How Do Insurers Demonstrate Intentional Fraud?

When it comes to proving intentional fraud, suspicion isn’t enough. In claims investigations, insurers need to build a case that shows intent.

But how do you prove someone meant to deceive you? According to federal case law, fraudulent intent doesn’t require a smoking gun; it can be inferred from behavior, patterns, and even victim impressions. In United States vs. Alston, the court affirmed that “the requisite intent… may be inferred from the totality of the circumstances” and does not need to be proven by direct evidence.

That principle is at the heart of insurance claims investigations, where carriers must turn conflicting documents, evasive statements, and surveillance footage into a compelling story of deceit, without crossing the line of bad faith.

Believe it or not, fraud is notoriously hard to prove. While many carriers suspect it, few cases rise to the level where intentional fraud can confidently be demonstrated without raising bad faith suspicions.

What is Intentional Fraud in Insurance?

Intentional Fraud means the insured knowingly misrepresented, omitted, or fabricated information with the intent to deceive and gain a financial benefit they weren’t entitled to.

In legal terms, it requires proof of intent to defraud, not just an honest mistake or misunderstanding.

This could include:

• Faking an injury or exaggerating its severity
• Claiming property was stolen when it wasn’t
• Misrepresenting employment status or income
• Submitting doctored medical records or receipts

The challenge? Intent isn’t something you can see. It has to be inferred from a pattern of behavior, documentation, and claims investigations.

5 Ways Intentional Fraud Can Be Demonstrated

1. Discrepancies in Documentation and Testimony

Inconsistencies between the claimant’s statements, medical records, police reports, and employment documents are often the first red flags.

Investigators look for:

• Conflicting dates and timelines
• Contradictions between recorded statements and filed paperwork
• Differences between provider notes and the claimant’s self-report

Patterns of inconsistency, especially when paired with other suspicious behavior, start to build the narrative of intent.

2. Surveillance and Activity Checks

This is one of the most visual ways to prove fraud. If a claimant says they can’t lift a box but is seen on video carrying heavy furniture, that’s powerful evidence.

Manned and unmanned surveillance provide objective proof of capability and behavior. When these observations directly contradict the claim, intent to deceive becomes much easier to argue.

3. Social Media Investigations

Public posts can expose everything from physical activity to location data that conflicts with a claim.

For example:

• A “bedridden” claimant tagging themselves at a music festival
• Photos of international travel during a disability claim
• Boasting about a side hustle while collecting TTD benefits

While not always admissible in court, social media helps steer claims investigations and can supplement more formal evidence.

4. Medical Canvassing and Provider Verification

Medical canvassing uncovers undisclosed treatment or pre-existing conditions that the claimant failed to report. This often supports a pattern of concealment or misrepresentation.

Insurers also verify provider credentials and treatment authenticity to ensure that records and billing are legitimate.

5. Collaboration with Law Enforcement and SIU

When evidence crosses the threshold from suspicious to criminal, carriers may escalate the case to their Special Investigations Unit (SIU) or even partner with law enforcement.

Criminal charges require clear intent and a demonstrable attempt to defraud, meaning the investigative process must be airtight, well-documented, and defensible in court.

How Insurers Prove Intentional Fraud

1. Intent is Not Always Shown, It Can Be Inferred

According to the U.S. Department of Justice (DOJ), intent does not need to be proven with direct evidence. Rather, it can be inferred from the “totality of the circumstances.”

2. Reckless Indifference and Modus Operandi Build the Case

The DOJ manual explains that fraudulent intent may also be shown through reckless disregard for the truth or the method (“modus operandi”) of the scheme itself.

For instance, repeated exaggeration of injuries, repeated misstatements on applications, or intentionally vague timelines can point toward a deliberate strategy rather than an innocent error.

3. Intent Can Exist Without Actual Loss

Importantly, criminal precedent clarifies that success of the scheme (actual monetary loss) is not required to prove fraud. The DOJ states that the intent to defraud is enough, even if the scheme didn’t ultimately succeed.

Similar to insurance claims investigations, even if a claim was denied or partially paid, carriers can still establish intentional fraud if the paperwork, statements, or conduct demonstrates the intent to deceive.

Proving Intentional Fraud Without Triggering Bad Faith Allegations

While insurers have both the right and responsibility to investigate suspected fraud, they must tread carefully. Accusing a claimant of fraud, especially without strong, well-documented evidence, can expose a carrier to bad faith litigation.

Under most state laws, bad faith occurs when an insurer unreasonably delays, denies, or handles a claim without proper cause.

When fraud is wrongly alleged, the fallout can include:

• Punitive damages
• Attorney’s fees
• Reputational harm
• Regulatory penalties

In some states, like California and Florida, the standards for proving bad faith are especially claimant-friendly. They require only that the insurer failed to conduct a reasonable investigation or acted with “reckless disregard” for the claimant’s rights.

As noted in Gruenberg v. Aetna Ins. Co., 510 P.2d 1032 (Cal. 1973), insurers owe a duty of good faith and fair dealing to their policy holders—meaning investigations must be impartial, fact-based, and free from animus or assumption.

Insurance fraud is rarely straightforward. It’s subtle, strategic, and often disguised as a misunderstanding. That’s why demonstrating intent is both the most challenging and most critical part of fighting fraud.

It takes experienced investigators, diligent adjusters, and a collaborative approach across medical, legal, and claims teams to build a case that sticks.

Ready to turn red flags into defensible evidence? Talk to us today.

Check out our sources:

Gruenberg v. Aetna Insurance Co., 510 P.2d 1032 (Cal. 1973).

United States Department of Justice. Justice Manual: Criminal Resource Manual 944. Proof of Fraud. U.S. Department of Justice, www.justice.gov/archives/jm/criminal-resource-manual-944-proof-fraud.

United States v. Alston, 609 F.2d 531 (D.C. Cir. 1979).