Immigrant Tries Arson for Profit
Post 5409

Posted on July 24, 2026 by Barry Zalma

This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ¬¬¬Perpetrators than any Other Crime.

The Insurer Understood that an Insured Intent on Arson Fraud Would Not Limit his Fraud to the Act Itself

Since arriving in the United States, the Russian had done well financially. He owned a million-dollar piece of real estate and three gas stations. He was in the jewelry business, wholesaling jewelry he would get on consignment from immigrants who arrived in the U.S. after he was settled. He was, however, cash poor. What he needed was quick cash.

He decided to burn his house down.

To profit from his action he increased his homeowners insurance coverage three fold. He found unscrupulous “art appraisers” who would sign appraisals in blank or which he prepared for them. He, without the knowledge of his insurers, personally appraised all of his household goods as if they were great works of art. He intended to, and did, claim they all came from the then Soviet Union as “household goods.”

Since U.S. Customs requires no declaration of the contents of household goods. He knew the ownership could not be traced. The insurer would be unable to verify the values of the items he expected to destroy in the fire.

He had no qualms about appraising a $1.00 art print at $1,000.00 or a fake oil painting as a $50,000.00 Russian grand master. The appraisals submitted to his insurer described Taiwan pottery as Lemoge or Meissen and glass as Waterford crystal. The appraisals showed him to have as much Faberge as did the Tsar of all the Russians before the revolution.

It took time, but he finally got insurance on the art work. The insurer issued a policy relying on the good faith of the Russian and the accuracy of the appraisals he provided.

A few weeks after the policy was issued, while the Russian, his wife and fourteen-year-old son were at Russian Businessman’s Dinner Dance; his eighteen-year-old son, a girl friend and Doberman Pinscher were at a drive-in movie in a Bronco; and his second Doberman was boarded away, a massive explosion occurred blowing the sliding glass door one hundred feet from the house.

Someone had spread gasoline throughout the house and ignited the fumes. Witnesses saw a car, without lights, speed down the hill from the house minutes after the explosion. His oldest son, who claimed to be at a Night Club at the time, was seen with burns on his hands, face and missing eyebrows.

Coincidentally, when the explosion occurred, there was a fire department helicopter overhead with a full load of water. It saw the explosion and sped to the scene and dropped water on the house almost immediately after the initial explosion. The fire was put out and the damage was not complete.

When the Russian returned home, he was angry. The arson investigators would not let him in the house. He claimed there was $2,000,000 in diamonds in a floor safe in the master bedroom closet. He begged the firefighters to look for it.

They found that the safe door was open and the floor safe was empty. He screamed. He ranted. He accused the arson investigator of theft. He demanded access to his house.

When he finally gained access, he found that destruction was minimal. There were still remnants of the items that would be part of his claim. Evidence would exist that they were not as valuable as his appraisals claimed. Therefore, being a thorough and experienced criminal he made sure that the next day, a second fire occurred at the house to complete the destruction. Only after the second fire had destroyed the evidence did he advise the insurance company of the fire and his loss.

The claim the Russian presented included over $2,000,000.00 in diamonds allegedly stolen by whoever set the fire, which from the overwhelming smell of gasoline was obvious.

The claim for the house and its scheduled and unscheduled contents included an additional $2,000,000 not knowing that his policy had a $500 limit for theft of jewelery or gems. He demanded, and received, the use of a rental dwelling of equivalent construction.

The insurer, as a result of its thorough investigation learned that the Insured had lied when he presented his application. He stated that he had never been canceled by a prior insurer nor had he ever incurred a loss or presented a claim to a previous insurer.

The insurer established that two different appraisals, stated to be written by two different appraisers in two different cities were typed on the same typewriter. Both appraisers also appeared to write English with East European syntax. Their spelling was appalling. The even misspelled the word “porcelain.”

The insurer, although it could not prove the insured committed arson for profit could, and did, rescind the policy and refuse to pay the claim. Litigation, of course, commenced almost immediately after the claim was denied.

It took three years, and $300,000.00 in investigation and attorney’s fees, to convince the Court that the Russian misrepresented and concealed material facts when he bought the policy. The insurer obtained a judgment rescinding the policy because of fraud and a judgment against the insured for the monies advanced and its attorneys’ fees and investigation expense. The Russian appealed.

Since the Russian’s lawyer was working on a contingency, there was no downside for the Russian dragging the lawsuit on interminably. The Russian, and his counsel knew about, in this type of case, the economics of defense.

They assumed the insurer would eventually offer to settle for a sum less than the amount it would cost to defend through trial and all appeals. In most cases corporate insurers in the U.S. would be willing to settle to avoid paying more defense costs.

In this case, however, the insurer was based in London, U.K., not the U.S. The insurer decided that it could not reward fraud. It would spend as much as necessary to defeat the claim. The insurer instructed its defense counsel to “take no prisoners!” Its persistence was rewarded. The court of appeal affirmed the judgment of rescission five years after the fire.

In the trial that followed the Court of Appeal’s affirmation of the trial court judgment and the insurer recovered $500,000 from the Russian and his broker.

By fighting to the end, the insurer’s position was not only vindicated but it recovered all of its costs and attorneys’ fees and a return of the payment for rental expenses. The insurer and its counsel were brave. The insurer spent everything needed to defeat the bad faith suit and win its cross claim.

The claims investigator had his life threatened four times and defense counsel received a bomb threat that required him to eliminate the case against the insured. During the final trial to set damages the insured threatened the life of the defense counsel as he approached the stand to testify. Because of the insured’s threats there were three bailiffs in the courtroom and all kept their hands on their weapons at all time. Counsel was escorted by a bailiff to his car after his testimony completed.

The decision to pay a person submitting a fraudulent claim to avoid the costs of defense is short sighted. It is not cost effective. Once the word gets out that the insurer will fight each fraudulent claim through the courts of appeal and will seek affirmative relief from the fraud the number of fraudulent claims presented will be reduced. Those who pay to avoid expense pay often and pay out more than they would if they defended all fraudulent claims without compromise.

This case also is informative because the insurer did not quit when it became clear that proof of the arson by the insured was difficult. The insurer understood that an insured intent on fraud would not limit his fraud to the act itself. The insurer found that the Russian also lied when he applied for the insurance.

Insurers should always investigate thoroughly each claim, and, as part of that investigation work to establish the truth or falsity of the information provided the underwriting department when the policy was first issued.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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