When your home is destroyed by a fire, flood, or windstorm, the chaos, stress, and displacement from your family home can make the situation confusing and costly. Insurance coverage can provide critical financial relief while placing your family back on the road to being economically whole. Unfortunately, many homeowners experience an increase in their anxiety when their carrier unjustifiably denies or stalls payment of the claim. The hardships faced by an insured get even more complicated when the insurer makes allegations of insurance fraud to intimidate the policyholder. While unsubstantiated threats to pursue fraud charges can provide a basis for bad faith liability, policyholders who attempt to inflate their claim can face criminal prosecution and significant adverse financial allegations.
A recent civil lawsuit from another jurisdiction demonstrates the folly of attempting to play “fast and loose” with the facts. In Akers v. Auto-Owners, the policyholders constructed a massive home that was badly damaged by a fire shortly after completion. Their insurance policy had a provision related to fraud or concealment that provided that the entire policy would be void if the insured did any of the following related to the policy or claim:
- Provide false statements
- Commit fraud
- Misrepresent or conceal material facts
The insured submitted invoices and other documents in support of the claim. The insurance company paid policy limits to cover damage to the pool house, the “dwelling endorsement, cost of clearing debris, additional living expenses, and personal property inside the home.
After large payments were made to cover these expenses, the insured submitted a letter requesting supplemental payments for electrical work to the swimming pool and landscaping damage. The letter included fabricated invoices bearing forged signatures that were accompanied by canceled checks from a construction company owned by the policyholders. The parties indicated as payees in the checks that they did not own the businesses referenced in the invoices. The policyholders had blank checks endorsed and subsequently completed the front of the checks before depositing them into the policyholders’ own account. The letter also was accompanied by 15 invoices marked "paid" for work that was not performed. These invoices were also accompanied by copies of photocopied checks made payable to a construction company owned by the policyholders’ daughter and created after the fire.
Against this background, the policyholders filed a lawsuit asserting causes of action for breach of contract and a claim analogous to insurance bad faith. The insurance carrier retained a forensic accountant to analyze the supporting documents submitted by the policyholders as part of the claim. The expert concluded that $4,318,000 of the moneys paid to the insured were fabricated expenses. The investigation also found that the twenty percent general contractor fee was never paid despite the fact the policyholders claimed their contracting firm was serving in this capacity. The forensic accountant also testified that many of the invoices submitted were not for actual repairs on the home and that checks written to workers on the project were deposited into the bank account of the policyholders. The conclusion of the accountant was that a maximum of $1.7 million was actually spend on rebuilding the home.
The trial court found the testimony of the insurance carrier’s forensic accountant to be credible and the testimony of the policyholders not credible. Based on this finding, the court ruled that the insurance policy was voided under the fraud and misrepresentation provision. The court ordered the insured to return all moneys received from the insurer, which amounted to $3,929,887. The judge added insult to injury by also ordering the insured to pay the carrier’s attorney fees in the amount of $146,919. Although the policyholders would have been entitled to receive $1.7 from the insurer, the insureds misconduct resulted in them receiving nothing and being compelled to pay almost $150,000 in the other side’s attorney fees.
This case demonstrates the potentially high cost of submitting claims for non-existent or inflated losses when filing an insurance claims. Even inadvertent misstatements can be an issue, so you should seek legal advice if you have questions about your insurance claim.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].