The “Red Flags” of Auto Insurance Fraud
Colorado law mandates car owners to buy liability and property damage insurance. Insurance spreads risk. Insurance transfers risk and economic power from us the insureds to the insurance company in exchange for money, called a "premium."
This social device enables us to pool our money so the few who require financial help when suffering a covered loss will get paid quickly and fairly without being squeezed or delayed.
Insurance companies bank profits when premiums are paid, knowing statistically not all policies require payouts. They bank profits based on calculating these risks. They invest their money to gain greater income as well. This prudent use of our money should keep rates affordable.
Colorado law requires insurers to act in good faith in all dealings toward their insureds and policyholders,Ballow v. Phico Insurance Co., 875 P.2d 1354 (Colo. 1993), but notes that this duty of good faith is a two-way street. Bailey v. Allstate Ins. Co., 844 P. 2nd 1336 (Colo. App. 1992).
Where the insurer acts unreasonably in delaying or denying benefits, the conduct becomes actionable without the insured being required to show any substantial economic or physical loss. Goodson v. American Standard Insurance Co., 89 P.3d 409 (Colo. 2004).
Bad faith in first party instances occur where the insurer acts unreasonably in delaying or denying benefits combined with knowledge the conduct is unreasonable or with a reckless disregard of whether the conduct is unreasonable. Farmers Insurance Group, Inc. v. Trimble, 805 P.2d 419 (Colo. 1991).
Claims adjusters should follow certain principles guiding their conduct. But sometimes, misguided people seeking insurance money. Here are some red flags recognized by claims professionals from the Colorado Claims Association to consider when people are looking for money, or damages, arising from car wrecks or crashes caused by someone else:
Lawyer contact of claimant pre-dates medical care.
Lawyer not doctor directs medical care.
Severity of pain out of line to documented injuries.
Medical bills or receipts for payment absent, missing or undocumented.
Demand for quick settlement before enough information available about injuries and crash.
Wage losses can't be proved or documented.
Severity of injuries out of proportion to objective findings.
Injuries inconsistent with medical science.
Marked inconsistencies with police report and claimant's version of crash.
Numbers of previous claims for insurance money for similar injuries as shown by insurance company Index Bureau data search.
Frequent address or phone number changes without explanation.
Exclusive place of contact is a bar, coffee house or hotel.
Frequent job changes without explanation.
Unemployed with no ability to document claimed wage loss.
Out of state, expired or temporary driver's license.
Extensive injuries claimed from minor impacts to car or occupants.
Lengthy unexplained gaps or intervals in medical care or treatment.
Medical bills show "treatments" on Sundays and holidays.
Offers inducement for "quick" settlement.
Unusually aggressive in pressing for a quick settlement within 30 days of crash.
Injury co-incidental with financial pressures such as home foreclosure or vehicle repossession or recent firing from job.
Avoids meetings with all claims investigators or claims adjusters.
Cancels meetings with claims adjusters.
Unreasonable delays in reporting claim to insurance company.
Alone, any one of these behaviors might not suggest a false, phony or fraudulent claim. But in combination, these types of behaviors individually may suggest that the claim is suspicious and should be investigated further.
Let's be careful out there.
