The Legal Gymnastics of Faked Car Accidents

Larry Whitcomb and Grant H. Hackley, Esq.

December 20th 2022

Originally published in Claims Litigation Management Magazine (December 2022). Reproduced with permission of the CLM.


As the second consecutive year of the COVID-19 pandemic draws to an arduous close, consumers are feeling greater economic pressure in terms of inflation. Consequently, an unforeseen yet unsurprising biproduct has evolved: a fraudulent insurance epidemic, spurred by staged and fraudulent auto accidents. In 2022, The Coalition Against Insurance Fraud (CAIF) conducted a study estimating the economic harm and impact caused by insurance fraud in the United States. Their findings reveal that insurance fraud can cost U.S. consumers almost $308.6 billion yearly (CAIF, CSU Global, 2022). Meanwhile, the percentage of fraudulent car accidents is estimated by the FBI to contribute $40 billion annually to this deficit. The implications of these numbers highlight the uptick in specific types of vehicular insurance fraud and the challenges legal defense teams face when representing insurance companies against these criminal schemes.

Like in film production, criminals involved in fraudulent or staged auto accidents script details of the accident and the correlated injuries. Some even go so far as to include other willing participants to corroborate stories, be involved in the fraudulent accident, or intentionally harm themselves before the accident occurs to create falsified injury. The most common types of auto fraud schemes include staged and paper accidents. Staged fraud typically includes multiple criminal parties and an innocent party, while paper accidents are simply a scripted accident, where the policy holder always admits fault and most times the police are not involved. Within staged and paper fraud, the most prevalent trends are swoop and squats, phantom side swipes or similar, and simply voluntarily walking out in front of a moving vehicle.

A swoop and squat usually involves three cars, two criminal and one innocent. Imagine you are driving down an urban street (where fraudulent car accidents are more likely to occur due to the greater volume of vehicles on the road and more affluent communities with perceived better insurance coverage) when two cars pull in front of you. Suddenly, the car in front of you slams on its breaks, causing you to rear-end that car. Little do you know, two criminals positioned themselves in front of you, one purposely cutting the middle car off, and the other knowing to hit the brakes, causing you to unavoidably rear end the middle car and forcing your insurer to pay the claim.

Phantom side swipes include fabricated accidents and scripted statements in which drivers claim that an uninsured motorist or phantom vehicle side swiped or hit the criminal’s car, injuring the occupants, and damaging the car. This also applies to claims made by multiple criminals in on the ruse. For example, a criminal may purchase a salvage title car, alter the VIN number, and claim the damages on the vehicle were made by another criminal in on the ruse.  Most times, the police are not called to assess whether the accident is genuine, and the policy holder admits fault, as they’re all in it together.

Another tactic that is incredibly common by those who engage in staged vehicle accidents and the associated insurance fraud, is walking or jumping in front of a moving car and claiming the vehicle hit them. More often than not, the criminal will exaggerate their injuries to receive more money and may even claim that previous injuries were caused by the accident in order for the auto insurance company to cover medical costs.

While many schemes seem obvious enough to deem as fraudulent, it’s difficult to legally disprove if it’s staged. A major factor in dealing with fraudulent claims is to limit damages and demonstrate that a plaintiff might not be as injured as they allege by finding inconsistencies in a potential claim, regardless of whether it’s staged or unwitting. However, there are two major challenges in defending companies from fraud: differentiating whether the criminal(s) staged an accident and legitimately got hurt or if the injuries themselves are made up. These two scenarios are difficult to parse out, especially in the post COVID-19 era of telehealth, where the increased use of virtual doctor’s visits exacerbates the methods to achieve insurance fraud. Individuals who take part in insurance fraud can take advantage of a doctor’s inability to physically assess patients, making it easier to lie or exaggerate symptoms and injuries. Doctors may be unwitting contributors to potential fraud and telehealth can lead to unreliable results.

Through the course of litigation, attorneys rely on medical experts that review claims and examine the claimant to assess the legitimacy of injuries, evaluating health records or hiring a personal investigator to mitigate the challenges of disproving fraudulent claims. Frequently, social media to the extent of its public availability and big data are also used to determine whether a claimant is making a legitimate claim. If a claimant is arguing extreme or severe back or neck pain but posts a picture of themself at the 18th hole, it’s a glaring contradiction. Tracking data is also used, which can come from devices placed by insurance companies in a vehicle with the intent to encourage safe driving and lower rates. The stored data relates to whether the driver speeds or brakes heavily, hours of the day driven, etc. These data points can, for example, determine if a driver suddenly slams on their brakes to create a claim. There are numerous avenues that can be used to investigate a claim. The drawback of investigating a claim and determining if it is potentially fraudulent, however, is the intensive work that it takes by the attorney, potential medical experts, and investigators.

The burden lies on both sides of the defense table. Federal courts and virtually every state court requires attorneys – even plaintiffs’ attorneys – to investigate whether the claims are legitimate and not pursue them to the extent that they are not, lest they be subject to sanctions. This necessarily relies on every attorney to diligently adhere to their own rules of professional conduct within their jurisdiction.

In 2021, the U.S. House of Representatives proposed the Highway Accident Fairness Act of 2021, to make, “staging a collision with a commercial motor vehicle a federal crime and modifying legal procedures for suits arising from commercial motor vehicle accidents.” More specifically, the Act as proposed provides harsh prison sentences. It further would expand federal court jurisdiction by abolishing the requirement for complete diversity in cases involving commercial motor vehicles in which more than $5,000,000 is at stake, ensuring that motor carriers with high exposure have access to judges unbeholden to local political considerations at the state level. Enactment would help protect insurers from the financial obligations of defending against, settling, or being found liable for fraudulent claims that result from staged collisions (Youngentob, 2021).

Another provision of the Highway Accident Fairness Act would require that a plaintiff disclose any third-party funding source, providing an additional powerful tool to reduce the incentive to stage an accident. Typically, plaintiffs’ attorneys work on a contingency basis. They don’t get paid unless something is recovered on behalf of their client.  Plaintiffs’ attorneys often advance the money to prove a claim, including filing fees, court costs, court reporters for depositions, and testifying medical experts, and their own time and effort, which can cost tens of thousands of dollars.

If a plaintiffs’ attorney is unsure of the claim’s success, they or their client may seek to fund the prosecution of the claim with money from a third party in exchange for an agreement that the third party is entitled to share in the recovery from a verdict or settlement with the defendant. Sometimes, even if the attorney is confident of the success of the claim, they may still use a third-party to fund the litigation, because they are short on finances, credit, or simply do not want to take the risk that their client may not cooperate. So, the attorney gets a cash infusion to pursue the claim, and the financial risk of the claim being unsuccessful is shifted to the third-party. Defense attorneys can use this information to decide how they may want to defend or settle a claim.

    Keep up to date with Davies