When Your Personal Injury Claim Becomes Fraud

If you're making a personal injury claim, be sure to include all relevant information on the accident, and avoid exaggerating your injuries, to avoid the legal consequences of fraud.

Filing a fraudulent personal injury claim can have serious ramifications. Not only can your insurance company deny your claim and drop your coverage, but you could also be liable to the insurance company for any money paid to you, for costs expended in investigating the fraud, and even for punitive damages in some cases. In addition, you may face criminal charges. This article will discuss the consequences of filing a fraudulent personal injury claim.

What is a Fraud in a Personal Injury Claim?

Personal injury insurance fraud is typically defined as any act that is intended to cause an insurance company to compensate you for an injury that is nonexistent, exaggerated, or unrelated to any accident covered by the policy.

Common examples include faking or exaggerating injuries from an accident, or planning or staging a car theft, arson, or collision.

It is important to note that you can be guilty of fraudulently filing a  personal injury claim  even if you do not lie or make false representations; if you simply fail to disclose information which you have a legal duty to disclose, or which would be reasonable for you to disclose under the circumstances, you may be guilty of filing a fraudulent personal injury claim.

Types of Fraudulent Personal Injury Claims

There are two basic types of fraudulent personal injury claims: (1) soft insurance fraud and (2) hard insurance fraud.

  • Soft Insurance Fraud.  Soft insurance fraud (also called "opportunistic" insurance fraud) is the most common type of insurance fraud. Soft insurance fraud occurs when the claimant makes an inflated claim, such as exaggerating the severity of a neck injury. Obviously you want to get every dollar your injury requires, but you cross the line when you claim injuries or pain beyond your actual damages.
  • Hard Insurance Fraud.  Hard insurance fraud (also called "premeditated" insurance fraud) occurs when the claimant devises a way to make an insurance claim. This type of insurance fraud usually involves some sort of deliberate action, such as intentionally causing an accident or staging arson or theft of the vehicle.

Civil and Criminal Consequences

If you file a fraudulent personal injury claim, you can be liable to the insurance company, and you might even face criminal charges.

Liability to the Insurance Company

Filing a fraudulent personal injury claim can result in the insurance company taking the following actions:

  • Denial of award from a claim.  The least severe consequence for filing a fraudulent personal injury claim is for the claim to be denied. In such a situation, the insurance company will not compensate you for any losses associated with the claim.
  • Cancellation of insurance coverage.  The insurance company also has the option of dropping the claimant as a customer, regardless of whether the claimant filed an insurance claim against the company. Fraudulent insurance claims are reported to the state department of insurance. Insurance companies check this on a regular basis. Most coverage contracts permit an insurance company to cancel a policy without notice if the policy holder is in any way involved in a fraudulent claim. Once appearing on a list as having filed a fraudulent insurance claim, it is unlikely the claimant will ever be able to obtain insurance in the future.
  • Revocation of settlement or lawsuit award.  If you were awarded any money by the insurance company, the insurance company will request that the money be returned. If you cannot refund the full amount, the insurance company may file a lawsuit against you. In this lawsuit, the insurance company can recover the full amount of losses it suffered as a result of your fraudulent claim, including the amount it paid you, but also the costs incurred for investigating your fraudulent claim. If your actions were particularly egregious, the insurance company can also recover  punitive damages, or damages meant to punish bad conduct. Punitive damages can double or even quadruple the size of the claim the insurance company has against you! If you are unable to pay the damages, the insurance company could request a lien in court. If granted, the insurance company could prevent you from selling or profiting from certain assets without their first being notified and being entitled to the proceeds. The company can also garnish your wages.

Criminal Consequences

No matter what state you live in, filing a fraudulent personal injury claim is a crime punishable as either a misdemeanor or felony. However, the punishment will vary from state to state and according to the severity of the fraud.

  • Misdemeanor personal injury claims.  Most fraudulent personal injury claims are misdemeanors. This usually applies if you exaggerated the claim or made a misrepresentation on the application. For example, if you state that your car is stored in a garage, when in fact you always park it on the street. A misdemeanor can result in a fine (typically less than $15,000), probation, and even jail time (less than one year).
  • Felony personal injury claims.  Fraudulent personal injury claims that involve the destruction of property can result in a felony conviction. For example, destroying a car by way of arson or staging a collision to claim the insurance payment. A felony can result in a fine and jail time.

To learn more about the criminal aspects of insurance fraud, see Insurance Fraud Laws and Penalties (On CriminalDefenseLawyer.com, opens in a new window).

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