Legal Question in Insurance Law in California

Re: Is this insurance fraud?

When an auto insurance company pays a claim, the policyholder can do whatever she wants with the money unless she has agreed to use it in a particular way. Ordinarily she is not obligated to repair the car if she doesn't want to, and can pocket the cash instead. Insurers know this, and often point it out to the insured. What your friend did is not fraud unless she got more money than she otherwise would have by telling the insurer she was going to use it to repair the car, or if she somehow got the insurer to pay twice for the same damage.

Then there is the matter of the reposession. You say that the checks were made payable to her and to the lienholder, so if she cashed them on her own she can get into trouble for depriving the lienholder of its share. But if the money was properly divided and the car was reposessed for some unrelated reason, that will not affect her rights to the insurance money. She may still owe money on the car, but that is a separate issue.

Re: Is this insurance fraud?

From the little facts you provided, if she decided not to repair her vehicle, that is her choice. Some clients keep the money and drive their damaged vehicle. As for paying back Honda through their lien, she is under contract to do so. I need more facts to determine if there is any possible fraud on her part.

Thanks for your question.