Some Red Flags in Residential Arsons Fly Before the Fire
Financial stress is the No. 1 reason residential dwellings are intentionally torched, but proving the act of arson is not that easy. In fact, Federal Bureau of Investigation statistics for 2007 show only around 6 percent of arson offenses of all kinds resulted in convictions.
Still, often there are red flags in advance of a residential burn that insurance agents may be able to recognize and claims adjusters can look to when investigating a suspicious fire, say two insurance professionals whose job it is to sort out the difference between accidental and intentionally set fires.
The levels of proof needed by law enforcement and insurance interests are ultimately different, said James H. Cole, an attorney with the law firm of Marshall, Dennehey, Warner, Coleman & Goggin, whose practice includes investigation and litigation of property damage claims.
The difficulty of proving intentional acts has led to what is called the arson defense, or arson triangle, Cole said, the elements of which are motive, opportunity and incendiary fire. While “the arson defense is not a reason to deny a claim,” Cole said, it can be used as an affirmative defense to support a denial. In fact in 90 percent of the claims he handles, the reason for denial is material misrepresentation, not an intentional act.
“We have a material misrepresentation standard where if I can establish there was a knowing misrepresentation, and that knowing misrepresentation was material to the claim, that’s sufficient to deny the claim without actual proof of someone setting a match to a car or a house,” Cole explained.
Critical Evidence
Circumstantial evidence, including phone records and financial records, is critical when it comes to investigating a claim, said John Davies, a senior special investigator for Farmers Insurance Group, who joined Cole in a claims conference presentation in Seattle last year. The actions of the insured before and after the fire are also important factors, he said.
Establishing financial stress, the primary motive for setting one’s home on fire, may involve getting access to credit reports, bank records and business records. It may be necessary to enlist a forensic accountant to trace a claimant’s earnings, especially if that person is self-employed, Davies said.
He stressed that an indicator of a potential problem does not prove potential fraud but it needs to be investigated. Some indicators or possible red flags include:
- The property’s insurance coverage history. Did the insured place a policy on the property just before it burned down? Were there increases or decreases in coverage, decreases in deductibles just prior to the loss, an increase in coverage just prior to the loss? A previously uninsured home that catches on fire just days after it gets insured definitely raises suspicions, Davies said.
- Loss history and prior claims. “A lot of these people start off small. They may file an injury claim. They may file a stolen vehicle claim,” Davies said. Once they feel as though they know what the insurance company is going to do as part of evaluating their claim, then they move on to an arson loss.