Copyright held by The John Cooke Fraud Report. Reprint rights are granted with attribution to The John Cooke Fraud Report with a link to this website.
By D. Michael Bush, Esq.
CALIFORNIA
The California State Bar is considering the proper means by which an attorney can bill for work performed on two or more matters simultaneously. For example, if an attorney has two motions scheduled at the same time, can the attorney bill two hours on each file even though his total time spent on both files totaled two hours? The preliminary opinion is that an attorney cannot double bill, unless the client has given his/her consent and the fee charged to each client isn’t unconscionable. All comments related to State Bar Proposed Formal opinion 93-0002 should be directed to Randall Difuntorum, C/O The State Bar of California, 100 Van Ness Avenue, 28th Floor, San Francisco, California, 94102-5238. The comments must be received by November 27, 1995.
The State Bar is also evaluating the ethical responsibilities of an attorney against whom sanctions are awarded in addition to or instead of his client. The Bar’s preliminary opinion regarding State Bar Proposed Formal opinion 90-0016 is that if the attorney and client don’t agree on a uniform course of conduct consistent with the truth, the attorney must withdraw.
Presently it is illegal for a body shop to offer a kickback for the referral of an insurance vehicle repair, or the discounting of deductibles. S.B. 639, sponsored by Senator Peace, extends the prohibition to contractors. We suggest consideration be given to making it a crime for a provider of health care to waive or discount deductibles or co-pay obligations under certain circumstances. For example, it would appear inappropriate if a doctor gives $10,000 worth of passive therapy while routinely waiving the co-pay obligations for the insured. At the very least, there should be a reporting requirement to the insurer or to others ultimately responsible for payment.
S.B. 247 would make it a crime for an employer to provide false information to get a lower workers’ compensation rate. It also seeks to protect moneys that are not spent by the end of the year by State agencies from being used for other purposes. Even if the bill is passed into law, there is some question whether unused funds can be protected.
In our last edition, reference was made to New Jersey’s AB 450, which makes it a crime to provide false information on an application for insurance, such as indicating that the applicant lives in New Jersey when that is not the case. In California, allegations have been made that insurance carriers don’t issue policies in the inner cities, a practice known as red-lining. California Insurance Commissioner Chuck Quackenbush recently unveiled a proposal that would allow insurance companies latitude to engage in creative ventures in order to come up with ways to cover inner city residents. The mere fact that this has been proposed is interesting. Many industry professionals have long been advocates of making a low cost, no-frills policy available that would allow the impoverished to buy affordable policies at the cost of not being able to file claims or lawsuits for pain and suffering.
TEXAS
Given the international distribution of this paper, this refers to the state of Texas, not the tiny Australian town between Beebo and Bonshaw. H.B. 1487 has been enacted, making insurance fraud a crime. The grade of offense depends on the amount of money involved. For example, it’s a class C misdemeanor if the fraud is less than $20. A state jail felony is in order if the amount is between $1,500 and $20,000. If there are three or more related claims, they can be charged as one crime, but the offense gets bumped up only one notch from the most serious single offense. It seems the beneficiaries will be some of our California exports who handle a high volume of small cases. Why not just add the total amount of claims the enterprise generates and charge the criminal accordingly? It doesn’t take those people more than a week or two to reach the $200,000 threshold, which is the limit for a felony of the first degree.
MICHIGAN
H.B. 4682 makes insurance fraud a felony. The sponsor of the bill, Rep. Eric Bush (no relation) said there was no such crime before. Insurers would have immunity as long as the reporting of fraudulent activities was made without malice. Some Democrats complain that the immunity provisions are too broad.
NEVADA
A.B. 331 has been enacted. making insurance fraud a felony. As an aside, hats off to any state that figures a way to make it a crime for an attorney to merely be too far from the action, or that disallows the defense the attorney didn’t know what was happening in his own office. States that have made capping a felony come the closest since the prosecution need only prove that fees were paid to outsiders for cases.
The cost of fraud programs is to be paid by the insurers. Unused money at the end of the year is to be retained by the commissioner of insurance and can be used in later years.
Also enacted was A.B. 587 which prohibits health care providers judged guilty of certain felonies from collecting benefits paid to injured workers. The bill also prohibits certain awards from being made to those who are the subject of a criminal action and who made false statements in order to get benefits.
RHODE ISLAND
Under the “that makes sense” department, H.B. 6196 has been enacted, obligating anyone applying for a loan or for insurance on his/her home to disclose if he’s been convicted of arson in the last ten years. The person reviewing the application can refuse to lend the money or insure the property if the answer is in the affirmative. The failure to disclose such a conviction is a crime. We would assume that the failure to include the information would justify a recission of the policy unless expressly waived by the insurance carrier. Perhaps that could be included in a future bill.
LOUISIANA
H.B. 837 makes insurance fraud a felony. Also included are immunity provisions.
NEBRASKA
Has enacted L.B. 385 which makes insurance fraud a felony and provides for immunity for reporting fraudulent acts.
DELAWARE
The recently created Delaware Insurance Fraud Prevention Bureau is part of a three year pilot project that is funded by Delaware’s insurance companies and agents. Those who report fraud have immunity if they have a reasonable belief that a criminal act has occurred. We will be interested to see if Delaware will move to having immunity based only on an absence of malice, as has been enacted or considered in other states.
If you have any developments that you would like to see covered in your state, or if you have any questions, please contact me at:
Bush, Koppel & Schweizer
D. Michael Bush
100 Oceangate 1000
Long Beach, CA 90802
Compuserve: 70413,2125
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