2001) (holding breach of the policy Thus, in a fire loss, the insured must prove the structure requirement to sign and return examination under oath was damaged by fire and the amount and extent of the loss. was a reasonable basis to deny claim). To defeat a fire loss, the carrier needs to prove the fire was incendiary in nature, the insured had an opportunity to set These investigative tools permit a carrier to assess the the fire or have the fire set and the insured had motive to veracity and reliability of the insured and to inquire into set the fire or other circumstances linking the insured to the issues regarding the claim with the insured under oath. fire. This three pronged test of arson is an additional defense under the policies which also provides the basis for DOES FRAUD BY ONE VOID THE POLICY AS the denial under the concealment or fraud provisions. TO ALL INSUREDS? Plaintiff’s counsel are wise to question their clients The simple answer is maybe. The cases in Texas which regarding prior claims as the prior claims may be dealt with the issue focus on the precise language of the admissible in a lawsuit involving extra-contractual claims. policy of insurance. In McEwin v. Allstate Texas Lloyds Thus, a client with multiple fires of incendiary nature in Ins. Co., 118 S.W.3d 811 (Tex. App. – Amarillo 2003, no their background for which they recovered insurance pet.) the court focused on the language of the policy as proceeds should cause a lawyer to at least evaluate the well as the language of the statute in determining that the merits of the claim a little closer. Those prior claims will husband’s conduct in setting the fire, turning in a false not be admissible to prove the truth of the matter asserted claim and then lying about it was sufficient to void the however, they would be admissible as part of the claim file policy as to all insureds even though the wife did not as they go to the reasonableness of the basis for the denial. know about the arson nor did she participate in it or the Despite public opinion to the contrary, carriers rarely deny cover up following. The Southern District of Texas, in claims based upon insurance fraud unless they have a well an unpublished opinion also found that fraud by one documented claim file. Counsel should carefully consider insured under one coverage voided the policy as to all whether or not filing extra-contractual claims against an insureds for all the coverages. See Corcoran v. State insurance carrier are worth the risk. Farm Lloyds Ins., Civil Action 0303077 (S.D. Texas 2005). Quite simply the language of most fraud and Investigations conducted immediately after a loss usually concealment provisions state that such conduct voids the turn up the necessary information to accept or deny a policy, not a particular type of coverage. claim. Prompt investigations turn up even more. Insurance carriers have an obligation to conduct their own BURDENS OF PROOF investigations even if there are companion criminal investigations on going. Carriers have affirmative duties to However before one even gets to the issue of whether or cooperate with law enforcement as well as the Texas not the concealment/ fraud provisions apply, the insured Department of Insurance such that the majority of the must first prove that they sustained a covered loss. See claim files may well be in the hands of law enforcement Employers Cas. Co. v. Block, 744 S.W.2d 940 (Tex. well be fore an indictment is ever issued or an arrest is 1988) Frequently insured’s and their counsel skip over made. However, insurance fraud and arson in particular this small issue. For instance, in theft claims, the are frequently not prosecuted simply because of the lack of insured needs to establish that a theft of the items resources available to do so in most counties. Thus the actually occurred. failure to charge someone criminally with regard to arson and/or insurance fraud is generally not admissible to prove Additionally in fire losses, it is the insured’s burden to the insured did not do it. Further as a cautionary tale to prove the contents allegedly lost were in facts at the Insured’s counsel, law enforcement who were unable to premises at the time of the loss. Occasionally, the convince the district attorney to take a case as frequently amount of debris remaining after a fire is not consistent more than happy to testify with regard to their experience with the amount of contents being claimed by an insured and training as well as their conclusions regarding who did on their claim. While it is not uncommon for an insured what when. not to have receipts for every item owned, most insureds do have the means to acquire copies of items recently

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Insurance fraud will continue to be a problem. The economic downturn makes people do desperate things they would not have considered in the past. Others do it simply to seek revenge against an insurance carrier for some other perceived past wrong. Insurance fraud hurts all rate payers causing increased premiums even to those insured who do not file claims. One of the most glaring examples are the substantial homeowner’s insurance premiums we pay in the state of Texas due at least in part to the mold “crisis” and those individuals who enhanced and exacerbated their own claims for personal gain all to the detriment of innocent insured’s across the state. Regardless why people do it, both the plaintiff’s bar as well as the defense bar need to do our part to make sure the legitimate claims get paid and the fraudulent claims are appropriately prosecuted.

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