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Insurance Fraud

By January 7, 2016October 24th, 2018Insurance, Jenna



  • With extensive insurance litigation experience, Cummins & White successfully represented a specialty fire and casualty insurance company that sued an independent adjuster and his employer for fraud in connection with various losses at a restaurant.
  • Attorneys Larry Arnold and Kevin Price established during trial that the adjuster and contractor colluded to inflate repair estimates in order to enrich themselves.
  • The judge found actual fraud by the adjuster and negligent misrepresentation by his employer for lack of supervision, ruling that they were liable for over payments totaling more than $250,000.


Case Study

Larry Arnold and Kevin Price of Cummins & White, LLP, secured a verdict for an insurance company against an independent adjuster who defrauded the company using inflated and fabricated repair estimates. The insurance company sought damages for overpaid policy benefits for property damage and loss of business income arising out of fire and theft claims. After a bench trial, the judge ruled that due to fraud by the adjuster, he and his employer were liable for more than $250,000 in overpaid policy benefits.


Following a fire in a restaurant, the owner submitted a claim to his Insurer for property damages and lost income. An independent adjuster from a prominent company was assigned to prepare an estimate of the damages. Over the next few months, three additional claims were submitted—for water loss, theft, and vandalism—each assigned to the same adjuster. In all four instances, the adjuster worked with the same third-party repair contractor to prepare damage repair estimates.

The Insurer paid the first three claims, but questioned the final claim based on duplication of costs submitted as part of the original fire loss. A construction expert hired to review the claims discovered that the true costs of repairs were substantially lower than the amounts proffered by the adjuster and paid by the insurer, and that the adjuster and the contractor also created artificial delays and prolonged the rebuilding process, leading to excessive lost business income. The insurance company filed suit against the adjuster, his employer, and the contractor, seeking compensatory damages.

Legal Strategy

Larry Arnold and Kevin Price of Cummins & White, LLC, were retained by the Insurer to pursue recovery from the Defendants. (The contractor never answered the complaint, leading to a default.) During a bench trial, Mr. Arnold and Mr. Price presented substantial evidence and live and deposition testimony, which established that the adjuster:

  • Manipulated the scopes of repair to maximize policy benefits, particularly in connection with the fire and water losses;
  • Manipulated the estimating software to make it appear that the artificially high contractor estimates were reasonable;
  • Reported as damaged items which were actually undamaged, such as tile flooring and dining booths, falsely claiming that they needed to be replaced;
  • Submitted high subcontractor bids when cheaper work had already been performed;
  • Took kickbacks from the contractor, including gifts and no-cost remodeling to his home.

They argued that the adjuster actively defrauded the insurer, and his company was negligent in failing to supervise him. Together, the defendants breached their duty of care to the insurer, and caused considerable damages.


After presentation of evidence and testimony, the court found that due to improperly adjusted losses, manipulated estimates, falsely claimed items, and failure of supervision to ensure an honest and accurate adjustment, the adjuster and his employer were liable to the insurer for more than $250,000 in overpaid policy benefits.

Mr. Arnold said the case was unusual in that the independent insurance adjuster was the party committing the fraud. “This is a unique case, because usually any dispute between an insurer and independent adjuster is resolved quickly and quietly. In this case, the adjuster refused to admit what he had done despite being caught red handed.”

Mr. Price added that this case could have ripple effects in the industry. “Traditionally there’s great trust between insurers and their independent adjusters. But insurers may want to keep close tabs, because guys like this were in the perfect position to take advantage” of that trust.