by Edwd » Sat Nov 01, 2014 03:05 am
A friend let a guy borrow her motorcycle. The guy had an accident and totaled the bike but he had only minor injuries. My friend's policy covers both passengers and additional drivers but she forgot about the additional driver coverage. So she lied, stating on a police report which she later filed and on her insurance claim that she was driving the motorcycle so that, she thought, the guy would be covered as passenger even though he was driving by himself. She did not claim she was injured. If her insurance company discovered that she lied, or if she came clean with the insurance company, would the insurance company take legal action against her? I know there was intent to defraud, but even though, based on her mistake, she lied, ultimately there was no harm to the insurance company, nor did she obtain anything that she wasn't entitled to anyway, because the driver and motorcycle would have been covered anyway. What would an insurance company likely do in this scenario? Legal action? Nothing? At worst drop her or increase her premium?
Posted: Sat Nov 01, 2014 04:29 pm Post Subject:
If her insurance company discovered that she lied, or if she came clean with the insurance company, would the insurance company take legal action against her?
This is clearly a case of filing a false claim, even though the injured person would have been covered if the claim were filed properly. As such, it constitutes insurance fraud. The insurance company can deny the claim in its entirety based on the false information provided if it discovers the deception, and it probably will -- how does a person total a motorcycle, injuring the passenger, yet escape the accident unharmed? Additionally, filing a false police report is usually a misdemeanor crime that is punishable as a separate offense.Insurance companies themselves cannot take criminal "legal action" against someone for fraud, they must turn the matter over to the state for prosecution. Every insurance company is required by law to have an "SIU" -- special investigations unit -- that works claims like these, and cooperates with other insurance companies and law enforcement and the Dept of Insurance to try to eliminate fraud just like this.
I know there was intent to defraud, but even though, based on her mistake, she lied, ultimately there was no harm to the insurance company,
If you were a licensed insurance agent, you would NEVER make such a statement, and if you, as a licensed insurance agent, failed to inform the state or the insurance company with that knowledge of intent, you could lose your license, too.Insurance fraud is not a victimless crime, and just because the insurance company paid what it MIGHT have paid had it known the correct information doesn't mean it wasn't harmed. As I stated above, the insurance company would be in its rightful place to deny the claim solely on the basis of a false report.
What would an insurance company likely do in this scenario?
Even though they have paid a claim, this doesn't mean they have stopped investigating it. If they devlelop additional information from you or other sources concerning the fraud, they are required by law to inform the state and then the state will conduct its own investigation leading up to prosecution.Insurance fraud is a felony and can result in up to five years in state prison in most states. Plus fines and restitution to the insurance company.
At worst drop her or increase her premium?
In the end, the rest of the insuring public pays the price for insurance fraud in the form of higher premiums.
And . . . guess what? Having stated "I know there was intent to defraud" and then failing to inform authorities, also make YOU an accessory after the fact to the whole fraudulent scheme. So, unless you want to roll the dice and see if you are prosecuted, too, you might just want to share your knowledge with the state Dept of Insurance sooner rather than later.
Posted: Mon Nov 03, 2014 08:01 pm Post Subject:
What's clear is that in contrast to ordinary fraud where intent is but a single element and resulting damages must also be proved, with insurance fraud the mere intent to defraud is enough whether or not the insurance company actually suffered any damages. However, the legal concept of insurance fraud contains an underlying assumption which cannot be ignored, which is that the fraudster is otherwise not entitled to the benefit he/she seeks. From the California Department of Insurance webpage on "What is Insurance Fraud?": "Fraud occurs when someone knowingly lies to obtain a benefit or advantage to which they are not otherwise entitled." http://www.insurance.ca.gov/0300-fraud/0100-fraud-division-overview/05-ins-fraud/ The operative phrase "not otherwise entitled" obviously means not otherwise entitled to under any circumstances. This is clear from the typical forms of insurance fraud such as staged accidents, exaggerated or nonexistent losses or injuries, false or inflated estimates, etc.. All of these examples show a clear and connection between false claims and undeserved payouts.
In the present example, the policyholder apparently thought she was engaging in insurance fraud and attempting to obtain a benefit which she *mistakenly* believed she was otherwise not entitled to. But the other part of the legal requirement, the assumption as to undeserved actual or potential monetary damages to the insurance company, appears to be missing. The physical injuries to the guy who was driving the motorcyle and motorcycle damage would have been covered anyway if the claim had been properly filed, regardless of whether the accident had actually occurred with him as passenger or as additional driver. Nor did the policy holder claim any false damages. I'm not saying this excuses the part of the false claim, the misrepresentation which is but one element of the legal requirement, but that the other implicit requirement doesn't seem to stand on its own. For all intents and purposes it appears that the insurance company would have paid out no different of an amount than if there had been no misrepresentation, and whether or not the insurance company would have honored an appropriately filed claim is sheer speculation at this point and an entirely different question. That is a big difference from ordinary insurance fraud.
I'd be the first to admit that this is a quirky situation which at first glance could trigger all kinds of bells and whistles. It's a form of half-baked insurance fraud, which thinking critically and objectively, appears to satisfy some but not all of the required legal elements. That's why I suggested that the insurance company could just dish out its own punishment by raising the policyholder's rates or dropping her. But I'm not sure that if the policyholder would have to fight it out in court that it would fly. In any case, it appears that the policyholder has an attorney from the insurance company, and the claim has not yet been paid out. Is there any way the policyholder could come clean with her insurance company and correct her misrepresentation to get the claim done properly?
Posted: Mon Nov 03, 2014 09:03 pm Post Subject:
See also, California Penal Code, Section 550.
(a) It is unlawful to do any of the following, or to aid, abet, solicit, or conspire with any person to do any of the following:
(1) Knowingly present or cause to be presented any false or fraudulent claim for the payment of a loss or injury, including payment of a loss or injury under a contract of insurance.
Doesn't mean the claim isn't payable. But the claim, as filed under the circumstances originally presented = a false claim.
My original response to the original post: This is clearly a case of filing a false claim, even though the injured person would have been covered if the claim were filed properly.
It's up to the state to investigate and prosecute. Will they?
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