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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 

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.

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White Paper

Study by: Albert Simeoni, Zachary C. Owens, Erik W. Christiansen, Abid KemalExponent, Inc. USAMichael Gallagher, Kenneth L. Clark, Nicholas SkowronskiNorthern Research Station, USDA Forest Service, USAEric V. Mueller, Jan C. Thomas, Simon Santamaria, Rory M. HaddenSchool of Engineering, University of Edinburgh, UK

Albert Simeoni, Zachary C. Owens, Erik W. Christiansen, Abid Kemal Exponent, Inc. USA Michael Gallagher, Kenneth L. Clark, Nicholas Skowronski Northern Research Station, USDA Forest Service, USA Eric V. Mueller, Jan C. Thomas, Simon Santamaria, Rory M. Hadden School of Engineering, University of Edinburgh, UK

ABSTRACT

Two experimental fires, with contrasting intensities, were conducted in March 2016, in the Pinelands National Reserve (PNR) of New Jersey, United States in order to provide a preliminary assessment of the reliability of the fire direction indicators used in wildland fire investigation.  The experiments were part of a larger project intended to measure firebrand production in a forested ecosystem.  As part of this project, fire behavior, as well as the environmental and fuel conditions were also measured.  Two burn parcels, covering an area of approximately 30 hectares each, were ignited from unimproved forest roads which delimited them.  The forest canopy was comprised primarily of pitch pine with intermittent oaks.  The understory contained a mixed shrub layer of huckleberry, blueberry, and scrub oaks. In order to explore a wide range of indicators, objects such as bottles, cans and small fence elements were planted in the burn area, and photographed before and after the fire.  To obtain an accurate measure of pre- and post-fire fuel properties, fuel load, fuel bulk density, and fuel moisture content were also measured. In addition, environmental data (wind velocity and direction, air temperature and humidity) were recorded.  The fire behavior can be reconstructed using measurements of fire rate of spread, fire front temperatures, fire front geometry, and heat fluxes.  Video and infrared cameras were used to document the general fire behavior in selected locations.  This paper represents the first step in the analysis of the fire indicators and focuses on the more intense of the two burns and on the appearance of the macro- and microscale fire pattern indicators.  A majority of the indicators were assessed, although the configuration of the burn parcels, the ignition technique, and precipitation immediately following the fires limited a full study.  The results show that some fire direction indicators are highly dependent on local fire conditions and fire behavior and may be in contradiction with the general spread of the fire.  Overall, this study demonstrates that fire pattern indicators are a useful tool but must be interpreted in the frame of a general analysis of the fire, combined with a good understanding of fire behavior and fire dynamics.

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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.

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.

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Abstract Candles can enhance décor or be a source of light. However, they can also start fires. National estimates of reported fires derived from the U.S. Fire Administration’s National Fire Incident Reporting System (NFIRS) and NFPA’s annual fire department experience survey show that candles were the heat source in an estimated average of 9,300 reported home fires annually during 2009-2013. These fires caused an average of 86 civilian deaths, 827 civilian injuries and $374 million in direct property damage per year. More than one-third (36%) of home candle fires started in the bedroom. Almost three of every five (58%) fires occurred because the candle was too close to something that could burn. Candle fires are most common around the winter holidays. Candles used for light in the absence of electrical power appear to pose a particular risk of fatal fire. Home candle fires climbed through the 1990s but have fallen since the 2001 peak. ASTM F15.45 has developed a number of standards relating to candle fire safety. Despite the considerable progress made in reducing candle fires, they are still a problem. In 2009-2013, candle fires ranked second among the major causes in injuries per thousand fires and average loss per fire. Efforts to prevent these fires must continue.

Abstract

Candles can enhance décor or be a source of light.  However, they can also start fires.  National estimates of reported fires derived from the U.S. Fire Administration’s National Fire Incident Reporting System (NFIRS) and NFPA’s annual fire department experience survey show that candles were the heat source in an estimated average of 9,300 reported home fires annually during 2009-2013.  These fires caused an average of 86 civilian deaths, 827 civilian injuries and $374 million in direct property damage per year.  More than one-third (36%) of home candle fires started in the bedroom.  Almost three of every five (58%) fires occurred because the candle was too close to something that could burn.  Candle fires are most common around the winter holidays.  Candles used for light in the absence of electrical power appear to pose a particular risk of fatal fire.  Home candle fires climbed through the 1990s but have fallen since the 2001 peak.  ASTM F15.45 has developed a number of standards relating to candle fire safety.  Despite the considerable progress made in reducing candle fires, they are still a problem.  In 2009-2013, candle fires ranked second among the major causes in injuries per thousand fires and average loss per fire.  Efforts to prevent these fires must continue.

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SAN DIEGO - A Team 10 and Scripps News investigation found arson fires are not investigated properly in many American cities -- including San Diego -- due to a chaotic patchwork of reporting systems and standards.

Many deliberately set building fires are not reported to the federal government.

Nationally, just 5 percent of all residential building fires are intentionally set, according to the National Fire Incident Reporting System, which is part of the Department of Homeland Security.  Data collected by Scripps News suggests the national arson rate to be significantly higher.

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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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