Pet insurance fraud is knowingly filing a false claim on a pet insurance policy with an intent to defraud. It is a type of insurance fraud and a criminal offense. Depending on the amount, it can be charged as a felony.
In California, a conviction for pet insurance fraud can carry penalties of up to:
- 5 years in jail,
- $50,000 in fines, or double the amount of the fraud, and/or
- restitution payments.
What is pet insurance?
Pet insurance provides financial coverage for a pet's healthcare needs. It is similar to a person's healthcare insurance. Pet owners with pet insurance coverage can have their insurer pay a portion of their veterinarian bills. In exchange, pet owners pay a regular insurance premium.
The logistics of pet insurance are different from a human being's health insurance, though.
A person's health insurance coverage will step in at the point of payment. Health insurance will pay for a part of the medical bill as soon as the bill becomes due. The bill will often reflect this amount as having already been paid.
Pet insurance, on the other hand, requires the pet owner to pay the bill up front in full. The owner then files a claim with the pet insurance company. The insurer will then refund the portion of the veterinarian's bill that is covered by the company's policy.
Pet insurance does not cover a pet's liability costs. When a pet hurts someone else, the owner's liability insurance provides the coverage. This usually falls under a homeowner's insurance policy.
How can a pet insurance policy be defrauded?
Most pet insurance fraud happens in 1 of 2 ways:
- filing fraudulent claims for coverage from the insurer, or
- falsifying information on an application for pet insurance coverage.
In either case, an actual loss is not necessary. The false claim does not need to succeed in getting an insurance payment. You can be liable for pet insurance fraud, even if you file a fraudulent claim that gets denied.
Filing a false claim can happen at any point after the insurance coverage has begun. This involves making a claim for insurance coverage, knowing that the claim is incorrect. False pet insurance claims include:
- exaggerating the costs of the pet's veterinarian bill,
- creating a fake vet bill,
- filing multiple claims to cover the same bill,
- asking for coverage for a vet bill that was never paid, and
- filing a claim for a procedure or medication that was never received or paid for.
Example: Greta brings her cat to the vet for a checkup that costs $300. She files a claim with her pet insurance company for $500.
Pet insurance fraud can also happen at the application process. This can happen by knowingly filing an application form that contains false information. This includes lying about the pet's:
- location, and
- preexisting health conditions.
Example: Mike applies for pet insurance for his dog, a Labrador Retriever named Peanut. To save money, he claims that Peanut is a parakeet rather than a dog on the application.
Is it a crime?
Pet insurance fraud is a crime. It is a type of insurance fraud, which is a white collar crime.
Most states do not have a statute that explicitly covers pet insurance fraud. In these states, though, laws covering regular insurance fraud are broad enough to include pet insurance.
For example, California Penal Code 550 PC forbids knowingly filing fraudulent insurance claims. While this is usually in the context of auto insurance, the broad language of the statute applies to other forms of insurance, as well.1 This includes pet insurance.
What are the penalties?
The penalties of a conviction for pet insurance fraud can depend on the amount at issue. Small amounts can be a misdemeanor. Larger amounts are often felonies.
In California, pet insurance fraud is a felony. The penalties of a conviction are:
- 2, 3, or 5 years in jail,
- Up to $50,000 in fines, or up to double the amount defrauded, whichever is greater, and
Your pet insurance claim will also be denied. If the fraud was detected after the payment was made, you will have to pay it back in the form of restitution.
There can be collateral consequences of a prior conviction for pet insurance fraud, as well. Employers may see a pet insurance fraud conviction as a sign of dishonesty. Financial institutions and insurance companies may refuse to provide you their services.
California Penal Code 550(a)(1): “It is unlawful to do any of the following,… Knowingly present or cause to be presented any false or fraudulent claim for the payment of a loss or injury, including payment of a loss or injury under a contract of insurance”.
California Penal Code 550(c)(1).