Arson fraud continues to remain a significant issue for the insurance industry. Undetected, arson fraud results in claims being paid undeservingly to those deceiving the system designed to protect the honest and loyal customer. The financial consequences can ultimately raise insurance premiums that can potentially turn existing and new customers away from an insurance provider.
Every insurance claim deserves a prompt and fair reply aligned with due diligence. However, on those occasions when alarm bells ring, repudiation may be on the horizon. Recognizing the warning signs and acting promptly is key to increasing the level of certainty for identifying arson fraud and having solid reasoning for repudiation; hence essentially preventing theft, and therefore retaining loyal customers by lower insurance premiums being maintained.
A generally accepted definition for arson can be: “The wilful or malicious burning of property (such as a building) especially with criminal or fraudulent intent.”
And for fraud can be: “The wrongful or criminal deception intended to result in financial or personal gain.”
No doubt insurers would welcome an increased frequency of detecting fraud, as well as successful prosecutions. While individual insurers, claim handlers, and loss adjusters have systems for detecting potential fraudulent claims, a fraudulent claim can occur at any stage during the claim process. The insurer is legally responsible to present the proof should a repudiation for arson fraud be made. The success of that repudiation will rest on the weight of evidence presented.
When those alarm bells ring, promptly involving a forensic fire investigator can greatly increase the prospects for a successful determination of arson fraud. Arson fraud stands a chance to be proven when the claimant’s engagement has been found to be dishonest; and when the claimant’s intention has been determined to gain from or cause loss to another. It is important to note that the gain or loss does not actually need to have happened.
A repudiated insurance claim may be the result of a breach in policy conditions or warranties. Ideally a copy of policy conditions and warranties should be provided by the insurer to the forensic investigator before the investigators site visit and scene examination. This equips the investigator with accurate information, as policy conditions can vary. It is important that the forensic investigator practices ethics in recognizing their duty is to the court, and regardless of reviewing the policy conditions and warranties, the investigator must remain objective.
During a forensic fire investigator’s site visit, having a keen eye to observe key indicators for arson fraud is all part of the job. These indicators are promptly communicated to the insurer, claims handler, or loss adjuster. Key indicators for the forensic fire investigator may include general issues related to property, combustion, circumstances, and fire protection.
An astute forensic fire investigator will be looking for indicators such as signs of fire doors being held open, or deliberate holes made in walls, ceilings, and floors. These actions support fire spread, indicating an intention. Evidence of forced entry may indicate the criminal intention of another; however, a prudent investigator will want to determine the actions of the local fire service to differentiate damage caused by an intruder and that of the emergency services. Emergency services may encounter deliberately obstructed access in the aim of the culprit to delay their response. This can allow more time for a fire to develop and spread.
Fire is the discipline of study for the forensic fire investigator. In terms of combustion, the forensic fire investigator is considering the materials involved in fire and the witness information against any signs of unusual rapid-fire development and unnatural fire spread. The presence of ignitable liquids or incendiary devices can indicate the intent to accelerate the fire; hence the term ‘accelerants’ could have been used. Fire scenes with multiples seats of fire are usually a clear indicator of a deliberate act. Items piled or stacked to assist the development and spread of fire are also strong signs of arson fraud. Origins of fire in a location that does not or has not contained an accidental ignition source are supportive indicators for arson fraud.
During a fire scene investigation, a red flag goes up when a forensic fire investigator observes indications that valuable items had been removed before the fire, and possibly replaced with lesser value items. When the fire damaged remains do not match those being claimed as lost in the fire, the potential for arson fraud exists. It is helpful for the insurer, claims handler, or loss adjuster, when aware, to communicate that the insured is either over insured or that the insurance claim is made a short time after the inception of the policy, or that there have been recent policy adjustments. It is also useful to be aware when there is history of insurance claims or losses from the claimant.
Alarm bells should also sound if before the fire the insured has asked the insurer hypothetical questions in the event a fire did occur, or a claim was to be made. An insisting claimant for a fast settlement, and the impression of rehearsed knowledge about claiming against an insurance policy is also a sign for potential fraudulent behaviour. Discrepancies in witness accounts between those given to local authority agencies and the forensic fire investigator can be a clear and often warning sign that the insurer is being defrauded. Doubts should be carefully considered when the insured either refuses, is unable to answer, or generally cannot remember when asked routine questions.
Should an investigation reveal that the insured is suffering from financial hardship, the consideration of if the claimant had intention to deceive and gain from the loss needs closer scrutiny. A forensic fire investigator may discover that the fire was concentrated on financial documents, occurred during a renovation or property sale, or was an attempt to conceal another crime; all instances being pointers to a fraudulent claim.
Fire protection systems are there to provide early warning to occupants should a fire occur. Data retrieved from fire protection systems can assist a fire investigation in understanding the origin and discovery of fire.
The deliberate deactivation or immobilisation of fire detection and security systems are a clear indicator for fraudulent behaviour.
The disabling or pre fire damage to fixed firefighting systems or removal of portable fire extinguishers should also be interpreted as irregular. CCTV cameras unusually being switched off or repositioned not to cover an area of interest are reasons to be cautious as investigations progress.
Responding to arson fraud
It goes without saying that the economic cost of arson fraud remains a problem for modern society. You do not have to look too far on the internet to find a common trend between arson fraud and times of financial hardship.
It can be anticipated that when a fraudster commits arson for profit, they will misrepresent and likely be evasive in the aim to get payment. The insurer will be legally bound to bring forward the case against the insured should they want to repudiate the insurance claim. An insurer has the right to protect themselves against arson fraud. Likewise, they have the right to apply and uphold the policy conditions against fraudulent claims.
There are many well equipped forensics service providers that offer excellent forensic solutions in the event of a suspected arson fire loss.
To increase the level of certainty for disputing an arson fraud claim, it is highly recommended to instruct a forensic fire investigator as soon as possible.
Preserving and recording a potential arson scene is paramount in raising the level of certainty for repudiating an insurance claim. A promptly appointed forensic fire investigator can add value to a potential fraudulent claim by responding quickly to the scene to record and recover any potential supportive evidence. The benefits of having an expert who is disciplined in interpreting fire scenes can add to the weight of evidence when pursuing a repudiation against arson fraud.
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