Saturday, April 27, 2013

Fighting Insurance Fraud - Some Red Flags That Should Cause An Insurance Agent To Ask More Questions

Tague Alliance works diligently with our member agencies to help them build profitable and stable independent insurance agencies.  In working to mitigate our loss ratios we need to utilize all frontline underwriting tools and insights that are available.  The article below provides some great tips on various red flags that an insurance agent should be aware of.

Fraud Red Flags

Allied's Special Investigation Unit (SIU) is where the fight against insurance fraud ends. Your agency is where it begins. By reviewing this list of red flag behaviors for a new applicant, you may be able to head off a potential fraudulent claim.

Please note: The following are industry red flags as established by the NICB. The presence of one or more does not prove fraud.

NICB general indicators of application fraud
The following list of behaviors may indicate a possibility of intent to commit fraud when applying for insurance.
  • Unsolicited, new walk-in business, not referred by existing policyholder.
  • Applicant walks into agent's office at noon or end of day when agent and staff may be rushed.
  • Applicant neither works nor resides near the agency.
  • Applicant's given address is inconsistent with employment/income.
  • Applicant gives post office box as address.
  • Applicant has lived at current address less than six months.
  • Applicant has no telephone number or provides a mobile/cellular phone number.
  • Applicant cannot provide a driver's license or other identification, or has a temporary, recently issued or out-of-state driver's license.
  • Applicant wants to pay the premium in cash.
  • Applicant pays minimum required amount of premium.
  • Applicant suggests price is no object when applying for coverage.
  • Applicant's income is not compatible with the value of the vehicle to be insured.
  • Applicant is never available to meet in person and supplies all information by telephone.
  • Applicant is unemployed or self-employed in transient occupation.
  • Applicant questions agent closely on claim handling procedures.
  • Applicant is unusually familiar with insurance terms or procedures.
  • Applicant is not signed in agent's view (i.e. mailed in).
  • Applicant works through a third party.
  • Applicant has had a driver's license for significant period, but not prior vehicle ownership and/or insurance.
NICB indicators associated with coverage
Existence of any of the following conditions may indicate intent to commit fraud.
  • Name of previous insurance carrier or proof of prior coverage cannot be provided.
  • No prior insurance coverage is reported although applicant's age would suggest prior ownership of a vehicle and/or property.
  • Significant break-in coverage is reported under prior coverage.
  • Question about recent prior claims is left unanswered.
  • Full coverage is requested for older vehicle.
  • No existing damage is reported for older vehicle.
  • Exceptionally high liability limits are requested for older vehicle inconsistent with applicant's employment, income or lifestyle.
NICB indicators associated with applicant's vehicle/business
Existence of any of the following conditions may indicate intent to commit fraud.
  • Vehicle is not available for inspection.
  • Photos are submitted in lieu of inspection.
  • Vehicle does not appear to be appropriate for the claimed address or income.
  • Vehicle has an unusual amount of after-market equipment (stereo, wheels, car phone, etc.)
  • Vehicle inspection uncovers discrepancy between VIN listed on title/bill of sale and the VIN plate on the dashboard or the manufacturer's door sticker.
  • No lienholder is reported for new or high-value vehicle.
  • Vehicle title or authenticated bill of sale cannot be produced.
  • Applicant is seeking new business coverage and has never been in any, or this type of business, in the past.
  • Sound financial backing for the business to be insured is not apparent.
  • Loss payee is not a legitimate lending institution.
© 2001 Allied Insurance, a member of Nationwide Insurance, All Rights Reserved

Wednesday, April 3, 2013

She was drunk at her Junior High Dance Who gave her the liquor???

As insurance agents, we all know how important it is for our clients to carry sufficient liability coverages. In some cases, it's difficult to explain to clients why they need it, what kinds of claims can occur, and how the liability coverage would kick in. Here is a GREAT example, that a lot of clients don't think about.... liability associated with their children and the choices they make.

Written By:

Laurie Infantino, AFIS, CISC, CIC, ACSR, CISR, CRIS
President of Insurance Community Center

This weekend I had a friend, Amanda, visit for a couple of days. Within hours of arriving she got a call from her daughter’s school saying she (her 15 year old daughter) had to be picked up immediately because she and her friends had been drinking. The drama unfolded with her being picked up, suspended for at least a day and hopefully being an indentured servant at her home for an unlimited time frame. But the question Amanda kept asking in heated tone was “where did you get the liquor”. Finally, after escalating threats, the daughter admitted to getting the liquor from her friend’s parent’s home with whom she was spending the night. Lucky in this case there were not any injuries---no one getting behind a wheel intoxicated—but, it could have happened and what then.


As we look at the holiday season and the parties we give and attend (and those our children are attending) we have to revisit our treatment of this issue from our last holiday newsletter which discussed “Social Host Liquor Liability”.

Most of us are aware of business’s legal requirements to stop serving alcohol to people that are visibly intoxicated. This is especially true for those insureds in the business of serving alcohol. What we are not as aware of is the liability we assume by serving liquor in a social setting referred to as “social host” liability.

We cannot have this discussion without broaching the topic of parents who actually provide alcohol to minors in their homes—who become “social hosts” to under aged people. It may be that they do not serve the liquor to the minors but make it available or they allow alcohol to be brought in their home by their children’s friends. Some parents use a thought process that goes something like this: I would rather my child drink at home than attend a party and either drive home drunk or ride with someone who has been drinking. And here is the flaw in that thought process while you think you are providing a safe haven to your child, your friend’s parents may not share your same philosophy and, in fact, you have contributed to the delinquency of a minor. If that child gets hurt or hurts others and you contributed to that harm by providing alcohol, you will be named in the ensuing lawsuit and you may find yourself being held liable.

This brings us to the discussion of “social host” liquor liability. We become a social host whenever we are hosting an event that serves liquor be it a dinner party for another couple or putting on a wedding in our backyard. Examples of “social host” liability could be cases where our guest gets intoxicated and hurts themselves or causes injury to others; or the situation where our guest leaves our party and is involved in an accident as a drunk driver. Or, it could be a guest that leaves your party and is stopped and ticketed for drunk driving. I know you might be thinking “my friend…my brother in law would never sue me”. Surprise!

They will.

State laws differ as relates “social host” liability and not all states recognize social host liability. However there are some guidelines as to when a host serving liquor can be held liable:

-The host did, in fact, provide or serve liquor to the individual in question

-The individual was intoxicated and caused either bodily injury or property damage to a third party

-The host was aware or “should have been aware” that their guest was intoxicated

And now to the question of insurance when you are sued as a result of someone becoming intoxicated in your home and incurring or causing damage be it bodily injury or property damage. The Homeowners Policy? The Umbrella Policy? The answer is a “probably” yes but as always you have to check the policy. While the Homeowner’s Policy may not have a specific liquor exclusion, most policies will have an “expected or intended injury exclusion” that the claims adjuster may or may not want to pursue. Whenever we talk about limits on a policy, these are specifically the type of situations that can take that $300,000 limit trying to respond to a $1,000,000 judgment.

The ISO 2000 edition says the following:

E.1. Expected or Intended Injury “Bodily injury” or “property damage” which is expected or intended by an “insured” even if the resulting “bodily injury” or “property damage”:

a. Is of a different kind, quality or degree than initially expected or intended; or

b. Is sustained by a different person, entity, real or personal property, than initially expected or intended.

Could this exclusion be broad enough to remove coverage for the parents? Perhaps it could. Could you then look to the Personal Umbrella? Better read the form. Some forms have a liquor exclusion that applies when serving liquor to a minor.

Let’s talk for a moment about a business that occasionally or incidentally serves liquor. The Christmas season is the perfect time for this discussion. We go to our hairdressers and they offer us a glass of wine, or eggnog with a little bourbon. The office that decides rather than taking everyone to an expensive restaurant will have pizza and beer brought into the office for the big celebration. Is there coverage on the Commercial General Liability Policy for the liability of the business in these situations? Are these businesses in the “business of serving liquor”? The CGL provides automatic coverage as the exclusion only applies if the named insured is the business of manufacturing, selling, serving or furnishing alcoholic beverages. The result of this language is that a business typically has coverage for these “social” situations involving liquor.

Questions about liquor liability coverage? Or placing liquor liability business? Contact Tague Alliance at (760) 729-1143, or