Guest Post: Insurance Fraud is No Laughing Matter

(This guest post was written by Kevin Wheeler, an associate attorney at Schlichter & Shonack, LLP.  Thanks to Steven Jones for sending in the question, and thanks to Kevin for a great guest post!)


Cameron Kaiser tries to play the Joker

I. Introduction 

In episode 41 of Batman the Animated Series, Cameron Kaiser, a casino mogul, opens up a brand new casino, “Joker’s Wild.” Gotham is shocked to see the casino is themed after one of Gotham’s most notorious villains. However, after some investigation by the world’s greatest detective, it is discovered that *spoiler alert* the Joker theme was part of an elaborate scheme to bait the Joker into destroying the hotel. Mr. Kaiser’s overspending on the casino had left him on the verge of bankruptcy, so he hatched this plot to collect the insurance money. Despite Mr. Kaiser doing everything he could to facilitate an attack on the casino, including assisting the Joker in escaping from Arkham Asylum and even letting the Joker deal in his casino, in the end, Batman is able to thwart Mr. Kaiser’s plans and lock the Joker back in Arkham to escape another day.

The topic of this article is whether Mr. Kaiser is liable for insurance fraud. This article will not focus on Mr. Kaiser’s ability to obtain insurance against an attack by the Joker, as that was discussed in a previous post. Instead the focus will be on the legal ramifications of intentionally baiting the Joker with the “Joker’s Wild” theme. As Mr. Kaiser would contend, “The joker is a classic symbol, long associated with cards and games, [he] can’t help it if there is a passing resemblance to some criminal fruit cake.”

Insurance fraud is an issue affecting everyone. At its core, the insurance business is simply the market of risk. Insurers take upon themselves the risks of their insureds, who in return pay the insurers insurance premiums. This system works because the insurers are able to assess the risks and distribute the costs evenly amongst all of their insureds. Fraudulent claims change the risk assessment for insurance companies. Insurance companies are forced to transfer the additional burden onto their insureds in the form of increased insurance premiums.

Each state has enacted its own statutory scheme to prevent and punish insurance fraud. Generally, when dealing with Gotham city this blog has applied New York law, I will continue in this tradition and use New York law in my analysis.

II. Insurance Fraud

New York Penal Law § 176.05 defines the commission of a fraudulent insurance act as taking place when a person “knowingly and with intent to defraud, presents, causes to be presented or prepares with knowledge or belief that it will be presented to or by an insurer, self-insurer or purported insurer or purported self-insurer, or any agent thereof, any written statement as part of… a claim for payment or other benefit pursuant to an insurance policy which he knows to: (i) contain materially false information concerning any fact material thereto; or (ii) conceal, for the purpose of misleading, information concerning any fact material thereto.” NY CLS Penal § 176.05.

On its own, the commission of a fraudulent insurance act constitutes insurance fraud in the fifth degree and is a misdemeanor. Insurance fraud rises to the level of a felony, when in addition to a fraudulent insurance act, the defendant also “wrongfully takes, obtains or withholds, or attempts to wrongfully take, obtain or withhold property,” the value of which determines the severity of the offense. NY CLS Penal §§ 176.05-176.30. Wrongfully taking insurance proceeds from the destruction of a $300 million casino would classify as insurance fraud in the first degree. NY CLS Penal § 176.30.

A. Knowingly and With Intent to Defraud

The first element of insurance fraud is that the fraud is committed knowingly and with the intent to defraud. “A person acts intentionally with respect to a result… when his conscious objective is to cause such result… A person acts knowingly with respect to conduct… when he is aware that his conduct is of such nature.” NY CLS Penal § 15.05. The question before us is whether Mr. Kaiser knew that his actions would result in a fraudulent act, and committed those actions with fraud as the intended result. Because direct evidence of a defendant’s mental state is rare, circumstantial evidence is sufficient.

Here, there is likely enough circumstantial evidence to show Mr. Kaiser acted with the requisite culpable mental state. The Joker and his crimes are well known to the citizens of Gotham city. Knowing of Joker’s tendencies toward destruction, Mr. Kaiser aided the Joker in his escape from Arkham Asylum on the same day the Joker’s Wild casino was unveiled. Mr. Kaiser clearly knew that the Joker would seek to destroy the casino and that thereby Mr. Kaiser could collect the insurance money. Similarly, this evidence shows that Mr. Kaiser’s acted with intent to defraud. There is no other reason Mr. Kaiser would help the Joker escape and even allow the Joker to act as a dealer in the casino.

Mr. Kaiser’s aid to the Joker is not the only evidence of his culpable mental state. We also discover through Batman’s sleuthing that the original theme for the casino was a medieval theme. As Mr. Kaiser is sure to argue, the joker is a perfectly reasonable theme for a casino, so the change in theme was innocent. The theme change, however, was recent enough to the opening that instead of a complete remodel, they simply placed joker wallpaper on top of knight wallpaper. This shows that it was not planned to be the theme of the casino, which puts into question his motive behind the switch. Combine that with the history of the Joker in Gotham city and his intentions become more clear.

There is also evidence of financial motivation to commit fraud. Mr. Kaiser basically bankrupted himself on this casino. He would not likely be able to make back the money he spent on the casino, no matter the theme. Choosing the Joker’s Wild theme in Gotham, however, would also likely be seen as a poor business decision. At the unveiling, the citizens of Gotham are disgusted by the choice of theme. Given the traumatic experiences most of them have likely had with the Joker, it would be foreseeable that this particular theme would cause potential patrons to avoid the casino.

These circumstantial facts taken together likely show that Mr. Kaiser knew that choosing the Joker’s Wild theme as well as breaking the Joker out on the same day as the unveiling would likely result in the destruction of the casino. Despite the known result, Mr. Kaiser still themed his casino after the Joker and broke the Joker out of the asylum which, combined with Mr. Kaiser’s financial state, shows an intent to defraud.

B. Prepares a Statement Concealing a Material Fact

The next element of the crime of insurance fraud is preparing a statement concealing a material fact. Here, Mr. Kaiser has obviously not presented or even prepared any sort of written statement, as he was foiled by the caped crusader before his scheme could be accomplished. Mr. Kaiser is not off the hook, however.

The absence of a written statement will not preclude a prosecution for attempted insurance fraud. In People v. Vastano (App.Div. 1986) 117 A.D.2d 637, 637 [498 N.Y.S.2d 87, 87], the court found sufficient proof of attempted insurance fraud even though no claim had been submitted. In that case the defendant plotted out a crime of insurance fraud in which he arranged to have the car of one of his coconspirators disposed of; so they could split the insurance money. The coconspirator, however, never reported the car stolen to the insurance company. The court held that “The necessary overt act for an attempt need not be the final one towards the completion of the offense. Whenever the acts of a person have gone to the extent of placing it in his power to commit the offense unless interrupted and nothing but such interruption prevents his present commission of the offense, at least then he is guilty of an attempt to commit the offense.” People v. Vastano, 117 A.D.2d at 637.

Here, Mr. Kaiser has acted to the extent that he would “commit the offense unless interrupted and nothing but such interruption prevents his present commission of the offense.” Batman was the interruption that both prevented the destruction of the hotel and the insurance fraud. Similar to the Vastano case, Mr. Kaiser had almost completed his portion of the fraud. Without Batman’s “interruption” the Joker would have destroyed the casino, and Mr. Kaiser could have collected the insurance money.

III. What If Mr. Kaiser Had Not Helped the Joker?

If we change the episode slightly, this time removing Batman’s interruption and Mr. Kaiser’s aid to the Joker. What would be the result if Mr. Kaiser, had simply realized he had spent far too much on the Casino, and simply changed the theme to Joker’s Wild knowing the Joker would destroy it. Here, the facts are a little closer as Mr. Kaiser is no longer an accomplice to the arson of the casino. However, he is still would likely be guilty of insurance fraud if he seeks to collect the insurance money on the destroyed casino.

“The essence of insurance fraud is the filing of a false written statement as part of a claim for insurance.” People v Alfaro, 108 A.D.2d 517, 520, affd. 66 N.Y.2d 985; see also People v. Michael (App.Div. 1994) 210 A.D.2d 874 [620 N.Y.S.2d 637], holding that although the defendant was found not guilty of arson, it did not mean that she could not be convicted of third degree insurance fraud where proof was overwhelming that defendant was aware that fire was intentionally set to collect on insurance policy.)

Even if Mr. Kaiser had simply changed the theme of the casino in order to entice the Joker to destroy it, he would have to either a) misrepresent or conceal his change of theme, or b) report the change of theme to the insurance company.

If Mr. Kaiser elected to simply misrepresent or conceal the change of theme, then he would be committing “the essence of insurance fraud” by filing a false written statement as part of a claim. Even if his policy would have covered the loss of the casino had he been truthful, he would still be guilty of insurance fraud. In People v. Stevens, the defendant falsely reported to her insurer that her truck had been stolen, when in fact it had been driven into a pond. The court in that case held that “The commission of the crime of insurance fraud is not dependent upon whether the insured is ultimately entitled to be paid under the policy; it is committed when the insured knowingly files false information with the carrier in an attempt to collect under the policy.” So any material misrepresentation or concealment to an insurance company constitutes insurance fraud.

So what if Mr. Kaiser was truly innocent, and had changed the theme of the casino, not to bait the Joker, but because he truly believed that “The joker is a classic symbol, long associated with cards and games.” New York and other states require that all insurers must obtain an anti-arson application for all property insurance policies covering peril of fire or explosion. NY CLS Ins § 3403. An anti-arson application is an application for insurance or renewal of insurance, that includes certain questions that the applicant must answer in addition to the basic information normally supplied to an insurer. NY CLS Ins § 3403(a). This information includes financial and background information about the property and the applicant. NY CLS Ins § 3403(c).

The improvements entailed with the change of theme of the casino would also need to be insured. Therefore, Mr. Kaiser would have had to complete an anti-arson application for the improvements. During the application process, the property would need to be appraised and inspected. During these inspections, the insurance company would likely find out the nature of the improvements. If Mr. Kaiser were honest in this anti-arson application concerning his financial condition and the financial condition of the property, and the insurance company still chose to insure him, then a court would likely find that the insurance company accepted the risk of the Joker destroying the casino and Mr. Kaiser could collect. All that being said, an insurance company is not likely to insure a Joker’s Wild casino in Gotham.


15 responses to “Guest Post: Insurance Fraud is No Laughing Matter

  1. Doesn’t Kaiser have bigger legal problems? He helped the Joker escape! What are the relative penalties for insurance fraud vs. helping a criminal escape prison?

    • Both carry prison sentences. Especially since the person he helped to escape was a known homicidal maniac, and the purpose of breaking him out was to bait him into blowing up a casino (most certainly killing everyone inside), not to mention the fraud is in the millions of dollars.

      Though really, between the million dollar fraud and the fact that had his plan succeeded dozens of people would be dead, breaking the Joker out is most definitely NOT the “bigger legal problem”. Had the Joker not been in Arkham at the time (meaning, Kaiser just had to hope that the Joker would see this and show up), he’s still be in more trouble for that than simply breaking the clown out.

      Regardless, Mr Kaiser is going away for a LONG time. And given that he’s bankrupt, he probably can’t even afford good lawyers.

      • He’s not guilty of arson. For one, the Joker wasn’t planning to burn the casino down- he was planning on blowing it up.

        Does raise some interesting questions about the specifics of his culpability though- Kaiser knew and arranged for the Joker to do SOMETHING to his casino, but even he couldn’t really know for sure what exactly that was going to be. Like, if you invite someone to steal your car for insurance fraud, but they instead opt to smash it up, what is your exact cuplpabilty?

    • You are absolutely right! Mr. Kaiser is in a lot more legal trouble, than just insurance fraud, and that generally holds true in the real world. In general, arson insurance schemes, when discovered, are prosecuted under the arson statutes rather than under insurance fraud provisions. If an insurance fraud count is charged, it is generally included only as a secondary count to the arson. This is so because arson is a major felony in all jurisdictions while insurance fraud is, in many jurisdictions, a misdemeanor or lower grade felony. In New York for example, the base insurance fraud is only a misdemeanor. But this article is more to address what if the prosecution wants to add the insurance fraud or there is not enough evidence for the more serious crimes.

      • (double post- sorry)

        He’s not guilty of arson. For one, the Joker wasn’t planning to burn the casino down- he was planning on blowing it up.

        Does raise some interesting questions about the specifics of his culpability though- Kaiser knew and arranged for the Joker to do SOMETHING to his casino, but even he couldn’t really know for sure what exactly that was going to be. Like, if you invite someone to steal your car for insurance fraud, but they instead opt to smash it up, what is your exact cuplpabilty?

      • In New York, as well as most jurisdictions, the definition of arson includes “causing an explosion.” NY CLS Penal § 150 et seq.

      • Huh. Did not know that.

  2. Hm. Isn’t it likely that the Wayne Enterprises would have a subsidiary specializing in business insurance? Might they tend to offer such insurance policies despite such risk as part of a broader decision of a more political nature? And might the offering of such a policy be exactly how it came to the attention of the Caped Crusader’s alter ego?

    • We saw how it came to the attention of Batman in the story- Bruce Wayne was a guest at the opening of the casino, he was disgusted with the choice of theme like everybody else (in fact he was looking forward to going until the theme was revealed), and while there he made the deductions on-site and found out the previous theme. He was not surprised when he Joker showed up and even (as Bruce Wayne) managed to insult him to his face while Joker was posing as a dealer (Bruce recognised him immediately and told the theme was hideous, deliberately annoying the Joker pretty much for fun).

      It’s possible that Wayne Enterprises deals in business insurance (though I don’t believe there is any mention that they do), and it’s possible that they might have elected to cover the Joker casino (though not if Bruce himself had anything to say about it), but none of that has anything to do with how Bruce figured out what was going on.

    • There must be certain kinds of businesses in Gotham for whom the insurance premiums are through the roof — say, hat shops, joke stores, umbrella shops, pet stores specializing in cats or exotic birds, plant nurseries, or just about any establishment on Second Avenue.

  3. Would Kaiser really be charged with letting the Joker loose? It’s suggested to us, the audience, that he had a hand in it, but can it really be proven? It doesn’t seem like anyone actually knows he was connected; Even the guard probably has plausible deniability.

    • Once it is established that the reason the Joker theme was chosen for the casino was in the hope that the Joker would destroy it, and that the Joker managed to escape from Arkham THAT VERY NIGHT and made an instant bee-line for the casino…yeah, he could probably be charged. He could certainly plead innocence, but the evidence is pretty damning. Not sure if they even need to show HOW he helped the Joker escape; the circumstantial evidence is overwhelming.

  4. Given how easily villains break out in these stories, I’m not sure that the “managed to escape from Arkham that very night” is all that compelling a bit of evidence. Now, if somebody placed the same guard both at Arkham and at the casino (Batman isn’t aware of the former as far as we know, though someone with his detective skills could probably ferret it out), that would be pretty damning.

    • That’s kind of what Kaiser is counting on. There is nothing unusual about the Joker breaking out of Arkham to destroy something he saw on TV…If the plan succeeded.

      But it didn’t succeed, and because the Joker showed up at all the Gotham police will be crawling all over the casino and very quickly find out that Kaiser changed the theme at the last minute (especially since Batman can inform them himself), and then further find out how much money trouble Kaiser is in, AND learn that Kaiser was leaving the scene by helicopter just around the time the Joker was preparing to blow up the building, only for the Joker to go after him personally. That, along with the fact that Kaiser chose to theme the casino after the Joker at all, is all pretty damning.

      So, by itself, Joker breaking out of Arkham is circumstantial. Taken together with all the other evidence…yeah, it’s pretty clear that Kaiser was probably behind it. As to the guard, you don’t need to place him at both the asylum and the casino (it’s very likely he never went to the casino), you just have to prove that a) he was guarding the Joker that night (easy enough- it should be on the roster, and there are witnesses), b) he’s come into a certain amount of money recently (harder, but not too tricky), and c) that he had been in contact with Kaiser or one of his associates recently (this is harder still, but it’s possible someone slipped up- could be witnesses to them meeting, could be telephone records, could be someone will confess etc).

      Though really, at the very least, the guard is in trouble just for the Joker escaping on his watch- no matter how often that happens, it still looks like incompetence-, and he will be investigated and likely punished. Since both Batman and the police have reason to suspect this guard now, he might end up admitting everything anyway.

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