Famous Cases of Car Insurance Fraud

The most famous car insurance fraud cases include Operation Dark Horizon and Project Whiplash. The CAIF is dedicated to countering the effects of car insurance fraud in the US.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Aug 30, 2021

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Here's what you need to know...

  • There are many different ways to commit auto insurance fraud
  • Experts maintain that between one-fifth and one-third of all car insurance claims contain some element of suspected auto insurance fraud.
  • With so many cases to pursue, insurance companies and law enforcement agencies must be ever vigilant to protect the public from a variety of insurance scams.

The Insurance Fraud Bureau of Massachusetts lists a number of ways that individuals and groups can commit automobile insurance fraud. Learn about the schemes before they happen to you.

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What are the kinds of car insurance fraud?

Believe it or not, there are actually many different kinds of insurance fraud. How do I know if my claim was fraudulent?

  1. One of the biggest sources for fraudulent claims involves the staging of auto accidents and faking injury reports.
  2. Another scam involves adding passengers to accident claims who were not in the vehicle at the time of the accident.
  3. A third common scheme involves claimants who exaggerate the extent of their injuries and treatment while others file falsified reports of auto thefts or further damage their own vehicles after a crash.

Many motorists file claims for damage to their cars which occurred prior to the accident on the claim.

Additional schemes involve reporting accidents that may have occurred before an insurance policy was in force.

Insurance Scams That Can Happen To You

  1. Auto Theft
  2. Collision/Damage Claims
  3. Uninsured Motorist Coverage
  4. Medical Payments Coverage
  5. Personal Injury Protection
  6. Underinsured Motorists Coverage
  7. No Fault Insurance
  8. Identity Theft
  9. Misrepresentation on Application Forms

Motorists also lie about where a vehicle may be parked or where an accident may have occurred. Misreporting damages to parked vehicles also amounts to car insurance fraud and a false insurance claim.

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What are the biggest car Insurance fraud cases?

In recent years, the biggest type of auto policy fraud cases involve no-fault insurance rules in a number of states. What may amount to the biggest single case of car insurance fraud in insurance industry history was recently uncovered in New York.

In April 2012, Federal law enforcement agents and New York City police detectives arrested more than three dozen people suspected of being involved in an automobile insurance fraud scheme estimated to total almost $280 million!

No-fault car insurance is an easy target for fraudsters, as state rules require fast payouts of claims with a minimum of investigation.

New York state law requires every motor vehicle to have no-fault coverage.

According to no-fault rules, the driver and passengers of a vehicle involved in an accident are eligible to get up to $50 thousand in benefits per person, regardless of who is at fault. Payments for medical treatment must be made quickly, negating the need for time-consuming lawsuits.

Federal officials allege that the suspects in the $280 million case set up medical clinics for the express purpose of defrauding a number of insurance providers under the state’s no-fault insurance rules.

These clinics would arrange for unnecessary treatments at other suspected fraudulent businesses and provide doctor referrals.

Alleged phony treatments included:

  • Physical therapy
  • Orthopedic supplies and treatments
  • Unnecessary x-rays
  • Acupuncture

In return for their referrals, the heads of the participating clinics would receive kickbacks. Recruiters were paid thousands of dollars to bring patients into these specific clinics.

The scope of the government’s investigation widened to include a number of prominent New York physicians and attorneys.

Ten doctors and three attorneys were arrested among the three dozen suspects. If convicted of these charges, the suspects face between 30 and 70 years in federal prison.

Authorities believe that those involved are tied to organized crime and the Russian mob in particular. The NBC television affiliate in New York City reports that the operation, based in Brooklyn, NY, is believed to be the largest single no-fault insurance scheme to be exposed.

The suspects face charges ranging from money laundering to racketeering among other crimes. According to a statement filed by Assistant FBI Director in Charge, Janice Fedarcyk, “The criminal enterprise, while it lasted, was obscenely profitable.”

What was Operation Dark Horizon?

Another major auto insurance fraud bust occurred in Florida in 2011 and was dubbed Operation Dark Horizon. In this case, 25 people were charged following one of the largest car insurance fraud investigations in recent years.

Over two dozen suspects included at least, one clinic owner, several doctors, and clinic employees. Also arrested were several individuals accused of staging accidents and recruiting other participants.

This was a scheme to defraud Florida’s auto insurance companies by filing phony personal injury protection (PIP) claims.

After nearly two years of investigating, Operation Dark Horizon accounted for over 140 criminal charges that were filed against more than two dozen suspects. The charges ranged from insurance fraud, staging an accident, and racketeering to money laundering and grand theft.

According to the National Insurance Crime Bureau (NICB), Miami is the third highest city in the nation for staged accidents and fraudulent medical claims, following New York City, and the national leader, Los Angeles.

Another major auto insurance scheme was masterminded by an Armenian-American gang in Los Angeles in 2011. Billed as one of the largest Medicare schemes to date, the gang is believed responsible for losses totaling $163 million.

Car insurance fraud played a major role in this scam, as phony crash victims were sent for treatment to more than 100 fake medical clinics, located in more than two dozen states.

The main perpetrator of these crimes, Armen Karazianis, received a sentence of three years in federal prison for his participation.

What was Project Whiplash?

Car insurance fraud is a big business in several other western nations including Great Britain and Canada.

In 2012, Toronto police, in cooperation with the Financial Services Commission of Ontario and the Insurance Bureau of Canada, brought in the first of 37 participants that were behind the largest auto insurance scam in the province of Ontario.

Officials claim that those charged are at the center of a major insurance fraud ring responsible for staging at least 77 accidents, causing losses in excess of $4 million.

Among the charges pending are operating medical clinics that filed phony insurance claims, falsification of financial records, and fraud.

According to the Toronto Star, the first seven defendants that were arrested were granted bail but were ordered to have no contact with other potential suspects in the alleged insurance fraud ring.

Dozens of additional charges are pending in a case that will be difficult to unravel. At this time, officials are seeking out other alleged participants.

It could take many months to determine the exact amount of damages inflicted on an unsuspecting public by the more than three dozen individuals involved.

For these reasons, evidence given at the initial hearings and arraignments of those accused is being banned from publication by the press. Over time, the full extent of the insurance losses those arrested are responsible for, could exceed many millions of dollars.

Another significant public expense of insurance fraud is the cost of investigation, arrest, and trial of the perpetrators.

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What happens when the government fights back?

In May 2012, Florida Governor Rick Scott signed a tough new anti-insurance fraud bill into law, signaling clearly that insurance fraudsters are not welcome in the Sunshine State.

This bill enacted several new measures and strengthened others designed to discourage fraud and to severely punish those convicted of fraudulent activities.

If convicted of fraud, doctors and other medical providers could lose their licenses.

Other provisions of the bill require licenses for clinics to treat auto crash victims and make it a crime to operate a clinic without a proper license.

What is the Coalition Against Insurance Fraud?

The Coalition Against Insurance Fraud (CAIF) was founded in 1993 by concerned citizens who were already waging war to counter the effects of insurance fraud in the United States.

The CAIF is made up of concerned citizens who are committed to rallying many diverse groups around a single banner and to take their fight to a more successful and far-reaching level.

After almost 20 years, the coalition has won many skirmishes and battles against car insurance fraud.

Today, the Coalition Against Insurance Fraud remains the only anti-fraud organization that represents the interests of consumers as well as insurance providers, government regulators, and legislative bodies.

Since 1993, the CAIF has helped to enact many tough, new laws and anti-fraud regulations. The CAIF provides a continuing source of public education on how to recognize and eventually eliminate car insurance fraud from the marketplace.

The Coalition has also become a U.S. clearinghouse of information regarding insurance fraud.

What is the Hall of Shame?

In 2011, the Insurance Claims Journal published a report of recent scams that qualified for the journal’s annual “Hall of Shame” list. Check out the website for a brief recap of these recent shameful insurance fraud cases.

The Coalition Against Insurance Fraud estimates that losses due to fraud in just the United States amount to $80 billion every year! This amount of money is staggering in terms of lost production and resources.

All Americans pay for insurance fraud each year when we pay for our own auto insurance premiums. Broken down per household, insurance fraud costs $980 per year! This is an extra thousand dollars that a family might better spend on food, clothing, or even a family vacation!

Inevitably, the American consumer picks up the tab for car insurance fraud. It is up to each consumer to become aware of possible insurance scams and to immediately report suspicious activities to the appropriate government agencies.

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