It Takes One to Know One

The day after the claim was received by facsimile, Burkard fielded several angry calls from the female claimant, who gave a post office box address and a cell phone number, demanding immediate payment for medical expenses. When the claimant was not satisfied with Burkard's response, she made calls to Burkard's manager. No time was lost referring the claim to Carr.

"A less-experienced adjuster in a larger company often would just meet demands like this, just to get the claimant to go away," said Carr. "It happens every day. And, when you consider the amount of a small commercial premium for a big standard insurer, they can do that with a claim for a couple of thousand dollars. But our insured, the owner of the small convenience store where the 'accident' occurred, paid an annual liability insurance premium of $1,423.

"We have to be vigilant," he continued. "Fraud costs our shareholders and our insureds and, frankly, it makes us angry, too. It's robbery, plain and simple."

The Game is Afoot

Carr began his investigation with a query of the ISO all-claim database. "This is routine whenever we investigate a fire, theft, or injury claim," he said. "I run a claimant multiple ways, using date of birth, the Social Security number, address, and phone numbers. Then I cross-reference with the Accurint and Choicepoint databases."

Carr hit the jackpot. "I located 19 prior claims from the same person, which obviously got my attention," he said. "The most striking was a claim made to Nationwide for an 'accident' that occurred in a pizza shop a few miles away from our insureds' convenience store, one hour after the 'accident' in the claim we received."

Carr called Nationwide's special investigative unit and learned that the suspicious claim had not been referred for investigation. "At that point, it was clear to me that we were involved in a fraud, so I studied the paperwork that had been faxed to us by the claimant," he said. "It had obvious, clumsy alterations. We later learned that it was the same hospital report that had been altered again and submitted to Nationwide."

Penn-America also had a videotape of the purported accident, provided by the store's owner. It showed the claimant's sister, a regular customer of the store, very obviously scouting the store for a location that the in-store cameras could not see. She stepped out of camera range and, presumably using the bottle of water she had brought with her, spilled some on the floor.

"As soon as she left the store, her sister, the claimant, entered the store and went directly to the spot, where she staged a fall," Carr said. "Her sister's scouting wasn't so good because we saw the whole thing. It was like a Three Stooges affair, with her legs and arms flailing. It was quite a performance."

Carr called the claimant directly and asked whether she had prior claims. "She lied," he said, "and started to get agitated." He also asked her to confirm her story that she had left the scene of the accident, dropped off her children at home, and gone immediately to the hospital.

"Of course she confirmed it," he said, "so I asked her about her claim against the pizza shop. She very angrily told me that she didn't like my questions and hung up on me. My next call was to the attorney general."

Even after that referral, the claimant submitted another eight fraudulent claims, switching her M.O. to claims that she had lost or damaged expensive jewelry in her falls.

The attorney general's Insurance Fraud Section filed criminal charges against a total of six suspects who allegedly had participated in a conspiracy that the AG's news release called "by far, one of the largest slip-and-fall rings we have ever investigated. The number of fraudulent claims and the brazenness … of this ring is shocking."

The charges allege that from 1992 through 2003, the defendants filed more than 80 insurance claims, defrauding numerous insurance companies of more than $158,000. The investigation leading to the charges was dubbed Operation Family Fraud.

The grand jury investigation found that the group, acting together, staged accidents for the purpose of filing fraudulent insurance claims. When filling out the claims, members would use different addresses in and around Altoona to avoid detection by insurance companies of multiple insurance claims that originated from a common address.

On occasion, the family would use their children in staged accidents. The grand jury noted that the advantage of using a child as a claimant in a staged accident is that a record of a suspicious claim by a minor would not be made. The adult members would coach the children about what to say to medical personnel or insurance company representatives in connection to the fraudulent claims.

Running the Scam

The grand jury heard evidence that family members went to numerous restaurants in Altoona and the surrounding area and staged slip-and-fall accidents. A typical scam involved going into the men's room and splashing water on the floor. A short while later, another family member would enter the men's room and lie down on the floor and wait for a customer to come in, while he pretended to be dazed or unconscious.

During a 40-day span in late 2002 and early 2003, one member claimed to have fallen and hit his head eight times on commercial properties. Five of these staged falls were on wet bathroom floors in restaurants, two were in store aisles, and one was in a laundromat.

Laundromat slip-and-fall claims were lucrative for the family and were very similar to the restaurant scam. Family members would wait until a laundromat was empty, put water on the floor, and pretend to have fallen down. They often would use another family member as a witness to the fall to aid in collection of the fraudulent claim. Since 1992, the family filed nine fraudulent claims of falls in laundromats, resulting in more than $22,000 in payouts.

The family also staged slip-and-fall accidents at grocery stores and convenience stores, as in the case with the Penn-America claim. One of the family members would break eggs or spill water on the floor and, a short while later, another member would come down that same aisle and pretend to slip.

One family developed a specialty of parking lot slip-and-falls. During a 25-day period in late 2002, family members claimed to have fallen in the parking lots of 10 Altoona-area businesses. In nine of those alleged falls, the claims included damaged or lost jewelry. There were four days, during that period, when a family member claimed to have fallen twice on the same day, as was the case with the claim against Penn-America.

Other family members staged accidents in tavern and bar parking lots. In 2001, three, including two children, pretended to be struck by an Altoona bar patron as he pulled out of a parking lot. A family member acted as a witness to that alleged accident. The next year, the same person claimed to have been struck by a Huntingdon bar patron as he backed out of the parking lot. To fabricate evidence of the collision, the family member allegedly placed a swatch of his clothing on the back of the vehicle.

While the grand jury heard testimony of evidence of more than 80 claims submitted by the family dating back to 1992, the defendants are being charged with claims within the five-year statute of limitations. Family members also are being charged with the theft of more than $27,000 from health-care providers in instances that a staged accident resulted in unpaid hospital or ambulance bills.

"The insurance industry has changed so dramatically since I started in the business," said Carr. "Technology has provided sophisticated tools that make it possible for carriers of any size to collaborate, to work with law enforcement agencies, and to combat the fraud that hurts us and ultimately our insureds.

"We're a small company and the founding family still owns one-third of the outstanding stock of the company," he continued. "For the most part, we work with family-owned, entrepreneurial general agents, and we insure small, family-owned businesses. We only have about 130 employees, so it's much easier to maintain the kind of communication you need to spot and react to this kind of crime. It's no accident that a company like ours was one of the companies to blow the whistle on a family-operated scam."

Richard W. Slomiany, CPCU, AIM, is vice president of claims at Penn-America Insurance Co. He can be reached at slomiany@penn-america.com.