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Posted By J.Patrick on 08 Feb 2012 07:23 PM
I work for a contractor that does storm restoration doing estimating & supplementing insurance companies while I work on becoming an adjuster myself. My ? is, this guy I work for has me submitting estimates to insurance companies on work they've approved to get the price up'd. For example , He just had me send in a supplement on 2 elevations of exterior paint that was approved by they adjuster, the estimate was written by a 1099 employee of my company who opened up an LLC in his name to write estimates to the insurance company to try & get more money on certain things, he is a 1099 employee but has been paid by this company for more than a year. To me this sounds like some type of fraud, can you tell me if it is or isnt? If it is I wanna get out before I ruin any chances I have to become an adjuster. Thanks  

It's called inflating a claim and yes it's fraud! Did you send in that estimate? If you did, well then you took part in defrauding said carrier. I suggest that you contact the state department of insurance with copies of every single estimate you took part in. Do NOT quit, do NOT tell this criminal of a boss that you work for that you are aware of said fraud. If you do, he will claim it was you doing the fraud. It is scum like your boss that causes John Q Homeowner's sky high insurance premiums.

Where's the fraud?

The OP states that the two elevations of paint was approved by an adjuster. The estimate was written by someone that understands Xactimate or whatever estimating system the contractor uses and has to be accepted by the carrier before any payment is made.

Either I don't understand the question or I'm having a senior moment................

Happy Trails

If I understand he is seeking more money for approved work. If the company pays what is the problem? (except the company is likely telephone adjusting to save on paying field adjusters). If is charging for work that was not done that is a different issue.

I have a simple rule I follow in business. If you don't lie you don't have to remember much because it is always the truth. If the contractor is charging for something that does not need to be done or not caused by the loss or charging for items that will never be done then yes, it is fraud. If they are inflating the bid to gouge more money and the adjuster pays it the\n that is his problem.

The rule in adjusting is it has to be necessary and it has to be reasonable. It has to be both not just one or the other.

I wouldn't throw around the word "fraud" unless I knew what it meant. If the contractor has a legitimate difference of opinion on the scope and cost of work and pushes hard to get every penny he feels entitled to, that's not fraud. It's just shrewd.

from Wikipedia:

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Common law fraud has nine elements:[3][4]

1.a representation of an existing fact;
2.its materiality;
3.its falsity;
4.the speaker's knowledge of its falsity;
5.the speaker's intent that it shall be acted upon by the plaintiff;
6.plaintiff's ignorance of its falsity;
7.plaintiff's reliance on the truth of the representation;
8.plaintiff's right to rely upon it; and
9.consequent damages suffered by plaintiff.
Most jurisdictions in the United States require that each element be pled with particularity and be proved with clear, cogent, and convincing evidence (very probable evidence) to establish a claim of fraud. The measure of damages in fraud cases is to be computed by the "benefit of bargain" rule, which is the difference between the value of the property had it been as represented, and its actual value. Special damages may be allowed if shown proximately caused by defendant's fraud and the damage amounts are proved with specificity.

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So when is it fraud? (in number order as above)

1) The contractor makes a statement about the quality/amount/cause of damage to the stucco
2) The lie results in a material dollar difference ($10.00 is probably NOT enough)
3) The statement in line #1 is FALSE
4) The contractor knows it is false, ie. he's not just innocently repeating something he was told incorrectly
5) The contractor told this lie anticipating he would trick the insurance company with it
6) The insurance company had no idea it was a lie
7) The insurance company depended on the contractor's estimate to determine how much to pay
8) there was no legal reason preventing the insurance company from depending on the contractor's estimate
9) the insurance company suffered (paid out too much money) because of the lie they depended on.

If you can remove any ONE of these elements there is no common law FRAUD (but it could be attempted FRAUD, or stuatory fraud).

For example, if the insurance company prepares their own estimate, laughs at the contractor's estimate and doesn't pay, THERE IS NO FRAUD.

example #2 If the homeowner asks an innocent contractor to perpare a bid for upgrading the stucco, and then turns it into the insurance company and says "This is the estimate from my contractor who says all the damage is from the water leak", then the HOMEOWNER may have committed FRAUD but the contractor didn't.

example #3

The insurance company knew the contractor was the biggest liar in the world, they also knew the estimate was inflated, but their own estimate was even HIGHER. So they decided to pay the contractor's estimate anyway. NOT FRAUD (but attempted FRAUD)

example #4

A young man works for a very agressive insurance contractor who advertises on the back of the yellow pages. This contractor has a bad reputation with the insurance company for pushing hard for every penny. He uses part time estimators and ex-public adjusters to prepare estimates. The contractor routinely encourages the insured to demand appraisal. He demands reinspections and badgers the insurance company to pay for things they don't agree with.

The young man feels uncorfortable with working for such a pushy boss. He decides the activity is fraud, and announces it to the world.

The contractor's ego is hurt, his reputation is damaged, and he feels disrespected. He loses 2 days work dealing with an iquiry from the state. He calls his attorney of 10 years, that he is good freinds with, and asks him to sue the young man for defamation and libel. The attorney thinks it is a weak case but the contractor pressures him to file. A lawsuit demanding $200,000.00 is filed.

I'll rephrase..One of are companies salesman opened a company in his name just to write estimates to supplement the the claims my boss signs up. She does not like the estimates she gets from actual sub-contractors because it doesn't in her mind make obscene profits for the company...So she writes up an estimate in this salesman's company name & inflates the actual cost with a number she just pulls out of a nowhere by not even actually job costing ..example..if State Farm xactimate pays 1.50 sf for painting she'll up it to 5.50 & then supp it to the insurance company while still asking for O&P on top..This also happens on siding, roofing, gutters.etc...This salesman is a 1099 employee, however has our company business cards & signs up homeowners under are company name...I have already put in my notice to leave this company because it seems fraudulent, just wondering if it is illegal/fraud & if I should say something to somebody? Thanks!

If a general contractor submits an inflated bid from a pretend contractor, that's a problem. The falsehhod is in the fake bid that is made to appear from a real contractor.

I'll give you two scenarios, one probably not fraud, and one that probably is:

Billy Bob general contractor is very busy. He knows that a certain electrical repair usually costs $1000.00 to $1200.00. That really is the fair market price. The adjuster asks for a sub bid. Billy Bob calls his cousin Sammy, an electrician. Billy Bob gets a blank invoice from sammy and writes $1000.00 on it, and submits it to the adjuster. This might be unethical and stupid on Billy Bob's part, but it is probably not fraud. Submitting an invoice with Sammy's name on it is a lie, because Sammy never actually bid the job. But if $1000.00 is truly a fair price and the work is really part of the covered claim, Billy Bob can argue that it was not a fraud. He can also say that Sammy said he could write the price in. Sleazy, stupid, unethical but probably not fraud.

(This is why as an adjuster, if you discovered such a situation, you would not write in your report "Billy Bob commited a fraud". If you're smart and you want to stay out of trouble, you can say "It appears that Billy Bob may have written in the $1000.00 figure on Sammy's invoice. There is no evidence that Sammy inspected the job." Let someone in a higher pay grade decide if it is fraud.)

Scenario #2

Contractor Chris doesn't think the panel was even damaged by the fire, because his foreman told him so. He knows most subs would charge $2000 to replace the panel. He goes into his computer and creates fake letterhead for a non-existant electrician. He writes up an estimate for $5000.00 with a notation "electrical panel damaged by fire". He adds the line item into Xactimate and adds 10 & 10 to it. This would be fraud. There are at least 3 lies: causation, non-existent expert, and price. The lie is material ($$$$). If the insurance company falls for it, its fraud.

I'm not sure how your situation compares to these examples because I could't understand your story that well.

Maybe you can try to write it a little bit clearer.

But it sounds sleazy from what I can understand.

Posted By J.Patrick on 10 Feb 2012 03:03 PM
I'll rephrase..One of are companies salesman opened a company in his name just to write estimates to supplement the the claims my boss signs up. She does not like the estimates she gets from actual sub-contractors because it doesn't in her mind make obscene profits for the company...So she writes up an estimate in this salesman's company name & inflates the actual cost with a number she just pulls out of a nowhere by not even actually job costing ..example..if State Farm xactimate pays 1.50 sf for painting she'll up it to 5.50 & then supp it to the insurance company while still asking for O&P on top..This also happens on siding, roofing, gutters.etc...This salesman is a 1099 employee, however has our company business cards & signs up homeowners under are company name...I have already put in my notice to leave this company because it seems fraudulent, just wondering if it is illegal/fraud & if I should say something to somebody? Thanks!

..........................

It is indeed fraud. In my opinion and others WILL differ, I believe it is your duty and to CYA to notify the department of insurance for said state. What this lady is doing is illegal and she needs to be prosecuted to the fullest extent of the law. My advice further is to NOT let your boss know you are leaving due to the blatant fraudulant activity to fleece the carrier. It is my belief that they will put all of this on you to cover their hind ends. If you ever want to work in this industry, having that on your record will all but sink your career before it starts. Even being associated with said activity will be a blemish that you do not deserve. Our job is based upon integrity, I plead for you to do the right thing and slam these idiots.

Please keep copies of all estimates you have written under their direction. If you handle this right, you will golden and they will get their just desserts 

There’s a story on the news recently: “Famous actress in bed with her nephew”. When you see the photo it’s a 40 year old woman snuggling a 6 month old baby – nothing scandalous about it. As adjusters we need to look beyond the headline and dig into the details. It’s a job requirement.

I deal with fraudulent claims all the time. I am a daily claims adjuster in a major metropolitan area. I see fake invoices and invoices that have been altered. I see asbestos removal bids from contractors that don’t even exist. I have three arson claims I am working on right now, and of course arson usually involves fraud. (If you can’t imagine an arson that doesn’t also involve fraud, ask me and I will explain).

It is important to realize that all frauds involve lies, but not all lies are frauds. All frauds are unethical, but not all unethical behavior is fraud. As an adjuster if you want to call something a fraud or arson, by all means, knock yourself out. But if you don’t have a precise understanding of what the word means and you don’t have a clear understanding of the facts, you are a loose cannon bringing harm to yourself and your employer and you should stop pretending to be an adjuster.


Robby might be right that it is a fraud. I never said it was and I never said it wasn’t. It's just so hard to read these run- on sentences with spelling mistakes and decipher what is really going on. It sounds like the boss is fabricating invoices from a sub that is not actually doing the work or intending to do the work. There are a lot of details that have been left out. I'm having the same problem analyzing this story as we had with Mr. Wangerin's story - somebody gets all excited and posts a rambling one sided story basically saying "he said and she said and isn't my story great don't you agree with my side?" In my opinion we have about a 75% understanding of what is going on. Maybe I'm just a cranky old guy but I like to have a thorough, detailed understanding of all the moving parts before I feel comfortable passing judgment.



If the activity does not fall within the legal definition of fraud it certainly sounds unethical and the poster should consider other employment. I agree with Robby that being associated with such an employer can hurt a career.



Here’s some questions I would like answered:

1) Does the boss prepare the sub bids, pretending they are written by other people?
2) She does it for only one trade (painting) or for multiple trades?
3) Does she have any ownership or business interest in the subs? Does she have any right to prepare their estimates?
4) Are the subs real companies doing work, or just paper fictions? Do the subs work for other contractors?
5) Does she have any discussions with the subs about what the price should be, or does she just invent the price from thin air?
6) Do the subs ever actually get the work? Are they paid the price shown? Or never?
7) Does she sign someone else's name to the bid, or her own name? Or no name at all?
8) Does the boss tell lies on the phone about how the bid was generated?


".......State Farm xactimate pays 1.50 sf for painting she'll up it to 5.50...."

At first glance this sounds outrageous. But what if the $1.50 line item is not including masking, detaching of light fixtures, setting up scaffolding, taking down scaffolding, cleaning of the smoke damaged wall prior to painting, final cleanup and trash disposal?

What we have in this case is an inexperienced person seeing something that doesn't look right. If the poster had business experience he wouldn’t be asking the question. Maybe it is a fraud. Sounds like it. But from my experience I think it is important to slow down and have a PRECISE description of EXACTLY what is going on. THERE IS NO SUBSTITUE FOR HAVING THE FACTS CLEARLY SPELLED OUT AND ORGANIZED. THOSE WHO CANNOT IDENTIFY FACTS AND COMMUNICATE THEM CLEARLY IN PROPER WRITTEN ENGLISH HAVE NO BUSINESS BECOMING ADJUSTERS.

This is important because accusing someone of fraud is a very serious accusation. Also, if it is fraud, the gentleman should have a clear understanding so he can describe it correctly and protect his own reputation.

Robby has a lot of experience and I find his opinion valuable. But this poster, in my opinion, has not yet presented a clear enough story to deserve Robby’s unequivocal judgment. I think Robby should give his opinion after the poster has earned it by writing up a more cogent explanation. And I won’t be surprised if Robby’s opinion doesn’t change. But we will all get some practice at the art of professional adjusting.

fraud, I don't think so. Leyland is right and he done the research to back himself up.Cat Adjuster X/Robby Robinson has no basis for his opinion.

It is only fraud when the prosecuting attorney and the judge and jury say it is. Until then it is only suspected fraud, at best.

If for some reason you want to do something about this situation, then reported to the Atty. Gen. in your state and allow law enforcement to investigate and make a determination.

Fraud, I don't think so. Leland is right and he done the research to back himself up. Cat Adjuster X/Robby Robinson has no basis for his opinion.

It is only fraud when a prosecuting attorney and a judge and jury say it is. Until then it is only suspected fraud, at best.

If for some reason you want to do something about this situation, then report to the Atty. Gen. in your state and allow law enforcement to investigate and make a determination.

I like it when you say it twice, Chuck.

The second time around, it sounds so much better.

Happy Trails

Posted By ChuckDeaton on 11 Feb 2012 02:26 PM
fraud, I don't think so. Leyland is right and he done the research to back himself up.Cat Adjuster X/Robby Robinson has no basis for his opinion.

It is only fraud when the prosecuting attorney and the judge and jury say it is. Until then it is only suspected fraud, at best.

If for some reason you want to do something about this situation, then reported to the Atty. Gen. in your state and allow law enforcement to investigate and make a determination.

..................................

OK Chuck, I will agree that it is only considered "FRAUD"when the jury says so.............

One of are companies salesman opened a company in his name just to write estimates to supplement the the claims my boss signs up. She does not like the estimates she gets from actual sub-contractors because it doesn't in her mind make obscene profits for the company...So she writes up an estimate in this salesman's company name & inflates the actual cost with a number she just pulls out of a nowhere by not even actually job costing.

However, if it looks acts and quacks like a duck..........................................just sayin'

Sleazy yes  fraud, in my opinion no. There is no rule I know for to stop a contractor from over bidding. But, is the insurance company is using a 21 college grad who does not know a ball peen hammer from a brad nail and do they blindly pay this because they are to cheap to hire real adjusters. The  ones who suffer are the policy holders, who will pay more. I drive contractor crazy  be demanding a detailed subtrade bids. You shold here the excuses!  Greed does not seem to be illegal, in fact it has become a normal part of business, no profit is obsene.

stormcrow, I doubt that most of the posters on this forum have handled large commercial claims. Especially claims where bids were solicited. Anyone that has handled large commercial where bids were solicited knows that the bidding process is all over the map. I'm reminded of a claim handled several years ago, in Pine Bluff Arkansas where the high bid was probably 15 times the low bid and the low bidder took the job and made money.

Was the high bid fraud? The answer to that is no.

I handled a claim in New Orleans during Katrina and then again the same claim came up again after Gustav. This was written up in a claim magazine. The insured first defrauded State Farm on on a flood claim, and then she defrauded Fireman's on a jewelry theft claim to the tune of 1.5 million then she defrauded FEMA and the local electric company. Finally after several years and a string of frauds she ended up in jail.

RUTH LESLIE GOODMAN, a/k/a Ruth Goodman, a/k/a Meagan McKinney, age 48, a resident of New Orleans, was sentenced today in federal court by U. S. District Judge Helen Berrigan to over three years (37 months) imprisonment for theft of government funds, mail fraud, false statements to FEMA and possession of a falsely obtained Canadian passport, announced U. S. Attorney Jim Letten. In addition, GOODMAN was ordered to pay full restitution in the amount of $476, 904.00, forfeiture of her personal assets and ordered to serve three (3) years of supervised release following imprisonment, during which time the defendant will be under federal supervision and risks additional imprisonment should she vioalate any terms of the release.

According to court documents, GOODMAN pled guilty in November, 2010 admitting that between August, 2005 and September, 2007, she created and executed a scheme to defraud the Louisiana Road Home, FEMA, and the Small Business Administration of $476,904.00 in United States government funds. In addition, GOODMAN obtained and possessed an official Canadian passport under the false pretense that she was born in Canada.

This case was investigated by the United States Department of Housing and Urban Development - Office of Inspector General, the Department of State Diplomatic Security Service, the United States Department of Homeland Security-Office of Inspector General, the U. S. Small Business Administration - Office of Inspector General and the Louisiana State Police. The case was prosecuted by Assistant U. S. Attorneys W. Scott Laragy and Marvin Opotowsky.

On June 9, 2005, FFIC filed a complaint in this Court, seeking the return of $1,836,000 dollars that it paid to Goodman on a claim for stolen diamond bracelets that FFIC subsequently claimed was fraudulent. (Rec. Doc. 1). Goodman filed a counterclaim against FFIC on March 24, 2006, averring damages as a result of bad faith, pursuant to La. Rev. Stat. § 22:1220; breach of contract and bad faith breach of contract; and defamation, slander, libel and damage to reputation. (Rec. Doc. 14). On June 6, 2007, plaintiff filed a motion for summary judgment seeking dismissal of defendant's counterclaim. (Rec. Doc. 56). On June 19, 2007, this Court ordered a stay and administratively closed the case until December 31, 2007, thereby dismissing plaintiff's motion for summary judgment without prejudice. (Rec. Doc. 57). The case was reopened on February 13, 2008 and the motion for summary judgment was re-filed on April 1, 2008. (Rec. Doc. 63, 68). Hearing on plaintiff's motion for summary judgment was continued several times. (Rec. Doc. 71, 73). Additionally, the Bill of Information pending against Goodman in connection with her arrest for insurance fraud was nolle prossed on August 6, 2007. (Rec. Doc. 83-7.

The woman is a romance novelist and had other pending charges prior to the ones noted above.

I would like to point out that there is a difference between common law fraud and statutory fraud. In a civil case I believe the standard is the common law fraud I explained above. When the State prosecutor goes after an individual for insurance fraud, the charge is based on a statute. It is a crime against the state, not a private party. The statutory definition of fraud is different than the common law definition. It might be a lower standard, I'm not sure. I just know that there are always certain elements that must be proven. What the person on the street thinks is a fraud may or may not meet the legal definition. And furthermore, as Chuck points out, proving it is altogether another step.

Notice that she appears to have been sued by the insurance company AND the Federal govt.

She also counter-sued the insurance company for defamation. Hopefully for the adjuster's sake he didn't use the word "fraud" in his written report so he could avoid being a defendant in the counterclaim.

As an adjuster go ahead and write down that the expert says the diamonds are fake. Go ahead and write down that the insured swore they were real. Just don't use the F word and you will stay out of unnecessary trouble. Leave that determination to the lawyers and police that are paid to do that