“Water Arson” Insurance Fraud Becoming Increasingly Common

Historically, insurers haven’t investigated water leaks as thoroughly as fire damage claims. This could make it easier for homeowners to stage water damage.

Some homeowners are taking advantage of this lack of investigation to commit insurance fraud. Now, water arson has reached a point where insurers are sounding the alarm.

Who Coined the Term?

The term “water arson” appears to come from Andy Dykstra, associate vice president of enterprise fraud for Co-operators, who spoke at the Ontario Insurance Adjusters Association (OIAA) Claims Conference in Toronto earlier this year.

The term gained further traction through an article published by Alyssa DiSabatino of Canadian Underwriter in April 2025. In that article, DiSabatino recorded highlights of Dykstra’s panel discussion:

It’s the new arson as far as I’m concerned. People used to burn their house down when they wanted a new house or when they were in financial difficulty.

Dykstra added it was relatively easy for homeowners to commit water arson:

You can accomplish the same thing by sabotaging the toilet on your second floor and going away for the weekend.

Making things worse, insurers don’t always investigate these losses. A broken toilet often happens organically or accidentally, making it hard to spot fraudulent damage. It’s easier to spot the origins of fire arson, and there’s greater risk of injury to the perpetrators.

Andy does not appear to have actually used the term “water arson” in his panel discussion. Instead, the first mention of that term online is traced to Simon Storm Frigon on LinkedIn, who shared the Canadian Underwriter article above and expressed worries about “the new water arson.”

(As pointed out by Merlin Law Group, a 2016 Litigation Management article also highlighted the rise of fraudulent water claims, describing it as “steadily rising to the arson equivalent” and suggesting some UK insurers referred to it as “wet arson.” An August 2025 Merlin Law Group blog post brought further attention to the concept of water arson.)

How Water Arson Works

Water arson is the practice of intentionally causing water damage – say, through burst pipes or deliberate flooding – to collect an insurance payout.

Water arson may seem like an oxymoron – and it is.

However, it’s a real phenomenon causing increasing concern in the insurance community. Insurers lose millions to water arson each year. Some see it as an alarmingly commonplace practice.

You might commit water arson by damaging your toilet before leaving for a lengthy vacation, for example, causing an extended leak. Or, you could intentionally plug a pipe and blame it on a kid or pet, causing a flood when you’re away.

Making things worse for insurers, some contractors are in on the scheme, as explained by Andy Dykstra and summarized by DiSabatino:

Unless your insurer, [per] the initial adjudication of that claim, is allowed to assess what happened, part of the scheme is often you don’t [get to investigate] — it’s gutted by the time you get there.

Maybe you want a new floor. Maybe you’re looking for a new paint job, ceiling, or drywall. You stage a water disaster, then hire a contractor to clean away that mess as quickly as possible.

Whatever the case may be, water arson is fraudulent, illegal, and difficult to detect.

Why Water Arson is Harder to Detect

Water arson is harder to detect than ordinary arson because:

• Evidence is quickly cleared away. After a fire, authorities tend to preserve evidence for investigators. They know there’s a risk of arson, and they avoid extensive cleanup until a proper investigation takes place. That’s not always the case with water damage, when damages are quickly cleared away to reduce the risk of mold. As mentioned above, some contractors could deliberately gut water-damaged components after a loss but before an investigation, making it easier to get away with water arson.
• Minimal physical risk. Burning down a home or business is risky. People die every year while attempting to commit arson. Water arson isn’t nearly as dangerous.
• Minimal effort. Conventional arson requires gathering supplies – like fuel and an ignition system – before starting a fire. Water arson could be as easy as turning on a tap, loosening a connection, or creating a small hole in a pipe.
• No need for a convincing story. It’s rare for a house or business to spontaneously combust. To successfully commit (fire) arson, you need a good story. Water arson requires less of a story. Every home or business has plumbing, and that plumbing could fail for a range of reasons.

Signs of Water Arson

Water arson can and does occur. Some of the signs of water arson include:

• No tangible evidence of failure. There may not be a missing, broken pipe or fixture at the scene, for example.
• DIY repairs or vague repairs. Homeowners may have fixed the issue themselves without proper documentation – say, by tightening a connection or replacing a leaking hose.
• Suspicious water staining or mold.
• Strange locations of water damage, like damage in areas that are unlikely to experience accidental flooding.
• Odd blockages, disconnections, or other unusual errors with plumbing, suggesting manipulation.
• Uniform dust or debris in soaked areas, which could suggest staging instead of real damage.

How to Protect Your Claim Against Suspicion

Every day, homeowners across the United States come home to legitimate water emergencies.

With water arson rising, insurers could become more suspicious of water damage claims. Even if you have a legitimate claim, you could face increased scrutiny.

Some of the ways to protect your claim against suspicion include:

1. Document claims thoroughly, taking detailed photos right after discovering water damage. The more visual evidence you have of water damage, before any cleanup starts, the smoother your claim will be.
2. Preserve the scene as much as possible. As a homeowner and policyholder, you have an obligation to secure the scene (say, by turning off water). However, don’t clean up too much until your insurance company’s contractor arrives on the scene.
3. Notify your insurer immediately. The sooner you notify the insurer, the stronger your credibility tends to be.
4. Get a professional assessment. Licensed plumbers and restoration experts can examine the situation and identify the root causes instead of just fixing damage.
5. Work with a public adjuster. Public adjusters help increase compensation for legitimate insurance claims. They organize documentation, negotiate with insurers, and work hard to make sure the insurer pays attention to your best interests. Public adjusters also know how to spot signs of legitimate vs. suspicious claims.

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Why Water Arson Matters to Honest Policyholders

American insurance companies lose billions of dollars per year to fraudulent insurance claims.

Instead of simply absorbing these losses, insurers pass these costs onto policyholders as higher premiums.

If your neighbor commits water arson, for example, then it could cause your premiums to spike. Your neighbor gets a new floor, ceiling, and walls from their insurance claim – and you’re paying $50 more per year for insurance.

In short, water arson:

• Drives up overall insurance costs
• Slows down claim payout timelines
• Creates skepticism around legitimate claims

If you’re an honest policyholder, then water arson should matter to you.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.