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By Dennis B. Kass
The first step in combating insurance fraud is to recognize that there truly is a problem. Is there really THAT much fraud out there? In truth, it is that bad. In California, even our legislature recognized this, codifying the extent of the fraud. “Insurance fraud is a particular problem for automobile policyholders; fraudulent activities account for 15 to 20 percent of all auto insurance payments.” (California Insurance Code section 1871(b))
Now that we know there is a problem, how do we fight back? When combating fraud, we always seem to be on the defensive. We react to events which have already transpired. We defend lawsuits one or more years post loss. We take examinations under oath. We are reactive.
When considering a successful fraud fighting formula and the deterrence that comes from fighting fraud, thought should be given to affirmative or offensive actions to deter fraud. California Insurance Code section 1871.7 California has a novel anti-fraud statute. It holds individuals responsible for even the attempted submission of a false insurance claim. With fraud and RICO, a completed fraud with the payment by the carrier is necessary. Under section 1871.7, aiding, abetting, conspiring or playing any part in the submission of a false claim subjects a party to liability. (Penal Code sections 549, 550, 551 and Insurance Code 1871.7)
This statute can be used to sue doctors, chiropractors, attorneys, cappers, claimants, applicants, insureds and anyone submitting a false insurance claim. Like fraud and RICO, this is an intentional tort. Before filing an action, one should have direct evidence or strong circumstantial evidence that the defendants intended to submit false claims. The “teeth” to this statute are the available “damages.”
In a successful suit, you are entitled to three times the amount of each claim for compensation (not three times what you paid). You receive a penalty of up to $10,000 per false claim. Finally, you receive all of your attorney fees, all costs and all reasonable expenses. Fraud rings beware. These “damages” and the exposure can become very large, very quickly.
Dennis Kass is an attorney with the firm of MANNING & KASS, ELLROD, RAMIREZ, TRESTER, LLP in Los Angeles, CA. He can be reached at (213) 624- 6900