Editor's Note: The story that follows is based on fact. The names, places and descriptions have been changed to protect the guilty. This story was written for the purpose of providing insurers, those in the insurance business, and the insurance buying public sufficient information to recognize and join in the fight against insurance fraud.

Sometimes what appears to be an obvious arson-for-profit case actually turns out to be an accidental fire. Our story begins with an insured living near the ocean in San Luis Obispo, California. Recently divorced, the homeowner lived alone for many months. The divorce had caused her much emotional trauma. After 25 years of marriage, the insured's husband announced he could not live with her any longer and promptly moved out.

The insured then sought treatment for her depression, visiting multiple psychiatrists and psychologists. These futile attempts to quell her misery only served to exacerbate it.

Shortly before the divorce was finalized, she happened upon an occult bookstore while walking aimlessly through an older part of San Luis Obispo. She bought a book on the power of the mind. The good book gave her a life purpose, so she began to apply the principles stated in the book. Finding peace for the first time since her divorce, she became a regular customer of the book store. A friendship grew between her and the owner, who introduced her to others interested in the occult and powers of the mind. She applied for, and received, a divinity degree from the Universal Life Church. The insured bought her first crystal ball, on which she concentrated her psychic energies after receiving her degree. The occult, the powers of the mind, and magic were the center of her life.

Later, with the divorce behind her, the insured allowed the book store owner to move into the house. As they, and their friends, concentrated their psychic energies, they became convinced that a major earthquake would strike California and destroy all who lived in San Luis Obispo. This convinced her that the only safe place was a small community in northern Arkansas. So she put her house on the market and accepted the first reasonable offer of sale.

Shortly before escrow closed, while the insured and her book store owner/boyfriend slept in the master bedroom, a fire broke out in the second bedroom of the house. Awakened by a sound resembling a heavy rainstorm, they discovered the blaze and managed to escape (naked) through the bedroom window and into the backyard. The neighbors called the fire department, which was able to quickly extinguish the fire after all of the contents and most of the structure had been destroyed.

Two damage claims ensued—one by the owner to her homeowner's insurance carrier, and another by the buyer, separately, to its insurer. They had never considered establishing who would have the risk of loss during escrow and, therefore, both maintained separate insurance policies with separate carriers.

The investigation conducted by the fire department revealed that the fire was “suspicious.” It was unable to pinpoint a specific cause for the fire, which burned very hot. There were marks on the floor in the second bedroom that seemed to indicate that a flammable liquid had been spread. Understandably, the insurer was concerned. It demanded the examinations under oath (EUOs) of the insured and her book store owner love interest. Both testified clearly, concisely, and apparently honestly.

The duo testified, with vigor, about their belief in psychic powers. Of course, both adamantly denied any knowledge about the cause of or precipitating factors leading to the fire.

Lingering Doubts

Their claim was indeed unusual. What's more, neither the adjuster nor counsel had ever received a claim for the loss (by fire) of three crystal balls. The value of the psychic paraphernalia was difficult to demonstrate. Convinced that an arson had indeed taken place, the fire department was stumped by one question: Why then, had the insured and her boyfriend started the blaze while nude?

The insurer conducted a thorough investigation, which necessitated retaining the services of an experienced fire cause and origin investigator. This expert sifted through the debris, where he found an electrically operated bed, equipped with a polyurethane foam mattress. The investigator advised the insurer that, after examining the bed and after reviewing the testimony of the insured and her boyfriend at the EUO, he concluded the fire was not intentional. Rather, he surmised it was the result of a short circuit in the bed motor that ignited the highly flammable—and now banned—polyurethane foam mattress. He explained that polyurethane foam, when heat is applied to it, liquefies and burns vigorously. The liquefied polyurethane foam flows on floor surfaces, leaving a trail similar to that left by the spreading of a flammable petrochemical accelerant.

With the mystery resolved, the insurer paid the insured the loss she had incurred to her personal property. The two insurers split the cost of rebuilding the structure. The insured used the proceeds of the house sale and the insurance claim to relocate to Arkansas, where she now lives with her boyfriend and a gathering of believers of the occult on about ten acres of land.

Because both the insured and her boyfriend were ministers of the Universal Life Church, they performed their own wedding and are seemingly content, spreading the word of the power of the mind. Interestingly enough, the wedding ceremony was interrupted by an earthquake from the New Madrid fault registering 3.2 on the Richter scale. Fortunately, no one was injured. To date there has not been an earthquake of any force near San Luis Obispo.

What appeared to be an obvious arson claim, with insureds who were far from average, turned out to be an accidental fire that resulted in an effective subrogation action by the insurer against the manufacturer of the bed. The insureds settled down to avoid a California earthquake on the cusp of the New Madrid fault.

Special Reports /

The Case of the Burning Bed: Arson or Grounds to Subrogate?

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