Insurance Fraud Laws

Consumers sometimes think that they can pick up some extra money by deceiving an insurer, imagining that nobody will ever find out. However, they may soon face criminal charges if they succumb to this temptation. Insurance fraud may involve any type of policy, ranging from auto insurance or homeowners’ insurance to life insurance or health insurance. Anyone accused of this crime should not explain their side of the story to the police directly. They should discuss what happened with an attorney who knows how to handle these cases. The attorney can help navigate encounters with law enforcement as the investigation and any prosecution unfolds.

What Is Insurance Fraud?

Insurance fraud usually involves a false statement on an insurance claim or application in an effort to get something of value.

Elements of Insurance Fraud

To get a conviction of insurance fraud, a prosecutor will need to show that the defendant made a false statement to the insurer. This might involve a claim for benefits or an application for a policy. The statement usually must have been material, which means that it would have affected the outcome of the claim or application. (Concealing or omitting a material fact is also prohibited.) Moreover, the defendant must have known that the statement was false.

In addition, the prosecutor must prove that the defendant had an intent to defraud or a similar mental state. This means that they sought to gain something of value from their deception.

Examples of Insurance Fraud

Phil gets into a minor car accident for which he was not at fault. He overstates the amount of the damage when filing a claim with the insurer.

Penelope is named as the beneficiary of her mother’s life insurance policy. She fakes a death certificate for her mother and submits it to the insurer with a request for payment.

Offenses Related to Insurance Fraud

Some other offenses that might be charged in situations similar to those in which a prosecutor might bring an insurance fraud charge include:

• Forgery: the defendant made a fake document with legal significance
• Arson: sometimes charged when a property owner sets fire to their own property to collect insurance covering it
• Perjury: may be charged when someone knowingly lies in a situation when they have formally pledged to tell the truth
• Bribery: may involve paying or offering to pay someone else to ignore or cover up an incident of apparent insurance fraud

A prosecutor sometimes may bring multiple charges if the facts support them. A defendant who cannot avoid a conviction entirely then might try to get the more serious charges dropped in exchange for pleading guilty to the lesser charges.

Defenses to Insurance Fraud

Some of the most common defenses to insurance fraud involve the mental state elements of the crime. A defendant might argue that they did not know that a statement was false, or that they did not intend to defraud the insurer. Perhaps they simply provided information that someone else told them, trusting that it was accurate. Or perhaps they misread or misunderstood a question on the form, or failed to notice a typo before submitting it.

Less often, a defendant might argue mistaken identity. Perhaps someone else filled out the document at issue and signed the defendant’s name on it. Another defense that may apply in limited circumstances is duress. This means that the defendant committed insurance fraud due to an imminent threat of serious harm by someone else. Or a defendant might be able to argue that the statement was actually true. Perhaps the insurer misinterpreted it, or perhaps flaws in the investigation wrongly suggested that the statement was false.

Penalties for Insurance Fraud

Potential prison terms for insurance fraud convictions may depend on the value of what the defendant fraudulently obtained. For example, Florida makes a fraudulent insurance claim or application a third-degree felony if the amount fraudulently obtained was less than $20,000. If it was at least $20,000 but less than $100,000, this is a second-degree felony. A third-degree felony carries up to five years of imprisonment, while a second-degree felony carries up to 15 years. Insurance fraud involving $100,000 or more is a first-degree felony, which may result in up to 30 years.

In Texas, insurance fraud involving an application for a policy is a state jail felony, which carries 180 days to two years. Insurance fraud involving a claim for payment under a policy may carry any of the following penalties, based on the value of the claim:

• Less than $100: fine only (no jail time)
• At least $100 but less than $750: up to 180 days
• At least $750 but less than $2,500: up to 1 year
• At least $2,500 but less than $30,000: 180 days-2 years
• At least $30,000 but less than $150,000: 2-10 years
• At least $150,000 but less than $300,000: 2-20 years
• At least $300,000: 5-99 years or life

Other states, such as Pennsylvania and Michigan, take a simpler approach. Fraud involving an insurance application in Pennsylvania carries up to five years in prison, while fraud involving an insurance claim carries up to seven years. Michigan treats both fraud on an application and fraud on a claim as a “fraudulent insurance act.” This offense is a felony that carries up to four years of imprisonment.

Last reviewed September 2024