Insurance Fraud Laws In Texas

December 5, 2009

A resident of Grand Prairie recently caught his insurance agent in Dallas committing fraud. The agent was taking the cash payments for the premiums from the resident and hand writing a receipt. Sounds okay so far. Next, the agent was pocketing the money rather than forwarding the payment to the insurance company. This could have happened in Arlington, Fort Worth, Weatherford, or anywhere else in Texas.

The agent would have continued to have got away with this except that the resident had an accident and got sued and when he turned the lawsuit papers over to the insurance company and was denied coverage the resident went to an experienced Insurance Law Attorney. A subsequent investigation revealed what was happening and a lawsuit is currently going forward against the agent.

Most of the time when people think of insurance fraud, they think in terms of someone staging a theft, an accident, or committing arson to recover monies from an insurance policy. This type of insurance fraud is defined and talked about in the Texas Penal Code, Chapter 35. Section 35.02, describes some of what constitutes an offense and also describes the penalty. The range of punishment is from a Class C misdemeanor, which is a ticket offense, all the way to a Felony of the First Degree, which is punishable by up to life in prison. The monetary cost includes fines up to $10,000, court costs, and restitution.

The Texas Insurance Code, Chapter 701, is another place where issues concerning insurance fraud are discussed. Section 701.001 says "Fraudulent Insurance Act" means an act that is in violation of a penal law and is: (A) committed or attempted while engaging in the business of insurance; (B) committed or attempted as part of or in support of an insurance transaction; or (C) part of an attempt to defraud an insurer.

The problem with both of the above laws dealing with insurance fraud is that they are focused on the person who may be trying to cheat an insurance company. The fraud that companies and agents commit are not the focus. When an insurance company or an agent commits fraud on one of its' insureds or customers there are things that can be done. But these things are less criminal in nature and more punative in a financial aspect. And this is where Insurance Law Attorneys are most helpful.

Even without an attorney a person can act on their own by turning in the company or agent to the Texas Department of Insurance. Most attorneys would discourage any actions being taken until you have first spoken with an experienced Insurance Law Attorney so that any complaint forms or other types of complaints filed are done so in a proper manner and that nothing that would jeopardize the case is handled in an incorrect manner.