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Order granting Motion for Spoliation sanctions and dismissing for failure to follow NFPA 921. Nothing groundbreaking here, but a good discussion of the basics and how poor housekeeping led to a very bad result.  Submitted by Michael Durr, Experienced Tennessee Subrogation & Recovery Attorney, on LinkedIn for discussion.  Click here to join the discussion.

BACKGROUND

The facts of this case are generally undisputed and have been set forth in detail, for the most part, in the Court’s prior Order on Defendant’s Motion for Spoliation Sanctions. (Dkt. No. 35.) In sum, Plaintiff Bear River claims that the speed control deactivation switch (SCDS) in the 1994 Ford F-150 pickup truck owned by its insureds, Jeff and Julie Schoepf, was defective and caused a fire that spread from the truck to the Schoepf’s house.1 Bear River’s claim is based on an investigation conducted by Bear River’s expert, Tad Norris, a fire investigator with IC Specialty Services, who was assigned to inspect the scene and determine the origin of the fire.  On behalf of Bear River, Mr. Norris inspected the scene and decided what evidence should be preserved without Ford’s presence, consent or input. As part of that investigation, Mr. Norris removed the SCDS’ hexport and electrical housing and claims that he sent both to another expert, Jeff Morrill, who requested an examination of the hexport. Mr. Morrill acknowledged receipt of the hexport, but claims he never received the electrical housing. Following Norris’ inspection and investigation, the scene of the fire was destroyed. Additionally, Plaintiff lost the hexport before it could be inspected and tested by Ford, and Plaintiff lost the electrical housing before inspection and/or testing by anyone.

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Accurate identification of the cause of a Wildfire plays a critical behind-the-scenes role when it comes to the presentation of evidence in Criminal, Coronial or Civil proceedings, or to gain an accurate picture of the cause of fires in an area. So how do you find the cause in a blackened landscape that may cover thousands of hectares?

Successfully preventing the unplanned ignition of wildfires is reliant on three key areas;

  • Engineering (or that of appropriate legislation governing the use of fire in the open and adequate penalties, authority to investigate fires etc);
  • Education (of the public and firefighters in wildfire ignition prevention and reporting of suspicious activity relating to the cause of a wildfire) and;
  • Enforcement (pro-active investigation of wildfires and follow-up prosecutions).

 

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On May 18, 2017, the United States District Court, Eastern District of Pennsyvania, ruled that a plaintiff's electrical engineering expert could not testify regarding the origin of a fire and fur excluded a portion of his testimony regarding the fire cause.

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This article was member submitted and includes a short comment about the article at the bottom.

ABSTRACT

Liquid fuel spill/pool fires represent the initiating fire hazard in many applications ranging from accidents at industrial plants using combustible liquids to residential arson fires involving flammable fuels.  Given the relevancy of such fires and broad range of potential scenarios, it is important to understand how liquid fuel fires develop and how to accurately calculate the fire size based on knowledge of the fuel type, quantity and the surface it is poured on.  In addition, it is important to quantitatively correlate fire size to spill area and burn patterns.  This understanding will afford the fire protection and investigation communities the ability to properly assess the potential hazards and forensically evaluate damage from fuel spill fire events.  The purpose of this study is to expand the fundamental understanding of liquid fuel fire dynamics, establish the utility of forensic tools, and validate empirically-based correlations used to model spill fire scenarios.  A multitude of small-, intermediate-, and large-scale noncombustible liquid spill and fuel spill fire tests were conducted using a total of six different liquid fuels and eight different substrates.  The results of these tests provide insight into the differences in fire dynamics between pool and spill fires (i.e., thick and thin fuel depths), provide a methodology by which liquid fuel fire events can be assessed, and identify forensic indicators that can be used in the analysis of liquid fuel fire events.

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from Firehouse.com by Karen Facey

I recently joined “the dark side" after I left the public sector as a fire marshal to become a fire investigator for Liberty Mutual and Safeco Insurance. While we collectively banter and joke about people leaving the public sector and starting their private sector careers, the reality is we all have the same needs and motivation. Ask any first responder, and they will likely tell you they love what they do because they get “to help people.” Ask any private fire investigator why they investigate fires and they will also answer “to help people.”

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From Out of the Abyss...

This week’s article from the past is titled Incendiary Fires Can Be Spotted and was written by Benjamin Horton, CPCU, who was President of the National Adjuster Traing School in Louisville, Kentucky..  It is taken from the Decembe 1968 Vol. XVI No.5 issue.

Incendiary Fires Can Be Spotted 

Congratulations

CCAI extends sincere congratulations to Wayne Tyson who was presented with the most prestigous "Lifetime Member" award along with a 45-year member pin from the International Association of Arson Investigators.


Wayne_Tyson-45yearpin-4x6

Practical Approaches for Recouping Good Faith Payments

Larry-Arnold-article

by: Larry Arnold

Faced with growing losses, insurance companies are focusing on fraud management and implementing risk mitigation controls, while at the same time remaining cognizant of their duty of good faith to policyholders.  So what happens when an insurer makes good faith payments on legitimate elements of an insurance claim but subsequently uncovers fraud in other elements of the claim?  Is the insurer entitled to recover all monies paid as part of the claim?  Or only the amount paid in reliance on the insured's misrepresentations?

Previously, there was no clear answer.  It was safe to assume that an insurer could recover monies paid on a claim under the right circumstances – the difficulty occurred when trying to recover payments made prior to the established fraud date.  For example, in California, the insurance code states, “If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false.”

Recent trial court rulings in favor of insurance companies, however, are changing the claims landscape.  These rulings will impact the way insurance companies handle genuine claims that are subsequently tainted by fraud, encouraging them to be proactive in recouping good faith payments.

Steps for Recouping

What options do insurance companies have to recoup these payments?  There are several avenues available.

Deny the Claim. When the SIU has completed a claims investigation and determined that an insured has breached the policy by materially misrepresenting facts, the claim can be denied – even the legitimate part.  Appropriate cases should be referred to law enforcement for prosecution.  In addition, the insured has a duty to present and prove the merits of the claim.  Failure to cooperate with insurance company representatives can independently result in denial of the claim.  This includes an examination under oath (EUO), which plays a key role in obtaining information.  Typically, the named insured (or others, as dictated by the policy) is required to submit to an EUO as a precondition for claims settlement.  Failure to do so can result in denial of the claim.

Void the Policy. An insurer may void or cancel its policy in the event of material misrepresentation or concealment of facts by the insured.  This includes fraudulent claims.

Litigation. If a policy is voided for fraudulent claims, insurers must then decide whether to sue the insured to recoup payments - even legitimate ones.  One advantage with litigation is that it allows for pretrial discovery process, including depositions and the ability to subpoena documents previously unavailable during the claims process.

A Case in Point

A recent case illustrates that insurance companies are entitled to recoup good faith payments when fraud is uncovered.  Here is some background on the case.

An insurer issued a fire insurance policy to the owner of a dry cleaning business located in Southern California.  A fire destroyed the business, so the owner submitted claims for replacement equipment, debris removal, damage to customer goods and loss of business income.  Based on these claims, the insurance company paid the owner $527,000.

However, during the insurance company’s investigation of additional claims, a forensic accountant uncovered inconsistencies in a laundry services contract submitted as part of the owner’s claim for loss of business income.  As a result, the owner was asked to sit for an EUO.  The owner declined and withdrew his pending claim.  The insurer then declined the claim, rescinded the policy and sued the business owner to recoup all loss payments.

At trial, evidence and witness testimony was presented that showed the owner had falsified the laundry contract and also inflated amounts paid for replacement equipment, debris removal, and payroll, among other items. Attorneys argued that the insurer was entitled to full recovery (payments made before the fraud occurred) for several novel reasons, including:

  • The outcome in Perovich v. Glen Falls Insurance Co. (9th Cir. 1968), where the court ruled that an insurer “may recover money paid in reasonable reliance on its insured’s fraudulent claim.”  The court held that the insurer was entitled to recover the full payment made under the policy.
  • Compelling the insured to return only a portion of the money would circumvent the purpose of the fraud statutes and create bad public policy.  The insured’s fear of losing even the legitimate claim payments should deter him from committing fraud.  An insured who knew he could recover the “honest” claims would be incentivized to calculate the risk of getting caught into his claims submission, determining that some things are worth lying about.

Though portions of the claim were legitimate, the judge ruled in favor of the insurer and its decision to rescind the fire insurance policy.  The insured was ordered to repay $452,064, which represented all payments less monies paid to customers who lost clothing in the fire and the policy premium.

Implications for Insurers

This decision is important as it reinforces the rights of insurance companies not only to decline a claim when fraud is uncovered but also to rescind a policy and sue the insured to collect good faith payments.  Previously, the law was not clear about what happens to monies paid as part of a legitimate claim, when fraud is discovered in a separate area.  It is now clear that fraud in part of a claim translates to fraud in the entire claim.

Claims managers should have an open discussion with claims adjusters and SIU team members, with the goal of establishing a claims review protocol that outlines what to look for and what to do if fraud is suspected.  This is critical, as claim adjusters are the first line of defense against fraud.  Once fraud is uncovered, insurance companies should not hesitate to consult with an attorney and pursue the insured in order to recover monies already paid.  In the end, both insurance companies and policyholders will benefit by reducing the high cost of fraud.

Larry M. Arnold, P.C., is a senior partner at Cummins & White, LLP.  He can be reached at (949) 852-1800, This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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