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Opinions and Commentary

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Please do not assume that anything on this web site applies to your factual situation or the laws of your state. The articles and news reports contained in this site are for informational purposes only, are subject to errors, and may be changed without notice. If you are doing battle with an insurance company, you may need an attorney experienced in insurance matters, or an experienced public adjuster, or both. These reports contain the opinions of the various authors and may at times challenge established insurance law. Those opinions sometimes editorialize what the law should be and not what it is. It is hoped that through this, various aggressive attorneys will seek to challenge existing laws and get bad precedents overruled.

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At a time when insurance companies are seeking legislative concessions in many states, it may be instructive to review how one former insurance company lawyer exposed alleged corporate policies that, if true, would constitute fraudulent criminal behavior and bad faith.  Amy Girod Zuniga, a former member of State Farmís litigation team, gave a deposition in support of a lawsuit filed by Roderick and Krista Taylor in 1995. She testified that State Farm agents and employees forged customer signatures to exclude earthquake coverage from policies after the earthquake.  She testified that State Farm was aware of the pattern of forgeries because the company paid claims whenever the forgery could be exposed and proven by Insureds.  In fact, American Home, which provides Errors and Omissions coverage for State Farmís agents, refused to accept the tender in State Farm agentsí forgery cases as American Home stated that State Farm had ample notice of conduct of this type by its agents and that State Farm had taken no meaningful steps to correct the problem.  Therefore, American Homeís position was that State Farm had ratified and authorized the agentsí conduct so that State Farm was responsible for claims arising out of this type of conduct. EDITOR'S NOTE: State Farm attempted to have Zunigaís deposition sealed. They argued that there was strategic information which should not be disseminated to the public. The Second District Court of Appeals in California ruled that it could be made public State Farm v. Superior Court (Taylor), no.B106120(Cal.Ct.App. filed Apr. 22, 1997).


A former State Farm employee, Amy Girod Zuniga, who was a former member of State Farmís litigation team, filed two affidavits in which not only allegations of blatant bad faith were made but also outright criminal conduct by high-ranking State Farm officials.  Just several brief highlights of her affidavits follow:

A.  She indicated that certain court documents filed by State Farm were false.

B.  She was instructed by her supervisor never to use the word "forgery" in connection with the forgery of signatures of State Farmís Insureds by State Farm agents and agency employees.  The word "forgery" was referred to as the "F word" by personnel in her unit.

C.  She stated that a John Bishop, one of State Farmís senior executives at corporate headquarters, instructed that State Farmís witnesses should never admit that forgeries occurred, and if compelled to do so by Court Order, that they would develop a story in which they would try to make this practice look like a "service."   (The forgeries were to void claims not to provide a service.)

D.  That instead of complying with requests for discovery by various plaintiffs, a carefully created "packet" from which many documents were removed was prepared.   One of the items removed was the index.  Their tactic was to give plaintiffs something containing no damaging information but which was voluminous enough to distract their attorneys.

E.  Prior to Ms. Zunigaís deposition, she was specifically instructed by her supervisor, Vanessa Gudeij, that under no circumstances was she to "give up" the name of David Tannenbaum to plaintiffís counsel.  Mr. Tannenbaum had told her that identical, screened packets of discovery documents referred to above were to be produced in all earthquake cases in response to discovery requests, regardless of the specifics of the particular facts of the case.

F.  She was given "talking points," a memorandum prepared by her supervisor, which contained untrue statements in which she was to memorize and give as her answers in the deposition.

G.  She also stated in her affidavit that the written script referred to above was typical of the practices and procedures she observed at the company in connection with the preparation of company witnesses for deposition.  She, herself, as part of her duties, participated in the preparation of many witnesses for deposition.

H.  Professional witness consultants were hired to prepare State Farm employees for giving testimonies at depositions and at trials.  Witnesses were taught to be very evasive and to try not to provide any relevant information.  One example of this training was that when asked, "Where is your car parked right now?" if they responded by stating where they had parked their car, they were told that their answer was wrong.  They were told that such an answer was incorrect because it had assumed that the car had not been stolen or towed away, and thus the only correct answer was, "I do not know."  The witnesses were taught other tactics such as not looking the questioner directly in the eye, since eye contact would tend to facilitate meaningful communication and the giving of information.  Witnesses were taught not to answer a question with a "yes" or a "no" to minimize the likelihood of giving a truly responsive answer.  A yes or no answer does not give "wiggle room" to change the answer at a later time.  Witnesses were taught to pretend not to understand the initial deposition admonition, in order to throw off the Insuredís attorney. The entire point of this training was to make it as difficult as possible for the Insuredís attorney to learn any meaningful information about the company, its practices, or the Insured's claim.

I.  At trial, the companyís witnessís tactics are different.  They are trained to act completely different for the jury than they do at deposition.   Witnesses were trained to appear helpful and polite, and to drop the evasive tactics used to keep information from being disclosed at deposition.  She gave examples of the company "purging" their files and knowingly producing incomplete files when they were legally bound to produce the complete file.

J.  She also explained a company policy in which "low damager" claims were not to be settled but rather fully litigated, and every effort was to be made to make it financially unfeasible for the Insured to obtain any benefits regardless of whether any liability was clear or not.  State Farmís attorneys were instructed to conduct formal discovery, obtain records via subpoena instead of authorization forms, and to take depositions of the claimant or Insured, even after the Insured had voluntarily given a recorded statement.  They were also forced to undergo so-called IMEís performed by doctors the company was confident would give reports unfavorable to the claimant/insured.  This policy was to be "broadcast" to all plaintiffsí attorneysí offices she dealt with.  The stated goal and purpose of that policy was to make it unprofitable and too expensive and costly for plaintiffsí attorneys to handle those types of cases, even those in which liability was clear.  It was explained to her that the results of the policy were intended to be a short-term increase in legal fees for the company but a significant long-term decrease in benefits payments once the plaintiffsí bar became aware that handling those cases would be too costly and unprofitable.  She not only observed but was, in fact, told at State Farm that said policy was extremely effective.

K. She told of one incident in which State Farmís conduct was so destructive, that it contributed to the deterioration of the plaintiffís health which resulted in suicide attempts and psychiatric hospitalizations during 1995.

EDITOR'S NOTE: State Farm is a company which probably more than any other company tries to convince insurance departments, police authorities, legislatures, judges, and juries that they are the ones who are victims of frauds. While that is certainly true some of the time, their methods and tactics must be exposed to the Insurance departments, police authorities, and to judges and juries, likewise. See the next six news reports for other examples.


Curtis and Inez Campbell sued State Farm alleging they had misrepresented Curtis Campbell after a fatal auto accident.  During the two-month trial, former State Farm employees testified that when Campbell was sued after the accident, the insurer deliberately altered the accident records.  The trial Court judge later lowered the punitive award to $25 million.


A Merrillville, Indiana woman shared with her former husband a $3.6 million verdict against State Farm Insurance Company which refused to pay the couple after their home burned down in. The coupleís original claim was for $145,000.  They fully cooperated with the police and even passed polygraph tests. While they were cleared as suspects in the blaze and were never charged with any crime, State Farm still refused to pay for the fire loss.  After a seven-day trial, the Insureds were awarded $145,212 for their home and personal belongings, and in addition, State Farm was ordered to pay $500,000 for showing bad faith and $3,000,000 in punitive damages.


In August of 1998, State Farm agreed to pay 4,400,000 of their customers $200 million to settle a lawsuit accusing the company of fraudulent practices.  It involved current and former owners of whole life and universal policies, some dating back over 17 years.  The lawsuit accused the company of encouraging policyholders to switch to new policies in which they lost value but were led to believe it was in their best interest to switch.  Lawyers say customers were also promised returns based on assumptions that the company knew were unrealistic, such as double-digit interest rates and were given artificially inflated dividend projections.  Editor's note: $200 million seems like a lot until we realize it amounts to only $45.00 per customer.


On September 30, 1998, it was reported that the State Farm Group violated the Insurance Law and Department regulations when, in connection with certain automobile insurance policies, they failed to pay or deny claims within 30 days, failed to send out no-fault applications in a timely manner, and failed to properly calculate the interest due on over-due benefits.  The companies also failed to use correct Red Book NADA Valuation Manual figures in calculating the value of stolen or totaled vehicles.  The companies were fined a total of $136,490 and must review payments they made between January 1, 1997 and June 6, 1998 and remit any interest in excess of $5.


State Farm was sued by more than 100 California policyholders for not disclosing the fact that their "new" policies had deleted significant coverages.   A Superior Court judge in May 1997 ruled that that violated State Law.   Discovery revealed an internal company memo in which executives decided not to inform policyholders about restructure plans because it would "appear inconsistent with our marketing philosophy."


Texas Attorney General Dan Morales announced on October 23, 1996 that Texas consumers will receive nearly $22 million in restitution from State Farm Insurance Company to settle allegations that the insurer did not refund deductibles paid by its customers when required to do so by Law.  75,600 Texas consumers were affected. 

Editor's Note:  While most people try to do things the right way, we ask if a sophisticated company like State Farm can really be sincerely wrong this many times, or have they calculated that they will still make more money in the long run by playing "hard ball" every step of the way?  Can the highest paid attorneys and executives in the industry really claim ignorance?  If, in fact, a corporate pattern of illegal activity occurs, the FBI should be involved in an intensive criminal investigation.


In a research report titled "Arson Incidence Claim Study," the All-Industry Research Advisory Council, known as ARAC (which was formed by the property-casualty insurance industry) found that of all arson fires, approximately 14% of residence fires were perpetrated by the Insureds, and 12% of commercial fires were set by the Insureds.  The study found that 50% of all arson fires are best labeled as vandalism, 12% are set for revenge, 7% are to conceal other crimes (burglaries, murder, etc.), 3% are perpetrated by pyromaniacs, and roughly 15% are designated as other causes. 

There are other studies which also prove that of the vast majority of arson fires, Insureds are rarely involved.  In fact, Clifford Karchmer, the editor for "Firehouse" magazine, published a few years ago that "arson for profit is down from 14% to around 1%." 

The FBI's National Center For Analysis of Violence In Crime found that 55% of all arson fires are vandalism, of which 96% of those are caused by juveniles.   The report says that 25% of arsonists commit the crime just for excitement.   The FBI goes on to say that they find 14% of all arson fires are set for revenge, and the rate of arson to cover up another crime is twice that of arson for profit. 

In a recent report, the federal government's Fire Administration found that juveniles accounted for 55% of all arson arrests.  This obviously indicates that they are responsible for a much higher rate than 55% as most are never even interviewed, while the Insureds are always interviewed.  We will see in a later article that numerous Insureds are falsely accused.

Statistics compiled by the Rocky Mountain News indicated that nearly 67% of all arson fires are caused by juveniles under the age of 18. 

In a 1989 University of Rochester, New York study, they found that 1 out of 7 school aged children have recently played with fire, and almost 40% will have played with fire by the time they are 14 years old. 

In the State of Connecticut alone, 127 children under the age of 18 years old were arrested for arson in 1991.   Many, many more were referred for treatment. 

The Colorado Department of Public Safety recently found that the rate of juvenile fire setters per 100,000 population has increased 57.7% and that 1 out of every 15 persons arrested for arson is under the age of 10, and 1 out of every 3 is under the age of 15.  Their study found that 67% of all persons arrested for arson are under the age of 18.  These statistics prove beyond doubt that Insureds are guilty of "arson for profit" in only a minute fraction of all cases.  It goes on to say, "Still, these statistics represent only part of the juvenile fire setting problem since only a small proportion of children identified as having set a fire are charged with arson, and fewer are arrested."  Many others do not even become suspects.

Who are some other people who set fires?

One fire bug arrested in Kokomo, Indiana admitted to setting fire to 38 buildings, some whoís owner had owned more than one.  Undoubtedly, many of those innocent Insureds were assumed arsonists by their insurance companies and police authorities.

An Evansville, Indiana man confessed to setting 32 homes on fire.  Any of those homeowners who had marital problems, had a house for sale, or were behind in payments were surely targeted as prime suspects.

In Valparaiso, Indiana, two of the four Burns Harbor firefighters accused of breaking into a greenhouse and setting a fire to cover up the burglary pled guilty.

In Los Angeles, not too long ago, two volunteer firefighters were the prime suspect of a Malibu wild fire that killed three people and destroyed 350 homes.

In Norfolk, Virginia, a state trooper faced up to 70 years in prison after admitting he planted explosives at two malls, a court house, and a coliseum to enhance his image and the reputation of his bomb sniffing dog.

Everybody has heard about Captain John Orr of the Glendale, California Fire Department.   He was the chief arson investigator and an acclaimed one at that.  He even wrote a novel which drew upon his expertise; his villain was a firefighter turned fire starter.  He was convicted in June of 1998 on four counts of arson and multiple murder by arson.  He faces the death penalty.  He was convicted of setting three fires while driving home from an arson investigators conference in Fresno, just like the fictional character in his book.

Earlier in 1998 a fire dispatcher for the Indianapolis Fire Department was convicted of arson and murder.  Prosecutors portrayed him as a "fire nut" who set the fire because he wanted to pretend to save the baby and come out a hero.

Not too long ago, a police officer was arrested for arson after he made his third dramatic fire rescue of the year.

Several years ago in a township near me, there was a series of arsons almost every Friday night for a period of several months.  The Fire Chief and police organized a "fire watch" in which volunteers and police officers would span the township during the hours most fires had been set.  The idea was that when an alarm came in, one of them would be near enough to observe the make of cars and possibly license plate numbers of nearby vehicles.  Guess what? As soon as this task force was organized, there was not one more arson. Guess why?  The volunteer fireman knew he would get caught.

In the summer of 1997, a volunteer fireman from Weiser, Idaho admitted to setting ten fires, as he was in college and was paid $5 per hour when called to a fire.

In April of 1998, two Illinois volunteer firefighters were charged with arson.   The Chief said that several other volunteers were being watched very carefully.   The Chief said, "They like showing up to put out fires.  Hero mentality."

The West Virginia Supreme Court found that Sgt. Fred Zain, a State Police lab expert, fabricated mountains of evidence and at least 134 convicted criminals, including a former state lawmaker, could have their names cleared as a result.

While we declare as emphatically as we can that the vast, vast majority of all law enforcement officers, firemen, and volunteer firemen are honest and hard working heroes (and grossly underpaid heroes at that), our point is that of all arson fires, Insureds are rarely involved, and it's just paramountly wrong for any insurance company or investigator to assume they are.  The only fair first assumption to make is that the Insureds are probably not involved.


Several 20-page booklets have been published by the Illinois Advisory Committee on Arson Prevention in cooperation with the Illinois Chapter of the International Association of Arson Investigators.  These were later revised by State Farm and reprinted for mass distribution to prosecutors, police officers, and firefighters.  The books contain large sections that are word for word, but incorporate different covers so that prosecutors, police officers, and firefighters all infer that it was written especially for them.  They contain many false statements and innuendoes which creates unwarranted prejudice and discrimination against policyholders who are victims of arson or undetermined fires.  Given the proven statistics (which State Farm themselves were involved in) in the above article, it seems to be nothing short of a fraudulent statement for the booklets to state, "Burning for profit is probably the most common arson motive."  Their owns statistics prove positively that that statement is an absolute lie! Of all proven arson fires, in excess of 90% of policyholders are innocent.   However, the booklets conceal those statistics to the prosecutors, police officers, and firefighters. 

The booklets strongly encourage police officers to view the policyholder as their number one suspect, but yet to interview the policyholder not as a suspect but as a witness so that "this way you donít have to advise him of his rights..."  The booklets also entice prosecutors by telling them that they will be known as "arson experts" after they have tried two or three cases.   While their own statistics clearly prove that well over 50% of all arson fires are caused by juveniles, these outrageous booklets infer that juveniles only cause a minute fraction of arson fires.  Among other unbelievable things, they inform police officers and firefighters that if a house or building has curtains or blinds pulled down, it is a good indication of arson.  They instruct that anyone who is poor or has marital problems must be given a lot of scrutiny.  The booklets then advise an investigation program which will surely defame and injure the Insured. Incredibly, they also encourage prosecutors to lie to the jury by tricking the jurors into believing that circumstantial evidence is much more reliable than direct evidence.  There are a number of other absurd and false statements which many of our prosecutors, police officers, and firefighters have been duped into believing. 

EDITOR'S NOTE: Something is drastically wrong when the insurance industry bombards our legal authorities with false information in an effort to try to manipulate them to wrongly convict innocent people of arson.   Psychological studies prove how easy it is to believe almost anything when you fully assume that the source of your information is honest and credible.  This is how the industry can con so many good law enforcement officers and juries.  One prosecutor recently, in violation of the Canon of Ethics, told an Insured if he did not drop his insurance claim, that he would be arrested for arson.  What is the difference of a person stealing money from you with a gun or an insurance company stealing money from you through rhetoric, confusion, and blatant misrepresentations?  There is a desperate need for insurance commissioners, police officers, and prosecutors to carefully scrutinize these types of representations being disseminated to them by insurance companies who have repeatedly been found guilty of bad faith and have a much greater profit motive to commit fraud than does any Insured.   740 persons died in arson fires last year.  Is the industry's deceptive campaign to mislead our legal authorities responsible for any of those deaths?   Time spent investigating innocent Insureds instead of the neighborhood juveniles may very likely have caused one or more of those deaths.  With prosecutors and police authorities being fed false information, not only regarding fire behavior, but also policyholderís "behavior" the insurance industry wrongfully wields a mighty club.  We beg you prosecutors and police officers to never assume credibility without a lot of sound, objective thinking.  Arsonists should indeed be sent to prison, but so should  white-collar criminals who try to frame an innocent victim.


In a Michigan Circuit Court trial (Marticoes v. American Employers Insurance Company), the jury returned a verdict in favor of the insurance company finding that the Insured had deliberately set fire to his building.  He filed a motion for judgment not withstanding the juryís verdict against him, and the Honorable Thomas Roumell, the presiding judge, granted said motion and issued a 55-page ruling.  Here are a few comments the judge wrote in his ruling:

A. "Every single item as the above recited crediting Mr. Millerís (insurance companyís expert) findings or conclusions are mere guesses, speculation, or conjecture when compared with the testimony of the plaintiff and his witnesses as herein set out."

B. "Mr. Miller was not credible or believable in the opinion of the Court. His performance was a show and a sham."

C. Among other things, the Judge blasted the companyís expert for suggesting paint thinner cans were evidence of arson when they were found in the same area where they were commonly stored, and that unburned toilet paper was in fact a plant used in burning the building. EDITORíS NOTE: Itís amazing how often insurance companies are able to con a jury into believing that a certain thing caused the fire, yet the "cause" wasnít even burned.

D. "He first amazed the Court when he described that he asked Deputy Chief Larson to arrange for a crane with a clam-bucket in order to conduct the investigation of the fire debris that remained rather than use the bulldozer that was offered by the Deputy Chief Larson.  In any event, he was furnished with a crane with a clam-bucket.   Mr. Miller then began with pomp and great flourish to unravel before the Court and jury a great number of pictures, extensive video tape, specially created exhibits to theoretically support his testimony than could possibly have been anticipated to have been necessary."  The Judge went on to conclude that his testimony was nothing but a "big production" designed to impress the jury.  The Judge then extensively compared his "testimony" with his "evidence."   He found that it was really nothing more than lights and mirrors.

E. "The truth and reality of it all, is, insofar as the foregoing was concerned, that it was never shown or established that Marketos had the slightest connection with the fireís commencement and this will be amply demonstrated in another part of this document when the evidence of how the fire began is reviewed."

F. "The defendant presented not a scintilla of evidence to support its arson affirmative defense except the testimony of a private fire investigation freelancer who was paid thousands of dollars to conduct an investigation so that he could come into court and make a careless and unsupported statement concerning the source of the fire and that accelerants were used in starting the fire.  This individual, so far as the Court is concerned, was not credible or believable.  Defendant also had the testimony of retained auditors who made illusory reference involving comparisons of financial problems and tribulations which in their general significance the plaintiffs had never tried to hide, deny or cover-up in the first instance.  Plaintiffs at all times acknowledged that they had pressing financial problems..."


The following are only a few of the common myths and false indicators that many fire investigators testify to be scientific evidence that an arson has occurred, when in fact many have been scientifically disproved.  Some are also phenomena which are regularly over-emphasized or misinterpreted to reach conclusions that are scientifically wrong.  While the cause of some fires can clearly be determined, others cannot be determined.  However, the causes of numerous fires are erroneously given for a variety of reasons.  Some are fraudulently misstated, but most wrong findings are just due to unsound teaching, ignorance, and an incredible campaign of false propaganda by the insurance industry.  The following are a few of those reasons:

1. Concrete spalling is often given as evidence of arson when not too long ago, it was decided by most experts that it should be debunked.  Numerous laboratory tests which saturated concrete with gasoline and other flammables (even torches were used on some) failed to produce the spalling.  There are many reasons why concrete will spall, and arson is usually not one of them.  Many consumers have lost everything to their insurance company because of this one faulty indicator alone.

2. Greasy windows a couple of decades ago was at least an indicator to look at.   However, with so many petroleum products now in the average home or business, greasy windows mean absolutely nothing.  Yet in some circles, it is still seen as an indicator of arson.

3. Color of smoke was often thought to be an indication of whether or not an accelerant was used.  There are usually too many variables for this to be safely interpreted.

4. White ash used to be a common theory until it was recently debunked.  In fact, experiments have proven that the existence of white ash means exactly the opposite of what some "fire investigators" use to justify denials of claims.

5. Accelerants burn hotter was disproved by none other than the National Fire Protection Association.  In their guideís section 921, 4-8.1 we read, "Wood and gasoline burn at essentially the same flame temperature."  It is true that an accelerant fire gets hotter faster but not hotter overall.  Still today, many consumers have their claims denied, and some even are convicted of arson because some ignorant or fraudulent "expert" convinced a jury that certain melted contents items proved accelerants were used.

6. Tripped circuit breakers proves little.  How often have you heard from some so-called expert that the power must have been on because it tripped?  Not necessarily.  Most all breakersí tripping action is spring loaded, so it can trip if the breaker gets hot enough even if it was off during the fire.  If you donít believe us, try baking one in your kitchen oven.  Put it in its OFF position, crank up the heat to 400į, and check it in about 20 minutes.  While this is not a classic false arson indicator, it does show that many so-called "experts" don't even know or understand the basics.  Yet they present long credentials to juries who assume they do.

7. Collapsed furniture springs. NFPA 921,4-14 states, "The collapse of springs cannot be used to indicate exposure to a specific heat source such as "flaming accelerant or smoldering combustion."  Another famous arson indicator is now debunked.

8. Fast fires do not in themselves indicate an arson fire.  There are many accidental fires that burn fast, too.  Numerous variables must be considered, and this is another example of a "little knowledge" being dangerous.  Captain Denny Smith ACFD recently wrote the following, "It is important to remember that an "accidental fire" can develop faster than an incendiary fire, and an incendiary fire can develop more slowly than an accidental fire.  Basically, there is no relationship between speed of fire growth and any particular ignition scenario.   Fire development scenarios (speed of fire growth) are contingent on many variables, such as HRR (heat release rates) of the initial fuel, geometry of the space (narrow rooms, wide rooms, high ceilings v. low ceilings), location of the fuel package within the space (in a corner, against a wall, near the center of the room), the lining materials, and the proximity of secondary fuels.  These are some of the variables to be considered in a fire growth scenario.  See NFPA 921, sections 3-4 and 3-5 for additional information.   Also see section 17-2.8 which is a warning against using subjective observations and terms such as Ďexcessive,í Ďunnatural,í or Ďabnormalí fire growth as indicators of incendiary fire causes."

9. Burn patterns. I have seen numerous "fire investigators" who read burn patterns less competently than someone would read tea leaves, and there is nothing about tea leaves that I believe.  Some of these so-called "experts" will say that it is a definite sign of a liquid accelerant if they find the bottom of a door charred.  Yet numerous tests have proven that that phenomena generally occurs when a door is closed and hot gases (not accelerants) escape through the space at the top of the closed door.  Cool air generally enters the compartment at the bottom of the door.  The hot gases then escape under the door and cause charring under the door and possibly even through the threshold. In a recent test, accelerants were poured in a living room and set on fire.  None was poured in the kitchen, yet holes were found in the kitchen floor but none in the living room (20 feet away).  There are so many complex variables involved in studying fire behavior which have caused many to call it "junk science."  The fact of the matter is that many of these so-called "experts" are no more qualified to perform surgery on you than they are to look at a fire and determine its cause.  Yet with refined speeches and designer suits, and with technical rhetoric that few judges and even fewer jurors can understand, they come across to most juries as "smooth as silk."  While some burn patterns can be accurately interpreted, it is often forgotten that the more fire damage to the building, the less they can tell. One investigator pointed to a hole in the roof which had collapsed and said that hole was evidence of a poured burn pattern.  Itís examples like this that are causing a growing number of people to call the field of fire investigation nothing but a "junk science."  Is the risk of error too high and too common not to take drastic action?

10. Multiple origin fires. While multiple origin is indeed a very good indicator of arson, itís down right sickening to see insurance companiesí investigators and police authorities interpret drop fires as multiple origins.  I was in a house once when a deputy fire marshal came in.  He said he knew nothing about electricity or furnaces, but said he was going to find out "what the hell caused the fire."  Within five minutes he thought he had it figured out.   He saw what he said was a second fire in front of the living room window.   When I asked him if it was possible for the heat from the utility room (clearly the point of origin) to have ignited the drapes which then dropped to the floor and scorched it, he became mad and left.  His report ruled that the cause of the fire was arson, when clearly it wasnít.  The owner had recently moved (job transfer), so it was "obvious" to this "investigator" that the owner just had to have done it.

11. Unpredictability: Honest experts who have conducted many tests will readily agree that fire sometimes does very mysterious things which just cannot be explained. Some experiments come out totally inconsistent with what is generally normal. Many experiments produce results which make no sense at all.  The fact is, there are numerous variables (moisture content in wood, type of wood, drafts [many of which are unknown], vents, wind [and wind often shifts back and forth], humidity, oxygen, size of rooms, ceiling heights, seldom knowing for sure everything that burned (fuel), etc., etc....any one of which can make a fire behave unpredictably.  Worse yet, after a fire does its damage, many possible variables are never even known to be considered.  Lt. Steckmeister recently wrote, "One of the many problems in fire investigation is that no single indicator can be taken at face value without considering other factors."

EDITORíS NOTE: Because the industry is wrong so many times and has failed to adequately police itself, more and more people have been raising the argument that fire investigation is nothing but a "junk science" or some kind of voodoo.   It appears that some courts may be agreeing. The U.S.Supreme Court Case of Daubert v. Merrill Dow Pharmaceuticals, ruled that expert testimony in areas of untested scientific theory (junk science) requires the proving the scientific reliability of every aspect of the analysis used to reach a final opinion. While the Daubert case was not about a fire investigation, nevertheless, The U.S. Court of Appeals has applied it to one in Michigan Millerís Mutual v. Benfield, U.S.C.A.No.97-9138.   Because so many innocent people are being jailed and wrongfully losing their homes and businesses to insurance companies, it is probably wise if Courts would declare it a "junk science" until a system with scientific integrity can be put in place.  We profusely apologize to the many fire investigators who are honest and competent, but there are just too many who are not which puts the public at too great of a risk.  We need to catch arsonists.  That is a  good thing to do, but we cannot allow the "lynching" of numerous innocent people by fraudulent and ignorant witch hunters.  A couple of years ago, a mother was not only charged with arson, but charged with the murder of her children who died in the fire.  When testimony of the deputy fire marshal during the criminal trial didn't "gel" the prosecutor became very suspicious.  Other fire experts were able to show that the investigation was not conducted or processed in accordance with professional standards.  The criminal charges were dropped against the mother and the deputy charged with perjury.  He was later ordered to pay the mother $500,000 in damages.  If the deputy didn't trip himself up, the likelihood of a different verdict would have been quite great.  Our hat goes off to this prosecutor who did not allow the adversarial process of our judicial system nor the fact that he originally believed the deputy to be credible to cloud his thinking.


It is a frightening fact that insurance companiesí experts are presenting to juries every day alleged evidence as scientific fact which has been scientifically proven to be wrong.  Their multi-page credentials are presented to a jury which becomes impressed and understands nothing the "expert" says except his conclusion that "the Insured did it."  To reinforce his testimony, the insurance companyís attorney generally presents several police or fire officials who will concur, but who really are not the least qualified to make such an opinion. Most of these law enforcement officers have the best of intentions but have unwittingly became servants of the insurance companiesí manipulation and campaign of propaganda.   Many of the industryís so-called experts have become very wealthy by being awarded much repeat business for their "uncanny ability to find arson."

Attorney Robert Richardson, from the State of Georgia, best sums up the situation in an article he wrote entitled "ARSON SEMINARS."  Here are some excerpts from his article:

One of the most dangerous and absolutely anti-consumer covens that I have ever witnessed is the Southeastern US Arson seminar held annually in Athens and now Brunswick, Georgia.  Iím sure that similar meetings are held in various locations across the nation.  The annual Southeastern Arson Seminar is a place where individuals who are not qualified to determine the cause and origin of a fire meet to teach policemen and firemen how to catch arsonists.  While catching arsonists is a good thing, teaching people who have never taken a physics, chemistry, or a fire science course how to determine from a review of the ashes of a fire the determination of the cause of the fire can be a dangerous thing for the public at large.

Even though many of the old wivesí tales that firemen and other fire investigators use have been discredited, the false science is still used to take the houses away from insured families.  The National Fire Prevention Association has published a standard by some concerned professionals in the fire prevention industry to try and stop or at least slow the spread of the false science that has enabled the insurance industry to avoid paying thousands of legitimate claims.  NFPA 921 has been savagely attacked by the individuals who make a living by determining the cause and origin of fires.  Many of the unqualified cause and origin experts do not enjoy having a guidebook that anyone can buy that debunks their science.

I once attended a two day arson seminar in New Orleans where one of the speakers lamented that the group had been using faulty indicators for was a speaker actually admitting the cause and origin profession had been doing it wrong for years.

When asked for comments from the attendees at the seminar, I asked what about the poor Insureds who had lost their homes and lifeís investments due to the cause and origin expertís mistake.  The answer I got was, "A good question! Any more questions?"

Guess who teaches the arson seminars?  People who feed at the trough of the insurance industry.  Claims adjusters, cause and origin people, chemists who process their samples, attorneys who are either on the insurance companiesí payrolls or are independent contractors but dependent on the insurance companiesí constant feeding.   It is not uncommon to find insurance professionals and insurance companiesí defense lawyers serving on associations of arson investigators.  I have never heard of a consumer advocate attending those meetings to try and temper the insurance companiesí propaganda.

Just so you get the picture, insurance companies sponsor, finance, support, send speakers (both employees and individuals beholden to them) to these seminars to teach firemen and policemen how to recognize what the insurance industry would like to be fire science.  It isnít science!  It is propaganda!  When you have a fire, donít think the fireman or policeman who investigates your fire is simply a dedicated public servant.  He may be in his or her own mind, but he or she may have been indoctrinated by the insurance industry.  Your tax dollars are financing this outrage.

If the state supported seminars really give a damn about the public and not just pleasing the insurance industry, consumer oriented speakers and scientists would be invited to give some balance.  Obviously, the insurance industry is not interested in balance, but rather indoctrination.  Rather than trying to convince firemen that every fire is caused by an arsonist (and when it is, over 90% of the time itís not the Insured), teach them that the insurance industry is interested in making them soldiers against the public interest.

...These "experts" arenít licensed by the state of Georgia!  If an insurance company finds a "predictable" expert who will say anything to please the insurance company and further if the insurance company claims adjuster is not honest, there is no way to protect yourself by going to the insurance commissioner or any other governmental agency...Count on a huge and savage fight if your state legislature ever tries to pass laws regulating these folks in an attempt to actually test their proficiency and ability.  The insurance companies donít want them closely tested...Burn some old abandoned buildings and make the experts tell the authority how the fire started and where.  (There will be more than one theory for sure.)

...Let me say in closing that many public safety officials are as competent and honest as the day is long.  Those individuals are aware of the fact that heavy insurance company involvement in their professional organizations does them no good.  Those people are trying to separate from the insurance industry personnel who have a vested interest in denying claims.  I admire those people who are sincerely interested in removing the stain of insurance company involvement in shaping their conclusions.

...I have deposed and cross-examined many cause and origin experts who were "assisted" by insurance claims adjusters when performing their investigations to determine the cause of a fire.  Why would a true professional need the help of a claims adjuster charged with the responsibility of paying or denying the claim?  An insurance adjuster has no business assisting or even accompanying an exert when a fire cause is being determined...

A cause and origin expert does not need any information about the Insuredís finances, domestic disputes, past criminal records, business failures or any other non fire related facts. Either the fire was intentionally set or it wasnít.  That determination should be made on examination of the fire scene alone!

EDITORíS NOTE: Whenever any adjuster informs an investigator of any negative information about the Insured, it is safe to assume that a signal is being sent.  As an example, while estimating a large commercial fire loss, the insurance companyís private investigator visited the scene.  After looking around and learning that the fire occurred a week before, he said that it was "way too late," as any investigation would be a "complete waste of my time."  However, 45 minutes later, after the adjuster bombarded him with information about the Insuredsí marital problems and the bouncing of a few checks, he marched in, and lo and behold, determined the cause was arson, even though his reasons for said cause were entirely based on non-fact.  The Fire Chief who was the first on the scene, witnessed just the opposite of what this private investigator used as the basis for "determining" arson.  He, of course, could have spent 10 minutes talking to the Fire Chief, the first person on the scene, but why waste his time since he knew it was obvious that anyone with marital problems and bounced checks who had a fire would have to be an arsonist.  This sort of thing happens all the time.  Itís even more frightening when you consider that often an Insured is unable to find an attorney who is experienced or aware of the flaws contained so often in the insurance companyís "expert reports."  In addition, the building or house is often demolished before the Insured even realizes they may need an investigator of their own.  The insurance companies laugh all the way to the bank.


The answer to that question is an emphatic and unequivocal YES.   To put this question in proper context, though, please review the five articles above concerning arsons.

The article on statistics and motives taught us that juveniles cause the vast majority of arsons, followed by revenge, crime cover-up, and then the Insureds.  Studies vary as to what percentage of arson fires are caused by Insureds, but the average indicates well less than 10%.  One study was as low as 1%.  Thus the question is, who should insurance companies, their investigators, their attorneys, and police authorities really be devoting the bulk of their time investigating?

Before we quote a spokesman for the insurance industry itself concerning this, let me ask that if Insureds are innocent in over 90% of arson fires, why do SIUís (Special Investigation Units) almost always devote 100% of their time trying to prove an Insured guilty rather than looking for the juvenile arsonist and others who are much more likely to have committed arson than the Insureds?  Why focus on a "long shot" if you really want the truth?   In fact, one member of an SIU suggested to his associates that when they are referred a case by a company adjuster and it does not result in them "hitting a home run," they should apologize.  Other SIUís classify a policyholderís loss as a "win." Some have contests among each other to score the most "wins."  With mentality like that, I rest my case.  Industry spokesman, Robert A. Meyerson, an insurance claims consultant in California, authored an excellent article about the abuse of SIUís in the January 1998 issue of "Claims" magazine. A few excerpts from said article follow:

"All too often, once a fraud indicator is identified, the thrust of the investigation seems to be to justify the suspicion rather than conduct an investigation that takes into consideration facts that would exonerate the Insured...Further, my observation, while reading testimony from several cases, is that some of the people handling the fraud investigation work from the premise that if there is a suspicion, the job is to prove the assumption..."

While Mr. Meyerson was in no way intending to attack the industry, nevertheless, he is pointing out that they are often guilty of bad faith and fraud, because whenever a company ignores facts which would exonerate the Insured and instead tries to prove a suspicion, not only is the company breaching the fiduciary duty they owe the Insured, but they are also in blatant violation of the Unfair Claims Act, not to mention engaging in tortuous conduct.  Any time a company ignores exonerating facts in order to avoid paying a claim, that is a fraud, and fraudulent conduct is in fact criminal.  Mr. Meyerson goes on in his article and highlights three specific claims which he believes were not handled correctly.  In one, the SIU investigator exploited an Insured who was an immigrant with some language difficulties who somehow was even able to overrule the companyís V.P. of Claims, who said the claim should be paid, but instead the SIU denied the claim.  The Insured was instructed to document his claim and went back to a jeweler to obtain duplicate receipts.  The receipts were obviously duplicates, written from consecutive pages of a receipt book.  The Insured, again an immigrant with some language difficulties, characterized them as "originals" (meaning the jeweler provided them) which was the SIUís basis for accusing him of fraud.  He hired a good attorney who obtained a $1 million dollar settlement.   Had he lost his claim, the immigrantís defeat would have resulted in a celebration (a "win") for the SIU.  The other two cases he describes are just as bad. He concludes his article by saying,

"Further, the suspicion of fraud is not proof of fraud.  SIU investigators should not think of themselves as bounty hunters.  Investigation of these three cases above could not, by any objective standard, be considered an effort to evaluate.   Rather, they were exercises in proving the validity of a predetermined position."

As Mr. Jerry Provencher, the Director of Property Claims for the Maryland Insurance Group, reminds us in his excellent article ("Claims Magazine", September 1994), that "The covenant of good faith implied within every insurance policy requires the investigation to objectively balance all evidence which could impact a decision on coverage.  He references that basic truth to 1Couch On Insuranceß1:5,LCP1982.   He states also in his article that "an expert who fails to recognize and weigh evidence supportive to the policyholders position is a dangerous liability."  It seems clear at least to this editor that any insurance company representative, any defense attorney representing an insurance company, any investigator, or other personnel hired by an insurance company who intentionally ignores or twists any facts or evidence in an effort to deprive an Insured of a valid claim is guilty of criminal fraud (and often the violation of civil rights) and should be charged accordingly.  They are literally more dangerous and do more damage than people with guns who rob banks.  Not only do they fraudulently cause people to lose their houses and businesses, but sometimes families and liberties are lost along with oneís reputation.  I know of attorneys who have told adjusters to burn fire reports (which listed the fire's cause as accidental) and who have tried to get police officials to change their reports from accidental to arson.   Should not these attorneys be in prison rather than being "officers of the Court"?  It is not fair for our governors, our insurance commissioners, and our legislatures to allow such an unchecked system, one which even recruits and manipulates our law enforcement departments to become agents of insurance companies, one which helps them to defraud tax paying citizens...the people whom our governors, insurance commissioners, and legislatures are sworn to protect.  When I recently raised "cain" about a state deputy fire marshalís finding of arson which clearly was based on blatant incompetency, and pointed out that we had experts which disproved it, I did not even receive an apology, but rather I received a subpoena.  No desire to change a wrong practice, just a desire to intimidate someone who caught their incompetency.

The fact that many insurance companies and their investigators and lawyers spend a disproportionate time trying to prove their Insureds are criminals by intentionally exploiting finances and other almost meaningless innuendoes, while ignoring exonerating facts, indicates they are, in fact, out of control.  If Mother Teresa had had a fire in this country before her death, using the same sick logic many companies generally employ, her claim would have been denied on the grounds she needed money.  Couple that with the fact that many S.I.U.s are required to submit company reports indicating how much money each unit is saving the company, and we have a situation that is intentionally set up for S.I.U.s to view Insureds as adversaries instead of honest, paying customers, which the vast majority of them are.


Michigan Supreme Court in Smith v. Michigan Basic Property Insurance, 90632,90639, confirmed the trial courtís ruling that the insurance company could not introduce into evidence the Insuredís poverty, unemployment, underemployment, or dependence on welfare to show motive, or for any other purpose. The Supreme Court said its decision in the 1980 criminal case People v. Henderson drew a distinction between evidence that a people are chronically short of money and evidence that they had experienced a shortage which was novel or unusual for them. EDITOR'S NOTE: This is a much needed precedent as the insurance industry has in too many cases escaped liability solely because a person was poor. I have said many times that I believe there is a much greater percentage of "well-to-do people" who cheat and commit frauds than the poor.  When you look at it objectively, it just isnít fair for an insurance company to try to prejudice a jury against an Insured because of that personís lack of wealth when the insurance company itself has a much, much greater financial motive for avoiding payment.  After all, the Insured had just lost possibly everything they had.  The best they could possibly do is break even, whereas the insurance company can gain 100% profit.


The Richmond, Virginia Fair Housing Organization, Housing Opportunities Made Equal (HOME) was awarded $100 million against Nationwide over accusations of redlining and racial discrimination.  The jury reached their decision on October 27, 1998.  Nationwide issued a written statement that it would appeal to the Virginia Supreme Court.  Their attorney, Arch Wallace, of Richmond, said, "The plaintiffs have not presented any factual evidence to support their claims against Nationwide, instead they swayed the jury by relying on insinuations and emotionally charged allegations which have no place in a Court of Law."  Nationwide spokesman, John Millen, called the verdict outrageous and "totally out of synch with the evidence as it was presented in Court."  He said that Nationwide has written thousands of homeowners' polices to African-Americans in the Richmond area, and that Nationwide does not unfairly discriminate.  This comes on the heels of Nationwide agreeing to a $5.3 million settlement in a lawsuit that also accused it of discriminating against minority homeowners in Toledo, Ohio and after Nationwide Life settled a life insurance class action suit for over $100 million.   HOME conducted 15 tests of Nationwide in the Richmond area in which blacks and whites posed as homeownerís seeking homeowner policy quotes.  In the majority of cases, HOME spokeswoman, Connie Chamberland, said, "The black policy seekers were not treated as well as the white policy seekers, and most of the black homeowners did not even receive quotes from the Nationwide agents.  When they did get quotes, they were invariably higher than what the whites were quoted."  Nationwide also settled a lawsuit in Louisville, Kentucky that charged it with racially discriminating practices.   They are currently under the gun from the Akron, Ohio-based Fair Housing Advocates Association (FHAA) because of similar complaints. The FHAA has filed an administrative complaint with the U.S. Department of Housing and Urban Development (HUD) against Nationwide alleging the company regularly practices redlining. EDITOR'S NOTE:  This is just one example of the industry's practice of racism and discrimination against the poor.  Insurance companies will often deny claims just because a person is poor.  They claim the need for money is a primary motive for fraud, yet I know more crooked lawyers and politicians than crooked poor people. Hopefully Smith v. Michigan Basic will be a much needed trend setter.  Please, Mr. Commissioner, our friends need your help. Not only are many frauds regularly perpetrated against the poor, but the premiums they pay are much higher for the coverage amount than average.


The FBI met with Allstate Insurance Companyís officials on five occasions in April of 1998 concerning the Northridge earthquake.  Allstateís former employee of 25 years, Jo Ann Lowe, had asserted that Allstate systematically pressured engineering firms to alter their earthquake damage reports in order to lower claim values.   Allstate had denied any wrongdoing and has asserted, if anything, the claims they paid were inflated.  A month after the FBIís meetings with company officials, the FBI obtained search warrants and raided several of Allstateís offices impounding thousands of documents.  Ms. Lowe said she had complained about the alleged practice to Allstate officials, who later denied that it had occurred. In a civil suit brought against Allstate last year by Prop. 103 Enforcement Project on behalf of the general public (Los Angeles Superior Court Case No. BC178734),  Harvey Rosenfield, director of the Prop. 103 Enforcement project, said that "Itís fraud to attempt to rip off the policyholders.  People got squeezed by the Ďgood hands.í"


Among other things, the Uniform Unfair Claims Settlement Act states the following:

1.  The insurers are required to keep in their claim files detailed notes and work papers pertaining to each claim.

2.  The insurer must fully disclose to their Insureds all pertinent benefits, coverages, and other provisions of an insurance policy or insurance contract under which a claim is presented.

3.  No agent shall conceal from a first party claimant benefits, coverages, or other provisions of any insurance policy pertinent to a claim.

4.  No insurer shall deny a claim for failure to exhibit the property without proof of demand and unfounded refusal by a claimant to do so.

5.  Every insurer, upon receiving notification of claim, shall promptly provide necessary claim forms, instructions, and reasonable assistance so first party claimants can comply with the policy conditions and the insurerís reasonable requirements.  Companies must comply with this paragraph within 10 working days of notification of a claim.

6.  Every insurer shall complete investigation of a claim within 30 days after notification of claim, unless such investigation cannot reasonably be completed within such time.

7.  Within 15 working days of receipt by the insurer of properly executed Proofs of Loss, the first party claimant shall be advised of acceptance or denial of the claim by the insurer.  No insurer shall deny a claim on the grounds of a specific policy provision, condition, or exclusion unless reference to such provision, condition, or exclusion is included in the denial.  The denial must be given to the claimant in writing, and the claim file of the insurer shall contain a copy of the denial.  (An exception to this requirement is where the insurance company has a reasonable basis supported by specific information available for review by the insurance regulatory authority that the first party claimant had fraudulently caused or contributed to the loss by arson.)  If the insurer needs more time to determine whether a first party claim will be accepted or denied, it shall so notify the first party claimant within 15 working days after receipt of the Proofs of Loss, giving the reasons more time is needed.

8.  Insurers shall not continue negotiations for settlement of a claim directly with a claimant who is neither an attorney nor represented by an attorney until the claimantís rights may be affected by a statute of limitations or a policy or contract time limit without giving the claimant written notice that the time limit may be expiring and may affect the claimantís rights.

Misc:  Many states have enacted provisions which either modifies or adds to the Uniform Unfair Claims Act.  A few of them specifically prohibit insurance companies from the following: 

a)  Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue.

b)  Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies.

c)  Refusing to pay claims without conducting a reasonable investigation based upon all available information.

d)  Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.

e)  Compelling Insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less that the amounts ultimately recovered in actions brought by such Insureds.

f)  Attempting to settle a claim for less than the amount to which a reasonable man would have believe he was entitled by reference to written or printed advertising material accompanying or made part of an application.

g)  Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of the Insured.

h)  Making known to Insureds a policy of appealing from arbitration awards in favor of Insureds for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.

i)  Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

j)  Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

k)  Delaying the investigation or payment of claims by requiring an Insured to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.

l)  Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

m)  An insurer may not request a first party claimant to sign a release that extends beyond the subject matter that gave rise to the claim payment.


In Tudor Insurance Company v. Township of Stowe, 697 A.2d 1010 (Pa. Super. 1997) ruled that an insurerís claim that its policyholder misrepresented earlier claims against it in the policy application required "clear and convincing" proof, and not just evidence to a preponderance standard.  The Court stated that the presumption of fraud only comes into play after an Insurer has proven, by clear and convincing evidence that the Insured knowingly made false statements that were material to the risk against which the Insured sought to be protected.


While many lawyers and other public adjusters acquiesce to the implementation of a co-insurance penalty, it is the editorís view that unless the Insured has been informed by the insurance company or their agent that they are underinsured and should increase their coverage, the implementation of a co-insurance penalty is so unfair and unjust that it should be vigorously contested.  It has been our experience that the few (most do not try to implement it) insurance companies who try to exploit this clause will back down when the flaws of it are argued.  Not only does it violate the industryís custom and tradition, it also violates the consumerís reasonable expectation. The terminology is often ambiguous, and at least one state has declared it to be unconstitutional as being against public policy.  Sometimes it can be shown that the insurance company knew of the "under-insurance" and ratified the coverage anyway.  Generally, the agent will concede that he believed the coverage amount he recommended was adequate and there would not be a co-insurance penalty.   Assuming the Insured believed the same, you may have a case of a mutual mistake. While insurance companies may suggest that the agents work for the Insureds, that representation is usually contradicted by their literature, agency agreements, and the basic law of agency.


The Federal Third Circuit in Polselli v. Nationwide Mutual Fire Insurance Co., 126 F.3d 524 (3d Cir. 1997) ruled that a bad faith action is separate and independent from the breach of contract claim.  The Court decreed that because a bad faith claim enables an Insured to enforce and insurerís implicit contractual duty of good faith, an assessment of attorney fees for time spent prosecuting a bad faith claim is necessary to make the Insured "whole" under Section 8371 of the Pennsylvania bad faith statute.  The parties had settled the breach of contract claim, and the Court conducted a bench trial on the bad faith claim.


The Wisconsin Supreme Court in Davis vs. Allstate reinstated a juryís award for punitive damages.  The Court said that Allstate was wrong by demanding receipts which did not exist, and also was guilty of bad faith for making a settlement offer which was lower than they knew was fair.  EDITOR'S NOTE: It is just not fair for any insurance company to require receipts as a condition for payment.  They know that no one keeps all receipts.  While documentation for large or unusual items may not be unreasonable, it is a fraudulent misrepresentation for any company to say receipts are required before payment can be made.


FC&S Bulletinís Q & A 479 states that the principle of indemnification obligates an insurer to pay for the undamaged portion of items (kitchen cabinets, roof, etc., etc.) where the replacement of the damaged portion will result in a mismatch.   The Court in Higgenbothan v. New Hampshire Indemnity Co., 498 So. 2d 1149 (1987) said that because a repair of an Insured's roof which had been damaged by a windstorm could not be guaranteed leak proof, the company owed to replace the entire roof and was ordered to pay all penalties and attorney fees for taking their "arbitrary and capricious" position.  Also see Mastin v. Sandy & Beaver Ins. Co., 461 N.E. 2d 332 (1983), Halloway v. Liberty Mutual Fire Ins.Co., 290 So.2d 791 (La. App. 1974), and Hutcherson v. Tennessee Farmers Mutual Ins. Co. of Columbia, 1987 CCH Fire & Casualty Cas. 288 (Tenn. App. 1986) for supporting cases.


In a recent Melvin Fieldsí survey, Californians ranked insurance companies dead last when asked to rate their degree of confidence in various industries.


The insurance policy is a contract that states if you sustain a covered loss, your insurance company will pay to you the fair value of your loss.  If your payment was not fair, either the insurance company intentionally defrauded you or there was a mutual mistake between you and them as to the correct amount of your loss.  The settlement is generally not binding under either ground, even if you signed a "release" or a check which said "full and final."  In other words, if they cheated you, not only did they breach the policy, but they violated the law. If they made an honest mistake (which most under-payments are), they have yet to fulfill the promises made to you under the terms of the contract of insurance they sold you.  This assumes that the Statute of Limitations has not expired.  (For a review of your situation, please click May We Help You?)


There are pros and cons concerning the appraisal process.  It is often a good way to resolve a tough claim, but many insurance companies abuse and manipulate the process by "stacking the deck" against the Insured.  There are many situations when both appraisers and umpire are advocates for the insurance industry.  If the appraisal process is being implemented, the Insured should have their attorney write a letter specifically instructing the company that the process better not be manipulated or interfered with.  As is often the case, the dispute which is alleged by the insurance company is not an "honest" dispute, but is one that is based on either fraud or incompetency.  If an umpire is selected who is pro-industry, often a low-ball estimate is merely rubber-stamped, and the consumer loses big time.  Some attorneys will even file a lawsuit at this point alleging breach of contract and bad faith.   We have had cases in which after we obtained substantial appraisal awards, also received settlements over and above the policy limits to settle the bad faith counts contained in the lawsuit (bad faith damages cannot be decided in appraisal).  We would also encourage attorneys to ask for appraisal expenses in situations where the award clearly indicated that the company's settlement offer was substantially low.  The Insurance Consumer Advocate will soon have a lengthy and detailed report analyzing the appraisal process from both a legal and a practical approach.  Be sure to subscribe to our free Internet newsletter for more information on this and many other insurance related topics.


Most insurance policies contain a provision which excludes "sewer backup" losses from coverage.  However, many times the water which comes into the building from a drain sewer is one which reached its capacity due to a hard downpour of rain.   This type is often covered.  We have a few happy clients whose claims were denied but quickly paid based on the interpretation of the Indiana Court of Appeals case of Thompson v. Gneiss Building Corporation and Great American Insurance Company, 394N.E.2nd242(1979) which in essence stated that to have a "backup" there must be a reversal of flow, and since an overfilled storm sewer comes directly in without a reversal of flow, there is no backup, and thus that type of loss is not excluded under the "sewer backup provision."  While not all states have adopted that opinion, the trend is to do so.  Also see Aetna v. Crawley, 207S.E.2nd666(1974).


Some policies will exclude certain coverages if a property is vacant for 30 or 60 days.  It should be noted that a property containing furnishings is legally considered unoccupied and not vacant.  The difference between vacancy and unoccupancy has been the deciding factor in more than one of our clients being paid for their loss which originally had been denied.  Some companies have amended their policies to now exclude certain coverages for properties which are also unoccupied, but it is certainly worth checking out if one of your claims has been denied.  


While not always true, most Insureds rely upon the agentís professionalism and expertise to recommend proper coverage amounts.  Most agents will even calculate a buildingís replacement cost before writing a policy.  If they are wrong, your lawyer should consider making a demand that they file an E & O claim (Errors and Omissions), and/or a demand that the company reform the policy.  If, in fact, it was everybodyís intentions for you to be insured for 100%, then either a negligent act occurred or there was a mutual mistake.  The insurance industry is the only industry I am aware of which has the audacity to suggest that they should be rewarded for their own negligence, i.e. lower settlement payments and co-insurance penalties.  We have more than a few happy clients who collected more than policy limits in situations like this, but we do acknowledge this is usually an uphill battle.


In July 1997, a Los Angeles couple filed a $46,000 claim with Farmers Home Group Insurance Company which the insurer denied saying the amount of damages did not even exceed their deductible.  The jury found that the insurer deliberately ignored the full amount of the plaintiffsí damages and awarded Leon and Mittie Robbins a total of $7.45 million in punitive damages plus the original $46,000 repair cost claim and an addition $100,000 for emotional distress.


A Superior Court jury in July 1997 found that 20th Century Insurance Company had acted in bad faith by denying a homeownerís claim that had been filed several months past the one-year filing deadline set in the California Statutes.  Though the judge in the case said that 20th Century gave the plaintiffs plenty of notice about the deadline, the jury disagreed and awarded James and Lorraine Meyer $6.75 million in punitive damages plus $480,000 to cover repair costs, court costs, and emotional distress.  Just before publishing, we learned that the judge remitted the judgment to $500,000.  20th Century has dropped their appeal, and the plaintiff's attorney said they may seek a new trial.  EDITOR'S NOTE: The enforcement of the one-year policy deadline to file suit varies widely from state to state. Some states mandate the one year deadline to begin from the date of denial. Other states interpret it from the date that the damage was discovered. It is generally not enforced where parties were in negotiations shortly before or at the time of deadline. Some Courts, due to the severity of the deadline, will look hard to find a waiver. It is the editorís opinion that unless a company is prejudiced by a delay in filing a lawsuit, that the various legislatures and insurance commissioners should not allow its use. After all, something is drastically wrong if an insurance company cannot settle a claim within a 12 month period.  They are really being rewarded for their delay tactics and for violating the Unfair Claims Act.  Some Courts will dismiss the breach of contract claim but not claims for bad faith and other tortuous conduct if they are properly alleged.


Just a few of many, many things that are often overlooked in the settlement of a claim.   The debris removal provision will pay an addition 5% over and above the limits for debris removal and another 5-10% for trees, plants, and shrubs if limits are exhausted.  Sales tax should always be added for contents.  If limits are exhausted, be sure you confirm whether or not there is an inflation guard protector or guaranteed replacement cost endorsement in effect. There may be more coverage than you think.  Most policies will also allow you to replace off premise in order to collect full replacement cost benefits.  A new provision of the I.S.O. forms is that you are allowed to use up to 10% of the policy limits to correct code violations.