(Note: This Guest Blog is by Robert Reynolds, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the twelfth of a thirteen part series he is writing on examination under oath).
Yesterday I had a meeting with a public adjuster who was referring me a theft loss. As we discussed the claim’s facts and circumstances, I became very skeptical. According to the PA, the policyholder had some health issues and went to the hospital for a few days only to return home to find he had been burglarized. Unfortunately, a good portion of the tale did not make a whole lot of sense. The insured claimed that the thieves stole furniture and power tools, but not the cases for the power tools. This just does not add up. That is, most burglars are petty criminals or drug addicts looking to pilfer items they can fence for quick cash: jewelry, electronics, etc. What is a filch going to do with a table and chairs? Trust me, furniture is not readily pawned; nor, for that matter, is it easily and stealthily removed from a residence. As it turned out, the policyholder did not show up for the meeting, so I did not have the opportunity to ask questions. This begs the questions: what should an attorney or PA ask the potential client about a suspicious theft loss and what should they expect at the examination under oath (EUO), which will inevitably be requested by the insurance company?
First, when a theft loss avails itself to you, look at it through a lens of common sense. Are the circumstances asserted by the claimant plausible? Was there forced entry, for example? Simply stated, if the facts do not bear scrutiny, pass on it. Any decent insurance defense attorney will harp on inconsistencies at an EUO. The claim mentioned above is an excellent example. Think about things logistically, that is, in order for a burglar to steal furniture, they need assistance moving the furniture, a truck to transport it, and a place to store it until it may be sold. Primarily speaking, three guys moving furniture into a large truck is substantially more likely to be seen than a lone thief in the night pocketing jewelry. Further, it is not very plausible that petty criminals have access to moving trucks and warehouses for storage. Finally, do thieves typically take the time to inspect power tools, leaving their casings behind? Of course not, they would simply take case and all. These points may seem picky, but they are precisely the type of suspicious facts that carriers will exploit and, often, ring true with jurors.
Especially in today’s economic climate, there will be no doubt that the insured’s finances will be poured over with a fine-tooth comb by defense counsel. Be prepared to give tax records, income documents, records of debts, etc. and, YES, the carrier does have the right to ask for them. Now this does not mean that legitimate theft losses do not happen to people in financial trouble, but financial trouble may be a motivating factor to commit insurance fraud. To those ends, the insurance professional looking at a suspicious theft loss must be extremely mindful of the list of stolen contents, as this is often the source of big problems. All too often, policyholders are tempted to exaggerate just a bit on that contents list. This is usually done in three ways: adding items that simply did not exist, changing an item’s value, or changing the age of the item in order to thwart potential depreciation. Take care to make sure the policyholder is not stating that they purchased $25,000 in contents in the last 12 months with a $35,000 salary, for example, or that they purchased several big-ticket items within the past year but with no savings and little disposable income.
Finally, the carrier will ask for receipts and proof of purchase for every single item claimed in a theft loss. It is very important to provide these receipts to substantiate the claim. What if the client can not locate receipts? I guarantee the insurer will say they are unable to pay for items which are not substantiated by receipts. This is complete foolishness. Most people do not retain receipts for every item they own. Further, I know of no policy provision stating, “no receipt, no payment,” rather, there are plenty of other methods to justify contents. Photographs, owner’s manuals, affidavits from people who can confirm the contents etc., all may be used to justify contents… so long as they actually existed!
Tune in next week insurance fans when we discuss Typical Questions Asked During an Examination or Sworn Statement Under Oath of a Disputed Structural or Personal Property Valuation Claim Suspected of Being Inflated, Exaggerated, or Made Up.