Evidence Needed to Prove Fraud

A Video Explaining the Need to Gather Evidence to Prove Fraud

Evidence is broken into two major categories: direct and circumstantial.

Direct Evidence

Direct evidence is proof that tends to show existence of a fact in question without the intervention of the proof of any fact.  It includes testimony that tends to prove or disprove a fact in issue directly, such as eye-witness testimony or a confession.

Sometimes, direct evidence may not exist because records have been destroyed in a fire, destroyed by water, stolen, discarded, or eaten by vermin.

If direct evidence does not exist for any reason, circumstantial evidence must be produced to prove the fraud.

Circumstantial Evidence

Circumstantial evidence is all evidence of an indirect nature when the existence of the principal fact is deduced from evidentiary facts by a process of probability reasoning.  The investigator takes circumstantial evidence and uses deductive reasoning to reach a conclusion.  Circumstantial evidence and the deductions of a professional investigator are often more reliable than direct evidence like eye-witness testimony.  Circumstantial evidence is sufficient to establish proof of arson and other criminal activities.

Clear and Convincing Evidence

The “clear and convincing” standard is a very difficult and stringent standard to establish.  In New Jersey, in the case of Italian Fisherman, Inc. v. Commercial Union, 215 N.J. Super. 278, 521 A. 2d 912 (1987), the court refused to accept the clear and convincing evidence standard of proof proposed by the plaintiff in an insurance fraud defense, pointing out that proof of fraud by a preponderance of the evidence (50 percent plus one, which is much easier to establish than the “clear and convincing evidence” standard) renders the insurance policy void from its inception.

Preponderance of Evidence

An insurer need only prove arson by a preponderance of the evidence. In our view the defense of arson against a fire insurance claim is established if it is proved by a preponderance of the evidence.

Scienter

In fraud cases, where intent, knowledge, and scienter (evil intent or guilty knowledge) constitute essential elements of the offense, evidence of similar frauds and misrepresentations is admissible at trial. The insurer need only demonstrate the facts elicited during an investigation that support the founded belief that a fraud was attempted. Circumstantial evidence is sufficient to prove such facts if a party's conduct may be reasonably inferred based upon logical inferences to be drawn from the evidence.

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at https://www.rumble.com/zalma ; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/  The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4