Fraud Investigation
Barry Zalma
May 24, 2023
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The heart of any successful investigation of suspected insurance fraud is the insured’s statement. Its importance cannot be over emphasized, and it should be recorded electronically and then transcribed. The transcribed statement should then be sent to the insured to read, correct and sign.
The primary purpose of the statement is to establish and preserve the insured’s version of all aspects of the loss so that it will be difficult–hopefully, impossible–for the insured to change his version or attempt to explain away the inconsistencies, discrepancies, and misrepresentations that invariably arise as your investigation proceeds.
Insurers are compelled by statute and Regulation to maintain Special Fraud Investigative Units, publish and fulfill a detailed anti-fraud program and train all of their anti-fraud personnel. Compliance by insurers is less than constant across the industry. Some have effective fraud units while others simply identify one employee as their anti-fraud director although his or her work is almost totally adjusting claims and not investigating fraud. The expense of staffing and pursuing the anti-fraud efforts required by statute and regulation reduces the profits earned by the insurer and is believed to be offset by the lack of payment to fraud perpetrators. Of course, these efforts are also made difficult by the imposition of fair claims settlement practices regulations that require quick, complete, thorough investigations and fair treatment and prompt payment of insureds even when fraud is suspected. The two opposing sets of laws create a Catch-22 from which insurers find difficulty complying with both.[1]
Investigation techniques including, but not limited to, interviewing, photography of loss scenes, use of independent experts, use of private investigators and use of claims counsel all are part of the required thorough investigation.
Since exposing fraudulent activity, if it exists at all, is a goal of an insurance claims investigation that really wants to find a proper, honest and viable claim, accuracy is crucial. There must be no confusion about the circumstances of the loss, the items claimed, and the amount claimed–in short, all aspects of the suspected claim. It is more important to the claims person to find that the suspicious claim is, in fact, proper and remove all doubts. It is a successful claims investigation. Finding sufficient evidence of fraud to defeat a claim is important, but not as important as paying promptly a legitimate claim.
Obtaining a complete statement, the first time out is preferred because second and third truthful statements become more and more difficult to get as the investigation matures. The most obvious reason for this difficulty is that the insured becomes wary or suspicious of the repeated inquiries and will be reluctant to cooperate. The professional claims person will want the investigation to be accomplished quickly so that the insured will not realize what’s going on and take steps to cover his tracks.
Accuracy and completeness are also essential as a process of verification necessary to ascertain whether what the insured reports and claims is, in fact, true or false. Of course, verification is accomplished by contacting the various sources of the true information, such as retailers, prior carriers, agents, adjusters, and law enforcement agencies–all of which is covered.
The statement the claims person obtains may be relied on to pay a legitimate loss, to deny the claim because it was not caused by a peril insured against, to deny a claim because of attempted fraud by the insured, used as evidence to rescind the policy and/or defend against a civil suit by the insured, and because the statement itself is the most direct evidence of insurance fraud. The recorded statement may also be used in a criminal prosecution of the insured. The importance of the statement and the requirement that it be meticulously performed and transcribed is important and essential to each claims investigation.
[1] For detail consider Barry Zalma’s book California SIU Regulations 2020 available on amazon.com.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
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ZIFL Volume 30, Number 2
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
Post number 5260
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ This issue contains the following articles about insurance fraud:
Read the full 19 page issue of ZIFL at https://zalma.com/blog/wp-content/uploads/2026/01/ZIFL-01-15-2026.pdf.
The Contents of the January 15, 2026 Issue of ZIFL Includes:
Use of the Examination Under Oath to Defeat Fraud
The insurance Examination Under Oath (“EUO”) is a condition precedent to indemnity under a first party property insurance policy that allows an insurer ...
ERISA Life Policy Requires Active Employment to Order Increase in Benefits
Post 5259
Read the full article at https://lnkd.in/gXJqus8t, see the full video at https://lnkd.in/g7qT3y_y and at https://lnkd.in/gUduPkn4, and at https://zalma.com/blog plus more than 5250 posts.
In Katherine Crow Albert Guidry, Individually And On Behalf Of The Estate Of Jason Paul Guidry v. Metropolitan Life Insurance Company, et al, Civil Action No. 25-18-SDD-RLB, United States District Court, M.D. Louisiana (January 7, 2026) Guidry brought suit to recover life insurance proceeds she alleges were wrongfully withheld following her husband’s death on January 9, 2024.
FACTUAL BACKGROUND
Jason Guidry was employed by Waste Management, which provided life insurance coverage through Metropolitan Life Insurance Company (“MetLife”). Plaintiff contends that after Jason’s death, the defendants (MetLife, Waste Management, and Life Insurance Company of North America (“LINA”)) engaged in conduct intended to confuse and ultimately deny her entitlement to...
Failure to Respond to Motion to Dismiss is Agreement to the Motion
Post 5259
Read the full article at https://lnkd.in/gP52fU5s, see the video at https://lnkd.in/gR8HMUpp and at https://lnkd.in/gh7dNA99, and at https://zalma.com/blog plus more than 5250 posts.
In Mercury Casualty Company v. Haiyan Xu, et al., No. 2:23-CV-2082 JCM (EJY), United States District Court, D. Nevada (January 6, 2026) Plaintiff Mercury Casualty Company (“plaintiff”) moved to dismiss. Defendant Haiyan Xu and Victoria Harbor Investments, LLC (collectively, “defendants”) did not respond.
This case revolves around an insurance coverage dispute when the parties could not be privately resolved, litigation was initiated in the Eighth Judicial District Court of Nevada. Plaintiff subsequently filed for a declaratory judgment in this court.
On or about April 15, 2025, the state court action was dismissed with prejudice pursuant to a stipulation following mediation. Plaintiff states that the state court dismissal renders its ...
Court Must Follow Judicial Precedent
Post 5252
Read the full article at https://www.linkedin.com/pulse/sudden-opposite-gradual-barry-zalma-esq-cfe-h7qmc, see the video at and at and at https://zalma.com/blog plus more than 5250 posts.
Insurance Policy Interpretation Requires Application of the Judicial Construction Doctrine
In Montrose Chemical Corporation Of California v. The Superior Court Of Los Angeles County, Canadian Universal Insurance Company, Inc., et al., B335073, Court of Appeal, 337 Cal.Rptr.3d 222 (9/30/2025) the Court of Appeal refused to allow extrinsic evidence to interpret the word “sudden” in qualified pollution exclusions (QPEs) as including gradual but unexpected pollution. The court held that, under controlling California appellate precedent, the term “sudden” in these standard-form exclusions unambiguously includes a temporal element (abruptness) and cannot reasonably be construed to mean ...
Lack of Jurisdiction Defeats Suit for Defamation
Post 5250
Posted on December 29, 2025 by Barry Zalma
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He Who Represents Himself in a Lawsuit has a Fool for a Client
In Pankaj Merchia v. United Healthcare Services, Inc., Civil Action No. 24-2700 (RC), United States District Court, District of Columbia (December 22, 2025)
FACTUAL BACKGROUND
Parties & Claims:
The plaintiff, Pankaj Merchia, is a physician, scientist, engineer, and entrepreneur, proceeding pro se. Merchia sued United Healthcare Services, Inc., a Minnesota-based medical insurance company, for defamation and related claims. The core allegation is that United Healthcare falsely accused Merchia of healthcare fraud, which led to his indictment and arrest in Massachusetts, causing reputational and business harm in the District of Columbia and nationwide.
Underlying Events:
The alleged defamation occurred when United ...
Zalma’s Insurance Fraud Letter
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ZIFL Volume 29, Issue 24
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/
Zalma’s Insurance Fraud Letter
Merry Christmas & Happy Hannukah
Read the following Articles from the December 15, 2025 issue:
Read the full 19 page issue of ZIFL at ...