Insurance Industry Enters Arson Battle
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The Editor’s Opinion Page
In any discussion of arson, there are those among us who point indignantly to the insurance industry and say: “There are the real culprits! If they didn’t pay off so quickly on claims, the incidence of arson fires would drop off to nothing.”
This statement sounds logical, but it doesn’t take into consideration the not-for-profit arson fires that are set for revenge and even just for kicks—by a psychopath. But beyond this there is something called the “bad faith” doctrine that has plagued the insurance companies for years. Boiled down to its essence, the bad faith doctrine means that when an insurance company holds back on a claim there is practically no limit to the amount of damage the claimant might receive in court for something called punitive damages. And since only about 2 percent of all suspected arson cases result in convictions, this doctrine eventually generated a timidity and cautiousness among the insurance companies in combating arson.
The insurance companies have been forced into this position because arson is such a difficult crime to prove in court as indicated by the 2 percent conviction rate. Also, the investigation of a suspected arson fire consumes a lot of time—time often beyond the 30 or 60-day period in which insurance companies are required by law to make a settlement on fire claims.
However, with claims going up, and up, there has been a stiffening in the attitude of the insurance companies. At a meeting of the Metropolitan Chicago Loss Bureau last March, it was reported that fire claims remain the bureau’s main concern, accounting for payments of $43,290,849 out of the total $46,276,847 paid for claims during the year. The MCLB also reported that “any claim appearing suspicious will be defended in court… To date we have defeated 67 percent of suspicious claims received…”
Another cause for optimism is the Property Insurance Loss Register recently started by the American Insurance Association. This register identifies persons having anything to do with insurance payoffs and includes owners, lawyers and tenants who have a record of repeated involvement in fire claims.
Back about 10 years ago the insurance industry operated an “arson squad.” This squad was part of the now defunct National Board of Fire Underwriters and was quite effective. Not only did this squad fight arson but it also “provided public agencies with an understanding and appreciation of insurance industry cooperation and insurance-related problems,” according to the National Fire Prevention and Control Administration.
Perhaps the time has come for the insurance industry to reconstitute this squad.
