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Two Insurance Fraud Laws That Whistleblowers Often Overlook…

by | Apr 15, 2016 | Whistleblowers

Most whistleblower cases are brought to recover the ill-gotten gains of fraud committed against the government. Most cases arise in the healthcare field, but many stem from military contracts, educational grants, and even environmental fraud.

One area that is often overlooked by whistleblowers is the opportunity to bring insurance fraud cases on behalf of private insurers in California and Illinois where special laws exist that provide whistleblower provisions to protect against insurance fraud.  Both acts are modeled after the Federal False Claims Act, with one major distinction: the government does not have to suffer harm.

Insurance Fraud versus Government Fraud

Insurance FraudBoth the California Insurance Frauds Prevention Act, Ins. Code §§ 1871 et seq., and the Illinois Claims Fraud Prevention Act, 740 ILCS 92/1 et seq. (the “Acts”), allow whistleblowers to fight insurance fraud by bringing qui tam cases against any person or company that defrauds private insurance companies. Rather than bringing the case on behalf of the government and fellow taxpayers, the whistleblower brings the case on behalf of the government and fellow policyholders.

Both statutes operate much like the Federal False Claims Act. The cases are initially filed under seal so that the government has an opportunity to investigate the claims. Like its Federal and State counterparts, the insurance fraud prevention Acts make it illegal to knowingly present false or fraudulent claims to insurers for payment of a loss or injury. In addition, the Acts forbid people and companies from paying incentives or kickbacks in exchange for obtaining insurance benefits.  And just like the Federal counterparts, only the whistleblower who files first may receive an award.

If found to have violated one of the Acts, a person or company can be fined from $5,000 to $10,000 per violation in addition to damages of three times the amount of money the fraud cost its victims.  Also, both Acts provide strong whistleblower retaliation provisions that allow a whistleblower to be made whole, including reinstatement and backpay, should he or she be demoted, harassed, or otherwise retaliated against for bringing a whistleblower case under the Act.

Larger Whistleblower Rewards

One welcome change from the Federal False Claims Act for whistleblowers is that both Acts provide larger whistleblower rewards for successful cases.  Whistleblowers receive at least 30% of the recovery in cases that the government intervenes in and at least 40% of the recovery in cases that the government declines to pursue.

In contrast, the Federal False Claims Act provides that the relator is entitled to receive between 15 and 25 percent of the amount recovered by the government in intervened cases and 25 to 30
percent in declined cases

Shorter Statute of Limitations

However, the Acts are slightly less friendly than their Federal counterpart in that they both require that the case be brought within 3 years of discovering the fraud, but no more than 8 years after the fraud itself took place.

Under the Federal False Claims Act, you have the same 3 years after the facts were discovered or should have been discovered, but when you’re traveling under this provision, you have up to 10 years from the actual violation — 2 more than the insurance fraud Acts — to bring the case.

If you’re interested in learning more about these Acts, you can read the entire California Insurance Frauds Prevention Act, Ins. Code §§ 1871 et seq., by clicking here and the Illinois Claims Fraud Prevention Act, 740 ILCS 92/1 et seq., by clicking here.

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