California has a unique statute called the California Insurance Frauds Prevention Act (CIFPA). The law allows a private citizen (a California insurance fraud whistleblower) to bring a lawsuit against anyone who commits insurance fraud.
CIFPA 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 or program, such as money taken from Medi-Cal or Medicare.
Although CIFPA doesn’t target fraud against the government, California whistleblowers must still bring claims under CIFPA as qui tam lawsuits on behalf of the State of California (or, more specifically, the California Insurance Commissioner).
California Insurance Whistleblower Rewards: How the Process Works
California is one of only two states that have an insurance fraud qui tam statute (the other state is Illinois). The California Insurance Fraud Prevention Act allows a California whistleblower to file a qui tam lawsuit against a person or company that they reasonably believe to be committing insurance fraud.
CIFPA makes it unlawful to:
- Present a false or fraudulent claim to an insurance company;
- Submit a false or fraudulent statement in an attempt to obtain money from an insurance company;
- Penalties for CIFPA violations are up to three times the amount of the insurance fraud, plus a civil penalty of up to $10,000 for each fraudulent claim submitted.
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 chooses to intervene, they will take over prosecution of the lawsuit.
If the California District Attorney or Insurance Commissioner intervenes in the lawsuit and achieves a settlement or award, the whistleblower is entitled to between 30 and 40 percent of the recovery. If the District Attorney and Insurance Commissioner decline to intervene and the whistleblower wins on their own, the whistleblower is entitled to 40 to 50 percent of the recovery.
Examples of California Insurance Fraud under CIFPA
- 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
Considering California insurance fraud whistleblowing?
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Who can file a California insurance fraud whistleblower claim?
Any private citizen who qualifies as an “interested person” may file a whistleblower lawsuit under the CIFPA 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 Insurance Fraud Prevention Act, 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.
What are the California insurance whistleblower rewards under CIFPA?
For their help in bringing original information about insurance fraud in a lawsuit, a California insurance fraud whistleblower is entitled to a share of any money recovered. Under CIFPA, the California qui tam 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.
California whistleblowers generally receive higher rewards when their contribution to the lawsuit is greater (i.e., they and their California whistleblower attorney are prompt and helpful in assisting the government, if the State intervenes), or if the whistleblower’s information is of substantial value on its own.
Generally, the larger the whistleblower’s contribution to the total recovery, the greater will be the California whistleblower’s reward
California Insurance Fraud Whistleblower Lawsuits/Cases
Chiropractor Upcoding & Improper Referral Fees Lawsuit
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.
Lawsuit: 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.
Lawsuit: 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.”
Our California Insurance Whistleblower Attorneys
Gibbs Law Group is a California-based law firm committed to protecting the rights of clients nationwide who have been harmed by corporate misconduct. We represent individuals, whistleblowers, employees, and small businesses across the U.S. against the world’s largest corporations. Our award-winning lawyers have achieved landmark recoveries and over a billion dollars for our clients in high-stakes class action and individual cases involving consumer protection, data breach, digital privacy, and federal and California employment lawsuits. Our attorneys have received numerous honors for their work, including “Top Plaintiff Lawyers in California,” “Top Class Action Attorneys Under 40,” “Consumer Protection MVP,” “Best Lawyers in America,” and “Top Cybersecurity/ Privacy Attorneys Under 40.”
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