Many seminars, articles, and blogs urge fraud investigators and attorneys to focus their investigations online in order to identify sources of information in a more cost-effective manner than in the past, when investigations were conducted in the “paper and shoe leather” age. Ease of access within a click or two to an overwhelming amount of information is a reality in the burgeoning information age. The sources are useful, but the sheer volume can conceal a key fact as easily as a curtain conceals scenery changes between acts in a play. There is a material difference between a sound bite or short summary when it’s compared to the facts that can be learned and the evaluation of credibility that occurs with personal contact.
Digital information often is best used as a starting point. Even phone conversations cannot replace face-to-face contact with persons who may have key facts. This is true for understanding documents and information collected online regarding claims histories and backgrounds. Those summaries are not evidence.
There is an anonymous quote from long ago worth noting: “Some of the best evidence is presented in a lawyer’s mind while walking away from the courthouse.” This encapsulates what can happen when a key detail has been missed, perhaps because it has been overshadowed by the mountain of available information. This can occur when there has been little or no follow-up and no face-to-face interviews with potential witnesses.
The theme of the movie Sliding Doors illustrates the point. The film’s storyline proceeds on two tracks as the movie’s main character (Gwyneth Paltrow) approaches a subway. One track proceeds based on her boarding the subway via an open door; the other track proceeds from her inability to board because the sliding door closes just as she arrives on the platform. One track leads to a better life; the other to misery. It demonstrates that seemingly small details can greatly affect events that follow. This applies in litigation and fraud investigations, too.
The Arsonist with Precognition
A recently divorced insured wanted to move. Though she had no close neighbors, she placed a “For Sale” sign in the front yard of her rural property. The insured was out of town the weekend that a fire broke out and destroyed her home. Only a slab remained. She swore that she knew nothing about it until she returned at 6:00 p.m. Sunday evening, having gone straight home from her trip.
The fire was ruled incendiary when samples containing paint thinner were collected. The insured explained that she was learning to paint. She also testified that after discovering the fire, she drove to her friends’ home. An investigator interviewed the friends in person and by phone, but took no statements. The investigator’s claims file note summaries confirmed the insured’s timeline.
When the insurer’s defense counsel met with the friends, they said they remembered that, at 1:00 p.m. the afternoon of the incident, the insured told them about discovering the fire and appeared upset. However, the insured had sworn she returned straight home from her weekend and learned about the fire that evening at 6:00 p.m. She either had precognitive ability or misrepresented a material fact about when she discovered the fire.
The result was a verdict for the insurer and recovery of the mortgage payoff from the insured. In this case, not accepting the file summaries and following up face-to-face with the friends were crucial steps for the investigator, and the jurors confirmed the importance of the material false statement. Even though the investigator interviewed the friends twice, he made no recording and stated only what the insured had said to the friends, not when she said it. When a person is interviewed, it should be recorded, regardless of the impact on the claim’s outcome.
Auto Accident Prevents Arson Fraud
A couple suffered the total loss of their home due to a fire. Roach bombs, or aerosol foggers, set off in the home were blamed initially, but the fire later was ruled incendiary. In arson cases, juries look for credible evidence that the homeowners started the fire. In this case, the insurer found circumstantial evidence for the most difficult element of proving arson fraud: opportunity.
After a million-dollar extracontractual suit was filed, it was learned that the insureds had a car accident just four months after the fire. Upon taking a closer look, a witness was found who testified that the insureds asked him to assist in faking the car accident. He said the insureds admitted that they had set fire to their home. They told the witness about setting the fire at a time when they thought they were going to get paid for the house, apparently to convince him how easy it was and that insurance companies did not follow up on details. Importantly, they also told the witness that they had used bug bombs in an attempt to make the fire appear accidental—information the witness would not have known unless it had come from the insureds.
The path to this information was not obvious, since the accident took place after the fire. Because of the additional follow-up in this case, the insureds walked away from both the arson case and the extracontractual case with no recovery when the cases were dismissed with prejudice.
Field of Beans (If We Sue, They Will Pay)
An insured who sold soybean seeds encountered a farmer who refused to pay for his purchase. The seller sued the farmer for the price of the seeds, an amount less than $10,000. The farmer countersued for millions claiming financial ruin from the insured’s allegedly defective seeds.
The insurer’s defense counsel assessed each of the farmer’s 45 bean fields for yields. He followed up on what types of seeds were planted in each field and the production of each field. The bushels per acre were highest for fields where the farmer used the soybean seeds from the insured. Confronted with the facts at trial, the farmer reviewed the spreadsheet evidence, looked up, and said, “Well, I guess you got me.” Two results followed: First, the judge hurt his knee sliding out of his chair upon hearing plaintiff’s admission; second, the case was dismissed.
Attempted fraud may come in different contexts, but the details always matter. Each of the above examples underscores the impact of seemingly insignificant details that often require retracing steps at some additional cost to obtain truthful information or greater detail. Despite easy access to digital data, counsel and investigators must still take the time—which is often hard to find—to follow up, record interviews, and continue to evaluate information during an investigation and litigation. What is learned today should be evaluated in the context of what has been learned before and what follow up could yield.