This past Friday, the Texas Supreme Court issued its opinion in Gharda USA, Inc. and Gharda Chemicals, Ltd. v. Control Solutions, Inc., United Phosphorus, Inc., and Mark Boyd; a case that will provide defendants with additional ammunition to attack subrogation claims involving fire losses.
The Gharda case involves a warehouse fire with a complex causation theory involving testimony from several experts, including two fire investigators, two chemists, and an electrical engineer. The fire investigators based their opinions on the opinions of the two chemists.
This recall involves Kaldi’s Coffee disposable paper cup sleeves used with 12- and 16-ounce paper cups. The black paper cup sleeves have the “Kaldi’s Coffee” and the company logo printed on the front, and “100% Recycled Paperboard” printed on the back.
Read the full article at CPSC
What is an E-Cigarette?
The e-cigarette, also called a personal vaporizer (PV) or electronic nicotine delivery system, is a battery-powered device that simulates tobacco smoking by producing a heated vapor, which resembles smoke. These devices have become very popular as an alternative to smoking, including among a growing number of individuals who have never been smokers but who enjoy the many flavors and/or the experience of using e-cigarettes.
by Thomas P. Shefchick
Forensic electrical engineering is the practicalapplication of electrical engineering knowledge tolegal questions about electrical phenomena. Practicalelectrical engineering knowledge is obtained fromexperience in designing, installing, maintainingand repairing electrical devices, appliances, andequipment. Reports, demonstrations, depositions,and court testimony are used to explain electricalphenomena to insurers, attorneys, arbitrators, judges,and juries. The area of practice extends from softwarefor computers to the generation and distributionof electrical power, which might be controlled bysoftware, and to consumer products.The electrical engineer explains how the electricalsoftware, equipment, or device functions normallyand why it malfunctioned, violated a copyright, orfailed in this instance causing damage, financial loss,injury, or death. In some instances, the electricalengineer might be retained by a client to verify thatelectricity was not involved with the cause of afire, damage, or injury. Quite frequently, electricalengineers must use mechanical, thermodynamic, andoptical knowledge to answer questions since thegeneration, distribution, and utilization of electricalpower involves mechanical components, which canproduce heat and light.
In the new issue of NFPA Journal®, President Jim Shannon said the Association will focus on the leading causes of home fires, including cooking. "We also need to continue to push hard for home fire sprinklers. That's still a large priority for NFPA, and we plan to work very aggressively in 2014 on our residential sprinkler initiative," he said.
NFPA 921, Guide for Fire and Explosion Investigations plays a fundamental role in fire and explosion investigations. A new edition of NFPA 921 is scheduled to be published in 2014. For years, this document has played a critical role in the training, education and job performance of fire and explosion investigators. It also serves as one of the primary references used by the National Fire Academy to support its fire/arson-related training and education programs. It is imperative that investigators understand the scope, purpose and application of this document, especially since it will be used to judge the quality and thoroughness of their investigations.
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:
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,
CCAI Advertisers enjoy unprecedented exposure to professionals in the public and private sector with tens of thousands of targeted visitors each year looking to arson.org for critical information on the state of fire and arson investigation in the United States and worldwide! Banner ads should be formatted to 699x125 pixels, JPEG or animated GIF or Flash SWF, 100Kb or less. Annual advertising rates available.
This is the official website of the California Conference of Arson Investigators.
The information published on this website is intended solely for educational purposes and is to be used as an advisory aid to members working to suppress the crime of arson and related offenses. It is also provided to assist in raising the level of expertise in fire investigation.
Articles herein express the views and opinions of the authors which are not necessarily those of the California Conference of Arson Investigators or its representatives. The Technical Publication Review Committee reserves the right to accept or reject any article, technical information or professional opinion submitted for publication on this site.
The acceptance of articles, technical information or opinions on this website does not constitute, and shall not be interpreted as an endorsement of the author(s), opinion(s), information or any product(s) included within this information. It is our intent to present articles and information from our peers to encourage profession discussion and debate among the CCAI members for the purpose of advancing knowledge in the field of fire science and investigation. Professional care should be used to confirm the accuracy of all content, opinions or supplied data prior to use for reference, consulting, and legal support.
All material submitted to CCAI and or posted or published by CCAI that is written, photographed, sketched, drawn, recorded or otherwise created by author(s) is copyrighted. As such, those materials are, and shall remain, the exclusive and sole property of the original author(s). All copyrights are reserved.
Utilizing information provided by CCAI implies that the User/Reader hereby agrees that to the fullest extent allowed by law, CCAI shall have no liability to User/Reader for any and all claims, actions, damages, or losses arising out of, or in any way related to User/Reader’s use of information provided by CCAI. User/Reader further agrees that in no event shall CCAI be liable for any claims or damages of any nature (including costs relating thereto) from such publication. Use of such information provided by CCAI constitutes User/Reader’s agreement with all these terms and conditions stated above.
Copyright© 2010. California Conference of Arson Investigators. SiteAdmin. Web Design by Todd Lando