In the 44 years attorney BarryZalma has been helping fight insurance fraud, he has seen justa few modifications to the same ole schemes. What has changeddrastically, however, is the willingness of insurers to fight andtake fraud cases to trial. In addition to practicing law, Zalma hasbeen publishing an e-newsletter, Zalma’s Insurance FraudLetter, twice a month for more than 15 years. ClaimsAssistant Editor Melissa Stewart spoke with Zalma about hisexperiences battling fraud, and he provided suggestions about howinsurers can successfully conquer their contenders.

What sparked your interest in insurance,specifically fraud?
I was an Army intelligence agent in the 1960s and wanted tocontinue acting as an investigator. Fireman’s Fund American hired me to work as an adjuster, and Iquickly found that insurance fraud seemed to be a regularoccurrence. Since I was an investigator before I was an adjuster, I gathered more facts than most and worked hard toestablish a defense.

What is the most common type of insurance fraud youcome across?
The most common types of insurance fraud are small and committed by honest people with areal claim who add something to their loss to cover theirdeductible. The state Departments of Insurance call these “soft”frauds, ignoring the fact that they are just as criminal as astaged accident.

With the economy down, people with leased vehicles who haveexceeded the agreed mileage and can’t afford to pay the penalty arethe most common types of fraud we see. The most expensive, on theother hand, are medical insurance, Medicare, and Medicaid fraud, where doctors, chiropractors, and fake medical clinics are collecting millions.

What resources and strategies will be the mostbeneficial to insurers in detecting and deterringfraud?
The most effective tools in detecting fraud are well-trained,educated, and experienced claims and SIU staff. It is essential that the claims staff is educated inrecognizing potentially fraudulent claims and the obligation torefer a case to the SIU for further investigation. The SIU has thetools and access to the entire claims database and other databasesthat will assist it in completing a thorough fraud investigationand determine if it is necessary to report a loss to the localDepartment of Insurance Fraud Investigators.

Once the preponderance of evidence convinces the insurer that afraud has been attempted, the company must be committed torejecting the claim and defending any suit by the fraud perpetratorthrough trial and all appeals; never agreeing to asettlement.

If the insurer determines there is a fraud ring, then it is also useful to bring suit against thering of perpetrators if they have assets that can be seized afterobtaining a judgment to take the profit motive out of thecrime.

How has fraud changed during your years ofexperience?
I’ve been involved with insurance claims since 1967 and have foundthat generally insurance fraud hasn’t changed all that much. Thereare just some different variations on the usual schemes. Peoplecome up with new ideas and get greedy, but those are fairly easy tocatch and defeat. If anything has changed, it is thatinsurers are more willing to fight, to take cases to trial andrefuse to pay claims they believe are frauds. I also notice thatthe U.S. Department of Justice is working to prosecute moreMedicare and Medicaid fraud perpetrators.

What are some tips for insurers for recovering fromfraud perpetrators?
Do a thorough investigation; retain competent counsel; and suethem. If they are prosecuted and convicted, then appear in courtand demand restitution.

What has been your most surprising or interestingfraud case?
They are uncountable, but the most interesting is a reporteddecision that established the grounds for rescission of aninsurance policy in California, Imperial Casualty and IndemnityCo. versus Sogomonian, 198 Cal. App. 3d 169, 243 Cal. Rptr.639 (Cal.App.Dist.2 02/04/1988). I did write an e-book with morethan 80 of my favorite stories.