Arson
What Does Arson Mean?
Arson refers to the criminal act of intentionally or maliciously setting property on fire. The legal penalties for arson depend on the severity of the crime and can range from fines and restitution to probation and imprisonment. In the context of insurance, policyholders may commit arson with fraudulent intent to cause property damage in order to collect insurance compensation.
Arson is also referred to as incendiarism.
Insuranceopedia Explains Arson
When fire damages an insured property, the insurance company must investigate whether the damage was intentional or accidental, as coverage typically excludes intentional and criminal acts meant to produce fraudulent claims. In some cases, an individual or business owner may set their property on fire, particularly if the remaining mortgage exceeds the property’s value. This allows them to use the insurance payout to pay off debts or address other urgent financial needs.
In insurance, damage or loss caused by arson is often not covered by property insurance, even if the arsonist is a third party. This is because it could be exploited by policyholders to fraudulently claim money from insurance companies. However, certain policies may cover two man-made risks: malicious mischief and vandalism. In such cases, the property owner might argue in court that arson caused by a third party qualifies as an act of vandalism or malicious mischief.
