California Insurance Claims Fraud Prevention Act and Whistleblowers: How the law works

The California Insurance Claims Fraud Prevention Act is a state law that helps whistleblowers stop fraud against private insurers and rewards them for doing so with a share of the funds recovered.

Under the law, whistleblowers who have information about fraud against private insurers can file a “qui tam” (whistleblower) lawsuit on behalf of the state against those individuals and entities that are committing fraud and recover funds for the state.

The California Insurance Claims Fraud Prevention Act is modeled after the federal False Claims Act, which allows private citizens to file qui tam lawsuits on behalf of the federal government against entities engaged in fraud that causes financial damage to the government.

California is one of only two states that have laws that allow whistleblowers to file lawsuits alleging fraud against private insurers and recover funds from the fraudsters. Whistleblowers can be private individuals or even insurance companies themselves. The fraud schemes can involve healthcare bills, automobile claims, workers’ compensation claims, property insurance claims and more. The Illinois Insurance Claims Fraud Prevention Act is the other state law that is similar to the California statute.

Both state laws were enacted to protect the public from harm caused by large insurance fraud, such as increased premiums, and also to provide state investigators with the knowledge and additional resources that whistleblowers and their attorneys bring to these often complex cases.

Whistleblower lawsuits brought under the California Insurance Claims Fraud Prevention Act are investigated by either the district attorney or the California insurance commissioner.  If the government decides to join, or “intervene,” in the case, the prosecutor will work with the whistleblower and the whistleblower’s attorneys to resolve the case. If the government declines to join, the whistleblower may continue to litigate the case.

In cases where the government intervenes in the case, the whistleblower is eligible for 30 percent to 40 percent of the recovery as a reward. When the government does not intervene, the whistleblower may receive 40 percent to 50 percent of the recovery.

There have been several fairly large whistleblower settlements recovered through the California insurance whistleblower law. The top whistleblower settlements under the statute came in qui tam cases against Sutter Health ($46 million), Bristol Myers Squibb ($30 million) and Warner Chilcott ($23 million).

If you’re aware of fraud that has caused losses to a private commercial insurance company, it’s important to discuss your options with an experienced whistleblower law firm before taking action.

MORE: Learn about how to choose the best whistleblower lawyer to represent you

Phillips & Cohen provides free and confidential reviews to those who are considering ways to expose and stop fraud. We work for whistleblowers on a contingency basis, which means you pay only if you receive a financial award. In the 30 years we have been fighting for whistleblowers, our whistleblower cases have helped recover more than $12.3 billion for taxpayers and defrauded investors.

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