Fraud Detection and Conviction - Back to the Basics
by: Patrica Tweedy
Law Office of Patrica Tweedy

While insurance fraud is a rampant white-collar crime, it is often undetected or, if detected, ignored or not prosecuted. Thorough investigation and documentation can increase fraud detection and convictions.

I. Heed your internal warning signals.
     Does something tell you the claim is not entirely legitimate? If there are fraud indicators with regard to the claim, further investigation is required. If the claimant is overly pushy for a quick settlement, presents a claim that significantly differs from the police officer’s investigative report, provides receipts that are suspicious, fails to have receipts or documentation of items claimant state are new or other fraud indicators exist, take another look. Follow up by contacting stores, neighbors, the investigating officer or other relevant wittiness.
     Frequently the adjuster who is responsible for paying a claim is located in a city remote from the claimant and claimant’s activities. For example, we recently assisted in the investigation of a claim that was being handled from a southern California claims office. The carrier had retained an outside adjuster company provided prompt written reports to the insurer and those reports contained several indicators of a possible fraudulent claim. Our firm was contacted to assist in the investigation and we, in turn, contacted Greg Nunes Investigations providing that company with specific additional tasks.

II. Investigate thoroughly and gather admissible evidence.
     When, in your investigation, fraud is revealed, gather and protect evidence of same. In our real life example, acting on his own hunch, Investigator Nunes recontacted the police department and located an original report filed by the claimant (the named insured). The report indicated that the claimant (the insured) knew that the property had been removed from the dwelling by a co-insured. The “loss” was not covered, the insured knew that it was covered, and a second police report, claiming that unknowns had entered her home and stolen her property, provided good evidence of her intent to defraud. The co-insured was contacted, her examination under oath was taken and she provided additional information which demonstrated that the claimant was making a knowingly false claim.
     The insured claimant had provided numerous check stubs and receipts allegedly documenting stolen items but Investigator Nunes contacted store owners, sales personnel, and the like discovering that numerous documents provided by the claimant were also false. Recorded statements were taken where feasible and the name, address and telephone number of each potential witness was documented for the file.
     The co-insured informed us, in the examination under oath, that the insured claimant had a criminal history. Again, that lead was followed and it was discovered that the claimant had been convicted of two felony white-collar crimes in the past. We obtained the complete criminal files regarding those matters. Admissible evidence was gathered each step along the way.

III. Get an outside legal opinion.
     Where the claims professional is convinced that insurance fraud has been committed, counsel should independently provide an opinion regarding whether to accept or reject coverage. In our recent case, we recommended that coverage be denied and further recommended that the matter be turned over to the authorities for prosecution. We also drafted the denial letter for the adjuster’s signature.

IV. If the claim is obviously fraudulent, provide the information to the Department of Insurance.
     If you are convinced that the crime of insurance fraud has been committed, the Insurance Code requires informing the Department of Insurance. If the Department of Insurance is unable to prosecute, then consider sending the evidence to your local District Attorney. Some carriers have opted to send the evidence to both agencies. In order to gain the agency’s interest in your case, the material you send must contain admissible evidence of all elements of the crime along with a cover letter demonstrating that a crime has been committed and referencing the evidence by exhibit. In our recent case, which we will continue to use as an example, we not only provided the evidence in the described manner but also provided that information we had obtained regarding the previous convictions. The claimant, in our case, was recidivist, thus likely to strike again. We believe that the Department’s acceptance of the case was, in part, based on the fact that this was not a one-time “mistake” in judgment.
     Even though our reported case was a first party claim, third party insurance fraud occurs with frightening frequently. Often it involves more perpetrators than first party fraud. Investigative basics are essentially the same. What you do with the evidence depends on the circumstances. When you discover chiropractic fraud, the information should be turned over to the Department of Consumer Affairs for potential licensing discipline or revocation. When you find fraud by a medical doctor, the information should be provided to the Department of Consumer Affairs for possible licensing discipline or revocation and to the Medicare fraud unit. We have found Medicare to be quite proactive in recovering money fraudulently obtained by physicians. Remember, however, that no agency can be expected to act unless the fraud is clearly spelled out and properly documented with admissible evidence. We hope these comments have been helpful. We wish you a prosperous, healthy and happy year 2000.

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