Disaster strikes twice Victims of catastrophe are prime candidates for fraud By Phil Zinkewicz
During the recent holiday season, many of us watched that Christmas classic, “It’s a Wonderful Life.” For aficionados, many lines of dialogue are memorable in that film—George Bailey standing on the bridge praying, “Please God, let me live again”; the angel, Clarence, telling the suicidal George, “Each man’s life touches so many others. When he isn’t around, it leaves an awful hole”; or probably the best remembered lines from the movie delivered at the very end of the film by George’s brother, Harry Bailey: “A toast. To my big brother, George. The richest man in town.” A series of lines delivered by George’s father, Peter Bailey, the chief officer of the building and loan firm, is less well known but particularly apt in these times. George has just expressed his loathing at the prospect of “being cooped up” in a “shabby little office.” He says he wants to “do something big, something important.” Peter Bailey responds: “You know, George, I feel that in a small way we are doing something important. Satisfying a fundamental urge. It’s deep in the race for a man to want his own roof and walls and fireplace, and we’re helping him get those things in our shabby little office.” Last year’s series of hurricanes in the Gulf Coast and Southeast, with Hurricane Katrina being the most severe catastrophic occurrence in insurance industry history, left many people without roofs over their heads or walls to protect them. At press time, claims adjusters were just beginning to get to the most damaged areas, months after the storms hit. Ideally, by the time this article appears, hurricane victims will have received claims payments so they can repair what has been damaged or rebuild what has been totally destroyed. But it is precisely that time when claims are finally being paid that catastrophe victims need to be vigilant so that they don’t suffer again, this time as victims of fraudsters eager to grab some of that claims money for themselves. Robert A. Rusbuldt, CEO of the Independent Insurance Agents & Brokers of America (IIABA), describes the usual scenario this way: “After natural disasters and large-scale tragedies, some individuals try to take advantage of those most in need by posing as insurance claims inspectors, contractors and insurance company representatives. It is despicable that a few unscrupulous individuals may try to take advantage of victims in the aftermath of a disaster, but there are things people can do to protect themselves and their families. Confusion about how insurance policies work helps these con artists walk away with money intended for victims.” Don Beery, of the New Orleans-based Eustis Insurance and Benefits Agency, says there have not been many instances of fraud in the wake of last year’s hurricanes. “The areas were so devastated and the losses spread out so widely that there have been long delays in getting claims paid,” he said. “So far, there hasn’t been any money for people to be conned out of. But the fraudsters will come, no doubt about that. There will be the contractors who will quote a flood victim a price for repairing or restoring his or her home, ask for money up front for materials and then disappear into the night. There will be contractors who will try to inveigle a flood victim into colluding with them by inflating the claims to ‘eat up the deductible.’ That would put the victim in the position of facing prosecution if the collusion is discovered. People in the afflicted areas have suffered enough, without having to face legal action.” Even in the cleanup stage, Beery says, flood victims are at risk. “I saw an item in one of the local papers where a cleanup contractor was working on a victim’s home while that victim’s personal belongings were stored in an unattended vehicle. That’s an invitation to theft.” Five key steps The IIABA and local and state agent associations provide advice to catastrophe victims in the following five steps: • If a contractor approaches you and purports to be from your insurance carrier and you haven’t reported a loss, be sure to verify his or her identity. Make sure the contractor is affiliated with your insurance company. Ask to see a contractor’s required state or local licenses and write down the license numbers. Also, ask for proof that any contractors you choose have liability and workers compensation insurance by asking for a certificate of insurance. • Make sure your policy covers the types of repairs that are needed. If possible, have your insurance company send a representative to assess the damage and provide probable cost to repair. This will give you a reliable basis for negotiating repairs with contractors. • If your policies require you to get multiple estimates to repair your damages, always try to obtain two or three written repair bids. They should include all costs, what work will be done, schedule for completing work, and guarantees. Never pay for repair bids. Dishonest contractors may take your money and vanish. Most reputable contractors won’t charge you simply for bidding on your repair work. • Never accept offers to increase the amount of your damage with the reasoning that it will be paid by the insurance company. This is a sure sign of a scam, and you could be guilty of committing fraud by doing so. • When paying for your damage, try to have the insurance carrier pay the contractor directly, but under no circumstances should you pay for your work in advance or before the work is completed. The contractor could disappear with your money, leaving your repair work unfinished. Deposits should be about 20% (or less) up front. If you do pay for the repairs yourself, never pay in cash; pay only with check or credit card. A contractor who demands cash may be trying to avoid paying taxes or buying legally required insurance. And, if the contractor asks for more money due to unforeseen damage or increased costs, be cautious before allowing work to continue. Make sure your insurance carrier is aware of the cost increases and agrees to payment before proceeding. The Department of Homeland Security’s Federal Emergency Management Agency (FEMA) also urges catastrophe victims to beware of unscrupulous contractors and their wiles. “Because of the extent of damages from the Katrina and Rita disasters, many legitimate licensed home-repair companies can be booked solid for months,” says FEMA. “Frustrated and anxious home owners and landlords, eager to get their property back in shape, may neglect to take the usual precautions when hiring contractors. As a result, some consumers will find that they’ve hired help that will be of no help at all. Consumers need to be aware of the risks of hiring part-time contractors, contractors from surrounding areas, inexperienced contractors and, all too often, just plain crooks, who are out to make a fast buck.” It’s not only unscrupulous contractors who perform fraudulent activities in the wake of natural disasters. Internet fraud poses a threat as well. After Hurricane Katrina, state officials in Florida and the FBI announced the arrest and indictment of a man for fraudulently soliciting charitable donations, supposedly intended for humanitarian relief to the victims of Katrina. According to the indictment, the man falsely claimed in conversations on the Internet, and ultimately via his own Web site, that he was piloting flights to Louisiana to provide medical supplies to the areas affected by Hurricane Katrina and to evacuate children and others in critical medical condition. He further claimed that he had organized a group of Florida pilots to assist him in his supposed relief efforts. Yet another area of potential fraud after a catastrophe is identity theft. Recently, a special Associated Press report on Katrina by Jennifer Kerr focused on the pervasiveness of floating debris that litters the hurricane-afflicted region. Much of the debris, she said, displays personal, financial and other identifying information. The information includes birth certificates, marriage licenses, driver’s licenses, personal checks and credit cards, all washed away in the storm. Robert Siciliano, a nationally televised identity theft and personal security expert, commenting on the aftermath of Katrina, says: “Identity thieves couldn’t ask for a better opportunity. It’s a shame that we have to think about thieves at times like these. It’s also the reality.” This should be a wake-up call for people who live in disaster-prone areas. Insurance experts recommend keeping personal documents in an off-premises vault or in a strong steel box to be taken along in an evacuation situation. * |
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