By Mike Mosser, Life Quotes, Inc.

For as long as there’s been life insurance,there have been those looking for an easy payout and willing to kill to get it. Sometimes it’s a husband or a wife looking to get out of a marriage and cash in an old policy. Other times someone buys a policy on a relative, business partner or even a stranger and waits for the right moment to take them out.

We don’t need no stinkin’ medical exam!

Someone buying life insurance without a medical exam requirement gets the advantage of a streamlined and faster process but will have to pay more to get it. For the insurance companies, it offers speedy turnaround times on selling policies but with a bit more risk.

“Think about society today. Most people want it right now. We carry around our phones with instant access to the internet and email and everything else because we want it right now. The marketspace for insurance has tried to move in that same direction,” says Ryan Pinney, vice president of brokerage sales at Pinney Insurance Center, Inc. in Roseville, Calif. “They want it right now and they’re willing a lot of times to pay a premium for it, especially young people.”

A traditional life insurance policy can take six to eight weeks to obtain as it requires filling out paperwork, setting up a paramedical exam and waiting for the results. Without that exam requirement, it can be as little as one or two days and handled over the phone or online.

Pinney says most policies are limited to $350,000 and from age 18 to 60 or 65, although some companies will insure beyond that age and up to $500,000. The rate difference for a no-exam policy can be 1 percent to 3 percent more for younger applicants up to 50 percent more for older ones.

“If someone is relatively young and is looking to get coverage and the extra dollar two a month isn’t really that big a deal then waiting six or eight weeks for coverage vs. one or two days is a lot of times, in a lot of people’s minds, it’s worth that extra buck or two a month over time,” Pinney says.

Such policies are also useful for those traveling if they’re trying to close a home or business loan and need a policy to provide collateral.

Apart from the higher cost, the other downside is they’re term policies, usually for 10, 20 or 30 years, that are not always convertible to a whole life or permanent life policy.

While avoiding an exam might seem like an invitation to fraud, Pinney says that’s the reason these policies are more expensive as they bear the potential risk of requiring the insurer to investigate a claim.

He says companies also have ways of verifying information. In addition to asking several questions involving personal details they use the Medical Information Bureau and the scripts prescription database to check past treatment histories, as well as motor vehicle reports to check for things like DUI convictions.

“Obviously in cases of fraud or something like that where somebody bought insurance on somebody else for illegal purposes the insurance company is not going to pay anyway,” Pinney says.

Policies are usually bought for perfectly legitimate reasons. Couples buy life insurance to provide security for each other or their offspring. Business partners may want a policy to offset the financial impact of an untimely death.

Even if someone buys a policy with the most innocent of intentions things might not stay that way, according to James Quiggle, director of communications for the Coalition Against Insurance Fraud.

“Most of the policies in life insurance are done by people who know they’re insured, they just don’t know they’re about to get murdered for that insurance,” Quiggle says. “You take out a life policy on your business partner because gee whiz this guy is essential and he mysteriously ends up murdered, leaving his partner with all this money to help run the business.”

While these cases don’t happen nearly as often as other types of insurance fraud, they have a certain cable TV movie quality that makes for a good but unfortunate read.

“Killing someone for their life insurance is something seen more in the movies than in real life,” says Whit Cornman, director of media relations for the American Council of Life Insurers. “Generally, state laws disqualify a beneficiary convicted of killing the insured from receiving the life insurance policy benefits.”

Cornman says in these cases an insurance company might still have to pay the benefit, but the money would go to a contingent beneficiary instead of the murderer.  If it’s proven the policy was bought with the intent of profiting from the insured’s death, the entire policy would be declared invalid.

Civil vs. criminal

Even if someone avoids a criminal conviction on such a case, a civil court can still determine that a beneficiary wrongfully killed the insured and is therefore disqualified from getting paid by the insurance company.

For more, read “How do insurance companies investigate a death claim?”

Criminal trials require proof beyond a reasonable doubt and a unanimous verdict from the jury.  Civil trials have the less rigorous requirement of a preponderance of evidence and typically need only eight out of 12 jurors to get a verdict.

O. J. Simpson may have avoided a murder rap in the deaths of his ex-wife and her friend, but he still lost a wrongful death civil trial.  A jury ruled there was a preponderance of evidence to hold him liable and hit Simpson with a $33.5 million penalty.

Investigating suspicious death claims typically falls to the police and examiners hired by the insurance company.  James Whitaker, president of The Whitaker Group, has experience with both, as he’s been an insurance investigator and head of a local police detective division.

“From the standpoint of a criminal investigation, you have to show that whatever the person did or persons that conspired, contributed to the approximate cause of death. They had to actually cause the death,” Whitaker says. “From a civil side, on the insurance side, it’s just a preponderance of evidence which is an easier standard but still you have to have something more than a gut feeling that on that day he killed his wife for the money and ran off with the secretary.”

Two different approaches

Whitaker says insurance investigators are required by law to comply with any police requests for information, but police are not required to reciprocate.  He says police will sometimes provide information to the insurance investigator but often times don’t, so as to avoid jeopardizing their case.

While they each have a vested interest in catching bad guys, their approaches can be very different. Whitaker says insurance investigators may have more time to pursue a case but can’t just turn each one into a fishing expedition.  The beneficiaries of a life insurance policy have to cooperate with the investigator in order to get their claim.

Police have the benefit of being able to compel people to talk to them, obtain search warrants, exhume bodies and make arrests, but they also have to prioritize their caseloads.

“For them to really drop everything else or a least put that up on the priority list as a homicide you’ve really got to take them something that’s tangible that they may have an actual chance of a prosecution down the road,” Whitaker says. “It’s not that they’re apathetic about it but they really have to go with the cases where there’s an actual chance of a prosecution.”

In one particular case that Whitaker handled on the insurance side, his company had a policy on a guy who died in a car crash. The guy was a passenger in his girlfriend’s car when it veered into the path of an oncoming semi truck.

Even though the case looked like an accident, Whitaker discovered the couple had been going through a rough breakup and the guy had told his girlfriend’s mother that her daughter might not come home that day.

With this information, the company convinced a jury that the man most likely caused the crash by grabbing hold of the steering wheel and committing a murder-suicide.  The crash happened to take place within the two-year contestability window, during which insurance companies can question a life insurance claim for any reason.

Even if the crash had happened after the contestability period, the policy still could’ve been automatically voided if the company could prove the man’s death happened while a felony was being committed.

For more,  read “What is a life insurance contestability clause?”

“We were able to show that there was a preponderance in our favor that, even though he was a passenger, that he intentionally caused this wreck because he had made statements to some friends that ‘if I can’t have her nobody will,’ that kind of thing,” Whitaker says. “We went ahead and fought it and we did not wind up paying that claim.”

The telltale signs

Every homicide is going to trigger some sort of an inquiry, even if it’s just looking at basic information. Whitaker says investigators look for a number of warning signs for fraud, such as changes to someone’s financial arrangements in the months before their death.

Altering a will, property titles or combining bank accounts can make it easier for a potential murderer to get their hands on a victim’s assets and provides the greatest payout possible—but it also leaves a paper trail for investigators to follow.

“Those people if they’re contemplating doing it, committing a homicide, or at least thinking about it they will do those things because it has to benefit them in some way besides just the life insurance policy,” Whitaker says.

Quiggle says someone who buys a policy close to the death of their spouse or insures them at a level that far exceeds their income or net worth would be viewed suspiciously if the spouse suddenly dies or disappears.

Investigators might also consider the state of a marriage, whether the surviving spouse had an affair and what their mental state was in dealing with the death.  Someone who suddenly goes out partying afterwards would certainly raise a few eyebrows.

The problems with ‘No Exam’ life insurance policies

Another potential area for fraud involves insurance policies that don’t require a medical exam, for with these policies a victim might not even know someone had taken out a policy on them.  Of course, forging someone’s signature or providing false information on an application can also invalidate a policy.

“One of the telltale signs is whether the policies were taken out without medical exams.  If they were too small, if they were too low of a dollar amount to necessitate a medical exam and maybe there were several of those, then that would be a red flag if the spouse died under suspicious circumstances such as being shot,” Quiggle says.

For more, read “The 11 dumbest insurance fraud cases of all-time.”

Although most crimes have a three to seven year statute of limitations, after which charges can no longer be filed, homicides don’t carry an expiration date.  Even if a murderer thinks they’ve gotten away with life insurance fraud, over time they’ll typically slip up.

“That’s how a lot of them are eventually solved because people get sloppy or they think they’re home free with it and they run their mouths and they tell somebody about it or they open up an account that they’ve kept closed for a long time thinking that everything had blown over,” Whitaker says.

Like Arsenic and Old Lace

When it comes to murder and life insurance there have been many notorious cases.  One of the most infamous bears a resemblance to the classic movie Arsenic and Old Lace, but with a strong profit motivation.

After living on the streets for years Kenneth McDavid probably thought his luck was improving when two old ladies offered to take care of him.  They set him up in an apartment and provided him with money.  At some point he went back to the streets but never fully escaped these two, for they drugged McDavid and ran him over in a Los Angeles alley with a stolen car in June 2005.

Ordinarily an apparent hit and run in Los Angeles might not get much attention, except for the fact that McDavid was covered by 23 life insurance policies through several companies, with a total value of more than $7 million.  The two ladies, Helen Golay and Olga Rutterschmidt, were the beneficiaries—Golay claimed to be his fiancé and Rutterschmidt his cousin.

Ed Webster, a private detective and owner of Orion Investigations in New York City, investigated the McDavid case for Mutual Insurance of New York where he worked for 20 years and was director of investigations.

The case didn’t make sense to Webster and he had a lot of questions to ask. McDavid’s injuries weren’t consistent with a hit and run.  His blood revealed a strange concoction of alcohol and barbiturates.

“He was also insured as a businessman and when I looked at the autopsy it was absolutely the first time that I had seen anything referencing him as homeless,” Webster says. “Either something was untoward from the onset or something rendered him homeless within the past two years from a successful businessman to a vagrant.  It was a head scratcher.  It just needed to be clarified.”

Webster didn’t get any help from Golay and Rutterschmidt, for they slammed the door in his face and refused to talk—highly unusual for someone looking to file a claim on a loved one.

The nature of the death also struck a chord with the Los Angeles police and one of the officers remembered a similar case from years before.  Homeless man Paul Vados was killed by an apparent hit and run in an alley in November 1999.  He had several life insurance policies worth nearly $1 million, with Golay and Rutterschmidt named as beneficiaries.

An extensive investigation was launched that involved the insurance company, the police, the FBI and state regulators.  As Webster and the authorities built their case, the two ladies were put under police surveillance and were seen out on the hunt for more victims.

“Everybody involved in this case knew that unless they were stopped they were going to continue killing homeless guys so there was an urgency around that issue,” Webster says. “They were putting guys in the back seat of the car and having them sign documents so everybody knew that there was more badness coming down and nobody wanted to be responsible for having somebody under a surveillance order kill somebody.”

The two were arrested for mail fraud and insurance fraud to get them off the street. A search warrant yielded a treasure trove of information—such as a rubber stamp with McDavid’s signature on it and a link to the stolen car that killed him.

Police found the stolen car, with McDavid’s DNA still under the chassis. Golay and Rutterschmidt  were recorded in a police interrogation room where they argued bitterly over their scheme and sealed their fates. They were convicted of murder in April 2008 and given life sentences.

This article was originally published by Life Quotes, Inc.