Fraudulent Mold Claims Result in Seven Arrests in Texas
Abstracted from Texas Department of Insurance Website

Investigators from the Texas Department of Insurance (TDI), the Federal Bureau of Investigations (FBI) and the US Postal Inspection Service arrested seven people June 27 in Houston in connection with "an insurance fraud scheme in which homeowners allegedly intentionally flooded their homes and filed claims that cost insurance companies about $5 million." Charges range from money laundering and mail fraud to conspiracy and monetary transactions with criminally derived property. Guilty verdicts could mean up to 20 years in prison and substantial fines. Investigators expect that more arrests will be made.

The investigation, which has become TDI's largest crackdown on fraudulent insurance claim filing, began in February of 2001. "The defendants allegedly served as homeowners, independent sub-contractors, vendors, and service providers in filing claims, repairing the damage and selling the homes to each other to repeat the process. Homes in the great Houston area, Bay City and Austin were used in the insurance fraud scheme." In variations on the scheme, the accused reportedly purchased two-story homes with full insurance coverage; then they allegedly intentionally used water hoses or damaged existing water lines inside the house to flood the interior, repairing water lines before an adjuster arrived. "The defendants would attempt to obtain the full policy limits of the insurance coverage along with additional living expenses." Some homes were insured with other companies and flooded more than once.

"It's unfortunate that individuals would try to take advantage of homeowner insurance policies when we're already facing rising rates because of water and mold-related claims. Let these arrests be a warning to others that filing fraudulent insurance claims will not go unpunished." Texas Insurance Commissioner Joe Montemayer said, "Insurance fraud hurts all of us. The financial loss starts with the insurance companies, but eventually it is paid out of the pockets of every Texas homeowner."