Penal Code § 550 PC – Insurance Fraud Charges in California

What begins as a disputed claim may end with investigators at your door and prosecutors seeking years of jail time. The line between an honest mistake and criminal fraud can be remarkably thin.

California Penal Code § 550 gives prosecutors powerful tools to pursue insurance fraud cases, with penalties including substantial prison sentences and crushing fines.

At David P. Shapiro Criminal Defense Attorneys, we’ve defended many clients against these serious charges, protecting their rights when they faced the full weight of California’s criminal justice system.

What is Insurance Fraud in California (Penal Code § 550)?

California Penal Code § 550 criminalizes various forms of insurance fraud, targeting those who knowingly present false claims or make misrepresentations to insurance companies.

This comprehensive statute covers numerous fraudulent activities across all types of insurance, including auto, health, property, and life insurance.

Under Penal Code § 550, it is unlawful to:

1. Knowingly present false insurance claims – Submitting claims for losses or injuries that never occurred or are deliberately exaggerated
2. Submit multiple claims for the same loss – Filing claims with multiple insurers for the same incident without disclosure
3. Stage accidents – Deliberately causing collisions or other accidents to generate fraudulent claims
4. File false vehicle damage or theft claims – Misrepresenting vehicle damage, theft, or destruction
5. Create false documentation – Preparing, making, or signing documents to support fraudulent claims
6. Submit fraudulent health care claims – Including billing for services never provided or submitting multiple claims for the same service

According to the State of California Department of Justice, Medi-Cal insurance fraud costs Californians billions of dollars annually, resulting in higher premiums for everyone. This explains why these cases are aggressively investigated and prosecuted.

What Makes Insurance Fraud Criminal?

Not every incorrect insurance claim constitutes fraud. For a claim to rise to the level of criminal insurance fraud under Penal Code § 550, prosecutors must prove three essential elements beyond a reasonable doubt:

1. Knowledge

You must have known the claim or supporting documentation contained false or misleading information. Simple mistakes, misunderstandings, or good-faith errors are not criminal fraud.

2. Material Misrepresentation

The false information must be “material” – meaning it would affect the insurer’s decision regarding the claim. Minor inaccuracies about irrelevant details typically don’t qualify as criminal fraud.

3. Intent to Defraud

You must have acted with the specific intent to defraud the insurance company. This means you deliberately presented false information to obtain benefits you weren’t entitled to receive.

Without these elements, what might appear to be insurance fraud may actually be a legitimate disagreement about policy coverage, an honest mistake, or a misunderstanding of the claims process.

Common Types of Insurance Fraud Cases

Insurance fraud investigations can target various scenarios:

Auto Insurance Fraud

• Staging or deliberately causing accidents
• Reporting vehicles stolen when they weren’t
• Exaggerating damage claims
• Adding pre-existing damage to legitimate claims
• Providing false information about where a vehicle is primarily kept
• “Paper accidents” – claiming accidents that never occurred

Health Insurance Fraud

• Billing for services never rendered
• Unbundling (billing separately for procedures normally billed together)
• Upcoding (billing for more expensive procedures than performed)
• Patient billing for services covered by insurance
• Submitting multiple claims for the same procedure

Property Insurance Fraud

• Reporting items stolen that weren’t
• Inflating the value of stolen or damaged items
• Deliberately damaging property
• Submitting claims for pre-existing damage

Workers’ Compensation Fraud

• Exaggerating workplace injuries
• Claiming non-work-related injuries occurred on the job
• Continuing to collect benefits while working elsewhere
• Employers misclassifying employees to reduce premiums

Serious Penalties for Insurance Fraud

Insurance fraud under Penal Code § 550 carries severe consequences that vary based on the specific violation and the amount involved:

Felony Penalties

Most violations of PC § 550(a) are straight felonies punishable by:

• 2, 3, or 5 years in county jail (under California’s realignment program)
• Fines up to $50,000 or double the amount of fraud, whichever is greater
• Restitution to victims

“Wobbler” Penalties

Some violations, particularly those involving health care benefits under PC § 550(a)(6)-(9), are “wobblers” that can be charged as either felonies or misdemeanors:

When the claim exceeds $950:

• Felony penalties as described above, or
• Up to 1 year in county jail and fines up to $10,000

When the claim is $950 or less:

• Up to 6 months in county jail
• Fines up to $1,000

Enhanced Penalties

Additional penalties may apply for:

• Prior fraud convictions (2-year enhancement per prior conviction)
• Staged accidents resulting in serious bodily injury (2-year enhancement per victim)
• Fraud committed in designated “auto insurance fraud crisis areas” (doubled fines)

Beyond these criminal penalties, a conviction for insurance fraud may also result in professional license suspension or revocation, difficulty obtaining insurance in the future, and permanent damage to your reputation and employment prospects.

Defense Strategies Against Insurance Fraud Charges

When facing insurance fraud allegations, several defense strategies may be effective depending on your specific situation:

Lack of Knowledge or Intent

One of the strongest defenses is showing you didn’t know the information was false or that you had no intent to defraud. Perhaps you made an honest mistake or were confused about what your policy covered.

No Material Misrepresentation

If the alleged misrepresentation wasn’t material—meaning it wouldn’t have significantly affected the insurer’s decision—this can be a valid defense. Not every inaccuracy constitutes criminal fraud.

Good Faith Dispute

Insurance policies are complex, and disputes over coverage often arise. What may appear to be fraud could actually be a legitimate disagreement about what your policy covers, which should be handled as a civil matter rather than a criminal case.

Insufficient Evidence

The prosecution must prove every element of insurance fraud beyond a reasonable doubt. Often, they lack sufficient evidence to meet this high standard, particularly regarding your knowledge and intent.

Constitutional Violations

If law enforcement violated your constitutional rights during the investigation—such as conducting illegal searches or seizures, or failing to read Miranda rights when required—evidence obtained may be suppressed, potentially leading to dismissed charges.

Related Criminal Charges

Insurance fraud investigations often lead to additional charges:

Penal Code § 548 – Destruction of Insured Property

This statute specifically targets those who damage, destroy, hide, or abandon insured property with the intent to defraud the insurer. It’s commonly charged alongside PC § 550 in cases involving vehicle arson, abandonment, or staged theft.

Penal Code § 549 – Referring or Soliciting Fraudulent Business

This law prohibits soliciting, accepting, or referring business, knowing the purpose is to commit insurance fraud. It’s often used to prosecute organized insurance fraud rings.

Penal Code § 551 – Illegal Compensation for Referrals

This statute prohibits auto repair shops from paying kickbacks to insurance representatives for referrals and is often charged in auto insurance fraud schemes.

FAQs About Insurance Fraud Charges

Is insurance fraud always charged as a felony?

No. While many insurance fraud violations are straight felonies, some forms—particularly health care benefit fraud involving smaller amounts—can be charged as misdemeanors. The decision depends on the specific violation, the amount involved, your criminal history, and the prosecutor’s discretion.

Can I face charges if the insurance company paid the claim?

Yes. You can be prosecuted for insurance fraud even if the insurance company paid your claim. The crime is complete once you knowingly submit a false claim with the intent to defraud, regardless of whether the fraud is successful.

How do insurance companies detect fraud?

Insurance companies employ Special Investigation Units (SIUs) that use sophisticated methods to detect potential fraud, including:

• Computer algorithms that flag suspicious patterns
• Database cross-referencing
• Social media monitoring
• Recorded statements and interviews
• Surveillance
• Collaboration with law enforcement and the California Department of Insurance

Can I be charged with insurance fraud years after submitting a claim?

Yes. The statute of limitations for insurance fraud in California is generally three years from the discovery of the offense, not from when the act occurred. This means investigations can begin years after a claim was submitted.

What if I withdraw my claim before receiving payment?

Withdrawing a fraudulent claim may mitigate consequences, but doesn’t eliminate criminal liability. The crime is complete upon knowingly submitting false information with the intent to defraud, regardless of whether you later withdraw the claim.

Protect Your Future Against Insurance Fraud Allegations

If you or someone you love is facing criminal charges in California, swift action is imperative. The penalties can be life-altering and long-lasting. Give us a call today to set up a case evaluation with one of our attorneys and learn how to best protect your freedom and future.

Too often, we see clients who “wait and see,” unsure of the legal landscape ahead, only for charges to escalate. They then find themselves backpedaling into a bad defense and an even worse lawyer. Don’t let that happen to you. Protect your freedom. Protect your future. Know your rights.

The contents of this article and blog are meant for informational and marketing purposes only and do not constitute legal advice. Viewing and/or use of the blog does not form an attorney-client relationship. No statements in this post are a guarantee, warranty, or prediction of a particular result in your case.