Insurance fraud refers to any fraudulent act committed with the intent to obtain an improper payment from an insurer. Every year, insurance fraud costs companies billions of dollars.
No sector of the insurance market is immune to insurance fraud or the potential for fraud. Policyholders, and in some cases insurance agents or adjusters, have defrauded all types of insurers, such as health insurance, auto insurance, homeowner’s insurance, and rental insurance.
In Colorado, insurance fraud is typically a felony-level offense and may be punishable by many years in prison, together with the long-term consequences of being a convicted felon.
Let’s take a look at what, exactly, constitutes Colorado insurance fraud, and what you need to know as an insurance consumer.
Two Classifications of Insurance Fraud
Regardless of the type of insurance company that’s being defrauded, there are two classifications of insurance fraud – hard fraud and soft fraud:
Soft Insurance Fraud
Soft insurance fraud occurs when a policyholder files a claim based on damages that really did occur but inflates the value of this damage. For example, if a rental insurance policyholder is a victim of burglary, he or she could inflate the value of the items stolen when filing a claim.
Hard Insurance Fraud
Hard insurance fraud involves filing a claim when there is no genuine loss or reason to file one. For example, a car insurance policyholder could fake vehicle theft to file a fraudulent claim. On a larger scale, some physicians bill health insurance companies or Medicare for services that were never rendered.
Acts That Constitute Colorado Insurance Fraud
Colorado’s insurance fraud statutes specifically prohibit insurance consumers from doing any of the following with the intent to defraud:
- Submit an application for insurance with false information, or which withheld relevant information
- File a false claim for a loss or injury that did not occur
- Cause an auto accident to make a fraudulent insurance claim
- File a claim for a loss or damage that was present prior to taking out the policy, unless this is explicitly permitted by the policy
- Knowingly provide false information in a written, oral or electronic statement for an insurance claim, including inflating the value of the damages
Insurance agents are prohibited from doing the following with the intent to defraud:
- Intentionally misappropriate premium funds
- Present evidence of insurance containing false information to another party
Are You Being Questioned by a Colorado Insurance Adjuster?
Insurance companies carefully investigate all insurance claims in order to prevent insurance fraud. In some cases, the claim could be flagged for further review, and you may be questioned by an adjuster or investigator.
It’s possible they are simply reaching out to clarify certain aspects of the claim, and that nothing more will come of the matter. However, in some cases, the adjuster or investigator may be conducting the investigation with the intent of eventually filing insurance fraud charges against you.
If something doesn’t feel right, or if you’ve been approached on multiple occasions, it is wise to consult with a Denver criminal defense attorney while you’re still under investigation.
An attorney can advise you of which questions to answer, and how to answer them, preventing you from inadvertently incriminating yourself.
Colorado Insurance Fraud Penalties
If convicted of insurance fraud in Colorado, you will be subject to criminal, civil and, potentially, administrative penalties.
In Colorado, insurance fraud is generally a Class 5 Felony punishable by up to three years of imprisonment and $100,000 in fines.
Providing false information for an application or renewal is a lesser charge, a Class 1 Misdemeanor, that typically carries an 18-month jail sentence and $5,000 in fines upon conviction.
If you defraud your insurance company, your insurer may sue you in civil court, forcing you to repay economic losses and potentially punitive damages.
If an insurance company or agent commits insurance fraud, the commissioner of insurance can impose disciplinary actions, including the revocation of business licenses.
Federal Insurance Fraud Prosecution
If insurance fraud crosses state lines or involves other federal crimes — racketeering, for example — it can also be prosecuted at the federal level.
Federal prosecution is never good news, for the following reasons:
- Federal investigators have greater resources than state agencies, making the case against you much stronger
- Federal insurance fraud is punishable by up to ten years in federal prison
- Federal prosecutors are more likely to seek the maximum possible sentence
- Federal inmates are ineligible for parole, meaning that you will serve the duration of your sentence behind bars
That being said, whether you’re prosecuted federally or by the state, an insurance fraud conviction is likely to land you time in prison.
To avoid a life-altering sentence, fight back proactively to get the charges against you dropped or reduced. If you’re under investigation, know your rights, and seek expert advice to avoid inadvertently incriminating yourself.
About the Author:
Kimberly Diego is a criminal defense attorney in Denver practicing at The Law Office of Kimberly Diego. She obtained her undergraduate degree from Georgetown University and her law degree at the University of Colorado. She was named one of Super Lawyers’ “Rising Stars of 2012” and “Top 100 Trial Lawyers in Colorado” for 2012 and 2013 by The National Trial Lawyers. Both honors are limited to a small percentage of practicing attorneys in each state. She has also been recognized for her work in domestic violence cases.