Securely processing insurance claims can be simplified into theidea of the singular intention of paying the right amount to theright person. Claims problems arise when a claim payment is delayedfor the insured, but insurers face financial losses whensettlements are paid on fraudulent claims or to parties who are notentitled to payment.

Fraud investigations and prevention focus on preventing thoseoccurrences.  Title forensics is a growing area ofinvestigative expertise which has been useful in claims management.By reviewing documents in a property title search and abstractfile, an insurer can acquire intelligence which will provide betterservice to the claimant and minimize instances of making erroneousclaims payments.

The Basics

The final official document of a title search is the titleabstract. This document summarizes the ownership status of theproperty along with mortgages and liens which accrue to the parcel.This by itself can ensure that the claimant is still the owner andthat no transfers have been made since original underwriting. Inthe current climate of foreclosures and short sales, this canprevent inadvertent payment of a claim settlement to an insured whois no longer in title to a property. 

In the case of a catastrophic or total loss, the mortgage lendermay need to be part of the claims process. Often listed asadditional insured and loss payee, the mortgagee has a vestedinterest in making sure that their collateral remains of valuethrough reconstruction. As mortgages have been assigned through theMERS nominee trustee system the lender currently on title may notmatch that listed on the policy.

Fraud Prevention

A title search forensic report will reveal possible red flagsfor fraud. While the title search abstract is a few pages ofsummary, title forensics reviews all of the hundreds of pages ofactual document filings which went into the chain of title historyfor the property. Each event in the history of the property isdocumented with a paper filing in the official land volumes. Atypical residential property will have dozens of deeds, mortgages,liens, releases, assignments, and tax report documents; commercialproperties could have hundreds of such instruments. Each is boundin a book and page corresponding to the date of filing. Once thesedocuments are located and retrieved, a Certified Title Abstractorand licensed investigator will cull the contents of the pageslooking for intelligence.

Here are a few examples of how fraud indications can appear toinvestigators:

• Excessive liens – can indicate financial distress, cancontradict statements made by claimant.
• Serial cash-out refinancing – claimant's credit application foreach refi will contain detailed snapshot info for that timeperiod.
• Flip transactions – ownership history may contain parties ofinterest or inconsistent records.
• Notaries or witness signatures – the persons who signed deedsand mortgages as witnesses or notaries can be reviewed to verifytheir relationship with the principals and knowledge of facts.
• Send-to box – the title company who performs the closing ofeach document is documented in the send-to block at the top of thedocument page one.
• Mailing address – if the property is insured as owner-occupied,the mailing address for the documents and tax bills should be thesame as the subject property.
• Signature consistency – forgeries are discovered by matchingsignatures across the documents, as well as those on insuranceapplications, claims submissions, and letters.
• Other parties – parties listed as other owners, tenants incommon, or private lien holders may have some 3^rd partyinterest in the property.
• Quit-claim deeds – full property ownership may not always betransferred when the evidence of transaction is a quit-claimdeed.

Underwriting

A title search performed at underwriting can ensure that theofficial legal description of the property is known. Often times astreet address is ambiguous, and can end up insuring more risk thanis intended.

BusinessDevelopment Opportunities. A title search canreveal other owners, business interests, additional assets, andfamily relationships which are sources of additional lines crossselling.

Commercialproperty. A title search on a commercial propertyhas more complex requirements. A title abstractor authorized toperform abstracting on commercial records is recommended. Multipleowners, environmental liens, leasehold improvements, and UCCfilings are a few of the variables on commercial properties.

Researching mortgage interests and fraud investigation throughtitle documents are among the best practices in the claims process,and helps to protect the claimant and the insurer.

David Pelligrinelli is founder and president of AFX ResearchLLC. AFX is a national title research agency and a licensedinvestigative agency, with certified abstractors who haveresearched over 10 million documents since 1995. Having extensiveexperience in the support of claims processing, AFX works withinsurers in the top 20 largest US companies, as well as TPA's andSIU departments. The company is a contractor for governmentagencies such as the US Departments of Justice, the IRS, US PostalInspector, and agencies at the federal, state and local levels. AFXis one of only 53 Certified Title Abstractors in the country.

In the area of fraud and asset recovery, AFX has discoveredfraud within corporations and recovered assets for clients in somecases exceeding $1 million. The company maintains offices in PalmBeach FL and San Luis Obispo CA, providing research services to all50 states.

For more information, visit AFXSearch.com, call 877-848-5337, ore-mail David at [email protected].