Insurance scams can have a wide-reaching effect

A Peel Regional Police officer recently convicted of insurance fraud is one example of the financial strain these actions can put on an entire insurance system, while also painting the whole industry in a negative light, says Toronto critical injury lawyer Dale Orlando.

Const. Carlton Watson, a 23-year veteran of the force, was found guilty on more than 40 charges of fraud, breach of trust and obstructing justice, the Toronto Star reports. Watson, says the Star, was paid in cash by two men, including a tow truck driver and manager, to provide accident reports that characterized staged or bogus car crashes as legitimate ones as part of a scam that bilked insurance companies out of more than $1 million.

Watson was found guilty of several counts of fraud, obstructing justice, uttering forged documents and breach of trust, in connection with the nine insurance claims dating back to 2010, says the report.

Fake accidents

“The Crown alleges that Watson was paid cash, typically $6,000 per (accident report) and well understood the (reports) were for fake accidents and to be used to defraud insurers,” the Star reports Justice John Sproat as saying.

Orlando, partner with McLeish Orlando LLP, says Watson’s role in the police force should not be taken lightly in the wake of the conviction.

“When you’re dealing with a police officer who’s supposed to have the public trust, for him to be involved is a real problem,” he says. “Insurance fraud is an issue that affects everybody who works in this industry. We all get painted with a brush of suspicion.

Affects perception

“Whether it’s legitimately injured individuals seeking compensation, professionals working with these people to help with their rehabilitation, or honest lawyers and paralegals who represent these individuals, the actions of those who are less than honest – even if it’s a very small percentage – affects the perception of everybody who works in a legitimate, honest way.”

In a case like Watson’s, which involves more than $1 million, Orlando says the impact is felt across the board.

“If millions of dollars are paid out annually on fraudulent claims, that puts a strain on the whole auto insurance system,” he says. “There are only three components to the system: the premiums that are charged; the product or protection people are afforded by a policy; and the profit the insurance companies receive. When you have money flowing out of the system on fraudulent claims, it affects the insurer’s bottom lines.

“The insurers have to make a reasonable profit in order to stay in business, so what happens then is it puts pressure on premiums, which is politically unpopular and unpopular for everybody who owns a car, but is particularly unpopular with people who want to seek re-election in provincial elections. The end result is the long-term erosion on the protection that people receive from their auto insurance policies,” says Orlando.

“Who ultimately pays the price? It’s the innocent, legitimately injured accident victim,” he adds.