From the most ridiculous and bizarre to the most heinous and tragic, the insurance industry has witnessed the extent to which unscrupulous scammers will go to profit from a claim. This article from Insurance Business examines some of the world’s worst cases of insurance fraud and how they were uncovered. Here are the ten items that made our list of the best.
10. Nicholas Di Puma: “Straight out of The Three Stooges”
A Delaware homeowner claims that a kitchen accident led to the destruction of his home and a convertible set off alarm alarms for his homeowner’s insurer. The incident resembled a scene from a slapstick comedy.
According to the Daily Star, Nicholas Di Puma attempted to extinguish a pan fire with a dishrag, but the dishrag also caught fire, so he flung the pan out of his front door. Sadly, it landed on the backseat of his convertible and ignited it. A second pan caught fire, but as he was about to throw it out, he tripped over a box, and the pan landed on his leather couch, igniting it instantaneously.
The presiding judge described the events as “like the plot of a Three Stooges movie.” Di Puma pled guilty to attempted insurance deception in the second and third degrees. He was ordered to pay restitution of $37,997 and given five years of probation.
9. Gerald Hardin – Choppy Companionship
From comedic to terrifying. In May 2008, a district court in South Carolina heard a case against Gerald Hardin and another individual who severed their friend’s hand to collect a $671,000 dismemberment claim. According to FBI records, the duo used a pole saw to sever the hand of their mentally handicapped accomplice, Michael Weaver, who then filed a claim against his homeowner’s insurance policy and three accidental death and dismemberment policies.
Weaver reportedly viewed Hardin as a father figure and consented to have his hand amputated so that Hardin, a known drug user, could file six separate claims for compensation for the accident. For his offense, Hardin was sentenced to five years in prison.
That doesn’t seem like enough prison time… Please share your thoughts in the comments section if you believe there should have been more.
8. John and Anne Darwin – the Canoe Conman Affair
Several documentaries have been inspired by the infamous case of British couple John and Anne Darwin, who committed life insurance fraud. The couple realized that if John staged his own death, all of their financial obligations would be wiped out. Anne assisted her spouse in 2002 when John allegedly vanished in a canoeing accident.
Anne cashed in life insurance claims totaling £680,000 and paid off their obligations. The couple then began a new existence under a false identity in Panama. Eventually, the couple was apprehended due to a social media post. They were each given a six-year penitentiary sentence.
7. Imad and Bahaad Dawara – Arson fail
Iwad and Bahaa Dawara are immediately removed from the Coalition Against Insurance Fraud (CAIF) Hall of Shame. The Philadelphia siblings attempted to save their failing hookah bar by torching the establishment and cashing in on a $750,000 accidental fire policy they purchased just weeks prior.
However, the brothers bungled their attempt at insurance fraud worse than they managed their hookah lounge. Their act of arson destroyed an old, picturesque neighborhood on Chestnut Street, closing it down for months and causing dozens of businesses and workers to lose their employment. For the offense, the brothers were sentenced to nine years in prison and ordered to pay $22 million in restitution. A hookah lounge that was intended to be consumed by smoke instead caught fire.
6. Where is the pelican, asked Andy House.
In 2009, luxury car dealer Andy House drove his $1 million Bugatti Veyron into a wetland in an attempt to collect a massive $2.2 million insurance payout, in what was arguably one of the least well-thought-out car insurance scams in history. House claimed he lost control of his vehicle while attempting to evade a pelican, which caused him to veer off the road and into a nearby swamp. The vehicle sustained irreparable damage.
With only 300 units produced in 2006, the Bugatti Veyron is an exceedingly rare luxury vehicle. It is also among the most potent, with a top speed of 235 miles per hour. Unfortunately for House, a passenger in another vehicle who was a rabid fan of luxury automobiles noticed the Bugatti and documented the incident on his phone. This foiled House’s attempt at deception, as the video revealed that no pelicans were present when the claim was made.
5. Harry Gordon – Dead man trekking
In 2000, Australian millionaire Harry Gordon attempted to collect AU$ 3.5 million from his life insurance policy by, you guessed it, faking his own demise. With the assistance of his wife, Sheila, and daughter, Josephine, they profited from the claim. Harry began a new existence in New Zealand, where he met his second wife, with the proceeds.
The situation deteriorated, however, when Harry and his new wife stumbled into his brother Michael in Tauranga while hiking. After Michael told Sheila about Harry’s new bride, the situation escalated rapidly. Later, Australian authorities uncovered the fraud, and Harry was arrested and sentenced to 15 months in prison after pleading guilty to, among other offenses, conspiracy to obtain money by deception. He went on to write a book appropriately titled How I Faked My Own Death and Was Caught.
4. Atul Shah and Mahaveer Kankariya – Snatch plagiarism
New York business partners Atul Shah and Mahaveer Kankariya devised a complex plot to rob their own store in order to save their floundering jewelry company. In December 2008, disguised as Hasidic Jews à la opening scene of Guy Ritchie’s film Snatch, the couple staged a fake heist and then filed a $7 million claim with their insurer, Lloyd’s of London. To conceal their tracks, the men poured drain cleaner into security cameras in an attempt to destroy any evidence that could be used against them.
However, the scheme fell apart when law enforcement officials were able to recover footage showing both men entering their safe and removing jewelry a few hours prior to the alleged burglary. In March 2011, the duo was convicted of first-degree insurance fraud, attempted grand theft, and falsifying business records.
3. Jacques Roy – Medicare mayhem
In 2017, Jacques Roy, a physician from Texas, was sentenced to 35 years in prison and ordered to pay $268 million for orchestrating one of the largest health insurance forgeries in history.
According to a report by the FBI, Roy, and his cohorts defrauded Medicare to the tune of $375 million between 2004 and 2011 by conducting unnecessary home visits, ordering medical services for healthy patients, and submitting fraudulent claims. According to reports, the scheme generated hundreds of fraudulent claims daily before it was discovered.
2. Eric Conn – American Covetousness
Disabled and destitute Kentuckians had faith that local attorney Eric Conn would assist them in obtaining federal disability funds. Instead, the small-town attorney defrauded them of $550 million through the largest Social Security fraud in history.
Conn duped the Social Security Administration (SSA) into paying disability benefits to thousands of healthy individuals through unlawful payments to Social Security Administrative Law Judge David Daugherty, who essentially rubber-stamped the claims. When the scheme was discovered, the Social Security Administration suspended disability payments for approximately 1,700 recipients, leaving those who genuinely needed the money in dire straits.
According to a CNBC report, Conn pleaded guilty to a two-count federal complaint of stealing from the government and paying unlawful gratuities in 2017 and was sentenced to 12 years in prison.
1. Ali Elmezayen – Heartless assassin
This case headed the list of the worst insurance frauds not because of the amount of money involved, but because of the heinous nature of the act.
In 2015, Ali Elmezayen, a California resident, faked a car accident that killed his two autistic children and nearly submerged his wife. A portion of his $260,000 settlement was used to purchase real estate in his native Egypt and a boat.
Later, authorities began to assemble evidence to prove that what occurred was indeed cold-blooded murder, including his frequent confirmations with insurers regarding the window for investigating fraud and recorded conversations with his wife after the deaths of their sons. For the homicide of his children, Elmezayen was ultimately sentenced to 212 years in prison.
What is the definition of insurance fraud?
The Insurance Information Institute (Triple-I) defines insurance fraud as “deliberate deception perpetrated against or by an insurance company or agent for the purpose of financial gain.” These unlawful acts can be committed by applicants, policyholders, third-party claimants, and even insurance brokers and providers.
In our handy guide, you can also discover the definitions of the most common insurance terms.
Who undertakes insurance fraud?
According to Triple-I, the following individuals commit insurance fraud:
- Criminal organizations that steal vast quantities through fraudulent business practices
- Professionals and technicians who exaggerate service costs or bill for unperformed work should be disciplined.
- People who want to cover their deductible or who view submitting a claim as an opportunity to make a few dollars
Common types of insurance fraud committed by these individuals include:
- Inflating or “padding” claims
- Falsifying information on an insurance application
- submitting claims for damages or injuries that never existed
- Preventing tragedies
Triple-Although the effects of insurance fraud are felt throughout the industry, certain sectors are more susceptible than others. Healthcare, workers’ compensation, and auto insurance rank among the industries most affected by fraud.
What are the most prevalent insurance deception schemes?
Fraud in the insurance industry takes various forms depending on the industry. According to industry experts, the following are the most prevalent forms of fraud committed against various segments of the insurance industry.
Auto insurance fraud
Premium leakage, which the analytics firm Verisk defines as “omitted or misstated underwriting information that leads to inaccurate rates,” is one of the most prevalent and costly forms of fraud in the automobile insurance industry. The company’s recent modeling estimates that auto insurers lose at least $29 billion annually due to “information failures and fraudulent practices.” These consist of:
- Unidentified motorists ($10.3 billion)
- erroneous mileage ($5.4 billion)
- Accidents and violations ($3.4 billion)
- False documentation to reduce premiums ($2.9 billion)
However, the financial impact of premium leakage extends beyond insurance providers. As much as 14% of all personal auto insurance premiums can be attributed to the cost of covering premium leakage, according to Verisk’s analysis.
Claim padding is another practice that costs the auto insurance industry a fortune. According to Triple-I, this typically occurs in no-fault states, where “unscrupulous medical providers, attorneys, and others” inflate the costs of legitimate claims. The invoicing of an insurer for a medical procedure that was never performed is one example.
The institute also received reports of unscrupulous auto body repair shops using counterfeit airbags and then obtaining reimbursement from insurance companies for genuine airbags.
Frauds against health insurance providers
The most recent FBI report on financial crimes revealed the most prevalent categories of healthcare insurance fraud. These consist of:
- Billing for services not rendered
- Upcoding services and medical items occur when a provider submits a receipt using a code that results in a higher payment than for the actual service or item rendered.
- Filing duplicate claims
- Unbundling or fragmented billing for tests or procedures that must be invoiced together at a discounted price.
- Providing excessive and superfluous services in exchange for remuneration.
Triple-I also mentioned the prevalence of health identity theft, in which criminals steal a victim’s name, health insurance number, and other confidential information in order to submit fraudulent claims to insurance companies.
Fraudulent use of workers’ compensation insurance
According to Triple-I, the most common types of workers’ compensation insurance fraud include the following:
- To save on premiums, employers misrepresent their payroll or the nature of their employees’ employment.
- Employers apply for coverage under various names to avoid paying claims or avoiding detection of their poor claims history.
- Employees who “over-utilize” medical care to continue receiving lost income benefits or who seek compensation for a work-related injury that never occurred are subject to disciplinary action.
Here is a recent example of workers’ compensation fraud in which a tradesperson omitted to disclose that he had recovered and was working a new job. Always a fraudulent practice.
Insurance fraud relating to natural disasters
Disasters provide opportunities for fraudsters to submit claims that are “exaggerated or completely false,” according to Triple-I. This includes seeking compensation for a maliciously damaged property. Another instance of contractor fraud is when householders’ insurance is used to pay for unnecessary repairs.