Crime Doesn't Pay (I)

SUV owners who are faced with rising gas prices have found a new way to get out from under their high car payments -- arson.

This trend was spotted by a Southern California arson task force in the summer of 2005 when gas prices spiked. At one point, firefighters responding to a report of a vehicle fire arrived at the Los Angeles River Bed to find two SUVs burning at the same time.

Investigators found the arson-for-hire ring involved a new-car dealership in Cerritos, California. Debt-weary SUV owners contacted the finance manager, hoping to trade in their gas-guzzler for something cheaper. They were then put in touch with an arsonist who told them to leave the keys in the ignition and $300 cash in the glovebox. An arsonist would then take the car to a remote location and set it afire. After the car was torched, the owners would then contact their insurance company and report their vehicle stolen, expecting their debt to be cancelled. Instead, they were investigated for insurance fraud.

A sting operation was arranged and an undercover officer posed as an "upside-down" SUV owner who wanted his vehicle burned. "Upside-down" refers to a loan where more money is owed than the car is worth. The vehicle was left at a predetermined location with cash in the glovebox. However, the would-be arsonist didn't know there was a "dash cam" installed in the car to videotape his actions. When the arsonist removed the money and started to drive away, investigators hit a kill switch and triggered the door locks, trapping him inside. Simultaneously, warrants were served on seven other people involved in the arson ring.

Here's a crime that doesn't pay. It's too easy to determine that your car was worth less than its outstanding loan, so you're not simply going to be getting a check from the insurance company, no questions asked. Also suspicious is getting insurance coverage to cover the gap between the car's value and your outstanding loan. If the would-be criminal had any foresight, they'd have this coverage already; however, if they had this insight, they wouldn't have bought such a large car, and wouldn't be in a position where they need to torch their car.

Amazingly, this crime used to be more common:

In 1984, Mieth said it was "commonly accepted for Mr. and Mrs. Citizen to 'sell' their car back to the insurance company by lighting it on fire." To put a stop to that, the Burned Motor Vehicle Reporting Law was passed in 1987. This required the owner of a burned vehicle to complete and sign a report that must also be signed by a fire official from the department where the fire occurred. The new law was the most likely reason that vehicle fires dropped 95 percent, from a high of 5,116 in 1987 to 217 in 2004.

This is yet another example of a crime that hurts the honest among us, as fraudulent losses for insurance companies will be recovered by higher rates for your insurance.