Battling The Living Dead

Insurance investigator Diane Kellner was suspicious at once. Last fall, a big insurer asked her and associates at First Services, based in Jericho, N.Y., to check out a $10,000 life-insurance claim involving the death of a 9-year-old boy in a taxi accident in Mali. The policy was new, and the boy's father, who was living in New York, said his son had been buried in the West African nation before his family was notified of his death. In Mali, however, an investigator found the child playing in his grandfather's yard. The official who signed the death certificate acknowledged that he had been paid to do so and had never seen a body. "It's a scenario that is so common--and has proven false so many times," sighs Kellner.

Indeed, life insurers are up in arms over the latest hot insurance scam: faked deaths. A spokesman for the Coalition Against Insurance Fraud says the trade group has noted an alarming increase in anecdotal reports of the swindles, especially those involving deaths staged abroad. The reason, says Sam Lawrence, an independent investigator based in Springfield, Mo.: "The profits are enormous, and usually the chance of prosecution is small."

It also has become an easy scam to pull off. Desktop publishing systems can churn out authentic-looking copies of death certificates. Plus, officials in some Caribbean and African countries are happy--for a fee--to hand out documents showing death has occurred. Closer to home, one investigator, Miles A. Hebding of Long Beach, Calif., says gangs are selling what appear to be official Los Angeles County certificates on the streets. The price: between $500 and $1,000 each.

What's more, the culprits face little risk--so far. Insurance antifraud efforts are focused on more traditional chicanery, such as workers' compensation fraud. Even when insurers launch heavy-duty investigations, the beneficiaries they nab often get off with impunity.

Just ask Michael J. Zanardi, director of life and health claims at State Farm Insurance Cos. Last year, the insurer hired an investigator to verify the death of a policyholder who was reported killed in a car accident while visiting his homeland of Vietnam. The hospital where the victim supposedly died had no record of the incident, and the death certificate turned out to be a fake. State Farm passed on the information to the state where the man's wife had made the claim, but no charges have been filed. "When there is no actual loss to the insurance company," Zanardi says, "prosecutors are less interested."

EASY MONEY. That's starting to change. Last year, Massachusetts Attorney General Scott Harshbarger brought two criminal cases involving attempts to collect life-insurance benefits based on phony death claims. Samson Omosefunmi, a 37-year-old Fall River man who had been scheduled for deportation, has been sentenced to up to five years in prison for trying to use a bogus Nigerian death certificate to collect on a $134,000 policy on his wife. In another case, Franois C. Maisonneuve is awaiting trial on charges he used a fake Haitian death certificate and burial permit to try to collect on a $100,000 policy on his brother.

Meanwhile, cases involving far more money are coming to light. In March, San Diego police arrested 36-year-old Samuel Allen for trying to collect nearly $2.2 million in insurance benefits on the death of his brother, Steven. Trouble was, Allen didn't have a brother at all. To get the policies, he allegedly sent in his medical records with the name changed. And for his claim, Allen also allegedly had put together a fraudulent obituary, proof of death, and police report. "It was very well planned," says Kim-Thoa Hoang, deputy district attorney for San Diego County. Allen is pleading not guilty to the charges.

As the scams proliferate, life insurers are playing catch-up. Meanwhile, the crooks are making a killing.

Scoping Out Scams

The telltale signs of a fraudulent life-insurance claim

DEATH OCCURRED OVERSEAS In places such as Haiti and Zaire, political turmoil makes investigations difficult and false death certificates often are easy to get.

LACK EF PHYSICAL EVIDENCE Fake claims often say the deceased was cremated. Or some beneficiaries claim unidentified bodies from foreign morgues and use their burial papers to support a claim.

PAPERS PERFECTLY IN ORDER Relatives of someone who has died often do not know what paperwork is required for insurance. A red flag is raised when the beneficiary quickly provides all the required documentation.