The Federal Crime of Insurance Fraud: Penalties and Possible Defenses

Do you have questions about penalties and possible defenses for the federal crime of insurance fraud? Contact Scrofano Law PC in Virginia, Northern Virginia, DC and Maryland for more resources and answers.

Is Insurance Fraud a Federal Crime?

The federal crime of insurance fraud involves the attempt by one person to defraud any person or entity by obtaining benefits. Learn more about your rights here.

Insurance fraud occurs when individuals deceive or trick an insurance company and try to collect money they are not entitled to. Insurance fraud is a crime in all U.S. states.

In most states, insurance fraud can be considered either a misdemeanor or a felony, depending on the circumstances of the crime and the extent of the fraud committed. Although many state laws address insurance fraud crimes, insurance fraud can also be prosecuted at the federal level.

Federal laws don’t address insurance fraud as a distinct offense, but the mail fraud and wire fraud statutes cover these offenses. That gives the federal government jurisdiction over insurance fraud that affects interstate commerce. Federal prosecutors consider insurance fraud a serious offense, but often, they don’t pursue these cases unless the evidence is airtight.

The penalties for federal crimes often include lengthy prison sentences and harsh fines. interestingly, some people don’t even realize they are under investigation for insurance fraud. Hence, it is crucial to contact a federal criminal lawyer as soon as possible if you are being investigated for insurance fraud. The right federal attorney can help you navigate the complex legal system and ensure your rights are protected.

How Is Fraud Detected?

 

Fraud bureaus have been established in some states to detect and fight fraud. Additionally, insurance companies typically have special investigation units (SIUs) or fraud investigators. Their job is to detect and investigate fraudulent activities and pursue action against the perpetrators.

These special units of insurance companies also work closely with the National Insurance Crime Bureau (NICB), Federal Bureau of Investigation (FBI), and Criminal Investigation/ Fraud Divisions within the regulatory agencies.

 

Does the FBI Investigate Insurance Fraud?

Yes, the FBI is authorized to investigate fraud schemes, including insurance fraud and health care fraud schemes, in partnership with other federal, state, and local agencies.

Who Can Be Accused of Insurance Fraud?

 

Insurance fraud occurs in many different forms. It can involve anything from a false or misleading statement on an insurance claim to complex insurance fraud schemes that involve many individuals.

Insurance fraud can include workers’ compensation fraud, health care fraud, property insurance fraud, and other fraud-related schemes.

According to the FBI, the insurance industry comprises over 7,000 companies that collect over $1 trillion in insurance premiums yearly. That fact significantly contributes to insurance fraud-related offenses.

An individual could face insurance fraud charges if they try to obtain money or some other valuable assets from an insurance company, an insured individual, or a business through misrepresentation or false pretenses.

One can be accused of insurance fraud if their insurance company believes they have provided them with false statements. Misrepresentation of insurance claims can be considered one of the most common forms of insurance fraud charges.

Many insurance fraud crimes occur within insurance companies, perpetrated by insurance agents rather than insured individuals. An insurance agent who embezzles or steals money from the insurance company can be guilty of a federal crime.

Insurance companies who make false statements or financial reports presented to a regulatory agent or office to influence government actions can also be prosecuted for federal insurance fraud.

Possible Defenses That Can Help Avoid an Insurance Fraud Sentence

 

To improve their chances of getting a conviction, prosecutors often add more charges to a case. If your attorney gathers evidence that shows the charges against you are unfounded, they can file a motion to dismiss.

In some cases, law enforcement agencies unlawfully gather evidence and violate a defendant’s constitutional rights. Having that evidence suppressed in a trial could lead to your case being dismissed because key evidence that could lead to the conviction would not be admissible.

Your attorney can also show that your actions were not a deliberate attempt to commit fraud against an insurance company. Lack of knowledge, fraudulent intent, or the simple lack of fraudulent behavior can also result in a favorable outcome.

Although many believe hiring a fraud attorney is a sign of guilt, it is more accurately interpreted as a sign of cautiousness and wanting to ensure your rights are protected if you are charged.

Penalties for Insurance Fraud

 

Generally, some states refer to insurance fraud schemes as either soft (opportunistic fraud) or hard fraud.

Soft fraud occurs when an individual exaggerates an existing and valid claim. For example, overstating the damages caused by a car accident in the claim. Soft fraud can be considered a misdemeanor. Potential penalties include fines, up to a year in jail, probation, and community service.

Hard fraud is not as prevalent as soft fraud since it requires a lot of planning. It represents a dedicated criminal effort to defraud an insurance company. It can involve committing crimes such as arson or destruction of property to commit insurance fraud and collect on the insurance policy. Hard fraud can be considered a felony and can result in imprisonment in state prison for several years.

Washington DC laws outline levels of insurance fraud charges, such as insurance fraud in the first degree and insurance fraud in the second degree. 

If you face federal insurance fraud charges, make sure you reach out to a DC criminal lawyer at Scrofano Law. They will fight your charges and give their best to restore your freedom.

FAQs

 

How Long Can You Go to Jail for Insurance Fraud?

You can spend anywhere from one to 15 years in federal prison for federal insurance fraud. The length of the prison time depends on which section of several related provisions of federal law 18 U.S.C. § 1033 was violated.

However, a prison sentence of one year can only be imposed if the value or amount that was misappropriated or embezzled doesn’t exceed $5,000. In any other case, the penalties include at least 5 to 10 years of imprisonment.

The maximum penalties of up to 15 years can be imposed if the fraudulent conduct or statement, such as overvaluing of land, embezzlement, misappropriation, and false entry, jeopardize the safety of an insurer and is a significant cause of the insurer being placed in liquidation or conservation by the court.

 

Insurance Fraud Statute of Limitations

Most federal offenses, including insurance fraud, have a statute of limitations of five years from the date of the offense, with a possibility of extension in some cases. Once this time has passed, the federal government can no longer file criminal charges or prosecute the defendant for this offense.

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