Insurance Fraud in Texas

What is insurance fraud under Texas law?

Texas Penal Code §35.02 sets out the criminal offense of insurance fraud. A person commits an offense when, with intent to defraud or deceive an insurer and in support of an insurance claim, the person prepares or causes to be prepared a statement they know contains false or misleading material information, or presents or causes such a statement to be presented to the insurer. A parallel subsection covers false or misleading material statements made in support of an insurance application. The statute also reaches specified benefits connected to goods or services for which a claim is submitted.

The intent and knowledge elements matter. A homeowner who estimates a repair in good faith and later learns that a contractor’s quote was inaccurate has not necessarily committed fraud. A person who knowingly adds a nonexistent room or fabricated repair invoice to increase a claim presents a different problem. A dispute about whether hail damaged a roof is a coverage and causation question unless evidence shows an intentional false statement meeting the statute.

Materiality matters too. A wrong detail can be serious if it is important to the insurer’s decision about issuing, pricing, investigating, or paying coverage. The statute’s text addresses materially false or misleading information. Do not reduce the analysis to whether a form contained any typo. Identify what was stated, whether the person knew it was false or misleading, why it was supplied, and how it related to an application or claim.

How does a claim-fraud investigation work?

A claim investigation can compare the notice of loss, photographs, inspection reports, invoices, estimates, prior-condition records, weather data, repair history, and statements from the insured or contractors. Different measurements are not automatically proof of an intentional scheme. Investigators look for evidence about knowledge, timing, coordination, financial benefit, and whether documents were created or altered to support a false claim. A claim may be denied for a policy reason without a fraud finding.

For example, a driver reports a collision but the damage includes an older unrepaired dent. The insurer may separate new impact damage from prior damage after inspection. If the driver does not know about the earlier damage, that distinction is an ordinary coverage question. If records show that the driver knowingly described the old damage as new to obtain payment, the facts may support a fraud investigation. The difference turns on evidence, not simply on the insurer paying less than requested.

Fraud can involve people on either side of the claim. A policyholder may inflate damages; a service provider may bill for work not performed; an agent may collect premium without procuring insurance; or a company employee may divert claim funds. TDI’s fraud unit investigates suspected insurance crimes and coordinates with prosecutors. Each actor’s conduct must be analyzed under the statute that applies, and not every dishonest act is charged under the same criminal provision.

The claim value can affect the offense classification and punishment under §35.02. Because thresholds and penalty provisions can change, use the current Penal Code text rather than a remembered dollar chart. A candidate should know that the statute grades offenses by claim value and that a felony may result for higher-value conduct, but should verify the current subsection before stating a numeric threshold in a live legal context.

Can an application statement be insurance fraud?

Yes. Section 35.02(a-1) expressly addresses statements prepared or presented in support of an insurance application, when the person acts with intent to defraud or deceive and knows the information is materially false or misleading. Examples might include deliberately misdescribing the home’s occupancy, hiding a known prior loss when asked, or submitting false information about household drivers. The exact question, answer, applicant’s knowledge, materiality, and intent all matter.

An application can contain inaccurate information without proving a crime. The applicant may misunderstand a question, rely on a producer’s mistake, or fail to know a detail. Those facts can still create underwriting or policy issues, but criminal fraud requires the statutory elements. Insurers and agents should correct known errors promptly, document the source of the answer, and avoid silently rewriting the application after issue.

An agent should ask the applicant to provide facts rather than fill in guesses. When a form asks whether a home is occupied full time, clarify the term using the insurer’s instructions. If the customer changes an answer, retain the corrected version and date. Do not suggest that the customer omit a prior claim or driver to get a lower quote. A deliberate instruction to conceal information can expose both the applicant and producer to serious consequences.

What counts as fraud involving repair services?

Section 35.02(b) makes it an offense, with the required intent to defraud or deceive, to solicit, offer, pay, or receive a benefit in connection with furnishing goods or services for which an insurance claim is submitted. This provision is relevant to schemes involving kickbacks, false invoices, or payments tied to work billed to the insurer. A legitimate contractor discount or ordinary referral fee is not automatically fraud; the statutory intent and relationship to the claim matter.

A homeowner should not sign a blank certificate of completion or allow a contractor to submit a bill for work that was not done. An agent should not tell a customer to exaggerate storm damage so the insurer pays a deductible. Texas law separately addresses contractor deductible practices and public-adjuster activities. The producer can encourage the customer to document actual damage and use properly licensed professionals without helping to manipulate a claim.

Suppose a roofer offers the homeowner cash if the homeowner submits a claim for a full replacement even though only a small repair is needed. The homeowner and roofer may be soliciting or paying a benefit related to a false claim for services. If the claim is honestly submitted for actual covered damage and the roofer provides genuine work at a disclosed price, that is a different scenario. The invoice, contract, scope of repairs, and communications help establish what occurred.

How do criminal fraud, civil disputes, and licensing discipline differ?

Criminal insurance fraud is prosecuted by the state and requires proof of the offense under criminal procedure. A civil coverage dispute asks whether a contract requires payment. TDI administrative discipline can address violations of licensing or insurance laws, such as fraudulent or dishonest conduct or misappropriating premium. The same conduct can create all three kinds of proceedings, but one outcome does not automatically prove every element in another forum.

A claim denial is not a criminal judgment. A TDI complaint is not an adjudication that the claimant committed fraud. Likewise, a criminal acquittal does not decide every contract question, because the legal standards differ. Keep allegations, investigative findings, administrative orders, civil judgments, and criminal convictions distinct in both writing and exam analysis.

Agents should be especially careful with client funds and binders. Collecting premium creates recordkeeping and remittance duties. If coverage cannot be placed, tell the customer promptly and return funds as required. Never say a policy is active because an application was submitted or a payment was collected. A false assurance can expose the agent to licensing discipline, civil liability, and potentially criminal scrutiny depending on the facts.

A person who discovers a discrepancy should preserve the original record and avoid editing it. If a customer gave an inaccurate answer, retain the submitted application and the later correction so the sequence is clear. If an invoice appears altered, keep the original digital file and transmission details. A file that contains only a retyped summary can obscure whether the author knew the information was false when it was sent.

Fraud investigators may compare independent sources: a repair shop’s records, payment history, inspection photographs, vehicle telematics, weather data, prior claim files, or recorded statements. Each item has limits. A weather map may show hail in a region without proving a specific roof was damaged; a contractor’s estimate may reflect a different scope rather than dishonesty. The strongest analysis explains why the evidence shows knowledge and intent, not merely why two estimates differ.

A material statement can concern the amount, cause, date, ownership, condition, or existence of a claimed item, depending on the statute and context. For instance, claiming a stolen laptop that was never owned is different from misremembering its purchase year. A false date may still matter if it changes whether the loss fell within the policy period. Do not minimize a deliberate lie because the item’s value is small; the Penal Code grades the offense separately from the agent’s ethical and licensing duties.

An insured should cooperate with reasonable claim requests and correct errors rather than doubling down. If the person is unsure, say so and explain what records can confirm the answer. An agent can help identify what the insurer needs but should not draft a statement that converts uncertainty into certainty. If fraud is alleged, preserve communications and do not discuss the case publicly; a formal accusation can have criminal, policy, and professional consequences.

How to report suspected insurance fraud

TDI provides an insurance-fraud reporting process for suspected fraud. A report should identify the parties, insurer, policy or claim number if known, dates, conduct, and supporting records. Submit facts rather than speculation: distinguish what you personally observed from what someone told you. Preserve original records and do not investigate by trespassing, impersonating another person, or accessing accounts without authority. TDI’s instructions explain where to submit a report and how to contact the Fraud Unit.

Do not promise anonymity or a specific outcome unless TDI’s current reporting process says so. A report can lead to review, but the department decides whether to investigate or refer a matter. If you are an agent who discovers possible fraud in a customer file, follow the insurer’s compliance and reporting procedures. If you may be implicated, do not destroy documents or ask a witness to change a statement; seek legal advice and respond to official requests through proper channels.

A false accusation can also harm a person. Report a good-faith concern with accurate supporting facts. Do not label a customer a fraudster merely because the estimate changed or a claim was denied. Use careful language such as “the invoice appears to list work not reflected in the inspection” and let the insurer or authorities evaluate it. That approach protects the integrity of the record and avoids turning suspicion into an unsupported public allegation.

People sometimes confuse exaggeration with an inaccurate estimate. A contractor may include demolition or code-related work the adjuster does not believe is necessary; that disagreement should be resolved through estimates, inspection, and applicable coverage. Fraud becomes a stronger concern if someone knowingly adds repairs that were never performed or submits a forged receipt. The dispute is evidence about scope; fabrication is evidence about intent.

Claim documentation should identify who prepared a statement and who submitted it. A policyholder who forwards a contractor’s invoice may not know the contractor inflated it; the contractor’s knowledge and the customer’s knowledge are separate questions. An agent who transmits an application may similarly be an intermediary or an active participant depending on what the agent knew and did. Do not assign criminal intent to every person in the chain without evidence.

A fraud report should not be used as leverage in a routine settlement negotiation. Telling a customer “accept this offer or we will accuse you of fraud” can distort the claims process and may create separate conduct concerns. If evidence supports a referral, follow formal procedures and state the facts. Settlement amount and criminal intent are separate issues.

Worked examples

An honest mistake on a home application

The applicant believes a roof was replaced in one year but later finds an invoice showing a different year. The applicant tells the agent and corrects the application before issuance. The error may affect underwriting, but the prompt correction is evidence against an intent to deceive. The insurer decides whether the risk or premium changes.

A fabricated auto repair invoice

A driver submits an invoice for repairs that were never completed and knowingly claims the work was paid. If the invoice contains material false information and is presented to obtain claim payment with intent to deceive, §35.02 may apply. The insurer can preserve the invoice and interview the shop, while TDI or prosecutors assess the case.

A disputed roof estimate

A homeowner’s contractor estimates more damage than the insurer’s adjuster. The disagreement does not prove fraud. The parties should compare photographs, scope, measurements, code requirements, and policy coverage. Evidence that someone knowingly fabricated damage or altered photos would change the analysis.

Frequently asked questions