Liar, Liar, Pants on Fire

Insurance Fraud Required to Survive

The following is a fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.

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If Louie has been born fifty years earlier, he would be called a gigolo. Louie was a classically handsome man. He stood 6’2” tall, combed his black hair straight back in a style that would do a Madison Avenue advertising executive proud. His eyes were an unblinking, watery blue that seemed to caress any woman at whom he looked. He ran three miles every morning and maintained a 180-pound, lithe physique.

Louie had a pleasant personality. Everyone he met liked him. He could drink beer with the boys and sip wine with distinguished and well-bred women. He wore a tuxedo as if Calvin Klein had his body in mind when it was designed.

Louie was not smart. Louie graduated from Thomas Jefferson High School in San Jose with a solid D- average. After leaving high school Louie worked at various menial jobs from janitor to fry-cook. He seldom held a job for more than six months.

Louie loved to dance. On weekends he would drive up to San Francisco and spend every night dancing in the clubs. It was on one of these dancing adventures in San Francisco that changed Louie’s life. Louie met Toni Di Battaglia. They danced every dance until the club closed at 4:00 a.m. They danced disco, waltzes and even country and western line dances.

Toni told him she worked for the Teamsters Union out of New Jersey and visited San Francisco monthly.

When Toni learned that Louie lived in San Jose, she invited him to her hotel and their relationship blossomed. Toni was a wealthy and powerful woman in her own right. She had a husband twenty years her senior who did not understand her. Louie was her release. They were in love. Toni did not love Louie for his intelligence. She did not love Louie for his ability to communicate. Toni loved Louie because he was beautiful, a good dancer and made her look good whenever they were out together.

She knew he could not afford to live in the manner in which she had grown accustomed. A suite at the Four Seasons Hotel (where she always stayed) cost more for a night than Louie could earn in a month. Only one solution existed. She needed to support him.

At first Louie rebelled. Taking money from a beautiful woman was not proper for a virile, healthy young man. Toni was insistent and Louie succumbed to her charm.

Toni bought Louie a condominium in the Marina district. She helped Louie furnish the Condo with antiques to satisfy her taste. She would come to San Francisco for three or four days every month. Toni gave Louie $5,000 cash each month to cover his expenses while she was gone. Louie could do whatever he wanted except during the three days Toni was in town.

Louie was a happy man. He lived better than he had in his life. He went out dancing every night. All of his clothes were custom tailored. Louie and Toni were a couple.

Every time Toni would visit, she would bring a gift for Louie. He did not understand the gifts but he accepted them with the grace of a well-bred gentleman. The gifts were always personal jewelry or gifts for his condominium. One month she brought a sterling silver tea service that Toni said was a Victorian antique. Next, she brought him a sterling silver cigarette case she said the famous Russian jeweler Faberge made for the Romanov family before the Russian revolution. She would bring him sculptures, oil paintings, silver candelabra, gold and diamond jewelry, or another bauble that peaked her fancy. To impress Louie, she told him the cost of each bauble. She exaggerated since he was unsophisticated and money still impressed him. Often, she would claim a gift cost her as much as $10,000 more than she actually paid for it. Louie thought he was rich. Louie, adding up what Toni told him she paid for each item thought the value of his household goods was more than $3 million.

Since Toni was away most of each month, Louie became bored. His only passion other than dancing was sports.

He had a satellite dish installed on his condominium; Louie would religiously follow each of the various sports channels. He even watched the Spanish language sports channel although he could not understand the commentary. His knowledge of sports was catholic. He usually knew which team would win and by how much. When he explained his skill to Toni (on one of her visits), she introduced him to a bookmaker. Toni suggested that he use his knowledge to make money by betting on sporting events.

On her next visit Louie pleasantly surprised Toni. He made enough betting on sporting events that he refused her cash contribution. She suggested that Louie set up a legitimate business and sell his sporting knowledge to the public. In this way, by just selling his choices, he could avoid any potential problem with the police. Toni had no compunction about violating the law. She wanted to keep Louie safe for her pleasure.

Running the business kept Louie busy and made him more lovable to Toni. Their relationship continued for ten happy years.

On a fateful November Sunday, while watching a San Francisco 49’ers football game, a news flash interrupted the game to announce a Mafia massacre in New Jersey. Four Teamsters Union officials, allegedly members of the Tortelini crime family, had been found dead in a parked Lincoln Town Car under an overpass of the Jersey Turnpike. All had been shot three times in the head with large caliber weapons. One of the dead was Toni Di Battaglia.

Louie mourned. He no longer had a source of income and gifts. His sports business was failing. The partner he chose had taken all of the company assets and gone to Arruba. He was broke. The love of his life, who supported him for many years, was dead. He had no skills, no profession. Louie owned his condo and could mortgage it. The proceeds would keep him for a short time.

Louie needed a plan to make a large amount of money. He wanted to continue to live comfortably until he could meet someone else, like Toni, who would support him in the manner he had grown accustomed to living. The solution was his condo owners’insurance policy.

Toni had insisted that he always keep a condo owners’ policy on his condominium. His condo owners’ policy had a $400,000 limit, although Toni had led him to believe that the antiques she had given him were worth more than a few million dollars. He would just make a list describing the various items in the condominium and place beside each description the amounts that Toni told him she had paid. He would then report to the police and his insurance company that he had been robbed of items very much like the items in the house.

Neither the police nor the insurance company could prove, since Toni was dead, that he was lying. The amount claimed would be more than the policy limit. Louie was sure the Insurance Company would immediately pay $400,000.00.

Just before Christmas Louie called the police to report that two armed robbers had come to his door and, pretending to be UPS delivery men, gained entrance. Holding him captive with pistols he would say they removed from his condo more than $1,000,000 in silver, fine arts and jewelry.

Included on his list were twenty-five bronze statutes by Erte; a Georgian silver epergne; three Faberge silver and gold cigarette cases; two Faberge picture frames made of semiprecious stones, gold and silver; a Victorian sterling silver tea set; two Georgian sterling silver tea sets; a Victorian sterling flatware service for twelve; two diamond rings; and a solid gold and diamond Rolex watch. The total value of all items Louie claimed stolen equaled $1,300,000.

The insurance company assigned its staff adjuster to investigate the loss. The adjuster was a twenty-five-year-old young woman who had started the profession two years before the day Louie reported the robbery. The opulence of Louie’s condominium and his good looks blinded her. It was clear to her inexperienced eye that the house was full of lovely antiques. She had no reason to disbelieve Louie when he told her that what was still in the house was worth more than $2 million. She presented the claim to her home office and recommended, since the loss exceeded the policy limit by a factor of three, that they pay the full policy limit.

Older and wiser people resided at the insurance company home office. Before they would authorize payment of $400,000 on a claim, they wanted evidence that the values Louie asked them to pay was reasonable and substantiated. They accepted the adjusters report, as fact, that Louie got all of the items by gift. The insurance company accepted that he could not, therefore, prove ownership or value. They expected, however, that he could, by comparison to the items still present, provide enough description to allow them to establish the true value of the items stolen.

The insurance company hired a fine arts appraiser who visited with Louie. The appraiser, looking at the initial written list, knew that Louie was unsophisticated about antiques and items of art. He could not spell “Faberge” or “epergne” and seemed to have difficulty with describing his items of silver. He would describe, for instance, silver as “Victorian” and yet insist it was manufactured before Victoria took the throne; Louie claimed Sheffield silver as “sterling,” not knowing that Sheffield was famous as a center for a specific type of silver plate.

The appraiser studied the silver and other items of art Louie still had in his home. She was convinced that his claim of values was fraudulent or, at the very least, highly inflated. The values stated on Louie’s claim did not agree with any reasonable market. The items he claimed to be Faberge were undervalued by thousands of dollars. Silver items claimed to be Georgian and Victorian were overvalued by a factor of three or more in the opinion of the appraiser.

The appraiser reported his conclusions to the insurer. The insurance company home office personnel, to aid Louie in describing his property, hired an attorney experienced in fine arts. The lawyer was instructed to examine Louie under oath. The insurance company hoped the lawyer would gain more detailed descriptions of the items stolen. They expected, with professional questioning, Louie would establish the true amount of his loss. They could not pay because their appraiser told them the loss could be in a range from $40,000 to $1 million.

Louie testified for two days. He was frightened. The lawyer, although always friendly caused Louie to break out in cold sweats he hoped was not visible. He did not tell the truth about anything to the lawyer. Louie limited his descriptions of the property stolen to the list he had written before he called the insurance company. Despite how detailed the lawyer’s probing, Louie stuck to the description he had written.

When the lawyer questioned Louie’s ability to earn money to keep up the condo, he created a story to show that he had a source of income. Louie told the lawyer that Toni’s “family” sent him, after her death, an annuity of $10,000 cash every month. The money came each month in a plain brown baggage via UPS.

When the examinations under oath were finished, the insurance company and its lawyer were convinced Louie was attempting to defraud it. The lawyer, with the approval of the insurance company, advised Louie that the insurance company denied the claim.

He sued. Five years later a Superior Court jury, after hearing all of the evidence, sent him away with nothing. Although Louie was a convincing actor, the jury concluded only that Louie had been robbed. The jury concluded, also, that he had lied to the insurance company about the existence and value of the property.  They gave judgment for the insurance company. It did not have to pay $400,000 to Louie. It did, however, find itself paying more than $700,000 to its lawyers and experts who made it possible for them to win the lawsuit.

Insurance fraud did not pay for Louie. Fighting fraud, however, on the surface saved his insurance company nothing. In fact, to defeat the fraud the insurance company spent more than it would have cost if it had paid his claim in full. However, Louie’s insurance company gained the reputation of being a fighter and found very few attempts at fraud in the next few years which saved it ten times what it cost to defeat Louie’s claim.

Justice was done and Louie lived happily ever after. During the trial he met Carla, a CPA with offices on the twenty-third floor of a building on California Street that his attorneys hired to prosecute his claim.

Carla took Toni’s place. Louie still lives in his condo surrounded by antiques. Whenever Carla visits, Louie receives a new bauble. Carla pays his expenses.

Louie will never again try insurance fraud.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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