Nearly 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.