If my insurance company sent me insurance $50,000 in checks (about $50,000) but I spent the money and now the medical facility is asking for payment, what can they do to me?

I cashed them and spent them. Now the medical facility is asking for the money and threatening to take civil and criminal action if I do not get the money you them. They are calling it insurance fraud. I realize this was a terrible choice I made and am worried.

Asked on July 25, 2015 under Insurance Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

If the money was to pay for medical care and you failed to use the money to do that, the medical faciity can certainly sue you to recover the money. Assuming you can't pay that much, you may need to consider filing bankruptcy as a way to get out from under this debt. Bankruptcy will affect your credit, etc. for at least 7 years to come, but since the alternative, if sued, is to have a $50,000+ (they may be able to get additional amounts, like legal fees) judgment against you which can be enforced for years to come, such as through wage garnishment, liens on real property, levying on bank accounts, executing on (having the sheriff seize and sell) personal property like cars, etc., bankruptcy may be the best option. However, bankruptcy is a complex topic, and if you wish to consider this route, you should consult with a bankruptcy attorney.

As to insurance fraud: technically, it's only fraud if you knowingly submitted a false claim. A claim could be false if you lied about the purpose to which you'd put the money--e.g. you submitted a claim for medical bills knowing or intending to not use the money for those bills, but rather to spend it on other things. However, if you did not submit a false claim but rather made a mistake later, when you received the check, this should not be fraud--though it would still be something you could be sued over (see above). The problem is, even if you did not in fact commit insurance fraud, there may be enough here for a complaint about insurance fraud to be made to the authorities, forcing you to defend yourself. If this happens, be sure to hire a lawyer to help you.

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