Insurance Claims Surging - and Who's to Blame?

Suspicious insurance claims are on the rise in 2009, according to the National Insurance Crime Bureau, but the explanations for the surge vary depending on the source. The NICB, an insurance industry trade group, released a Sept. 9 report that numbered 2009 "questionable claims" at 41,600, a 13-percent leap from 2008. The NICB findings were recently reported by the National Law Journal.

Bogus claims vary from broken glass (up 76 percent) to car fires (up 20 percent) to questionable product liability claims (90 percent). NICB spokesman Frank Scafidi points to economic conditions as a possible cause. "People have been committing insurance fraud as long as there's been insurance coverage," he says. "But it's interesting given the economic background. There are things going on in the world that cause people to do things that they might not otherwise do."

However, Scafidi notes that "suspicious" is a broad term. "It doesn't mean that all of these are, in fact, fraud," he says.

San Antonio lawyer Barry Chasnoff isn't surprised. He leads the insurance practice at Akin Gump Strauss Hauer & Feld. In an interview with the NLJ, he said he's been hearing the same thing from his own clients. "Their fraud investigators have become very busy in the last six months," he says.

Stradley Ronon Stevens & Young's Steven Davis agrees. "I think this is the result of folks who might normally consider eating a claim, instead of risking surcharges or increases in premium, simply being unable to do so in this economy. Of course, with more claims activity and more difficult economics generally come increased fraud."

On the other hand, Phillip Sanov, who heads the bad-faith insurance practice team at The Lanier Law Firm, told the NLJ that he believes it's insurance companies who are to blame, not policyholders. "I laughed - I just laughed," Sanov says about his initial response to the NICB report. "That is a smokescreen put out by the insurance industry in an effort to put out higher rates."

Sanov says he's seen the opposite of what the NICB claims. Rather than an increase in false claims from policyholders, Sanov thinks the report reflects an increasing willingness of insurance companies to deny legitimate claims. In the past few years, Sanov says, he's been flooded with calls from property insurance policyholders who've had their natural disaster claims delayed, underpaid and flat denied.

"It has gotten exponentially worse over the last two years. Sanov suggests that the economy is a factor, but also says insurance carriers are forsaking their customers. "Their primary reason for existence is to take care of their policyholders," he says, "not to turn a profit for their shareholders."

Contact The Lanier Law Firm for more information, or submit a Bad Faith insurance claim.

The original National Law Journal article, entitled Policyholders filing more suspicious claims - or are they?, was published September 9, 2009.