Altered Invoices Void Alabama Church's Hurricane Claim
Most property insurance policies include provisions that void coverage if the policyholder commits fraud or some form of misrepresentation regarding the insurance. In each jurisdiction, there is typically a body of case law that further defines when misrepresentations or fraud will void coverage. For example, some states require an intentional misrepresentation, while others consider an innocent mistake sufficient.
In the recent case of Scottsdale Ins. Co. v. Prayer Tabernacle Early Church of Jesus Christ Number 1, No. 10-0346, 2011 WL 3320544 (S.D. Al. Aug. 2, 2011), the fraud provision of an Alabama church’s insurance policy was the focus. The policy provision stated:
A. CONCEALMENT, MISREPRESENTATION OR FRAUD
This Coverage Part is void in any case of fraud by you as it relates to this Coverage Part at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning:1. This Coverage Part;
2. The Covered Property;
3. Your interest in the Covered Property; or
4. A claim under this Coverage Part.
Originally, the church submitted insurance claims for losses from Hurricane Ivan and Hurricane Katrina. The church’s insurer, Scottsdale, paid the claims in 2004 and 2005. In 2009, the church submitted a supplemental claim for damage and invoked the appraisal clause of the policy. Scottsdale sought to investigate the claim by inspecting documents and records.
The church submitted receipts and invoices for work allegedly performed on the property. Although the church’s representative testified to the authenticity of the invoices, the companies that purportedly worked on the property had no records of ever doing any work or receiving any payment from the church. Additionally, and perhaps most fatal to the church’s claims, the invoices it submitted did not look like invoices that the contractors normally used. In fact, the heading on one invoice “appear[ed] to be cut from their yellow pages ad and pasted onto another form.” In addition, the heading and portions of another contractor’s advertisement “appear[ed] to match the heading on the invoice submitted by [the church].” The court held that, “[t]he evidence clearly indicates that these invoices were made up or altered and although defendant denied such allegations in its answer, it has offered no evidence or even argument to dispute these allegations.”
The church argued that because the insurer had previously provided coverage benefits and failed to appraise the loss as requested, it could not assert policy defenses, but the court held that the insurer had a right to investigate the 2009 claim before appraising the loss, and held the policy void because of the altered invoices.
The clear lesson from this case is that making up evidence to support an insurance claim is never a good idea. This case is proof that such misdeeds will not go unnoticed by the courts.
Whilst I can agree that mistakes can be made on both sides and that during large events, a second look can be required as "hidden damage" takes awhile to present itself, but there should be ZERO tolerance to outright fraud (on both sides!!)
What this church has done is inexcusable and every penny said church has received(even of damage legitimately incurred and was proven to have been beset by a covered peril) should be immediately due and payable back to the carrier. In addition, those responsible for the fraud should be held accountable and made an example of in criminal AND civil proceedings.
Said church should be unable to obtain future coverage until such a time that an investigation can reveal any and all perpetrator's have been identified and any and all subjects are no longer members of said church or hold a place on the church's administrative and/or board of director's.
This must be done to combat rampant fraud and to keep the cost to insure reasonable.
The church may be a victim of contractor misrepresentation. Often in a catastrophe zone following a severe event, estimators misrepresent themselves as representing one contracting firm or another, using altered documentation to earn contracts in the field. Who knows what the facts are from this short article. With out court room testimony of witnesses we cannot be quick to judge and/or comment on "rampant fraud" or "cost".
Maybe if the Alabama's insurance commission wasn't such a pawn to the insurance lobbyist, they would allow public adjusters to operate and the this consumer would have had a advocate that would have advised on proper filing procedures. The appraisal process in Alabama is a joke. Providers do not have to follow the decision of the umpire after the process has been rendered. The insurance commission help lines for complaints against improper claim handling, which leads to the appraisal process, are staffed by former insurance company employees, who have ingrained in their thinking that the insurance company cant be wrong.
This blogger has first hand experience with this, having just recently just represented 4 separate policy holders in this appraisal process and witnessed first hand how the state of Alabama placates to the insurance industry in order to maintain coverage options as well as low premiums and deductibles.