Whenever there is a catastrophic event or recession in the world, our desks are filled with investigations with questionable physical evidence. Since March 2020 (the onset of the global covid-19 pandemic) we have seen the trend come to pass yet again. The last time this had happened – the global financial crisis of 2008.
Anecdotally, some adjusters report that they saw more claims in the first three months of the first covid-19 lockdown in Canada than they had seen in the three years prior.
In keeping with that, the 4th Annual National Tour organized in 2020 – virtually, of course – focused on the investigation of suspicious claims. Five sessions examined fraudulent claims involving break and enter, water loss, fire damage, vehicle claims, and structural damage.
Once again, a thank you to all the participants who joined us for these sessions. A thank you also goes out to all participants who joined us in presenting a different perspective into claims – and helped make these sessions so valuable for adjusters, lawyers, and risk managers alike.
A fraudulent claim is one made for a loss that has been caused wholly or partially by the insured. In some fraudulent cases, the claimant may try to ‘cash in’ on a legitimate loss by trying to claim pre-existing damage opportunistically. In others the insured may have taken active steps to cause the loss themselves.
To make the claim appear legitimate, the insured will try to manipulate the scene of the incident before or after the loss; or weave a false narrative about how the loss occurred.
And that’s where the team at Origin and Cause comes in. We cut through the narrative that is being presented and delve deep into the facts. Our goal is simple – to determine to a high degree of probability causes behind the loss.
Once the cause of the loss has been identified, it becomes clear if the insured has played a role in causing/exacerbating the loss.
We are a full-service forensic engineering and investigation firm in Canada. That means we assess incident sites and investigate all types of claims, including:
Invariably some of these are fraudulent claims. From premeditated actions (leading to the loss) to weaving a false narrative, insureds can try a variety of tactics to make a false claim or exaggerate the value of the claim.
One type of loss we couldn’t discuss during the sessions are boat fire claims. The use of private boats is a very popular pastime in Canada and a lot of people own boats. Watch an earlier marine fire and explosion webinar to learn more about marine fires and fraudulent boat loss claims.
“A forensic expert needs to look at the physical evidence of every case with no bias and no preconceptions”, says Michelle Bradley, a veteran forensic engineer with over 15 years of investigations.
And this theme is common across all our sessions – as forensic investigators we have to focus on the physical evidence. We don’t factor in the intent of the insured. It is critical not to comment on intent, something that is outside the scope of our investigation.
Whenever a client tells us about the insured’s financial situation or other circumstantial evidence, we reiterate that our opinion will be based only on the physical evidence – anything else will weaken the technical opinion (if taken to court).
Such as an approach is essential for keeping the methodology consistent across investigations. We let the scene of the incident speak for itself, avoiding physical contamination or bias from creeping in.
However, that does not mean we take information at face value. A forensic engineer must sometimes dig deeper into the findings of police and fire reports, sometimes question the statements of the insureds. After all, an insured is not going to be totally truthful if they are trying to make a fraudulent claim.
Legitimate claims involve burglary, arson, or vandalism. Incidents are investigated through CCTV footage, alarms, and motion detectors. So when ‘burglars’ have been able to rip out a concealed alarm panel within 30 seconds of breaking into an unfamiliar building it sets the ‘alarm bells’ ringing.
Another red flag is when the insured suggests the CCTV system is not set to record, especially when the DVR equipment is present. We have also seen cut communications lines, tampered motion detectors, cameras hindered by unusual placement of content, door contact hardware being defeated, bypassing for alarm zones, and ‘smash and grab’.
Arson and fraud vehicle claims have been on the rise since the onset of the covid-19 crisis. A similar trend was seen in 2008 too. The motive behind a vehicle fire claim is inevitably financial. A common type of incident is when the insured sets fire (or tries to set fire) to the vehicle. This can be if the vehicle is a ‘lemon’ (constant mechanical faults); the insured is unable to afford payments on it; or is trying to make a claim for their business.
In such instances data from the vehicle’s infotainment system and control units is vital for verifying the insured’s version of events. Modern systems can track vehicle movement, opening and closing of doors, maintenance cycles, and vehicle faults.
Another powerful ally for information gathering is Statutory Condition 6 (Insurance Act 1990), requiring the insured to produce reasonable evidence required in the investigation of the incident.
There are numerous indicators that can suggest fraud in a structural fire claim. These can be multiple fire indicators; unusual fuel load or configuration; irregular fire patterns; lack of expected fuel load; incendiary devices; lack of expected ignition sources; and burn injuries.
In one fire incident we observed an irregular fire pattern. A ‘protected area’ that looked virtually undamaged could be seen on the floor, and the area surrounding it showed surface heat damage. A similar protected area was found on the bed. It also ran all the way down the stairs. As it transpired, fuel had been poured along the path of the protected area and the fire had been lit. However, the fire burnt out because of a lack of ventilation, leaving behind a telltale sign of arson.
Claims involving water loss can be difficult to investigate since even fraudulent claims look like real claims. Did a braided hose fail on its own or was it cut deliberately? Did a pressure valve have a manufacturing defect or was it tampered with to cover up another loss? It’s why we rely on X-rays and electron microscopes to determine the cause behind the loss.
Fraud in structural damage claims arises in two ways: pre-existing damage and opportunistic claims. In case of pre-existing damage, insureds try to slip in unrelated damage with real damage claims. In opportunistic claims an insured may try to claim for instance, loss of inventory due to structural damage, but that structural damage may have been pre-existing.
We receive many requests to investigate wind damage claims. In such cases there is a chance the property owner is trying to pass off frost damage as wind damage. That’s why a ‘big picture’ view of the incident scene is important. Things like damage to surroundings and past attempts to repair similar damage are vital clues.
What do we see, or not see, at a scene? That’s what we put in our reports. Witness statements, fire department and police reports, service/maintenance history, before and after photographs of the event, can all indicate a fraudulent claim. As forensic engineers we need to know how the loss occurred, not just the mechanism of the loss.
Imagery from electron microscopes; video footage from doorbell cameras, dash cams, and social media; and witness statements all aid the investigation of a claim.
Time is of the essence in investigations and incidents must be investigated promptly. In part to make sure the physical evidence is available and isn’t disturbed any more than necessary; in part because it helps the insurance company make a more informed decision.
Timely assessment by an investigator before payment is made by the insurance company is extremely beneficial for the insurer. Before the claim is paid out, the insured is under a statutory duty to provide a lot more information, than once the claim has been approved.
The sooner you can ask questions of the insured, the sooner you can get the best information. Right at the beginning is when they are most motivated to help you and give you the information you need. Once the insured retains legal counsel or the insurance company has made payment, it can become very difficult to get information.
We hope you found our sessions informative. If you have any questions or would like to know more about investigating fraudulent claims, feel free to speak to us. We are more than happy to take your questions.
