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ItalianPrincess1217's avatar

Would this be considered insurance fraud? (See details)

Asked by ItalianPrincess1217 (11187points) February 15th, 2013 from iPhone

My car was totaled in an accident. The other guy’s insurance company wrote me a check for the blue book value of the car. Unfortunately it wasn’t enough to pay off what I owe on the car. If I choose to keep the check and not pay the dealership, is this insurance fraud or illegal in any way? Keep in mind I am filing chapter 7 bankruptcy this month also (if this has any effect at all). I just don’t want to do anything that will put me in jail. I also don’t want to give my only money to a dealership and still owe them thousands more on a car that I don’t even have anymore.

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11 Answers

muhammajelly's avatar

@ItalianPrincess1217 I don’t think it is insurance fraud but you are defrauding the dealership. Bankruptcy court may have some requirements for your reporting of this and they may have their own ideas on your conduct.

zenvelo's avatar

It’s not insurance fraud as far as I know, your claim was legit and what you do with the money is your business.

That being said, you could be in a world of hurt for not paying off the car or trying to walk away from the car loan.

Normally, the other guy’s insurance should be dealing with your insurance, which also knows that their is a different owner. You might lose insurance if your insurance knows you didn’t go through them. And you might never get another car loan.

tedibear's avatar

Why did the insurance company write you the check? The finance company/bank/lender is the lien (and therefore title) holder and that is who they should have paid. And yes, as @zenvelo said, they should have worked through your insurance company, not you.

CWOTUS's avatar

As others have said, the insurer who wrote a check “to you” is in the wrong. But if you don’t transfer that money to the lien holder, then you will be in the wrong.

The wrong would not be “insurance fraud”, assuming that the accident really was an accident, and not some kind of staged event to total the car. So we’ll assume it was an “honest” accident, and the insurer only acted improperly (not illegally, I think) in writing the check payable to you.

The wrong that you’d be in is in not making the honest attempt to rectify the insurer’s mistake and withholding that money from the lien holder. Presumably, if the insurer had acted correctly, the lien holder would have been compensated for the loss regardless of your bankruptcy status. That is, the lien holder would have received whatever cash was available from the insurer – which you never would have seen or had in your possession – and your bankruptcy declaration (whenever it occurs) could have discharged the remainder of the debt.

If you attempt to withhold the cash now, you may invite a suit from the lien holder, and that may come with other financial penalties or sanctions, in addition to the court and attorney costs that you would incur. I’d make the check payable to the lien holder and present it in person (with or without a story about what’s down the road regarding the non-payment of the balance that they should not expect), but at least they’d know that you were honest about not keeping what was clearly not yours.

Adirondackwannabe's avatar

The insurer should have issued a check payable to you and the lien holder. I would really suggest checking with your attorney before cashing the check. I would expect the bankruptcy court would take a dim view of you casing the check and might not discharge the car loan.

ItalianPrincess1217's avatar

@CWOTUS I assure you it was an “honest” accident. I didn’t pay off some construction truck to side swipe me and leave me without a vehicle for some small check that wasn’t nearly enough to cover what was owed. I promise. But in any matter, I only need the legal facts here. Again, I’m filing for bankruptcy this month so as far as the lien holder coming after for me for the money owed on the car in the future, it’s not a concern. I only want to make sure the insurance check does not have to be used to pay off my car balance (or a portion of it in this case). I am not sure why the insurance company issued me the check and not the lien holder. It was never even questioned.

Tropical_Willie's avatar

@ItalianPrincess1217 Sounds like you should have had your insurance company and bankruptcy lawyer tied in to the pay-out on this check. Ooopsy – - once you cash the check you’ve gone off the gang plank.

marinelife's avatar

Don’t cash the check. Get a lawyer and fight for the insurance company to pay at least what you owe on the car, Don’t keep the money. Yes, it would be fraud.

Pachy's avatar

“Fraud” or not, I think the fact that you asked the question indicates you know it’s not the right thing to do.

dabbler's avatar

Not insurance fraud, loan fraud. You stopped paying a loan you agreed to.
Possibly Bankruptcy fraud if you try to hide the insurance money paid to you when you go to court for that.

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