The Welcome Fire

True Crime Stories of Insurance Fraud Number 25

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Barry Zalma, Esq., CFE presents videos so you can learn how insurance fraud is perpetrated and what is necessary to deter or defeat insurance fraud. This Video Blog of True Crime Stories of Insurance Fraud with the names and places changed to protect the guilty are all based upon investigations conducted by me and fictionalized to create a learning environment for claims personnel, SIU investigators, insurers, police, and lawyers better understand insurance fraud and weapons that can be used to deter or defeat a fraudulent insurance claim.

Honest People Venture into Fraud

The insureds had wealth. He was a successful lawyer and she owned and operated a chain of chiropractic clinics. They lived in Marin County in a multi-million-dollar home. They had two small children who excelled at school. They entertained frequently. They contributed to political campaigns. The Governor, State Senators, Members of Congress and U.S. Senators stayed at their home as honored guests.

Insurance fraud was not in their vocabulary. It was a crime committed by people below the insured’s’ social status.

The insureds’ venture into crime began innocently. They discovered, on a family outing, a one acre lot atop a hill overlooking San Francisco Bay. Its owner had recently died. The executor needed to sell the land to pay taxes. They could “steal” the lot for only $2,750,000. Finally, they could build their dream home.

The carpenter was a graduate of Loyola University. He had trained under Jesuits. He had a moral sense and was racked with guilt. He admitted working with the insureds and their counsel in presenting the documentation to establish the amount actually spent in fire repairs. He did not want to lie and place his ex-employers in any difficulty. He therefore, for three days of cross-examination, provided almost no information. Every clear answer he gave came only after the same question was asked at least four times in four different ways.

Counsel for the insurance company, the day before she was to finish the cross examination, received a telephone call from the witness. The witness told counsel:

“I must tell the appraisers why I have been such a difficult witness.”

Counsel explained that was not a proper question to ask but, when she finished his cross-examination she would give the witness the opportunity to tell the appraisers anything he wanted. Appraisal, being informal and not bound by rules of civil procedure found in a trial allowed for narrative responses that could not be heard in a court trial.

The insured succeeded in their fraud. They did not succeed as they wished but they succeeded. The insurance company, and all of its customers lost. To even partially defeat this fraud the insurance company spent more than it would have spent to pay the initial demand. It stood on principle until principle became too expensive.

The lethargy of the court system frustrated it since it allowed the bad faith lawsuit to continue even after the appraisal award showed that the insurer had overpaid the claim.

The insurer succumbed to settlement negotiations because of frustration in the criminal justice system that refused to accept that it is a crime to steal from an insurance company. Everyone who buys insurance lost.

The insurance company will think twice before it disputes a claim with an insured. The insurance company will refuse to believe the next time a prosecutor tells them he intends to prosecute insurance fraud counts against an insured. The next person who attempts a fraud against this insurance company will find his job easy and profitable.

© 2022 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

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You can contact Mr. Zalma at,, and . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

You may find interesting the podcast “Zalma On Insurance” at;  you can follow Mr. Zalma on Twitter at; you should  see Barry Zalma’s videos on; or videos on Go to the Insurance Claims Library – The last two issues of ZIFL are available at 

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