Private Insurance Fraud and Qui Tam Cases

September 10, 2015 — California is one of two states that has a unique statute that permits qui tam actions in the context of private insurance claims. Generally, qui tam cases involve claims paid for by the government. Any claims paid for by private insurance companies under the False Claims Act are not actionable. Within the False Claims Act context, the idea is that the federal or state government healthcare programs have paid for a service or product that is in violation of the Act. As such, generally, even though defendant’s services or products are paid for by both government healthcare programs and private insurance companies, generally the defendant is only liable for payments by the government under the False Claims Act.

On the other hand, the California’s Insurance Frauds Prevention Act prohibits individuals or companies from engaging in conduct that will increase the private insurance claims paid for by private insurers in the State of California. It is modeled after the federal False Claims Act and the federal Anti-Kickback Statute.

To the benefit of the whistleblower, the Act permits relators to obtain between 30-50% of the share of the recovery that the State of California obtains through settlement or judgment. Although this large percentage seems advantageous, there is a catch. The 30-50% is determined after costs and statutory attorney’s fees have been deducted from the recovery. Depending on whether the case is settled early on or litigated, the costs and statutory attorney’s fees in the case may be substantial. In which case, the portion of the recovery owed to the relator would be lessened accordingly.

At Waters & Kraus, LLP, our attorneys are well versed in the application of the California Insurance Frauds Act. If you are aware of a company engaging in unlawful conduct to purposefully increase the private insurance claims paid for in the State of California, there is a remedy recognized by California Statute. Please contact us.

This article was contributed by Louisa Kirakosian, an attorney at Waters & Kraus, in the firm’s Los Angeles office. She is one of the attorneys currently working on California Insurance Frauds Act cases at the firm.