Insurance Fraud by Divine Right
The story that follows is based on fact. It is, however, a work of fiction. The names, places and descriptions have been changed to protect the guilty. Any resemblance to real people is purely coincidental. This story was written for the purpose of providing insurers, those in the insurance business, and the insurance buying public sufficient information to recognize and join in the fight against insurance fraud. This article is a chapter in my e-book “Heads I Win, Tails You Lose” and is available at http://www.zalma.com/zalmabooks.html.
They were All-American girls. Muffy and Buffy met each other as cheerleaders in high school. They were best friends. They did everything together. The two young women shared everything from clothes to boyfriends.
When they graduated from high school, both started to work as trainee tellers at the Fresno Friendly Loan and Mortgage Corporation. They learned to handle money. More than anything else, they learned how to beat the system. When the need to shop came upon them, they called in sick simultaneously. They were the antithesis of modern liberated women. They did not do the same job that men did. They did less. They were rewarded by their male supervisors more for their tight sweaters and plunging necklines than their ability as bankers.
Muffy and Buffy rented an apartment together and, even with their limited banking salaries, began to gather things. They had a fine stereo, a 50” High Definition television with surround sound, a DVR and a microwave oven. They had all of the accouterments of the modern young upwardly mobile professional. To get these things, Muffy and Buffy charged more than the limit available on their credit cards. Their earnings were only sufficient to barely make the interest payments required by the credit card companies.
After paying their credit card companies and rent, even with their salaries combined, there was little money left for groceries. Muffy and Buffy had grown up on a high protein diet and would not conceive a meal without prime meat. They could not buy clothes unless they had a designer label. It was inconceivable that they could venture outside without wearing, at least, one piece of diamond jewelry.
Buffy and Muffy were high school graduates. Each was intelligent. They could read but had no interest in reading. They needed some way to increase their income or the credit card company would take all of their nice things.
Buffy and Muffy knew they were important people. Their parents had always told them they were important. They went to the best private high school in all of Fresno. It was their right to live well. Buffy and Muffy were born to be rich and famous. That they were not rich or famous would not deter them from the conviction that wealth and fame were their birthright.
Muffy was promoted from the position of teller to personal banker. She was assigned, among other accounts, to the chief financial officer of Fresno Property and Casualty Insurance Company. He would come in, every day, to receive special attention for his daily deposits of $20,000 to $30,000 in premium payments. She was never asked for counter checks or certified checks. As far as Muffy knew, the client, Fresno Property and Casualty Insurance Company, only deposited premiums. They had to be the richest, most successful company in all of the state of California.
She tried to become friendly with the CFO, but he was married. He did, like most older men, like to sit and talk with Muffy. Muffy knew nothing about insurance, but she listened.
After patiently listening, and smiling, while the CFO of Fresno Property and Casualty Insurance Company explained how insurance worked, Muffy had a brilliant idea. She and Buffy could resolve the problem they faced with their enormous credit card debt. That night she explained her plan to Buffy.
“First,” she said to Buffy, who sat cross legged on their living room sofa, “we buy an apartment contents package from my friend at Fresno Property and Casualty Insurance Company. We tell them that the value of all of our furniture and clothing in the apartment is $70,000.” “Doesn’t that cost a lot of money?” Buffy asked.
“No,” Muffy replied. “My friend the CFO says a policy like that would only cost us $250.”
“But Muffy, we don’t have $250.”
“All we need to do,” Muffy explained, “is to adopt $10 a day from our cash drawers. In no time we will have more than $250. With that money we will buy a policy and then report that a burglary happened at our apartment. The insurance company will give us the value of anything we tell them was stolen.”
“How do we get someone to steal our things?” Buffy asked.
“Silly, we don’t need to have anything stolen. All we need to do is give the insurance company a list of things that we are claiming stolen. We can keep all of our good things.”
Buffy wasn’t convinced, but she went along with the proposal and liberated only $10 bills from her cash drawer, one a day for fourteen working days. Muffy did the same, and they had saved on their adoption program $280. They bought the policy. They waited until two weeks had passed after the policy was delivered to them and began the efforts needed to make it appear a burglary had occurred.
First, they took their most valuable and favorite things and stored them in Muffy’s mother’s garage. An old black and white television, which had never worked properly, they placed near their front door and broke the screen with a balpeen hammer. They then went to their bedrooms and took the drawers out of the dressers and emptied them onto their respective beds. Muffy didn’t want to need to wash their underwear again so she was careful not to throw things on the floor.
Buffy took the hammer they used to damage the television out on their patio. She used it to break a small hole near the locking mechanism of the sliding glass patio door. She was careful to make sure that all of the broken glass fell inside their apartment. A can of spray paint was used to spray on their bedroom wall the word “Bitches!” and on their living room walls, “Die, Money Changers!”
After the house was totally ransacked and the spray painted graffiti dried, Buffy and Muffy climbed into Buffy’s Ford Fiesta and drove to a nearby movie house. They saw a film about a teenager’s first love. Buffy, because she wanted to, insisted that they watch a second film about the rebirth of the devil. Totally frightened out of their wits by the fiction on the screen, Buffy and Muffy returned to their apartment. They called the Fresno police to report a burglarized and vandalized apartment. Muffy went to the building manager to report the damage.
They told the police they did not know they had any enemies. Buffy admitted that they were employees at a bank and that a customer could have become angry with them for no apparent reason. The police had no suspects. Buffy and Muffy provided the police department, two days later, with a complete list of everything claimed stolen or damaged. Their banking experience helped them make the list in alphabetical order, showing description, cost price and fair market value at the time of the burglary of each item. Each purchase was backed by a receipt or other evidence of purchase and ownership.
Sometimes all they had was a canceled check to prove their purchase.
When they finished their list of stolen property (all of which was either worn out and already taken to the dump or was stored in Muffy’s mother’s garage) they were pleasantly surprised. The total value of their loss was $80,000. They could only claim the $70,000 policy limit.
At the same time they delivered the list to the police department, they also delivered a list including serial numbers and model numbers of each item they claimed was stolen. They used the actual serial numbers of their appliances, except for the last digit. They replaced that digit with the letter “C.” The adjuster, recognizing that the claim far exceeded limits of the policy, explained to the Buffy and Muffy how they were to fill out the proof of loss showing that her loss was over $80,000 and that her claim was for the policy limit, $70,000. The adjuster tried to explain the concept of “betterment” or physical depreciation to them. Depreciation is a simple and direct concept that, however, requires at least three years of college level mathematics to properly calculate. The adjuster was impressed with the claim and tried to help the poor woman understand the difference between a loss and her claim against the company.
He wrote out a check to Buffy and Muffy for the full $70,000 policy limit based upon their representation of loss. He did not ask, nor did he learn, that Buffy and Muffy had a storage facility where the reportedly stolen property now resided.
With the $70,000 collected from their fraudulent claim, Muffy and Buffy paid off their credit cards and moved the “stolen property” back into their apartment. The money left over they used to get more things and to live comfortably. Muffy and Buffy felt no guilt. Muffy and Buffy did not do anything wrong. They had more right to the money (because they were good and deserving people) than did that vile money grubbing insurance company.
They had never learned about the concept of indemnity. Buffy and Muffy felt that people with money, like insurance companies, deserved to have that money taken from them by good, clean living, lovely, highly intelligent, perspicacious, tenacious and honest young women. The money belonged to Muffy. It did not occur to her that other people could be more deserving.
They had perpetrated an exceptionally well planned and executed insurance fraud. Neither of them thought a crime was committed. They didn’t think anyone was being hurt. An insurance company, with more money that it could ever spend, could not be hurt.
What Muffy and Buffy believed was that they took the money from the insurance company by right. The insurance company should be required to share its wealth with Muffy and Buffy who were poor and deserving. The insurance company was not slightly harmed by the actions of Muffy and Buffy since, they believed, it took advantage of most of the people it insured.
Of course, to collectors of things, it takes very little time to spend a great deal of money. Even money that came to them as a gift of the gods because they were so deserving could be spent. Within a few months all of the insurance money was gone and Buffy and Muffy had an apartment bursting at the seams with wonderful things. Their credit card limits began to grow. The minimum payment acceptable on their credit cards became egregiously high. They could not live and continue to pay these high fees. There was only one thing left to do. Buy a new insurance policy and have a second claim.
This time, with Buffy as the only insured, signed an application for a new tenant’shomeowners package policy, with limits of $90,000, was presented to Fresno National Property Insurance Company. They quoted her a reasonable premium that she immediately paid. She took the policy home to Muffy who was proud of her roommate getting an even bigger policy with what was left of their cash finances. Since they did not want the insurance company to remember the first claim, Buffy and Muffy packed four empty suitcases into the trunk of Buffy’s car and drove toward Sacramento. They stopped at a truck stop in the small town of Agua Verde for lunch. After lunch they went out to their car (which was parked in view of all of the patrons of the restaurant), opened the trunk and began to scream, “We’ve been robbed!”
The manager of the restaurant called 911 and the County Sheriff arrived. He found auto burglary to be a rare occasion in his small town and pulled out all stops to apprehend the villains. He brought out his fingerprint kit and dusted all over their luggage and trunk lid trying to find a finger print different from those of Muffy or Buffy. The Deputy failed. No one in the restaurant had seen anything unusual happening. There were no witnesses. The Sheriff had no choice but to prepare a report based on what Muffy and Buffy told him of the incident. He listed everything that they told him had been in their suitcases in the car. Wrist watches and other jewelry totaled almost $20,000. Small appliances like hair dryers and electric toothbrushes were dutifully listed as were each piece of Buffy and Muffy’s designer clothing. When the entire list was added up an additional $40,000 in value was claimed missing.
A $60,000 auto burglary was the biggest crime ever to be perpetrated in the small town of Agua Verde. The sheriff, unsuccessfully, used all of his investigative skills. The car burglars appeared to be invisible, master lock picks. There was no evidence of forced entry into the vehicle. They were thieves with eclectic tastes in ladies clothing and jewelry.
Dejected, without ever reaching Sacramento, Muffy and Buffy returned home. They reported their loss to their new insurance company, the Fresno National Property Insurance Company who immediately sent out an adjuster. Muffy and Buffy were surprised to see the same adjuster who had worked for Fresno Property and Casualty Insurance Company. He, also, was surprised to see Muffy and Buffy. Apparently these were two very unlucky ladies. He took their claim down in detail. He informed them that he was sorry to say they had not purchased a jewelry floater and that their policy would only pay $1000 per item up to a maximum of $10,000 for the unscheduled jewelry. Muffy and Buffy appeared devastated by this information. Buffy asked the adjuster to get her only as much money as she was entitled to receive. She did not need a lawyer or public adjuster. She wanted to be fair with her insurance company.
The adjuster went back to his office to process the claims of this nice woman. As he was going through the list, however, he noticed a Rolex wristwatch that appeared familiar to him. He called his old claims manager at Fresno Property and Casualty and asked him to look up Buffy and Muffy’s old claim. He was shocked to learn that the Rolex watch claimed stolen in this burglary from Buffy’s automobile in Agua Verde had the same serial number as the watch stolen from Muffy’s home. Similarly, she had lost an identical toothbrush and hair dryer in their first burglary.
The adjuster, faced with a new claim for what appeared to be the same items returned to meet with Muffy and Buffy. Using his tape recorder he obtained a statement from them in copious detail concerning both losses. Muffy and Buffy, honestly, reported that they had not replaced a single item they had claimed stolen in their first burglary. The things taken in this burglary from their vehicle were all items they purchased before the first loss. They even provided receipts and canceled checks establishing the purchase and the date of purchase of each item. After that the adjuster was convinced. There was no doubt, they had attempted a fraud. He reported his conviction to the Fraud Division of the California, Division of Insurance, and to Buffy and Muffy.
Buffy and Muffy admitted to the adjuster that the watches were never stolen in either claim. They withdrew the claim for the two watches. They still tried to convince him that the rest of their claim resulted from a legitimate auto burglary. He was not convinced. He denied the claim on the spot. He followed up with a written denial.
He reported the claim to the Fraud Division who agreed it was a fraudulent claim and presented it to the local district attorney. The District Attorney refused to prosecute on the grounds that there was insufficient evidence to guarantee a conviction.
Muffy and Buffy went back to work at the bank. They hired a lawyer who threatened to sue if the claim was not paid in full. Since there was no arrest the insurer felt vulnerable. It paid $60,000 to obtain a general release.
Muffy and Buffy lived comfortably for a while on the money the lawyer obtained for them.
They were determined to, and continue to, commit insurance fraud once every few years, to supplement their income. For Muffy and Buffy crime pays well.
© 2017 – Barry Zalma
This article and all of the blog posts on this site digests and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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