Deductibles Motivated Homeowners to Cheat on Claims

Insurance fraud has increased dramatically in Florida as an after-effect of the 2004 hurricane season Robert Elliott, a lead investigator with Nationwide Insurance’s Special Investigation Unit told law enforcement investigators, special investigation unit investigators, attorneys and claims adjustors attending the June 13 to 15 Annual Florida Insurance Fraud Educational Committee meeting in Orlando, Fla.

“Insurance Fraud, Florida’s Aftermath of the 2004 Atlantic Hurricane Season,” was discussed by Elliott and Glen Hughes, a Florida Department of Insurance Fraud detective.

“Fighting Insurance Fraud Through Education and Commitment” was the topic of the 13th annual conference. According to Eric W. Miller, director of the division of Insurance Fraud, Florida Chapters of Special Investigative Units, the event drew a record number of participants from Florida and even surrounding states.

According to Elliott, the 2004 hurricane season resulted in an increase in insurance fraud when unscrupulous contractors and roofers encouraged homeowners to pad their claims to cover the 2 to 5 percent deductible on their insurance policies. He said vendors enrich their profit margin by increasing the cost of their estimates.

Elliott displayed local newspaper advertisements offering to “pay” homeowners thousands of dollars, while over-estimating their damages. He also passed around examples of an “altered” invoice.

Elliott described numerous efforts he encountered in which homeowners damaged their homes, even smashing windows, to increase their claims and help cover high deductibles. He described overestimating the value of household contents, especially electrical equipment as a common method of inflating insurance claims.

Elliott described his experiences during Hurricane Charley, when his home was damaged, and he had to pay multiple deductibles and ended up mediating his insurance claims-and lost.

Although the carriers did change some policies and procedures to better prepare for a major storm, the fact that four storms hit in such short succession was overwhelming and caught most carriers off guard.

Elliott looked at last year’s hurricanes as a single incident, describing his experiences in Port Charlotte during Hurricane Charley.

“I saw grown men crying and wearing one set of clothes for weeks, having one tank of gas in their car and who came to me for assistance,” Elliott said. “Hurricanes wreak havoc and alter everyday life-compassion had to come first and victims had to be consoled first, in any way you can.”

Elliott said he was one of only a few people in the area with a working cellular phone.

“One elderly woman came to me and even though her home was destroyed, her main concern was to call her daughter and let her know she was alive,” Elliott said. “She borrowed my phone, talked to her family and they were relieved to hear that she was all right.”

Elliott gave his phone to numerous victims to use and ended up with a phone bill of more than $1,000.

“The media only plays up the negative side of what happens during a hurricane,” Elliott said. “Hurricane victims were provided with more than 2,000 meals per day and no one ever reported that.”

He said that cleaning up after the hurricanes and providing records so that claims could be justified was a major problem.

Elliott described numerous instances in which homeowners claimed household items, like furniture and electronic equipment had been damaged, and when proof was requested the owner said that it had been put out in the street, or taken to the dump.

“After the hurricanes the only debris picked up by waste management services was hurricane debris, so if the furniture or equipment had been put out in the street it would have still been sitting there,” Elliott said. “Also, after a hurricane, waste facilities were also only accepting hurricane debris, so if someone tried to take furniture or household goods to the dump they would have been turned away.”

Elliott presented a detailed description about what insurance investigators do to prove fraud and told the audience how he investigated, talking to neighbors to determine if they had witnessed any unusual activities that could have contributed to inflated claims. He said that in several instances, neighbors had even taken photos of the policyholder knocking out their windows and verified that damage done weeks or even months before the hurricane, like a destroyed fence, had been claimed as occurring during the hurricane.

When confronted with such evidence, Elliott said policyholder usually withdraws their claim. He also said that when such fraud claims are verified, the policyholder not only loses the fraudulent claim, but any and all claims for damage to the
property.

State-level fraud

Hughes described instances of fraud encountered on a state level, such as adjusters operating without a license and other infractions of state rules and regulations. He also described what action the state could take after it discovered such violations.

He said the Department of Financial Services had investigators in the field looking for
suspicious activities.

“Our goal was to confront criminal activity and create a presence,” Hughes explained.

On Florida’s barrier islands, where there was a lot of damage and everyone was evacuated, Hughes said no one was allowed on the islands until the homeowners returned. As the islands opened DFS distributed “insurance adjuster alerts,” advising everyone to talk to their insurance carrier before considering an adjuster because one might not even be necessary.

Hughes said that if a claim was investigated by a public adjuster, the average charge was 10 percent.

Hughes concluded his presentation describing types of crimes and penalties incurred for participated in such a crime, including, up to a $20,000, third-degree offense, five years in prison; $20,000 to $100,000 second degree offense, up to 15 years in prison; and $100,000 up, a first degree offense, punishable by up to 30 years in prison.

Robert Elliott, lead investigator with Nationwide Insurance’s Special Investigation Unit.

Glen Hughes, Florida Department of Insurance Fraud detective.

Topics Florida Catastrophe Fraud Claims Hurricane Homeowners