Dr. Albert Sterling, a Fictitious Surgeon, Submitted a Disability Income Claim: Investigations Assignment, NKU, US

University Northern Kentucky University (NKU) US
Subject Investigations

CASE STUDY 6:  Dr. Sterling’s Disability Insurance Claim


After completing and discussing this case, you should be able to

  • Spot some red flags of fraud
  • Recognize that fraud investigations proceed in stages, with information coming in at various times
  • Develop analytical skills in a specific context
  • Focus on where funds are spent
  • Learn how to search for more information

Dr. Albert Sterling, a fictitious surgeon, submitted a disability income claim to Guardian Professional Protection Insurance Corporation, a fictitious insurance company. Dr. Sterling is making a disability claim, stating that he cannot continue to work as a surgeon, due to debilitating depression. While the doctor and the insurance company are fictitious, several aspects of this case are real.

You assume the role of an insurance investigator who is assigned to assess the validity of the claim. The case is divided into two phases, Phase I and Phase 2. Phase I contains most of the information and questions and requires most of the analysis. Phase 2 contains six additional sources of evidence and allows for a more in-depth investigation of the validity of the claim. Phase I is effective by itself, but Phase 2 shows that a fraud investigation usually proceeds in stages, with information coming in at various times.

This case provides an opportunity to practice forensic accounting techniques in the specific context of disability insurance. You will find several “red flags of fraud” to investigate. Tracy Cornett, CPA, CFE, an insurance investigator, notes: “For insurance claims that deal with illness or injury, such as workers compensation, disability or personal injury the key to finding red flags of fraud is looking for financial information that doesn’t add up or is inconsistent with the claims submitted” (Drat, 2006).


Guardian Professional Protection Insurance Corporation File February 10, 2010, Assume that you are a claims investigator with Guardian Professional Protection Insurance Corporation (GPPIC), a large insurance company based in Chicago. You have received a claim on the long-term disability policy for Dr. Albert Sterling. His policy is of the “own occupation” type. You are responsible for determining the validity of the claim. Here is the information that you have at this time:

  1. Dr. Albert Sterling is 59 years old.
  2. He is a general surgeon.
  3. He is the sole owner of his medical practice. There are two offices, one in downtown Chicago and one in Lake Forest.
  4. He has ten employees between the two clinics. They are nurses, office managers, medical records specialists, and receptionists.
  5. He has hospital privileges and does his surgery at two well-known hospitals.
  6. He works around 60 hours a week performing surgery, visiting patients in the hospital, and conducting office appointments.
  7. Mrs. Melissa Sterling and Dr. Sterling have been married for 35 years.
  8. Mrs. Melissa Sterling has been a full-time homemaker since her marriage.
  9. They have two children, Lauren and Albert Jr. (A.J.).
  10. Lauren works in her father’s Lake Forest office. She attended college for 2 years. She is married with one child.
  11. A.J. graduated from a local university with a degree in business administration and is employed with a local market research firm.
  12. Dr. Sterling reports the following salary information:













  13. The combined federal and state individual income tax rate is approximately 40%.
  14. Dr. Sterling states that he has been suffering from debilitating depression recently. He has filed a claim for long-term disability insurance, asserting that he cannot continue to work in his profession, as a surgeon.
  15. Dr. and Mrs. Sterling’s personal financial statement (Personal Statement of Net Worth/Balance Sheet) has not changed significantly since the policy was issued in December of 2005. Copies of the Personal Statements from December 31, 2005; December 31, 2006; December 31, 2007; and December 31, 2008, are in GPPIC files. The Personal Statement for December 31, 2009, is provided next.


  1. What type of income is is Dr. Sterling hoping to replace?
  2. In general, do you notice anything unusual about the Personal Statement? Consider that Dr. Sterling is 59 years old and his children are adults. He is a surgeon, and surgeons usually work a lot and are usually high-income professionals.
  3. What accounts on the Personal Statement should you investigate? Why? Please be specific as to why these accounts are of concern.
  4. Consider accounts that you do not see on the Personal Statement. Please identify these accounts and discuss what concerns you would have because these accounts are not reported by the Sterlings. In other words, what accounts might you expect to see on such a Personal Statement for a high-income family?
  5. Here are two guidelines usually used by claims investigators in these types of cases:
    • If a person is trying to accumulate wealth, his or her home should cost at least twice as much as his or her take-home pay.
    • A commonly-used formula for expected net worth is: Expected Net Worth=(Age-10 years) x Current Yearly Pretax Household Income/10
      Please apply these guidelines to the Sterlings. Show your calculations. How do the Sterlings “measure up” here?
  6. What concerns do you have about Dr. Sterling and his disability insurance claim?
  7. What additional sources of information (documents, interviews, etc.) should you request or search for?

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