Richard Schwartz, a former fire cause and origin investigator, recently shared some of his insight into how insurance carriers evaluate fire losses and the evolution special investigative units have had in the claim process. Richard has vast experience, with more than nineteen years as an insurance company consultant and expert witness.
Richard Schwartz has quite the resume:
I worked 15 years in the Fire Department as a Fire Fighter/Paramedic and eventually became shift commander. I worked combat as well as investigation and inspection duties. In January of 1986, I opted out of public sector employment and started by career as a private Fire Origin and Cause Investigator working mostly for the insurance and legal community. The job caused me to travel throughout the Southern United States, Caribbean and Central and South America. I also worked for a forensic engineering company and eventually opened my own forensic engineering company from June of 1994 through October 2005.
Richard’s experience working with insurance companies on various fire investigations gave him an insider’s view of how many insurance carriers rely on special investigative units (SIU) in connection with claims.
SIU in the beginning:
Schwartz remembers how SIU assisted insurance companies decades ago.
SIU worked collectively at reducing the large increase in fraudulent auto claims. Back then, police departments were undermanned and concentrated on the drug crimes and cocaine cowboys. They would not perform follow up investigation on the suspicious accidents. Many claims included a crash with a car always carrying 4 people that would smash into a fixed object like a concrete pole, but they would claim that a mystery vehicle hit and ran from the scene, leaving 2 to 4 victims with back injuries. SIU, working in conjunction with DFS Department of Insurance Fraud and DOI staff, put the cases together.
SIU became larger and now plays a role in all facets of the insurance claims process, from investigating information provided on applications, first report of claims, field recorded statements, EUOs and so on. SIU now gets involved on any claim at any time, depending on who requests their involvement.
Prior to the SIU, insurance adjusters and private investigators would conduct the investigations. This would entail adjusters performing some work and also obtaining approval to spend carrier dollars which would not be freely authorized.
The evolution of SIU
With respect to property damage claims, Richard explains what has evolved:
Nowadays, SIU can be brought in at any stage of the claim process. For instance, when an insured reports a simple water loss, if the field adjuster arrives and finds anything suspicious or even something as little as PA involvement, some carriers assign SIU to gather details and give protected information to law enforcement. Most SIU personnel are former law enforcement and their files ARE NOT PART OF THE INSURANCE ADJUSTER’S FILES. In some cases, they may even be an outside company, so there is separation between the adjuster file and the SIU file.
Sometimes, SIU can be assigned because a particular contractor or PA who has done battle with the carrier is involved. Sometimes, a simple kitchen fire brings about a full investigation. In part because years ago, there was a series of suspicious kitchen fires.
…. intentional damage escalation is fraud, and that is what the carrier is looking for. Carriers use SIU investigations to delay the claim process. Remember, as long as law enforcement is investigating or not issuing a report, the SIU investigation is still open and the claim investigation is considered to be open. Neat how that works!
Investigation length and extent was usually a business decision. For instance on marine claims, especially with Lloyds, hoursor weeks could be spent, depending on the information developed and whether that information was favorable to the carrier. However, if information was developed that indicated the carrier would have to pay, investigations were shut down, and in most cases, left unfinished. Dollars controlled what was being spent. The only real exception to the rule was State Farm. If they had a small loss but felt that it was fraud, the sky was the limit.
Why Richard no longer works as a fire investigator for insurance companies:
In the spring of 2005, I felt the need to change careers. I never figured out which specific case it was, but in general it was a definite “AH HA Moment.” After undergoing a series of depositions, I learned how certain carriers would take a portion or excerpt from my report and represent it to the insured as the findings of the report. This resulted in certain disclaimers being added to my reports, and like a magic wind blowing in, certain clients who used my services for years, stopped. I realized it was time to move on, as I would not be a part of this new demand to issue reports that were other than the truth.
In the spring of 2005, I embarked on my newest career as a Public Insurance Adjuster with The BCH Group, Inc. This allowed me to use my Fire Department experience and my 19 ½ years of private investigation, fire and explosion analysis and forensic engineering work to assist policyholders with their insurance claims.