Nebraska Insurance Fraud: Laws, Penalties, and Reporting

Insurance fraud touches every policyholder in Nebraska by driving up premium costs and undermining trust in the insurance system. This guide explains how Nebraska law defines fraudulent insurance acts, outlines criminal penalties, and shows both consumers and insurers how to respond when they suspect fraud.

Understanding Insurance Fraud in Nebraska

Under Nebraska law, a fraudulent insurance act is more than simply telling a small lie on a claim form. It involves deliberate deception in connection with an insurance policy or benefit, carried out with the intent to obtain money or other advantages that are not legitimately owed.

Nebraska’s Insurance Fraud Act is primarily codified in the insurance code at Neb. Rev. Stat. § 44-6601 to § 44-6608, and mirrored in the criminal code at § 28-631, which sets out specific offenses and corresponding penalties. Together, these statutes define what conduct qualifies as insurance fraud and how severely it is punished.

• Insurance Fraud Act (Title 44): Focuses on enumerating fraudulent insurance acts, including misrepresentation, false claims, and deceptive practices involving insurers.
• Criminal Code (Title 28): Adopts the same list of acts and grades them according to the value involved, following Nebraska’s theft penalty structure.

What Counts as a Fraudulent Insurance Act?

Nebraska law lists numerous ways a person or entity can commit a fraudulent insurance act. Although the exact statutory language is technical, the underlying themes are straightforward: knowingly providing false, incomplete, or misleading information in order to obtain or avoid paying insurance benefits.

Common Fraud Scenarios Recognized by Nebraska Law

• False or Exaggerated Claims: Submitting a statement or documentation in support of a claim while knowing it contains false, incomplete, or misleading information about a material fact (for example, inflating repair costs or claiming damage that never occurred).
• Assisting or Conspiring in Fraud: Helping someone else prepare or present a false statement to an insurer, such as cooperating with a provider or contractor to overbill an insurance company.
• Misrepresenting Death or Disability: Falsely certifying or reporting that a policyholder or covered person has died or become disabled to trigger life or disability benefits.
• False Entries in Regulatory Documents: Knowingly making false entries in documents required by the Nebraska Department of Insurance, including filings, statements, or reports submitted to the department.
• Premium Avoidance Schemes: Providing inaccurate information about employee numbers, location, or classification in order to lower workers’ compensation premiums.
• Discount Medical Plan Abuse: Operating as a discount medical plan organization without complying with legal requirements, or collecting membership fees while intentionally failing to provide promised benefits.

Importantly, Nebraska law reaches both individuals and entities. Policyholders, insurance agents, brokers, insurers, and third-party service providers can all be liable if they knowingly participate in fraudulent schemes.

Felony and Misdemeanor Penalties for Insurance Fraud

Nebraska grades insurance fraud offenses according to the amount of money involved, using the same structure that applies to theft offenses. This means that even relatively small fraudulent acts can lead to criminal charges, and larger schemes quickly escalate into serious felonies.

Penalty Structure Based on Dollar Amount

These gradations apply to many of the core fraudulent acts described in the statutes, such as submitting false claim information or assisting in the preparation of fraudulent statements.

Some acts enumerated in the Insurance Fraud Act, such as certain regulatory filing violations or discount medical plan fraud, are expressly classified as Class IV felonies even without reference to a specific dollar threshold.

Additional Civil and Administrative Consequences

Criminal penalties are only part of the picture. Nebraska’s enforcement framework allows for civil and administrative responses, especially when the Nebraska Department of Insurance is involved.

• Restitution Orders: Courts may require offenders to repay fraudulently obtained benefits to insurers or state programs.
• Administrative Sanctions: The Department of Insurance can pursue license suspension, revocation, or other discipline against insurance professionals involved in fraudulent acts.^[10]
• Civil Fines: Separate from criminal fines, civil penalties may be imposed for specific regulatory violations under the insurance code.

The Role of the Nebraska Insurance Fraud Prevention Division

To address insurance fraud systematically, Nebraska created the Insurance Fraud Prevention Division within the Department of Insurance. This division coordinates prevention, investigation, and referrals for prosecution.

Mission and Responsibilities

• Detecting Fraud: Identifying suspicious patterns, complaints, and cases involving potential fraudulent insurance acts.
• Developing Prevention Programs: Educating insurers, agents, and the public about common fraud schemes and warning signs.
• Investigating Complaints: Reviewing and investigating referrals and reports from insurers, consumers, and other sources.
• Supporting Prosecution: Working with law enforcement and prosecutors to pursue criminal charges where appropriate.
• Restitution Efforts: Assisting in efforts to recover illegally obtained benefits and reduce premium dollars spent on fraudulent claims.

The division’s work aims to protect Nebraska policyholders by ensuring that premium payments go toward legitimate claims rather than fraudulent activity.

Mandatory Reporting Obligations for Insurers and Producers

Nebraska law does not leave detection of insurance fraud to chance. Insurance companies and licensed producers (agents, brokers) have specific duties to report suspected fraud to the Department of Insurance.^[10]

Key Reporting Requirements

• Insurance Companies and Producers: Must promptly report facts and circumstances indicating a violation of the Insurance Fraud Act or other fraud-related provisions to the Nebraska Department of Insurance.^[10]
• Continuing Duty: Insurers are under a continuing duty to submit additional reportable information discovered later, not just the initial suspicion.
• Confidentiality: Reports and the identity of informants may be kept confidential by the Department, which helps encourage reporting without fear of retaliation.

Failure to comply with mandatory reporting requirements can itself have regulatory consequences, including potential disciplinary action against the insurer or producer.

How Consumers Can Report Suspected Insurance Fraud

Consumers also play a critical role in Nebraska’s fraud prevention system. If you believe you have encountered insurance fraud—either against you, your insurer, or a state insurance program—you can submit a report to the Nebraska Department of Insurance.

Typical Consumer Reporting Process

• Gather Documentation: Collect copies of policies, claim forms, correspondence, invoices, and any other materials that support your suspicion.
• Describe the Suspicious Activity: Provide a clear narrative explaining what happened, who was involved, and why you believe fraud may have occurred.
• Submit to the Department of Insurance: File your report using the department’s referral mechanisms (which may include dedicated forms, mail, or telephone hotlines, depending on current procedures).

Consumers who report suspected fraud help protect both themselves and other Nebraskans by supporting investigations and discouraging future misconduct.

Special Focus: Unemployment Insurance Fraud in Nebraska

While general insurance fraud covers areas like property, auto, health, and life insurance, Nebraska also confronts unemployment insurance fraud under separate laws governing the joint federal–state unemployment system.

Unemployment insurance fraud occurs when claimants, employers, or other actors intentionally violate state unemployment rules to receive benefits they are not entitled to.

Examples of Unemployment Insurance Fraud

• Claimant Misrepresentation: Failing to report work or earnings while receiving unemployment benefits, or claiming benefits while not meeting work-search requirements.
• Employer Schemes: Providing false wage or separation information to help an employee obtain benefits improperly.
• Identity Theft: Using another person’s identity to collect unemployment benefits.

Consequences for Unemployment Insurance Fraud

Penalties for unemployment insurance fraud in Nebraska can include:

• Up to 90 days in jail per count of fraud.
• Additional fines—at least 15% of the overpaid benefit amount, as required by federal guidelines.
• Restitution, meaning repayment of unlawfully received benefits.
• Garnishment of state income tax refunds.
• Loss of eligibility for future unemployment benefits, sometimes permanently.

The U.S. Department of Labor has reported notable improper payment rates for unemployment benefits nationally and in Nebraska, underscoring the importance of robust fraud prevention and enforcement mechanisms.

Practical Tips to Avoid Participating in Insurance Fraud

Because insurance forms and claims can be complex, some policyholders may unintentionally come close to fraudulent conduct. The following practical tips help Nebraskans stay on the right side of the law.

• Be Accurate and Complete: Always provide truthful, thorough information when applying for insurance or filing claims. If you are unsure about how to describe a loss, ask your insurer or agent for guidance.
• Keep Records: Maintain copies of applications, policy documents, receipts, and communications with insurers so you can verify information if questions arise.
• Avoid Exaggeration: Do not inflate values or add damage that did not occur. Nebraska law treats intentional exaggeration for financial gain as fraud.
• Question Unusual Requests: If a contractor, provider, or agent suggests a strategy that sounds like “working the system” or hiding facts from the insurer, seek independent advice or contact the Department of Insurance.
• Report Suspicions: If you encounter activity that appears fraudulent, report it promptly to protect yourself and other policyholders.

Frequently Asked Questions (FAQs)

1. Is every mistake on an insurance form considered fraud?

No. Nebraska’s Insurance Fraud Act focuses on knowing and intentional misrepresentation or concealment of material facts. An honest mistake, promptly corrected, is generally not treated as a fraudulent insurance act. However, repeated inaccuracies or deliberate omissions can raise suspicion and lead to investigation.

2. Can insurance companies be liable for fraud too?

Yes. Nebraska’s statutes apply to both individuals and entities, including insurers, agents, brokers, and other participants in the insurance system. If a company intentionally falsifies information, engages in deceptive practices, or fails to comply with required disclosures, it can face administrative, civil, and criminal consequences.

3. Who enforces Nebraska’s insurance fraud laws?

Enforcement is shared. The Nebraska Department of Insurance, through the Insurance Fraud Prevention Division, investigates suspected fraudulent acts and may refer cases to law enforcement or prosecutors. Criminal charges and sentencing are handled through the state’s courts, applying penalty structures in the criminal code.

4. What should I do if I suspect my claim adjuster or agent is acting improperly?

You can raise concerns directly with the insurer and, if not resolved, submit a complaint or fraud referral to the Nebraska Department of Insurance. Provide as much documentation as possible, including dates, names, and copies of communications.^[10]

5. How does insurance fraud affect my premiums?

Fraudulent claims increase the overall costs insurers must cover. Those costs are ultimately reflected in premiums. Nebraska’s Insurance Fraud Act and the work of the Insurance Fraud Prevention Division are aimed at reducing premium dollars spent on fraudulent claims, helping stabilize costs for honest policyholders.

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medha deb

 

Medha Deb is an editor with a master's degree in Applied Linguistics from the University of Hyderabad. She believes that her qualification has helped her develop a deep understanding of language and its application in various contexts.

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