Auto Insurance Fraud

THE LAW

In the State of California, under Penal Code Sections 548-551, “auto insurance fraud” refers to any unlawful activities involving automobile insurance.  Typically, auto insurance fraud occurs when a person:

  • destroys, hides, damages, or abandons their vehicle specifically with the intent to profit from the filing of an auto insurance claim;
  • knowingly submits a fraudulent car insurance claim for a loss due to damage, destruction, or theft of a vehicle for the purpose of collecting insurance proceeds;
  • deliberately submits two or more car insurance claims for the exact same loss, intending to fraudulently profit from the proceeds;
  • causes, plans, or participates in a car accident solely to for the purpose of collecting the proceeds of a car insurance claim;
  • deliberately presents or prepares any written or verbal statement as part of an insurance claim or investigation that is false;
  • lies about being a resident of the state of California on an application for car insurance.
  • hires an employee and/or directs/forces an existing employee (as the business owner) to solicit, refer, trade, or accept business, with the prior knowledge that the business owner intends to commit auto insurance fraud;
  • owns or is an employee of an automobile repair shop that offers insurance agents or adjusters a commission or profit-sharing arrangement (a “kickback”) to refer policyholders to their shop.

PENAL CODES PERTAINING TO CAR INSURANCE FRAUD IN CALIFORNIA

Penal Code section 548 PC

Under Penal Code section 548 PC, it is a crime to:

  • purposefully concealing, damaging, defacing, destroying, abandoning, or scrapping a vehicle or other insured motor vehicle that has coverage against loss or damage; and
  • doing so with the intent to collect the proceeds of the policy holder’s insurance company

Intent to defraud for purposes of Code section 548 PC is intent to deceive the insurance company for the purpose of collecting money from them.

Note that Penal Code section 548 PC does not require that you actually cause damage or loss to the insurance company.  Under Penal Code section 548 PC, you can be guilty of auto insurance fraud even if your actions do not result in any financial loss to the insurance company, so long as you intended to fraudulently collect money from the insurance company and you took the necessary actions to do so.

For example, John is going through some financial difficulties. At the same time, he has been involved in a series of feuds with his neighbor, Joe.  One day, John vandalizes his own car in an effort to collect the insurance proceeds from the insurance coverage on the car.  John then accuses Joe of the vandalism.  Before John calls his own insurance company to report the false claim, he has a change of mind about going through with the scam.  He then apologizes to Joe.   However, Joe calls the police on John and reports him for auto insurance fraud.  Even though John’s insurance company never received a claim and thus was not damaged by John’s actions, John is guilty of auto insurance fraud under Penal Code section 548 PC.  John satisfied both requirements of Penal Code section 548 PC: he intended to fraudulently collect monies from his insurance claim and he took an action (the vandalism of his own car) in furtherance of this intent.

Penal Code section 550 PC

Submitting fraudulent claims in violation of Penal Code section 550 PC

Penal Code section 550 PC prohibits several types of auto insurance fraud, including:

  • Tendering a false or fake, or fraudulent claim for theft, defacement, destruction, damage, or conversion of one’s car;
  • Submitting two or more claims for the same loss incident or vehicle to the same or multiple auto insurance companies with the intent to collect the proceeds;
  • Falsely claiming payment for a loss due to theft, destruction, damage, or conversion of one’s insured car, a car’s part, or items inside one's vehicle.

To prove you guilty of auto insurance fraud under Penal Code section 550 PC, the prosecutor must establish beyond a reasonable doubt that you:

  1. Attempted to collect money from an insurance company by claiming payment for theft, destruction, or damage of a motor vehicle;
  2. You knew that the damage, theft, or destruction of the vehicle never occurred;
  3. You intended to deceive the insurance company and knew that your claim was false.

Note that Penal Code section 550 PC also does not require that the insurance company actually suffer damage or loss.  You are guilty of this offense so long as the prosecutor can prove the above elements beyond a reasonable doubt.

For example, during a heavy windstorm, a tree falls on the back of John’s car and damages the rear of the vehicle.  John never fixes the damage or reports the collision to his insurance company.  Months later, John is rear-ended by another vehicle.  John blames the damage already caused by the tree on this driver, and represents the damage as such to his own insurance company.  John is guilty of auto insurance fraud under Penal Code section 550 PC.

Note that the prosecutor has to prove that you knew that the claim made to the insurance company was false.   In the example above, assume that John inadvertently bumped the back of his car into a tree.  Unbeknownst to John, the back of the car suffered some scratches.  Months later, John gets rear-ended by another vehicle.  John then notices the scratches to the back of his car.  Thinking that these scratches were caused by the vehicle that rear-ended him, John submits a claim for the scratches to his own insurance company.  John is not guilty of auto insurance fraud under Penal Code section 550 PC because he did not know that the claim he made to his insurance company was false.

Submitting multiple claims in violation of Penal Code section 550 PC

You violate Penal Code section 550(a)(4) PC if you:

  • knowingly submit more than two claims to the same or several insurance companies;
  • with the intent to fraudulently collect the proceeds from your insurance coverage.

Causing an accident in violation of Penal Code section 550 PC

Penal Code section 550 PC—under subsection (a)(3)—prohibits causing an accident for the purpose of collecting insurance proceeds.  To prove you guilty of this specific auto insurance fraud, the prosecutor must prove beyond a reasonable doubt that you:

  1. Caused a car accident or participated in causing a car accident;
  2. With the intent of submitting a claim for damages to collect insurance proceeds.

For purposes of Penal Code section 550 PC, you “cause” an accident if:

  1. Your actions resulted in the occurrence of the accident; or if
  2. The accident would not have occurred but for your actions.

For example, John is suffering from financial difficulties.  He figures that if he gets his vehicle involved in an accident he could collect the insurance proceeds on it.   He then approaches Joe, a neighborhood kid in need of money.  John asks Joe to follow John in Joe’s father’s pick-up truck and to then rear-end John.  Joe follows that instruction.  The back of John’s car gets severely damaged as a result of the collision.  John then submits a claim for damages to his own insurance company.  Both John and Joe are guilty of auto insurance fraud under Penal Code section 550 PC because they intentionally caused an accident for the purpose of collecting insurance proceeds.

Submitting false claims in violation of Penal Code section 550 PC

Penal Code section 550 PC, subsection (b)(1)(4), prohibits submitting false claims for the purpose of collecting insurance proceeds.  You violate this subsection if you do any of the following:

  • Present a false written or oral statement as part of an insurance claim or in response to an insurance claim, knowing that the statement is false or contains misrepresentations with respect to material facts;
  • Prepare or devise a false written or oral statement as part of an insurance claim or in response to an insurance claim, knowing that the statement is false or contains misrepresentations with respect to material facts;
  • Preparing, making, or presenting a written or oral statement as part of an insurance claim or in response to an insurance claim in which you falsely claim that you reside in California when you reside somewhere else.

For example, John lives in New York.  He realizes that car insurance rates in California are lower than those in New York.  He submits a claim to a California car insurance company.  In that claim, he falsely reports his place of residence as his sister’s home in Los Angeles.  John is guilty of submitting a false insurance claim under Penal Code section 550 PC.

Business owners’ or employees’ potential liability for auto insurance fraud under Penal Code section 550 PC

Business owners or employees of businesses involving automobiles can become implicated in auto insurance fraud if they solicit, accept, or refer to or from any person or entity any business knowing that this person or entity intends to commit auto insurance fraud, or demonstrating reckless disregard as to whether or not this person or entity intends to commit auto insurance fraud.   An auto repair shop can also commit auto fraud insurance under Penal Code section 550 PC if it offers commission or any other form of compensation to an insurance, broker, or adjustor for referring policy holders to the repair shop for matters covered by their insurance companies.

For example, Joe, the owner of an auto repair shop, asks Jill, his girlfriend who is an adjustor at a car insurance company, to refer to Joe’s body shop policy holders.  In exchange, Joe offers to pay Jill 20 percent of the proceeds that he collects from the customers referred by Jill.  Joe is guilty of auto insurance fraud for this profit sharing.

PENALTIES FOR AUTO INSURANCE FRAUD UNDER PENAL CODE SECTION 550 PC

Most forms of California auto insurance are prosecuted as felonies. Some forms of auto insurance fraud, like preparing or submitting false statements, are known in the industry as “California Wobblers,” meaning they may be charged as either misdemeanors or felonies. Possible sentences for felony automobile insurance fraud range from 16 months to 5 years, and may include a fine up to $50,000 or twice the amount of the fraud—whichever is greater.

When prosecuted as a misdemeanor, car insurance fraud carries a potential county jail sentence of up to one year and/or a fine of up to one thousand dollars $1,000.

DEFENSES TO AUTO INSURANCE FRAUD

In the state of California, automobile Insurance fraud is a much bigger problem than one might think. Thus, prosecutors work intensely on investigating fraud of this kind. Studies conducted by the car insurance industries in California suggest and estimate that around 10% of property/casualty driven auto insurance claims are fraudulent. Statistics like this have led the Los Angeles County District Attorney's office to open a separate Automobile Insurance Fraud Division, just to handle these cases. Additionally, the Insurance Industry wields significant power politically and financially; it is in the industry’s best interest to cooperate with and convince local law enforcement to identify and prosecute auto insurance fraud more seriously. In California, the Department of Insurance works in tandem with law enforcement and local prosecutors to ensure that car insurance fraud is properly handled.

If you are charged with insurance fraud in the state of California, the following legal defenses may apply to your situation:

  • You did not intend to commit auto insurance fraud

You cannot be found guilty of auto insurance fraud if you did not have the specific intent to defraud—i.e., if you did not know that the claim you submitted to the insurance company was a false claim.  A careless or inadvertent mistake can be easily construed as fraud by insurance companies, and then reported to law enforcement as such. A skilled criminal defense attorney can thoroughly examine your actions and the insurance company’s role in misinterpreting or misconstruing your conduct, and thereby obtain a not guilty verdict or a more favorable outcome on your behalf.

  • There is insufficient evidence that you committed car insurance fraud

Auto insurance cases typically involve complex scenarios and a myriad of facts.  It can be extremely difficult to identify what really transpired or how culpability should be assigned, particularly if the matter involves really complicated paper trails or conflicting statements. A skilled defense attorney will sort through these ambiguities to identify and carefully litigate bases for reasonable doubt.

HOW THE LOS ANGELES CRIMINAL DEFENSE ATTORNEYS CAN HELP

At Los Angeles Criminal Defense Attorneys, we understand that no allegation of fraud can be taken at face value.  Our lead attorney, Negin Yamini, has extensive experience litigating against accusations of fraud.  As with every case, she will painstakingly examine the circumstances of your case and engage in her own fact finding to obtain an outcome most just and favorable.

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Call 424-333-0943 24/7 if you want to retain excellent attorneys.

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