Unfair Claims Practices -- They are not "fraud"

by MaxHerr » Mon Oct 04, 2010 11:40 am
Posts: 7886
Joined: 29 Nov 2009

Insurance fraud is committed (or attempted) by persons against insurance companies (or in an attempt to collect on a claim against a person who is "self-insured" [unisured = self insured]).

Insurance companies can and do commit unlawful acts against policyowners and claimants who file claims. But those acts are not "insurance fraud", they are "unfair acts or practices" defined in a state's insurance code, commissioner's regulations, or other state statutes.

Here's an example of problems encountered by an insurance company (two insurers owned by one company) from a CA Dept of Insurance press release on 9/27/2010:

NEWS RELEASE
Commissioner Poizner Announces Settlement of Enforcement
Action for $505,000 Against Two Insurers
Examination findings include multiple violations of Insurance Code and Regulations


Insurance Commissioner Steve Poizner announced today that a settlement has been reached in an enforcement action against Civil Service Employees Insurance Company and CSE Safeguard Insurance Company. The settlement marks the end of a market conduct examination that found numerous violations of the Insurance Code and Regulations for the period May 1, 2005 through April 30, 2006. Specifically, Department examiners reviewed the companies' claims handling practices in automobile, homeowners, and commercial liability lines of insurance, randomly selected 596 claim files closed during the review period and found 661 claim-handling violations.

"Let me be clear - I will continue to pursue and sanction any insurance company that engages in such gross misconduct," Commissioner Poizner said. "The laundry list of violations perpetrated by each of these companies is unacceptable. I am pleased with the work of my department in holding them accountable for their irresponsible actions. This settlement is a victory for policyholders in California, as well as a notice to all insurers that deficient and illegal business practices will not be tolerated."

The violations include such acts as failing to provide their policyholders with necessary facts, including policy provisions and other pertinent policy information upon filing of a claim, failing to properly advise the insured of the determination of fault, failing to provide the claimant with a copy of an automobile repair estimate, failing to provide claimant with a written basis for total automobile loss settlement, failing to pay all fees and taxes incident to an automobile total loss settlement, failing to explain the basis for depreciation, failing to effectuate prompt, fair and equitable settlements of claims and failing to adhere to the claims processing laws of the State of California

This is not the first time that these companies were charged with violations the Insurance Code. A prior examination, for the period May 2000 through April 2001, uncovered violations similar to the ones identified in the 2005 - 2006 examination. The companies paid $155,000 to settle those charges. The current settlement was preceded by a two-week hearing in Oakland that was continued for additional testimony to August 2010. The settlement was reached during the recess of the hearing.

The Order, signed September 20, 2010, requires the two companies to cease and desist from the acts in which violations were found and pay a $505,000 monetary penalty, $450,000 of which was applied under CIC Sections 790.03 and 790.035, with the remaining $55,000 applied under CIC Sections 790.05 and 790.07.



Now here's an example of insurance fraud from another CA Dept of Insurance press release on 9/24/2010:

COMMISSIONER POIZNER ANNOUNCES MODESTO MOTEL OWNER ARRESTED FOR ALLEGED INSURANCE FRAUD


Commissioner Poizner today announced that CDI detectives arrested a Modesto motel owner for allegedly committing workers’ compensation insurance fraud. Muhammad Hassan Raza, 36, was arrested at his place of business, the Vagabond Inn in Modesto. He was booked into the Stanislaus County Jail. Bail has been set at $15,000. If convicted, Raza may be sentenced to two, three or five years in state prison and be fined up to $50,000, or double the amount of the fraud, whichever is greater.

"If you fail to maintain the appropriate workers’ comp insurance for your business, you are not only breaking the law – you are putting your employees and yourself at financial risk," said Commissioner Poizner. "Do not ignore the law in an attempt to save a few bucks – you will only wind up in legal trouble with costly bills and fines."

Muhammad Raza is part owner of the Vagabond Inn in Modesto. On August 27, 2009, one of the Vagabond Inn employees was the victim of a sexual assault while working at the Vagabond Inn. Raza provided the name of the workers’ compensation insurance carrier to the injured employee’s family as First Comp. It was determined the Vagabond Inn was previously insured by First Comp but that policy had cancelled on December 10, 2008 due to non-payment of premium. The injured employee received treatments through her private health insurance plan and Raza paid for the ambulance bill and some of the other co-payments and bills.

On September 17, 2009, Raza applied for a workers’ compensation insurance policy with State Farm Insurance. During the application process, Raza was asked if the Vagabond Inn had any workers’ compensation injuries, whether insured or not, within the last three years. Raza answered that they did have an injury in 2008 but he did not disclose the injury on August 27, 2009. At the end of November 2009, the injured employee reported that Raza told her that he would give her money if she dropped her claim. The injured employee retained an attorney and ultimately filed a claim with the Department of Industrial Relations Uninsured Employers Fund.

Raza admitted to detectives that he knew he was supposed to have workers’ compensation insurance and that he did not have insurance at the time of the injury because he did not pay the bill. He further said the reason why he provided First Comp as the insurance carrier to the injured worker’s family was because he was negotiating with First Comp and believed he could get the policy reinstated. Raza admitted he paid the injured worker’s bills and paid her salary while she was unable to work because he felt guilty but denied offering her money in exchange for her dropping her claim.

This case is being prosecuted by the Stanislaus County District Attorney’s Office.

Total Comments: 10

Posted: Tue Oct 05, 2010 07:29 am Post Subject:

Most of the carriers have sometimes been accussed of unfair practices. But, it seems it has become easier for hotel and motel owners to commit insurance fraud these days. So many complains are coming up each day.

Posted: Tue Oct 05, 2010 02:48 pm Post Subject:

There is nothing special about motel/hotel owners' abilities to commit insurance fraud. The example above relates to failure to provide workers' compensation insurance, as required by California's Insurance Code, which itself is described as one form of insurance fraud. There are many more employers, especially in the construction trades, who violate this same provision of law.

Posted: Wed Oct 06, 2010 12:11 pm Post Subject:

Do such employers think that it's easy to violate this provision? What does the Californian insurance code state about coping with such frauds?

Posted: Sat Oct 09, 2010 07:27 am Post Subject:

What does the Californian insurance code state about coping with such frauds?



The penalty for insurance fraud can be:

A fine of $150,000 (or twice the amount of the fraud if greater), or

One year in county jail, or

Both fine and imprisonment.

Posted: Mon Apr 18, 2011 12:31 pm Post Subject:

Look even i believe that it is not a fraud. Insurance companies are also running a business. Even they would not like to experience any sort of loss. That's the reason why they sometimes deduct the cost that you are entitled to receive and sometimes they do not even pay you a penny.

As said earlier, insurance companies like any other business also want to make profit, so we should not think that they are bad people. Just like the insurance company, you too (i.e. insured) see your profit in getting the maximum settlement.

_____________
Loss Assessors

Posted: Mon Apr 18, 2011 01:17 pm Post Subject:

That's the reason why they sometimes deduct the cost that you are entitled to receive and sometimes they do not even pay you a penny.



WHAT?

Please . . . the way business is conducted in India is not the same as here in the United States. Your statement above makes no sense.

In India, Citibank sends thugs to break people's arms or legs if they don't pay their credit card bills (at least they used to do that). They never did that in America.

Obviously, insurance companies are in business to make money. I don't want to be insured by one that doesn't. But insurance companies pay claims according to the contract, and if the contract does not provide for a claims payment, then they don't pay. If it's covered, they pay, minus any deductibles.

Do insurance companies sometimes offer low amounts of money? Yes, that is sometimes true. Do they stall when it comes to paying claims? Yes, that is sometimes true. Do they treat people with a condescending attitude? Yes, that is also sometimes true.

But these, and other reported acts are not the usual ways in which insurance companies handle claims. If it was, the companies would have been put out of business long ago. Either by the regulators or by the insurance-consuming public.

Posted: Fri May 13, 2011 11:54 am Post Subject: it is fraud

when you think your going to be protected and your not.

Work comp companies who slander injured workers are insurance frauders.

Not just fraud but EVIL!!!!!

Posted: Fri May 13, 2011 01:05 pm Post Subject: insurance

(Just a 'general' question) If you KNOW someone is going to committ insurance fraud, what can a 'citizen' do about it, if anything? I live in a small community. A few years ago, there was an owner of a small 'pub' who bragged to alot of people he needed money and was going to burn his own estalishment down. Well..he did and received alot of money for it!! How does 'fraud', like that happen under somebodies nose!?

Posted: Wed May 18, 2011 07:30 am Post Subject:

You report it to the Dept of Insurance, the state Attorney General, or the local city or county District Attorney. It happens frequently.

Posted: Sun May 22, 2011 04:33 pm Post Subject: insurance

It's really frustrating to see what people actually get away with............when yu have HONEST people working for what they have..ya know? Sometimes I think of it this way............'what comes around,goes around'. Eventually these people will get caught.

Add your comment

Image CAPTCHA
Enter the characters shown in the image.