If Arlene misrepresents damage caused by a tornado as being from a previous earthquake, what has she committed?

In this scenario, Arlene has committed soft fraud. Soft fraud, often referred to as "opportunistic fraud," occurs when an individual exaggerates or misrepresents the details of a claim to receive a higher payout. By claiming that damage from a tornado is actually the result of a previous earthquake, Arlene is attempting to manipulate the insurance process to her advantage, potentially leading to a claim settlement that she would not legitimately qualify for.

This is distinct from hard fraud, which involves outright fabrication of a claim or the intentional creation of a loss. In Arlene's case, the damage does exist, but the misrepresentation of its cause is what constitutes soft fraud. The context of her misrepresentation—downplaying the actual cause of the damage to gain a more favorable claim outcome—fits typical behaviors associated with soft fraud.

Moral hazard refers more to the increased risk brought on by an insured party's behavior altering after gaining insurance coverage, often in terms of risk-taking behavior. Physical hazard involves factors related to the insured property that increases the chance of a loss but does not pertain to dishonest claims behavior like Arlene's.