‘Five life insurance policies seemed a bit extreme’: Former State Farm investigator believes Karlsen



From the Calaveras Enterprise:


A claim investigator for State Farm Insurance recommended that the company deny Karl Karlsen his wife’s life insurance payout after she perished in a 1991 house fire.

The former State Farm employee, Heather Gower Small, today testified that she believed the defendant started the fire.

“I recommended that it was an intentional act act by Mr. Karlsen and that the cause of the fire was not accidental,” Small said.

Her report and recommendation were reviewed and endorsed by two superiors, according to her then-supervisor Ulises Castellon, who also testified today. However, State Farm rejected the recommendation and paid Karlsen over $215,000 in January of 1992.

Both Small and Castellon stated that they were baffled by the payout but were not permitted to testify as to why the decision might have been made.

Small’s report, which included expert opinions, witness interviews and photos taken of the scene, was likely destroyed, both testified, as State Farm had a seven-year records retention policy at the time of their employment.

However, a copied transcript of Small’s two-hour-long interview with the defendant at his family home in Romulus, New York, was preserved, as well as a diagram of the destroyed Murphys house that Karlsen drew during the meeting.

The defendant remained cooperative during the majority of the March 1991 interview, Small said, but grew agitated when she asked him how the fire started.

“He got very emotional,” Small said. “We had walked through a lot of questions about the possible sources for the ignition of this fire, all the accidental possibilities of this fire starting. … He got upset and started banging the kitchen table. He got up from the table, and he was yelling and ran down the hallway.”

Small added, “He was very angry. I was upset.”

At another point in the interview, Karlsen told Small and a second State Farm employee who was present to “stop beating around the bush,” she said.

“If I’d been in it for the money, why not the kids?” Small recalled Karlsen’s words. “In your terms, I’d be a rich man. I’d have half-a-million dollars. But here I am with three kids. It's a [expletive].”

Small testified that Karlsen took out life insurance policies on himself, his wife and his three young children in December of 1990.

“He originally wanted policies on just (Christina Karlsen) and the kids,” Small said.

Local State Farm agent Mearl Lucken required that Karlsen present proof of his own life insurance before taking out policies on the unemployed members of the family, she stated. Karlsen initially claimed to be insured elsewhere, changing his story twice before taking out a policy with State Farm.

“To take out five insurance policies seemed a bit extreme to me,” said Small, pointing to a $400 monthly premium with a $2,200 monthly household income as a “red flag.”

“Is that sustainable for 30 years?” she asked.

Another red flag, she said, was the immediateness of the claim. Only one $400 payment was made before Christina died on New Year’s Day 1991, and the loss was reported to State Farm by Karlsen the following day.

Prior to the fire, Christina came in to the State Farm office only once to sign her name, Small said. However, while she was there, she also signed documents requesting to be the owner of the children’s $100,000 life insurance policies.

According to Small, an owner has control over the policy if the insured party is a minor.

“I found it intriguing that (Christina) asserted herself and changed what Karl had set up—that she wanted to be the owner for the kids,” she said.

In interviews with neighbors, Small was told that “altercations and screaming” could be heard at the Karlsen home in the days leading up to the fire.

The defendant relayed his account of the fire and the days prior during his interview with Small.

A few days before, the bathroom window broke while Karlsen and his wife were trying to wedge it shut with a plunger. The defendant boarded it up, using nails to secure the warped plywood, Small said.

Two days before the fire, Christina had mistaken a jug of kerosene for water and set it down in the hallway. The pipes had frozen, and the family was bringing in water for their daily living, using “anything they could get their hands on” to carry it.

It was the dog and cat running through the house who likely knocked over the jug, but Karlsen said he didn’t see it happen, Small said. The couple mopped up the spill with clothing.

On the morning of the fire, Karlsen woke up early and went to work at Art Sheet Metal, where he was employed by Christina’s father. After a couple of hours, he realized no one was working on New Year’s Day and returned home.

“He watched some college ball and played with the kids,” Small said.

Later in the day, Christina washed the kerosene-soaked clothes and put them in the dryer. The dryer vented into the house and caused a noxious cloud of kerosene, triggering the smoke detectors.

Karlsen emptied and checked the dryer, opened the windows and pulled down a smoke detector from the ceiling to blow on it.

In the afternoon, Christina and the children were napping while Karlsen worked on a blower in the attic. He wanted to pull heat from the wood stove into the bedrooms and bathroom, Small said.

In the hallway, there were about 30 stacked boxes of clothing, as the family was moving the winter clothes out of the attic.

Christina got up and took a bath, and Karlsen descended from the attic to retrieve some wires from the garage. He left the trouble light he was using somewhere on the ground floor, though he couldn’t remember where. It was missing its hook, he noted.

In the garage, Karlsen heard his wife’s screams to “get the kids” and saw black smoke coming out of “every crack in the house,” Small said.

He first retrieved his son Levi from his room and was hit by a “fireball” in the process, which blew him back and singed his eyebrows and forehead. After throwing Levi across the porch and putting him in the truck, Karlsen retrieved the girls.

When asked by Calaveras County Deputy District Attorney Jeff Stone what Karlsen did next, Small replied, “He left.”

“I asked him if he tried to do anything with the bathroom window, and he said no,” she stated.

Karlsen then went to a neighbor’s house to call 911, bypassing the closest neighbor to drive to another home about three minutes down the road.

Small said she later talked with the Karlsens’ closest neighbor and confirmed that he had been home at the time of the fire.

The defendant told her that when he returned to the burning house after calling 911, “he walked around the home, and there was nothing he could do. He got back in the truck,” Small said.

She testified that while performing her investigation, she checked the height of the bathroom window, which she measured to be six feet off the ground and within her own reach from the porch, at 5 feet, 11 inches tall.

In his cross-examination, Karlsen’s defense attorney Richard Esquivel asked Small if she was aware that fire personnel knew of Christina’s location in the bathroom at the time of the fire, yet did not remove the board from the window.

Small responded that she was not aware of that fact at the time of her investigation.

Esquivel also questioned Small’s conclusions in her report and whether they were largely based on forensic electrical engineer Kenneth Buske’s findings that the fire was intentional.

“I believed the evidence that he presented,” Small answered.

Castellon replied when asked the same question that he would not have reached the same conclusion if Buske’s report didn’t determine the fire to be intentional.

When asked what other elements influenced her conclusion, Small replied “Mr. Karlsen.”

Small also cited a number of details that she found “unusual” in the case, including inconsistencies in Karlsen’s interviews with her and other investigators, the insurance policies, the kerosene spill and the clothes reportedly used to mop it up.

“And that was enough for you to think this man murdered his wife?” Esquivel asked the witness.

Small replied that it was.

“This case, when you looked at everything all put together, that was my recommendation, and it wasn’t a hard one to make,” she said.

When asked why she did not report her findings to law enforcement, Small answered that she assumed the case was already being investigated, based on her interactions with the California Department of Forestry and Fire Protection.

During his cross-examination by the defense earlier this morning, former Calaveras County Sheriff’s Office fire investigator Howard Stohlman testified that he took photos of the scene the day after the fire, but he doesn’t know where they are now.

“They would have been locked up in evidence with the sheriff’s office,” he said. “That’s the last time I saw them.”