The manager of a Road America convenience store in Lebanon, Indiana, knew enough to keep his eye on a customer who was wandering aimlessly around the back of the store one February morning. As the manager watched on the store's security mirrors, the customer sat down, slapped his hand against a display case and began screaming in pain. Alarmed, the manager called an ambulance and the police. The man was treated for minor injuries and released.
Two months later, Road America's carrier, Indiana Farmer's Insurance Agency, received a bill for $60,000 from a hospital in Nigeria, claiming the customer had been treated there for extensive injuries. The customer demanded payment through numerous phone calls, even after the company denied the claim.
The Indiana Insurance Fraud Task Force uncovered a pattern of suspicious claims by the customer. When he was arrested in Cincinnati, he was carrying a computer disk full of fake letters and bills he would print at local copy shops and fax to insurers.
According to the National Insurance Crime Bureau (NICB), 10 percent of all property/casualty insurance claims are fraudulent. In one popular scam, the hustler stages an accident at a business in hopes of collecting insurance. It's not a victimless crime; every accident claim filed on your business raises your premium. Fortunately, the same steps you'd take to eliminate real accidents can also help prevent bogus ones.
Tricks Of The Trade
Jacob Stone got away with insurance fraud for more than 20 years before he began consulting to business owners on how to avoid personal injury scams. After "A Current Affair" aired his story, however, he was charged with insurance fraud and sentenced to four years in prison. He's now living in a halfway house and has co-written a book with Graham Mott called Insider Secrets onBusiness Liability Fraud (Golden Shadows Press).
Raised in a fourth-generation carnival family, Stone says he was born to hustle. "We were taught to spot the easiest, most vulnerable victims," he says. For personal injury scams, that meant grocery stores, convenience stores, fast-food restaurants, pet shops and theaters because they have high customer traffic and young employees who know little about insurance fraud.
Personal injury scams fall into four basic types:
1. Slip and fall. The "customer" stages a fall on a slippery substance spilled on the floor or in the parking lot. It's typically something that would normally be found on the premises: ketchup at a fast-food restaurant, cleaning supplies in a public restroom, produce dropped on the floor in a grocery store. Some con artists find a spill; others create one.
2. Trip and fall. Con artists often visit stores in search of accidents waiting to happen: an electrical cord stretched across an aisle, a loose weatherstrip, an obstructed sidewalk or merchandise left in the aisle. Then they trip, fall and claim an injury. "Professional hustlers are like professional actors," Stone says. "They know how to stage a fall so well no one can tell the difference."
3. Yank down. In this scam, the hustler finds a top-heavy stack of soda cartons, bags of pet food or other unwieldy merchandise, then pulls it down on top of himself. "It looks legitimate," says Stone, who contends that a professional hustler is as skilled as a stunt man at not getting hurt.
4. Chew and sue. At a restaurant, the schemer will put a shard of glass in a salad or a chicken bone in the soup, then claim to have been injured trying to eat it.
To collect on an insurance claim, the hustler has to have medical documentation of the "injury." Some stick to "internal head injuries" or "sciatic nerve damage," knowing what symptoms to claim and how to move to convince a doctor they're hurt. Others use a syringe to squirt blood up their "broken nose." If they have an old nose injury, they can convince a doctor the damage was caused by this accident, get scheduled for reconstructive surgery and file a claim for $30,000.
Scam artists use fake names and addresses, says Jerry Dolan, a special agent for the NICB. When they call the insurance company to ask about their claim, they say they've moved; the phone's not connected yet. Often the insurance company is willing to settle the claim quickly.
Ounce Of Prevention
For a business to be held liable for an accident, its employees must have either known about the hazard or reasonably be expected to have known about it and failed either to remove it or to warn people. Accordingly, con artists usually either find an existing hazard or wait awhile after creating one. That means careful attention on your part greatly reduces your chances of being hit by a scam (as well as reducing the chance of real accidents).
Regularly check your premises for potential dangers, and eliminate them immediately. These include improperly stacked displays, leaks from coolers, debris on the floor, oil spills in the parking lot, ice on the sidewalk, poorly cleaned spills, and loose carpets, floor mats or weatherstripping.
Train employees to display "Wet Floor" signs every time they mop.
Keep a chart of when you clean public restrooms. That way, you have a defense if someone claims there was a spill on the floor for hours.
Train employees to watch for suspicious behavior. It's not easy to recognize a professional hustler, but you might catch an amateur and avoid paying a claim.
If someone falls or gets hurt on your property, be sympathetic. "These are your customers," says Jon Hoch of the NICB in Palos Hills, Illinois. "They're innocent until proved guilty. The worst thing you can do is say 'You're not hurt.' Maybe they are."
Have one employee help the customer, while another takes pictures of the scene for later use. (Keep a single-use camera handy.) Explain that you want to do everything possible to help.
Call an ambulance and the police, who will press the customer for identification.
Ask other customers if they saw what happened; get their names and phone numbers. Beware of a witness who seems too eager to help, though; con artists often bring their own "witnesses."
If you're suspicious, mention it to your insurance adjuster. Also call the NICB at (800) TEL-NICB. The adjuster can investigate, decide if the claim is fraudulent, and perhaps save your business a bundle.
Steven C. Bahls, dean of Capital University Law School in Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.