Arson, Insurance Fraud On The Rise As Housing Market Sinks

It’s a trend the FBI reports show spiked about four percent in 2006: People setting fire to their homes and cars. While local officials said they have yet to see a significant pick up, state officials said they’re starting to see signs of trouble.

“We have seen an increase in both vehicle fires and residential arsons,” said Ted Clark, who’s the director of the anti-fraud division of the Kansas Insurance Department.

It’s a drastic and dangerous measure fire and insurance fraud investigators said they’re seeing more of: People using arson to get out of home and car payments.

“It’s not worth this. To face prison time, a felony conviction, the risked posed to your neighbors and friends,” said Marc Bennett, who’s the deputy district attorney for Sedgwick county.

Across the nation in 2007, nearly 33,000 structure fires and 20,000 vehicle fires were intentionally set. Those arsons caused 295 civilian deaths and more than $733 million worth of damage. The Kansas Insurance Department is seeing an increase in fraud-related arson’s, particularly with cars. But it said homes are going up in smoke too.

“People who would not normally violate the law, can see an opening for them,” said Clark.

“We investigate vigorously and we prosecute as much as we can,” said Tim Millspaugh, who’s the Sedgwick County fire marshal.

In Sedgwick county, David Rathbone, the man charged with arson and intent to defraud after setting fire to a home he owned in 2007, was convicted Wednesday.

“There were two insurance policies on the home at the time, both in the close range of $380,000,” said Randall Hubert, who’s the chief administrative attorney for Sedgwick county.

Sedgwick County has seen about a dozen arson related fires this year. Whether any are insurance fraud related is still unknown. Many are abandoned buildings. Fire officials said they are working to educate people about the danger and the legal consequences of arson, in an attempt to ward off any future trouble and hoping those who might see it as a way out think twice.

“You can recover from a home foreclosure. You can find a place to live,” said Millspaugh. “You cannot recover from losing your home and being in prison for the crime of arson.”

Rathbone’s sentencing is set for April 16th. Since he’s convicted of arson, not aggravated arson, prison time is up in the air. Prosecutors said he will face probation, but they have asked for jail time.

KAKE also spoke with State Farm Insurance company. It released this the following statement about insurance fraud cases:

We know the loss of a job or the slumping value of a home can create a criminal motive for a few people. These pressures might very well be increasing the number of fraud cases. It’s difficult to determine how much arson activity is directly linked to the downturn in the economy.

State Farm is a member organization of the National Insurance Crime Bureau (NICB). When we look at a claim, we use the bureau’s list of possible fraud indicators as part of our own investigation. After a thorough investigation, we make a claim decision. We also notify the state department of insurance if we believe we have a fraudulent claim.

The good news is that the overwhelming majority of our policyholders act in good faith when turning in a claim. Despite the economy, we have been able to, and will continue to, keep our promise to our policyholders of paying exactly what we owe and in a timely manner.

State Farm has joined consumer groups and law enforcement to create the Coalition Against Insurance Fraud which develops legislation to reduce fraud throughout the country.

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