  We design the insurance contract when the insurer faces arson-type risks. The
optimal contract must be manipulation-proof. It is therefore continuous, it has
a bounded slope, and it satisfies the no-sabotage condition when arson-type
actions are free. Any contract that mixes a deductible, coinsurance and an
upper limit is manipulation-proof. We also show that the ability to perform
arson-type actions reduces the insured's welfare as less coverage is offered in
equilibrium.
