Protecting insurer rights to EUOs vital to fraud fight

Adverse decision in Kentucky could embolden crash rings

A Kentucky lower court has thrown a wrench in the campaign to combat the growing scams involving PIP crashes in the Bluegrass State. The court agreed with two claimants in an auto crash. They’re suspected of fraud. Insurers have no right to compel them to attend an examination under oath (EUO), the lower court ruled.

The Coalition and NICB filed an amicus brief this week asking the Kentucky Supreme Court to overturn the decision and restore insurer rights to use EUOs.

EUOs are a powerful weapon to get at the truth. When summoned, many fraudsters don’t bother showing up —especially lower-level ring members. They feel the few dollars they’re making don’t offset the potential of getting caught.

EUOs are a deterrent as well. Knowing there’s a chance you might have to give details of a claim under oath helps keep people honest.

Take the EUO away, and more fraud rings likely will escape detection and feel emboldened to commit more fraud.

The Kentucky claimants contend insurers use EUOs to harass and intimidate honest claimants. We’ve found no evidence to support this contention. We determined that insurers use EUOs very infrequently, and only when necessary to discover truth about a claim.

In fact, EUOs can be an important tool to validate legitimate claims.

Sometime later this year, the Kentucky supreme court will announce its decision. Here’s hoping they support uncovering the truth about potentially fraudulent auto claims.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

New Jersey court gets it right about insurer/fraud bureau partnership

But too close a relationship could harm public interest

Accused fraudster Harshad Patel said his rights were violated because New Jersey’s anti-fraud agency works too closely with insurers to root out fraud. The Office of Insurance Fraud Prosecutor “outsources” investigations to insurers because it lacks financial resources to fully investigate on its own, Patel contended.

So he sued the state, alleging his constitutional rights were violated.

A U.S. Court of Appeals tossed the case this week. Patel didn’t prove he was harmed by the relationship between the fraud bureau and insurers, the court ruled. But the judge left the door open to revisit this issue in the future.

Other fraud defendants have claimed a fraud bureau has gotten too chummy with insurer investigators to beat up on citizens. Yet their legal challenges all failed.

Still, future challenge could succeed if fraud bureaus and insurers cross a line in working together. As state agencies, fraud bureaus need to make their own decisions about which cases to investigate. And they must conduct their own investigations.

Insurers can and should provide case information and offer assistance, such as providing pretext policies and bait cars.

But insurers should never attempt to direct a fraud bureau investigation or in effect, become an investigative arm of the state. It’s bad public policy. The legal and public-relations consequences also could be disastrous.

Patel’s ill-conceived challenge was a stretch. Yet it reminds us that state and private investigators must stay vigilant.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Oregon needs insurance-fraud law

Would court rule against an insurer if Oregon had fraud law?

Oregon fraud failNearly every state in the union has made insurance fraud a specific crime. Oregon and Virginia are the only states without a specific insurance fraud law.

At least Virginia has a fraud unit, housed within the state police. There are robust investigations, and prosecutors use the state’s false pretense law to convict scammers.

Oregon has little anti-fraud infrastructure to call on. The governor vetoed a bill back in 1997 because it wasn’t “good enough.” Efforts to make fraud a specific crime have been garaged ever since.

And here’s the fallout: An Oregon appellate court recently ordered an insurer to pay a $10-million loss after a claimant’s expensive home burned down. The insurer suspected a misrepresentation that could’ve been fraud. The insurer refused payout, and a lower court agreed.

My first reaction was that the appellate court wouldn’t have required that payout if the state had a robust insurance fraud law. An insurance-fraud law would’ve allowed the insurer to investigate, and refer the case to a prosecutor if it suspected fraud. Instead, the court decided the claim had to be paid, without a whiff of looking at whether fraud was involved.

Some 48 states plus Washington, D.C. have insurance-fraud laws, and for the most part, they work well. They all reference willfully misrepresenting or filing a false claim. Insurers thus have a potent tool for seeking justice when they suspect a false claim. Fraud laws adroitly cover willful and knowing lies about a claim and loss.

The Oregon case involved, among other things, the cost of chandeliers destroyed by the fire. The insurer believed the claimant had misrepresented by inflating the cost of those chandeliers.

Insurance fraud laws protect insurers and consumers from schemes. Insurers can keep premiums down if convictions can help reduce pass-along cost that scams impose.

Oregon has no insurance-fraud law, dedicated fraud prosecutors, or even a state agency to lead investigations. Instead, we have state courts coming down with questionable decisions like the latest one.

It’s high time Oregon joins the rest of the nation by making insurance fraud a specific crime.

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

Chiros fight Kentucky anti-solicitation law

Fraud fighters seek to thwart constitutional challenge

A federal court in Kentucky ruled the state’s anti-solicitation law unconstitutional last year. In response, anti-fraud community helped enact a new solicitation law this year that satisfies the court’s concerns.

The legislature overwhelmingly approved the fix.

Soliciting crash victims for potentially worthless medical treatment thus took a hit. The new law strictly limits soliciting of drivers and passengers for 30 days after the crash. It also blocks insurance payments to providers who violate the law, and protects consumers from making forbidden payments.

The law serves a timely purpose. Fraud rings are moving into Kentucky — some from Florida to escape ramped-up heat by law enforcement. They’re trying to lure often-traumatized crash victims for treatment at shady clinics that lodge inflated insurance billings for useless treatment.

Problem fixed, right? Wrong. Several chiropractors didn’t even wait for the law’s June 24 effective date.

They sued in federal court, saying the new law violates the First Amendment and due process. A hearing on an injunction to stop enforcement of the law is scheduled for late August.

Just hours before the Kentucky suit was filed, the Texas governor signed a new law restricting access to its crash reports. Much like Kentucky, the law aims to prevent insurance criminals from hounding crash victims to get injury treatment at shady clinics.

Only crash victims, their reps (insurers, medical providers, attorneys) and reporters now can obtain the full crash report. Anyone can buy the reports. Except that the personal information is redacted for outsiders, so the reports lose all value to fraudsters.

Kentucky’s new law builds on another initiative in Texas. After surviving court challenges, the state started enforcing a law restricting solicitation of auto crash victims for the first month after a crash. Fraud rings started moving out of Texas when the enforcement heat rose. They’re moving into other states like Kentucky, which the rings perceive as softer enforcement environments.

So fraud fighters must stop the Kentucky lawsuit. Success by the chiros could embolden challenges to anti-soliciting laws in other states such as Texas. 

The Coalition already has sent the Kentucky attorney general info that will help derail the suit. We also plan to team with partners to file friend-of-the-court briefs that provide strong legal support.

The new law keeping criminals from recruiting crash victims is a constitutionally sound idea that limits dishonest activity and protects crash victims from being victimized yet again.

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

Lawsuit threatening N.J. fraud fight tossed

Vigilance against such suits needed in any state

A federal judge tossed out a New Jersey doctor’s lawsuit that could’ve threatened the state’s fraud fight. It’s a call for vigilance despite the win.

Harshad Patel owns a diagnostic imaging firm — X-rays and the like. The state and insurers are investigating him for possible bogus claims. He fired back with a lawsuit. Patel alleged that insurer funding of the state Office of Insurance Fraud Prosecutor allows insurers too much insider influence over who the state investigates for suspected scamming.

Fraud fighters followed the case closely. A successful lawsuit could’ve jeopardized funding of state anti-fraud efforts. Like most states, New Jersey’s fraud bureau is funded by annual assessments of insurers. Funding, however, has zero influence over which cases the state investigates or prosecutes, the state and insurers steadily argue.

Patel filed his original complaint to try and sidetrack their investigation of potentially false treatment claims, insurers contended.

Fortunately, the judge dismissed Patel’s case — with prejudice. He had no legal standing to bring the suit, the judge ruled. Prejudice means Patel can never bring that kind of suit in New Jersey again.

The win ensures that New Jersey fraud fighters can safely return to busting the bad guys. For now.

Fraud fighters must stay vigilant. Patel lost on procedural grounds, leaving his “outsourcing” allegations untested in court. So that legal ball could easily remain in play, even if Patel is out of action. Another medical provider could try the same legal outsourcing gambit, and work around the issue of legal standing.

Several years ago there was a similar outsourcing suit in Massachusetts. We won there also. The Coalition wrote an amicus “friend-of-the-court” brief to support fraud fighters opposing the suit. Where else could a lawsuit rear up?

Fraud fighters should stay alert and watch for outsourcing suits in your backyards. All it takes is a willing claimant with a beef, and a special-interest group with deep pockets.

Insurer funding of state anti-fraud efforts is a time-honored approach that’s fair and works. Let’s keep the system away from ill-conceived lawsuits and instead working to catch fraudsters.

 About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

Comp benefits too low for injured Fla. workers, judge rules

Focusing more on preventing fraud reduces need to cut benefits

A judge in Florida delivered a wake-up call to insurers and employers last week in ruling that workers compensation in its present form violates the state constitution. Current benefits aren’t enough to balance workers giving up their legal rights to sue, the court ruled.

Is this the result of a wayward judge, or more mischief by the trial bar trying to throw out a no-fault system that limits lawsuits?


But business-friendly legislatures in many states have cut benefits for several years, to where some contend that injured workers are being shortchanged. Especially in Southern states, critics say it’s too easy to deny benefits and that the ability to appeal has been sharply curtailed.

At one time, benefits were so rich in some states that it encouraged workers to fake injuries and malinger once they started receiving benefit checks. Remember California in the 1990s with the spike in stress claims? Or Pennsylvania, where you could make more on comp than your regular job because benefits weren’t taxed?

The political pendulum has swung far and wide. Sooner or later it will begin turning back toward increased benefits, especially if more states deem their comp systems are out of balance.

Insurers and employers should prepare for that day because pressure will increase to hold the line on premium hikes. A good start is to beef up anti-fraud measures and go after schemes by claimants and medical providers, as well as premium scams by businesses. Better prevention programs like this one would help as well.

A hostile environment for fraudsters will best serve the interests of insurers, employers and workers who are legitimately injured.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Insurers lodging uncivil civil suits against rings

Court actions can disrupt crash rings, send positive signals to public

A federal judge whacked a Las Vegas-area chiro this week with an order to pay Allstate more than $1.2 million involving 78 bogus crash claims. The insurer’s RICO civil suit alleged that Rit Charette inflated medical reports, gave unneeded treatments, prepared fraudulent bills and made illegal referrals to other healthcare providers.

The recovery speaks to a larger and welcome trend of insurers taking down fraudsters with civil suits. Much of the action centers around networks of crooked no-fault doctors, chiros, attorneys and others. They stage car wrecks, or simply invent medical records of phantom passengers and crashes.

Sometimes crashes are real, involving real victims who are recruited unknowingly for shoddy treatment. Whatever the business model, the crime rings bombard insurers with lavish and false treatment claims.

Crash rings are soaking up billions of dollars in false injury claims a year. They’re hiking auto premiums for honest drivers.

Fed-up auto insurers are striking back with increasing force by lodging civil actions against brazen fraud rings in federal and state courts.

State Farm has sued the heavily promoted clinic network called “1-800-ASK GARY” accident-referral service in Florida. The insurer alleges the large outfit illegally referred crash victims only to medical providers controlled by owner Gary Kompthecras in Florida, Minnesota and Kentucky.

Farmers Insurance is going after more than 40 New York medical providers for an alleged illegal scheme involving unlicensed laypeople who made false claims for treating crash victims.

Geico sued the owners of an Orlando chiro practice in March. The insurer alleges that the practice stole $2.3 million from false claims involving real and staged crashes.

Other auto swindles feel the weight of civil suits. Allstate last week earned a judgement of more than $1.4 million against a firm that billed the insurer for false windshield repairs. Part of that money will also go to the State of California as a co-plaintiff in the case.

Insurers may or may not recoup their typically large investments in attorney fees, staff time and other expenses. Often these suits are financial break-even propositions, at best. Frequently the crooks have spent or laundered the money, or don’t have enough assets to pay off the judgements.

But forcing ringleaders into protracted suits with large-dollar judgments can disrupt rings and drain their finances — thus undermining or putting them out of business.

Civil suits also emit a loud signal to the public that a given insurer takes a no-nonsense approach to crime rings that are driving up premiums and endangering motorists.

Word also spreads in the criminal underworld that certain auto insurers are too dangerous to try and defraud. Some rings avoid insurers that are known to make trouble with civil actions.

Crash rings must come to fear the large prospects of courts gaveling them into ruin. For fraud rings, there’s nothing civil about civil suits.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

More courts need to hear from insurers about how fraud affects them

In many states, fraud victims have a right to have their say in court

Justice imageLawyer Joseph Haddad stood in a Connecticut courtroom yesterday and pleaded guilty to masterminding an auto fraud ring that swindled millions from insurers.

Before the judge announced Haddad’s sentence, the court heard how crimes like his negatively affect insurers and society.

John Sargent, investigations director for MetLife, read an impactful statement in court that detailed how automobile fraud schemes raise rates, disrupt the lives of innocent crash victims, compromise medical records and cost insurers a ton of money.

The statement helped educate the judge, other court officials, reporters in attendance and even the convicted fraudster about how fraud is detrimental to society and erodes trust.

The fraud-fighting community does a good job of reaching out to consumers, legislators, the news media and others, but sorely lacks in educating the judiciary. Many states have enacted “victims’ rights” laws that allow victims — including insurers — to make a statement in court either during a trial or at sentencing, but few insurers take advantage of this opportunity.

We don’t know if John’s statement influenced the sentence in this case (51 months in prison, $1.7 million in restitution), but hopefully this information will be recalled the next time a fraud mastermind comes before the court.

As John concluded in his statement: “With all the resources the insurance industry and law enforcement dedicate to combating fraud, we will never be able detect, investigate and prosecute all of the schemes like this one. We must rely on deterrence to encourage professionals not to cross the line into committing fraud. We must rely on the criminal justice system to administer swift and sure punishment that will send a clear message to others that society will not tolerate such unethical and criminal behavior — and if they do cross that line, they will pay the price.”

The Coalition has posted facts, figures and a sample statement on a webpage for anyone wishing to make such a statement in court.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Court to rule on medical data transparency

Data transparency might help providers think twice about committing fraud


Medical fraud investigators could have hundreds of new allies — and a powerful new anti-fraud tool — after an upcoming federal court ruling in Florida. The court is weighing whether to lift a 1979 exemption of Medicare data from the Freedom of Information Act.

If the ban is lifted, journalists would have access to data about physician treatments, tests ordered and a whole host of medical services. The news media would represent another powerful entity crunching medical data and potentially uncovering fraud and abuse by medical providers.

If nothing else, the transparency of data might help medical providers think twice about committing fraud.

The ban was put in place 33 years ago at the urging of provider groups. They said that permitting access would violate their privacy and could hurt the doctor-patient relationship — even though no patient identity ever would be disclosed.

The Wall Street Journal and the Center for Public Integrity filed the lawsuit to lift the ban. A decision by Federal Judge Marcia Morales Howard is expected soon.

Journalists, by the way, wouldn’t be the only ones with access to this medical data. Medical fraud investigators could file FOIA requests as well.

Let’s hope Judge Howard rules for data transparency.

About the author: Dennis Jay is executive director for the Coalition Against Insurance Fraud.

Set the prisoners free…and then what?


Fraud fighters funnel tremendous amounts of time and effort into detecting, investigating and helping to prosecute people who commit insurance crimes. That last step of the process — punishing people who defraud — is running up against a trend sweeping the nation: prison depopulation.

Grappling with crumbling budgets, state after state is facing the reality that they can no longer afford to incarcerate growing numbers of criminals, especially non-violent ones.

The number of prisoners in the U.S. is at an all-time high. The U.S. imprisons more people than even China, which has four times the number of citizens. Sooner or later, something has to give. That something, in part, is pressure to resist handing out prison sentences for white-collar crime, including insurance fraud.

Not only is there pressure on judges to resist incarcerating white-collar criminals, but sentences are becoming shorter. At least 19 states have taken action to cut their prison population by reducing sentences. Mississippi began allowing non-violent prisoners to be considered for parole 60% earlier than usual. New York, Rhode Island, Minnesota, Michigan, and New Jersey enacted similar sentence-cutting measures for low-risk inmates.

Budgets aren’t the only reason states are taking action. Overcrowding is another factor. California — under a Supreme Court order — will soon release at least 30,000 convicts to ease inhumane conditions. How many fraudsters currently locked up in California prisons will be let out to continue plying their trade?

This trend not only will put more white-collar criminals back on the streets, but likely will create a disincentive for prosecutors to take these cases in the first place. Plus, deterrence for committing fraud will diminish.

Michigan prosecutor Kym Worthy recently expressed her disappointment in Michigan’s prison system, pointing out that arsonists are keenly aware of the state’s lenient policies, and knowingly perpetrate these crimes because they “know they can get away with it.”

Fraud fighters and prosecutors need to meet this trend head on and come up with creative ideas as alternatives to long prison terms.

Out of necessity, some jurisdictions already are employing such measures. In Texas, one district attorney has cut plea bargains with auto giveup scammers to require them to appear in video PSAs talking about how dumb their crimes are and the impact on their lives. A prosecutor in Florida recently cut a deal with convicted clinic owners to fund a public outreach campaign about the cost of such crime and to alert citizens to report shady clinics.

Public service spots and public speaking mandates by remorseful fraudsters would further put a face on this crime, creating a lasting impression in the consumers’ experience, in a more direct way than reading about a conviction.

Public embarrassment is good, but much more thought needs to go into alternative sentencing. Increased fines on professionals who defraud would be a good start. Perhaps medical professionals who defraud should be sent to third-world countries for a couple years to provide free care. Convicted lawyers might be sentenced to long-term jobs at nonprofit legal centers providing services to the poor. Whatever alternatives, they must be sure, swift and somewhat painful to serve as deterrents.

If our criminal justice system fails to hand out effective punishment, deterrence will continue to diminish and fraud will continue to flourish.