Meet 鈥楩red鈥�. (For the purposes of this article, we鈥檝e changed his real name). Fred鈥檚 account of the incident was straightforward.
He dropped his Mercedes 4x4 into his local garage in Knockloughrim, NI, on a Friday. The car went in for a 鈥榳inter service鈥�.
The owner of the garage (let us call him 鈥楤arney鈥�) called Fred on Monday morning with 鈥�bad鈥� news. The service had been completed but, on a test drive, the car had been badly damaged 鈥� debris in the road had punctured the oil sump. Oil drained from the engine causing catastrophic engine damage.
Fred hadn鈥檛 yet seen the car and no one had assessed the damage, however, Fred immediately contacted his GAP insurers to begin a claim.
Before the GAP claim could be considered, an insurer needed to make a total loss payment. Fred initially began a claim against the garage. The garage鈥檚 insurance broker referred the claim to the wrong insurer 鈥� the goods in transit policy refused to respond. In response, Fred switched his total loss claim to his own motor insurer who arranged for its engineer to assess the damage, and subsequently took the accident circumstances at face value and paid the claim. The total loss payment to Fred was 拢21K.
The GAP insurer was not convinced 鈥� Fred鈥檚 car was high mileage, the policy had two days left on a three-year policy term. A total loss payment would net Fred 拢16K. The claim was referred to Crawford Legal 麻豆区 (CLS) to validate鈥�
CLS鈥� Investigation and the Fraud
Things that immediately struck CLS鈥� counter-fraud team:
- Fred reported the claim to his GAP insurer on the same day of the 鈥榓ccident鈥�. He hadn鈥檛 even had the damage assessed at that point. How did he know the car was a total loss?
- Barney was questioned about the fact that Fred鈥檚 car had been damaged on the test drive 鈥� he was vague. On one hand the damage was caused by a pothole, but on the other the garage mechanic had driven over scrap metal fallen from the rear of a lorry.
- Fred was asked about his previous claim history 鈥� he admitted an earlier accident from 鈥渇ive or six鈥� years ago. CLS insisted that Fred provide details and documents relating to the claims 鈥� it turned out this was actually just over three years earlier. Only under pressure did Fred admit his earlier accident had led to a previous GAP insurance claim.
- Fred鈥檚 previous RTA had led to the total loss of his Jaguar XJ and, by striking coincidence, the RTA occurred on the second last day of the GAP policy term. The previous GAP insurer was traced and the claim reviewed 鈥� the previous motor insurer and previous GAP insurer had no concerns at the time, but conceded the claim looked suspect with the benefit of hindsight.
- Fred and his wife stated that they had no social connection with Barney and his garage 鈥� ie they didn鈥檛 know him. Detailed social media analysis by our Insight Team established extensive social media connections between Fred and Barney鈥檚 families.
- CLS sought to interview Barney and the garage owner. Insight established that Barney had previously been banned from being the director of a business for the maximum 12 year period due to serious corporate misdemeanours. Barney and the garage owner refused to cooperate with CLS attempts to establish the accident circumstances.
With serious concerns established, CLS instructed forensic engineers to reinspect Fred鈥檚 vehicle. It turned out that the damage to the bottom of Fred鈥檚 car had been caused deliberately by the use of an angle grinder, a hammer, and a screwdriver.
After this piece of evidence was established, both Fred and Barney were contacted again by our counter-fraud team. Barney aggressively denied that the garage had caused the damage to the car. Fred refused to provide a further statement and instead instructed solicitors.
CLS, liaising with Fred鈥檚 motor insurer, declined the GAP claim on the grounds of fraud, specifically:
- The damage had been caused deliberately.
- Fred had a substantial financial motive to have the car deemed a total loss.
- Fred was dishonest regarding his relationship with Barney.
- The garage story, like the bottom of Fred鈥檚 car, was full of holes 鈥� the garage鈥檚 vagueness about the cause of the damage was significant.
- Barney had previously been convicted of serious dishonesty.
- The alleged RTA was on the second last day of the policy term.
- Inferences could be drawn from the previous GAP insurance claim in remarkably similar circumstances, which Fred had attempted to conceal.
Recovery proceedings
Immediately following the decline of the claim, CLS was instructed by Fred鈥檚 motor insurer to recover the total loss payment made to Fred in the sum of 拢21K. A recovery action was launched against Fred, Barney and the garage on the basis that all parties associated with the deliberate damage to Fred鈥檚 car were jointly and severally liable in the tort of deceit for the loss caused.
CLS is acting for numerous RTA insurers in similar circumstances to recover substantial total loss and other claim payments, exemplary damages, and costs from fraudsters motivated by the existence of GAP insurance to fabricate accident, arson, deliberate damage and theft claims from policyholders and their associates.
Often, fraudsters (even when caught red-handed) compound their original fraud by refusing to repay insurers.
Fred, however, quickly agreed to repay insurers 拢21K.
Lessons for Insurers 鈥� Don鈥檛 鈥榃RITE OFF鈥� recoveries
For Fred鈥檚 motor Insurer this was a familiar scenario 鈥� one faced regularly by all motor insurers: its policyholder鈥檚 vehicle was damaged beyond repair but through no fault of his own. The garage would have insurance and Fred鈥檚 insurer naturally expected to recover the total loss payment via a subrogated claim. Quite rightly, motor insurers try to settle non-fault claims as quickly as possible, but inevitably with minimal or no validation. The motor engineer, in this case, had simply valued the vehicle and confirmed the existence of damage, but he/she had missed the fact that the damage had actually been caused deliberately.
The motor insurer in this case had no knowledge of the GAP claim, and this is common when it comes to motor claims.
Had the RTA insurer noted the previous total loss from September 2017 it still would have been unaware of the associated GAP insurance claim.
When fraud is uncovered, motor insurers regularly write off the payments they have made and don鈥檛 consider going down the road of pursuing recoveries. Recovery actions are often seen as costly with little prospect of success. But, in our experience, we would urge insurers to reconsider the viability of recovery actions.
CLS acts for GAP and motor insurers on a CFA basis and has recovered hundreds of thousands of pounds for motor insurers that have been induced into making a total loss and other claim payments by fraudsters.
What we also know with some certainty is that previous, similar claims are a strong fraud indictor. Previous GAP insurance claims can be difficult to identify and investigate. But given CLS acts for a number of GAP insurers, our team was able to trace and investigate the previous claim in this particular case.
Fred鈥檚 winter service turned out to be more expensive than he bargained for 鈥� his insurers have returned his very badly damaged 4x4 to him and retained his insurance premium, Fred has repaid the 拢21k, plus CLS鈥� costs. The garage insurer has been notified of its policyholder鈥檚 fraudulent conduct. Fred didn鈥檛 get his 拢16K GAP payout either.
Fred now faces a recovery action in relation to the September 2017 RTA. Both the GAP insurer and motor insurer from that claim want their money back too鈥�.
Let us help, contact:
Peter Oakes
Head of Counter-Fraud, Crawford Legal 麻豆区
E: peter.oakes@crawco.co.uk
