The California Insurance Fraud Prevention Act (“CIFPA”) or California Private Insurance Qui Tam Act is a unique whistleblower law. Explained further, it is unique because the law allows individuals to sue on behalf of private insurance companies. It’s one of two laws that allows individuals to sue on behalf of private insurance companies (the other one is Illinois). Additionally, if the case is successful, the individual who brought the lawsuit, receives a portion of the recovery.
In other words, there need not be government harm to pursue a case under the California Private Insurance Qui Tam law. Rather, private insurance companies have to suffer harm.
By way of example, lets say a whistleblower has a False Claims Act case alleging that a doctor routinely billed Medicare for services that the doctor did not provide. If that doctor practices sees patients in California. And if that doctor does not discriminate on who he/she is charging. Meaning, the doctor also bills private insurance companies for services that the doctor did not provide. Then the whistleblower also has a case under the California Insurance Fraud Prevention Act.
Qui Tam Cases on behalf of Private Insurance Companies
The California Insurance Frauds Prevention Act is codified at Ins. Code §§ 1871 et seq. The CIFPA allows whistleblowers to fight private insurance fraud. More specifically, whistleblowers can bring qui tam cases against any person or company that defrauds private insurance companies.
Under the California Insurance Qui Tam Statute, 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.
Operation of the California Insurance Fraud Prevention Act
The California Insurance Fraud Prevention Act is modeled after the Federal False Claims Act. Thus, its not hard to imagine that the CIFPA operates in a similar fashion.
CIFPA cases are initially filed under seal so that the government has an opportunity to investigate the claims. Cases are usually filed in California State Court, by hand, with the clerk. Prior to filing, the whistleblower lawyer should contact the clerk’s office for the specific motions and paperwork that need to accompany the complaint.
The complaint and disclosure materials are served after the case is filed. Similar to the False Claims Act, disclosure materials include all relevant documents and evidence related to the case. However, the case and disclosure materials are not served on the Attorney General and United States Attorney. Rather, the case and disclosure materials are served on the California Insurance Commissioner and the relevant District Attorney.
Third, like the False Claims Acts, the California Insurance Fraud Prevention Act makes it illegal to knowingly present false or fraudulent claims to insurers for payment of a loss or injury. The same types of fraudulent conduct pursued under the False Claims Acts are pursued under the California Insurance Fraud Prevention Act.
Finally, the CIFPA forbids people and companies from paying incentives or kickbacks in exchange for obtaining insurance benefits. Explained further, this is an anti-kickback statute law.
Large Qui Tam Rewards
Damages under the California Insurance Fraud Prevention Act are similar to damages under the False Claims Act. For example, if found to have violated the CIFPA, a person or company can be fined from $5,000 to $10,000 per violation. Additionally, the person must pay damages of three times the amount of money the fraud cost its victims.
However, one of the differences between False Claims Act cases and California Insurance Qui Tam cases is the amount of the reward. Put simply, the California Insurance Fraud Prevention Act provides for larger qui tam rewards.
Whistleblowers that bring successful actions under the CIFPA are rewarded with 30-40% of the recovery. Whistleblowers receive at least 30% of the recovery in CIFPA cases where the government intervenes. Whistleblowers receive at least 40% of the recovery in cases that the government declines.
In addition to the percentage of rewards, there is a difference in reduction of the reward. If the Court determines that a False Claims Act case is based on a public disclosure, it can divest the whistleblower of jurisdiction. In other words, the whistleblower gets bounced out of Court and does not receive an award of any amount. However, under the California Insurance Fraud Prevention Act, even if the court ultimately determines that the whistleblower’s case is based primarily on information that was already publicly available, the whistleblower can still receive up to 10% of the government’s recovery.
California Insurance Fraud Prevention Act Qui Tam Cases
There is very little case law regarding the California Insurance Prevention Act. This is because it is an under-utilized whistleblower statute. Additionally, there are very few settlements under the California Insurance Fraud Prevention Act. A review of the CIFPA cases, verdicts, and settlements shows the following:
- There is little case law interpreting the California Insurance Fraud Prevention Act;
- Several rulings issued over the last few years under the CIFPA (California insurance qui tam) confirmed the statute’s expansive reach and potential for significant recoveries;
- Rulings issued show a tendency of the Court to look to False Claims Act law in interpreting the California Insurance Fraud Prevention Act;
- The California Insurance Fraud Prevention Act is an underutilized whistleblower Act;
- Insurance companies have utilized these Acts upon locating potential insurance fraud (i.e., they have filed cases under the CIFPA when they themselves have been defrauded); and
- Cases are varied and include the giving and acceptance of kickbacks, upcoding, workers compensation fraud, claims regarding medical necessity, claims involving uncertified healthcare professionals, false billing, and many more.
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