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[Congressional Record Volume 141, Number 76 (Tuesday, May 9, 1995)]
[Extensions of Remarks]
[Pages E977-E978]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

                              MONEY TO BURN

                                 ______

                            HON. TOM LANTOS

                             of california

                    in the house of representatives

                          Tuesday, May 9, 1995
  Mr. LANTOS. Mr. Speaker, as I am sure you know, Arson Awareness Week, 
commemorating the end of the Los Angeles fires set during the 1992 
riots, just ended, with communities all across the country focussing 
public attention on the terrible costs in lives and money from arson 
for profit. Arson Awareness Week has the support of firefighters around 
the Nation, many of whom have organized with consumers, government 
agencies and insurers to combat this form of insurance fraud through 
public information and the advocacy of such groups as the Coalition 
Against Insurance Fraud. The coalition recently published in its 
newsletter the following article, ``Money To Burn'', which I would like 
inserted in the Congressional Record in recognition of our firefighters 
and the arson problem:
                             Money To Burn

                         (By Michael E. Diegel)

arson-for-profit and its many faces are a dangerous--sometimes deadly--
                        form of insurance fraud

       In 560 cases in 1993, someone's world ended just as 
     biblical writers predicted--in a blaze of fire.
       The 560 dead were the victims not of apocryphal wrath but 
     of arson.
       For at least 80 other people living in apartments above a 
     New York warehouse, salvation came in the form of 
     investigators who unearthed a plot to burn the warehouse for 
     the insurance money.
       There's no way to know how many of the 560 were killed in 
     cases of arson for profit, but experts believe at least 15 
     percent of reported fires are deliberately set for several 
     reasons, including insurance fraud and other profit-seeking 
     motives.
       ``It's as difficult, or perhaps even more so, as 
     determining the level of [other types of] insurance fraud,'' 
     said Rick Gilman of the Insurance Committee for Arson 
     Control. ``It's perhaps more difficult because arson covers a 
     wide variety of motives where generally insurance fraud is 
     strictly for profit.''
       He defines arson for profit as ``an intentionally set fire 
     to recover some financial gain. Maybe it's financial gain 
     through insurance proceeds, maybe it's financial gain through 
     reducing the competition, maybe it's financial gain through 
     some other avenue.
       ``There isn't any information as to how common it is,'' 
     Gilman continued. ``The whole issue is one that's very 
     difficult to find out anything about because there hasn't 
     been an effective study of that aspect of arson for over a 
     decade.''
       A 1982 study of closed claims files from 1980 was conducted 
     by the Insurance Research Council's organizational 
     predecessor, Gilman said.
       ``In general, what they found in the voluntary [insurance] 
     market, the percentage of 
     [[Page E978]] arson cases was 15-17 percent, but when you got 
     into the FAIR [Fair Access to Insurance Requirement] plan 
     market, they found [arson cases were] upwards of 40-50 
     percent,'' Gilman reported.
       What is known are recent cases that illustrate the variety 
     of arson-for-profit schemes, such as:
       A seven-person ring operating in Florida for at least six 
     years. Participants torched houses, usually under the guise 
     of renovation or construction projects. The group also burned 
     cars and at least 15 insurance companies.
       A New Jersey couple accused in February of setting fire to 
     their home after it languished on the real estate market for 
     more than a year.
       Three San Francisco men were arrested in March and accused 
     of buying a house in 1990, enhancing its value by presenting 
     a fictitious lease-to-purchase agreement and filing a claim 
     after setting the house afire. Investigators said one of the 
     men had been pursued since the late 1970s for suspected 
     arson, but this was the first time they'd gotten enough 
     evidence to charge him.
       A Prince George's County (Md.) man who owns a topless bar 
     recently was accused of
      hiring others to set fire to the county's only other topless 
     bar.
       While large commercial arson cases and homeowner arson-
     related fraud is fairly common, arson for profit crosses all 
     socioeconomic groups. Investigators in Buffalo, N.Y., report 
     a rash of arson fires in apartments occupied by people on 
     public assistance. Officials cited one woman who had fires 
     break out in five separate apartments over three years. 
     Relatives of hers experienced at least three fires.
       In these cases, burned out welfare clients move into public 
     housing. They refuse to pay any rent and eventually are 
     evicted. Then the apartment is torched, usually after all 
     belongings have been surreptitiously removed. The client 
     moves into a hotel, which is paid for, gets all her meals 
     paid for, and collects on claims for the ``destroyed'' 
     belongings.
       Typically, the ``victim'' can collect around $3,000 plus 
     pocketing what would have gone to rent. Fire investigators 
     believe that more than a third of the city's more than 300 
     arson fires can be attributed to the scheme, which they say 
     is increasingly popular. In a couple of blatant cases, they 
     report welfare clients related to each other had fires at the 
     same time.
       Cases like these earn headlines or are part of the 
     anecdotes told among arson investigators. So, too, are tales 
     of arson by juvenile or serial offenders. Usually these cases 
     aren't fraud-motivated arson. Residential fires, too, are 
     less likely to be suspected arson for profit.
       ``It may be that the grease fire in the kitchen may have 
     been intentionally set,'' Gilman said, ``but it's the local 
     fire department and the local homeowner that maybe they know, 
     [so] I think there may be less of a tendency to investigate 
     residential fires unless it's glaringly evident--multiple 
     ignition sights or other glaring evidence of arson.''
       Gilman also suspects investigators are less likely to look 
     closely at residential fires because there's not as much 
     money involved as in commercial arson fires. Again, he 
     lamented, ``There's all too few facts in this arena.''
       Still, he added, companies are investigating fires more 
     than in the past.
       ``The same intensity that is being addressed to insurance 
     fraud is being found in the arson investigation arena,'' 
     Gilman said. Companies are creating and expanding special 
     investigation units, using resources such as property loss 
     databases and public records, trying to identify patterns and 
     motives. They also go low-tech.
       ``Some companies train arson dogs and give them to local 
     fire departments,'' Gilman said, ``Nationwide has its own 
     arson dog they use for their investigations, which I think is 
     kind of neat.''
       Passage of arson immunity laws has helped, too. All 50 
     states and the District of Columbia have some form of arson 
     immunity to protect insurers who give information to law 
     enforcement.
       In some cases, the law's scope is limited. For example, 14 
     states do not allow reciprocity; law enforcement cannot share 
     information with insurers. Most insurers support full 
     reciprocity in immunity laws and also would like to see 
     legislation protecting insurer-to-insurer information 
     sharing.
       And there is good news. The number of suspected arson fires 
     has dropped for three straight years and there was a reported 
     11 percent drop in arson cases in cities with more than 1 
     million residents. However, the cost of those fires was up in 
     1993 by more than $350 million.
       The National Arson Forum, a group of companies and 
     organizations concerned about arson, developed Arson 
     Awareness Week (the first week of May) to bring the cost of 
     this crime to the attention of the public. It also 
     commemorates the end of the Los Angeles fires set during the 
     1992 riots.
       While the dollar costs are something that's borne by all of 
     us, it's also a good time to remember that some of us pay 
     with our lives.
     

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