Insurance Fraud is committed to obtain payments under an insurance policy and is not uncommon. The consequences of Insurance Fraud could be serious, which may include, inter alia, jail time and criminal record for the person committing an insurance fraud. However, to prove an insurance fraud, the insurer will have to prove its case on more than a mere “balance of probabilities”. The burden of proof required is very stringent as the allegations are considered quasi-criminal in nature. Thus, many a times the fraudulent claims get paid since there is not enough evidence to prove that an act of insurance fraud has been committed.
In Kolesnykov v. ICBC, 2004, Madam Justice Martinson, writing for the Supreme Court of British Columbia stated:
Fraud is a quasi-criminal allegation and a finding of fraud could affect the claimant’s life well beyond the outcome of the insurance claim. The trial judge, when scrutinizing the evidence, must keep in mind that substantially more than a mere tilting of the evidentiary scales is required. The quality of the evidence must be assessed taking into account the degree of proof required. The scrutiny is heightened in the sense that the judge must determine whether the evidence is clear and cogent enough to more than just tilt the scales. The more serious the allegation and its consequences, the greater the degree of proof required.
Nancy-Louise Hustins, author of What is a Crime? Defining Criminal Conduct in Contemporary Society, for Ottawa Law Review, discusses Insurance Fraud in her book. She refers to "Criminalization in Private: The Case of Insurance Fraud", by Richard V. Ericson and Aaron Doyle, stating:
Ericson and Doyle's interviews of 224 insurance personnel in Canada and the United States reveal the insurance industry operates in a climate of suspicion, deception and mutual distrust. Their research reveals that exaggeration of claims is a widespread practice in the insurance industry. Analogous to Penney's example of downloading music files over the Internet, exaggeration of insurance claims is so common that the majority of claimants do not view themselves as engaging in inappropriate behaviour. Research indicated that claimants and insurers distrust one another and engage in deliberate deception that has become institutionalized in the claims process and in the insurer-client relationship. Claimants expressed temptation to exaggerate claims they feel will be minimized, whereas adjusters attempt to minimize claims they view as exaggerated.
In Guilbert v. Economical Mutual Insurance Company, 2019, heard by the Court of Queen’s Bench of Manitoba, the Insurer was successfully able to deny a claim based on deliberate acts committed by the Insured, in setting his own business’ premises to fire.
The facts of the case are as under:
The Plaintiff (“Guilbert”) operated a home hardware store, insured by the Defendant (Economical).
In February 2015, the store was gutted by fire and the incident was immediately reported by Enterprises to Home Hardware, to Programmed Insurance Brokers Inc. (PIB), Enterprises' broker, to Economical, and to Crawford & Company (Canada) Inc. (Crawford), the independent insurance adjuster.
Economical denied insurance coverage alleging fire was deliberately set by the plaintiff. Guilbert brought in an action against Economical for coverage and punitive damages, and Economical, maintaining denial, counterclaimed for claim monies paid to mortgagees and clean up costs.
POSITION OF THE PARTIES
Denies Arson and sues for damages.
Alleges fire was deliberately set by the plaintiff (Allegation of Arson), and also that the plaintiff misrepresented the facts.
The onus was upon Economical to prove that the plaintiff deliberately set fire. The court stated:
The cases suggest that evidence, including circumstantial evidence, of an intentional setting of the fire, exclusive opportunity to set it, and motive is highly relevant.
Clearly, motive and circumstantial evidence are the two major factors in such cases.
At trial, the plaintiff conceded to the financial motive since his business was failing. He was also in talks with prospective purchaser(s) to sell the business.
The following, inter alia, were considered:
· Guilbert’s practice was to leave the premises by 1530 hours, but on the day of fire, he stayed until closing at 1800 hours, and was the last one to leave.
· On the day of the fire, Guilbert directed employees to remove from the building an ice auger owned personally by Guilbert. He also removed his fishing tackle.
· Levandoski, a long-time acquaintance of Guilbert testified that during the weekend before the fire, he received a phone call from Guilbert advising Enterprises had just sold the business and Guilbert was seeking employment. This was not true.
· Guilbert acknowledged that two days after the fire, he could have deleted multiple text messages between himself and a prospective buyer.
· Actual cash value for the loss was sought for on a replacement value policy.
Further, the court confirmed that “The R.C.M.P.'s decision to not pursue criminal charges against Guilbert is not determinative of these civil proceedings”.
Kroft J., writing for the Court of Queen’s Bench of Manitoba, stated, dismissing the plaintiff’s action and allowing the defendant’s counterclaim:
Taking all the evidence into account, which in this case is mostly circumstantial, motive, opportunity, and incendiary cause are established. Economical has proved, on a balance of probabilities, Guilbert started the fire—a clear breach of the plaintiffs' contractual and statutory obligations to Economical….
It was also confirmed that though the court carefully considered expert reports, they were not essential to the conclusion reached on motive and circumstantial evidence.
Don’t suspect everyone, but don’t just let it go either.
Clearly, the ruling, for most part, was based on motive and circumstantial evidence only. Thorough investigation enabled Economical to prove its allegation of arson, which is generally difficult to prove. Establishing motive and circumstantial evidence require critical thinking and right questioning.
Sometimes, an adjuster needs to wear the shoes of an investigative police officer and critically analyse the answers being provided by the claimant/insured to determine the facts of a case. Finally, don’t simply rely on the police report or an expert report. Dig deeper when need be. An expert report that confirms cause of fire as “undetermined” does not necessarily mean that an action cannot be pursued against a party that you suspect to be involved in setting the fire. Look for that motive and for the circumstantial evidence. Look for those “rare occurrences” and “out of the ordinary” circumstances.