Understanding Delaware Insurance Fraud Laws

Insurance fraud is a serious offense in Delaware, with consequences that reach beyond criminal punishment to civil penalties, regulatory action, and long-term financial damage. Delaware has developed a detailed legal framework to detect, deter, and punish fraudulent acts involving insurance applications, claims, and related documents.

This guide explains how Delaware law defines insurance fraud, how the state’s Insurance Fraud Prevention Act works, what penalties apply, and what policyholders and insurers should know to remain compliant.

1. Why Delaware Treats Insurance Fraud So Seriously

Insurance functions on trust: applicants must provide truthful information, and claimants must accurately report losses. When individuals or businesses manipulate this process, the cost of fraud is ultimately passed on to honest policyholders through higher premiums and reduced benefits.

Delaware law recognizes that fraud can occur at multiple points in the insurance relationship, and therefore addresses:

• False statements in insurance applications
• Misrepresentation of facts in claims for payment or benefits
• Fabricated or altered supporting documentation
• Misleading certificates of insurance issued to third parties

By codifying these behaviors as fraudulent, Delaware aims to discourage misconduct and strengthen confidence in its insurance markets.

2. Key Legal Sources Governing Insurance Fraud in Delaware

Two primary bodies of law shape Delaware’s insurance fraud landscape:

• Title 18 of the Delaware Code (Insurance Code) – Contains the Delaware Insurance Fraud Prevention Act and defines what constitutes a fraudulent insurance act, along with administrative penalties and reporting duties.
• Title 11 of the Delaware Code (Criminal Code) – Specifically Section 913, which makes certain insurance fraud conduct a criminal offense classified as a class G felony.

Together, these titles allow the state to respond to fraud both criminally and administratively, empowering prosecutors, the Insurance Commissioner, and the Insurance Fraud Prevention Bureau to act.

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3. What Counts as Insurance Fraud in Delaware?

Delaware law focuses on intentional deception aimed at gaining an insurance benefit or affecting insurance rights. Fraud generally requires:

• A knowing act or omission
• Intent to injure, defraud, or deceive an insurer or claimant
• False, incomplete, or misleading information about a material fact

Under the Insurance Code, it is a fraudulent insurance act to knowingly do any of the following:

• Submit or cause to be submitted a statement in connection with an insurance application that contains false, incomplete, or misleading information about a material fact.
• Prepare or submit a statement, including computer-generated documents, in support of a claim for payment or benefits that misstates material facts.
• Assist, abet, solicit, or conspire with another person to submit such a deceptive application or claim.
• Issue or demand a certificate of insurance that inaccurately describes coverage, limits, or terms.

On the criminal side, Title 11 focuses specifically on claims-related fraud. A person commits insurance fraud when they submit or help submit a claim containing knowingly false or misleading information about a material fact in order to obtain benefits.

4. Criminal Liability: Insurance Fraud as a Class G Felony

Under Title 11, Section 913, certain insurance fraud conduct is treated as a felony offense. The statute provides that an individual is guilty of insurance fraud if, with the intent to defraud or deceive an insurer, they:

• Present or cause to be presented a written or oral statement in support of a claim, knowing the statement contains false, incomplete, or misleading information about a material fact; or
• Assist or conspire with another to prepare such a statement for submission to an insurer.

Insurance fraud under this provision is classified as a class G felony, which carries the potential for imprisonment, fines, and a permanent criminal record. Delaware also requires claim forms to contain a warning statement explaining that knowingly submitting false information is a felony, but importantly, the absence of this warning is not a defense.

5. Civil and Administrative Consequences Under the Insurance Code

In addition to criminal charges, fraudulent insurance acts may lead to administrative enforcement by the Delaware Insurance Commissioner and civil liability under Title 18.

Examples of non-criminal consequences include:

• Administrative penalties – The Insurance Commissioner may impose monetary penalties for violations of the Insurance Fraud Prevention Act and related provisions.
• Cease-and-desist orders – Individuals or entities engaging in unfair, deceptive, or fraudulent insurance practices can be ordered to stop and may face additional sanctions if they do not comply.
• Denial of coverage – Misrepresentation in an application can allow an insurer, under certain conditions, to deny claims, rescind a policy, or adjust premiums if the misrepresented facts were material to the risk.

These civil and regulatory tools complement criminal prosecution by allowing the state and insurers to address fraud even where criminal liability is not pursued or proven beyond a reasonable doubt.

6. The Delaware Insurance Fraud Prevention Act and the Fraud Prevention Bureau

The Delaware Insurance Fraud Prevention Act, found in Title 18, creates a dedicated infrastructure to identify and pursue insurance fraud. A central feature of this framework is the Insurance Fraud Prevention Bureau, an office within the state’s Department of Insurance that receives reports of suspected fraud and coordinates investigations.

Key components of the Act include:

• Definition of fraudulent insurance acts and applicable penalties
• Procedures for referrals and investigations
• Mandatory reporting requirements for insurers
• Civil immunity for good-faith reporters of suspected fraud

The Act is designed to ensure that suspected insurance fraud does not go unreported and that responsible parties can be held accountable.

7. Mandatory Reporting Duties for Insurers

Delaware places a specific obligation on insurers to report suspected fraud. Under the Insurance Code:

• Any insurer that has a reasonable belief that insurance fraud is being or has been committed must report the suspected fraud to the Insurance Fraud Prevention Bureau.
• Insurers must provide all requested information related to the suspected fraudulent act, including documentation and contact information for relevant personnel.

The Bureau encourages use of the National Association of Insurance Commissioners’ Online Fraud Reporting System, and also provides forms and procedures for direct reporting to the Delaware Department of Insurance. Insurers are instructed to clearly indicate whether a referral is for information only or for active investigation, to avoid unnecessary follow-up.

8. Protections for Individuals Who Report Suspected Fraud

To encourage reporting, Delaware law provides immunity from civil liability for individuals who report suspected insurance fraud in good faith to the Bureau. This immunity typically applies to claims such as libel or slander related to the report.

In practical terms, this means:

• Employees of insurers can share information about suspected fraud without fear of being sued for defamation, as long as the report is made honestly and without malice.
• Other individuals who possess relevant information can assist investigations, knowing they are protected when acting in good faith.

These protections are intended to ensure that fear of civil lawsuits does not become an obstacle to detecting and addressing insurance fraud.

9. Examples of Conduct That May Constitute Insurance Fraud

While each case depends on specific facts, the following scenarios illustrate conduct that could be considered insurance fraud under Delaware law if done knowingly and with fraudulent intent:

• Inflating the value of damaged property in a homeowners claim and submitting documentation that exaggerates the loss.
• Staging a car accident and submitting medical or repair bills for injuries or damage that did not occur.
• Failing to disclose prior claims or serious health conditions on an application for life or health insurance when those facts are material to the risk.
• Issuing a certificate of insurance to a contractor that misrepresents limits of liability or the existence of coverage.
• Creating or altering invoices and repair estimates to obtain higher claim payments.

Conversely, honest disagreements about claim value, unintentional errors, or misunderstandings do not automatically constitute fraud; the legal focus remains on knowing, intentional deception.

10. Application Misrepresentation and Its Impact on Coverage

Fraud is not limited to claims. Misrepresentations made during the application process can affect whether a policy is issued or paid. Under Delaware law, an insurer may be able to deny recovery if an insured’s misrepresentation was:

• Fraudulent, meaning knowingly false with intent to deceive
• Material to the acceptance of the risk or hazard assumed by the insurer
• Of a nature that, if the truth had been known, the insurer would not have issued the policy or would have issued it under different terms.

For policyholders, this underscores the importance of providing accurate and complete information when applying for coverage. For insurers, it provides a legal basis to challenge claims where the underlying policy was obtained through deception.

11. How Delaware’s Approach Compares to Other Fraud Contexts

Although this guide focuses on insurance fraud in general, Delaware also deals with specific forms of insurance-related fraud, such as unemployment insurance fraud. For example, individuals who unlawfully receive unemployment benefits in Delaware may face prison time, fines equal to 15% of the overpayment, and restitution obligations. These penalties reflect broader state policy that fraud against public or private benefit systems is unacceptable.

While the statutes and enforcement mechanisms differ across types of insurance, the core principle remains consistent: intentional deception to obtain benefits is punished and may result in criminal, civil, and administrative consequences.

12. Practical Steps to Avoid Insurance Fraud Risk

Both policyholders and insurers can take proactive steps to minimize the risk of fraudulent conduct or accusations of fraud.

These measures help ensure compliance with Delaware law and support fair, efficient processing of legitimate claims.

13. Frequently Asked Questions About Delaware Insurance Fraud

Is every inaccurate statement on an insurance form considered fraud?

No. Delaware law targets statements that are knowingly false, incomplete, or misleading and made with intent to injure, defraud, or deceive. Unintentional mistakes without fraudulent intent generally do not meet the legal standard for insurance fraud.

Can insurers be penalized for failing to report suspected fraud?

Insurers have a statutory duty to report suspected fraudulent insurance acts when they reasonably believe fraud is being or has been committed. Failure to comply with reporting requirements may expose insurers to regulatory scrutiny or administrative penalties under the Insurance Code.

What should I do if I suspect someone is committing insurance fraud?

Members of the public and industry professionals can report concerns to the Delaware Department of Insurance or the Insurance Fraud Prevention Bureau. Individuals who report suspected fraud in good faith are protected from certain civil liability under Delaware law.

Does the absence of a warning on a claim form protect me from prosecution?

No. Delaware’s criminal statute explicitly states that the lack of a warning statement on a claim form is not a defense to prosecution for insurance fraud.

Can a policy be voided if I made a misrepresentation when applying?

Depending on the circumstances, a material, fraudulent misrepresentation in an application can allow an insurer to deny coverage or rescind the policy if the misstatement affected the insurer’s decision to issue the policy or its terms.

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Author

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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