Federal Crime of Insurance Fraud – 18 U.S.C. § 1033
Insurance fraud cases normally involves using a fraudulent insurance claim in order to obtain insurance benefits. This includes attempting to gain a financial benefit from the insurance company, another insured party, or from a state or federal governmental agency.
Insurance fraud can occur in many different forms, and might be just a false statement on an insurance claim, or could involve a large complex criminal enterprise where many people are participating in the scheme.
This crime includes life insurance fraud, workers' compensation fraud, property insurance fraud, unemployment insurance fraud, and others. However, one of the most common forms of insurance fraud involves health care insurance. This includes fraud by the patient as well as the healthcare provider.
California state law contains numerous provisions which target individuals who engage in fraudulent or deceptive practices in connection with insurance policies or insurance claims, including health insurance fraud, dental insurance fraud, worker's compensation fraud, disability fraud, and others.
A substantial amount of the insurance industry, however, engages in activity which affects and concerns interstate commerce. Accordingly, United States federal law also contains criminal law provisions to address interstate conduct which is fraudulent or deceptive.
Federal law also provides relatively harsher penalties compared with California law for substantially the same conduct.
To give readers a better understanding of insurance fraud laws, our federal criminal defense attorneys are providing a review below.
Material False Statement under 18 U.S.C. § 1033
18 U.S.C. § 1033 contains several related, but distinct, provisions of federal law which address insurance fraud. Under subsection (a), Section 1033 provides that anyone who is engaged in the insurance business and has activities which affect interstate commerce is guilty of a federal crime.
However, it must be proven they, with the intent to deceive, makes a material false statement or report or willfully and materially overvalues any land, property, or financial instrument under certain circumstances. These include making financial reports which are presented to a regulatory agent or office for the purpose of influencing government action.
This subdivision is directed primarily at insurance companies rather than insured individuals and punishes primarily the overvaluation, with deceptive or fraudulent intent, of insured land or property.
Note that the false statements must be material – meaning they concern important facts which could affect the outcome of an insurance matter. The statements must also be made to an insurance regulatory official or their appointee for the purpose of influencing that person's actions.
A violation under this subsection carries the harsh potential punishment of up to 10 years in federal prison.
This type of fraud crime carries a maximum sentence that is increased to 15 years in cases where the false statement caused the insurance company to be placed in financial jeopardy and/or caused the insurance company to be placed in receivership or be liquidated pursuant to a court order.
Fraud Involving Employees of Insurance Companies
Under subsection (b) of Section 1033, anyone who is an officer, director, agent, or employee of an insurance company, which again is engaged in interstate commerce such that the federal government has jurisdiction, and who embezzles, steals, or otherwise misappropriates any money or other property of the insurance company is guilty of a federal crime.
The punishment for this version of a Section 1033 violation is again a maximum of 10 years in federal prison. There is also an enhancement under subsection (b) which increases the maximum punishment to 15 years where the defendant's conduct put the viability of the insurance company at risk of caused it to be subject to mandatory court supervision such as receivership.
Under subsection (c) of Section 1033, anyone engaged in interstate insurance commerce who enters a false, material fact into any logbook, report, or other similar written material with the intent to deceive anyone – not just insurance regulators – about the financial condition of the insurance company is guilty of a federal crime.
The maximum punishment allowable under this subdivision is 10 years, which can again be increased up to 15 years if the false statement caused serious harm to the insurance company.
Conduct including threats and use of force, whether verbal or physical, which is intended to unlawfully influence or obstruct the business of insurance affecting interstate commerce is also guilty of a federal crime.
This provision is found in subsection (d) of Section 1033 and is punishable by a maximum of 10 years in federal prison.
Penalties for 18 U.S.C. § 1033 with Prior Conviction
Subsection (e) of Section 1033 creates a federal criminal penalty for anyone who has previously been convicted of a felony involving dishonesty or breach of trust, including prior convictions under Section 1033, who engages in the business of insurance.
This means that convictions for certain state-level felonies which involve dishonesty creates a lifetime ban on working in the insurance industry. The punishment for violating this subsection is up to 5 years in federal prison.
Similarly, anyone who works in the insurance business and who permits a forbidden individual to work with them is guilty under Subsection (e) and faces the same maximum punishment.
There is, however, a mechanism under Subsection (e) by which a person who is ordinarily forbidden to work in the insurance industry because of a prior conviction may apply for and receive permission from an appropriate insurance regulatory official.
Fighting 18 U.S.C. § 1033 Insurance Fraud Charges
Insurance fraud is considered a serious crime by federal prosecutors. Many people don't realize they are under insurance fraud criminal investigation. The moment you become aware that you are the target of a federal insurance investigation, you need to contact an experienced federal criminal defense lawyer who knows how to defend these type of charges.
Most federal Insurance fraud cases are complex and involve many alleged unlawful activities, along with state and federal laws and multiple federal agencies.
Due to the serious potential penalties described above, you will need to retain a federal defense lawyer who has experience in federal courts and knows how to develop an effective strategy for best possible outcome.
Insurance fraud under federal law is a serious offense which carries potential decades in federal prison if convicted, in addition to stiff fines.
If you or a family member who works in the insurance industry and is concerned about federal criminal liability, contact our experienced team of criminal defense attorneys for an initial consultation.
Our practice includes a substantial amount of federal prefiling intervention and federal jury trial work. We will leverage our experience and expertise to assist you in seeking the best possible resolution in your matter.
Eisner Gorin LLP is a nationally recognized criminal defense law firm located at 1875 Century Park E #705, Los Angeles, CA 90067. We defend clients throughout the United States who are facing any type of federal offense. Contact us for a consultation at 877-781-1570.