Preparing a State Insurance Fraud Referral

As a private investigator, you may focus your business on insurance and claims related work. If that’s the case, have you ever submitted a state insurance fraud referral? If you said no, your not alone by any means; however, being able to do so will certainly set you apart from your competition.

Every state has their own way of doing things but the general idea remains consistent, identify the state statutes that were violated, determine the elements of the statute and match them to your case, and pull out all of the evidence from your investigation and the claims file to support your belief that fraud was committed. It’s no different from what a detective in a police department does with crimes he/she may be investigating.

This need for private-public cooperation in the battle against insurance fraud has led to the enactment of state fraud reporting laws that facilitate insurance fraud referrals while affording insurers a measure of insulation from civil liability for defamation or bad faith. However, these laws sometimes referred to as “immunity acts”, do not create an impenetrable shield to insurers who provide evidence of suspected fraud to law enforcement. A finding that an insurer or investigator acted with malice or bad faith during the referral process can completely undercut any immunity and lead to costly litigation. Simply be professional and act in good faith at all times and the state immunity laws will provide adequate protection against frivolous lawsuits.

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Who would have thought the word milk would have so much relevance to the world of insurance fraud? I’ve always told people, if you have MILK, you have fraud. No, no, not the liquid milk, the acronym M.I.L.K.

  • Materiality – was the activity in some way material to the case?
  • Intent – was the activity done intentionally?
  • Lie – did the subject lie about something for the purposes of concealment?
  • Knowledge – did the subject know what he was doing was wrong?

If you can prove these four elements, you most likely have a solid case of fraud and can prove it.

Who do I submit my state insurance fraud referral to?

Although the governing authorities vary by state, most states have an organized insurance fraud bureau; the investigators there will be your first point of contact. This doesn’t mean that you won’t speak with other people during the process, it’s just where you’ll start. You will most likely discuss the case with a state attorney who will use you to get up to speed on what happened and what you’re alleging.

There have been times when I feel I have a solid case but the investigator assigned from the fraud bureau just doesn’t see it my way. Because I’ve reported so many of these, I know what state attorneys are looking for and in some narrowly tailored situations, I’ll take my case right to the Assistant State Attorney (ASA) to review the salient facts and generate some interest in the case. I recommend not doing this too often you want to develop a good working relationship with the state investigators. Going to the ASA on every case they say no to will certainly anger even the most patient of investigators.

Keys to a Successful Fraud Prosecution

  • Know and follow the requirements and limitations of applicable fraud statutes.
  • Limit company representatives involved in referrals. Insurance fraud referrals and responses to requests for information from law enforcement should only be handled by designated special investigations units or claims personnel.
  • Document, document, document. The importance of documenting everything sent to or received from law enforcement or prosecutors and maintaining that documentation cannot be overstated.
  • Provide the good, the bad and the ugly. If it’s material, report it.

How do I prepare the actual referral?

Now that you know fraud exists, you have to express it to someone else in a written referral. It’s like the longest school project you’ve ever been assigned! You’ll have to answer the who, what, where, when, and how of the case.

In this post, I’ll break down the most important topics and the sequence you should submit them in the final referral.

General Information

The general information section basically covers the “who” is involved in the referral. Here you will provide information on the subject or suspect, the insurance company, and any involved agencies, such as the police, the fraud bureau, or even the state attorney.

This is important because whoever is working on the file may be duplicating efforts, or worse, stepping on another agencies toes.

Statement of Facts

This section will most certainly be the most voluminous. In this section, you will document every fact that has led you to the conclusion fraud was committed.

Facts can come from many different places. For instance:

  • Investigation Reports
  • Claims Notes
  • Depositions and Statements
  • Medical Records and Medical Professionals
  • ISO Reports (Claims History Report)
  • Database Searches
  • Witnesses
  • Co-workers

Seeing all of these possibilities, you can see why it’s so important to outline the fraud in a documented referral. Giving the ASA a solid case that they don’t have to do too much with will go a long way in whether or not they accept the file. The days of slamming a huge box of paperwork in an ASA’s office and saying, “…there is fraud in that box” are over.

Material Misrepresentation

Within the Statement of Facts, you’ll be including a section called Material Misrepresentation. In this section, you’ll outline where, when, and how the suspect committed fraud. Address how the suspect misrepresented himself, his injury, or anything else he may have intentionally misrepresented during the claim process.

Current Status of the Claim

The people reading your report will want to know where the claim stands currently. Is the claim denied, still active? Is the suspect still getting paid, or not getting paid?

In most cases, the claim will have been denied but there still may be medical expenses that need to continue being paid.

Date of Discovery of Suspected Fraud

Pretty basic. What date did you determine fraud existed?

You’ll write something like, “Potential fraud has been established as of April 10, 2014.”

Some people make the mistake of using the date of loss as the date the fraud was discovered. The date at which point restitution can be ordered is the date the fraud was discovered and that could be years into a claim.

Applicable Statutes

A statute is a written law enacted by a legislature. The statutes you will deal with most frequently regarding insurance fraud, are state-level statutes. Keeping in mind, there may be other statutes, other than just insurance fraud, that is applicable to your referral.

For instance, if the suspect lied during a deposition, he may have committed purgery. Insurance fraud is theft, so if you have a situation where the restitution you’re requesting is greater than a certain amount of money (usually $500 or so), your suspect may have committed grand theft, or conspiracy to commit grand theft.

You must research the laws and determine what statutes are applicable to your case. Once you determine the statutes you’ll be using, it’s important to determine what degree of the crime is applicable. For instance, in Florida, an offense will be charged as Grand Theft in the First Degree if the property that was stolen is valued at $100,000 or more. An offense will be charged as Grand Theft in the Second Degree if the property that was stolen is valued at $20,000 or more, but less than $100,000.

For instance, in Florida, an offense will be charged as Grand Theft in the First Degree if the property that was stolen is valued at $100,000 or more. An offense will be charged as Grand Theft in the Second Degree if the property that was stolen is valued at $20,000 or more, but less than $100,000.

Based on what you’re asking for in restitution, that could change the statute you want to use significantly, and in turn, will also change the prevailing penalty. FindLaw has an excellent website that goes over all of the insurance fraud statutes by state.

Loss and Restitution

In this section, you’ll be defining how much money was allegedly bilked from the insurance company and what you would like to see in restitution be returned back to your client.

These amounts may vary greatly, some over $100,000, some just a few hundred dollars. No matter the amount, it’s important that you don’t lose sight of the fact the reason you’re submitting the referral isn’t just punitive in nature. You want your client to be made whole again and get the money back they lost.

Why not just sue them and get a judgment? Good question. Because insurance fraud is stealing and against the law. Also, if you are able to tie the restitution to their possible conviction and sentencing, even if the sentence is just probation, you will have a much greater chance of getting the money back than if a civil court issues a judgment. If they default on payments during the probationary period, they violated the terms of their probation and may have to serve the original sentence in its entirety.

Are you aware, on a national level, if insurance fraud was a business, it would be a Fortune 500 company, according to national reports? It is, by all accounts, the second largest economic crime in America; only tax evasion exceeds it.

Witness List

You will be required to submit a list of prospective witnesses. A witness list is comprised of the players involved in the case. It’s proper to provide their names, addresses, and contact information, along with what role they played in the claim.

If either party desires the testimony of a given witness, that party must take the appropriate steps to obtain the witness’s presence at an appropriate time and in an appropriate fashion. Failure to include a witness on the required witness lists may result in that witness’ testimony being prohibited at trial or other sanctions. Court rules vary, so requirements in your jurisdiction should be consulted.

Exhibit List

An exhibit is a document, record or another tangible object formally introduced as evidence in the court. Your exhibit list is a list of such Exhibits a party wants to produce before the court to prove a case.

It’s best to label each Exhibit first, then produce a reference sheet (Exhibit list) to add to your referral. Trying to label and record the Exhibits as you go can get confusing and will take much longer.

Remember, as you collect the evidence you may require a chain of custody form.


Here’s my typical conclusion, “Based upon the foregoing, it is respectfully requested the findings are made as set forth above.” No reason to be wordy here as you’ve already outlined your entire case in detail throughout the referral.

Final Thoughts

I’ve submitted close to 100 insurance fraud referrals in my time and I still learn new things simply because there are so many laws, so many variables, and things are ever-changing in this environment. Once you get the first one under your belt, the rest became easier and easier and it’s rewarding to follow these assignments through to the end.

If you have any questions, or I can be of assistance, email me at

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