Proving Insurance Fraud: Real Case Studies

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Proving Insurance Fraud: Real Case Studies

  1. 1. PROVING INSURANCE FRAUD REAL CASE STUDIES Robert R. Pohls, Managing Attorney2011 Western Claim Conference Renaissance Esmeralda HotelSeptember 20, 2011 Indian Wells, California
  2. 2. PROVING INSURANCE FRAUD REAL CASE STUDIES AGENDA 1. What is insurance fraud? 2. Recognizing insurance fraud 3. The Claim-Handler’s Dilemma 4. Claim Strategies 5. Litigation Strategies 6. Trial Strategies 7. Claim Management Considerations 8. QuestionsSlide 2
  3. 3. PROVING INSURANCE FRAUD REAL CASE STUDIES WHAT IS INSURANCE FRAUD? Legal definition of fraud: “One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damages which he thereby suffers.” Cal. Civil Code §1709Slide 3
  4. 4. PROVING INSURANCE FRAUD REAL CASE STUDIES WHAT IS INSURANCE FRAUD? Examples of actionable fraud: · Suggesting a fact is true when not believed to be true · Asserting a fact is true without reason for believing it to be true · Suppressing a fact when obligated to disclose it or giving information which is likely to mislead about that fact · Making a promise without any intent to perform it Cal. Civil Code §1710Slide 4
  5. 5. PROVING INSURANCE FRAUD REAL CASE STUDIES WHAT IS INSURANCE FRAUD? Working definition of insurance fraud: “Any deliberate deception perpetrated against or by an insurance company or agent for the purpose of unwarranted financial gain.” Coalition Against Insurance FraudSlide 5
  6. 6. PROVING INSURANCE FRAUD REAL CASE STUDIES WHAT IS INSURANCE FRAUD? Types of insurance fraud: Hard Fraud When someone deliberately plans or invents a loss that is covered by their insurance policy in order to receive benefits Soft Fraud When the policyholder exaggerates an otherwise legitimate claimSlide 6
  7. 7. PROVING INSURANCE FRAUD REAL CASE STUDIES WHAT IS INSURANCE FRAUD? Examples of insurance fraud: Life · Misrepresentations (or omissions) in application · Fake death claims · Fraudulent procurement Health · Provider fraud (bogus treatment/diagnosis) Disability · False claim of injury or sickness · Exaggeration of symptoms/functional impairment · Concealment of income-producing activitySlide 7
  8. 8. PROVING INSURANCE FRAUD REAL CASE STUDIES RECOGNIZING INSURANCE FRAUD Fraudulent insurance claims are purposely made to look legitimate. Claimants often “control” the circumstances surrounding a fraudulent claim: · Time · Place · Witnesses · Nature of Injury · Symptoms Claimants learn from past claim experiences: · Paid Claims · Denied Claims · Fraud by Others · “Professional” CrooksSlide 8
  9. 9. PROVING INSURANCE FRAUD REAL CASE STUDIES RECOGNIZING INSURANCE FRAUD Fraudulent claims often are crimes of opportunity. Pay attention to claims that involve those opportunities. Consider fraud reporting obligations or referral to SIU. Trust your instincts . . .Slide 9
  10. 10. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #1 Gregory v. Company Two men from North Las Vegas go to an agent’s office in suburban Henderson to apply for a $250,000 life insurance policy. Conditional receipt given in exchange for tender of initial premium. Insured fails to appear for paramedical exam because he was murdered. Police suspect the man who accompanied him to the agent’s office (who was to be named as the beneficiary).Slide 10
  11. 11. PROVING INSURANCE FRAUD REAL CASE STUDIES THE CLAIM-HANDLER’S DILEMMA You should be trying to confirm that benefits are payable. Investigating the possibility of insurance fraud creates the impression you are trying to establish that benefits are not payable. · If you are right, you may uncover a fraud. · If you are wrong, you may make it difficult to defend a claim for bad faith.Slide 11
  12. 12. PROVING INSURANCE FRAUD REAL CASE STUDIES CLAIM STRATEGY #1: A picture’s worth a thousand words.Slide 12
  13. 13. PROVING INSURANCE FRAUD REAL CASE STUDIES CLAIM STRATEGY #2: Read Between The Lines.Slide 13
  14. 14. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #3 Multiple-Murder/Suicide Insured dies in a multiple-murder suicide during the contestable period. · Application denied prescription drug use. · Vendor’s database reflects no known prescriptions. Medical records predominantly relate to childbirths and known history of surgery. OB/GYN’s records also mention insured’s request for anti- depressants and doctor’s prescription for Lexapro.Slide 14
  15. 15. PROVING INSURANCE FRAUD REAL CASE STUDIES Mama always said: “IF YOU TELL ONE LIE, YOU’LL HAVE TO TELL ANOTHER.”Slide 15
  16. 16. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Proposed Insured: Stacey Applicant/Owner: Cynthia Proposed Beneficiaries: Cynthia’s 3 children (all minors) Application: · Completed in agent’s office (Los Angeles) · Dated: March 17, 2004 · Physical Description: 32 years old 5’1” and 120 lbs. · No Adverse Medical History · No History of Tobacco Use · Occupation: UnemployedSlide 16
  17. 17. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Face Amount Applied For: $50,000 Monthly Premium: Less than $20/month Cash With Application: First month’s premium · No paramedical examination · Additional underwriting requirements satisfied on May 3, 2004 · Underwriter approved application: 4:48 p.m. on May 5, 2004 · Pronounced dead at 6:20 a.m. on May 6, 2004 · Agent was told Stacey died of a heart attackSlide 17
  18. 18. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Initial Telephone Interview of Cynthia · Stacey had “never been ill and didn’t have a family physician.” · Stacey had gone to Houston to visit their mom and became ill. · Stacey was taken to “the largest trauma center in Houston,” which is where she died. · Cause of death is not yet known.Slide 18
  19. 19. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Interview of Stacey’s Mom · Stacey died of a “massive heart attack.” · Stacey had been “physically healthy.” · Stacey was mentally ill. · Stacey had been living in a nursing home in Southern CA · Had “breathing problems” in March 2004. · Was moved to a Southern CA hospital for 4-5 days, then transferred to hospital in Houston “to be closer.”Slide 19
  20. 20. PROVING INSURANCE FRAUD REAL CASE STUDIES CLAIM STRATEGY #3: Give ’em some rope.Slide 20
  21. 21. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Interview of Cynthia · Stacey had been “in and out of mental type institutes.” · Someone asked her if she had insurance “in case something happened to” Stacey. · Picked Stacey up from a nursing home one day to go shopping with two friends, then to agent’s office to sign the application.Slide 21
  22. 22. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Interview of Cynthia · Did not remember any application questions being read to her. · Just “signed the application” where “she was told to.” · Told the agent that “if something happened to her and her sister, she wanted her [Cynthia’s] kids to be the beneficiaries.”Slide 22
  23. 23. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Interview of Cynthia · Reported that she has “only a 5th grade reading/writing level.” · Claimed she went to the agent because the insurer indicated its agents would “do everything” for her. · Trusted the agent “with everything.” · Told the agent that: · Stacey “was in a nursing home for mental problems.” · Cynthia was supposed to be the beneficiary, not her kids. · Friends and family told her to “get a lawyer.”Slide 23
  24. 24. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Interview of Cynthia · Told the agent in January 2004 that Stacey was mentally ill and living in a nursing home. · One friend went with her and Stacey to the agent’s office to sign the application on March 17, 2004. · “no questions were asked.” · she and Stacey “both signed paperwork” where told. · Is “sure the agent is trying to trick her as she is sure the agent forged her signature on the policy.”Slide 24
  25. 25. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Interview of Cynthia · Stacey left Los Angeles for Houston on April 22, 2004. · Stacey “got away from” her mother, became delusional, and was admitted to hospital involuntarily. · Stacey was discharged, then re-admitted after a week or two, just before she died. · Stacey was 5’1” or 5’2” and weighed about 260 lbs.Slide 25
  26. 26. PROVING INSURANCE FRAUD REAL CASE STUDIES CLAIM STRATEGY #4: Dig deep . . . really deep.Slide 26
  27. 27. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Autopsy Report Death was the result of “[c]ardiomegaly associated with hypertensive cardiovascular disease,” secondary to obesity. Height: 5’ 4” Weight: 309 lbs.Slide 27
  28. 28. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Medical Records · hypertension, with non-compliance regarding treatment and abnormal EKG’s associated with the hypertension; · asthma, COPD and pulmonary hypertension; · obesity; · congestive heart failure and cardiomegaly; and · ten year history of mental/nervous disorders, including numerous medications and institutional stays.Slide 28
  29. 29. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Medical Records (California) Medical Center 6/17/2003 - 10/31/2003 (California) Care Center 10/31/2003 - 1/23/2004 (California) Hospital 1/23/2004 - 1/27/2004 (California) Nursing Home 1/27/2004 - 3/5/2004 (California) Hospital 3/5/2004 - 3/11/2004 (Texas) Hospital 3/14/2004 - 4/8/2004* (Texas) Hospital E.R. 4/11/2004 - 4/12/2004 (Texas) Psych Ward 4/12/2004 - 5/6/2004Slide 29
  30. 30. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Medical Records 3/5/2004 Admitted (SOB/aggressive behavior) 3/9/2004 “Cardiology assessment with COPD confirmed . . . Discussed patient’s predicament last night by phone with patient’s sister, Cynthia, and mother. On learning of CHF, they agreed to permit . . . development of appropriate Tx.” 3/11/2004 Discharged (to fly with Cynthia’s Mom to Texas)Slide 30
  31. 31. PROVING INSURANCE FRAUD REAL CASE STUDIES CLAIM STRATEGY #5: Get them to commit.Slide 31
  32. 32. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Interview of Agent · Only two people came to the office on the application date: Cynthia and Stacey. · All application questions were read aloud while displayed on two computer monitors. · Cynthia had no problem reading the questions. · Stacey answered all the questions “No.” · Would not have taken the application if knew Stacey was in a nursing home for mental problems.Slide 32
  33. 33. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Interview of Agent’s Assistant · Came to office on date application was completed · Called just before coming · No prior calls, messages or discussions about Stacey Letters from Agent and Agent’s Assistant · Application completed on March 17, 2004 Telephone Call to Cynthia · One friend – Michele – was with Cynthia and Stacey when the application was signed in the agent’s office. · Michele “moves around a lot” and cannot be contacted.Slide 33
  34. 34. PROVING INSURANCE FRAUD REAL CASE STUDIES CLAIM STRATEGY #6: Tie up any loose ends.Slide 34
  35. 35. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Interview of Agent · Cynthia specifically said she did not want to be named the beneficiary. · Cynthia gave no reason for not naming herself. Letters from Agent and Agent’s Assistant · Cynthia asked that her three kids be named beneficiaries.Slide 35
  36. 36. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Call to Agent · Cynthia signed the application when it was filled out. Claim Form Addendum:Slide 36
  37. 37. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Call to Agent · Stacey signed the HIV consent form on the date the application was completed · Application was mailed to Cynthia’s home for Stacey to sign HIV Consent Form ApplicationSlide 37
  38. 38. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Telephone Call to Agent · Stacey signed the HIV consent form on the date the application was completed · Application was mailed to Cynthia’s home for Stacey to sign HIV Consent Form ApplicationSlide 38
  39. 39. PROVING INSURANCE FRAUD REAL CASE STUDIES CLAIM STRATEGY #7: Get an Explanation.Slide 39
  40. 40. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Denial Letter Our investigation indicates Stacey was confined in a hospital “in Houston, Texas from March 14, 2004 to April 8, 2004; therefore she could not have appeared in the agent’s office in California to complete this application, as confirmed by Cynthia in previous statements.” In addition, “the application did not include information about the insured’s history of schizophrenia, hypertension with non- compliance regarding treatment, abnormal EKGs associated with the hypertension, congestive heart failure, cardiomegaly, and pulmonary hypertension during her confinement.”Slide 40
  41. 41. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Attorney’s Response “On March 17, 2004, Stacey, Cynthia and a friend” (Michele) went to the agent’s office. · No one asked them questions. · Neither of them signed a document with medical questions. · Cynthia left the office with a Binding Receipt. As of March 17, 2004, Stacey “was residing in a nursing home in Pasadena, California. To the extent any medical records show Stacey residing in Texas as of that date, they are in error.”Slide 41
  42. 42. PROVING INSURANCE FRAUD REAL CASE STUDIES LITIGATION STRATEGY #1: Don’t bite off more than you can chew! Proving fraud requires evidence of: • Representation of fact • Falsity • Knowledge of falsity • Intent to deceive • Actual reliance • Reasonable reliance • DamageSlide 42
  43. 43. PROVING INSURANCE FRAUD REAL CASE STUDIES Basic Contract Principles Every contract requires consenting parties. If there is mutual assent to the subject matter of the agreement, a contract results. However, it may be voidable when there is a harmful mistake as to some basic or material fact that induced the aggrieved party to enter it. · If both parties are mistaken and neither is at fault (or both are equally to blame), the mistake may prevent formation of a contract. · A contract formed when one party has made a unilateral mistake is not voidable unless the other party had reason to know of the mistake or his or her fault caused it.Slide 43
  44. 44. PROVING INSURANCE FRAUD REAL CASE STUDIES Insurance Laws California “If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false.” Cal. Ins. Code §359 Whether the representation was intentionally or unintentionally false does not alter the injured partys right to rescind the policy. Telford v. New York Life Ins. Co., 9 Cal.2d 103, 105 (1937)Slide 44
  45. 45. PROVING INSURANCE FRAUD REAL CASE STUDIES Insurance Laws No. Carolina “. . . a representation, unless material or fraudulent, will not prevent a recovery on the policy.” N.C. Gen. Stat. §58-3-10 Illinois “No such misrepresentation or false warranty shall defeat or avoid the policy unless it shall have been made with actual intent to deceive or materially affects either the acceptance of the risk or the hazard assumed by the company.” 215 ILCS 5/154Slide 45
  46. 46. PROVING INSURANCE FRAUD REAL CASE STUDIES Insurance Laws Ohio No answer to any interrogatory made by an applicant in his application for a policy shall bar the right to recover upon any policy issued thereon . . . unless it is clearly proved that such answer is willfully false, that it was fraudulently made, that it is material, and that it induced the company to issue the policy, that but for such answer the policy would not have been issued, and that the agent or company had no knowledge of the falsity or fraud of such answer. Ohio Rev. Code §3911.06 See also, Ohio Rev. Code §3923.14Slide 46
  47. 47. PROVING INSURANCE FRAUD REAL CASE STUDIES Consider Alternatives Application Agreement: “Coverage will be effective as of the policy date if the following conditions are met: · the first premium is paid when the policy is delivered; · the Proposed Insureds are living on the delivery date; and · on the delivery date, the information given to the Company is true and complete without material changes.Slide 47
  48. 48. PROVING INSURANCE FRAUD REAL CASE STUDIES Consider Alternatives Binding Receipt: · “There is no coverage under this Receipt if the application contains any material misrepresentation.” · “No death benefit is provided by this Receipt unless death results from an accident that occurs or an illness that first manifests itself after the Application Date.” · “Coverage under this Receipt will end when the first of the following occurs: (a) The application is approved; (b) Notice of disapproval of the application is given; (c) 60 days have expired starting with the Application Date.”Slide 48
  49. 49. PROVING INSURANCE FRAUD REAL CASE STUDIES LITIGATION STRATEGY #2: Gather all your bricks.Slide 49
  50. 50. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 1. Do I have the complete file? - All coverage(s) with the company. - Correct policy forms with all riders. - All signed application forms, especially the delivery requirements. - Conditional receipt form. - Applicable underwriting guidelines.Slide 50
  51. 51. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 1. Do I have the complete file? - Recording of inspection report/telephone verification. - Premium/Billing information. - Outstanding or incomplete investigation. - Medical record requests (time period). - Inspect original application documents to assess the appearance of alteration – different handwriting or color ink.Slide 51
  52. 52. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 2. Is the policy contestable? · Has the policy been in effect less than two years? · Review the language of the contestability provision. · except for fraudulent misstatements. · strict two years. · If outside the contestability period, are you in a jurisdiction that provides other recourse? · Are there other ways to adjudicate the claim? · Waiver of premium rider (life insurance) · Pre-existing condition limitationSlide 52
  53. 53. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 3. What do we need to prove? · Which state’s law applies? · Require proof of intent to deceive? · Require proof of loss-causation? · If group insurance: · Does ERISA apply? · Do DOL regulations impose other requirements?Slide 53
  54. 54. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 4. Misrepresentation/Concealment · Are there misrepresentations in the application? · Were facts omitted from responses in the application? · Were the facts subjective or objective? “Have you ever received treatment for or been diagnosed as having or had any of the following?” “Within the past 5 years have you had a physical examination, medical consultation, X-ray or laboratory study, or been a patient in a hospital or other medical facility?”Slide 54
  55. 55. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 5. Materiality · Were the misrepresented/concealed facts material? · Is there an underwriter’s opinion about materiality? · Are there written underwriting guidelines that support the underwriter’s opinion? · Did the underwriter comply with those guidelines? · What information did the underwriter consider? · Did the underwriter know of other facts that created a duty to make further inquiries?Slide 55
  56. 56. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 6. Conditional Receipts · Generally two types that provide different contractual rights: 1) Provides coverage if conditions are met, with a beginning and end date; 2) Fixes a date for determining insurability, if conditions are met.Slide 56
  57. 57. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 6. Conditional Receipts · When did the Company get the money? · How long did it take to underwrite the application? · Compare to company standards · What caused the delay? · Was the policy delivered? · How? · By whom?Slide 57
  58. 58. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 7. Change in Health · What documents were signed at time of delivery? · Do the medical records suggest any material change in the insured’s health and/or insurability during the underwriting process? · Were those facts misrepresented or concealed in the delivery receipt? · Were those facts material?Slide 58
  59. 59. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 8. Reinstated Policies · Was the policy ever reinstated? · Does the reinstatement application provide an alternative basis for adjudicating the claim? “The reinstated policy will only cover disabilities due to injury occurring after the date of reinstatement, and due to sickness beginning more than 10 days after that date.”Slide 59
  60. 60. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 9. Agent Misconduct · Investigate the agent’s relationship with the company and with the insured · Review the agent’s statement (with application and in claim file) · Interview the agent · Get the agent’s filesSlide 60
  61. 61. PROVING INSURANCE FRAUD REAL CASE STUDIES Rescission Checklist 10. Claim Determination · Appropriate tone · Properly quotes from applicable policy provisions · Factually accurate · Identifies all basis for decision, including alternate grounds · Avoids inconsistent positions · Complies with company protocols · Was there a reservation of rights?Slide 61
  62. 62. PROVING INSURANCE FRAUD REAL CASE STUDIES LITIGATION STRATEGY #3: Leave no stone unturned.Slide 62
  63. 63. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #3 Multiple-Murder/Suicide · Application denied prescription drug use. · Vendor’s database reflects no known prescriptions. · OB/GYN’s records also mention insured’s request for anti- depressants and doctor’s prescription for Lexapro. · Pharmacy records confirmed one prescription filled. · Report of underwriting telephone interview also denied prescription drug use. · Recording: “I had my OB prescribe anti-depressants, and I filled the prescription once . . . But I never took them.”Slide 63
  64. 64. PROVING INSURANCE FRAUD REAL CASE STUDIES LITIGATION STRATEGY #4: Make a new friend.Slide 64
  65. 65. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #5 Spencer v. Company · Insured claims to be totally disabled by generalized back pain · Former occupation as an independent cameraman · Claim file reflects a website devoted to his business which promotes his projects · Insured suggests all projects were completed long ago · Insured claims to have had no new projects in years · Also claims to have refused projects because unable to hold and operate his cameraSlide 65
  66. 66. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #6 Paul v. Company · Insured claims to be totally disabled by low back pain · Daily activities include: · Morning hot tub · Watch news from bed · Home exercise routine · Study towards graduate degree in new field · When answering questions about efforts to secure new job, insured claims he spends time with his “blog” · Insured also mentions riding a bicycle to local meetings of a networking groupSlide 66
  67. 67. PROVING INSURANCE FRAUD REAL CASE STUDIES LITIGATION STRATEGY #5: Shop around.Slide 67
  68. 68. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #7 Penelope v. Company · Insured worked as chiropractor and received full benefits for total disability due to low back pain · Claim file reflects inquiry through agent about ability to qualify for further benefits after career change · New claim involves impact of carpal tunnel syndrome on insured’s work as skin esthetician · Insured denies any work-related activity in past yearSlide 68
  69. 69. PROVING INSURANCE FRAUD REAL CASE STUDIES LITIGATION STRATEGY #6: Be ready to herd some cats.Slide 69
  70. 70. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Letter from Attorney “I have reviewed the underwriting and claim files. . . It appears the initial meeting with the agent was probably in February 2004, at which time Cynthia was given a binding receipt post-dated to March 17, 2004 (the date Cynthia would have premium funds available).” Cynthia: Went to agent’s while shopping since just got tax refund Agent: No way (and no reason) to post-date binding receipt Binding Receipt: No coverage 60 days after application dateSlide 70
  71. 71. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Cynthia’s Testimony “I told the agent that Stacey was in a nursing home, had schizophrenia, was depressed and had hallucinations.” Agent: Would not have taken application if knew of those facts. Underwriter: Application would have been denied without inquiry if those facts were known. Cal. Ins. Code §332: An applicant who communicates some (but not all) facts which are material to the risk he or she is trying to insure is not excused from his or her failure to communicate other facts which are material to that risk.Slide 71
  72. 72. PROVING INSURANCE FRAUD REAL CASE STUDIES REAL CASE #4 Cynthia’s Kids v. Company and Agent Cynthia’s Testimony “No one asked us any questions. The agent must have filled out the application.” Agent had never met, talked to, or talked with anyone about Stacey, but application had her: · Address · Date of Birth · Social Security Number Agent had never met, talked to, or talked with anyone about Cynthia’s kids, but: · all 3 are named in application · all 3 have a different last name than CynthiaSlide 72
  73. 73. PROVING INSURANCE FRAUD REAL CASE STUDIES Trial Strategy Number 1: Keep the stories straight.Slide 73
  74. 74. PROVING INSURANCE FRAUD REAL CASE STUDIES Underwriter’s Perspective · 32 year old non-smoker · 5’1” and 120 lbs. · No adverse medical/psychiatric history Claim Handlers’ Perspective · 32 year old smoker · “about” 260 lbs. · Significant undisclosed medical/psychiatric history · Imposter at point of sale Jury’s Perspective · 309 lbs. · Cynthia and her mother were told she was dying · Could not have been in agent’s office on either dateSlide 74
  75. 75. PROVING INSURANCE FRAUD REAL CASE STUDIES Trial Strategy Number 2: Let the facts speak for themselves. If they are enough to prove fraud, jurors will see it.Slide 75
  76. 76. PROVING INSURANCE FRAUD REAL CASE STUDIES Trial Strategy Number 3: Remember the “simple” truth.Slide 76
  77. 77. PROVING INSURANCE FRAUD REAL CASE STUDIES Claim Management Considerations · Insurance fraud is a crime of opportunity. · Did the opportunity simply present itself? · Was the opportunity manufactured? · Insurance fraud is prevalent because insurers’ remedies often are limited and there is little risk of prosecution. · Understand what litigating a fraudulent claim is (and is not). · Consider the potential for future claims under the policy. · Make sure you have the stomach for it.Slide 77
  78. 78. PROVING INSURANCE FRAUD REAL CASE STUDIES QUESTIONS? Robert R. Pohls, Managing Attorney e-mail: rpohls@califehealth.com2011 Western Claim Conference Renaissance Esmeralda HotelSeptember 20, 2011 Indian Wells, California

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