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THE FINANCIAL MOTIVE FOR ARSON

In order to deny insurance coverage in a case of suspected arson, the insurer must establish motive, opportunity, and incendiary origin. The first criterion may conjure up pictures of extreme financial stress driving an owner to burn down his own property. This note simply points out that financial stress need not be a factor in establishing the financial motive for arson. All that one needs to motivate arson is a sufficiently large net benefit from a fire.

The modifier "net" implies that there are both benefits and costs to engaging in arson. Here is a short (but fairly complete) list of the benefits and costs:

Benefits

Financial gain

Relief from debt burden

Personal reasons

Costs

Financial loss

Moral conflict

Jail

Several of these variables are difficult to quantify. For example, someone driven by revenge (certainly a personal reason for arson) might gain so much benefit from the act of arson that it would outweigh any potential cost. Similarly, a pyromaniac may perceive "benefits" unseen to all others.

On the cost side, we cannot measure the personal "cost" in terms of loss of self-esteem that different individuals may face as a consequence of doing something immoral or illegal. Because of these measurement problems, it may be impossible to literally calculate the positive net benefits (i.e., the excess of benefits over costs) associated with arson.

There is one class of benefits from arson that is fairly easily measured: the potential for financial gain. In many cases there may be the opportunity for outright profit if properties are overinsured. The potential arsonist may also recognize that insurance payments following a fire can relieve him of a heavy debt burden, improving his cash flow. Thus one might turn to arson as a means of backing out of a contract gone sour. A businessperson’s hopes that he would turn a profit have not materialized. Insufficient profits, or actual losses, may not warrant a continuation of the project. The owner would just close up shop if it were not for the cost of mortgage payments.

A fire in a building fairly insured might free up the funds to pay down the mortgage and allow the producer to move on to another project. If arson is perceived as being more profitable than not turning to arson, there is a financial incentive to burn.

Once these potential financial gains have been measured, they must be compared to the less easily quantifiable perception of potential for detection (and the associated financial loss due to the insurance denial and even jail) and the personal cost of doing what is wrong. In general, the greater the potential financial gain, the greater the net benefits of arson.

It is fairly common practice in arson cases to pore over bank, business, and personal records to establish financial stress before the fire. However, finding financial stress may simply be icing on the cake. Financial stress is not a recondition for financial gain from arson. Thus, it also follows, not finding financial stress is not evidence of lack of financial motive for arson.

It is fairly common practice in arson cases to pore over bank, business, and personal records to establish financial stress before the fire. However, finding financial stress may simply be icing on the cake. Financial stress is not a recondition for financial gain from arson. Thus, it also follows, not finding financial stress is not evidence of lack of financial motive for arson.

 
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