Insurance Fraud - A Costly Con Game

Insurance fraud is the second costliest white-collar crime in the country, surpassed only by tax evasion. According to the Florida Department of Financial Services, it costs the United States $80 billion-plus a year. Florida families pay an additional $1,400 annually in premiums as a result.

City governments are as vulnerable to insurance fraud as any organization. In a March 2014 Baltimore Sun article about the impact of insurance fraud on municipalities, National Insurance Crime Bureau Public Affairs Director Frank G. Scafidi said, “Where there’s money, there’s going to be crime. And where there’s government money, it’s even more.”

Consider these case studies from the Florida League of Cities Special Investigation Unit, which investigates suspected fraud for Florida Municipal Insurance Trust (FMIT) members: 

  • A man claims to have injured his shoulder, neck and back after falling on the ground from a broken swing in a park owned by the City of New Smyrna Beach. He’s later arrested charged with filing a false claim and ordered to pay restitution of $2,395 to the FMIT.
  • An equipment operator for the City of Palm Bay misrepresents prior injuries, treatment and diagnostic studies in deposition and is charged with workers’ compensation fraud. He is ordered to pay $3,046 in restitution to the FMIT.
  • A former custodial worker for the City of Tarpon Springs misrepresents prior problems, complaints and treatment in recorded statements to an authorized health care provider and in deposition. She later pleads guilty to charges of workers’ compensation fraud, is sentenced to five years’ probation and is ordered to pay $10,219.87 in restitution to the FMIT.

While statistics regarding insurance fraud’s specific impact on cities are difficult to pin down, Special Investigation Unit Manager Sean Kucala believes it is a very common problem. Since the SIU’s inception in 1999, its investigative work has resulted in more than $205,000 in restitution that has been paid back to the FMIT. The amount of court-ordered restitution to date is $1.8 million.

“I think most of the time, the majority of claims, especially on the workers’ compensation side, start out as legitimate claims,” Kucala said. “Then someone sees an opportunity to take advantage and prolong things a little bit, or see if they can ramp the claim up (to be) more than it is.”

Then there are the professionals.

“There are people out there that I would classify as professional litigants,” Kucala said. “They float from employer to employer, from carrier to carrier, and try to file claims to make a living.”

There are several red flags that could indicate insurance fraud – for example, claims filed on a Monday. The timing is a little too convenient, because some people who injure themselves over the weekend show up at work Monday and claim the incident happened in the workplace either that morning or the previous Friday. Another possible indicator: The person has a significant history of claims. Under Florida statutes, the Special Investigation Unit can contact the other carriers to discuss those prior claims if there is an open case.

“That’s just a huge red flag for us,” Kucala said. “Most of the other carriers cooperate with us. We find out what their injuries were and then we can start comparing that with what we have.”

While Kucala said that the most referrals by far come from adjusters, the SIU accepts cases from a variety of sources, but the most common source is referrals.

If you suspect fraudulent activity involving a Florida League of Cities or FMIT claim, you can call the Special Investigation Unit hotline at 1-(888) 447-5877 or visit the League’s website at, selecting the “FMIT Insurance” tab at the top, and then selecting the “Report Fraud” tab on the right.

To report suspected fraud on non-FMIT-related cases, call the Florida Division of Insurance Fraud’s hotline at 1-(800) 378-0445 or the Division of Insurance Fraud headquarters at (850) 413-3115. Reports of suspected insurance fraud can also be made online at

Erika Peterman is a freelance writer.

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