A new claim comes to you and you begin to review for payment. However, during your review, something just does not feel right. You begin to find red flags like inconsistent statements, excessive damages being claimed, or prior similar claims, so it is time to take a closer look at the case. The devil is in the details, as they say. You may not find the smoking gun that says it is fraud, but you
may find far more circumstantial evidence than you imagined and begin to identify the building blocks for a potential fraudulent claim. If you do find multiple red flags, it is often time to get a Special Investigative Unit (SIU) professional involved.
What are some potential red flags?
There are different red flags for different types of losses or claims. For example, the red flags you will see in staged accident cases are different from those in first-party property claims, but
nonetheless, some overlap. Those flags tend to be specifically related to the insured or the insured’s background, such as an insured with a criminal history of fraud, extensive prior claim
history, financial difficulties, or unemployment.
For first-party property claims, here are some things to watch out for:
- Claim reported on the date of loss by an attorney or public adjuster
- Late reported claim
- Two claims reported at the same time
- Involvement of a plumber without proof of hiring or payment
- Repairs done by someone the insured cannot identify or a friend/neighbor and no receipts
- Claim involved a public adjuster, attorney, and water mitigation company but the insured thought they only hired one company
- Insured never saw an active water leak
- Insured cannot recall when the loss occurred
- Insured cannot recall the facts of loss or provides inconsistent facts
- Excessive demolition by the water mitigation company
- Multiple tarps followed by shrink wrap
- Tarps stapled down to the roof
- No one inspected the home’s attic
- Damaged property or plumbing source was removed before the insurer had the opportunity to inspect
- No photographs were taken on the date of loss documenting the source of loss or damages
- Claim was called in the day after the emergency mitigation service company completed its job
- Photographs taken by the water mitigation company of moisture readings all show the same gloved hand in the same position against the same backdrop
- Claim made at the beginning or end of the applicable policy period
- Claim made on a newly purchased home
- Insured cannot identify the source of the leak inside the sink base cabinet
- Public adjuster came up with the date of loss
- Inflated damage estimates
- Excessive mitigation services
- Mitigation services provided months or years after a loss
Once you spot these flags, how can you investigate further?
Start by carefully examining the claim file, especially photos and videos. If they are not in their original format, ask for them. Otherwise, there is no way to tell when the photographs were
taken. What does a really helpful photo or video look like? Some will be obvious. For example, an insured recently produced a video following a deposition that was time stamped showing water
leaking from her ceiling prior to the reported tropical storm date of the loss. Other photographs are less obvious, and you will only find the hidden details if you really study the photo or video.
Below are three brief examples of how studying the details in the claim photographs can lend support to your claim defense.
- Theft claim involving thousands of dollars in cash and Rolex watches allegedly stolen from a safe in an upstairs master bedroom closet. Nothing else from the home was taken. The
photograph of the upstairs master bedroom closet showed it was full of boxes and bags of counterfeit merchandise all covering the safe that was supposedly broken into by a stranger.
There was no room to see the safe or even walk to it. Nothing in the closet was disturbed. How did a stranger know about the safe, know to be in and out of the house in less than 5
minutes, and know how to open the hidden safe without disturbing all of the boxes shielding it from view? - Tropical storm claim with alleged tile roof damage and interior water damage. Photos of the room show all ridge caps in place, no missing tiles and minimal corner cracks to some tiles.
The broken corner pieces of the cracked tile are still in place. In addition, the photographs revealed undamaged Christmas lights hanging along the roof line and the yard was full of
unharmed light weight plastic yard ornaments. - Reported kitchen supply line leak. Yet, photographs revealed the supply lines were not new. They have tags on them, that when photographed and enlarged, can be used to date them to years prior, and they look old as well. There is little to no cabinet damage. A plumber, the insured did not hire or pay, submitted an invoice for a shark bite angle stop valve. There was no new angle stop valve visible in the photos.
Understanding plumbing and roofing basics can help spot inconsistencies. For example, a p-trap cannot be the source of a widespread flood unless the sink is left running. A clogged toilet will
not result in a widespread flood unless there is an issue with the fill valve, such as a broken float or broken toilet handle that allows the toilet water to keep running. Furthermore, usually the first
part of a roof damaged by wind will be the ridge caps. When there is tile or shingle roof damage, it often is found in groups of tiles or shingles missing together. A corner crack with the cracked
piece in place is not typically indicative of wind damage. This knowledge helps you ask the right questions during a recorded statement and/or an examination under oath.
After going through the claim file, check prior and subsequent claims and underwriting reports. Comparing photos band claim estimates can show patterns, like duplicate claims or pre-existing
damage.
Another important step is to make yourself a timeline. It can help track the sequence of events and oddities. Was there a delay in reporting the claim? Were two claims reported at the same
time? Was the claim reported the day after the mitigation company removed its equipment? When did the insured purchase the property? When were permits pulled? When was a plumber
called? Each fact is placed in relation to the other and the overall claim history is revealed. Along with it may be some further indicators of fraud, but if not you will be much better prepared for
questioning any witnesses, which can uncover additional pertinent defense facts down the line. Is there a water mitigation company? Look at their reports. Did the company drill holes above the
base boards causing unnecessary damage? Did they remove the base panel of the kitchen sink base cabinet, dry out the cabinet, but then also drill holes on the back side of the kitchen island?
Did they start right out using Injecti-Dry units on ceilings or on baseboards with questionable to no water damage? If you look carefully, you may find that the readings on the moisture meters in
photos do not match the moisture logs prepared by the water mitigation company. In studying these records, you will be better prepared to confirm with the insureds the following questions:
- How many days was the dry-out equipment in the home?
- What rooms was the equipment in?
- How many pieces of equipment were installed in the home?
- Was all of the equipment plugged in and running the whole time?
- Did anyone come to the home to monitor the equipment each day?
- What building materials were removed from the home before the insurer inspected?
- Was any microbial agent actually sprayed at the home?
In short, spotting red flags is just the start of determining whether a claim is a potentially fraudulent claim. By carefully analyzing evidence and using investigative techniques, you can
uncover the truth and protect against fraud.