Insurer Flagged Your Injury Claim as Fraud? Read This
Getting accused of fraud when you are truly hurt is frightening, and it usually starts quietly: suddenly the insurer wants an examination under oath, years of your records, and your benefits slow to a crawl. What most people do not realize is that a computer often started it. Insurers run claims through fraud-scoring software, and a high score sends your file to a special investigation unit. Here is the part that matters: that score is a guess, not proof, and Michigan law makes an insurer clear a high bar before it can actually deny you for fraud. This guide explains what a fraud flag really means and how to protect yourself and your benefits.
What a ‘Fraud Flag’ Actually Is
A fraud score is just a probability guess from software trained on old claims. All it says is that your file looks, to a computer, like other files the company decided to treat as suspicious. It does not prove anyone lied, that any statement is false, or that your claim is not owed. The software cannot know whether your injury is real. It sorts files by patterns, and those patterns can reflect bias in the data just as easily as actual fraud. If you started treatment a little late, or used a clinic the model does not like, you can get flagged for reasons that have nothing to do with honesty. You also rarely get to see how the score was calculated, the same closed-box problem we explain in our guide to how Colossus software lowballs injury settlements.
Why a Flag Is Not the End of Your Claim
A flag starts an investigation. It does not end your case. To actually beat your claim on fraud, an insurer has to meet real legal standards, and Michigan courts have made those harder for insurers, not easier.
If your claim went through the Michigan Assigned Claims Plan (the system for uninsured or hard-to-place claims), MCL 500.3173a can bar benefits when a claim is supported by a ‘fraudulent insurance act.’ But the Court of Appeals in Candler v Farm Bureau Mut Ins Co of Mich, 321 Mich App 772 (2017), spelled out what the insurer must prove: that you made a statement, in support of the claim, that you knew was false, about something that mattered to the claim. Every piece has to be there. A statistical score does not prove you knowingly said anything false.
For a regular auto policy, the Michigan Supreme Court in Meemic Ins Co v Fortson, 506 Mich 287 (2020), held that an insurer cannot use a fine-print anti-fraud clause to wipe out your coverage for something that happened after the policy started. And in Haydaw v Farm Bureau Gen Ins Co, 332 Mich App 719 (2020), the court said statements you make during the lawsuit itself do not let the insurer cancel your policy, because it can test those statements in the case. These rulings reined in the aggressive fraud-voiding that insurers once tried under Bahri v IDS Prop Cas Ins Co, 308 Mich App 420 (2014). Bottom line: the insurer needs proof you knowingly lied about something important, not just a suspicious score.
The Pressure Is Real, and So Are Your Rights
Even though a score cannot end your claim, being flagged is not harmless. A special investigation often means an examination under oath, demands for years of records, surveillance, and slow payments. When you cannot work and are waiting on benefits, that delay alone is a hardship, and it is meant to wear you down into giving up or settling cheap. Michigan law fights back: when an insurer drags out a valid claim, overdue benefits collect penalty interest, and the no-fault act lets you recover attorney fees when the insurer’s refusal or delay was unreasonable. We cover that in our guide to overdue PIP benefits and penalty interest. A fraud flag does not suspend those protections. In fact, if an insurer leans on nothing but an algorithm to justify withholding payment on a valid claim, that thin excuse can itself show the delay was unreasonable, the very thing that exposes the insurer to penalty interest and your attorney fees.
| What the insurer has | What it actually proves | What it would take to bar your claim |
|---|---|---|
| A high AI fraud score | Your file looks like past flagged files; nothing about the truth | Nothing on its own; it only starts an investigation |
| An SIU referral and an EUO | The insurer is investigating you | Still must prove you knowingly made a material false statement |
| An alleged false statement (assigned-claims file) | A possible ‘fraudulent insurance act’ | Every Candler element under MCL 500.3173a, fully met |
| A false statement during the lawsuit (regular policy) | A credibility question for the case | Not grounds to cancel coverage under Haydaw |
What to Do If Your Claim Is Flagged
Do not panic, and do not go it alone. Cooperate truthfully, keep copies of everything you send, and be careful and consistent, because honest gaps in dates or memory are not fraud, but sloppy or shifting answers give an investigator something to chew on. Ask the insurer to point to the exact statement it thinks is false and why, instead of accepting a vague accusation. If an automated tool flagged or denied you, the same push for transparency we describe in our guide to AI-driven no-fault denials applies, and if you are in the assigned claims system, our guide to the Michigan Assigned Claims Plan explains how it works. A lawyer can also turn the insurer’s reliance on a secret score against it, using that thin basis to argue the delay was unreasonable and to push for penalty interest and your attorney fees. Most important: talk to a lawyer before any examination under oath. It is not a routine form, and what you say in it can shape the rest of your claim.
Frequently Asked Questions
Can the insurance company deny my claim just because software flagged it as fraud?
No. A fraud score only starts an investigation. To actually bar your claim, the insurer must prove you knowingly made a material false statement. For an assigned-claims file, that means meeting the Candler elements under MCL 500.3173a, which a statistical score does not satisfy.
What is a special investigation unit, and why was my claim sent there?
An SIU is the insurer’s fraud-investigation team. Your claim was likely routed there because a fraud-detection model gave it a high score based on patterns in the file. Being referred does not mean you did anything wrong; it means the software flagged you for a closer look.
Can something I say during the lawsuit cancel my coverage?
Generally no, for a regular auto policy. In Haydaw v Farm Bureau Gen Ins Co, 332 Mich App 719 (2020), the court held that statements made during first-party litigation do not give the insurer grounds to cancel the policy, because it can test them in the case itself.
What should I do if I have to give an examination under oath?
Talk to a lawyer first. Cooperate and tell the truth, keep copies of everything, and ask the insurer to identify the exact statement it believes is false. Honest inconsistencies are not fraud, but careful, consistent answers protect you, and an EUO is not something to walk into unprepared.
Can the insurer just stop paying while it investigates?
Not without consequences. Overdue no-fault benefits still collect penalty interest, and you can recover attorney fees if the insurer’s delay or refusal was unreasonable. A fraud flag does not pause those protections, and an algorithm-only excuse can actually help show the delay was unreasonable.
Accused of fraud or facing an EUO? Talk to a real attorney first.
Attorney Manny Chahal personally reviews every case. Free statewide consultation, day or night. No fee unless we recover.
Call 1-844-624-2425