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 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:
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.
The California Insurance Frauds Prevention Act prohibits a broad range of healthcare, disability, life, and auto insurance fraud. Among other things, it holds liable:
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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.
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
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.
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.
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.”
