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Liability Insurance Is

A Christmas Fable of Fraud
By Barry Zalma, Esq., CFE - December 20, 2010

This story is fiction, yet it is based upon a true story handled by author Barry Zalma.  Any similarity to actual persons is unintentional. It is meant for the educational value it can provide to anti-fraud professionals, along with a little entertainment, on how some unscrupulous people use the crime of insurance fraud for fun and profit during the Christmas season. The Editor

Raymond Alexander had no religion. He cared only for himself and the money he could take from good-hearted people.  Raymond loved the Christmas season. His marks were in such a kind and giving mood that it wasn't even work to take their money.

The Christmas before last, Raymond stumbled on insurance fraud as a lucrative means of making quick, easy money.  Raymond made a good living playing bunco schemes about town. He would work the money switch with old folks, the dip, and every possible scam invented to take money from honest people who had a little larceny in their hearts.

Because he was good at what he did, Raymond lived well. He leased a three-bedroom apartment in the best part of town, drove a BMW convertible when he wasn't working, and purchased all of his suits from a custom tailor. He ate at gourmet restaurants and collected an eclectic assortment of popular art dishes and Lladro figurines.

Raymond, because he loved his collection, insured his home with the best and most expensive insurer he could find. He had his figurines appraised and scheduled on his policy so there was no dispute if he had to make a claim.

Last Christmas burglars entered Raymond's home and stole two Lladro figurines and one art dish depicting the English Countryside on Spode china. Raymond was upset that a burglar ripped him off. It was his profession to rip off others. Raymond felt he now understood how women who had been raped must feel.

Raymond called his insurance agent and reported his claim. To his surprise his insurer telephoned him and asked what was lost. No one came to his home. No one asked to come to his home to investigate. They merely called on the telephone and asked for the number of the police report so the insurer could obtain it.

Such unthinking trust deserved to be made a victim of Raymond's wiles. He, the consummate professional, could not resist the temptation. He told the person on the telephone that he was not sure what was taken and that he had only reported that which was obvious on first inspection to the police. As a bunco artist of the first order what came next was simple – the police officer had left him with a sheet of paper to list any items that he later discovered were missing. Raymond sat at his oak and leather antique partner's desk and prepared his supplemental police report. On the report he listed one out of every four items on the insurance schedule. Then he added three Armani suits, two pairs of Ecco dress
boots, a pair of Bruno Magli sport shoes, two pairs of gold cuff-links, and a simple Omega wrist watch. He was not greedy.

He sent the list to the detective and a copy to the adjuster who spoke with him on the telephone. Raymond expected he would need to haggle and would be forced to document each item to the insurance company. Much to his surprise, two weeks later Raymond received a nice letter from his insurer. It advised him that the adjuster had calculated his loss, deducted $500 (his deductible) and could only count the jewelry to $1,000 because of a special limitation in the policy. The adjuster expressed her regret in not being able to pay him for everything he lost and hoped the enclosed check for $35,650 would be satisfactory.

Since Raymond had only lost $375.50 worth of goods, the check was quite satisfactory and he spent the Christmas season in a comfortable resort in Bermuda.

When Raymond returned from Bermuda, he took the things he had reported stolen to high-end swap meets in Long Island, New York. He traded one Lladro for another, one plate for another and bought some new jewelry.  He called his appraiser, who updated the appraisal on his schedule by taking out the items stolen and replacing them with the new items he had acquired. His policy was renewed and the schedule increased and changed to meet the new items with a value of more than $150,000.00.

Raymond Alexander was not a greedy man. He was a successful confidence man because he was not greedy. He did not bleed his marks' dry. He just took an adequate sum of money to properly support his accustomed lifestyle. Raymond never took everything the mark had. He wanted the mark to know he was taken and to be too embarrassed to do anything about it.

Raymond looked on his insurance company as another mark. He did not want to collect $150,000 from them, only enough to take him through the holiday season that he had not celebrated since he was four-years-old.

It was time to have another loss and claim. A fire was out of the question, too messy. Robbery was dangerous and the person hired to fake a robbery might forget he was not supposed to really rob Raymond. A fake burglary might be worse because the police got testy about false police reports. He might make a mistake and they would learn the burglary was
not real.

Raymond Alexander was successful at his chosen criminal profession because he paid attention to detail. He read his insurance policy. Part of that policy was a Personal Articles Floater that insured for all risks of physical loss. It had very few exclusions. It covered, for instance, the Lladros and the plates against loss (with no explanation) or even breakage from any cause, including an earthquake.

Raymond knew he could not cause an earthquake but he had no problem losing his art. He removed from his home, two or three items at a time, for several weeks. Figurines and plates valued by his appraiser at $51,632.00 were stored at a Public Storage unit. The number was nice, odd and with no zeros except the cents.

On November 15 Raymond telephoned his insurance agent to report that he returned home from a weekend trip to Connecticut to his apartment in Boston and found selected parts of his collection missing. There was no evidence of a break-in to his house and all he could explain to the agent was that the items had disappeared, mysteriously from his home. The alarm had been set and was operating perfectly. It detected no intruders but the items were gone.

Again, Raymond was contacted by an adjuster by telephone. He learned that she was in Phoenix, Arizona and never left her desk to deal with claims. She asked for, and Raymond gladly gave, a recorded statement concerning the events and the items claimed stolen. She kept him on the telephone for almost an hour taking from Raymond as much detail as he could possibly remember about each item.

Raymond was distraught. His holiday had been ruined. The adjuster empathized with him and told him she would work hard to complete his claim before Christmas. She did. A check for $49,162.00 arrived in Raymond's mail box on November 30. They broke a record getting money to him. They did no investigation other than speak to him, and they paid him promptly. Since the loss was his second loss in two years the adjuster sent a note to the underwriters about the loss history and they decided not to renew Raymond for a second term.

He went to his insurance broker, after he "replaced" all the missing goods and obtained an identical policy from another insurer for a smaller premium. They were willing to take a chance that lightning would not strike the same place three times in a row.

Raymond enjoyed his insurance company money and did less of his normal scams. It seemed wrong to take an old woman's savings through a convoluted scheme when he could wrest money from an insurer with such ease. The payments also allowed him to add to his collection with no new spending.

Raymond was a happy man. His BMW had become boring to him. The state made him insure it so he had the best insurance money could buy from the New York Auto Insurance Specialists.

He drove the vehicle to Boston Harbor where it was shipped to an acquaintance with whom he had done a sting in Hartford who now lived in Belize. For a 15% commission the BMW was sold to a General in the Belize army for its high Blue Book value. Raymond then reported to the Boston PD and his insurance company that his BMW had been stolen from the street in front of his apartment while he slept.

Everything went well, the BMW was valued and the insurer was ready and willing to pay Raymond low blue book value on the car. They did, however, automatically report the theft to the National Insurance Crime Bureau (The "NICB") who records the vehicle identification number of every vehicle ever shipped out of the United States. The insurer was about to send a check to Raymond when it received a report from NICB that the BMW had been shipped from Boston to Belize three months before.

The insurer assigned the investigation to its Special Investigation Unit. Investigator Steve Nazarian went to Raymond's home to interview him in detail. Raymond lied with alacrity until he was confronted with the shipping documents. The ease with which he had been caught frightened Raymond. He thought he might have to go to jail. He knew there was no way to take back the reported theft. It was a week before Christmas. He pleaded with Nazarian.

"Well, Mr. Alexander" Nazarian, responded, "the state of Massachusetts takes insurance fraud very seriously. We are required to report you to the Insurance Fraud Bureau. They make all decisions about crime. Your insurer, on the other hand, is quite upset that you tried to cheat it.

"What do you think we should do?"

"Just forget I made the claim. I will sign any paper you ask to withdraw my claim. Getting me arrested won't help you," Raymond suggested.

"I just happen to have a release in my briefcase, here. Please sign it. I will report you to the IFB but I will also report that we settled with you for no payment as I am required to do by law. They may have more important criminals to arrest than you."

"Give me the release." Raymond exclaimed as he grabbed the release out of Steve Nazarian's hand and signed it. "Now please leave my house."

"Of course, Mr. Alexander, and have a Merry Christmas."

Raymond stayed at home through the Christmas season. He saw no one, did nothing. He ate a frozen turkey dinner alone on Christmas eve. He decided he would never attempt an insurance fraud again.

The Insurance Fraud Bureau had received, along with Nazarian's report of Raymond's attempted fraud, eighteen hundred reports of suspected fraud for the month of November. His name was put in their data base for future reference but no file was opened. Bigger and more exciting fraud perpetrators took up their attention. No one was hurt. The insurance company paid no money and immediately cancelled all policies it had for Raymond.

Raymond went back to his regular work taking money from widows, orphans, the sick and the partially criminal. He continued to live well and never again committed insurance fraud. His Christmas present to the insurance industry was to set his criminal mind to other victims.

This is, of course, a Christmas fable.

All insurers do not run auto thefts through the NICB or ISO database. Most insurers believe whatever the insured tells them. Most have under trained, understaffed and overworked claims departments who just send out money.

Most insurance criminals, unlike Raymond, know about the lack of staff, how overworked and underpaid adjusters are, and would never sign a release. The insurance criminal would either try to bribe the SIU investigator or sue the insurer for bad faith for having the gall to claim they caught them at their crime. Insurance fraud perpetrators do not give up a chance of easy money just because their scheme did not hold together. They change the scheme and bluster. Insurers, faced with an expensive defense, will pay something. Insurance criminals are not as naive as Raymond and insurers are not as bright and forceful as his insurer.

Steve would never just give Raymond a release, he would need to consult with management (up at least four layers) and a lawyer before he took such a chance to defeat an insurance fraud.

Insurance fraud perpetrators, even if they feel they have been caught and will never recover, merely redouble their efforts and perpetrate more frauds so they can make up for the few where they are caught.

Raymond Alexander gave a Christmas present to the insurance industry but is still loose to take advantage of the old, the poor, and the weak who are prime candidates for a bunco artist. Insurers, unlike an octogenarian widow, are better able to protect themselves from a bunco scheme.

The Christmas present I would like is a state government willing to prosecute every insurance fraud to the limit of the law. I dream of an insurance industry willing to spend the money necessary to fight insurance fraud.

If you are out there, Santa, this is what I want as a gift to me and the entire world: Governments and insurers willing to fight insurance fraud and give no quarter to the fraud perpetrator.

Barry Zalma, Esq. CFE, serves as an expert witness for the insurance industry in legal actions against insurance fraud.  His email address is



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