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Texas Penal Code

Texas Laws on Insurance Fraud

If you are working with a roofing contractor on an insurance claim, both of you need to know what the law says. Two Texas statutes apply: Penal Code Chapter 35 and Business and Commerce Code Section 27.02. Below is the statutory text with our notes for context.

Bert Roofing project manager reviewing a Texas insurance estimate with a Dallas homeowner

Title 7: Offenses Against Property

Chapter 35: Insurance Fraud

Sec. 35.01. Definitions

In this chapter:

  1. Insurance policy means a written instrument containing the terms of any certificate of insurance, binder of coverage, contract of insurance, benefit plan, nonprofit hospital service plan, motor club service plan, surety bond, cash bond, or any other alternative to insurance authorized by Chapter 601, Transportation Code. The term includes any instrument authorized to be regulated by the Texas Department of Insurance.
  2. Insurer has the meaning assigned by Article 1.02, Insurance Code.
  3. Statement means an oral or written communication or a record or documented representation of fact made to an insurer. The term includes computer-generated information.
  4. Value of the claim means the total dollar amount of a claim for payment under an insurance policy, or, as applicable, the value of the claim determined under Section 35.025.

Sec. 35.015. Materiality

A statement is material for the purposes of this chapter, regardless of the admissibility of the statement at trial, if the statement could have affected:

  1. the eligibility for coverage or amount of the payment on a claim for payment under an insurance policy; or
  2. the decision of an insurer whether to issue an insurance policy.

Sec. 35.02. Insurance Fraud

(a) A person commits an offense if, with intent to defraud or deceive an insurer, the person, in support of a claim for payment under an insurance policy:

  1. prepares or causes to be prepared a statement that the person knows contains false or misleading material information and is presented to an insurer; or
  2. presents or causes to be presented to an insurer a statement that the person knows contains false or misleading material information.

(b) A person commits an offense if, with intent to defraud or deceive an insurer, the person solicits, offers, pays, or receives a benefit in connection with the furnishing of goods or services for which a claim for payment is submitted under an insurance policy.

(c) An offense under Subsection (a) or (b) escalates by claim value:

  • Class C misdemeanor if the value of the claim is less than $50
  • Class B misdemeanor if $50 or more but less than $500
  • Class A misdemeanor if $500 or more but less than $1,500
  • State jail felony if $1,500 or more but less than $20,000
  • Felony of the third degree if $20,000 or more but less than $100,000
  • Felony of the second degree if $100,000 or more but less than $200,000
  • Felony of the first degree if the value of the claim is $200,000 or more, or if an act committed in connection with the offense places a person at risk of death or serious bodily injury

(e) The court shall order a defendant convicted of an offense under this section to pay restitution, including court costs and attorney's fees, to an affected insurer.

Sec. 35.025. Value of Claim

If the value of a claim is not readily ascertainable, the value of the claim is the fair market value, at the time and place of the offense, of the goods or services that are the subject of the claim, or the cost of replacing the goods or services that are the subject of the claim within a reasonable time after the claim. On a roof claim that value comes from a line-item estimate, usually written in Xactimate, the software adjusters use.

Texas Business and Commerce Code, Sec. 27.02: Certain Insurance Claims for Excessive Charges

(a) A person who sells goods or services commits an offense if:

  1. the person advertises or promises to provide the good or service and to pay all or part of any applicable insurance deductible or a rebate in an amount equal to all or part of any applicable insurance deductible;
  2. the good or service is paid for by the consumer from proceeds of a property or casualty insurance policy; and
  3. the person knowingly charges an amount for the good or service that exceeds the usual and customary charge by an amount equal to or greater than all or part of the applicable insurance deductible paid by the person to an insurer on behalf of an insured or remitted to an insured by the person as a rebate.

(b) A person insured under a property or casualty insurance policy commits an offense if the person submits a claim under the policy based on charges that are in violation of Subsection (a), or knowingly allows such a claim to be submitted, unless the person promptly notifies the insurer of the excessive charges.

(c) An offense under this section is a Class A misdemeanor.

Update: Texas Closed the Loophole

Texas has now passed legislation that makes the payment of a deductible, no matter how it is structured, illegal. While the practice was always shady, the law is now very specific. Visit dontfraudmytexas.com for the campaign run by the Texas Department of Insurance on this issue.

Please Report Insurance Fraud

If a contractor is offering to commit insurance fraud, please report them to the Texas Department of Insurance. You may do so anonymously at 1-800-252-3439.

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