COVID-19 related closures and concerns have changed the landscape of the U.S. Economy in just a few short weeks. Insurance claims are no exception and a number of sources including the International Association of Special Investigations Units (IASIU) and the National Insurance Crime Bureau (NICB) have suggested that COVID-19 provides a good environment for new types of insurance fraud and new challenges in the investigation of claims. Below are a few examples of the type of issues insurers, their adjusters, and their counsel should watch for as closures and changes in the business environment related to COVID-19 continue.
Suspicious or Staged Car Accidents
The number of car accidents investigated by police departments has fallen considerably in the past two months as a natural, but perhaps unexpected, consequence of the nationwide implementation of stay-at-home orders, closures of non-essential businesses, and other efforts to mitigate the spread of COVID-19. In New York City, for example, the NYPD reports that the total number of collisions and the number of collisions involving injuries dropped by nearly 70% in the 28-day period ending April 12, 2020 when compared to the same 28-day period in 2019. NYPD also reports that the year-to-date number of traffic accidents is down 30% and accidents with injuries are down about 22% compared to last year.  Other cities and states are reporting similar decreases in the number of reported accidents. The decreased risk of an accident has reportedly caused some car insurance companies are reportedly offering their customers refunds or premium discounts and credits. 
At the same time, state departments of insurance are already reporting an increase in the number of accidents that insurers believe are “staged.” Those cases often involve claims where the accident is not reported to police or law enforcement agencies until long after the accident allegedly happens or simply is not reported and investigated at all.
Federal authorities in New Orleans were already investigating an insurance fraud scheme involving staged car accidents before COVID-19 came on the scene.  In the civil cases that were the subject of the federal investigation, plaintiffs alleged that they collided with tractor trailers that abruptly swerved into their lane of travel on highways in the New Orleans area. The truck drivers swore that they had not swerved and had not felt an impact or seen any other signs of an accident, and thus did not stop at the point where the plaintiffs claimed the accident had occurred.
Social distancing and concerns about the spread of COVID-19 potentially create an enhanced environment for similar claims. The IASIU , NICB, and state regulators in Delaware and Ohio have all suggested that insurance carriers should be on the lookout for car accident claims that are reported to police long after the accident or that are not reported at all after stay-at-home orders are issued in an effort to combat the spread of the virus. They anticipate that insureds and plaintiffs will later say they were afraid to wait for the police to arrive at the scene of an accident because of the potential risk of exposure to the virus. That problem is potentially compounded by the fact that local police departments are focusing their attention on enforcing stay-at-home orders; are understaffed because of illnesses within their own ranks; or are assisting local fire departments and EMS units in responding to COVID-19 related medical emergencies. That can mean that even when an accident is timely reported, the local authority’s response and investigation times are greatly extended.
Likewise, plaintiffs who claim serious injuries in cases ranging from car accidents to slip-and-fall type injuries may report that they chose not to go to the Emergency Room or seek the expected level of medical care immediately after an accident because they were concerned about over-burdening the system or contracting the virus themselves through contact with other patients of a medical facility. While delayed reporting or refusal to seek prompt medical attention does not necessarily mean a claim is false or fraudulent, these are certainly issues that insurance companies should watch for as they investigate claims during the COVID-19 stay-at-home period.
Body Shop and Towing Company Charges
IASIU and NICB also caution that plaintiffs, auto body shops, and towing companies may try to take advantage of the COVID-19 crisis to increase the cost of repairing damage caused in a collision. Such increases may come in the form of extended time to repair a damaged vehicle so that the body shop can make sure it is not contaminated with the novel coronavirus. While such efforts are potentially understandable, insurers will want to watch out for higher than normal storage fees associated with holding a damaged vehicle at the body shop for longer than normal in the name of “decontamination.” Insurers should also watch for separate “decontamination” charges in the repair bills from body shops that claim they were forced to clean and decontaminate a damaged vehicle to be sure that the virus would not spread to their workers.
Employment Related Issues
The widespread transition to remote offices or Work-From-Home (WFH) status are also changing the landscape of employment-related risks in both the workers’ compensation and the employer’s liability arenas. Extended periods of remote work and WFH status raise questions about how to tell when an employee is “in the course and scope” of their employment. Previous cases that define daily tasks such as commuting to or from the office; leaving the office for lunch or coffee; or completing other personal tasks as “outside the course and scope” of employment may be of little assistance in an environment where the workplace and personal space have merged. Similarly, existing concepts about “working hours” and “furthering the employer’s mission” may become much more flexible in the current context.
Stay-at-home orders, the closure of restaurants, bars, and other businesses, and the expansion of WFH status potentially changes an insurance company’s investigation of first-party property losses as well. Where it was once difficult to find witnesses to suspicious fires, staged thefts, and other questionable first-party property damage claims in the past, the fact that a large majority of Americans are now spending more of their time at home should make it easier to come by witnesses in those cases. Chances are that someone saw something, even in neighborhoods that might have been empty at the same time of day or night just a few weeks ago.
That being said, national insurance organizations indicate that, based on their experience during the financial crisis in 2008, carriers can expect financial conditions related to the economic problems associated with COVID-19 closures to result in a dramatic increase in the number of first-party claims. They suggest that, even with mortgage forbearances and federal financial assistance, many insureds will see increasing economic pressure and look for a way out of their potentially serious financial difficulties. Data from the internet search engine Google supports the conclusion that the risk of arsons as a mechanism of insurance fraud is rising as the economic crisis becomes more severe. Search term data compiled by Google shows that the number of users looking for information on “how to start a fire” grew by 125% year-over-year in the last week of March 2020.  The Coalition Against Insurance Fraud notes that insurers saw a spike in suspicious or fraudulent claims coming out of the Great Recession in 2008 and their spokesman has told several media outlets that “there is every indication that we could see the same or worse coming out of COVID-19.”
We must emphasize that this does NOT mean insurers should treat every claim as though it is suspicious. The National Insurance Crime Bureau has noted that there were similarly dire predictions and anticipation of a large increase in the number of fraudulent claims in 2007 and 2008, but that never occurred on the scale that some projected. Insurers should, however, give heightened attention to claims which show signs of fraud or other ill-practices. Additional tools and information may be available to assist in the investigation of suspicious claims under the circumstances.
As always, we are here to counsel our clients on a variety of different insurance claims and the issues associated with them. If we can be of assistance in evaluating a suspicious first-party claim; analyzing coverage issues in light of COVID-19 related developments; or defending a coverage position that involves COVID-19 related issues, please contact us at email@example.com.
- See https://trafficstat.nypdonline.org/2e5c3f4b-85c1-4635-83c6-22b27fe7c75c/view/89
- See, e.g., Top Auto Insurers Offering Consumers Refunds During COVID-19 Crisis, https://www.nbcdfw.com/news/coronavirus/top-auto-insurers-offering-consumers-refunds-during-covid-19-crisis/2351283/
- See Court Documents Reveal Expanded Federal Probe into Staged Accidents Insurance Fraud, wdsu.com, November 4, 2019.
- See Rise in Searches for How to Set a Fire a Sign Insurance Fraud Beckons as Economy Crashes, https://www.washingtonexaminer.com/news/rise-in-searches-for-how-to-set-fire-a-sign-insurance-fraud-beckons-as-economy-crashes