Unfortunately, there are occasions when an insurer suffers damages at the hands of their insured. Special Investigation Unit (SIU) cases are specific to claims where there has been suspected insurance fraud.
In this episode of On Subrogation: SIU Claims, Rathbone Group attorney Jason Sullivan discusses fraud claims in the context of subrogation, and offers advice on how best to proceed when you are faced with the dilemma of pursuing recovery from your own customer.
The Nature of a Subrogation Claim Involving SIU Fraud
The FBI estimates that there are around 40 billion insurance fraud claims, not counting medical insurance. This is a vast field of capital loss for insurance companies, who need an avenue to recoup these losses. Additionally, successfully subrogating an SIU claim helps deter future criminal behavior on the part of the tortfeasor and society writ-large.
How can a private citizen defraud their insurance carrier? Jason offers a few examples:
- Intentionally causing an accident and claiming injuries that do not exist
- Submitting a claim for an incident that never occurred.
- Claiming damage to property that was not actually damaged in an incident.
- Claiming damage to an item they never even had.
- Submitting a claim for a stolen item that was, in fact, not stolen.
As you can see, there are countless ways a bad actor can surreptitiously file an insurance claim and get a payout before the insurer realizes (if they even do) that they have been duped. The right subrogation coverage, however, can help the insurer figure out the next steps towards recouping that stolen money.
Insurance Fraud is a Criminal Offense with Civil Repercussions
There is no question: insurance fraud is a criminal offense. However, that does not mean the civil effects of the fraudster’s actions should go unaddressed. When dealing with an SIU claim, you are often dealing with a state lawsuit that coincides with or precedes your own. This creates opportunities for the subrogating insurer.
Burden of proof is less stringent in civil cases. If the government’s criminal indictment succeeds, it is more likely that your civil pursuit will, too. In addition, your subrogation counsel may be able to work with the state to add repayment of your loss to the sentence for the fraudulent claim.
Recovering the Stolen Funds via the Subrogation Process
Despite any concurrent government actions against your insured, you still require a legal team that proceeds with their own direct, offense-based approach towards recovering the money that was fraudulently paid out. Consider that there will be at least a tort action, but also likely a breach of contract action as well. Money taken unlawfully must be returned under a tort legal theory, and many insurance policies obligate return of payments that were claimed unjustly.
Keep in mind that these two actions may have different statutes of limitations and dates where cause of action begins to accrue. For instance, the clock might not start at the date of the fraudulent claim, but at the time the claim was paid out, or maybe at the time the insurer should have realized that fraud had occurred.
Jason offers some tips for optimizing your chances of recovering loss from fraudulent claims via subrogation:
- Act quickly. These people are likely to spend the stolen money quickly, and then there will be nothing for you to pursue.
- Know the jurisdiction. Will they order restitution if you request cooperation with the state’s criminal pursuit of the fraudster?
- Understand the framework. Will a tort approach suffice? Is breach of contract a more viable route? Are they best used complementarily?
- Weigh your options. Consider the complications and costs of pursuing the claim; decide the viability of the matter before diving into an SIU subrogation claim.
This is a niche set of circumstances in the field of subrogation, as the tortfeasor is also the customer. As a carrier, you want your customers to feel satisfied, but if fraud is left to run rampant, it not only affects your bottom line, but your ability to offer competitive premiums to customers. An insured who has committed fraud hurts not only you but society as well. Subrogation, in this perspective, acts as a deterrent for the current tortfeasor as well as future bad actors.For more free educational resources on subrogation and insurance topics that are important to you, visit Rathbone Group’s YouTube channel and podcast library for more episodes of On Subrogation. Can’t find what you’re looking for? Reach out at [email protected] or [email protected] to suggest your topic for a new episode.