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Can Legitimate Claims Be Denied for Insurance Fraud?

Insurance companies provide coverage for a host of different things, from your car to your house. However, for someone to benefit from their insurance coverage in the event of an accident or natural disaster, they have to prove to the insurance company that the event that damaged their insured items took place and that they were not at fault for it. This can be a difficult process, as insurance companies tend to find any reason they can to deny a claim. In some instances, insurance companies have even accused people of fraud for making claims that were missing information. An accusation of insurance fraud can be shocking, but it is avoidable if you follow the steps accurately and truthfully when making a claim.

What is Insurance Fraud?

Insurance fraud occurs when a client makes a claim intended to defraud their insurance company or the overall claim making process. If a client tries to benefit from a part of their insurance policy or an advantage their insurance company offers when they do not qualify for that benefit, they have committed insurance fraud. People tend to commit insurance fraud for financial gain.

Insurance fraud is usually separated into two different categories:

  • Soft fraud: Soft insurance fraud occurs when someone exaggerates certain reports in a claim that would be legitimate otherwise, or when someone lies on their initial application for an insurance coverage policy. This type of fraud ultimately increases insurance premiums for other people. Some examples of soft fraud are:
    • Omission: When a car insurance policyholder neglects to inform their insurance company of everyone who will be driving their car.
    • Lying about home address: When a potential policyholder uses the address of another person to sign up for insurance because they know the rates are lower in that area
    • False reporting: When people make new insurance claims but lie about the value of things such as stolen goods or damaged vehicles.
    • False ownership: Claiming one person in a shared living situation owned everything that was stolen because the other person is not insured.
    • Multiple claims: Claiming the same incident on multiple insurance policies with different companies.
  • Hard fraud: Hard fraud occurs when someone comes up with a plan to create an incident that they can claim for a financial payout from their insurance company. Hard fraud is a more serious crime that often results in jail time. Some examples of hard fraud are:
    • Planned car accidents: When someone plans or intentionally causes a car accident with another person and a witness who has been planted tells the insurance agent that it was the victim’s fault.
    • Break checking: Break checking is when a driver gets in front of another driver on the highway and intentionally slams on their breaks to get the driver behind them to rear end their car. Rear ending is almost always the fault of the second car, unless it can be proven break checking took place.
    • Arson: When someone intentionally burns down a structure, be it their home or a business they own, to collect a payout from their insurance.

Do Insurance Companies Commit Fraud as Well?

When most people think about insurance fraud, they picture policyholders trying to scam their insurance companies out of money. However, some insurance companies participate in fraud as well. Policyholders can become victims of fraud when dishonest insurance companies or agents collect payments for fake policies they have no plan or ability to fulfill.

Consumers looking for a new insurance policy should look out for the following signs they may be working with a fraudulent agent or company:

  • An insurance agent putting an irregular amount of pressure on a potential client, such as suggesting bad things will happen if they don’t buy the insurance immediately
  • Contact information that is not immediately available or that is hard to find
  • Offers that are much lower (up to 20%) than other companies offering comparable policies

Fraud is not only committed by consumers, but also by insurance companies themselves, and all consumers should be vigilant in ensuring they are receiving fair and legitimate coverage.

Can My Insurance Deny My Valid Claim Because They Think It Is Fraudulent?

Insurance company employees are tasked with determining whether the many claims they receive daily are legitimate and whether they should be granted. Given the volume of claims they must work through, there are times when legitimate claims get denied or flagged as potentially fraudulent. Some reasons an insurance claim might be denied or flagged as fraudulent include:

  • The incident being claimed is very similar to other incidents that were proven to be fraudulent. For example, hit-and-run accidents are often flagged as fraudulent because of how often fake claims of that nature are submitted.
  • An addition to the policyholder’s coverage that went into effect very close to the time of the incident being claimed. If someone adds comprehensive coverage to their insurance and gets into a suspicious accident immediately afterwards, an insurance agent may see that as a red flag.
  • A claim of a similar nature was made closely to the time of the claim that was denied. Frequent claims are a big red flag, so if someone happens to have bad luck and needs to make frequent claims, they may see their claims being denied or flagged for fraud.
  • The information in the claim is incomplete or inaccurate. If someone files a claim and the information provided doesn’t match the information from police reports, medical reports, or if there is information missing that should be provided, there is a good chance the claim will be returned for further questioning. Mistakes happen, but insurance companies are always on the lookout for fraud and for reasons to deny claims.

What Are the Penalties of Insurance Fraud?

Insurance fraud is a crime. The penalties for committing insurance fraud depend on the type of fraud that has been committed and how much money was involved. In South Carolina, the consequences also depend on whether it was the policyholder’s first time committing fraud or if they have committed insurance fraud previously. For certain fraudulent claims, the punishment will result in a felony. In South Carolina, punishment for insurance fraud is given as follows:

First Offense

  • Fraud worth less than $1,000: Tried as a misdemeanor, sentence of a fine ranging from $100 to $500 or a prison sentence of up to 30 days.
  • Fraud worth $1,001 to $10,000: Tried as a misdemeanor, sentence of a fine ranging from $2,000 to $10,000 and up to 3 years in prison.
  • Fraud worth $10,001 to $50,000: Tried as a felony, sentence of a fine ranging from $10,000 to $50,000 and a prison sentence of up to 5 years.
  • Fraud worth more than $50,001: Tried as a felony, sentence of a fine ranging from $20,000 to $100,000 and a prison sentence of up to 10 years.

Second Offense

Second offense insurance fraud convictions result in an immediate felony as well as a fine ranging from $20,000 to $100,000 and a prison sentence of up to 10 years. This conviction is an umbrella conviction for all second offenses of insurance fraud, regardless of how much the fraud was worth.

To prove a claim of insurance fraud, prosecutors need to prove beyond a reasonable doubt that the defendant intentionally made a misleading or false statement on their claim and that the claim was immediately relevant to the incident they made the claim about. Proving that the defendant made a false statement is not enough on its own to result in a conviction; prosecutors also have to prove that the defendant was lying in order to support or benefit their claim.

Contact an Attorney Today

If you have been accused of committing insurance fraud or have had a legitimate insurance claim denied, contact Pierce, Sloan, Kennedy & Early, LLC today. With over 20 years of litigation experience behind us, we have the resources and knowledge to help defend you against claims of insurance fraud. We aim to provide simple and concise solutions to our client’s legal problems, and we accomplish that through our unwavering commitment and extensive experience. Contact us today at (843) 968-0886 or via our contact page.