Fraud fighters logged several important state legislative victories, making this one of our strongest first quarters in several years. EUOs were successfully defended, statutes of limitation were extended for investigations, more fraud prosecutors were funded, and an airbag-fraud law went onto the books.
Washington state. A bill that would've chilled fraud investigations started moving through the legislature in early January. It would've limited when and how insurers could conduct EUOs. Supporters called it a consumer-protection measure. Except that insurers would've been forced to pay fraudulent claims to comply with the overly tight restrictions.
The Coalition joined with the state insurance department and other fraud fighters to warn the legislature. We convinced key committees in both chambers to halt the dangerous bill.
Statute of Limitations. Both Colorado and Arkansas extended the timeframe for bringing fraud charges.
"These states grasp that complex insurance scams take time to discover and dismantle. It makes little sense to treat insurance fraud like a home burglary, bank robbery or murder. These are single acts that occur in specific moments," the Coalition's Howard Goldblatt blogged.
Complex insurance schemes such as longstanding staged-crash rings can be different. Insurers may discover the ring well after the money is stolen. Crash and medical rings might get away with bogus injury claims for years before insurers discover them and build evidence to earn a prosecution.
Virginia. The state police fraud unit gained two dedicated fraud prosecutors. The money was budgeted, and the police just needed authority to spend the funds. Yet the governor removed the funds from his initial 2017 state budget. Fraud fighters joined to have the money reinstated. The Coalition and NICB jointly worked on the push. The new fraud prosecutors will start chasing down schemers starting in July.
Georgia. The Peach State is verging on becoming the 15th state to criminalize airbag schemes in recent years. A bill would make it a specific crime to sell or install counterfeit bags in vehicle repairs. It cleared the legislature, and the governor is expected to sign. Most other airbag laws are similar. Honda North America and the Coalition are teaming for stronger laws protecting consumers from phony airbags.
Motorists have died when airbags were removed or replaced with counterfeits during repairs. Dishonest body shops typically charge $1,000 or more for a manufacturer's replacement after installing a non-functioning knockoff they bought on the black market for a few dollars.
New York. There's a strong move to shield homeowners from schemes by larcenous roofers. The Coalition is part of an alliance of insurers, businesses and consumer groups supporting legislation. Under the bill:
Widespread abuse by storm chasers after Megastorm Sandy and other major storms in the state was a major driver of the bill. Crooked roofers, however, prowl neighborhoods after nearly any storm. Often they're unlicensed, incompetent and from out of state.Inflated repair claims, stolen downpayments, unfinished work and botched repairs using substandard material are part of the swindler's toolbox. Homeowners often must pay out of pocket when fixing lousy repairs maxes out their policy limits or the claim is denied for fraud.
Fraud fighters are rushing to pass bills in the final moments of several brief state legislations. Whatever the outcomes, there's still a good chance Florida will clamp down on contractors and Minnesota will gain two fraud analysts.
New Mexico. A law allowing judges to aggregate the total insurance fraud when sentencing was blocked again. Well-organized medical lobbies think the effort unfairly targets them.
The statehouse still agreed to fines of insurers if they miss paying required annual assessments that fund the state's anti-fraud effort. Insurers would pay $1,000 per month, which is more than their annual fees based on annual premiums. The governor is expected to sign.
Michigan. The Wolverine State urgently needs a state agency to help corral crash rings and other automobile cons that are draining insurers. Two measures would create an automobile fraud authority, and the future of both is questionable.
The authority is built into a large no-fault reform bill. That effort appears stuck in neutral, however. Strong lobbies oppose reducing the state's guaranteed lifetime medical benefits for injured motorists. It's the most-generous system in the U.S., and is a big target for predatory crash rings that are helping drive up premiums.
There's plenty of political support for the authority. But the floundering overall reform effort could drag down the agency this year. A freestanding bill creating the authority sits quietly on the sidelines. It'll need a lot more traction, however, before lawmakers will consider it independently of the larger reform push. The Coalition helped draft the original fraud-authority language several years ago.
Florida. Tallahassee closed its 2017 session with a mixed bag of results.
Minnesota. Two fraud analysts would be hired under an omnibus budget bill moving steadily through the legislature. The measure would transfer $1.3 million into the insurance-fraud account. The money would fund the analysts and their support infrastructure. They'd be housed in the state fraud bureau. The money comes from a state auto-theft surcharge.
"Maybe we should seek more civil actions when the winds of change for tougher criminal penalties blow in our faces. Enacting large civil penalties get inside the wallets of fraudsters and remove their profit motive," the Coalition recently blogged.
Should more states be empowered to sue fraudsters instead of wait for the often-cumbersome criminal system to wind along? Many lawmakers seem reluctant to strengthen criminal penalties at the same time they are looking at criminal justice reform that seeks to reduce certain felony crimes.
The Coalition welcomes Matthew Smith to the Coalition's government-affairs team. Matthew is a well-known insurance defense attorney, and the Coalition's general counsel.
Florida bids farewell to a vocal anti-fraud voice when elected CFO Jeff Atwater retires after the legislative session. He was a tireless advocate for stronger auto insurance fraud laws and crackdowns during his tenure.
Texas insurance commissioner David Mattax passed away in mid-April after a short illness. The Coalition extends condolences to the Texas insurance department and the commissioner's family.
Insurers find their voice in Kentucky through the Insurance Institute of Kentucky. That voice is vocal in the statehouse, where fraud fighters had a busy year maneuvering bills aimed at equally busy crash rings and deceitful home contractors. Mark Treesh led the effort as Executive Director of the Institute. He shares some insights about the Institute's statehouse achievements this year, and the fraudsters who made the bills necessary.
2017 was a successful year in getting the legislature to enact several fraud bills into law. What made it possible this year?
The biggest change was the shift in control of the state House of Representatives. The November election saw the Republicans net 17 additional seats to gain a 64-36 majority. This gave the Republicans control of the House, Senate and Governor's office for the first time in history.
That change led to a lot of business-friendly legislation passing in the recently completed session, including all of our agenda bills. Our agenda included two fraud-related bills. SB 128 deals with roofing fraud enforcement, and HB 215 deals with access to police accident reports.
I should also say that while we often face opposition from the plaintiff bar on many initiatives, that has not been the case with our bills dealing with insurance fraud. In past sessions we passed legislation curbing soliciting of accident victims, and the plaintiff bar was one of our chief allies in getting that done.
Roofing scams are ongoing problems in many states, especially after storms. Kentucky passed its version this year. Why did it take several years to convince the legislature that clamping down on crooked contractors is good for Kentucky residents?
Actually, we did pass a good roofing bill dealing with "storm chasers" in 2012. That bill allowed a homeowner who signed a contract with a roofer up to five days to cancel the contract. This assumed insurance was expected to pay for the repairs and that the claim was denied. The bill also banned "free roofs" by prohibiting inducements in excess of $100.
However, that bill did have one deficiency: It it wasn't very strong in the enforcement area. In fact, the only penalties for bad actors applied to scammers in general, cases the Attorney General usually pursues.
At the time we passed the bill, the General Assembly did not favor establishing criminal penalties for violations, and the bill was light on civil penalties. We decided a few years ago that we really needed to beef up enforcement, and that is what we have been working on since then.
It did take several years to get this bill passed, and it underwent quite an evolution. We first spent a couple of sessions trying to establish licensing for roofers, which we believed would have been an effective way to deal with the fly-by-night roofers who pop up after storms.
Our efforts at licensing failed for a couple of reasons. First, we could never get contractors and homebuilders fully on board. They perceived that licensing would just add to their costs and paperwork, with no benefit to them.
Also, Kentucky is a fairly conservative state, and a new licensing bill of any kind is sometimes viewed with skepticism as a possible impediment to legitimate businesses. We next tried to have certification for roofers instead of licensing, but that effort failed for the same reasons.
We changed our approach in 2016 to providing civil remedies for consumers negatively impacted by the storm chasers. We came a lot closer to passing the bill last year, but ended up falling just short because we failed to convince a few key legislators about a couple of provisions.
We went to work on the bill for the 2017 session. The bill that finally resulted was much-improved over the ones we had in 2016 and before. Essentially, the bill as passed expressly prohibits a roofer from causing damage to a roof to expand the scope of repairs. It also allows a homeowner, another roofer or an insurer to seek an injunction against a bad actor for violating bill provisions. Consumers suffering economic damages can recover double damages, and homeowners can recover their attorney fees.
You earlier passed limits on the ability of rings to access police crash reports to lure crash victims for false treatment. This year Kentucky blocked fake journalists from getting reports for fraud rings. How big is the problem of fake journalists?
As I mentioned earlier, we passed legislation in 2015 prohibiting the soliciting of accident victims by specified medical providers for 30 days after an accident. That bill is especially important, given how much fraud and abuse is taking place in personal injury protection coverage, especially in and around Louisville.
That bill has been upheld in court so far, but the legal fight is not yet over. Therefore, other efforts to curb solicitation also will help deal with the abuses. I have heard from my members that accident reports are one of the sources of that solicitation.
You are correct, Kentucky restricted the use of accident reports several years ago in an effort to stop that practice and other abuses. However, that legislation did allow for an exemption for access by the media, as you would expect under the First Amendment.
The trouble is that some referral services have styled themselves as media entities, even though they only make the accident reports available to a limited audience who uses them to solicit accident victims. We worked with the Kentucky Press Association and State Police to come up with the language in the bill that passed. We think that will help.
The bill does three things. First, it creates the criteria for a newspaper to qualify as a news-gathering organization. Second, it clarifies that entities that exist only as referral sources for making PIP claims do not qualify. Finally, it allows the State Police to issue a regulation for accessing accident reports.
What legislative issues may be on the horizon for the 2018 legislature and beyond?
We are already discussing the PIP statutes and reforms that we need to make. PIP was established to make it easier for accident victims to recover their medical bills without going to court. However, in the past 40 years a number of abuses have arisen with PIP that work to the detriment of consumers.
In addition to abuses of the statute, there has been an epidemic of outright fraud — staged accidents, treatments billed but not provided, and other abuses. We are searching for the best way to deal with all aspects of the problem. We hope to have a solution ready later this year.