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
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.
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
- 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).