Individuals who are involved in local law enforcement know that it can be difficult to get a conviction for an alleged arson offense. However, those who think that insurance companies carry the same burden of proof for denying a fire insurance claim should know that a different standard makes it much easier for insurers to catch cases of insurance fraud.
A recent report in the Insurance Journal reveals more about how insurance companies covering fire damage to properties limit the amounts they must pay for fraudulent fire insurance claims.
According to the Insurance Journal piece, although conviction rates for arson are only around 6 percent, insurers use a “material misrepresentation” standard to deny claims in many arson-related cases; the article quotes insurance lawyer James H. Cole as saying material misrepresentation provides the vehicle for denial in 90 percent of claims that come across his desk.
Proving financial stress for the policyholder is a method insurance companies may sometimes use. In general, insurers have a lot of leeway in denying fire insurance claims that look suspiciously like arson. This helps limit the number of property owners who decide to burn down a structure in order to claim insurance money. Those involved in property insurance cases after a fire should know about these industry standards and how to advise any party about the after-effects of this type of unfortunate situation.
Insurers look to documents to prove that the claimant had a motive to burn down the property to collect insurance money. Other fire insurance fraud investigations include looking at the timing of coverage for property, what went on prior to and after the fire and how the claimant interacted with police and first responders or other witnesses.