An Insurance Working Example - Self-Induced Loss - Part V

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As soon as the evidence has been gathered the claims manager should

call a meeting of his team to decide whether the evidence justifies rejecting the claim (which has already been made by Rankin Manufacturing Ltd.) or whether, despite the strong indications of arson, there is insufficient evidence to confirm the loss as self-induced. This is the main obstacle in deciding whether or not fraud has occurred; invariably the strength of the circumstantial evidence will depend upon eliminating alternatives. The police may be able to assist in providing information as to the assured's alibi but the experts and the solicitors should be able to provide the insurer with a detailed chronology of events prior to, during and subsequent to the fire - timing is essential. Consideration will need to be given to issues such as:

- the actions of the security guardstheir whereabouts, patrolling patterns and so on;

- the opportunity for intruders to have caused the fireare locks still intact;

- the identity of the personnel that knew of the alarm system security

code - was the alarm system working; and (iv) motivation.

These are all issues which need to be weighed up when deciding whether the insurer could satisfy the burden of proof, namely, a somewhat higher degree of probability than is usual in civil proceedings but something less than "beyond reasonable doubt".

- Should a formal letter be sent rejecting the claim? The draft of the letter

to be sent must be carefully considered to take into account whether or not the insurer wishes to reject the claim or avoid the contract in its entirety and whether it is necessary to hand back the premium. In many circumstances it may be better not to reject the claim formally in writing and simply wait for the assured to commence proceedings and allege fraud in the defence.

As has been seen, fraud has to be alleged with a high degree of

particularity and this is another good reason for the insurer making certain that his proof is as complete as possible prior to proceedings being commenced. Indeed, the evidence should be prepared as if a trial were to take place in a week's time, not in two or three years' time.

An Insurance Working Example - Self-Induced Loss - Part V

By: Willis J. Watson

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