An individual dies of slow poisoning from a toxic substance inserted daily into his evening drink. A premeditated killing is staged to look like an ambushing of the deceased victim by a burglar. And a scuba diver fakes her disappearance off the coast of the Bahamas, leaving behind only a few documents to identify her. 

A common thread in these scenarios is the element of death, plus something else: In each case, a life insurance policy beneficiary stands to reap (in respect to the last, in connivance with the insured) a payout on a life insurance contract.  

The illustrations are also among the most common types of life insurance fraud. But intrigues that end in death — real or staged — aren’t the only scams that worry top execs at major insurers. 

Also of growing concern to the industry are cons engineered to close on a policy sale. In some cases unethical agents convince unsuspecting seniors to replace a perfectly good life policy or annuity with a new contract that pays a high commission. Or agents will inflate an applicant’s net worth to sell an unnecessarily large policy.

Producers also have pitched and sold health insurance policies that turned out to be life insurance contracts. (Evidently the victims, most of them seniors, weren’t paying close attention to literature intended to conceal the purpose of the policy.)

In still other cases, applicants misrepresent their income replacement needs, insurable interest or heath status to get through underwriting with a favorable outcome. Often, for example, policy applicants lie when asked if they’re smokers or have been hospitalized for a health condition.

Whatever the cause or motivation, scams are costing insurers staggering amounts. The Coalition against Insurance Fraud conservatively estimates that fraud across product lines at $80 billion annually. Property and casualty fraud is pegged at $32 billion each year.  

In the life space, losses are also “in the billions,” but precise figures are hard to come by. One reason: life insurance fraud tends to go underreported in the industry. 

“Many instances of fraud are stealth scams — nobody knows they happened,” says Jim Quiggle a communications director for the coalition. “The insurers often prefer to settle cases behind the scenes with family members.  

“Many life insurance scams do get reported to the state fraud bureaus,” he adds. “But you don’t see on a national level enough omnibus reporting to know how widespread life scams are and which types are the most endemic.” 

To be sure, life insurers are constantly on “high alert” for signs of foul play. That’s especially true for the most widespread type of fraud: a policy beneficiary murdering the insured (typically a spouse) to collect the death benefit. 

This is true even for policies with low face amounts. Case in point: Sue Basso, who romanced and lured Buddy Basso (a man with the intellect of an 8-year-old) into marrying her. She thereafter bought a $15,000 life policy — one with a clause raising the payout to $60,000 if Buddy, the insured, died a violent death — and named herself as beneficiary. She then recruited gang members to bludgeon him to death. 

More typically, the payouts are much higher. In November of 2014, Colorado authorities charged Harold Henthorn with murdering his second wife, Toni Henthorn, by pushing her off a cliff in September of 2012 — the date falling on the couple’s 12th wedding anniversary. The alleged motive: to cash in on her $4.5 million in life insurance benefits.  

“A combustible combination of greed, large dollar payoffs and resentment can lead to a murder of a spouse or close family relation,” said Quiggle. “And many of the perpetrators think this is an easy crime to get away with.” 

That’s evidently also the belief among people who fake their deaths, of which examples abound. Exhibit A: Raymond Roth, a Long Island man who in 2012 attempted to defraud his life insurance company with the aid of his son Jonathan. Less than a month after the son told authorities Roth was missing in the breakers off Jones Beach (which spurred a massive and expensive search), a traffic cop stopped the father for speeding in South Carolina.  

Often, such frauds are committed by foreign nationals living in the U.S. who stage their death during a trip to their country of origin. In many third-world countries, says Quiggle, it’s easy to get an underpaid bureaucrat overseas to issue falsified documents like death certificates by paying a bribe.

In such cases, life insurers often will hire outside investigators who specialize in the country of origin. The largest multinational insurers — AIG, MetLife, Prudential Financial, among others — may also be able to tap internal expertise to validate death claims.  

When there’s reason for suspicion, says Quiggle, a payout on a policy will generally be withheld pending a detailed inquiry, starting with questions about policy beneficiary’s financial situation and relationship to the insured. Evidence, for example, that the beneficiary was facing financial difficulties, had a troubled marriage with the insured or aspired to a better life are sure to send up red flags at a carrier. 

But it’s the front-line agents who are best positioned to thwart potential scams before a policy is issued. Quiggle says producers need to be familiar with the warning signs and, in suspicious cases, alert the insurer.

“Agents need to look at policies critically,” says Quiggle. “If someone on a low income is trying to buy a life policy with a huge payout, they need to ask why? Or why is a parent taking out a $500,000 life insurance policy on a child?

“Parents have killed their kids to get a payout on a life policy, he continues. “So the insurable interest should be carefully screened for potential warning signals of a tragic scam in the making.”

Insurers can aid in the process by educating agents and advisors in the detection of fraud, whether sham deaths or other cases of misrepresentation. Producers can also be of service to their companies, says Quiggle, in identifying fraudulent acts — in all of their morbid variety.

What follows are three examples of life insurance fraud: the first concerning the murder of a house maid; the second, a sham death; and the third involving a funeral director … we’ll hold off on the details ‘till you get there. If we have your (morbid) interest, then read on.

Death at the hands of Irish travelers  

It’s not every house maid who has some $5 million in life insurance coverage. Still more unusual are insured house maids that get slain by policy owners who, doubling as beneficiaries, stand to collect on a contract’s death benefit. 

This unfortunate outcome befell Anita Fox in September of 2014. Hired to clean a Colleyville, Tex.-based home, the 72-year-old maid was stabbed to death there by a father-and-son duo who, unbeknownst to Fox, had purchased life insurance coverage on her life. 

The accused — Bernard and Gerard Gorman, ages 27 and 48 — bought $1 million in whole life coverage from Fox’s daughter, Virginia Buckland and her husband, Mark Buckland. Unable to maintain the premium payments, the Bucklands tapped an insurance agent, Charles Mercier, to facilitate a sale of the policy on the secondary market. 

Whether by design or not, the $1 million contract ended up in the wrong hands. The Gormans are “Irish Travelers,” descendants of an itinerant ethnic group, an estimated 10,000 of whom emigrated to the U.S. from Ireland in the mid-19th century. The secretive travelers are, like gypsies, often perceived as insular, anti-social and misfits; many have been implicated in criminal conduct connected with such blue-collar trades as roofing and asphalt-sealing.  

And now, evidently, profiting from life insurance sales. The indictment lodged against Bernard “Little Joe” Gorman stipulates one count of murder and one count of conspiracy to murder. The younger Gorman allegedly provided a getaway car for his father who, after stalking and then knifing Fox to death, purportedly died of “natural causes” before the police could bring him into custody. 

The son is now free on bail while awaiting trial. As part of the bail agreement, he’s required to wear an ankle monitor. 

As to the Bucklands, they’re also in court, attempting in separate lawsuits to force insurers that issued about $5 million in coverage on Fox’s life to disburse the policy proceeds. (The couple owned several contracts apart from the one they sold the Gormans.) The insurers are in no rush to do so. They’re investigating whether Fox had advance knowledge of the policies; or, if not, whether the Bucklands are guilty of fraud. 

Or else negligence. Fox’s son, Al Fox III, argues in a motion that, as his mother’s nearest relative, he is the “rightful recipient” of the policy proceeds. He alleges that the Bucklands are “negligently responsible for the death of the insured.”  

A North Carolina man fakes his death 

Two years ago, Jose Salvador Lantigua traveled from the U.S. to Rio Chico, Venezuela, a seaside tourist spot. There, suffering from “mad cow disease” and burdened by debt from a failing furniture store business, he passed away. His body was thereafter cremated, the ashes scattered elsewhere in Latin America. 

Or so Lantigua’s “widow” asserted upon submitting his death claim, thereby securing $9 million in life insurance benefits on multiple policies in his name. Turns out, however, that Lantigua, a Cuban-born native and resident of Jacksonville, Fla., is very much alive and kicking. 

Proof-positive arrived when he showed up last March in an Asheville, N.C. federal courtroom, shackled and sporting a brown prison uniform, to face trial for the sham death. The charges, according to the Associated Press, included one count for falsifying a statement on a passport application, 7 counts for filing fraudulent insurance claims, plus one count for scheming to fraud. 

The ruse worked for a time. Unfortunately for Lantigua, insurance investigators uncovered evidence that failed to jibe with the death claim. A man matching Lantigua’s description had been sighted by a construction worker after 2013. Also suspicious was Latigua’s passport application: It shows the name of an African-American man, but the Social Security number of a deceased white woman. 

The scheme came to an end earlier this year when authorities used facial recognition technology to identify Lantigua. Though still living in Asheville, he visited his wife’s Blue Ridge Mountains home in Sapphire, North Carolina. The basement of the house, equipped with a hidden room and 20-inch-thick steel walls, may have been used as part of a “back-up plan” to protect Lantigua and the millions in life insurance proceeds, according to an attorney not connected with the case. 

If convicted of the charges against them, Lantigua and his wife (Daphne Simpson) will be spending long days inside another set of thick walls. In the interim, the defrauded parties are doing what they can to recover assets lost in the scheme. 

In a separate civil lawsuit, Florida Capital Bank claims that Lantigua still owes the financial institution $500,000 for using a fraudulent check to purchase a house and car. The bank earlier recovered $800,000 on a $1.6 million loan extended to Lantigua by foreclosing on his failing business, Circle K Furniture. To secure the remaining $500,000, the bank is now attempting to take possession of the Jacksonville Beach, Fla.-based home of his daughter, Christina Lantigua. 

A scene of utter chaos and disarray 

The work of funeral directors is straightforward enough. They provide emotional support to the bereaved, arrange for removal of a deceased’s body, prepare the remains, file death certificates and process other legal documents. 

The occupation is, in short, not typically the kind that lends itself to front-page headlines. Yet, one funeral director recently found himself high up in the news — and not in a good way. 

William Ryder, director of a former Massachusetts-based funeral home, pled guilty in July to 61 criminal counts, most of them for larceny. He now faces new charges resulting from civil complaints by 9 customers against his business. 

How did Ryder land himself in so much trouble? A state district attorney slapped him with 56 counts of the most serious charge, larceny, for embezzling over $375,000. The money represented premiums paid by 70 customers for “pre-need funeral arrangements.” 

As it turns out, however, Ryder redirected the funds into a business account. To boot, he forged the signing of life (funeral) insurance applications on behalf of his wife, Susan Ryder, a licensed agent for Columbian Life Insurance Co. Commissions the insurer paid her for the policy sales over a 10-year period totaled more than $100,000. 

The crimes might have been viewed a tad less severely if the ill-gotten funds had at least been put to some positive use in the business. Alas, that was not to be. 

State regulators who visited the Ryder Funeral Home last July found the establishment in “utter disarray.” According to a July 25 article appearing the Daily Hampshire Gazette, Alan Van Tassel, an investigations supervisor with the state Division of Professional Licensure, found some 30 boxes of unclaimed ashes, including those of a woman who had been cremated in 1966. 

The mess extended to steamer trunks, suitcases and other items that, according to Van Tassel’s report, “dirt” and “grime” had discolored; an empty space featuring “enormous dusty webs” from ceiling to floor; first-floor rooms that were “beyond any hope of cohesion,” and documents of deceased clients that were “scattered everywhere.” 

So much for record-keeping. After surveying the devastating scene, Van Tassel told the Gazette, he needed to step outside to catch a breath of fresh air. You might do the same yourself — there’s more. 

Namely, the stench of death. A state funeral home investigator who initially delved into the case on May 28, 2014 found 7 decomposing bodies and two embalmed ones in several rooms and garages.  

The investigator’s discoveries, made with Ryder in tow, roused the funeral director, but in ways you might not expect. Rather than invoking in him, say, expressions of anger, denial or fear on being questioned, he responded with “disjointed” and “unfocused” answers. And he seemed not to understand the “severity of the situation.” 

Indeed, Van Tassel noted in his report, Ryder appeared “anxious to please, and was absolutely cooperative, but was wholly ineffectual in both due to his inability to properly answer questions or to understand expectations.” 

Perhaps — neither Van Tassel nor reporters covering the story speculated on this — Ryder became so overwhelmed (possessed even?) by the morbid business that he came unhinged.