Top 5 Misconceptions About Criminal Insurance Fraud in New Jersey

Insurance fraud might seem like a victimless crime or a minor misstep, but in New Jersey, it is taken very seriously, and the consequences can be life-altering.

Many people do not realize they are crossing a legal line until they are already facing an investigation. A seemingly harmless exaggeration on a claim, an omission that feels inconsequential, or a misunderstanding about what constitutes fraud can quickly escalate into criminal charges. Ignorance of the law is not a defense to fraud.

The problem is that misconceptions about insurance fraud are widespread. These misunderstandings can lead people to make decisions that put them at serious legal risk, sometimes without even realizing it until investigators come knocking.

Why misunderstanding insurance fraud can lead to criminal charges

Insurance fraud in New Jersey is governed primarily by N.J.S.A. 2C:21-4.6, which makes it illegal to knowingly make a false, fictitious, fraudulent, or misleading statement of material facts, or omits a material fact, to obtain insurance benefits or avoid obligations.

What makes these cases particularly challenging is that they may involve both criminal and civil enforcement. The Office of Insurance Fraud Prosecutor (OIFP) has its own team of detectives and prosecutors who investigate and prosecute criminal cases. Additionally, the New Jersey Department of Banking and Insurance (DOBI) handles civil and administrative fraud matters. Both of these offices frequently overlap, and it is important to have an attorney who knows how to navigate both the civil and criminal implications of insurance fraud.

If OIFP launches a criminal investigation, you may end up facing potential criminal charges, which can carry prison time, substantial fines, restitution obligations, professional licensing restrictions, and a permanent criminal record.

The misconceptions in this article represent the most common ways people unknowingly cross the line from legitimate insurance claim to criminal conduct.

Misconception #1: exaggerating a claim is not a crime

One of the riskiest misconceptions is that padding a claim or exaggerating damages is just a common way of “working the system” rather than committing a crime.

Under New Jersey law, knowingly inflating the value of a claim is insurance fraud, whether you are exaggerating by $500 or $50,000. The statute does not require that your entire claim be fraudulent, only that you knowingly made a false statement about a material fact.

If you are in a legitimate accident but then claim pre-existing vehicle damage occurred during the collision, or if you inflate the value of personal items that were in the car, you have crossed the line into criminal conduct. The same applies to homeowners’ insurance; if you claim that a covered event damaged items that were already broken, that constitutes fraud.

The key element at play is intent. Prosecutors must prove you acted knowingly, meaning that you were aware you were making false statements. This is different from an honest mistake or a good-faith disagreement about the value of property. But once investigators believe you acted deliberately, even small exaggerations can lead to serious charges.

Misconception #2: only big scams count as insurance fraud

Many people assume insurance fraud charges are reserved for elaborate schemes, staged accidents, fake medical clinics, or organized crime rings defrauding insurers out of millions.

New Jersey authorities prosecute insurance fraud across the entire spectrum. Even a single fraudulent act is a third-degree crime, carrying a sentence of up to 5 years in prison and fines of up to $15,000, regardless of the dollar amount involved. If a person commits five or more acts of insurance fraud and if the aggregate value of property, services or other benefit wrongfully obtained or sought to be obtained is at least $1,000, it is a second-degree crime, carrying a sentence of up to 10 years in prison and fines of up to $150,000.

This means inflating a homeowners claim by a few hundred dollars after a storm, or exaggerating injuries from a minor car accident, can result in felony charges. There’s no minimum threshold that makes fraud too small to prosecute.

What’s more, OIFP has made clear that they pursue cases regardless of the amount involved. This is because every fraudulent claim, no matter how modest, can drive up premiums for policyholders.

Misconception #3: it is only a civil matter, not a criminal one

Some people believe that insurance fraud is merely a civil dispute between them and their insurance company, something that might result in a denied claim or policy cancellation, but nothing more serious.

The truth is that insurance fraud in New Jersey is a criminal offense under state law. Insurance companies establish special investigation units that investigate suspected fraud and are required to refer suspicious claims to OIFP.

Once a referral is made, OIFP’s investigators can launch a full criminal investigation. OIFP has dedicated detectives who use the same investigative techniques as any law enforcement agency, such as interviews, surveillance, document analysis, and forensic accounting.

The civil consequences are significant too, including denied claims, policy cancellation, and potential civil lawsuits, but they’re in addition to, not instead of, criminal charges. Under the New Jersey Insurance Fraud Prevention Act, you may also face civil penalties, including treble damages (three times the amount of the fraud).

Misconception #4: you can fix it by paying the money back

When people realize they may have made false statements on an insurance claim, they often assume they can resolve the situation by simply withdrawing the claim or paying back any benefits received.

However, insurance fraud is defined as knowingly making false statements, not by actually receiving the benefits. Once you have submitted fraudulent information or made false statements to an insurer, the crime has been committed.

The fact that you later try to correct the situation or return money does not erase the criminal conduct. Paying restitution may be considered a mitigating factor by the prosecution and courts when determining appropriate penalties. But it does not provide immunity from prosecution or guarantee that charges will be dropped.

Related charges may also still apply. If your fraudulent claim involved falsifying documents, wire fraud (if you used electronic communications), or other white-collar crimes, paying back the insurance benefits does not address these separate criminal violations.

Misconception #5: you do not need a lawyer unless you are charged

Perhaps the most costly misconception is waiting until formal charges are filed to seek legal representation.

By the time you are formally charged with insurance fraud, investigators have likely been building a case against you for weeks or months. They have gathered documents, conducted interviews, and assembled evidence. At that point, many of your best defensive opportunities have already passed.

The critical period for protecting your rights is before charges are filed. This is when investigators may contact you for interviews, request documents, or ask you to provide statements. What you say and do during this phase can determine whether charges are ultimately filed.

An experienced attorney can evaluate whether you should speak with investigators at all, protect you from making statements that could be used against you, negotiate with prosecutors early in the investigation, and preserve evidence to build your defense. In some situations, early intervention by counsel can prevent charges from being filed.

How to protect yourself if you are under investigation for insurance fraud

If you are being investigated for insurance fraud or suspect you might be, take these critical steps immediately:

Retain experienced legal counsel immediately. Your attorney will review the circumstances of your claim, evaluate the strength of the potential case against you, and develop a strategy for protecting your interests.
Do not speak with investigators without an attorney present. You have the constitutional right to remain silent and to have an attorney present during any questioning. Exercise these rights.
Do not destroy or alter any documents. Preserve all documentation related to your insurance claim. Destroying or altering evidence can lead to additional criminal charges for obstruction of justice or evidence tampering.
Do not discuss the case with anyone except your attorney. Conversations with friends, family members, or coworkers are not protected by the attorney-client privilege and could be used against you.

Consult with an experienced New Jersey insurance fraud attorney

Insurance fraud charges in New Jersey carry serious consequences that extend far beyond the immediate criminal penalties. A conviction can result in prison time, substantial fines, restitution obligations, and a permanent criminal record that affects employment, professional licenses, and future opportunities.

At Dughi, Hewit & Domalewski, our criminal defense attorneys understand the complexities of insurance fraud cases and the aggressive approach prosecutors take in pursuing these charges. We know how OIFP investigations work, how prosecutors build their cases, and the most effective strategies for protecting our clients’ rights and futures. Our attorneys have handled cases of insurance fraud in both the civil and criminal context.

If you are facing an insurance fraud investigation or charges, do not wait to seek legal counsel. The earlier we get involved, the better positioned we are to protect you and achieve the best possible outcome.

Contact Us Today!