Debt may be a factor in suspicious house, car fires

In what appears to be the latest symptom of the nation's mortgage meltdown and credit crisis, insurers, law enforcement officials and state agencies nationwide report a jump in home and automobile fires in the last year believed to have been set by owners unable to pay their debts. The numbers are small, but they're leading the insurance industry to scrutinize more closely what seem to be accidental blazes.

"We've seen a dramatic increase in this kind of fraud," said Dan Bales, director of fraud investigations at Mercury Insurance. "People upside-down on their house with variable-interest-rate loans, or upside-down on their cars, are pretty quick to burn their property right now."

Last week, a Sacramento-area couple were arrested on allegations that they burned their Jeep and drove their Nissan pickup into a river, then filed fraudulent insurance claims. According to investigators, the wife admitted she was trying to escape her $600 monthly car payment.

On April 1, police arrested a woman in Easley, S.C., accused of deliberately setting fire to her home just three days after the bank hung a foreclosure notice on her door. And in January, an Omaha man was arrested on suspicion of arranging to have his three-bedroom house burned down as he was facing foreclosure.

The fires are keeping fraud investigators such as Anne Luce occupied.

"I'm busier now than a one-armed paper hanger," said Luce, who works on auto cases for the special investigations unit at Bristol West Insurance, part of Farmers Insurance Group. "What is happening is terrifically economically driven."

These financially motivated fires are surprising some officials because they come after a decade-long decline in overall arson rates nationwide. Few state or federal agencies categorize arson in terms of the financial status of liens on the property, making nationwide figures elusive. Still, pockets of the country are showing a significant increase.

Insurers referred 14 cases of questionable home fires, with foreclosure as a possible factor, to the California Department of Insurance last year, up from seven in 2006 and two in 2005. In the same three-year period, reports of auto arson increased by a third, to 343 cases last year. On Friday, the Department of Insurance announced the arrests of seven people in two investigations of possible automobile arson and insurance fraud.