What is Insurance Fraud?

Insurance fraud generally involves providing false information (or omitting material information) or making false claims to an insurance company for the purpose of obtaining a benefit. Insurance fraud is prosecuted at both the state and federal levels, generally dependent on the amount of the loss and the complexity of the alleged fraud. There are two general forms of insurance fraud alleged in Texas – property/casualty insurance fraud and state healthcare benefit fraud. State insurance fraud is prosecuted by county District Attorney’s Offices. Federal insurance fraud is prosecuted by the United States Attorney’s Office.

Contact an Insurance Fraud Attorney in Houston for more information. Our insurance fraud lawyers in Houston have extensive knowledge of the prosecution and defense of insurance fraud charges and defends individuals charged with insurance fraud in state and federal courts.

Insurance Fraud in Texas

Property/casualty Insurance Fraud

Property/casualty insurance fraud in Texas is generally investigated by the Texas Department of Insurance, though it may also be investigated by local police agencies. Insurance fraud in Texas is prosecuted under Chapter 35 of the Texas Penal Code. The range of punishment for state insurance fraud charges is tied to the amount of the alleged loss. Under Texas law, an insurance fraud offense is classified as:

  • a Class C misdemeanor if the value of the claim is less than $100;
  • a Class B misdemeanor if the value of the claim is $100 or more but less than $750;
  • a Class A misdemeanor if the value of the claim is $750 or more but less than $2,500;
  • a state jail felony if the value of the claim is $2,500 or more but less than $30,000;
  • a felony of the third degree if the value of the claim is $30,000 or more but less than $150,000;
  • a felony of the second degree if the value of the claim is $150,000 or more but less than $300,000; or
  • a felony of the first degree if the value of the claim is $300,000 or more.

Additionally, insurance fraud is a felony of the first degree if there an act committed in connection with the commission of the offense places a person at risk of death or serious bodily injury.

State Healthcare Fraud

The Health and Human Services Commission (HHSC) Office of Inspector General investigates waste, abuse, and fraud in all health and human services programs in the State of Texas.

In the event that someone is convicted of insurance fraud in Texas, the court is legally required to order the person convicted to pay restitution, including court costs and attorney’s fees, to an affected insurer.

Federal Insurance Fraud

The federal government generally prosecutes insurance fraud where the loss amounts are high, the mechanisms for committing the alleged fraud are complex, or the scale of the alleged fraud is large.

The range of punishment for federal insurance fraud varies considerably depending upon the offense charge and the amount of the alleged loss. Many federal criminal offenses related to insurance fraud are found in 18 U.S.C. Chapter 47, and other common statutes of prosecution include mail and wire fraud under 18 U.S.C. Chapter 63.

Premium Diversion

Premium diversion is the theft of insurance premiums, and is a common type of federal insurance fraud. The scheme often involves an insurance agent’s failure to send premiums to an underwriter, instead keeping the money for personal use. An additional form of common premium diversion involves the sale of insurance without a license, the collection of premiums, and the failure to pay claims.

Fee Churning

Fee churning involves a number of intermediaries taking commissions using reinsurance agreements. An initial premium is reduced by repeat commissions until the funds used to pay claims have been exhausted. The company paying the claim is often a shell, and the government will attempt to prove that there was never any intent to pay the claim.

Medicare and Medicaid Fraud

Medicare and Medicaid fraud generally involve the billing of government providers by doctors and healthcare workers for benefits not actually received by patients. In these cases, the government often intends to establish that Medicare or Medicaid paid for claims that were either exaggerated or entirely false.

Insurance Fraud Defense

Effective defense of an insurance fraud case requires granular review of the evidence associated with the allegations as well as an understanding of the law under which an individual or company is being prosecuted.

Our firm has the experience and knowledge necessary to effectively defend individuals charged with insurance fraud in state and federal courts. When possible, retaining an attorney during the investigative stage of a potential criminal prosecution for insurance fraud may mean the difference between being charged and the investigation being terminated.


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