Operation Under N.J.S.A. 39:4-50: State v. Daly

Understanding New Jersey’s Insurance Fraud Law

New Jersey has some pretty strict laws when it comes to insurance fraud. As someone who lives in the Garden State, it’s important to understand what exactly constitutes insurance fraud so you don’t accidentally break the law. Let’s break down the key definitions and implications of Section 2C:21-4.5 of New Jersey’s criminal code.

What Activities Are Considered Insurance Fraud?

The law defines insurance fraud pretty broadly. Essentially, any intentional deception relating to an insurance transaction is considered fraud. This includes things like:

• Submitting false claims for payment
• Misrepresenting facts on an insurance application
• Staging accidents to file claims
• Exaggerating injuries or damages to get bigger payouts

Yeah, it covers a lot of ground. The law even considers just attempting to commit fraud as a criminal offense, even if the fraud isn’t successful.

Who Can Be Charged with Insurance Fraud?

Insurance fraud charges can apply to all sorts of people involved in insurance transactions:

• Policyholders
• Claimants
• Applicants
• Insurance company employees
• Attorneys
• Doctors
• Any other professional who facilitates insurance claims

So even if you don’t personally hold an insurance policy, you could still face charges if you help facilitate a fraudulent claim.

What Are the Penalties for Insurance Fraud?

The penalties really depend on the specific circumstances of the case. But in general:

• Fraud of $500 or less is a disorderly persons offense, punishable by up to 6 months in jail and a fine up to $1,000.
• Fraud between $500 – $75,000 is a 4th degree crime, with up to 18 months in jail and a fine up to $10,000.
• Fraud between $75,000 – $150,000 is a 3rd degree crime, with 3-5 years in prison.
• Fraud over $150,000 is a 2nd degree crime, with 5-10 years in prison.

And if the fraud involves falsely billing a government health care program like Medicare or Medicaid, the penalties can be even more severe. Like up to 10-20 years in prison and fines up to $150,000![1]

As you can see, insurance fraud is not taken lightly in New Jersey. Even minor offenses can land you in jail or leave you with crippling fines.

What Constitutes an “Insurance Transaction”?

This is important – the fraud has to relate to an “insurance transaction” for the law to apply. The law defines an insurance transaction pretty broadly:

• Any interaction between an insurance company and a policyholder, claimant, applicant, etc.
• Calculations related to insurance premiums, claims, or benefits
• Investigations into claims
• Any other insurance-related activity

So just about anything involving insurance could potentially lead to fraud charges if deception is involved.

Does the Law Apply to Self-Insurance Programs?

Yep. The law considers self-insurance programs administered by businesses or governmental entities to be “insurance companies” for purposes of fraud prosecution.

So if you falsify a claim through your company’s self-insured health plan, you could face the same penalties as regular insurance fraud.

What About Out-of-State Insurance Companies?

The New Jersey fraud law applies to any insurance company authorized to do business in the state, even if they’re based in another state or country.

So if you file a fraudulent claim with Geico, Progressive, State Farm, or any other national insurer, you’re subject to prosecution under New Jersey’s law if the fraud involves a New Jersey-issued policy.

Are There Any Defenses to Insurance Fraud?

There are a few potential defenses:

• You lacked intent to defraud. For instance, maybe you made an honest mistake on your claim form. As long as there’s no evidence you intended to mislead, this could be a valid defense.
• The alleged fraud didn’t meet the dollar thresholds. As mentioned earlier, fraud under $500 is just a disorderly persons offense, which is a much less serious charge. If the alleged fraud falls below the dollar thresholds for a 4th, 3rd, or 2nd degree crime, you may be able to get the charges reduced or dismissed.
• There are procedural problems with how the state is prosecuting the case. If there are issues with how the investigation was conducted, how evidence was obtained, etc., the case could potentially get thrown out. But you’ll need an experienced criminal defense attorney to identify and argue these procedural defenses.
• You retracted the fraud before it was discovered. If you catch your own mistake and withdraw the fraudulent claim before the insurance company uncovers it, you may be able to avoid charges under N.J.S. 2C:21-4.6(c). But again, you’ll need a lawyer’s help making this argument effectively.

How Are Insurance Fraud Cases Investigated in New Jersey?

There are a few ways insurance fraud ends up getting exposed:

• Insurance company SIUs. Many insurers have Special Investigations Units (SIUs) dedicated specifically to detecting fraud by policyholders and claimants. They investigate claims that seem suspicious.
• NJ Office of the Insurance Fraud Prosecutor. This state agency investigates fraud referrals from insurers. They work with local prosecutors to build criminal cases against fraudsters.
• Whistleblowers. Disgruntled employees or contractors working with shady attorneys and medical providers may come forward to report fraud they’ve witnessed behind the scenes. There are even financial incentives for whistleblowers under the NJ Insurance Fraud Prevention Act.
• Police investigations. Sometimes insurance fraud comes to light during police investigations into related crimes, like drug trafficking, theft, or organized crime.

What About Frivolous Lawsuits Against Insurers?

There’s a separate law dealing with frivolous lawsuits against insurance companies, known as the NJ Frivolous Lawsuit Statute. This allows insurers to request dismissal of bogus claims and recover attorneys fees.

So policyholders and claimants can’t just file baseless lawsuits to try to extort settlement payouts from insurers. The frivolous lawsuit law is meant to deter that type of abusive behavior.

The Bottom Line

Insurance fraud is taken very seriously in New Jersey. State prosecutors have tremendous power to investigate and punish any deception tied to insurance claims or transactions.

The penalties can be severe, even for seemingly minor offenses. So it’s critical to be honest and accurate in all your insurance dealings within the state.

If you’ve been charged with insurance fraud, don’t try to talk your way out of it with the investigators. Get advice from an experienced criminal defense lawyer before making any statements. An attorney may be able to negotiate a plea deal or even get the charges dismissed altogether.

Just make sure you have competent legal representation. Otherwise, you could end up being convicted of a crime and facing years behind bars plus massive fines. Not worth it for a little insurance fib!