Homeowners Insurance Fraud

This type of fraud takes place when someone knowingly submits an inflated claim on their homeowners or renters’ policy for more than the actual value of the loss or damage. Submitting a false or misleading claim to receive undeserved compensation is also considered homeowners fraud.

The most common types of homeowners insurance fraud in Pennsylvania involve:

  • overstating the value of stolen items in a burglary of a home or vehicle
  • lying about the extent‚ cause‚ date or location of damage
  • intentionally damaging property to make a claim
  • staging a phony burglary or vehicle break–in and faking the theft or damage
    of property
  • asking a repairman to "cover the deductible" by increasing their estimate or bill
  • fabricating supporting evidence‚ such as repair bills or receipts‚ often in collusion with a crooked contractor‚ plumber‚ repairman or insurance adjuster
  • concealing that a residence is used as a rental or in a commercial business

EXAMPLES

Here are a few typical scenarios to illustrate some of the different ways homeowners insurance fraud can be committed:

A strong storm blew the shingles off of John’s house. When the insurance adjuster inspected the roof, John also said some siding was damaged during the storm, even though the siding had been damaged when John bought
the house.

During a trip to Philadelphia, Rebecca’s car was broken into. Her motor vehicle insurance paid to fix the damage done to the car. On her homeowners insurance claim, she said the items she lost were a lot nicer than they really were — a leather coat instead of a denim jacket — and she added a few extra items to the list she gave to her homeowners insurance company.

Zeke’s big screen TV quit working, then his home was struck by lightning. He told his insurance company the TV had been damaged by the electrical storm.

To view a TV spot from the prevention campaign that addresses the issue of homeowners insurance fraud‚ click here.

To listen to a radio spot from the prevention campaign that addresses the issue of homeowners insurance fraud‚ click here.

To view the billboard from the prevention campaign that addresses the issue of homeowners insurance fraud‚ click here.

To download a brochure from the prevention campaign that explains the issue of homeowners insurance fraud, click here.

ACTUAL CASES

Unfortunately‚ scenarios of homeowners insurance fraud are played out all too frequently in Pennsylvania. In 2012, crimes involving homeowners and renters insurance accounted for 12 percent of referrals received about suspected fraud. The following cases show how this crime is committed – and prosecuted – in real life.

INEXPENSIVE PAINTINGS PASSED OFF AS WORKS OF ART

A Berks County woman fraudulently obtained more than $12,600 in claim proceeds from the Nationwide Insurance Company by inflating the value of eight paintings she reported as stolen. In a notarized Contents of Loss Inventory given Nationwide she said that eight original paintings received as gifts, worth $8,000, would cost much more to replace.  Nationwide paid her $12,617 as the replacement cost of her stolen goods. Investigation however revealed that most of the paintings were done by a central Pennsylvania artist who’d sold them at a cost of approximately $25 dollars apiece. Investigators found the “stolen” artwork hanging on the woman’s kitchen wall at the time of her arrest. She was sentenced to serve 2 years probation, and was also ordered to perform 50 hours of community service and pay $12,617 in restitution and all court costs.

BURNING DOWN THE HOUSE!

Pennsylvania State Police Fire Marshals charged a Clearfield County woman with intentionally burning her home to collect insurance. She’d told her son that they needed to burn the garage or they would be out on the streets, causing her son and another teen to set fire to the home’s garage causing extensive damage to the garage and its contents. Clearfield County Grange Mutual Insurance Company was the home’s insurer. The woman entered guilty pleas and was imprisoned for one to five years, and was ordered to make restitution including payment to Clearfield County Grange Mutual in the amount of $15,707.

WHAT WAS HE THINKING?

Detectives of the York County District Attorney's Office charged a 42-year-old man with having fraudulently reported the loss of jewelry. He'd filed an insurance claim with Travelers Insurance Company claiming that he'd lost his wife's engagement ring, valued at $8,250, while taking it to a jeweler for cleaning. Investigation determined that the man and his wife were separated and that the man's wife still had the ring in her possession. The man admitted to detectives that he's thought no one would check his story and that a quick insurance settlement would help him catch up on overdue bills. The man was granted admittance to a rehabilitation program and was ordered to serve 12 months probation and pay a find of $400 and $1785 in court costs.

CONSEQUENCES

Homeowners insurance fraud is a serious crime. As with all other types of insurance fraud‚ Pennsylvania considers it a felony. Violators can spend up to seven years in prison and spend up to $15‚000 in fines. There are also many other associated expenses such as court costs and legal fees. Plus‚ those found guilty of insurance fraud have the stigmas and limitations of being a convicted felon to carry with them for life.

PREVENTION

There are simple ways to avoid facing situations where there’s an opportunity for you to commit homeowners insurance fraud.

First‚ it is important to make sure your homeowners insurance policy is up–to–date. Second‚ you need to understand your policy‚ what is and isn’t covered‚ and under what circumstances. Your insurance agent can help you with these.

Learning all you can about homeowners insurance fraud will help you avoid costly and life–changing mistakes. And in all aspects of your dealings with insurance companies – from applications to claims – make sure the information you provide is truthful and accurate.

To help all Pennsylvanians better understand homeowners and other types of insurance fraud‚ the Pennsylvania Insurance Fraud Prevention Authority (IFPA) in 2009 embarked on a statewide public education and prevention campaign which continues to inform consumers of the risks and penalties of insurance fraud though a variety of channels.

Click here to learn more about the IFPA Prevention Campaign.