Daughters on losing their mother and brother to dad who killed for insurance payouts

Growing up with their father Karl Karlsen, sisters Erin DeRoche and Kati Reynolds are no strangers to tragedy.

“It was just, does this much bad stuff happen to normal people?” Reynolds told ABC News’ “20/20” in an exclusive interview with the sisters.

DeRoche and Reynolds opened up about the heartbreak of losing their mother, Christina Karlsen, and brother, Levi Karlsen, at the hands of their father and described how he nearly got away with their murders.

“This was our life ... it was just one bad thing happening to us after another,” Reynolds said. ”So while it was upsetting, it was all we knew.”

Watch the full story on "20/20" Friday, June 5 at 9 p.m. ET on ABC.

In March, Karl Karlsen, 60, was sentenced to life in prison without the possibility of parole for the murder of his first wife Christina Karlsen in a 1991 house fire in California. Her death had initially been ruled an accident.

He will start serving that sentence at the end of his current 15-years-to-life sentence for the death of his son Levi Karlsen in 2008 in New York.

In November 2008, Levi Karlsen, 23, was crushed to death while working on his father’s truck at the Karlsen family farm in Varick, New York. The truck fell off a single jack and landed on top of him. Levi’s death was initially ruled an accident, but DeRoche believed otherwise.

“I knew as soon as I heard that Levi was gone that [my father] had done it. I knew with every fiber of my being.” DeRoche said.

Affectionately described as "goofy" and a lover of heavy metal music, his sisters said Levi Karlsen was misunderstood and never got along with their military-trained father.

At 16 years old, Levi moved out of the Karlsen family home. By 18, he was married to Cassie Hohn. The couple had two daughters together but divorced after five years of marriage.

Reynolds said Levi loved being a father.

“Prior to Levi's death, his life was on an upswing,” Reynolds said. “He was coming back to the farm more often ... he was able to get a job with one of the factories. They had ... insurance and stuff that he needed as a father trying to support his children.

“He very much was trying to get life figured out and he was happier,” she added.

According to authorities, 17 days before Levi Karlsen’s death, his father introduced his son to an insurance agent and convinced Levi to take out a life insurance policy on himself.

Karl Karlsen made the first payment on his son’s policy in cash and was the sole beneficiary, according to Levi’s handwritten will, which was notarized the day of his death. Levi Karlsen left his father in charge of deciding how his assets would be distributed to his young daughters.

“The life insurance policy that's taken out on Levi prior to his death -- I think it's beyond bizarre,” former New York State Police investigator Jeff Arnold said. “Karl made it out to be that Levi didn't trust his ex-wife [and] that Levi wanted his daughters taken care of and he trusted his dad.”

Following Levi Karlsen’s death, Reynolds said her father told her that Levi had a small insurance policy.

“[Karl] stated it was barely enough to cover the cost of [Levi’s] funeral,” Reynolds said. “I had no idea how much money there was until it was gone.”

After Levi Karlsen’s death was ruled an accident, Karl Karlsen collected a $700,000 payout.

Karl Karlsen’s second wife, Cindy Best, whom he married two years after Christina Karlsen's death, said she learned about the life insurance policy on Levi shortly after his death.

“It ended up being $700,000 because Levi died accidentally. So, that was a kind of a shock but … there was no reason for me to question anything at that time,” Best told “20/20.” “I just trusted my husband and this insurance agent that they were setting it up … for the best of Levi's daughters.”

Christina Karlsen’s family in California learned of Levi’s death when her younger sister, Colette Bousson, got a call from her niece with the news. Bousson said she always had her suspicions about her brother-in-law.

Eighteen years prior to Levi Karlsen’s death, Bousson’s beloved older sister and best friend Christina “Chris” Karlsen, 30, died in a mysterious fire in the home she shared with Karl and their three children in rural Murphys, California, on New Year's Day, 1991.

“I got my time with [Christina]. I definitely would have loved to still have that time but my kids were shorted and her kids were shorted and that really bothers me,” Bousson said.

She said it’s been a brutal cycle of heartbreak for the family.

“My sister is gone, three young kids grow up without a mom. Now, her son is gone, two young kids grow up without their dad because of one person,” Bousson said. “I knew beyond a shadow of a doubt he did it. I just didn't know what was the reasoning behind it but yeah, I was pretty confident that it was not an accident, not at all.”

Bousson said she kept her suspicions from Karl Karlsen so she could have a relationship with her sister’s children.

“My sister and I committed that our kids were going to know each other,” Bousson said. “They were going to be best friends. Whatever I had to do to make sure our kids were growing up together. We made that commitment.”

Karl Karlsen had taken out an insurance policy on Christina Karlsen just 19 days before her death and collected more than $200,000 in life insurance money, according to authorities. He moved back to his home state of New York with his three kids just four days after the fire, which authorities ruled an accident.

Carl Kent, an investigator for the California Department of Forestry, investigated the fire.

"I thought the circumstances of the fire were suspicious," Kent said. "There was concern that something wasn’t right."

The insurance company also conducted an investigation, hiring Ken Buske to look into the Murphys' house fire. He determined there was evidence that the fire was set deliberately. Despite the fire investigators’ findings, the insurance company paid out the claim.

“The insurance company did a very good investigation but... law enforcement didn't seem to be doing anything,” Reynolds said.

Kent said he "never saw" Buske's report and "didn't know" who Buske was. He also said he wanted to travel to New York state to interview Karlsen but was told that there were not enough funds for such a trip.

"The DA's office said it was a good circumstantial case, but there wasn't enough to prosecute at that time," Kent said.

DeRoche was 6 years old and Reynolds was 4 years old when their mother died. They remember her as a kind, fun and caring person.

Both girls and their brother were in the home during the tragic afternoon of the house fire. They still remember details from that day.

The sisters said they both had been put down for a nap and DeRoche said she remembers waking up to her mother screaming, “Karl, get the kids.”

Reynolds said she remembers seeing the hallway engulfed in flames.

Karl Karlsen was able to pull his three children out of the house but Christina Karlsen was killed in the fire. Authorities determined she died from smoke inhalation while trapped in the bathroom as the fire raged outside of the bathroom door.

Karl Karlsen told investigators that the bathroom window, which was boarded up at the time of the fire, had been broken by Christina just days before. Karl boarded up the opening from the inside. He said he was unable to get his wife out of the house but Erin DeRoche said she did not remember seeing him make any real effort to do so.

“My father had said ‘mommy's gone to heaven’ ... even before the ambulance got there,” DeRoche said.

DeRoche and Reynolds said they watched the house burn from their father’s truck.

Bousson said she went to the house the day after the fire “and could not for the life of me understand why somebody didn’t try to get [Christina] out. It wasn’t an accident.”

“I told [Karl] that I wanted to see my sister … and he said, "You can't, she's a crispy critter," Bousson said.

“That was his term, ‘a crispy critter’ because I think he truly believed that my sister had burned up in the house and that there would be no evidence and he was wrong.”

DeRoche said she and her brother Levi Karlsen always believed their father killed their mother. They even confronted him about it when they were teenagers.

“Levi and I told our father that we knew that he had murdered our mother,”“ DeRoche said. “Levi and I would talk about [the day of the fire] a lot about what he remembered, about what I remembered and about how things just didn't add up,” DeRoche said.

By 2012, Karl Karlsen’s second wife Cindy Best said she and Karl’s marriage of nearly 20 years was falling apart.

Best said that about two years after Levi Karlsen’s death she began to have serious suspicions that Karl was involved in her stepson’s and Christina Karlsen's deaths. She said she became worried that she could be Karlsen’s next victim. Her concerns grew so strong that Best hired a private investigator to look into her husband and what he found alarmed her even more.

“I would be worth $1.2 million to Karl if I was dead,” Best told “20/20.”

Best said she confided these findings and her concerns to her cousin, who picked up the phone and called police.

“I had called my cousin...and told her my fears: ‘I think Karl might have killed Levi. I'm not sure, but maybe he killed Christina. I'm scared, but I can't go to law enforcement until we get enough evidence,’” Best said. “She took that out of my hands by calling Seneca County Sheriff's Office.”

After talking with authorities, Best agreed to wear a recording device for police while asking Karlsen questions about Levi's and Christina's deaths.

During one of these recorded conversations, Karl Karlsen told Best he saw an “opportunity” and "took advantage of the situation” after the truck fell on Levi. He was arrested in 2012 and charged with second-degree murder of his son and insurance fraud.

DeRoche said she visited her father in jail after his arrest in Levi’s murder. She says she confronted him about killing her brother and mother, but Karl Karlsen denied his involvement in both deaths.

“I looked at him and I was like, ‘I know that you [killed Levi] and I know that you killed my mother’ … and he looked at me and he smiled like a Cheshire cat and he said, ‘It's been 22 years, they haven't caught me yet and they’re not going to,’” DeRoche said.

Karl Karlsen pleaded guilty in November 2013 to second-degree murder for his son’s death and stated in court that the truck fell onto Levi as a result of his actions and that, even though he knew Levi was likely still alive under the truck, he made no attempt to lift it off his son or call for help. As part of his plea deal, the insurance fraud charges were dropped.

“It was devastating for me to have my dad admit [to Levi’s murder],” Reynolds said. “It wasn't just the loss of my brother, with that one statement, it was the loss of my father, too.”

The investigation into Karl Karlsen for Levi’s death in New York prompted authorities in California to reopen the investigation into the 1991 house fire that killed his first wife.

DeRoche and Reynolds credit the media coverage of their brother’s case and their aunt Colette Bousson, who never stopped seeking justice for her sister, for encouraging authorities to take another look at their mother’s case.

Bousson created a Facebook group and wrote letters to law enforcement and politicians calling for the investigation into her sister’s death.

“My aunt [Colette]. God love her,” DeRoche said. “My aunt was on [investigators] like white on rice to make sure that this happened. She … and my grandmother, they were always there and in their ear. They made it known the family … needed this handled.”

“Once he was charged in New York, it gave me a glimmer of hope that maybe just because of that we could finally get some traction in Calaveras County. So, I definitely ramped up my activities to try and get their attention that we're still out here. We're still waiting for justice,” Bousson said. “We want him to be held accountable for what he did and for everything that he stole from us because he stole a lot.”

In 2014, the Calaveras County District Attorney’s office charged Karl Karlsen with first-degree murder of his first wife Christina Karlsen and extradited him back to California.

Authorities in New York had already pieced together Karl Karlsen's long history of collecting life insurance payouts not only for the deaths of family members, but also seemingly tragic accidents.

When Karl Karlsen went on trial in March of this year on murder charges for a second time, Calaveras County District Attorney Barbara Yook argued in court that Karl Karlsen collected $10,000 from an insurance payout from a car fire in 1986 and also nearly $115,000 from a barn fire in 2002.

Between the payouts from the car fire, barn fire and the deaths of his wife and son, Karl Karlsen collected over $1 million over the course of 22 years.

Investigators also learned that Karl Karlsen took out life insurance policies on his son’s two daughters.

In 2015, Best cashed out the policies. She has said it was to ensure they wouldn't hang over the heads of Levi Karlsen's daughters.

“I was very concerned ... that an accident was going to happen with one of them,” Best said. “I was scared half to death.”

Karlsen was found guilty by a jury for Christina’s murder on Feb 3, 2020, the day of Levi Karlsen’s birthday. He would have been 35.

“It was surreal … he would have been so happy.” Reynolds said. “It was the best verdict we could have hoped for.”

“I've never been more humbled by or grateful to 12 strangers in my entire life,” DeRoche said. “It was everything I wanted.”

Karl Karlsen has appealed his conviction.

Through the many tragedies, the memories of Christina and Levi Karlsen live on through photos and reminiscences shared in a special bond between DeRoche and Reynolds and their aunt.

Christina and Levi Karlsen are buried side-by-side in a Murphys, California, cemetery. DeRoche, Reynolds and Bousson visited the cemetery together the day of Karl Karlsen’s guilty verdict.

“I tried to fill the gap. I tried to make sure that they knew their mother through me. I'll sit [at the cemetery] and I'll be like, 'Did I do enough? Did they know you? Was I able to let them see what a great person you are?' And now, with Levi there, they're there together,” Bousson said.

And while both sisters grieve the loss of their mother and brother, emotions are still complicated.

“After dad was arrested, I started to then have to go through major milestones in my life without a father, without a mother and without my brother. It's been a real struggle ... to get to these big milestones into time. And again be reminded of the loss,” Reynolds said.

She added, “Obviously what he did was wrong, but I still struggle with the fact that prior to the arrests, he was the most important person in my life."

Reynolds added that she feels like her life has been chaotic since her father’s arrest in Levi’s murder and that she “hasn’t had time to process” it all, including how to have a relationship with her father now.

“I struggle personally because ... he committed [these crimes] and also [I have] the lost connection of having a dad ... and part of me still wants a relationship. I don't know what will happen long term. We're not talking right now, but you know, I don't know long term what my plan is,” Reynolds said.

Her sister feels differently.

“He's able to manipulate people very easy. That's who he's always been. So for me, I saw the monster more than the man,” DeRoche said.