C39 Chapter 6 – Property Claims
Sho Shin-Feeney
1) Fire Scene Investigation
a) Insurance coverage indicators
b) Personal indicators
c) Arson indicators
i)
Timing
ii) Premise
iii) Other
iv) Fire scene
d) Burn patterns
i)
Inverted Vee
ii) Vee
2) Arson and the Criminal Code
3) Defending Against Arson
a) Set fire
b) Motive
c) Opportunity

Credible Witnesses
4) Damage Claims
5) Assessment of Claims
a) Formal Appraisal Process
6) Theft Claims
a) Reasonable proof
b) Contents theft indicators
i)
Analysis of Receipts
ii) Personal Theft
iii) General Theft

Text uses “Red Flags” and “Indicators” similarly

Notice the recurring themes for flags/indicators (see Ch 4/5), and recognize that
“you know what you already know”

Always! Suspicion does not equal Fraud!
C39 Fraud Awareness and Prevention
Page 1 of 10
C39 Chapter 6 – Property Claims
Sho Shin-Feeney
1) Fire Scene Investigation
•
Line up your ducks before approaching the scene of the fire

Recent coverage changes, eligible coverage, insured’s profile & background, claims history
 E.g., slip and fall where adjuster stated insured was very “credible” in statement that he
maintains property and nothing like this has ever happened before; only other claim on file
is an open liability claim under the exact same circumstance – uneven concrete on
driveway causing injury
•
Fraudsters don’t want to spend more money than necessary

Flags often involve limited windows (time spans) of coverage to limit the premium
a) Insurance Coverage Indicators

Coverage shortly before fire, or recently increased

Coverage was reviewed/confirmed shortly before fire

Heavily over-insured (property value not as described in policy)

Duplicate coverage through different agents

Fire before effective date of policy expiration or cancellation

Property uninsured for long period prior to coverage onset and fire soon-after

Important documents destroyed but policy survived (less value in digital era)

Misrepresentation on application

Extensive claims record of small and large losses
b) Personal Indicators – Insured’s Background
•

Recent separation/divorce with dispute over property

Onerous financial obligations : alimony, child support

Difficult financial situation : unemployment, business closure, poor sales

Threatened foreclosure

Past/current criminal involvement
Act Within the Law – Public protection will always prevail

Right of access to property : in stat conditions, but insurer cannot exercise control

Search warrant required by fire marshal prior to investigation of alleged arson
 Regina v. Ouida (1996) : failure of fire marshal to get a search warrant resulted
in incriminating items not admitted into evidence

Protection of private personal information must be considered when investigators share
information
C39 Fraud Awareness and Prevention
Page 2 of 10
C39 Chapter 6 – Property Claims
Sho Shin-Feeney
c) Arson Indicators – Timing, Premises, Other, Fire Scene
i.
Timing
•
Late at night or early morning (no witnesses)
•
When business is closed, weekends/holidays
•
Insured out of town or far away
•
Shortly after insured left premises
•
Removal of pets/personal/sentimental items prior to fire
ii. Premises – Status and Condition
•
Vacant/unoccupied; Under renovation
•
Deteriorating neighbourhood (environment threatening business by either
revenue or greater physical/moral hazards)
•
Improving neighbourhood (no money to keep up with the Jones’ resulting in loss of
customers, business, unable to update technology/equipment)
•
Needs expensive/extensive repairs
•
Needs expensive/extensive maintenance, new equipment
•
On the market for extended time with no buyers
iii. Other
•
Witnesses (insured’s friends/colleagues) and investigation inconsistent
•
Carefully planned alibi
•
Claim items/value inconsistent with insured’s income/lifestyle
•
Multiple mortgages (financial burden)
•
Hires public adjuster (prohibited in ON for motor vehicle accidents)

Represent insured for fee, may encourage claim inflation

Used by insured as screen from insurer and resource
iv. Fire Scene
•
Multiple points of origin (splatter of accelerant)
•
Evidence of flammables
•
Trailers : Intentional link to distribute fire from one area to another, causing
elongated burn patterns
•
Explosion (series of); flames of unusual colour
•
Tampering of gas, electricity, sprinklers
•
Items removed or out of place
C39 Fraud Awareness and Prevention
Page 3 of 10
C39 Chapter 6 – Property Claims
Sho Shin-Feeney
d) Burn Pattern – Shape of charred areas, http://www.interfire.org/res_file/patterns.asp
i.
Inverted Vee / Inverted Cone suggests accelerant
•
Damage is greater at the bottom or floor level
ii. Vee pattern indicative of normal burn
•
Vee points downward to point of origin
iii. Irregular burn patterns
•
Also suggest chemical accelerants

•
i.e., splashing flammable liquids causes mottled/spotted effect
Fire Department suspects arson

Calls in FMO (Fire Marshal’s Office), police, ICPB (Insurance Crime Prevention Bureau), SIU
C39 Fraud Awareness and Prevention
Page 4 of 10
C39 Chapter 6 – Property Claims
C39 Fraud Awareness and Prevention
Sho Shin-Feeney
Page 5 of 10
C39 Chapter 6 – Property Claims
Sho Shin-Feeney
2) Arson and the Criminal Code
•
•
Crime against society, noted within Criminal Code

Disregard for human life

Damage to property

Own property

Arson for fraudulent purposes

Holder or beneficiary of fire insurance policy

Arson by negligence

Non-compliance with prevention laws

Possession of incendiary material
After criminal conviction, fraudster may be required to make restitution
3) Defending Against Arson
•
“Balance of probabilities” – with quality of proof : commanding, convincing evidence

Echoes 2-16 where standard of proof for civil allegation of fraud is greater than “balance
of probabilities”, yet not “beyond a reasonable doubt”
 Monteleone v. R (1988)
•
Key elements of an arson defence must evidence
i.
Fire was set – someone intentionally set the fire
ii. Insured had a motive to set the fire
iii. Insured had opportunity to set the fire
a) Set Fire
•
•
Elimination of other plausible causes can reinforce the fire was manufactured

E.g., engineer confirms electrical system not defective, eliminates electricity as potential cause

E.g., fire department confirms doors/windows were secure so building not broken into,
eliminates burglary
Examine all statements and evidence carefully as insured may hire expert to present carefully
reasoned and plausible theory
C39 Fraud Awareness and Prevention
Page 6 of 10
C39 Chapter 6 – Property Claims
Sho Shin-Feeney
b) Motive
•
Financial problems, often

Debt, behind in mortgage, unsuccessful business

Motive = important to add to circumstantial evidence to connect insured to setting of the fire

Financial info provided by insured may not be accurate; always confirm with third-parties and
actual source documents (invoices, receipts, store where purchased)

Assess if profits were generated? Productivity of assets/operations or continuous losses and
cash flow problems
i.
Checklist for deceptive financial practices
•
Statements not available
•
Suspicious invoices/possibly fictitious
•
Fudging of sales numbers to create stronger financial position
•
Creditors unpaid
ii. Sales indicators
•
Insured claims increasing, when really falling
•
Fictitious sales
•
Current reporting period out of proportion with prior periods
•
Alterations and amendments
iii. Inventory indicators – cash flow issues from timing of stock/consumer demands
•
Obsolete – no one wants it, sunk costs
•
Overvalued – rapid depreciation (equipment, dépêche mode)
•
Large stock purchase with cash – fake purchase to anticipate claim
iv. Business indicators – the externalities like suppliers, legal problems
•
Economic recession
•
Reduced traffic; increased competition
•
Staff poorly trained, disgruntled
•
Suppliers out of business, jeopardizing insured’s operation
•
Insured wants to exit

Partner disputes

Labour/health problems
C39 Fraud Awareness and Prevention
Page 7 of 10
C39 Chapter 6 – Property Claims
Sho Shin-Feeney
c) Opportunity
•
Must be highly unlikely that anyone else set the fire or had opportunity to set the fire
•
Credible Witnesses
•

Sincerity and truthfulness

Balance of probabilities is a perception; attitude and behaviour, credibility of witness can tip
the scales
Pleadings include evidence of misrepresentation

Claim void if policy void for misrepresentation, or

Insured’s credibility exposed as unreliable
 D’Amico v. General Accident Assurance Co. Of Canada (1997)
4) Damage Claims – Not Fire
•
Physical (existing) damage to items/buildings may motivate insured to act fraudulently

•
Insurers must respond to only items which have coverage under the existing policy; generosity
for payments not provided in policy may encourage fraudulent behaviour
Estimates of Damage

Get an expert opinion : experienced contractor, engineer

Estimates must be fair, and reasonable : eliminate non-claim related damage
i.
Estimates
•
Establish scope of damage related to claim
•
ACV exercise, even when total or replacement cost anticipated
•
Detailed itemization from contractors; insured to complete proof of loss
•
Other insurance to establish priority or apportionment
ii. Property Damage Appraisals
•
Materials in repair estimate should be equivalent to original value

If insured wants to repair otherwise, make sure estimate is fair and accurate,
then cash settle so insured can use money for repairs that are different or
upgraded from pre-loss condition

Cash settlements should be followed-up to ensure money used toward repairs;
not to pay other bills, etc, because then you have an uninsurable building
•
Cost of repair to include item quality and labour (different for suburb v. city)
•
Be vigilant of collusion between insured/contractor; ensure repair estimate is fair
and accurate
C39 Fraud Awareness and Prevention
Page 8 of 10
C39 Chapter 6 – Property Claims
Sho Shin-Feeney
5) Assessment of Claims
•
To be established for all claims, even when fraud is suspected

Remove inventory for further inspection, and prevent further damage
a) Formal Appraisal Process

Stat conditions provide for valuations in dispute

Appraisal by insured and insurer to quantify damage to buildings, contents, loss of
earnings/profits

Rules for appraiser behaviour with ultimate disagreement to be reviewed by umpire who’s
decision is not binding; following due process shows courts that you are acting in good faith
even when there is no resolution and left to the courts
6) Theft (and Burglary) Claims
•
Most costly source of insurance fraud
•
Less severity than fire, but much higher frequency and much less risk to perpetrator (criminal
implications)
a) Reasonable proof required; when indicators are present, hold client to strict proof of loss
i.
Value (what’s it worth)
ii. Existence (did it ever exist?)
iii. Ownership (insurable interest)
b) Contents Theft indictors
i.
Analysis of receipts
•
No receipts, cancelled cheques, or credit card slips/statements
•
Suspicious – copies, same handwriting, same store, tax
•
Too easily provided, and neatly organized for inspection
•
Receipt and appraisal from same store
•
Store has no record to match receipt; doesn’t carry the item; not available in
Canada
•
Actual cost far less than receipt
•
Many expensive items purchased in short time frame
•
Local items with distant supplier/retailer
•
Theft of recently purchased items
C39 Fraud Awareness and Prevention
Page 9 of 10
C39 Chapter 6 – Property Claims
Sho Shin-Feeney
ii. Personal Theft indicators – Characteristics of insured
•
Aggressive, pushing to expedite settlement (for less)
•
Threats to speak to regulators, media, get a lawyer
•
Unusually knowledgeable about insurance/claims
•
Cash settlement preferred
•
Claims history
iii. General Theft indicators
•
Calls insurer before police
•
Not reported to police (sometimes a policy provision as discouragement)
•
Police report not match claims statement
•
Not burglary
•
Expensive items were bought in cash, no receipt
•
Alarm disconnected or defective or not on (discount applies to working alarms)
C39 Fraud Awareness and Prevention
Page 10 of 10