Chapter 7 – Liability Claims
Fraud on liability policies
· The third part claimant on a liability claim represents an unknown factor to insurers
· The insured has some sort of a relationship w/ the third party – one that gave rise to the impending claim
· The relationship b/w the parties is generally the traditional one of tort-feasors – adversarial
· Insurers are protected by policy conditions that impose a duty on insureds not to assume any obligation on claims w/out the insurer’s consent
· Many liability claims arise from slip-and-fall and products liability cases
· Fraudulent property damage liability claim situations arise, but more often they are associated w/ a BI claim as a secondary item
· Exaggeration may not necessarily constitute fraud
· Adjusters must be alert to exaggeration and whenever possible, to control the loss
· The promise of cash in injury cases continues to be a powerful motivation to commit fraud
· Various types of professionals have been drawn into fraudulent claims
Planned ‘accidents’
· Fraudulent claims can be staged anywhere but they are likely to occur in a public place like a mall, restaurant, store, or supermarket
· Fraudulent claims have been known to allege injuries whose symptoms are subjective in nature
Occupier’s liability claims
· Slip-and-fall scams represent the most common type of occupier’s liability claims
· Occupier liability laws meant to protect the general public against dangerous conditions on property have been used to the detriment of businesses and their insurers
· Techniques sued to create claim situations have included:
o Carrying water bottles to squirt the floor
o Inflicting actual injury (usually superficial) upon themselves
o Using fake blood in their nostrils to make noses look broken
o Pulling down display items or store merchandise
Products liability claims
· A common feature of fraudulent products liability claims involves missing evidence or ‘manufactured’ evidence
· It is up to the person alleging the injury to provide adequate proof of the incident and the injury to the insurer
· Examples page 4-5
Opportunistic liability fraud
· A claimant may start out w/ a legitimate injury but the lure of extra cash may influence some to exaggerate or prolong the effects of an injury well beyond the normal time range for recovery
· Legitimate accidents are used by fraud opportunists
· The number of people involved in a disaster provides a screen for the fraudster who hopes that individual claims will not be looked at too closely. Typically the fraudster’s complaints are subjective – major depressive disorder, post-traumatic stress disorder
Accident investigation
· The basic steps of any investigation also apply to liability claims
· The special focus of liability accidents may involve:
o The insured (mgment and maintenance personnel) and the claimant are interviewed
o Independent witnesses are located and interviewed
o Statements should be taken whenever possible from the individuals
o The scene should be photographed and relevant measurements taken
o Local weather conditions should be verified where claims have occurred outdoors
· Generally, thoroughness is the key to a successful defence against fraud
· For liability claims, a knowledge of tort liability and any related statutes is desirable as the adjuster must focus on the factors that would relieve the insured of legal responsibility for the accident
· Some medical knowledge is also needed by adjusters to ask the right questions when it comes to a particular type of injury
· Once a claim occurs, adjusters have an opportunity to report on conditions that cause injury. The concern and care taken may reduce the possibility of any future opportunistic or other types of fraud
· When a loss occurs the adjuster should examine the company procedures in place to respond to events
· Questions for the claimant:
o What was the claimant doing at the time
o Why was the claimant there
o Did the claimant usually take part in the activity that led him to be there on that day
o How does the claimant describe what happened directly after the event
o What was it that specifically caused the claimant’s injury
o What part of the claimant’s body was affected
o Are the physical characteristics associated w/ the event precisely described by the claimant: weather, lighting, noises, actions of other participants
· Analyze the facts – inconsistencies in evidence w/ respect to the accident and the injuries can be linked to false statements
· Injury claim red flags:
o Witness is very eager to provide a statement and to help the claimant
o Property allegedly damaged in the accident does not appear to be recently damaged or damage does not appear consistent w/ the accident as described
o Injury is difficult to measure or verify as only subjective complaints are raised
o Medical treatment appears excessive or inappropriate
o Out-of-pocket medical expenses were not incurred even though the injury claimed is a serious one
o The recovery period is unusually long for the type of injury claimed
· Invoices or receipts for medical treatment should be reviewed
· Wage verification and the employer red flags:
o Named employer cannot be easily verified
o The employer’s business phone is an answering machine/service
o Employer is evasive or responds unsatisfactorily to requests for confirmation
o Employment record or earning record is handwritten and not on business letterhead
o Claimant will not authorize access to employer records – instead provides a payroll stub or letter
o Claimant is self-employed or related to the employer
o Wage statement appears altered
o Earnings loss indicated does not match claimant’s apparent standard of living
· Claimant red flags:
o Refuses medical attention at the scene and insists on seeing his own doctor
o Started working shortly b4 the accident
o Employed in home-based business
o Eager to settle quickly
o Refuses to provide authorization to insurer to obtain medical and wage info
o Threaten legal action if claim is not settled quickly
o Unusually knowledgeable about medical terminology
o Has a claims history
o Engages lawyer known to handle dubious or nuisance-value claims
o Engages lawyer the same day or shortly after the accident
o Reports conflicting versions of the accident and damage
· Organized insurance fraud has surfaced in major urban centers
· Lawyers and red flags:
o A lawyer or law firm repeatedly associated w/ dubious or questionable claimants
o The lawsuit was launched the same day that the person was injured
o The lawyer and the doctor have paired up consistently to represent unrelated plaintiffs
o Extensive legal action undertaken
· Paralegal – provides certain limited law services but is not a lawyer. They are either supervised by lawyers (provide their services w/in the law firm) or unsupervised (provide their services directly to the public for a fee). Functions include negotiations in a civil suit
· Legal Assistant may also be used in conjunction w/ supervised paralegals
· In Ontario
· In a liability situation experts or forensic specialists may be hired to develop, record, or preserve evidence in 5 areas:
o Determine how the accident occurred
o Preserve objects related to the event
o Perform testing on objects
o Produce or analyze medical reports and other related documentation
o Conduct surveillance and interpret results
· The type of expert chosen and the depth of investigation depends on the facts of the case
· Surveillance experts may be hired to confirm what type of activities the claimant is capable of
· Kinesiology – the study of human movement. It is a multi-disciplinary science involving four primary areas of study: anatomy, biomechanics, physiology, and psychomotor behaviour
Medical professionals and fraud
· Physicians operating solo are quite unusual, most prefer to work in a group practice
· Medical report red flags:
o The medical report seems to be a boilerplate, all reports from the particular doctor are very similar
o Treatment prescribed for various claimants w/ various injuries are the same
Injuries and symptoms
· Subjective complaints (muscle sprain, back/shoulder pain, headaches, nausea, insomnia, nightmares, loss of appetite) and aggravation or reoccurrence of an old injury are tools used for fraudulent liability claims
· Measuring pain and its effects is an area vulnerable to questionable diagnoses b/c it relies so heavily on subjective reporting
· Malingering – intentional feigning of mental or physical illness to gain insurance money or to avid returning to work. The person is consciously aware that there is nothing wrong w/ them.
· An illness that is not supported w/ an organic based physical issue is tough to rationalize
· What must be established is that the injury exists and that it was caused by the accident
· Controversial types of diagnoses:
o Somatoform pain disorder (myofascial pain syndrome or fibromyositis) – a preoccupation w/ pain in the absence of adequate physical findings to account for the pain or its intensity. The symptom is either inconsistent w/ anatomical structure or it cannot be accounted for by organic pathology. To diagnose the disorder the patient must,
§ Have been preoccupied w/ pain for at least 6 months
§ Not have any organic pathology or pathophysiological mechanism that accounts for the pain
o Psychogenic pain syndrome – caused by emotional problems but patients express the pain they feel by complaining about some physical symptom. By all objective standards the person is physiologically normal but they believe they are sick
o Factitious illness – self-induced injury generally thought of as employing more psychopathology than malingering, perhaps b/c the secondary gain is less obvious or absent
o Symptom magnification syndrome – self-destructive behaviour pattern consisting of self reports and displays of inappropriate disability. The behaviour is produced consciously or unconsciously to control one’s life circumstances and is reinforced by family, cultural, vocational and financial facilitators
Sample Review Questions - Fraud Awareness and Prevention
1. Third parties are generally involved in a liability claim.
2. When the insured is a friend of the third party claimant, the insured may be sympathetic and tempted to enhance a third party’s claim by accepting responsibility for an accident when in law, no legal liability applies.
3. Types of professionals that may be involved in liability insurance fraud include medical professionals, lawyers, adjusters, etc.
4. Planned accidents are typically staged in a public place such as a mall, restaurant, store or supermarket.
5. Injuries whose symptoms are subjective in nature are easier for a fraudster to feign.
6. Techniques used to create a staged accident include:
a. Carrying water bottles to squirt the floor
b. Inflicting actual injury (usually superficial) upon themselves
c. Using fake blood in their nostrils to make noses look broken
d. Pulling down display items or store merchandise
7. An example of a fraudulent property damage liability claim: a claim was filed for a defective produce – a carpet that developed discoloration spots. It was stated that no attempts were made to claim the spots. When the carpet was examined under UV light, it showed fluorescence – the presence of residues from the optical brighteners present in many cleaning agents
8. A fraudulent claim may arise out of a disaster due to the number of people involved. The number of people involved provides a screen for the fraudster who hopes that individual claims will not be looked at too closely. Adding another dimension to a complex investigation is a class action suit that is filed in such an incident.
9. The special focus of liability claims investigation:
a. The insured (management and maintenance personnel, as applicable) and the claimant are interviewed
b. Independent witnesses are located and interviewed
c. Statements should be taken whenever possible from the individuals
d. The scene should be photographed and relevant measurements taken
e. Local weather conditions should be verified where claims have occurred outdoors
10. Adjusters must possess a knowledge of tort liability and any related statutes and some medical knowledge – enough to ask the right questions when it comes to a particular type of injury.
11. In addition to resolving the claim, the benefit the adjuster provides for u/ws is that they have an opportunity to report on conditions that caused the injury (accident prevention issues). Something as simple as housekeeping can play an important psychological part in the control of future claims.
12. The type of questions that can be asked of claimants:
o What was the claimant doing at the time
o Why was the claimant there
o Did the claimant usually take part in the activity that led him to be there on that day
o How does the claimant describe what happened directly after the event
o What was it that specifically caused the claimant’s injury
o What part of the claimant’s body was affected
o Are the physical characteristics associated w/ the event precisely described by the claimant: weather, lighting, noises, actions of other participants
13. Red flags associated with injury claims:
o Witness is very eager to provide a statement and to help the claimant
o Property allegedly damaged in the accident does not appear to be recently damaged or damage does not appear consistent w/ the accident as described
o Injury is difficult to measure or verify as only subjective complaints are raised
o Medical treatment appears excessive or inappropriate
o Out-of-pocket medical expenses were not incurred even though the injury claimed is a serious one
o The recovery period is unusually long for the type of injury claimed
14. Wage verification and the employer red flags:
o Named employer cannot be easily verified
o The employer’s business phone is an answering machine/service
o Employer is evasive or responds unsatisfactorily to requests for confirmation
o Employment record or earning record is handwritten and not on business letterhead
o Claimant will not authorize access to employer records – instead provides a payroll stub or letter
o Claimant is self-employed or related to the employer
o Wage statement appears altered
o Earnings loss indicated does not match claimant’s apparent standard of living
15. Actions on the part of the claimant that might raise red flags:
o Refuses medical attention at the scene and insists on seeing his own doctor
o Started working shortly b4 the accident
o Employed in home-based business
o Eager to settle quickly
o Refuses to provide authorization to insurer to obtain medical and wage info
o Threaten legal action if claim is not settled quickly
o Unusually knowledgeable about medical terminology
o Has a claims history
o Engages lawyer known to handle dubious or nuisance-value claims
o Engages lawyer the same day or shortly after the accident
o Reports conflicting versions of the accident and damage
16. Red flags and Lawyer:
o A lawyer or law firm repeatedly associated w/ dubious or questionable claimants
o The lawsuit was launched the same day that the person was injured
o The lawyer and the doctor have paired up consistently to represent unrelated plaintiffs
o Extensive legal action undertaken
17. The 5 main areas that experts would be hired are:
o Determine how the accident occurred
o Preserve objects related to the event
o Perform testing on objects
o Produce or analyze medical reports and other related documentation
o Conduct surveillance and interpret results
18. Surveillance is important b/c it confirms what type of activity the claimant is capable of.
19. Kinesiology – the study of human movement. It is a multi-disciplinary science involving four primary areas of study: anatomy, biomechanics, physiology, and psychomotor behaviour
20. A formal complaint about a medical doctor would be sent directly to the provincial colleges of physician and surgeons. The colleges administer a public complaints process to deal w/ allegations of professional misconduct or incompetence. The colleges are bound by legislation to investigate all complaints and to adhere to a strict rule of confidentiality w/ respect to any investigation.
21. Medical report red flags:
o The medical report seems to be a boilerplate, all reports from the particular doctor are very similar
o Treatment prescribed for various claimants w/ various injuries are the same
22. Subjective complaints are difficult to deal w/ b/c there is no clear and objective way to measure it or its impact.
23. Malingering – intentional feigning of mental or physical illness to gain insurance money or to avid returning to work. The person is consciously aware that there is nothing wrong w/ them. It is generally considered to be fraud and believed to be the most common type of abuse in the presentation of fraudulent insurance claims.
24. The 4 diagnoses associated w/ illnesses that do not fit the criteria for fraud but pose difficulty for adjusters b/c the diagnoses are vague and often related to psychological conditions are:
o Somatoform pain disorder (myofascial pain syndrome or fibromyositis) – a preoccupation w/ pain in the absence of adequate physical findings to account for the pain or its intensity. The symptom is either inconsistent w/ anatomical structure or it cannot be accounted for by organic pathology. To diagnose the disorder the patient must,
§ Have been preoccupied w/ pain for at least 6 months
§ Not have any organic pathology or pathophysiological mechanism that accounts for the pain
o Psychogenic pain syndrome – caused by emotional problems but patients express the pain they feel by complaining about some physical symptom. By all objective standards the person is physiologically normal but they believe they are sick
o Factitious illness – self-induced injury generally thought of as employing more psychopathology than malingering, perhaps b/c the secondary gain is less obvious or absent
o Symptom magnification syndrome – self-destructive behaviour pattern consisting of self reports and displays of inappropriate disability. The behaviour is produced consciously or unconsciously to control one’s life circumstances and is reinforced by family, cultural, vocational and financial facilitators
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