Having practiced personal injury law for over 20 years, I can tell you that fraud for personal injury law claims does exist. But, it does not exist to the extent the insurance industry wants you to believe. The numbers for what you and I believe to be fraud are lower because what the insurance industry accounts as fraud is more all encompassing that you would suspect in order to inflate those fraud statistics in order to justify rate hikes. Some classic examples of fraud for personal injury cases include things that would come to mind when you think of personal injury insurance fraud.
Staged Car Accidents
Fake, or staged car accidents, in order to recover money and benefits in personal injury cases are a real thing. But, fraudsters are really playing with fire with these sort of cases. After a car accident happens, people call the police. The police investigate car accidents. And if the police don’t come to the scene of a car accident, then it’s expected that the parties which are involved in the car accident report the collision to the accident self reporting collision centre. It’s not wise for a fraudster to voluntarily call the police after their scheme, but this is exactly what is supposed to happen. The police can sometimes detect the fraud at first site. Insurance companies are also very good at detecting staged car accidents. They have their own investigators to look in to claims which don’t pass the sniff test so to say. This is not to suggest that every car accident gets investigated by an internal fraud team at an insurance company. But, when things don’t line up, the insurers can sense it and will then do what they need to do in order to look in to the suspected fraud.
Rehab Clinic Fraud
Rehab Clinics will bill car insurers directly for treating injured accident victims on approved treatment plans. Some clinics try to cheat the system and bill for work which was not incurred. They will indicate that they have treated a patient; when in fact they have not; and attempt to bill the insurer for work which was not performed. Insurers have a way of sniffing this out as well. But, it’s more difficult to do because this is largely a paper fraud which does not have to involve many parties; it only takes one employee to submit a fraudulent bill. Contrast this with a staged accident which is a real life charade involving many different parties and different moving parts.
But not all fraud is meant to hurt car insurers. There are fraudsters out there aiming at the personal injury lawyers and their clients as well. Here are a few examples of personal injury fraud which is not committed against insurers.
Fake Cheque Schemes/Collection Schemes
Fraudsters suggest that they have been injured in an accident. They have vivid photographs to prove the accident and injuries. They have entered into a settlement with a Defendant, or his/her insurer; but the Defendant has failed to honour the settlement agreement and has not paid the Plaintiff the settlement funds. The injured Plaintiff needs a lawyer to collect the settlement and will offer the lawyer a healthy percentage of the settlement for recovering the funds. The personal injury lawyer opens the file, sends a few letters, and the settlement cheque arrives. It looks completely legitimate, from a legitimate insurer. The settlement funds are issued to the law firm in trust, to be released to the client. The lawyer releases the settlement funds to the client, after taking his/her fees; only to find out later that the settlement funds never cleared. The fraudster runs off never to be found again. The lawyer is out of pocket having paid the fraudster on a cheque which never cleared. This is criminal, but it happens more frequently than you would think. There are no protections for lawyers to prevent these schemes from happening or from being attempted. They’re inexpensive (although elaborate) for the fraudsters to try. If they try 100 different personal injury law firms, and 1 of the schemes works, then they’re in good shape.
The Curse of the Lottery Winner
Winning the lottery is great. But, it’s what you do with that money afterwards which will define how great that win really was. Are you going to be like the majority of lotto winners and spend all of the money within a year. Or will you be smart with the money and use it to long term financial independence and growth? Personal injury awards are rather similar. For most Plaintiffs, the award represents a lump sum windfall of money, the likes which they haven’t seen. When was the last time you received a lump sum cheque for $10,000-$1,000,000? Most people don’t receive cheques for these large amounts that often in their lives. That’s why banks put holds on large lump sum cheques. Most settlement agreements contain confidentiality agreements. While these are meant to protect Defendants, they can also protect Plaintiffs in an indirect way. When a Plaintiff receives a large lump sum of money, does the Plaintiff really want everyone knowing about it? Once people know that a Plaintiff has money, oh boy do they become popular! Everyone wants a piece of them; or a piece of their new found money so to say. Strangely, before the Plaintiff had that money; s/he felt invisible. And now that their bank account is swelling, they’re getting calls from friends and family members who they haven’t spoken with in years. It’s not just friends and family members who hear about the money. Con artists and fraudsters have a way of finding out as well. The next thing you know, the Plaintiff is convinced to “invest” in some sort of business or real estate project which they would not have done otherwise. More often that not, those newly found businesses or real estate projects go belly up. The only winner is the business person who presented the idea to the Plaintiff in the first place.