Cedric Stephens | Insurer’s denial of accident claim ‘not fortuitous’

QUESTION: My vehicle was stolen last year. I reported the incident to the police and my insurer. After waiting patiently for 12 months, they wrote me on October 4, 2018. The letter said that based on investigations, they concluded that the loss was "not fortuitous". As a result, the claim was not paid. I negotiated a loan of $1.8 million to buy the vehicle for $1.98 million. What should I do now?

- H.J.N., Lucea, Hanover

INSURANCE HELPLINE: 'Fortuitous means', according to the Oxford online dictionary, "happening by chance: for example, a fortuitous meeting is a chance meeting, which might turn out to be either a good thing or a bad thing".

There is also a second meaning: "Today, however, 'fortuitous' tends to be often used to refer only to fortunate outcomes, and the word has become more or less a synonym for 'lucky' or 'fortunate' (the ball went into the goal by a fortuitous ricochet) ... . This usage is now widespread, [but] it is still regarded by some people as incorrect."

The adjective's second meaning is as relevant as the first. After a nearly 12-month wait time - the market standard for this kind of claim is six to eight weeks - the theft can also be described as 'not fortuitous' for you.

Only one inference can be drawn from insurer's refusal to pay: they believe that you were involved in the planning and, probably, the execution of the theft. Contracts of insurance, quite properly, give insurers the right to refuse to pay claims where they can prove that the policyholder was involved in causing the insured event.

If you were so involved, 'dawg nyam yu supper'.

The fraud condition typically says: "All benefit under this policy shall be forfeited if any claim made is in any respect fraudulent or if any fraudulent means or devices are used by the insured or anyone acting on his behalf to obtain benefit under this policy or if any damage is caused by the wilful act or with the connivance of the insured."

Insurers must have evidence to prove dishonesty. A suspicion is not enough.

Insurers outsource fraud investigations. Investigators are sometimes the weakest link in the claims chain. Though they must be licensed by the regulator, very little is known about how they operate. What professional qualifications and/or experience do they have? Are they bound by a code of ethics? How are investigations conducted? How is their job performance monitored/supervised? How are they compensated? Answers to these questions are buried in Stygian darkness.

The Insurance Fraud Handbook of the Association of Certified Fraud Examiners throws light on some of the things that investigators in the United States often look for in cases where dishonesty is suspected.

It says: "To properly investigate fire, theft, or other first property homeowner claims, the following constitute typical areas of inquiry:

- Does the insured have an insurable interest in the property?

- Do the insured's finances support the dollar amounts claimed?

- Does the insured have a financial motive to stage or cause the subject loss?

- Where did the insured reside at the time of loss?

- Where was the insured at the time of loss?

- What proof of alibi does the insured have?

- What were the insured's debts, assets, and income on the date of loss?

- What was lost?

- Does the loss detail an analysis of supporting documents support the claim?

- Has the insured had prior insurance claims? When? With whom? Was there a claim disposition?"

To properly investigate a fire or theft claim, any competent carrier would require answers to these basic questions.

"The traditionally accepted method for procuring answers to these questions is the scheduling and taking of the insured's examination under oath by independent, outside counsel. This ensures objectivity and allows a carrier to make a fully informed claim decision ... ."

Given the cloak-and-dagger way local investigators operate, a few questions are appropriate. Was the collection and analysis of information about the theft based solely on objective considerations? What safeguards were there in place to prevent him from pursuing a personal agenda?

The insurers have treated you in a grossly unfair manner. Seven things support this conclusion:

1. The time taken to process and investigate your claim was much longer than the industry norm of six to eight weeks. Why?

2. The company failed to tender an apology for the extreme delay.

3. You have not been provided with any information to challenge the investigator's findings.

4. You have not been given any information to question the company's decision not to pay the claim or to correct the severe damage that its action will cause to your personal and professional reputation.

5. The company has improperly increased the premium on your third-party policy on the premise that a claim would be paid under your comprehensive policy.

6. The company has failed to comply with general principles one, two and four of the Financial Services Commission's Market Conduct Guidelines IR-GUID-09/08-0014.

7. Your request to management to undertake an independent review of the claim has been denied.

The only course of action on your part, at this stage, is to retain the services of an attorney and seek legal remedy.

- Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to aegis@flowja.com.