There are over 7,000 companies that compete in the insurance industry in the United States.[1]  The sheer size of the industry has created more opportunities to commit fraud, as well as increased incentives.

  • Legitimate companies that are not licensed by the state to sell insurance may be considered frauds for evading state insurance regulations.
  • Rogue employees of legitimate insurance companies may subject their company to fraud investigations by collecting premiums from customers without ever delivering the insurance policy to the company.
  • Customers can stage accidents, injuries, thefts, arsons, and other types of loss that would be covered under an insurance policy.

For customers, even the exaggeration of a claim, or knowingly omitting or providing false information on an application, can lead to charges of insurance fraud.  With such high lease payments and high loan payments, it may seem reasonable to exaggerate an insurance claim after an accident in order to get a settlement checks and use it to get out of this debt.

Dishonest claims by mechanics and medical service providers have lead to a nationwide crackdown on auto insurance fraud.

Network like sting operations and investigations across the country have led to many innocent claimants finding themselves being accused of auto insurance fraud.

Our firm has successfully handled charges and accusations brought by the FBI, National Insurance Crime Bureau, and the U.S. attorneys’ offices.  Our lawyer’s focus on white-collar crimes like fraud and conspiracy and can help you defend against these charges.

If you have been charged with auto insurance fraud or you are concerned about potential liability, call the Blanch Law Firm at (212) 736-3900.

What Is “Auto Insurance Fraud?”

Exaggerating or fabricating a claim to your automobile insurance provider regarding the extent of the damage to your car or your injuries can lead to serious consequences.

Generally, most claims of auto insurance fraud involve:

  • Fabricating a loss;
  • Overstating damages;
  • Claiming pre-existing damage.

Some cases of auto insurance fraud involve elements of health insurance fraud as well.  These cases involve medical practitioners and service providers who:

  • Bill for treatment they never provided to the patient;
  • Bill for treatment that is not medically necessary;
  • Bill for treatment to a nonexisting “ghost patient.”

But wait, there’s more…

Receiving, accepting, or offering kickbacks in return for things like fraudulent quotes, repairs or referrals may also subject you to criminal liability.

Let’s say you have a friend who owns a body shop and he offers to repair your car.

Before he repairs the car, he prepares a trumped up repair estimate for the insurance company, claiming that you need repairs that are actually unnecessary.  Some of these claims will never even be performed.

Or, maybe you just stage the accident altogether with a friend.  After all, who’s gonna find out?

If you consider yourself to be an honest person, completely fabricating an insurance claim may not seem like something you would do.

But most auto insurance fraud claims involve claim inflation, and by simply exaggerating the cost of your auto repairs or claiming pre-existing damage, you may be engaging in auto insurance fraud.

New York State Auto Insurance Fraud

Insurance Fraud Defined

N.Y. Penal Law § 176.05

In New York, charges of insurance fraud require that you act with the knowledge and intent to defraud, you present a written statement with false information to a commercial or health insurer.  Concealing information with the purpose of misleading the insurer is also actionable.

Degrees of Auto Insurance Fraud

N.Y. Penal Law §§ 176.10 – 176.30

N.Y. Penal Law Degree Property Value
N.Y. Penal Law § 176.10 Fifth Degree Any fraudulent insurance act, regardless of the property value.
N.Y. Penal Law § 176.15 Fourth Degree Wrongful taking of property with a value in excess of $1,000.
N.Y. Penal Law § 176.20 Third Degree Wrongful taking of property with a value in excess of $3,000.
N.Y. Penal Law § 176.25 Second Degree Wrongful taking of property with a value in excess of $50,000.
N.Y. Penal Law § 176.30 First Degree Wrongful taking of property with a value in excess of $1,000,000.

Aggravated Auto Insurance Fraud

N.Y. Penal Law § 176.35

In New York, charges of aggravated auto insurance fraud require that the defendant has previously been convicted of a fraudulent act against an insurance company within five years of the current charge.

Federal Auto Insurance Fraud

Under federal law, fabricating a loss to an insurance company is a felony.

On the other hand, overstating damages could be a felony.  Whether or not overstating damages is considered a felony depends on:

  • how much was fraudulently sought or obtained;
  • the criminal history of the defendant; and
  • whether or not the fraud involved a single fraudulent claim or multiple fraudulent claims.

Common Schemes[2]

  • Premium Diversion. Premium diversion is considered embezzlement and involves making a claim, collecting the premium from your insurance company, and then not paying for the auto repairs.  By not following through with the repairs, you are engaging in insurance fraud.
  • Asset Diversion. Asset diversion involved the acquisition or merger of an existing insurance company. By acquiring control of an insurance company with outstanding or borrowed money, the acquirer is able to use the assets of the acquired company to pay off the acquired company’s debt and keep the remaining assets.  While this may seem standard, it may constitute the theft of that insurance company’s assets.
  • Workers’ Compensation Fraud. Some medical service providers advertise reduced prices in exchange for a portion of a claimants insurance premium.

Latest Trend in Auto Insurance Fraud

“Hit while parked” claims.  Fraudulent “hit while parked” claims are especially easy for investigators to spot because of the technical aspects of an accident.  If a car has damage to the wheels, that would suggest the car was in motion, and not parked at the time the accident occured.  Furthermore, airbag deployment could also indicate the car was in motion because airbags don’t deploy when car is parked.

Charges Related to Auto Insurance Fraud

Knowingly Making a False or Misleading Statement.  It is important to remember that in order to be convicted of knowingly making a false statement, you must know that the statement is false, and the statement must be material.  If you did not know the statement was false at the time it was made, or your misstatement was unintentional, you should not be convicted of knowingly making a false or misleading statement.

Receiving, accepting, or offering kickbacks in return for inflated repair quotes. This type of accusation may carry a charge of conspiracy to commit fraud.  A “conspiracy” involves two or more people who agree to participate in criminal activity.  Each co-conspirator is equally liable for all actions taken by all of the other co-conspirators, as long as the action was taken “in furtherance of the overall conspiracy.”[3]

How do auto insurance investigations work?

When insurance fraud is reported or suspected, your insurance company may conduct a comprehensive investigation in conjunction with both state and federal authorities.

Auto insurance investigation can involve:

  • interviewing the people that may have been involved in an accident;
  • examining physical evidence like damage to the vehicle or tire marks on the street,
  • going through financial records and bank statements;
  • checking your history of claims; and
  • performing statistical data analysis.

The federal agencies involved in reporting and investigating auto insurance fraud include:

  • The Federal Bureau of Investigations (“FBI”);
  • The National Insurance Crime Bureau (“NICB”);
  • The Coalition Against Insurance Fraud (“CAIF”); and
  • The National Association of Insurance Commissioners (“NAIC”).

The Negative Impacts You Will Face If You Are Accused of Fraud

Penalties for engaging in a “scheme or artifice” to defraud a health benefit program or auto insurance program can include a fine of up to $1,000,000, up to 10 years imprisonment, or both.

6 Things Everyone Needs to Know About Auto Insurance Fraud

  1. Fabricating a loss to an insurance company is fraudulent.
  2. Exaggerating a claim to an insurance company is fraudulent.
  3. Claiming pre-existing damages is fraudulent.
  4. Knowingly submitting false information on an application is fraudulent.
  5. Knowingly omitting relevant information on an application is fraudulent.
  6. Representation during questioning and interrogations is essential.

First Steps If You Are Audited, Investigated or Accused

  • Contact a federal insurance fraud attorney. The Blanch Law Firm has successfully handled numerous insurance fraud cases and we can help you defend yourself, your family, and your reputation against charges and accusations of fraud.  If you have been charged with auto insurance fraud or charges related to fraud, do not hesitate to contact one of our federal fraud attorneys at (212) 736-3900 for a free legal review of your case.
  • Organize your information. Part of defending yourself against accusations of fraud is performing your own investigation.  While government agencies are gathering information and working against you, it is up to you and your attorney to organize your information and present it in a way that evidences your innocence.  This can include hiring an independent auditor claim specialist.  Protecting your confidential information is essential during this process.
  • Avoid incriminating statements. There is an inherent risk when making statements to agencies and investigators. Having representation during questioning is essential.  Also, keep in mind, most phone calls to insurance companies are recorded.
  • Rectify inaccurate information. If you realize that you have made a misrepresentation to your insurance company or the investigating agency, or if you realize that you have omitted some valuable piece of information, you should speak with your attorney about rectifying those statements.

5 Best Defenses to Auto Insurance Fraud

  1. You did not knowingly commit a scheme to defraud.
  2. You did not knowingly make a false statement.
  3. If you did make a false statement, it was not material.
  4. Damages claimed on the vehicle were accurate.
  5. Damages reported were consistent with the facts of the accident.

Compliance Corner – “Common Indicators of Auto Insurance Fraud

In order to remain compliant with all legal requirements and avoid prosecution, it is important to consider the indicators that insurance companies look for when trying to determine whether or not an auto insurance claim is fraudulent.

Common indicators of auto insurance fraud include:

  • Vehicle has been moved;
  • Delay in reporting claims;
  • History of previous similar claims;
  • Lapse in policy shortly before claim was filed;
  • Damage reported is inconsistent with the facts of the accident;
  • Whether or not there are excluded drivers in the house.

You may think it’s harmless to include a scratch or dent that was already there, but this, my friend, is insurance fraud, and insurance companies and federal agencies are working diligently to identify all false claims.

By acknowledging the “Common Indicators of Auto Insurance Fraud” listed above you may be able to avoid future investigations and accusations.

High Profile Case of Auto Insurance Fraud

Some auto insurance fraud cases are linked to health insurance fraud.

For example, on February 27, 2015, Tatyana Gabinskaya was sentenced to one year in prison for her role in what the FBI referred to as “the largest single no-fault automobile insurance fraud scheme ever charged.”

Gabinskaya was one of thirty-six individuals named in the indictment charging defendants with mail fraud, insurance fraud,racketeering and money laundering.

According to the indictment, Gabinskaya claimed to be the owner of a radiology clinic which billed insurance company for numerous fraudulent claims of MRi’s and radiology tests.

In addition to her one year imprisonment, Gabinskaya was also sentenced to 3 years probation, ordered to forfeit almost $70,000 and ordered to pay restitution to the victims of her crimes.

Generally, most cases of fraud involving health insurance involve:

  • Billing for treatment never provided to the patient.
  • Billing for treatment that is not medically necessary.
  • Billing for treatment to a nonexisting “ghost patient.”
  • Receiving, accepting, or offering kickbacks in return for referrals.

If you or someone you know has charged or accused of committing insurance fraud, or you are concerned about potential liability regarding insurance fraud, you should contact an attorney as soon as possible.

Our lawyers at the Blanch Law Firm have experience working with auto insurance fraud and conspiracy cases.  If you would like a free legal review of your case, call the Blanch Law firm at  (212) 736-3900.

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Let the Blanch Law Firm Earn Your Trust

Our focus is your freedom.  Having recruited our attorneys from top-ranked national law firms, Ivy league schools and prosecutors’ offices, the Blanch Law Firm offers its clients a diverse team of criminal defense attorneys who will work together to help you avoid probation, fines, and imprisonment.

If you have been charged with auto insurance fraud or you are currently being investigated due to an allegedly fraudulent claim and are concerned about potential liability, call the Blanch Law Firm at (212) 736-3900.




[3] 18 U.S.C. § 371