Insurance fraud in Texas — Penal Code § 35.02 — means presenting an insurer a statement you know contains false or misleading material information, with intent to defraud or deceive, in support of a claim or application. Punishment tracks the value of the claim: from a Class C misdemeanor under $100 to a first-degree felony at $300,000 or more. Below: the statute, the full punishment ladder, proven defense theories, and what to expect in Collin, Dallas, Denton, or Tarrant County.
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Published 2026-06-11 · Reviewed by Reggie London and Njeri London, Co-Founding Partners · Last reviewed: 2026-06-11
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Controlling statute:Texas Penal Code § 35.02 — Insurance Fraud Classification: Graded by value of the claim — Class C misdemeanor (under $100) through first-degree felony ($300,000+, or any act risking death or serious bodily injury); application fraud is a flat state jail felony Punishment range: Up to $500 fine (Class C) at the bottom; 5–99 years or life plus a fine up to $10,000 at the top; mandatory restitution to the insurer, including its court costs and attorney's fees, on conviction
What Is Insurance Fraud Under Texas Law?
Texas Penal Code § 35.02 defines insurance fraud three different ways. Under subsection (a), a person commits an offense if, with intent to defraud or deceive an insurer, the person prepares or presents — or causes someone else to prepare or present — a statement the person knows contains false or misleading material information, in support of a claim for payment under an insurance policy. Subsection (a-1) criminalizes the same conduct when it supports an application for a policy rather than a claim. Subsection (b) reaches a third group entirely: anyone who solicits, offers, pays, or receives a benefit in connection with the furnishing of goods or services for which an insurance claim is submitted. That last provision is the one prosecutors use against clinics, chiropractors, body shops, roofers, and case runners in organized claim schemes — no false statement required, just the kickback.
Two defined terms give the statute unusual reach. A "statement" under § 35.01(3) is any oral or written communication or any record or documented representation of fact made to an insurer, and the definition expressly includes computer-generated information. A recorded call to the claims hotline, an entry typed into an online claim portal, a text message to an adjuster, an emailed contractor invoice, and a sworn proof-of-loss form all qualify. "Insurance policy" is just as broad: beyond auto, homeowners, health, life, and commercial coverage, § 35.01(1) sweeps in surety bonds, cash bonds, benefit plans, and motor club service plans — which means false statements connected to bond instruments can land inside Chapter 35 rather than the general fraud chapters.
Notice what the statute does not require: payment. Nothing in § 35.02 makes the insurer's loss an element. The offense is complete the moment a knowingly false material statement is prepared or presented with the required intent, so a claim that was denied, withdrawn, or still pending when investigators arrived can be prosecuted on the same footing as a claim that was paid in full. People are routinely surprised to learn that "the company never lost a dime" is not a defense — though it matters enormously at the negotiation table.
Elements the State must prove
To convict under § 35.02(a), the State must prove every element beyond a reasonable doubt:
1. A qualifying statement
An oral or written communication, record, or documented representation of fact made to an insurer — § 35.01(3). The indictment must tie the charge to an identifiable statement: a specific claim form, recorded interview, invoice, or portal submission. Vague allegations that "the claim was fraudulent" without an identified false statement are vulnerable to attack.
2. The statement was false or misleading
Falsity is measured against fact, not opinion. A genuine estimate, a valuation the policyholder believed, or a figure supplied by a third party the policyholder reasonably trusted is not "false" in the statutory sense unless the State proves the accused knew better.
3. The false information was material
Under § 35.015, a statement is material — regardless of whether it would be admissible at trial — if it could have affected the eligibility for coverage, the amount payable on the claim, or the insurer's decision to issue the policy. The test is objective and possibility-based ("could have affected"), which favors the State, but trivial inaccuracies that could not move coverage or payment fail it.
4. Knowledge of the falsity
The accused must have known the statement contained false or misleading material information when it was prepared or presented. Honest mistake, faulty memory about dates or serial numbers, and reliance on someone else's paperwork all attack this element directly.
5. Intent to defraud or deceive an insurer
The highest culpable mental state in the chapter. Intent is almost never proven by confession; it is inferred from conduct — timing, inconsistencies, financial pressure, and what the accused said to whom. That inference is the central battlefield in most contested cases.
For an application-fraud count under § 35.02(a-1), the State swaps element one's "claim for payment" nexus for an application nexus. For a benefit count under § 35.02(b), the State must instead prove the solicitation, offer, payment, or receipt of a benefit tied to goods or services billed to an insurer — a structurally different offense that defends differently.
What Are the Penalties for Insurance Fraud in Texas?
Punishment is graded by the value of the claim on the same dollar ladder Texas uses for theft — a deliberate choice. The Court of Criminal Appeals reviewed the legislative history and observed that lawmakers intended insurance fraud punishment levels to be tied to those of the general theft statute. Logan v. State, 89 S.W.3d 619 (Tex. Crim. App. 2002). The current brackets, last reset effective September 1, 2015, run:
$300,000 or more — or any act risking death or serious bodily injury
First-degree felony
5 to 99 years or life, TDCJ
$10,000
Application fraud — any amount (§ 35.02(a-1), (d))
State jail felony
180 days to 2 years state jail
$10,000
Last reviewed
2026-06-11
Three grading rules decide more insurance fraud cases than the brackets themselves. First, only the fraudulent portion of a claim should set the grade. Logan held that "value of the claim" in the grading provision means the fraudulent portion of the claim, not the gross amount the policyholder submitted — so a $40,000 hail claim with $3,000 of padding is a state-jail-felony number, not a third-degree-felony number. The Legislature later wrote the mechanism into the statute itself: under § 35.02(g), an accused who proves by a preponderance of the evidence that part of the claim came from a valid covered loss reduces the value to the difference between the total claim and the valid portion. That subsection quietly shifts a burden onto the defense, which makes documenting the legitimate loss — receipts, photographs, weather data, repair scopes — a core defense project from day one.
Second, the risk clause in § 35.02(c)(7)(B) overrides every dollar bracket: if any act committed in connection with the offense places a person at risk of death or serious bodily injury, the case is a first-degree felony no matter how small the claim. Staged collisions are the textbook charge. Third, § 35.03 lets the State combine separate claims made pursuant to one scheme or continuing course of conduct — either by aggregating the dollar values into one offense under subsection (a), or, where three or more claims are involved, by bumping the classification one category above the most serious single claim under subsection (b), capped at a first-degree felony. The statute makes the two mechanisms mutually exclusive; an indictment that tries to stack both has a charging defect worth litigating.
Conviction also carries a financial tail most offenses lack: § 35.02(e) makes restitution to the affected insurer mandatory and expressly includes the insurer's court costs and attorney's fees. And under § 35.02(f), the same conduct can be prosecuted under § 35.02, another statute such as theft or arson, or both.
How Do Prosecutors Prove Insurance Fraud?
Unlike a bar fight or a traffic stop, an insurance fraud case is usually months old before any officer touches it. The pipeline matters. A claim trips internal red flags — late reporting, recent policy changes, prior claims history, inconsistent recorded statements — and gets routed to the insurer's special investigative unit. The SIU works the file with tools civil policyholders hand over voluntarily: recorded interviews, examinations under oath compelled by the policy's cooperation clause, scene and vehicle inspections, photo metadata, and database checks against industry claim records. By the time the file leaves the building, the State's exhibit list is largely built — out of the policyholder's own words.
Texas law then formalizes the handoff. Insurance Code Chapter 701 channels reports of suspected fraud to the Texas Department of Insurance Fraud Unit, a law-enforcement agency that investigates and refers cases for prosecution, and § 35.04 authorizes the Attorney General to assist or prosecute on the local district attorney's request. The practical takeaway: anything you say to an adjuster or SIU investigator should be treated as a statement to law enforcement, because § 35.01(3) makes it chargeable and Chapter 701 makes it forwardable.
At trial, the contested element is almost always intent, and intent is proven by inference. A defendant's intent may be inferred from her actions, words, and conduct. Ducthanh Thi Nguyen v. State, No. 01-04-00449-CR (Tex. App.—Houston [1st Dist.] Aug. 31, 2005). In that case the policyholder reported her BMW stolen two days after it had already arrived at a site to be destroyed — and the court held a rational jury could find fraudulent intent from the timeline alone, even though she never wrote a dollar figure on the proof-of-loss form. Leaving the amount blank did not help her; the court looked at the police report value and the loan balance to establish what she intended to claim. The State also gets a statutory head start on one element: under § 35.02(h), a person who submitted a bill for goods or services in support of a claim is rebuttably presumed to have caused the claim to be prepared or presented — a presumption aimed at providers who later say the billing department acted alone.
What Defenses Work Against an Insurance Fraud Charge?
Defense strategy in a § 35.02 case starts from a simple observation: the State must prove a knowing lie about a material fact, made with intent to defraud — and most claim files are full of estimates, third-party paperwork, and good-faith disagreement instead.
No knowing falsity. Policyholders sign what contractors, public adjusters, and billing staff put in front of them. If the inflated roof scope or upcoded procedure entry originated with someone else and the accused did not know it was wrong, element four fails. The (h) presumption about who "caused" a bill to be presented is rebuttable and says nothing about knowledge or intent.
Valuation dispute, not fraud. Disagreements about depreciation, actual cash value, scope of repair, or pre-existing damage are coverage arguments the civil system resolves every day. Treating a contested valuation as a criminal lie criminalizes negotiation, and juries understand that.
Materiality failure. Under § 35.015 the misstatement must have been capable of affecting coverage eligibility, payment amount, or the decision to issue the policy. A wrong date or address that could not have moved the payment decision does not satisfy the element.
The valid-portion fight. Even where some padding occurred, Logan and § 35.02(g) mean the grade should reflect only the fraudulent slice. Proving the legitimate loss by a preponderance can pull a third-degree felony down to a state jail felony or a misdemeanor — which changes probation eligibility, record-clearing options, and bargaining posture all at once.
No intent to defraud. Where the timeline, the financial picture, and the accused's cooperation are consistent with an honest claim, the State's inference case thins out. Prompt corrections, voluntary supplements, and openness with the adjuster cut against deceit.
Suppression and sourcing problems. Recorded statements taken in custodial settings without warnings, claim files assembled in violation of the policy's own procedures, and chain-of-custody gaps in digital evidence are all litigation targets before trial ever starts.
Hypothetical example (illustration only, not a real case): after a spring hailstorm, a Frisco homeowner signs a roofing contract and the roofer submits a supplement to the carrier listing gutters and window screens that were never damaged. The homeowner signed a blank authorization and never saw the supplement. The SIU flags the file and refers both names to TDI. The homeowner's defense runs straight at knowledge and intent — she made no statement she knew to be false — while the documentation fight under § 35.02(g) protects the grade if any count survives.
Can an Insurance Fraud Charge Be Dismissed or Expunged?
Outright dismissals happen most often early, when defense counsel can show the screening prosecutor that the "lie" was an estimate, the materiality theory is thin, or the complaining carrier's file contradicts its own referral. Because § 35.02(e) restitution and the carrier's civil remedies make the insurer financially whole without a conviction, charge-stage advocacy has more room here than in most felony dockets — particularly where the accused has no history and the disputed amount is modest. Several North Texas counties also operate pretrial intervention or diversion programs for first-time, non-violent financial offenses; eligibility and terms vary county to county and case to case, and successful completion typically ends in dismissal.
Record-clearing turns on how the case ends. An acquittal or a dismissal without conviction opens the door to expunction under Code of Criminal Procedure Chapter 55A. A deferred-adjudication outcome that ends in discharge and dismissal generally points instead to an order of nondisclosure under Government Code § 411.0725 after the applicable waiting period, subject to that statute's eligibility rules. A final felony conviction forecloses both. Which path is realistic should be mapped before any plea is signed, not after — the difference between "deferred" and "probation" on paper is the difference between a sealable record and a permanent one.
What Happens After an Insurance Fraud Arrest in North Texas?
These cases almost never start with handcuffs at the scene. The typical rhythm: the claim is denied or quietly paid short, the SIU referral goes to TDI or the county, months pass, and the first sign of trouble is a TDI investigator's business card, a grand jury subpoena for records, or a warrant notice. That gap is the defense's window — counsel retained before charges can sometimes present the valid-loss documentation, contest the materiality theory, or negotiate a walk-through arrest that avoids a workplace scene.
After arrest, the standard Texas sequence applies with fraud-specific wrinkles. Magistration under Code of Criminal Procedure article 15.17 brings the bail decision within roughly 48 hours; bond on a fraud case is usually attainable, though conditions can include no contact with carrier employees and surrender of claim proceeds. Felony grades then go to a grand jury for indictment — and because the case is document-driven, the indictment's description of the charged "statement" deserves early scrutiny. Discovery under article 39.14 reaches the entire claim file, the SIU workup, and the referral packet, which means the defense gets to audit the investigation that built the case. Expert work follows where the numbers are contested: forensic accountants on value and aggregation, estimators on scope of loss, and — in burn cases — origin-and-cause analysts shared with any parallel arson investigation. Resolution paths range from dismissal or diversion through reduced misdemeanor pleas to trial; the claim-value rules above frame every one of those conversations.
County-by-county practice notes
Collin County
Felony insurance fraud cases are indicted and heard in the district courts at the Collin County Courthouse (the Russell A. Steindam Courts Building) at 2100 Bloomdale Road in McKinney; misdemeanor grades go to the county courts at law in the same building. Collin juries draw from Frisco, Plano, McKinney, and Allen — document-literate panels that follow paper trails closely, which cuts both ways and rewards a defense built on the accused's own records.
Dallas County
Dallas County felony dockets run out of the Frank Crowley Courts Building on Riverfront Boulevard, with misdemeanors in the county criminal courts there as well. The county's volume means TDI referrals compete with a heavy violent-crime docket; intake prosecutors have discretion, and a well-documented presentation before indictment can shape whether a borderline file is charged as filed, reduced, or declined.
Denton County
Cases file at the Denton County Courts Building in Denton. The county's mix of suburban property claims — roofs, vehicles, water losses — makes contractor-driven supplements a recurring fact pattern, and the knowledge element correspondingly central.
Tarrant County
Fort Worth's Tim Curry Criminal Justice Center houses both the felony district courts and the misdemeanor courts. As elsewhere, restitution posture matters early: arriving at the first setting with a concrete accounting of the legitimate loss changes the tone of negotiations.
L and L Law Group defends insurance fraud cases in all four counties from our single office at 5899 Preston Road, Suite 101, in Frisco.
Collateral consequences beyond the sentence
A fraud conviction is a crime of dishonesty, and the paperwork follows you. Licensed insurance agents and adjusters face Texas Department of Insurance disciplinary action independent of the criminal court. Physicians, chiropractors, and nurses drawn into § 35.02(b) billing cases face parallel licensing-board proceedings where the criminal disposition becomes Exhibit A. A felony conviction strips firearm rights under Penal Code § 46.04 and federal law (18 U.S.C. § 922(g)(1)). For non-citizens, fraud convictions are generally treated as crimes involving moral turpitude, and a fraud offense with a victim loss over $10,000 is classified as an aggravated felony under federal immigration law — among the most serious removal categories that exist. Add employment screening (banking, bonding, fiduciary roles), the insurer's civil suit and policy rescission, and industry claim databases that outlive the court file, and the cheapest-looking plea can become the most expensive decision in the case.
Insurance fraud vs. related Texas offenses
Prosecutors choose among overlapping statutes in claim cases, and § 35.02(f) expressly permits prosecution under Chapter 35, another law, or both. The neighbors worth knowing: theft under § 31.03, where the State alleges the payout itself was an unlawful appropriation; arson under § 28.02, the companion count whenever a fire precedes the claim; forgery under § 32.21 for fabricated receipts and signatures; securing execution of a document by deception under § 32.46 when the target is a payment authorization rather than an insurer's claim decision; misapplication of fiduciary property under § 32.45 for agents and administrators handling premium or claim funds; and money laundering under § 34.02 when claim proceeds move. Health-care billing schemes against Medicaid are carved out into their own chapter — Medicaid fraud under § 35A.02 — with a separate enforcement apparatus. And where the scheme crosses state lines or uses interstate wires and mail, federal exposure under 18 U.S.C. § 1033 and the mail and wire fraud statutes sits alongside the state case.
Hypothetical example (illustration only, not a real case): a recruiter pays two drivers to brake-check a tractor-trailer on LBJ Freeway and steers the "injured" passengers to a clinic that bills the trucking carrier for treatment never rendered. Every participant faces § 35.02 exposure — the drivers through the staged collision (first-degree exposure under the risk clause, regardless of claim size), the clinic through subsection (b)'s benefit provision, and the recruiter through party liability — and the federal mail and wire statutes hover over the whole arrangement. Distinctions among the counts drive who can negotiate for what.
Key Legal Terms
Insurance Fraud (§ 35.02)
Preparing or presenting a statement to an insurer that the actor knows contains false or misleading material information, with intent to defraud or deceive, in support of a claim for payment or an application for a policy.
Statement (§ 35.01(3))
Any oral or written communication, record, or documented representation of fact made to an insurer — expressly including computer-generated information such as online claim-portal entries.
Materiality (§ 35.015)
A statement is material — regardless of its admissibility at trial — if it could have affected eligibility for coverage, the amount payable on a claim, or the insurer's decision to issue the policy.
Value of the Claim (§ 35.01(4))
The total dollar amount of the claim, or the value computed under § 35.025 (fair market value or replacement cost) when not readily ascertainable — read with the rule that only the fraudulent portion sets the grade.
Aggregation (§ 35.03)
Separate claims made pursuant to one scheme or continuing course of conduct may be combined into a single offense — by adding the dollar values, or, for three or more claims, by bumping the grade one category above the most serious single claim.
Frequently Asked Questions
Is insurance fraud a felony in Texas?
Insurance fraud becomes a felony once the value of the claim reaches $2,500 — a state jail felony from $2,500 to under $30,000, a third-degree felony at $30,000, a second-degree felony at $150,000, and a first-degree felony at $300,000 or more under Penal Code § 35.02(c). Below $2,500 it is a misdemeanor, and fraud on a policy application is a state jail felony regardless of amount.
Can I be charged if the insurance company never paid the claim?
Yes — payment is not an element of the offense. Section 35.02 is complete when a statement the person knows contains false or misleading material information is prepared or presented to the insurer with intent to defraud or deceive. A denied or withdrawn claim can be prosecuted on the same footing as a paid one.
What if part of my claim was legitimate?
Only the fraudulent portion of the claim should set the punishment grade. The Court of Criminal Appeals held in Logan v. State, 89 S.W.3d 619 (Tex. Crim. App. 2002), that the value of the claim means the fraudulent portion, and § 35.02(g) now lets the accused prove a valid portion by a preponderance of the evidence so that the value equals total claim minus valid loss.
Is exaggerating an estimate the same as insurance fraud?
An estimate becomes criminal only when it is a statement the person knows contains false or misleading material information, made with intent to defraud or deceive the insurer. Good-faith valuation opinions, contractor-supplied repair figures the policyholder reasonably relied on, and disputes about depreciation or scope of loss are coverage arguments, not crimes — the knowledge and intent elements separate the two.
Is lying on an insurance application a crime in Texas?
Yes. Penal Code § 35.02(a-1) covers false or misleading material statements made in support of an application for an insurance policy, and subsection (d) fixes the grade at a state jail felony — 180 days to 2 years in a state jail facility and a fine up to $10,000 — no matter how small the premium or policy involved.
Who investigates insurance fraud in Texas?
Most cases start inside the insurer's special investigative unit (SIU), which works the claim file before law enforcement ever sees it. Texas Insurance Code Chapter 701 directs reports of suspected fraud to the Texas Department of Insurance Fraud Unit, a law-enforcement agency that investigates and refers cases to county district attorneys, and Penal Code § 35.04 lets the Attorney General assist or prosecute at the local prosecutor's request.
Will I have to pay the insurance company back if convicted?
Yes — restitution is mandatory, not discretionary. Penal Code § 35.02(e) requires the court to order a convicted defendant to pay restitution to an affected insurer, and the statute expressly includes the insurer's court costs and attorney's fees, which is broader than the restitution available for most Texas offenses.
Does an insurance fraud conviction affect immigration status?
A fraud conviction is generally treated as a crime involving moral turpitude for immigration purposes, and federal law classifies a fraud offense as an aggravated felony when the loss to the victim exceeds $10,000 — a category that triggers removal for non-citizens. Anyone who is not a U.S. citizen should have immigration exposure analyzed before resolving the criminal case.
Can a staged-accident case be a first-degree felony even if the claim was small?
Yes. Penal Code § 35.02(c)(7)(B) makes the offense a first-degree felony — 5 to 99 years or life — whenever an act committed in connection with the offense places a person at risk of death or serious bodily injury, regardless of the dollar value of the claim. Intentionally causing a collision on a public road is the classic example prosecutors charge under this clause.
Reggie London co-founded L and L Law Group with a focus on federal criminal defense, complex felony defense, and TEA/SBEC matters. Licensed in Texas, admitted to TXND and TXED.
Njeri London co-founded L and L Law Group with a focus on DWI defense, family violence cases, and juvenile defense. Licensed in Texas, admitted to TXND and TXED.
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