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What is the Punishment for Insurance Fraud

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Member Since-29 Dec 2015

California insurance fraud is punishable by a combination of probation and five years imprisonment, fines, community service, restitution, and other penalties.

Insurance fraud charges can be caused by either a fraudulent insurance claim or the destruction of the insured property.


  • A person files a false insurance claim or assists another claimant in making a fraudulent claim.
  • The person knew that the claim was fraudulent or dishonest.
  • The act was intended to defraud.


  • An accused willfully destroys, hides, or abandons any insured property.
  • To defraud an insurer.

Insurance fraud can be defined as a fraudulent claim made to an automobile insurance company or a false claim. This is done to obtain benefits that are not legal. In California, insurance fraud is generally a felony and can result in a maximum of 5 years imprisonment.

You can commit auto insurance fraud under the California Penal Code if you do the following:

  • You may damage, hide or abandon your vehicle to obtain car insurance proceeds.
  • Inadvertently submit a false auto insurance claim for loss caused by damage, destruction, or theft of a car.2
  • With intent to defraud, you may knowingly submit two (2) or more auto insurance claims for one loss.
  • Intent to collect auto insurance proceeds fraudulently, cause or participate in an accident involving an automobile.4
  • In an insurance claim, you must know to make or prepare any oral or written statement that contains misleading or false information. You also need to falsely claim that your California residency is a part of the application for auto insurance.

It can also be used to commit criminal auto insurance fraud.

  • An employee or business owner who solicits refers or accepts any business from another person knowing that s/he plans to commit auto insurance fraud.
  • A person who offers a commission to adjusters or insurance agents (a "kickback") in exchange for referring policyholders to their shop. This offense is similar to commercial bribery.
  • One man leaves his car at a remote spot and plans to report it stolen to collect the insurance proceeds.
  • A minor collision that does not cause any damage to her SUV results in a woman filing a claim with her insurance company. She claims that the scratches that her car had suffered for some time resulted from the accident.
  • An auto shop owner often produces exaggerated estimates of vehicle repairs as part of a vehicle insurance fraud scheme.



However, a few types of auto insurance fraud can be committed, such as the preparation or submission of false statements or forms by representatives from businesses or auto shops. As a result, these California wobblers could face criminal charges.

Vehicle insurance fraud can lead to felony sentences of up to sixteen months or five years in prison. Fines for felonies can reach fifty thousand dollars ($50,000), or twice the amount of fraud, whichever is higher.


What does California law mean by auto insurance fraud?

California's legal definition of vehicle insurance fraud depends on the California Penal Code section that you are alleged to have been violated.

This section will cover the main types of California auto insurance fraud.

1.1 Penal Code 548 PC Damage or Abandoning a Vehicle

California Penal Code 558, PC makes it illegal to do the following:

  1. You can injure, destroy or hide a car or any other motor vehicle covered against loss or damage.
  2. Intent to defraud the insurance company.

"Intent to Defraud" refers to the intention to deceive an insurance company into causing them to lose money or cause damage to their legal or financial rights.

Auto insurance fraud can also be committed by injuring, destroying, hiding/abandoning a vehicle even though the insurance company has never lost money due to your actions.

Example: Scott, Hilary's husband, has been unemployed for a while. As a result, their household struggles to pay its bills.

Scott has an expensive car that is named in his honor. When the vehicle is parked on the street one night, Hilary sneaks out while Scott sleeps and spray-paints it.

She plans to pretend they were victims of vandalism (594PC) to collect their car insurance for the damage.

Hilary collapses when Scott wakes up, calls the police, and reports the damage. She admits to what she did to the police.

Hilary and Scott never filed an insurance claim, so Hilary's insurance company won't lose any money. Despite this, Hilary is guilty under PC 548 of auto insurance fraud.

1.2 Penal Code 550 PC Fraudulent Claims

California Penal Code, 550 PC covers a variety of forms of California car insurance fraud.

Penal Code 550 (a)(4) is one of them. It allows you to make a false or fraudulent claim of theft, destruction, damage, or conversion of a motor car.

This type of insurance fraud is legalized as:

  1. Falsely or fraudulently claimed payment in respect of a loss due to the theft, destruction, damage, or conversion of a vehicle or a part of a vehicle or its contents;
  2. You knew the claim was fraudulent or false.
  3. You intended to defraud when you filed the claim.17

Penal Code 548 does not require that someone suffers a financial loss due to what they did.

Example: Raul's car's rear bumper is dented from an accident when Raul backed into his wife's vehicle in their driveway. Raul didn't think it was worth the cost to repair the damage.

Another driver then rear-ends Raul. Raul thinks fast and decides to blame the accident on the other driver.

He obtains the insurance information of the other driver at the scene. Then he files a claim with his insurance company, stating that his car was unaffected by any pre-existing damage.

Raul has been found guilty of filing a fraudulent/false claim under Penal Code 55 PC.

The punishment for a felony is:

  • Two, three, or five-year imprisonment
  • A $50,000 fine or twice the amount of fraud.

A fraudulent insurance claim is a misdemeanour that can lead to a maximum of:

  • One-year imprisonment
  • A $10,000 fine.

The offence of a fraudulent claim involving health care benefits less than $950 is a misdemeanour that can be punished by:

  • Six months in prison
  • A $1,000 fine.

Fraudulent property damage to insured property is a felony. A conviction for a felony is punishable by:

  • Two, three, or even five years in a state prison
  • A $50,000 fine.

In all cases of insurance fraud, restitution must be ordered. This includes paying back insurance payments that were wrongfully received.

Insurance fraud defenses can include:

  • Make a mistake
  • There is no intention to defraud.
  • The statute of limitations is now expired.

What is Insurance Fraud in California

California Department of Insurance has investigated insurance fraud and identified over 60 types of fraud. 

The four most common areas of insurance fraud in California are:

  1. Automobile property and personal injury fraud after a car accident (auto insurance fraud/automobile insuring fraud)
  2. Healthcare fraud, including the copy on payments and benefits (health insurance fraud/healthcare fraud).
  3. Workers' Compensation Fraud
  4. Property, life, and casualty fraud.

Is insurance fraud a felony or misdemeanour in California

California law makes it possible to make a fraudulent insurance claim. It can either be a felony, or a misdemeanor, depending on what type of claim. As long as the suspect committed the act to commit it, the actual loss is not necessary.

Insurance fraud is a crime with specific intent. The district attorney must prove the identity of the individual involved.

  • You knowingly defraud.
  • The act was complete.

Insurance fraud is a felony that can lead to the following:

  • Two, three, or five-year imprisonment
  • A $50,000 fine, or as much as twice the amount of fraud.

A misdemeanor could result in a maximum of:

  • One-year County Jail
  • A $10,000 fine.

If the claim involves fraud in health care benefits less than $950, it is a misdemeanor that can be punished by:

  • Six months in county jail
  • A $1,000 fine.

The destruction of the insured property is a felony that can be punished by:

  • Two, three, or even five years in prison
  • A $50,000 fine.

If an accused has:

  • OR
  • If someone is seriously injured in vehicle fraud cases.

Note that probation is not available to anyone with a history of insurance fraud convictions.

In every case of insurance fraud, restitution must be ordered.

What defenses are available to insurance fraud charges in California?

An experienced criminal defense attorney can help you raise defenses against insurance fraud because it is a crime with specific intent. These are:

  • An error made by the defendant, or the adjusters/insurance agents
  • There is no intent to defraud.
  • The statute of limitations is now expired.

Another defense is that law enforcement agencies committed misconduct such as coercing confessions.


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