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Criminal Defense

Defending Against Insurance Fraud Charges

7 min read
Philip Ahn, Attorney

by Philip Ahn, Attorney

Insurance fraud occurs when an individual knowingly and willingly prepares a false or misleading statement when applying for a policy or when attempting to receive insurance benefits. The false or misleading statement must have made an impact on the final outcome of the claim.

If you have insurance fraud charges against you, working with a defense attorney can help you effectively answer those charges, and possibly reduce those charges or get them dismissed altogether. To put up a successful defense, it is important to know how insurance fraud is defined, what documents that investigators will look at, and what burdens a prosecutor needs to successfully bring a claim against you.

Being Charged With Insurance Fraud

If you are charged with insurance fraud, three main elements are needed for the prosecution to pursue a case against you:

  1. You must have intentionally made a materially false misrepresentation,
  2. The fraudulent misrepresentation must have been made in connection with the insurance benefits, and
  3. The misrepresentations must have impacted the outcome of the claim.

It is important to understand that a false and misleading statement must be a material one. A material fact would have a big impact on the payout of the claim. Common acts that are generally deemed to be material include:

  • False Claims: A false claim occurs when you report something that never happened. For example, if you filed a health insurance claim asserting that you broke several limbs and visited the doctor six times when you only broke your foot and visited one doctor, then you would have committed insurance fraud. Blaming a DUI accident on another driver when you know it was your fault would also be a false claim.
  • Misreported Damages: A claimant could file for damages that stemmed from a previous accident. For instance, if you have a car that had prior body damage, and then get into an accident and claim that the body damage was from the accident, you would be filing for more benefits than what you should receive. 

Hard Fraud vs. Soft Fraud

Insurance fraud charges can also be categorized under one of two levels, namely:

  • Hard Fraud: This type of fraud occurs when you fake an accident, injury, or loss to receive benefits from an insurance company. The claim is entirely fabricated and never happened.
  • Soft Fraud: This type of fraud occurs when you stretch the truth and or add lies to make a claim seem more favorable in order to receive greater benefits. While some parts of a soft fraud claim are true, they mask untruthful parts of a claim..

Regardless of how big the lies are, hard and soft fraud can both be punishable under the law.

Potential Consequences of Insurance Fraud Charges

Since it involves intentional deceit that leads to financial losses, insurance fraud is deemed to be a criminal offense. While certain cases will be classified as misdemeanors, some can be categorized as more serious felonies. The potential punishment for insurance fraud varies depending on which one the alleged crime is charged as.

While the consequences will vary between jurisdictions and largely depend on the individual facts of the case and the type of fraud, punishments can range from probation and community service to jail time and fines. In most instances, those convicted of insurance fraud will need to pay restitution (that is, give back their illegal gains).

In California, for example, if you engage in felony insurance fraud, you may be imprisoned for up to 5 years and be required to pay a fine of $50,000 or double the amount of fraud. For misdemeanor healthcare fraud under $950, you may be put in jail for up to 6 months and fined $1,000; for fraud greater than $950, you may be put in jail for up to a year and fined $10,000. These offenses may come with greater penalties if you have previous convictions of insurance fraud.

In Texas, penalties are assessed based on the value of the claim or benefits obtained from the fraudulent acts. For claims valued at less than $2,500, the crime will be determined to be a misdemeanor, where you can be imprisoned for 1 year in jail and fined up to $4,000. For claims valued between $2,500 and $30,000, the crime will be determined to be a third degree felony, where you can be punished anywhere from 2 to 10 years in prison and fined up to $10,000. Pleading guilty to claims of $30,000 to $150,000, will add a second degree felony to your record, opening you to punishment anywhere from 2 to 20 years in prison, with fines up to $10,000. For all other claims above $150,000, you will be punished as a first degree felon, sentenced anywhere from 5 to 99 years in prison, and fined up to $10,000.

Every state will have its own laws and consequences, so be sure you are familiar with them if charged with insurance fraud.

Examples of Insurance Fraud

Given the wide variety of insurance products, there are many different ways that fraud can occur. Commonly-prosecuted insurance fraud cases involve:

  • Auto Insurance: Claiming that you do not know how a big scratch ended up on your car, when in fact, you caused the damage yourself.  
  • Health Insurance: Medical providers or suppliers may bill for nonexistent patients.
  • Home or Property Insurance: Claiming that something that was stolen from you was of a higher value than it actually was.
  • Life Insurance: Faking someone’s death to receive a lump sum payout. How do you even expect to cash the check here? This only works in the movies.
  • Unemployment: Since these benefits are actually structured as insurance, claiming unemployment payments when you were actually working can be prosecuted as insurance fraud.
  • Workers’ Compensation: Lying that an injury from outside the workplace occurred in the workplace.
  • Bogus Claims: Claiming prior damage was the result of a new accident; claiming a minor injury created a partial or total disability; receiving disability payments while working elsewhere conducting similar work duties.

Legal Considerations for a Successful Defense When Charged with Insurance Fraud

Any individual can be prosecuted when they make false claims of loss and injury to receive unwarranted benefits. The insurance company will generally be the one detecting fraud, potentially through internal audits, but other people may report you as well. If you are discovered to be engaging in fraud, the insurance company can handle the problem internally or report it to a law enforcement agency.

If the insurance company handles the issue internally, you may be denied the claim and kicked out of the policy. If a law enforcement agency decides to pursue the case, you may be found guilty of violating the law and be responsible for fines and prison time.

When facing an insurance fraud case, a well-structured defense can reduce charges, lessen penalties, or even have the case against you dismissed. If you’re assessing an insurance fraud defense, consider basic legal guidelines:

Be Aware of the Specific Accusations

Prosecutors will need to prove the truth of their case in court and show that your actions violated the law in order to get a conviction. Understanding exactly what you are accused of is necessary for preparing your defense and showing why the prosecution’s specific claims are not true. 

Gather and Prepare Evidence

Collecting evidence and being able to rebut a claim that you made a purposeful, material misrepresentation of fact is crucial to tackling insurance fraud issues. Forms of evidence may include:

  • Medical Records: A doctor’s notes can serve as strong proof of an insurance claim. When both the existing records and your claim line up, it can help to show innocence.
  • Expert Opinions: Having a specialist corroborate what you filed in the claim can be evidence to prove that you did not commit fraud.
  • Witness Statements: If other witnesses can also attest that what you wrote in the claim was truthful and all the benefits you were looking for were accurate, this can absolve you of fraud. 

Understand the Burden of Proof

In criminal cases, the prosecution must prove that you intentionally made a misrepresentation of fact to receive benefits you would not have been entitled to. They must also show this beyond a reasonable doubt. Therefore, demonstrating that you did not knowingly provide false or misleading information may be the most important part of fighting an insurance fraud case. You can work with a lawyer to show your  good faith intentions. Proving that you did not try to commit fraud can be enough to stop a court case before it begins, or to win at trial.

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