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It seems like it would only be fraud if they explicitly misrepresented the level of risk. But simply offering to insure against cell phone radiation or gamma ray bursters or zombiepocalypse has the advantage that simply by mentioning such a policy, you can *suggest* that it's a risk worth insuring against, without ever having to actually lie about any real numbers.
The idea seems unethical, because at best, you are misleading or not divulging the situation in its entirety (at worst, you are inflating the risk, even if by "suggestion", to vulnerable and misinformed clients). In any case, I wonder if anyone has any experiences of this kind of thing. I'm only speculating and toying with this idea.
Sure, I agree that it's sort of unethical to insure against something when you the insurer know full well the risk is essentially zero. But unethical doesn't mean illegal, and that doesn't make it fraud in the legal sense.
I don't know about P&C risk but DOI looks very closely at what's filed by Health insurers.
I someone is willing to take the losing side of a bet there will always be someone to take the winning side.
Insurers are not radiologists, nor are they medical researchers (although they may employ these professionals from time to time as expert witnesses, consultants, etc.). Insurers are specialists in risk financing. There have been plenty of things that the general consensus has changed on with medical research. Insurers are accepting risks based on the fact that a claim could arise in the future (depending on statutory conditions and contract provisions) where a policy could pay out based on an occurence that occurred decades prior.
Yes, it is possible that the current general consensus in the scientific community is that there is no causal link between cell phone radiation and cancer or tumour. That only needs to change for a time for a liability claim to occur. Remember, also, that the insurer doesn't just indemnify in the case where the defendant is found guilty of negligence or found liable for their product (products liability); there is also the possibility that a claim is brought against the defendant who is innocent, but the insurer has agreed to foot the defence bill (which could run into the hundreds of thousands to millions). They, of course, would subrogate against the claimant for lawyer fees and defence costs if defendant is not found guilty, but no "out-of-pocket" expenses (depending on policy provisions) help the bottom line too. Time value of money and opportunity cost are factors.
Especially when there are so many debates about an issue (cell phone radiation, calorie consumption (McDonald's Lawsuit), etc.) frivolous lawsuits are a risk, even if they only cause reputational damage to a company/person. They take time, money, and expertise to defend, and net income losses almost always result. There will be damages to collect whether innocent or not. Whether the case is provable or not.
Just because an award may not be issued, doesn't mean that a loss has not occured. And if a loss has occurred (which will most likely be the case if you have to defend your company in court), an insured can usually be indemnified.
Last edited by bsd058; November 4th 2011 at 05:14 PM. Reason: clarification
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