Insurance Fraud Perpetrators are Creative

Multiple Types of Insurance Fraud

Sep 08, 2021

We All Do it Fraud

The California Court of Appeal, in Cassim v. Allstate Insurance Co., 94 P.3d 513, 33 Cal.4th 780, 16 Cal. Rptr.3d 374 (Cal. 07/29/2004), was faced with a trial verdict of bad faith against an insurer that it found was based upon prejudicial final argument leading the jury to believe that “some fraud” is permissible

The law in California, as it should be everywhere, is that an insured cannot commit a little fraud. You either commit fraud or you do not. You cannot commit a little fraud any more than you can be a little dead.

If you commit fraud, regardless of the bad faith of the insurer, you recover nothing.

Hard Fraud

The following types of fraud are premeditated and intentionally committed. Those who differentiate between types of fraud would place these in the category of “hard fraud,” which is considered more egregious than “soft fraud” since it is performed with malice aforethought.

Hard fraud takes planning, scheming, and even someone on the inside to help you get money from an insurance company. An example of hard fraud would be getting into an accident on purpose so that you can claim the insurance money. This example is fairly prevalent lately; someone hits the brakes so that the person behind them can’t stop quickly enough.

Another really severe form of hard fraud would be faking your own death or murder for the life insurance death benefit.

The Staged Loss

A theft where the owner contracts with an intermediary to dispose of a vehicle. The owner ‘gives up’ the vehicle and then reports it to the insurer as stolen.The person to whom the vehicle is given up will pass it to a salvor who breaks it up into its component parts and sells the parts (a “chop shop.”) Staged theft also includes cases where the insured ships an auto to Mexico, China, Vietnam, or other foreign country where it is sold after which the insured makes claim reporting the vehicle stolen. All staged thefts are planned and performed for the sole purpose of defrauding an insurer.

Abandonment

The owner abandons a vehicle on a city street or in a parking lot, creating a morale hazard. The insured will report the vehicle stolen and attempt to collect before it is recovered.

Dumping

When the owner disposes of a vehicle by dumping it into a lake or other body of water. Cars have even been found buried underground and some lakes have been found to have more than 50 cars underwater.

ZALMA OPINION

Insurance fraud takes from the insurance buying public between $80 and $300 billion every year. It is essential that those who perpetrate the fraud are defeated or, at least, reduced and more spend time in prison. This can only happen if insurers are aware of the variations the crime takes and what is needed to defeat those who try fraud to profit.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4