Special Investigation Units Deliver ROI in Insurance Fraud Campaigns

With the cost of insurance fraud estimated to be a staggering $80 to $120 billion annually, insurance companies cannot afford to take an arbitrary approach in their overall fraud deterrence strategy.

According to a recent article in Property Casualty 360°, taking a closer look at the special investigations unit (SIU) is a proven strategy for effective fraud management. Three key objectives in SIU management are outlined below.

1. Know Ideal Roles for SIU Personnel

Knowing the skill set of SIU team members is often the best way to ensure that employees are up to the task of contributing to overall strategic implementation. Traditionally, investigators and insurance/business professionals make up the SIU industry, but each have separate strengths they can bring to the table.

Investigators with law-enforcement or investigative backgrounds are generally well suited to the front lines.  They typically understand the dynamics of fraud, can manage efficient investigations, and possess the critical interview skills that can lead to confessions. On the other hand, business-minded professionals can be effective in supervisory positions to triage cases, help analyze and assess, and make innovative data-driven decision to support your strategy.

2. Develop the SIU Departmental Strategy

Even though industry benchmarks can be a source in the design and operation of the SIU, the effects of insurance fraud are not universal due to differences in insurance companies’ products and applications/claims processes. Therefore, the most critical point in an SIU’s fraud strategy should involve data collection and analysis.

Data collection includes information like the number of investigators that are needed, how many cases they get, which cases are assigned, what technology is being used, as well as spending and budgets.  The data analysis can then determine if the right measurement systems are in place, and whether SIU metrics are being analyzed in a way that best adjusts to the company’s overall fraud strategy and efforts to maximize return on investment.

3. Capitalize on the SIU’s Power of Deterrence

Deterrence is a potent weapon in fighting fraud, but because many insurers are focused on projecting an image of simplicity and speed in the claims process, consumers may think companies are ignoring what is going on behind the scenes. Insurers are advised to balance the message that they are nabbing scammers while not appearing to deny claims unreasonably.

The article suggests that insurers create a dedicated webpage on the corporate website devoted to SIU efforts, starting with a description of what the SIU is and does. Special Investigation Unit success stories, including news of campaigns with state and national law-enforcement agencies, can demonstrate how SIU actions are helping to minimize increases in customers’ insurance premiums.

The goal is to communicate to the marketplace that there is a vetting process, that fraudsters are not getting away with their crimes, and that the company is trying to protect customers.

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Filed under Insurance Fraud

Nine Arrested in Miami PIP Fraud Schemes

There has been no shortage of auto insurance fraud in Miami of late as Chief Financial Officer Jeff Atwater announced the arrests of nine individuals who have been charged in connection with eight separate cases of personal injury protection (PIP) fraud schemes.

According to Atwater’s announcement, the Division of Insurance Fraud (DIF) uncovered seven staged vehicle accidents in which the scammers collectively filed more than $242,000 in fraudulent billings to 11 different insurance carriers. Staged accident participants were referred to at least 13 different South Florida medical clinics.

The nine were arrested for acting in one or more of these capacities:

  • The organizer or staged accident recruiter;
  • The patient broker who encouraged participants to seek post-accident medical treatment for bogus injuries;
  • The licensed medical provider who agreed to sign off on falsified medical documents in exchange for payment billed under PIP insurance benefits.

The investigation into these cases remains ongoing and additional arrests are expected, DIF said.

“While their injuries may have been fake, PIP fraud is real and it is not a victimless crime,” CFO Atwater commented. “When insurance carriers absorb such high-dollar losses to fraud, we all pay in the form of higher insurance premiums. I’m thankful to our dedicated investigative team for shutting down this fraud ring.”

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Filed under Insurance Fraud

Driving in Florida May Be Hazardous to Your Wallet, New Study Finds

You don’t want to have a car accident in Florida, according to a new study released by WalletHub last week. Their numbers ranked states on how ‘safe’ it is for drivers’ finances after an accident. The study placed Florida dead last among 50 states and the District of Columbia—which means driving in the Sunshine State can be risky to your wallet.

In producing the rankings, WalletHub looked at whether drivers had insurance and whether that insurance would be enough to cover the damages in the event of a car accident. They found significant differences between states. Specifically, the study took into account available car liability insurance to protect others, other forms of required insurance to protect drivers, and the percentage of uninsured drivers in each state.

When those three factors come together, Florida holds the dubious distinction of being the “worst state to get into a car crash,” WalletHub says. Here’s why:

  1. Insurance requirements in Florida are lower than in most other states. Florida drivers are only required to carry minimum liability coverage of $10,000 per person. The amount goes up to a $20,000 minimum for accidents involving multiple parties. By comparison, Maine and Alaska—the states ranked highest—both require $50,000 in coverage up to two people and $25,000 in property damage insurance, according to WalletHub.
  2. A high percentage of Florida drivers are uninsured. According to the study, 23.8 percent of drivers carry no auto insurance. Florida is only surpassed by Oklahoma, which has 25.9 percent uninsured drivers on the road. The best state where drivers have coverage is Massachusetts—only 3.9 percent of their drivers are uninsured
  3. Florida does not require additional forms of insurance coverage to protect drivers. Although Florida does require personal injury protection (PIP) coverage, the state does not require medical payment coverage or uninsured motorist coverage for bodily injuries or personal damage.

What can Florida drivers do? Experts recommend spending a few extra dollars to add uninsured/underinsured motorist coverage to your auto insurance policy to offer protection.

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Filed under Insurance Fraud

Cuban Crime Rings behind Florida Staged Accident Fraud

Originally intended to provide refuge to those fleeing Cuba’s Castro regime, the Cuban Adjustment Act of 1966 has enabled a thriving Cuban criminal network to expand from South Florida throughout the country and take hold without legal recourse. A recent three-part series by the Sun Sentinel, which examines the prevalence of this illegal activity, reveals that the cost to American businesses and taxpayers exceeds $2 billion over the past 20 years.

The story found Cuban criminals often work in rings that specialize in non-violent economic crimes such as credit card fraud, cargo theft, Medicare fraud, and insurance fraud through staged auto accidents. Frequently, they make their money, move it to Cuba, and return to the U.S. when more money needs to be made.

One massive auto insurance fraud ring with more than 100 participants—most of whom were Cuban—exemplifies just how easy it is for these groups to pull off the crime and get away with it because of their special immigration status.

In this particular case, 21 clinics in Palm Beach and Miami-Dade counties were involved in $18 million worth of fraud. Recruits found participants to smash cars with sledgehammers and stage vehicle accidents. Participants were then sent to the identified clinics that billed injury claims to auto insurance companies for treatment of their fake maladies.

It was discovered that the accused ringleaders were Cuban immigrants who were returning to Cuba on a weekly basis. Millions of dollars stayed in Cuba, apparently used to purchase properties and support family there, as IRS agent Pamela Martin testified at a court hearing last year.

After the FBI started to bust the fraud ring and make arrests, five main organizers fled back to Cuba, evading capture.

According to Fred Burkhardt, who is a South Florida auto-insurance industry fraud investigator from the National Insurance Crime Bureau (NICB), the small-scale outfits of a decade ago have evolved and become very sophisticated and organized.

“Someone is sitting back with a strategy, figuring out where the clinics will be, where the patients will come from,” he said. “There’s a structure involved. There are specific duties that people have.”

Staging auto accidents to defraud insurance companies basically started in Miami in the late 1990s, the Sun Sentinel reported. By 2007, the crime has progressed to other Florida cities like Fort Myers, Tampa, Orlando and Jacksonville, Burkhardt said.

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Filed under Insurance Fraud

Dunedin Man Arrested for Fabricating Vehicle Thefts and Defrauding Insurance Company

A 26-year-old Dunedin man was arrested by Pinellas County Sheriff’s Detectives on January 14 for auto insurance fraud.

Joseph Harris allegedly lied about three incidents of vehicle theft, and then falsely reported the burglaries to his insurance company to collect money.  Harris reported that the thefts took place at his home on February 28, 2014, June 12, 2014, and September 30, 2014.

According to a recent news story on TBN Weekly.com, Harris claimed that parts were stolen off his truck, which was parked in his driveway.   However, during a January 14 interview with detectives, the suspect supposedly admitted that he took the parts and buried them in his back yard in order to report them stolen.

Harris said he lied about the thefts because he needed the money.  He was able to collect over $10,000 from his insurance company as a result of his fraudulent activity.

Detectives charged Harris with two counts of false report of a crime, and two counts of defrauding an insurance company.  He was booked into county jail, and released on $4,300 bond on January 15.

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Filed under Insurance Fraud

11th Circuit Appellate Division Rules Insurer’s Adjuster Notes not Discoverable

On January 5, 2015, the Appellate Division of the Eleventh Judicial Circuit in and for Miami-Dade County issued a ruling reversing the lower court’s order compelling production of the insurer’s pre-litigation documents.  The court held that such documents are not discoverable in a first-party coverage lawsuit between the insured and the insurer.

In 2011, respondent Yesenia Romero sued State Farm for PIP benefits, alleging State Farm breached the insurance contract and violated the Florida PIP statute in not paying for claims resulting from a 2009 motor vehicle accident. Romero filed a request for State Farm’s “entire claims file concerning the case,” including all of the adjuster’s notes made prior to the pre-suit demand letter.  State Farm objected to the production, asserting work-product privilege.

A hearing on the issue was held in the trial court.  Following an in camera inspection of the adjuster’s notes, the judge determined that they were not protected under the work-product doctrine because they were not prepared in anticipation of litigation.  The court ordered State Farm to produce all the adjuster’s notes.  State Farm sought to have the appellate division quash the order.

In its analysis, the appellate division noted that all three levels of Florida’s judiciary, including its own court, have said that an insurance company’s claims file documents are not discoverable in a first-party coverage and damages lawsuit between an insurer and the insured. The court cited a Third District case, Castle Key v. Benitez, in concluding that “where the insured is not seeking a bad faith claim, but rather seeks relief for breach of contract,” the insurer’s claims file documents are not discoverable.

In this case, where the plaintiff was alleging breach of contract and not bad faith, the appellate division determined that the trial court erred in ordering State Farm to produce the documents and therefore quashed the trials court’s order.

State Farm v. Yesenia Romero, Case No. 13-48 AP (Fla. 11th Circuit January 5, 2015).

Castle Key Ins. Co. v. Benitez, 124 So. 3d 379 (Fla. 3d DCA 2013).

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Filed under Case Law, Fla. Stat. 627.736 (2012)

Appellate Court Rules that Two Providers Not “Prevailing Insureds”

A trial court ruling awarding attorney’s fees to two medical treatment providers was reversed by the Appellate Division of the Eleventh Judicial Circuit in and for Miami-Dade County in an opinion filed January 9, 2015. The court concluded that the providers did not constitute “prevailing insureds” and therefore were not entitled to the statutory award of attorney’s fees.

Fritznel Leconte was allegedly injured in an automobile accident on July 22, 2006, while insured by a PIP insurance policy issued by United Automobile Insurance Co. He received treatment from two providers—A Rehab Associates and Med Plus Centers—and assigned his PIP claims to them. The cases were tried separately and consolidated on appeal.

In response to a pre-suit statutory Demand Letter, United determined it was responsible only for the cost of the pre-IME (Independent Medical Exam) treatments and offered A Rehab $595.20 and Med Plus $1,324.80. At trial, verdicts were returned in favor of the providers for the exact amounts offered earlier by United.

The providers filed motions for attorney’s fees as “prevailing insureds” pursuant to Florida Statutes section 627.428. That statute grants an insured the right to recover attorney’s fees when the insured obtains a judgment or decree against the insurer, i.e., is a “prevailing insured.” The question before the court was whether an insured is a “prevailing insured” when it obtains a judgment no better than the amount offered by the insurer pre-suit.

The court held that the “prevailing insured” referred to in the statute is “one who has obtained a judgment greater than any offer of settlement tendered by the insurer.” Put another way, “insureds who rejects settlement offers that would make them whole cannot seek attorney’s fees under section 627.428.”

In this case, the judgments received were not greater than the amount offered by the insurer prior to the suit, so the insureds do not qualify as “prevailing insureds” and are not entitled to attorney’s fees pursuant to section 627.428.

United Automobile Ins. Co. v. A Rehab Assoc. and United Automobile Ins. Co. v. Med Plus Centers, Case Nos. 12-413 AP, 13-148 AP, 12-381 AP, 13-147 AP (Fla. 11th Cir. January 9, 2015).

Click on the link to access the court ruling.

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Filed under Case Law, Fla. Stat. 627.736 (2008)