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The story that follows is based on fact but is fiction. The names, places and descriptions have been changed to protect the guilty. This story was written for the purpose of providing insurers, those in the insurance business and the insurance buying public, sufficient information to recognize and join in the fight against insurance fraud. This is presented as a gift for the New Year.

The public perceives insurers to be rich. Insurers build the towers downtown. Insurers are perceived to take premiums from poor policyholders and never pay claims. When someone steals from an insurer the public cheers. They want to believe the thief is like the noble Robin Hood stealing from the rich to give to the poor. Their dislike for the insurer who refused to pay for the damage to their house when an earthquake struck clouds their judgment.

An insurance criminal is as much a thief as the person who uses a gun to take cash out of the convenience store’s register. The insurance industry, and every person involved in it, must convince the public that Robin Hood is dead. The insurance criminal does not steal from rich, impersonal insurance companies. The insurance criminal steals from every person who buys insurance. Until the word gets out, the public will continue to make the fortunes of criminals. It is inevitable that the person we will call Robin Hood will continue to succeed. Crime against insurers pays well.

Robin was an affluent manufacturer of children’s clothing. He lived in Beverly Hills in a modest two million-dollar home without a mortgage. His line was popular. His personal income was never less than six figures and in many years exceeded seven. He was popular. He hosted a regular poker game at his house that was attended by his wealthy neighbors. They always played nickel-dime poker and no one ever lost much money. They gathered for company and conversation.

One of the poker players was a lawyer who represented major corporations including insurance companies. During the poker game the lawyer could not relax. He seemed furious and whether he won or lost would slam his cards down on the table. Finally, one of the other players asked what was bothering him.

“Yesterday, a jury in Compton came in with a $30,000,000 verdict against one of my clients, Pay Fast Insurance. They asked me to see if the judgment can be set aside on appeal. I think it can, at least partially. Its ridiculous. The insured committed fraud. He had a legitimate burglary but he made claim for the theft of more items that could possibly fit in his house. The jury even agreed, they found that the claim he made was for twice what he lost. They still gave him punitive damages. The jury thought the insurance company gave the insured a hard time. It’s disgusting. They just want to punish all insurance companies even if they were right in rejecting the claim.

“I’m sure I can get the Court of Appeal to reduce the punitive damages since they’re so out of proportion with the actual loss. I might even get them to reverse the judgment. It doesn’t matter. Pay Fast is so scared now they are paying any claim presented to them. They now pay the claims they know are fraudulent.”

The poker players commiserated with the lawyer and the game went on without further discussion. Robin remembered the conversation. This was a lottery he would like to enter. The odds were much better than that given by the State and he had inside information.

The next morning he called his insurance broker and told him to move his insurance from Fire Fighters Insurance to Pay Fast. He also doubled the limits of liability on contents because he had purchased some new antique furniture and art works. He did not, however, want the personal articles floater since he knew that would require an appraisal and an itemized schedule of the items. He then started collecting information on antiques and art with pages out of the Sotheby and Christie’s auction catalogues. When he gathered enough information, he instructed his secretary to prepare a list of items with the descriptions and prices taken directly out of the Sotheby and Christie’s catalogues. All the items listed were generic such as a Windsor chair or a Queen Anne desk. Paintings were never attributed to famous artists but rather to schools such as “the Venetian School circa 1500.” Nothing was specific. By the time his secretary finished the list totaled two million dollars. The amount was $100,000 less than the limits of liability stated on his new homeowners policy with Pay Fast Insurance Company.

Robin sent his wife and children for a week’s holiday at their condominium in Maui. He told them that he had a business meeting but would join them in a few days. His house was protected by a silent central station reporting alarm system. The alarm system, however, was only equipped with contacts on the doors and windows and a single motion detector that looked down the central hallway. He moved a grandfather clock directly in front of the motion detector making it ineffective.

In his backyard was a brick planter with a loose brick that he meant to have fixed months before. Early one afternoon Robin took the loose brick and carefully broke six window panes in the French door leading into the family room from the patio. All of the glass fell into the house. He climbed through the hole and ground the broken glass into his carpet. He went upstairs to the bedroom where his wife usually keeps her jewelry and opened each of the drawers dropping the clothes stored there on the floor. His personal office in the house had filing cabinets and he opened each cabinet and removed papers. He picked up the small fire safe and put it in the trunk of his Lexus. He then locked up his house and set the alarm knowing that the broken glass would have no effect. Robin drove to his office, installed the fire safe under his desk and worked until his normal quitting time. Since his wife was not home and there were no servants in the house he went to his club for dinner. He had dinner with a friend who was also temporarily a bachelor and arrived at his home about 10:00 p.m. punched the code calmly into his alarm keypad disarming his alarm and immediately dialed 911.

The Beverly Hills Police Department responded promptly and took a report of what appeared to be a burglary at Robin’s residence. He told the police that at the recommendation of his insurance agent he had prepared an inventory of all his household goods. He promised to provide them a copy of the list the next day. He informed the officer that it appeared that all of his antiques and fine arts had been stolen. The thieves left his normal household furniture, furnishings, television sets and stereo equipment. They obviously knew what they wanted and took only what they wanted. He reported that his wife had taken all her jewelry with her to Maui. He told them that the jewelry was not stolen. The fire safe he used to hold his important records, including all of his purchase records, was taken. Apparently the thieves thought there was something of value in the safe.

Pay Fast assigned one of its more senior adjusters to investigate the claim. He received from Robin the list of household goods whose total value was more than three million dollars. Of that list Robin had checked off the items of antiques and arts that never existed. He informed the adjuster that the items checked were the only items stolen. He also informed the adjuster that he intended to sue his alarm company. He was upset that they had not warned him about moving things in front of the motion detector. He believed that, but for their negligence, the burglary would not have succeeded. The adjuster reviewed the alarm company contract with Robin. He explained to Robin that the maximum damages Robin could recover were $250.00 because the contract had a liquidated damages clause. The adjuster told him that insurance companies have attempted to break this liquidated damages clause many times without success.

The adjuster asked for substantiation of the ownership of the items. Robin told the adjuster that most of the items were bought from private parties at estate sales. He kept all of his receipts and records in the safe that was stolen. He had no backup except the inventory his insurance agent had told him to make at the time he bought his policy from Pay Fast. Robin told the adjuster he was ready to sign a sworn statement that he owned all of the items on the inventory and that they were stolen. He reminded the adjuster that his loss totaled almost two million dollars.

The adjuster was suspicious. The burglary was too neat. Too much was taken out of the small hole in the patio door. Robin was cool and calm and did not even seem upset that his privacy had been violated. The total lack of records was a major indicator of a potential fraud. The family taking a vacation on Maui while the husband and father remained home was another indicator of fraud. The disabling of the infrared detectors by Robin that were part of the alarm system, supposedly without his knowledge, made the adjuster extremely suspicious.

The adjuster took the list of antiques and fine art to well-known appraisers all of whom verified that if the descriptions were accurate the values stated were accurate. If anything, the values stated were low auction prices rather than a normal replacement value appraisals for insurance purposes. The adjuster wanted to compel the insured to testify under oath. He believed that a skilled lawyer will destroy the insured’s story and establish the fraud. He presented his opinions to his claims manager. The claims manager was the same manager who made the decision to deny the fraudulent claim that resulted in the thirty million dollar verdict Robin learned about at the poker game. He knew, from the adjuster’s report and the recorded statement that the adjuster had taken from Robin that there were at least three major indicators of a fraudulent claim. He knew that under the law, Pay Fast had the right to compel the insured to appear for examination under oath. He was convinced the insured could not prove such a large loss. Photographs the adjuster had taken of the house showed no empty spaces. There were no shadows on the walls where paintings supposedly hung. There were no marks on the floor where furniture had supposedly sat before it was stolen.

The adjuster knew that Robin was a successful businessman. Robin made it clear he knew on a first name basis the mayor of Beverly Hills and played poker with a lawyer who often represented Pay Fast. He congratulated the adjuster on the thoroughness of his investigation. He informed the adjuster that the request for examination under oath would be proper but he could not recommend it unless compelled to do so by the home office. The claims manager informed the adjuster that he could not place Pay Fast Insurance Company in a position where it might find itself paying another thirty million dollars punitive damages judgment. The claims manager passed the adjuster’s report to his Pay Fast home office with a recommendation that a proof of loss be issued and delivered to Robin for $1,950,000 and also recommended that Pay Fast pay the insured.

The Home Office, still tender about the punitive damages judgment and recognizing that eighty percent of the payment would be paid by their reinsurers, agreed with the claims manager. A proof of loss was issued and a check for $1,950,000 was placed in Robin’s hand the day he returned from his holiday on Maui.

When the adjuster delivered the check he was surprised to see that Robin was disappointed. He asked Why? Robin replied: “My neighbor told me about the thirty million dollar verdicts. I was hoping you would deny my claim so I could sue you for bad faith. I don’t need the money. I didn’t even like the antiques.”

Robin succeeded in insurance fraud. His plan, however, failed. If Pay Fast had exercised its rights under the policy, they would have denied the claim. He would have sued. There was a good chance that he could convince a jury that he was the original Robin Hood, the jury would give him his two million dollars plus multi millions in punitive damages to punish Pay Fast Insurance Company for its refusal to pay his obviously fraudulent claim. He didn’t win the big lottery but he won a small one. Robin robbed the rich insurer and all of its investors and enriched himself further.

In about three or four years, after he no longer has to report the loss on an insurance application, some unsuspecting insurer will find itself in the same position as Pay Fast. Robin will make another fraudulent claim and hope, this time, that the insurer will reject it so that he will hit the big jackpot of punitive damages.