Legal Penalties for Insurance Claim Fraud


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Insurance fraud is an all-too-common occurrence, as people try to take advantage of a system designed to protect them. Insurance fraud occurs when someone engages in lying to an insurance company in order to get money or to get more money than he/she really deserves. Insurance fraud can take the form of staging accidents, like a swoop and squat that involves pulling in front of someone else and then slamming on the brakes to get rear ended. It can also take the form of lying about injuries or exaggerating injuries in order to get more money when a legitimate accident does happen. Commonly, people engaging in this type of insurance fraud will assert that they have whiplash or other soft tissue injuries since these kinds of injuries are difficult to prove. Insurance fraud costs legitimate consumers money, partly because they have to pay higher insurance premiums to subsidize claims paid to fraudulent claimants, but also because they might have a harder time making a legitimate claim, or they may be stuck paying an illegitimate one made against them. There are, however, criminal penalties in place designed to deter insurance claim fraud and to punish those who commit the crime. 

Understanding Insurance Claim Fraud Penalties

The penalties for insurance fraud may differ from state to state, as insurance is not generally sold across state lines, and thus, each state passes their own rules and legislation. Insurance fraud is usually an intentional crime, meaning that the prosecutor assigned to your case will have the burden of proving you meant to commit the fraud (making a mistake when filling out a form, for example, isn't going to constitute insurance fraud). When a prosecutor proves that you are guilty of the crime, potential penalties for insurance fraud include the following:

  • Jail time: The fraud may be a misdemeanor or a felony, depending on what was taken, the events surrounding the actions, and state law. Felony insurance fraud can carry a sentence of several years in prison, while misdemeanor fraud usually results in a sentence of one year or less. Those who are first-time offenders tend to have a better chance of getting a lesser charge or sentence than those with a criminal record of insurance fraud, but there is still a good chance that a perpetrator will spend at least some time in jail. 
  • Fines: The fines that are assessed as a result of a criminal action for insurance fraud can total many thousands of dollars. These fines are generally assessed by and paid to the justice system and are separate from any action on the part of the insurer to divest you of the money you fraudulently obtained. 
  • Probation: Instead of jail time or following jail time, there is a very good chance you are going to have a probationary period, during which you are monitored to make sure you do not engage in any other fraudulent or unlawful behavior. You may have to meet with a probation or parole officer, and if you are in any trouble or get arrested again, your sentencing will usually be much worse and your criminal charges will include a parole/probation violation.
  • Community service: Again, instead of or in addition to jail time, you may have to perform work in your community as punishment for what you did. The number of hours will vary based on the other aspects of your sentence.
  • Restitution: Restitution refers to a legal order to give back what you took. An insurer would not have to bring a separate civil action to get money back if you were ordered to make restitution to him/her. An insurer cannot, however, both collect restitution and sue you in civil court to get repaid the same amount of money twice. 

Furthermore, if you were involved in an organized accident ring, like those who regularly engage in swoop and swats and other forms of staged accidents, there may be additional charges brought against you on the basis of your involvement with that organization.

Getting Help

The penalties for insurance fraud are, as you can see, quite significant. The larger the amount of money defrauded, the more consequences the perpetrator can expect to face. For any insurance fraud claim, you should strongly consider getting a lawyer to assist you. Your attorney can help you understand what the potential consequences of the case are and how you can take steps to lessen these consequences.

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