Insurance is an essential aspect of life these days. We pay for insurance on everything, from our health to our cars. It provides a measure of security that prevents us from having to pay more than we can afford when something goes wrong
Unfortunately, there are occasions where people take advantage of the insurance systems in place in order to get paid under circumstances where it is not warranted. If this is done intentionally, it is generally considered a fraudulent act; and can be subject to criminal prosecution.
It is possible to commit insurance fraud in connection with just about any type of insurance that companies offer. However, there are a few areas where insurance fraud is more common. These are auto insurance, unemployment insurance, health insurance and worker's compensation benefits. That said, insurance fraud can be prosecuted whenever there is a false or fraudulent claim or statement made to obtain insurance benefits.
What is Insurance Fraud:
Insurance fraud can include workers’ compensation fraud, auto insurance fraud, unemployment insurance fraud, welfare fraud or fraud in connection with any other type of insurance or payment of benefits. There are many statutes which apply to the specific type of fraud that is charged. Workers’ compensation and auto insurance fraud can be charged under California Penal Code Section 550(a) (1).
Penal Code Section 550(a)(1) includes many permutations of insurance fraud, including knowingly presenting a false claim for the payment of a loss of injury, participating in a vehicular collision for the purpose of presenting a false claim, preparing a false writing to support a false or fraudulent claim, and knowingly making a false claim for the payment of a health care benefit.
Penal Code Section 550(b)(1) makes it illegal to present a false oral or written statement to an insurance company in an effort to obtain insurance benefits.
Workers’ compensation fraud is also contained in Insurance Code Section 1871.4. Unemployment insurance fraud can be charged under Section 2101 of Unemployment Insurance Code.
Penal Code Section 548 makes it illegal to intentionally damage or destroy a motor vehicle for purposes of submitting a claim to auto insurance companies.
A related crime to all of the above charges is a violation of Penal Code Section 487, grand theft. Therefore, the same crime could be charged under more than one of these sections.
Specific Examples of Insurance Fraud:
Workers’ Compensation Fraud By Employee:
- Failing to report earnings to your worker’s compensation insurer while you are receiving benefits;
- Collecting benefits when you have been returned to health and are able to work;
- Making a false statement on your worker’s compensation report indicating that you cannot certain tasks that you are in fact able to do, such as lifting, sitting for a prolonged period or reaching above your head;
- Engaging in strenuous leisure activities when you have reported that you are unable to work.
Workers’ Compensation Fraud By Employer:
- Failure to properly identify workers as employees;
- Failure to properly report the work classification of employees;
- Failure to report payroll accurately.
Automobile Insurance Fraud:
- Reporting that your car has been stolen when in fact you had given it to someone;
- Reporting to an insurance company that you were injured in an accident when in fact it was not true; and
- Reporting your vehicle as being stolen and then selling it to a chop shop;
- Intentionally crashing your car, or otherwise damaging or destroying it, and then filing a claim with your auto insurance compan
Unemployment Insurance Fraud:
- Collecting benefits and failing to report that you are working and earning income;
- Receiving both disability benefits and unemployment benefits at the same time without reporting the other; and
- Reporting that you were laid off from a job when in fact you were fired for good cause.
How Does a Prosecutor Prove Insurance Fraud:
In order for a prosecutor to prove that a defendant committed insurance fraud, they must prove the following:
(1) The defendant engaged in one or more of the following acts:
- The defendant presented or caused a false or fraudulent claim for payment for a loss or injury to be presented; or
- The defendant claimed payment for a loss as a result of theft, damage to ot destruction of a motor vehicle in a false or fraudulent manner; or
- The defendant prepared a document or signed a document, intending that it would be used to support a fraudulent or false claim; or
- The defendant made a claim for payment of healthcare benefit that was fraudulent or false;
(2) The defendant knew the claim to be fraudulent or false; and
(3) When the act was committed by the defendant, they intended to defraud.
As with most crimes, the intent of the defendant is an essential element that must be proven by the prosecutor, though the level or type of intent that must be proven does vary depending on the crime being prosecuted. In the case of insurance fraud, the prosecution must prove that the defendant had an intent to defraud. In simplest terms, this means that the defendant intended to deceive another person. In other words, they intended to make someone believe something that was not true.
Penalties For Violating Penal Code Section:
The crime of insurance fraud is what is commonly known as a "wobbler" meaning that it can be charged as either a felony or a misdemeanor. Which of these ends up being charged depends on the facts and circumstances surrounding the crime as well as the discretion of the prosecutor. If the crime is charged as a misdemeanor, the penalties will be significantly less severe than if it is charged as a felony. Typically, however, if an instance of insurance fraud involves a claim of $950.00 or less, the crime will be prosecuted as a misdemeanor. If the amount of the claim is greater, it will likely be charged as a felony.
There are a number of statutes prohibiting insurance fraud in its various forms, and as a result, and depending on the facts and circumstances of the alleged crime; a single instance of insurance fraud can result in multiple crimes being committed with different (cumulative) penalties for each. In most cases, however, an instance of insurance fraud will be controlled by Penal Code Section 550, which has provisions for both felony and misdemeanor offenses.
Penalties for Misdemeanor Insurance Fraud under Penal Code Section 550:
- Imprisonment in a county jail for up to six months; and/or
- A fine of up to $1,000.00.; and
- Three years of summary probation; and
- Payment of restitution.
Penalties for Felony Insurance Fraud under Penal Code Section 550:
- Imprisonment for between two to five years; and/or
- A fine of up to the greater of $50,000.00, or double the amount of the fraudulent claim; and
- Five years formal probation; and
- Payment of restitution.
Common Defenses to Insurance Fraud:
A claim of insurance fraud can be difficult to defend against. However, there are a few ways in which a skilled attorney can defend against the charge.
One of the ways an attorney can defend against an insurance fraud claim is to demonstrate that the defendant did not intend to defraud an insurance company, but rather made false statements as the result of negligence or ignorance. Since the intent to defraud is central to the charge; if the prosecution cannot prove that the defendant intended to make a false statement, the defendant cannot be convicted. Similar to this, if the defense can show that the defendant simply made a mistake of fact (meaning, they believed that a claim they made was legitimate when it was not,) they cannot be convicted.
Another way to defend against an insurance fraud claim is to demonstrate that there is insufficient evidence to convict. This is not exclusive to insurance fraud claims, but rather is a type of defense that can be presented or virtually any type of crime. Other such defenses include, (1) prosecutorial misconduct; (2) statute of limitations; (3) double jeopardy and (4) lack of capacity resulting from a mental defect or intoxication.
Actual Case No. 1:
Susan was injured at her job as a warehouse worker. Susan went out on disability and began receiving workers’ compensation benefits. After all conservative treatment failed, Susan had surgery to repair her damaged shoulder. Susan received medical benefits that paid for her surgery as well as bi-weekly disability pay. After six months of recuperation Susan began engaging in physical leisure activities in a limited manner. Susan asked her surgeon in a follow-up visit if she could pursue her passion, which was fishing. Susan’s orthopedic doctor gave her the okay as long as she agreed to stop if her shoulder started to hurt her. Susan’s employer suspected that she her injury was healed and that Susan should have returned to work. As a result, Susan’s employer had her investigated by a private investigator who took secret video of Susan fishing. Also, the investigator searched Susan’s Facebook and found posts regarding fishing trips and pictures of Susan fishing. Susan went to a medical examination for workers’ compensation and was asked about her leisure activities. Susan reported that she did fish but on a very limited basis. The insurance company forwarded the case to the district attorney and Susan was charged with worker’s compensation fraud.
Working with my expert workers’ compensation investigator I was able to obtain interview reports from many of Susan’s friends and family that attested to the fact that Susan was very limited in her activities and when she fished, she could only do so for a few minutes at a time. My witnesses also testified that Susan needed assistance in performing many of the everyday activities of living such as brushing her hair and regular household chores. Also, I obtained a statement from my client’s significant other who stated that he had attended the doctor’s visit with Susan and that Susan’s doctor had confirmed that Susan could engage in the fishing on a limited basis. After presenting the evidence to the District Attorney I was able to obtain a dismissal of the charges. Susan is now back at her job and doing well.
Actual Case No. 2:
Tom was charged with automobile insurance fraud in falsely reporting his Mustang to be stolen when in fact he had disposed of the vehicle. After having Tom make substantial restitution payments to the automobile insurer I was able to persuade the district attorney to reduce all the five charges to one misdemeanor. As a result of the reduction in charges, Tom was able to keep his job.
Actual Case No. 3:
Tomika was a twenty-four year old single mother who had never been in trouble with the law before. Tomika was going to school and received government assisted child-care funds for her four year old boy. Tomika left school but continued to have her son attend the day-care which was paid for by the government funds. Tomika was charged with welfare fraud for falsely reporting that she was in school. The district attorney was first seeking $6,000 in restitution from Tomika. Since the filing of the charges, Tomika had obtained a good job and was making a living wage. I was able to persuade the district attorney to reduce the amount of the restitution to $1,500. Tomika borrowed the money and made one full payment of the debt. In return, the district attorney dismissed all charges against Tomika.
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