California has a unique statute called the Insurance Frauds Prevention Act (IFPA). The law allows a private citizen, such as a whistleblower, to bring a lawsuit against anyone who commits insurance fraud.
The IFPA is different than other whistleblower laws because it allows private citizens to recover funds defrauded from a private company. Most other whistleblower statutes only allow private citizens to recover funds defrauded from a government entity, such as Medicare.
Examples of Insurance Fraud
The California Insurance Frauds Prevention Act prohibits a broad range of healthcare, disability, and auto insurance fraud. Among other things, it holds liable:
- An insured who knowingly submits an insurance claim that contains false or materially misleading information
- An insured who attempts to get reimbursed twice for the same loss
- An attorney or other representative who prepares a false or fraudulent insurance claim on someone else’s behalf
- Co-conspirators who aid or abet insurance fraud
- A doctor who accepts referred patients while knowing that the referral service committed insurance fraud
- A doctor who refers patients to a health care provider or pharmacy while knowing that the provider or pharmacist intends to commit insurance fraud
- A worker who knowingly makes a false or fraudulent statement to obtain workman’s compensation
- An employer who knowingly makes a false or fraudulent statement to prevent someone from obtaining workman’s compensation
- A doctor who lies about someone’s medical condition to help them to obtain life insurance
- A car mechanic who pays a referral fee to an insurance company for sending its clients to the auto mechanic
- Anyone who pays a referral service to procure clients for an insurance fraud scheme can be held liable under the Insurance Fraud Prevention Act
Aware of Fraudulent Insurance Activity?
If you believe you have information about insurance fraud in the healthcare, auto, disability, or other industries, find out if you have a whistleblower claim and how to proceed with it by speaking privately with our attorneys, free.
us at (800) 254-9493
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Penalty for Insurance Fraud
Anyone committing one of the above violations is subject to a civil penalty of between $5,000 and $10,000 per violation, plus an assessment of three times the total amount of false or fraudulent insurance claims.
Who are Insurance Fraud Whistleblowers?
Any private citizen who qualifies as an “interested person” may file a whistleblower lawsuit under the IFPA to recover civil penalties and other damages. Though the law doesn’t define “interested person” and it has not yet been sufficiently litigated to provide a clear definition, courts have held that a former employee who blows the whistle against an employer’s insurance fraud can qualify as an “interested person” under the law.
Under the California IFPA, private citizens who bring suits to combat insurance fraud are called qui tam relators. Qui tam is short for a Latin phrase that means “in the name of the King.” Qui tam laws allow private citizens to sue in the name of the state.
Filing an Insurance Whistleblower Lawsuit
Qui tam relators must initially file their whistleblower cases under seal: The defendant is not notified that a case has been filed, and the identity of the relator is kept confidential.
Next, the relator sends a copy of their lawsuit to the California attorney general and insurance commissioner, the head of the California Department of Insurance, to give them a chance to intervene in the lawsuit. If either the attorney general or insurance commissioner choose to intervene, they will take over prosecution of the lawsuit.
Rewards for Reporting Insurance Fraud
For their help in bringing the lawsuit, however, the relator is still entitled to a share of any money recovered. Under the IFPA, the relator is entitled to a minimum of 30 percent and a maximum of 50 percent of any settlement or trial award, depending on the circumstances.
Insurance Fraud Whistleblower Cases
Chiropractor Upcoding & Improper Referral Fees
One lawsuit involved allegations that a chiropractor, Dr. Cruz, had submitted fraudulent claims for reimbursement to Geico. The complaint alleged that Dr. Cruz had engaged in upcoding and payment of improper referral fees when treating Geico car accident victims. Upcoding involves billing for a higher level of service than was actually performed. Deposition testimony and other evidence showed that Dr. Cruz had used billing “codes that inaccurately identified returning patients as new patients; she billed for reviewing seven X-rays when she took only five; and she presented claims using [billing] codes for ‘level four’ and ‘level five’ services, when she admitted in her deposition that those services” were never performed by her practice.
The court also found that the plaintiff had plausibly alleged that Dr. Cruz had paid improper referrals fees to the provider who owned her offices. The complaint alleged that Dr. Cruz disguised the fee rent payment as part of her lease agreement, but the payment exceeded the fair market value for the space.
Pharmaceutical Kickbacks in Exchange for Prescriptions
In another suit, Michael Wilson, a former salesperson for Bristol-Meyers Squibb, brought a qui tam action against his former employer alleging that Bristol-Meyers had “targeted high-prescribing physicians, members of formulary committees, and sometimes their families, to be recipients of lavish gifts and other benefits (such as tickets to sporting events and concerts, free rounds of golf, resort vacations, meals, gifts, and other such incentives– characterized in the complaint as ‘kickbacks’), in order to induce physicians to prescribe [Bristol-Meyer’s] drugs and to reward them for doing so.”
In particular, Mr. Wilson alleged that Bristol-Meyers “targeted these benefits to physicians who had large numbers of patients enrolled in private health insurance plans.” Mr. Wilson sued, on behalf of the State of California, to recover funds fraudulently taken from private insurance to reimburse for Bristol-Meyer drugs that were prescribed due to the kickbacks.
Series of False Claims for Fictitious Car Accidents
Another lawsuit involved allegations that numerous individuals had engaged in an “insurance fraud ring,” which had submitted hundreds of false claims to Financial and Allstate based on fictitious car accidents that never occurred.
An “investigation of Financial’s claims files revealed at least 27 purported collisions giving rise to at least 90 fraudulent insurance claims,” and “Allstate obtained 78 taped confessions concerning 47 staged collisions.”
Girard Gibbs’ whistleblower lawyers have more than two decades of experience prosecuting fraud. Our attorneys have successfully litigated against some of the largest companies in the United States, and we have recovered more than a billion dollars on our clients’ behalf. We have fought some of the most complex cases brought under federal and state laws nationwide, and our attorneys have been recognized with numerous awards and honors for their accomplishments, including Top 100 Super Lawyers in Northern California and The Best Lawyers in America, and rated AV Preeminent (among the highest class of attorneys for professional ethics and legal skills).
We proudly hold memberships in Taxpayers Against Fraud, a public interest organization dedicated to combating fraud against the government and protecting public resources. Our firm supports the nonprofit’s educational initiatives and efforts to advance public and government support for qui tam whistleblower cases.