California Auto Insurance Fraud Laws

Automobile insurance fraud is when a person makes a knowingly false insurance claim, or otherwise deceives an insurance company, in order to receive benefits to which he or she is not legally entitled. Insurance fraud is generally prosecuted as a felony in California and carries a penalty of up to 5 years in state prison.

Under the California Penal Code, you commit auto insurance fraud when you do any of the following:

• Damage, hide, or abandon your vehicle on purpose, with the intent to collect car insurance proceeds for it;¹
• Knowingly submit a fraudulent auto insurance claim for a loss due to damage, destruction, or theft of a vehicle;²
• Knowingly present two (2) or more auto insurance claims for the same loss, with intent to defraud;³
• Cause or participate in an automobile accident with intent to fraudulently collect the auto insurance proceeds;⁴ and/or
• Knowingly present or prepare any written or oral statement as part of an insurance claim that contains false or misleading information, or falsely claim that you live in California on an application for auto insurance.⁵

It is also a form of criminal auto insurance fraud for:

• A business owner or employee to solicit, refer, or accept any business from a person, knowing that s/he intends to commit auto insurance fraud;⁶ and
• An owner or employee of an auto repair shop to offer insurance agents or adjusters a commission or profit-sharing arrangement (a “kickback”) to refer policyholders to their shop (this offense overlaps with commercial bribery in California).⁷

Examples

Here are several examples of activities that could lead to California car insurance fraud charges:

• A man abandons his car in a remote location, with plans to report it as stolen and collect the insurance proceeds.
• After a minor fender-bender that causes no damage to her SUV, a woman submits a claim to her insurance company claiming that scratches the car has had for a while were the result of the accident.
• As part of a vehicle insurance fraud conspiracy, the owner of an auto repair shop regularly produces inflated estimates of vehicle repair costs.

The following bubble graph shows common examples of car insurance fraud:

Penalties

Most forms of California auto insurance fraud are felonies.⁸

But a few kinds of auto insurance fraud—such as preparing or submitting false statements, or the forms that are committed by business or auto shop representatives—are California wobblers, which means they may be charged as either misdemeanors or felonies.⁹

The potential felony prison sentences for vehicle insurance fraud range from sixteen (16) months to five (5) years. Felony fines can go up to fifty thousand dollars ($50,000) or twice the amount of the fraud (whichever is greater).¹⁰

Auto insurance fraud as a misdemeanor carries a potential county jail sentence of up to one (1) year, and/or a fine of up to one thousand dollars ($1,000).¹¹

Legal defenses

If you are charged with auto insurance fraud in California, you may be able to get the charges reduced or dismissed by arguing one of the following common legal defenses:

• You did not act with fraudulent intent (a useful defense to any kind of insurance fraud charges); and/or
• There is insufficient evidence to support the charges.

In this article, our California criminal defense attorneys¹² explain the following:

• 1. How does California law define auto insurance fraud?
  • 1.1. Penal Code 548 PC damaging or abandoning a vehicle
  • 1.2. Penal Code 550 PC fraudulent claims
  • 1.3. Penal Code 550 PC multiple claims
  • 1.4. Penal Code 550 PC causing an accident
  • 1.5. Penal Code 550 PC false statements
  • 1.6. Auto insurance fraud by business owners or employees
• 2. What are the consequences if a person is convicted?
• 3. What are the best defenses to assert in court?
• 4. What other crimes can be charged along with car insurance fraud?
  • 4.1. Penal Code 451 PC arson
  • 4.2. California health care fraud
  • 4.3. Vehicle Code 10501 VC making a false report of vehicle theft

If, after reading this article, you would like more information, we invite you to contact us at Shouse Law Group.

1. How does California law define auto insurance fraud?

The legal definition of vehicle insurance fraud in California depends on which section of the California Penal Code you are alleged to have violated.

In this section, we will discuss the major forms of California auto insurance fraud.

1.1. Penal Code 548 PC damaging or abandoning a vehicle

California Penal Code 548 PC makes it a crime to do the following:

1. Injure, destroy, hide, abandon or dispose of a car or other motor vehicle that is insured against loss or damage;
2. With the intent to defraud or prejudice the insurance company.¹³

“Intent to defraud” means intent to deceive the insurance company so as to cause them a loss of money, or else to cause damage to their legal, financial or property rights.¹⁴

You can be guilty of auto insurance fraud through injuring, destroying or hiding/abandoning a car even if the insurance company never loses money because of your actions—and even if the car is not yours.¹⁵

Example: Hilary’s husband Scott has been out of work for some time. Their household is struggling to pay its bills.

Scott owns a fairly expensive car that is titled in his name. One night when that car is parked on the street, Hilary sneaks outside while Scott is sleeping and spray-paints the car.

Her plan is to pretend that they have been victims of vandalism (594 PC) so they can collect on their car insurance for the damage.

But when Scott wakes up and calls the police to report the damage, Hilary breaks down. She confesses what she did to the police.

No insurance claim was ever filed, so Hilary and Scott’s insurance company will not lose any money because of her actions. Still, Hilary is guilty of auto insurance fraud under PC 548.

1.2. Penal Code 550 PC fraudulent claims

California Penal Code 550 PC covers several different forms of California car insurance fraud.

One of these is Penal Code 550(a)(4) presenting a false or fraudulent claim for theft, destruction, damage or conversion of a motor vehicle.¹⁶

The legal definition of this form of auto insurance fraud is:

1. You falsely or fraudulently claimed payment for a loss due to theft, destruction, damage, or conversion of a motor vehicle, a motor vehicle part, or the contents of a motor vehicle;
2. You knew that the claim was false or fraudulent; and
3. When you submitted the claim, you intended to defraud.¹⁷

As with Penal Code 548 damaging or abandoning a vehicle, it is not necessary that anyone actually suffer a financial loss because of what you did.¹⁸

Example: Raul’s car has a dent in its rear bumper from a time when Raul accidentally backed his car into his wife’s in their driveway. Raul has never fixed the damage because he didn’t consider it worth the money.

Then one day Raul is rear-ended by another driver. Raul, thinking fast, decides that he will try to blame the dent on the other driver.

At the scene of the accident, he gets the other driver’s insurance info. He then submits a claim with his own insurance company in which he states that there was no preexisting damage to his car.

Raul is guilty of submitting a false/fraudulent claim under Penal Code 550 PC.

But it is important to note that you need to have known the claim was false or fraudulent in order to be guilty of this form of auto insurance fraud.¹⁹

Example: Teresa’s car has acquired several scratches on its rear bumper due to bad parallel parking jobs. But she doesn’t look at that part of her car very often and is not aware that they are there.

One day Teresa is rear-ended while driving home from work. She and the other driver get out to inspect their cars. Teresa notices the scratches for the first time and assumes that they are from the accident.

Teresa then submits a claim for the scratches to her insurance company, stating that they were caused by the accident.

Teresa is not guilty of automobile insurance fraud because she did not know her claim was false.

1.3. Penal Code 550 PC multiple claims

Another way of violating California car insurance fraud laws is to:

1. Present two (2) or more claims for the same loss to the same or several different auto insurers;
2. Knowing that you are submitting two (2) or more claims for the same loss;
3. With intent to defraud.²⁰

The “multiple claims” form of auto insurance fraud is covered in Penal Code 550(a)(4).²¹

1.4. Penal Code 550 PC causing an accident

You violate California Penal Code 550(a)(3) PC if you:

1. Cause or participate in a vehicle accident;
2. Knowing that the purpose of the accident is to present a false or fraudulent insurance claim;
3. With the intent to defraud.²²

You are considered to have committed auto insurance fraud by “causing” an accident if both of the following are true:

1. The accident was the direct, natural and probable consequence of your act; and
2. The accident would not have happened without your act.²³

Example: Greg’s sports car has been requiring a lot of repairs. He realizes that it would probably be financially beneficial for him if he could collect the insurance on it and use it to buy a car that needs less maintenance.

So Greg enlists his friend Patrick to help him make this happen by causing an accident. Patrick owns a large pickup truck that could hit Greg’s car without sustaining any damage.

Greg parks his car on the street in front of his house. Patrick takes the license plates off his truck at Greg’s house (so he won’t get accused of misdemeanor hit and run (20002 VC)), drives his truck around the block in Greg’s neighborhood, and then crashes it into Greg’s car and speeds away.

Both Greg and Patrick are guilty of causing an accident as a form of auto insurance fraud.

1.5. Penal Code 550 PC false statements

You can also violate California Penal Code 550, subsections (b)(1)-(4), by doing any of the following:

1. Presenting any written or oral statement as part of or in opposition to a claim for an auto insurance payment or other benefit, knowing that the statement contains false or misleading information concerning any material fact;
2. Preparing or making any written or oral statement as part of or in opposition to a claim for an auto insurance payment or other benefit, knowing that the statement contains false or misleading information concerning any material fact; or
3. Preparing or making any oral or written statement, intended to be presented to an auto insurer for purposes of obtaining car insurance, that you reside in California, when really you reside somewhere else.²⁴

Example: Eloise, who had been living in Marin County, gets divorced and moves to Florida.

She prices car insurance in her new home and discovers that her premium will go up by a significant amount because of the risk of damage from hurricanes.

So Eloise tells her insurance company that she still resides mostly at her old house in Marin. Her ex-husband passes on mail from the company to her.

Eloise is guilty of auto insurance fraud for falsely claiming to reside in California.

1.6. Auto insurance fraud by business owners or employees

There are several ways in which the owners, representatives or employees of auto-related businesses can violate California’s auto insurance laws—and thereby subject themselves to criminal liability.

These include:

1. Any type of business soliciting, accepting or referring any business to or from any person or entity with the knowledge that, or with reckless disregard for whether, that person or entity intends to commit auto insurance fraud;²⁵ and
2. An auto repair shop offering a commission, fee, profit-sharing, or other form of compensation to an insurance agent, broker, or adjuster, in exchange for referring policyholders to shop for repairs covered by auto insurance.²⁶

Example: Harry has just opened his own auto repair shop. His sister-in-law Phyllis owns a car insurance brokerage firm.

Harry tells Phyllis that, if she will refer her policyholders who live near his shop to him for repairs covered by insurance, he will give her 30% of the profits he makes off of that business. Phyllis agrees.

Harry is guilty of auto insurance fraud for offering Phyllis the profit-sharing from insurance customers.

2. What are the consequences if a person is convicted?

The penalties for California auto insurance fraud depend on the form of fraud you are alleged to have committed.

PC 548 damaging or abandoning vehicle

Penal Code 548 damaging, destroying, hiding or abandoning an insured vehicle with intent to defraud the insurance company is a California felony.²⁷

The potential penalties are:

• Felony (formal) probation;
• Two (2), three (3) or five (5) years in jail; and/or
• A fine of up to fifty thousand dollars ($50,000).²⁸

There is also a two (2)-year sentence enhancement for each prior felony conviction for auto insurance fraud under Penal Code 548 or 550.²⁹

PC 550 fraudulent claims/multiple claims

Both submitting a false or fraudulent claim under Penal Code 550(a)(4) PC, and submitting multiple claims under Penal Code 550(a)(2), are felonies. These offenses carry the following penalties:

• Felony (formal) probation;
• Two (2), three (3) or five (5) years in jail; and/or
• A fine of up to fifty thousand dollars ($50,000) OR double the amount of the fraud, whichever is greater.³⁰

There is also a two (2)-year sentence enhancement for each prior felony conviction for auto insurance fraud under Penal Code 548 or 550. And if you have a prior felony conviction for auto insurance fraud, you may not receive probation or a suspended sentence.³¹

PC 550 causing an accident

Auto insurance fraud by causing an accident, Penal Code 550(a)(3) PC, is another felony. It is punishable by:

• Felony (formal) probation;
• Two (2), three (3) or five (5) years in jail; and/or
• A fine of up to fifty thousand dollars ($50,000) OR double the amount of the fraud, whichever is greater.³²

And the following sentencing enhancements apply to this form of auto insurance fraud:

• A two (2)-year sentence enhancement for each prior felony conviction for auto insurance fraud under Penal Code 548 or 550;
• A five (5)-year sentence enhancement if you have two (2) or more prior felony convictions for car insurance fraud by causing an accident under PC 550(a)(3);
• A two (2)-year sentence enhancement for each person other than an accomplice who suffers serious bodily injury as the result of your actions;³³ and
• A potential sentence enhancement of three (3) or more years if you personally inflict great bodily injury on someone in the course of causing the accident.³⁴

PC 550 false statements

Making false statements under Penal Code 550(b)(1)-(4) is a wobbler in California law.³⁵

This means that the prosecutor may choose to charge these auto insurance fraud crimes as felonies or misdemeanors, depending on:

• The alleged details of the crime; and
• The defendant’s criminal history.

The felony penalties for false statements are the same as the penalties for filing a fraudulent claim under PC 550(a)(4), or filing multiple claims under PC 550(a)(2).³⁶

But if false statements car insurance fraud is charged as a misdemeanor, the potential penalties are:

• Misdemeanor (summary) probation;
• Up to one (1) year in county jail; and/or
• A fine of up to ten thousand dollars ($10,000).³⁷

PC 549 referring, soliciting or accepting auto insurance fraud business

Referring, soliciting or accepting business from someone who intends to commit auto insurance fraud, under Penal Code 549 PC, is also a wobbler.³⁸

The potential felony penalties for this form of car insurance fraud are:

• Felony (formal) probation;
• Sixteen (16) months, two (2) years or three (3) years in jail; and/or
• A fine of up to fifty thousand dollars ($50,000) OR double the amount of the fraud, whichever is greater.³⁹

The potential misdemeanor penalties are:

• Misdemeanor (summary) probation;
• Up to one (1) year in county jail; and/or
• A fine of up to one thousand dollars ($1,000).⁴⁰

A second or subsequent conviction for a violation of this California car insurance law will always be a felony and will carry the felony penalties set forth above.⁴¹

PC 551 kickbacks from auto repair shops

Finally, the form of auto insurance fraud consisting of kickbacks from vehicle repair shops to insurance agents, brokers or adjusters carries different penalties depending on the amounts of money involved.

If the amount of the kickback is nine hundred fifty dollars ($950) or less, a violation of Penal Code 551 PC is a misdemeanor, carrying a potential county jail sentence of up to six (6) months and/or a fine of up to one thousand dollars ($1,000).⁴²

If the amounts in question are more than nine hundred fifty dollars ($950), then this form of vehicle insurance fraud becomes a wobbler.

If it is charged as a misdemeanor with more than $950 at issue, the potential penalties are a county jail sentence of up to one (1) year, and/or a fine of up to one thousand dollars ($1,000).⁴³

Charged as a felony, it carries a jail sentence of sixteen (16) months, two (2) or three (3) years; and/or a fine of up to ten thousand dollars ($10,000).⁴⁴

3. What are the best defenses to assert in court?

California prosecutors work hard to investigate and prosecute cases of auto insurance fraud, for a few reasons.

First, car insurance fraud is apparently a big problem, both in California and throughout America.

Some industry groups estimate that at least ten percent (10%) of property/casualty auto insurance claims are fraudulent.⁴⁵ The LA County District Attorney’s office has a separate Automobile Insurance Fraud Division for handling these cases.

Second, insurance companies have plenty of political power—and it is in their interest for law enforcement to crack down on auto insurance fraud. In California, the Department of Insurance works closely with local prosecutors to see that suspected fraud is dealt with aggressively.

But according to Los Angeles insurance fraud defense attorney Neil Shouse⁴⁶:

“There is a fine line between aggressive law enforcement and abusive law enforcement. California law enforcement’s ‘get tough’ approach to auto insurance fraud can lead to shoddy investigations, rushed judgments and overzealous prosecutions. Prosecutors who work in specialized vehicle insurance fraud divisions need to justify their positions—which can cause them to focus more on generating arrest and conviction statistics than on making sure justice is served.”

If you are charged with California insurance fraud, you and your criminal defense attorney may want to consider the following legal defenses:

You did not act with fraudulent intent

Specific intent to defraud is a key element of all forms of auto insurance fraud.

Many times a careless mistake on your part will be flagged as potential fraud by your auto insurance company—and reported to the authorities.

But the burden is on the prosecution to prove, beyond a reasonable doubt, that you intended to commit fraud and were not simply making a mistake. A skilled criminal defense attorney may be able to cast enough doubt on this assertion to lead to charges being dropped—or a not-guilty verdict in a jury trial.

There is insufficient evidence that you committed auto insurance fraud

Many auto insurance cases revolve around a complicated set of facts. It can be challenging to sort out beyond a reasonable doubt what really happened—particularly if there are convoluted paper trails, circumstantial evidence, or conflicting testimony involved.

It is a good criminal defense attorney’s job to find the ambiguities in the prosecution’s case—and to help you collect the strongest evidence for your innocence.

4. What other crimes can be charged along with car insurance fraud?

The most closely related offenses to California auto insurance fraud include:

4.1. Penal Code 451 PC arson

Penal Code 451 PC California arson occurs when someone sets a fire “willfully and maliciously.”⁴⁷

If you set your own car on fire with the intent to fraudulently collect auto insurance proceeds, you are guilty of the felony crime of arson, punishable by sixteen (16) months, two (2) years or three (3) years in California state prison.⁴⁸

Arson under these circumstances can also lead to a fine of fifty thousand dollars ($50,000) or double the amount of the anticipated monetary gain from the auto insurance fraud.⁴⁹

4.2. California health care fraud

California health care fraud occurs when, for example:

• Someone bills an insurance company for medical services they never actually received;
• Someone bills an insurance company for more expensive medical services than the ones they actually received; or
• Someone submits multiple insurance claims for the same medical services.

Penal Code 550 PC prohibits forms of health care fraud that are analogous to the forms of auto insurance fraud addressed by that statute. The penalties are also similar.⁵⁰

A car accident—real or fraudulent—may lead to charges of both auto insurance fraud and health insurance fraud, if a person submits fraudulent or multiple claims both for property damage to the car and for medical expenses.

4.3. Vehicle Code 10501 VC making a false report of vehicle theft

Falsely reporting an auto theft under Vehicle Code 10501 VC is a crime that is often charged in connection with auto insurance fraud cases.

You can be charged with this offense if you make or file a false or fraudulent report of a stolen vehicle with a law enforcement agency, with intent to deceive.⁵¹

VC 10501 is a misdemeanor with a maximum jail sentence of six (6) months for a first offense.⁵² Therefore, it can a helpful plea bargain from more serious auto insurance fraud charges.

Call us for help…

For questions about California’s auto insurance fraud laws, or to discuss your case confidentially with one of our California criminal defense attorneys, do not hesitate to contact us at Shouse Law Group.

We have local criminal law offices in and around Los Angeles, San Diego, Orange County, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, and several nearby cities.

In Colorado? See our article on Colorado insurance fraud.

For more information on Nevada automobile insurance fraud laws, please visit our page on Nevada automobile insurance fraud laws.

Additional Resources:

California Department of Insurance: What is Insurance Fraud?

---

Legal References: