Joe Epps 2014-04-01 00:06:57
Was The Ring Purchased? In a recent case, a couple made an insurance claim for the theft of a ring. The claimed value of the ring was $75,000. In support of the amount claimed, the couple submitted an appraisal showing that value. The appraisal was done by a reputable local jewelry store appraiser and was not questioned. The insured also had photos of the woman wearing the ring. They had also added the ring to their insurance coverage in the amount of $75,000 approximately three months prior to the alleged theft. Based on this evidence there was no question that (1) the ring existed, and (2) the woman had the ring in her possession when the photographs were taken. The issue was whether or not the couple actually had purchased and had ownership of the ring at the time it was allegedly stolen. The couple testified that they live in Arizona and the ring was purchased by the husband in California. A down payment of $15,000 was made in January followed by a number of subsequent payments of varying and unspecified amounts and a final payment of $20,000 was made in October. The investigation focused on obtaining all documentation and information that the insured could provide in support of their purchase of the ring. In that context, the following documentation and information was requested with the indicated results: • A copy of the purchase invoice including the specific date. There was no invoice; the date was indicated as early January. • A copy of the canceled check or credit card statement. All payments were made in cash. • The specific location where the purchase and each subsequent payment was made. The specific locations could not be identified; a general description of “Orange County California” was provided. • The person or business from whom the ring was purchased. The name of the person was Ha; it was not known if this was a first or last name. • The specific number of payments, specific dates and specific amount of payments made after the initial purchase. The specific number of payments was not known, it was estimated to be four or five, the specific date was not known and the specific amount of each payment was not known. • Receipts for gasoline, food and hotel room purchases for the California trips. All purchases were made in cash. The husband did not stay in a hotel, each time a payment was made he would drive to California, make the payment and return without staying overnight. • Federal income tax returns, pay stubs and all bank statements. This was not merely a general request for whatever documentation could be provided with a response that there was no documentation. By making requests for specific documentation and information, it was possible to convince the jury that the insurance representatives had a sincere interest in finding a way to verify the purchase of the ring, if possible. Another element of the analysis was to determine whether it was reasonable that the insured could have had $75,000 in cash available to them during the year in which the purchase was made. By reviewing the tax returns, pay stubs and banking records, it was possible to determine the exact amount of cash inflow of the insured before the purchase payments allegedly started and throughout the period of time during which the payments were said to have been made. The cash flow analysis indicated that, at most, the insured could have had $35,000 available to pay toward the ring. All other cash inflows were accounted for. This was a particularly challenging case in that the insured had proven the ring existed and that at one time they had possession of the ring. The insurance company denied the claim on the basis that the insured could not prove that they had ever actually purchased the ring. At trial, the jury came back with a defense verdict indicating that the denial of the claim was made in good faith. Joe Epps is a CPA and CFE with over 30 years of experience in forensic accounting. His litigation support experience includes contract disputes, anti-trust, economic damages, fraud investigations, business valuation and intellectual property litigation. Joe is currently president of Epps Forensic Consulting and teaches a graduate course on forensic accounting at Arizona State University. For more information, please call (480) 595-0943 or visit www.eppsforensics.com.
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