Suspicious Jewelry Robbery and an Unsupported Inventory Claim
A public adjuster is retained by the owner of a jewelry store after a reported after-hours robbery. The owner claims $300,000 in stolen watches, chains, and loose diamonds. The only inventory list was handwritten after the loss. The owner has purchase invoices for about $120,000 of the claimed merchandise, but none for the rest. The police report was filed 36 hours after the alarm, and the alarm company's log shows the rear door was opened with a valid code and no forced entry. Two employees gave statements; one is the owner's nephew, and the other changed her account twice. The PA also finds a social-media post from three weeks before the loss advertising a 'close-out watch sale' and a recent policy increase from $100,000 to $300,000. The insurer has not paid. The owner tells the PA to 'submit the full $300,000; the insurer can't prove what we had.'
1. Identify the red flags and explain how they affect the investigation.
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The red flags include the post-loss handwritten inventory, the lack of invoices for $180,000 of claimed merchandise, the delayed police report, the absence of forced entry, the use of a valid alarm code, the relationship and inconsistent statements of the employee witnesses, the pre-loss 'close-out' social-media post, and the recent tripling of the policy limit. Each fact has an innocent explanation, but together they require a careful investigation rather than a demand for payment.
The missing invoices matter because the insured bears the burden of proving ownership, quantity, and value. The alarm log undermines the robbery narrative unless someone had the code. The social-media post may show that merchandise was being sold before the loss. The policy increase may be legitimate, but it is a motive indicator. The PA should not assume fraud, but should recognize that submitting the claim as presented would be reckless. The investigation should focus on what can be verified: purchase records, bank payments, suppliers, inventory software, video, alarm data, employee interviews, and the owner's financial condition.
2. What investigative steps should the PA take before submitting any proof of loss?
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The PA should obtain signed statements from the owner and both employees, preserve the alarm log and any video, and request the full police report and detective contact information. The PA should ask for purchase invoices, supplier statements, bank and credit-card records, import documents, inventory counts, sales-tax records, and any inventory software backups. The PA should photograph the store, the rear door, and the display cases, and should check whether the 'close-out' sale post was followed by actual sales or shipments.
The PA should also verify the policy application and any recent increase, including whether the insurer asked for inventory values. If the owner cannot document a material portion of the loss, the PA should explain that the claim will be limited to what can be substantiated. The PA should not coach witnesses or create documents. If the owner refuses to provide records or insists on the unsupported amount, the PA should consider declining or withdrawing from the representation and should consult coverage counsel about any duty to report suspected fraud.
3. Can the PA submit the $300,000 claim as requested? What are the ethical and legal consequences?
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No. A public adjuster may advocate aggressively for a legitimate claim, but may not knowingly present or assist in presenting a false or inflated claim. Submitting $300,000 when only about $120,000 is documented, while omitting the alarm-code evidence and the pre-loss sale post, would be misleading even if the PA did not personally invent the numbers. The PA should submit only the supported amount and explain in writing what remains under investigation.
Legal exposure includes discipline by the Missouri Department of Commerce and Insurance, license suspension or revocation, civil liability to the insurer or insured, and potential referral for insurance fraud. The PA should document the owner's instruction, explain why the claim cannot be submitted as demanded, and give the owner a chance to provide support. If the owner insists on a false claim, the PA should withdraw and preserve the file. The PA should not accuse the owner of fraud without evidence, but should not participate in a claim that cannot be substantiated.