Insurance

Federal Insurance Fraud - 18 U.S.C. § 1033

Insurance fraud cases typically involve using a fraudulent claim to get benefits, such as trying to get an advantage over the insurance company or a state or federal governmental agency. This could involve life insurance fraud, workers' compensation, and unemployment insurance fraud.

Insurance fraud occurs in many forms, such as a false statement on an insurance claim or a sizeable sophisticated criminal enterprise with many people participating in the illegal scheme.

One of the common forms is healthcare insurance, such as fraud by the patient and healthcare provider. In addition, many insurance industries engage in activity impacting interstate commerce.

Thus, 18 U.S. Code 1033 crimes by or affecting persons engaged in the business of insurance whose activities involve interstate commerce says, “(a) (1) Whoever is engaged in the business of insurance whose activities affect interstate commerce and knowingly, with the intent to deceive, makes any false material statement or report or willfully and materially overvalues any land, property or security….(A) in connection with any financial reports or documents presented to any insurance regulatory official… (B) to influence the actions of such official….”

There are also other criminal law provisions to address interstate conduct which is fraudulent or deceptive. Let's review this federal law further below.

What Are Material False Statements?  

Title 18 of the United States Code, Section 1033, has specific provisions of federal law which address insurance fraud. 

Subsection (a) provides that anyone engaged in the insurance business with activities affecting interstate commerce is guilty of a federal crime. To be found guilty, it must be proven that the perpetrator:

• Had the intent to deceive,
• Make a false statement or report, or
• Willfully overvalue any land, property, or financial instrument.

This includes making financial reports to a regulatory agent or office to influence government action.

This provision is focused on insurance companies rather than insured individuals. It penalizes the overvaluation of insured land or property with deceptive or fraudulent intent. 

The false statements must be material concerning essential facts that could affect an insurance matter's outcome. They must be made to an insurance regulatory official to influence their actions. 

Penalties under this subsection carry up to ten years in federal prison but increase to 15 years if the false statement causes the insurance company to be placed in financial jeopardy.

What About Fraud Involving Company Employees

Subsection (b) of Section 1033 covers anyone who is an “officer, director, agent, or employee of an insurance company” engaged in interstate commerce and who “willfully embezzles, steals, or otherwise misappropriates any money,” or other property of the insurance company is guilty of a federal crime.

The penalties for the subsection include a maximum of 10 years in federal prison. Still, an enhancement under subsection (b) increases the maximum punishment to 15 years if the conduct puts the viability of the insurance company at risk of mandatory court supervision, such as receivership.

Subsection (c) of Section 1033 says, “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” is guilty of a federal crime. 

The penalties under this subsection are ten years, but they could also increase to 15 years if the false statement causes severe harm to the insurance company.

Subsection (d) of Section 1033 cover conduct, including “threats and use of verbal or physical force intended to unlawfully influence or obstruct the business of insurance affecting interstate commerce,” is also guilty of a federal crime. 

What Are the Penalties for 18 U.S.C. 1033?

Subsection (e) of Section 1033 imposes a criminal penalty for anyone previously convicted of a felony with dishonesty or breach of trust, including prior convictions, and who engages in the insurance business.  Thus, the penalties include the following:

• Convictions for certain state-level felonies involving dishonesty mean a lifetime ban on working in the insurance industry;
• The punishment for violating this subsection is up to 5 years in federal prison;
• Anyone in the insurance business which allows a prohibited person to work with them is guilty under Subsection (e) and will face the same penalty.

A person ordinarily forbidden to work in the insurance industry due to a prior conviction can apply for and receive permission from an appropriate insurance regulatory official.

What are the Defenses for 18 U.S.C. 1033?

Federal insurance fraud is a serious federal crime. Many alleged perpetrators don't even know they are under an insurance fraud criminal investigation.

Once you learn that you are the target of a federal insurance investigation, you must contact an experienced federal criminal defense lawyer who has dealt with these charges before.

Insurance fraud cases are generally complex, involve allegations of violating multiple federal and state laws, and are investigated by several federal law enforcement agencies.

Due to the potentially severe penalties described above, you must retain a federal defense lawyer who has experience in federal courts and knows how to develop an effective strategy for the best possible outcome.

Insurance fraud under federal law is a serious offense that carries potential decades in federal prison and harsh fines if convicted. 

If you work in the insurance industry and are concerned about federal criminal liability, contact us to review the case details and legal options.

Our law practice includes substantial federal prefiling intervention and federal jury trial work. So perhaps we can negotiate with the federal prosecutor for a favorable plea bargain if guilt is not in doubt.

Eisner Gorin LLP is a nationally recognized criminal defense law firm in Los Angeles, California. Contact us by phone or contact form for an initial consultation.