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HOA Insurance Case Studies Flukes, Fires and Floods

There is a joke that is regularly circulated via e-mail among insurance industry professionals. It goes a little like this: A North Carolina man, having purchased a box of 24 rare and very expensive cigars, insured them against fire. (Yes, fire.) Within a month, having smoked his entire stockpile of fabulous cigars, and having yet to make a single premium payment on the policy, the man filed a claim against the insurance company.

In his claim, the man stated that he had lost the cigars in "a series of small fires." The insurance company refused to pay, citing the obvious reason: clearly, the man had consumed the cigars in the normal fashion.

Punch line number one? The man sued, and won. In delivering his ruling, the judge in the case stated that the man held a policy from the company, which warranted that the cigars were insurable. The company, in the policy, had also guaranteed that it would insure the cigars against fire - without defining what it considered to be "acceptable" versus "unacceptable" fire. Thus, the company was obligated to compensate the insured for his loss. Rather than endure a lengthy and costly appeal process, the insurance company accepted the judge's ruling and paid the man $15,000 for the rare cigars he had lost in "the fires."

But here's punch line number two: Shortly after the man cashed his check, the insurance company had him arrested on 24 counts of arson. With his own insurance claim and testimony from the previous case used as evidence against him, the man was convicted of intentionally burning the rare cigars and sentenced to 24 consecutive one-year prison terms.

It's a good joke, but insurance companies regularly deal with odd, interesting and even funny insurance cases like these. All, however, come with their own morals-of-the-story. Here are just a few that might not seem as odd as North Carolina cigar man, but really stuck out in the minds of the insurance experts we interviewed.

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