The Tiffany Kid – Insurance Journal Reprint

Copyright held by The John Cooke Fraud Report. Reprint rights are granted with attribution to The John Cooke Fraud Report with a link to this website.

By Barry Zalma

The insured grew up with his wealthy parents on the shores of San Francisco Bay in Marin County. He wanted for nothing that money could buy. He was tall, blond, blue-eyed and handsome. Debutantes pulled their sisters’ hair for the chance to dance with him. Life was good, but dull.

The insured tried drugs. The results disappointed him. He was brilliant, so college was no challenge. He felt he would die from the boredom. Nothing he did challenged his intelligence.

He found the cure for his boredom one summer vacation from college. On a dare, he surreptitiously entered the home of a neighbor. He removed a single, solid brass and stained glass dragonfly lamp made by Louis Comfort Tiffany in the 1920’s. From this single event he found more excitement, a greater “high,” than he had ever had with drugs. The flow of adrenaline as he entered his neighbor’s dwelling was delicious. He had found the excitement he wanted. He had finally found a way to relieve the boredom and lack of challenge in his life. He did not steal for profit. He stole for excitement. He did not need the lamp. With the money he received from his trust fund, he could have bought many similar lamps.

Like all addictions, burglary on a small scale continued. His burglaries occurred in Marin County and in the small college town where he went to school. He specialized in burglary limited to Tiffany lamps and objects of art. He managed to amass a collection of considerable value.

Burglary, however, was too easy. The challenge and the excitement of burglary had lost its glow. He needed a new challenge. He needed interaction. He needed to defeat another human being. Burglary, by definition, is a solitary activity.

The solution to his boredom was insurance fraud. The insured retained a fine arts appraiser to appraise the collection of Tiffany lamps he had gathered over the past five years of burglary. The results of the appraisal shocked him. He found the lamps had a retail value of over $500,000. He used the appraisal to get a personal articles floater (PAF) policy of insurance from a major surplus lines insurer. He waited until the policy was “ripe.” Then, with his considerable experience in burglary, the insured staged a burglary at his own residence. He made claim to his insurer for the loss of all of the scheduled Tiffany lamps he claimed were stolen.

When visited by the adjuster, the insured found the challenge that he had sought when burglary became a bore. Sitting in his living room, across from an experienced investigator, he engaged in a battle of wits.

Because of the amount involved, the insurer had retained the services of an independent adjuster and private investigator with more than thirty years’ experience. The insured knew he would not have a simple task in front of him. He had expected the insurer to send their usual twenty-two-year-old novice adjuster. Still, he was in absolute control when the silver-haired adjuster placed his recorder between them and started taking a recorded statement about the loss. Since this was the first time for the insured, he did not know what to expect. He answered the questions posed to him glibly and with certainty, always looking the investigator directly in the eye. He kept complete physical control of his body. Neither his gestures nor his physical appearance showed any outward signs of the nervousness and flow of adrenaline that the interview caused him. His only difficulty came when the investigator asked for the ownership history of the Tiffany lamps. Obviously, the insured could not tell him that he had gained possession of the lamps by burglary. Rather, he advised the adjuster that he had received the lamps as a gift from his grandparents shortly before they died in a tragic automobile accident. There was no record of the transfer. There was no one alive who could verify the means by which he acquired the lamps. The adjuster could not verify the insured’s acquisition of the lamps.

The insured had read Dostoyevsky’s Crime and Punishment. He knew that the way to commit a crime was to admit everything about his actions during the time of the commission of the crime except the crime itself. If there are no witnesses, neither the investigating police officers nor the investigating insurer have leads to disprove the statements made.

The insured showed the investigator the point of entry where he had broken out a small glass window in the rear door of the premises. It revealed easy entry to the house. He showed the adjuster where the lamps had been. He explained how they had been carefully removed from the premises. He speculated that the thief was a collector or working for a collector. Nothing else was stolen.

He admitted that this was his first PAF that scheduled the Tiffany lamps. He had a homeowner’s policy, but never considered the lamps to be exceedingly valuable. Shortly before purchasing the policy, the insured reported that he had been reading an article in the New Yorker magazine in his dentist’s office that said that stained glass bronze lamps made by Louis Comfort Tiffany had become the latest collector’s craze. The article caused him to believe that the value of his Tiffany lamps was appreciating with considerable speed. He explained to the adjuster that because of the article he retained the services of a fine arts appraiser. He needed to know the value of the gift made by his grandparents. He expressed shock and fear on learning the true value. He, therefore, immediately went out and bought a policy. He told the investigator that he had no idea who might wish to burglarize him. He was basically a loner with few friends. None of his friends knew of the value of his collection of lamps. He was totally distraught by their loss since they were the only tie to his dear departed grandparents. Near the end of the statement, the insured’s eyes welled up with tears and he had to ask for a short break to get control of himself.

The investigator left the insured’s premises with a feeling engendered by his thirty years of experience that there was something wrong with the claim. He was certain that the insured had not told him the truth. The facts of the acquisition of the lamps, the method by which the insured decided to buy a personal articles floater and the tears all raised his suspicions. He did everything he could to find some facts to prove his suspicions. He checked public records and found that the insured had no criminal record. The insured was never a party in a civil lawsuit. He owned his home and his own business. No motive for insurance fraud existed. The insured was wealthy. The investigator contacted a few friends that the insured advised him may have seen the Tiffany lamps. Each verified that the lamps were in the house. They had no information how the insured acquired the lamps. They reported that the insured had considerable wealth and would have no trouble in making such a purchase.

The investigator, faced with no leads and nothing but a “gut feeling” there was something wrong with the claim, informed the insurer of his conclusion. The investigator recommended that the insurer issue a proof of loss for the amount of the policy and pay the claim. The insurer followed his advice. The claim was paid in full. The insured successfully completed the fraud.

The insured found new meaning in his life. He thoroughly enjoyed the challenge of the interaction with an experienced investigator. The insured used the money he stole from the insurer to add to his collection of Tiffany lamps. Over the next fifteen years, the insured has perpetrated the same fraud on different insurers, waiting three years between each claimed loss. The delay, of course, was so he could honestly report to the insurer, when he applied for the new policy, that he had incurred no losses within the last three years.

Unlike the other stories in this series, this one (like most insurance fraud) successfully separated an insurer from its money illegally. The insured received $400,000 for a burglary that did not occur. The insurer, faced with nothing more than a “gut feeling” was forced to pay what it knew to be a fraudulent claim. If not, it knew it would find itself sued for the breach of the covenant of good faith and fair dealing. It might also be required to pay punitive and exemplary damages.

The insurer, after the policy was issued, had no chance to defeat this fraud. Its chance came, and went, at the time it accepted the insured’s application without first investigating the insured. The insurer failed to protect itself by accepting the insurance without requiring that the insured establish his ownership and legitimate possession of the lamps. It also did not protect itself by requiring the insured to warrant, before the issuance of the policy, facts concerning the insured, the acquisition of the lamps, their ownership and value. The insurer failed to require the maintenance of appropriate security systems that would have made the faking of a burglary more difficult. A monitored central station alarm, with contacts on all doors and windows and infrared detectors to detect motion throughout the dwelling that would record every entry and exit from the premises, would have made the fraud more difficult.

Warranties and security requirements do not always stop an attempt to defraud. By not having the security requirements, the insurer made the crime easy for the insured. It almost deprived the insured of the challenge he wanted.

Insurers, if they wish to stop frauds like that described here, must stop making the crime easy. Underwriters must understand that insureds do not always treat their insurers with utmost good faith. Risks must be looked at with skepticism. If fraud is to be defeated, insurers must make the crime more of a challenge. Honest insureds are tempted to commit fraud because it is too easy.

Copyright Barry Zalma, 1994

REPRINTED, WITH PERMISSION, FROM THE INSURANCE JOURNAL, 1994

Barry Zalma, of the Culver City, California, law firm of Barry Zalma, Inc., is also president of ClaimSchool, Inc., the publisher of “How Your Friends and Neighbors Are Screwing You,” a compendium of similar columns.

© Copyright 1996 Alikim Media