Key bit of evidence
Ignition lock analysis may not solve theft claims, but insurers back it

The Journal Lawbeat
By Mark Hansen

Auto insurance companies seem to love Rick Pacheco. It's not hard to understand why.

Pacheco owns North Eastern Technical Services, a company in Fall River, Mass., that claims it can tell which key was last used in a car's ignition, even if the car has been submerged in water or gutted by fire.

That kind of information can be useful to an auto insurer, especially one that suspects policyholders may be involved in the theft of their own vehicles, a type of fraud known in the industry as a "give-up."

If Pacheco can really tell whether a policyholder's key was the last one used to operate a vehicle that has been reported stolen, it could be grounds for denying the policyholder's claim, particularly if the vehicle has been abandoned with no apparent damage to the steering column or ignition.

Fraudulent claims are a big problem for the industry, according to the Coalition Against Insurance Fraud, accounting for an estimated $14.2 billion in losses in 1996, the most recent year for which such figures are available. And automobile give-ups are thought to be on the rise, industry officials say.

Pacheco says that the process he uses to examine an ignition lock, which he calls "key pathway analysis," really works--though he declined to elaborate. "The exact way we do it is proprietary information," he says.

Some who have used Pacheco's services vouch for his abilities. Michael Reynolds, a special investigator with the South Carolina Farm Bureau, says he has used Pacheco on 10 different occasions, including one that resulted in the conviction of eight members of an auto insurance fraud ring. "It seems to be scientifically reliable," Reynolds says of the process. "It's like matching a bullet to a gun barrel."

But critics say there is no proof that Pacheco's top-secret process actually works. Some go so far as to say the insurance companies that use his services don't care whether it does, as long as it gives them a reason to deny what they regard as a suspicious claim.

James Starrs, a professor of law and forensic sciences at George Washington University, says he sees no merit in Pacheco's claim that he can tell what key was last used in any given lock. "Nor does anybody else I know of," Starrs says.

That includes Jim Cadigan, chief of the FBI's firearms and toolmark unit, who says it may be possible to tell whether a particular key has been used in a particular lock but not whether it was the last key used. "It's something akin to the Psychic Friends Network," Cadigan says of Pacheco's claims.

And E. Lee Griggs, a Camden, S.C. auto theft expert who has tried to do what Pacheco claims he does, says there is no way to tell whether a particular key has been used in a lock--let alone what key was last used--unless the key in question has some major anomaly, such as a raised burr.

Benefits Override Believability
But the doubts raised by many have failed to deter some insurance companies from using Pacheco's services. Even if Pacheco can't do what he says he can do, his willingness to say he can provides an insurance company with cover in the event a policyholder whose claim has been denied decides to file a bad-faith suit.

A client of Philadelphia lawyer Mark Tanner sued her insurer in 1998 after it refused to cover her claim for the loss of her car, which she had reported stolen from a friend's house in Staten Island, N.Y. The Premier Auto Insurance Co., based in Fort Washington, Pa., denied the client's claim based primarily on Pacheco's examination of her vehicle's ignition lock assembly, from which he concluded that the car had last been driven with a valet key that should have come with the auto.

Pacheco never examined the valet key he came to conclude had been used to steal the car, Tanner says. He never even established that such a key had come with the vehicle. And even if he had, Tanner says, he couldn't rule out the possibility that the car had been towed or driven away using a duplicate key, which is easily obtainable.

"They were just buying themselves an excuse for not paying a legitimate claim," Tanner says of the insurer, knowing that a bad-faith action is hard to prove and can cost more to prosecute than the car is worth, which in many states is the extent of the damages to which a policyholder is entitled.

Premier officials did not return calls for comment. If the company was looking for an excuse to deny the claim, though, it didn't work. Shortly after Tanner filed a Daubert motion challenging the admissibility of Pacheco's June testimony, Premier offered to settle.

While the terms of the settlement are confidential, Tanner says both he and his client were pleased with the company's final offer.

Another Challenge, Another Settlement
Don Holtman, a lawyer in Hartford, Conn., says one of his clients had a similar experience with another insurer.

Holtman says his client, who went to a movie with his wife one afternoon in February 1997, came out to find his car missing. The car turned up in New York City several days later, Holtman says, heavily damaged and missing all four wheels and both front fenders.

GEICO Corp., the client's insurer, called in Pacheco, who said he had determined that the policyholder's own key had been the last key used to operate the vehicle. Based on that, Holtman says, GEICO denied his client's claim, asserting that the car was "not in a state of theft" when it was reported stolen.

Holtman says he consulted with several auto theft experts, including one FBI official, all of whom questioned Pacheco's key pathway analysis. So he started issuing notices of deposition. Then, out of the blue, Holtman says, GEICO offered to settle, eventually agreeing to pay for the value of the car plus attorney fees and still leaving a few thousand dollars left over for his client.

Holtman says he doesn't know whether GEICO officials really believe Pacheco can do what he says he can. But if they do, he says, they are either "very stupid or very gullible."

GEICO officials could not be reached for comment. But Thomas Pavano, a West Hartford, Conn., lawyer who represented the insurer, says it makes a good-faith effort to settle all claims, including the one filed by Holtman's client.