The Law Firm of Piacentile, Stefanowski & Malherbe LLP
Private Insurance

Private Insurance Fraud in the United States

Insurance Fraud Attorneys 

Insurance fraud is a widespread and costly problem in the United States that results in higher insurance premiums for a massive number of Americans across the country. 

California and Illinois are the only states with a whistleblower or Qui Tam statute that addresses fraud committed against private insurers

The California Insurance Fraud Prevention Act 

The California Insurance Fraud Prevention Act (IFPA), found in Section 1871.7 of the California Insurance Code, allows the public to file private Qui Tam lawsuits against anyone who commits insurance fraud in the State.

Violating the Insurance Fraud Prevention Act 

The Insurance Fraud Prevention Act helps combat this issue by making it illegal for individuals to knowingly file a false or misleading insurance claim. The IFPA covers all forms of commercial and personal insurance, including life, auto, home, and health insurance. The IFPA provides for fines ranging from $5,000 to $10,000 per violation, in addition to damages of three times the amount of money the fraud cost its victims. 

Some types of violations of the Insurance Fraud Prevention Act include:

Making any false statement or knowingly reporting false information in connection with insurance. 

  • Submitting multiple claims for the same healthcare service.
  • Providing kickbacks to recruit patients or clients.
  • Receiving money or other valuables from an insured for services not rendered.
  • Knowingly producing or distributing documents containing false statements in connection with insurance.
  • Knowingly concealing information relating to an accident or injury for purposes of collecting benefits.
  • Staging auto collisions and submitting claims for damage.

Just like the False Claims Act, an IFPA action can be brought by either the State or a private individual suing on the State’s behalf. However, under the IFPA it is not necessary that the government suffer any harm as a consequence of the fraud. The reason for this is that insurance fraud usually harms a large number of people due to the fact that insurance companies frequently cite insurance fraud losses in raising rates for policyholders. The Act’s legislative record states that healthcare insurance fraud likely increases national healthcare costs by “billions of dollars annually.”

If a relator or insurer decides to file a civil suit in the name of the State of California in an IFPA action, this complaint and all the related evidence must be filed under seal in a California Superior Court, served to that California jurisdiction’s local district attorney and to the state insurance commissioner. The latter has 60 days to decide whether or not to intervene in the case. In case the district attorney or the commissioner decides to intervene, government attorneys may take over and lead the case or allow the relator to continue to do so while they play a supportive role. 

Whistleblower Entitlements Under the IFPA

Under the IFPA, a whistleblower is entitled to between 30 and 40 percent of the recoveries of a successful intervened case. In a case where the government decides not to intervene, the relator would be entitled to between 40 to 50 percent of any recovery. The IFPA also protects employees from retaliation and requires that the employer: 

  • reinstate the employee with the same seniority, 
  • pay the employee twice the amount of backpay they are due, plus interest, and 
  • compensate the employee “for any special damages sustained as a result of the discrimination.” These can include reasonable litigation costs and attorneys’ fees.

Reporting Insurance Fraud: Protecting Your Rights as a Whistleblower

As a whistleblower, you play a crucial role in uncovering and reporting insurance fraud, protecting the interests of both individuals and society as a whole. Whistleblowers International is dedicated to supporting and advocating for individuals who have witnessed insurance fraud and are seeking to take action.

When you choose to blow the whistle on insurance fraud, you are entitled to certain rights and protections under the law. These rights include:

  • Anonymity: Whistleblowers have the right to remain anonymous during the investigation process, safeguarding their identity and protecting them from potential retaliation.
  • Legal Protections: Whistleblowers are protected from employer retaliation, such as termination, demotion, or harassment, for reporting insurance fraud.
  • Financial Rewards: In many cases, whistleblowers may be eligible for financial rewards or a percentage of the recovered funds if their report leads to a successful prosecution or settlement.
  • Legal Guidance: Whistleblowers International provides experienced attorneys who specialize in insurance fraud cases, ensuring that you have the necessary legal support and guidance throughout the entire process.

If you have witnessed insurance fraud or suspect fraudulent activities, it is important to take action and report it. By doing so, you not only protect your rights but also contribute to the prevention of future fraudulent activities and the overall integrity of the insurance industry.

The Illinois Claims Fraud Prevention Act

In addition to California, Illinois is the only other state with a Qui Tam statute allowing a private individual to bring claims for commercial insurance fraud on behalf of the State. The Illinois Claims Fraud Prevention Act, 70 ILCS 92/1, et seq., imposes liability for paying unlawful remuneration to induce services under a contract of insurance and for violating certain criminal state antifraud provisions. 

Protections for Whistleblowers in CA and IL

Both California and Illinois have first to file rules, which means that once a person or government agency has brought an action under the Act, no person other than the State can intervene or bring a related action. 

As mentioned before, California and Illinois employees who act in furtherance of an insurance fraud prevention action are also protected against retaliation. Any anti-discrimination action as a result of their involvement with an IFPA action and the pursuit of damages must be done within three years from the time the fraud was committed or from when they discover “the facts constituting the grounds” for the action or within eight years of the retaliatory act.

If you know of insurance fraud that occurred involving insurers in California or Illinois, contact Whistleblowers International. Our team of whistleblower lawyers can help you use your information about insurance fraud to seek justice and potentially earn you a reward by co-counseling you matter with a firm located in California or Illinois. 

Call us at (800) 689-8552 to get started.


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