Blowing the whistle on insurance fraud will be easier for Illinois companies and private citizens thanks to legislation sponsored by Senator Patrick O’Malley (R-Palos Park) and signed recently by Gov. George Ryan.
“The National Association of Independent Insurers (NAII) commends Senator O’Malley and the Illinois General Assembly for making Illinois the second state in the nation to enact a so-called ‘whistle blower’ statute,” said Laura Kotelman, NAII counsel. “California was the first to enact a whistleblower statute in 1993 and the law has proven to be a major deterrent of insurance fraud. Recently Allstate Insurance, an NAII member, won a landmark $8.2 million jury award in a medical fraud case under the whistleblower law.”
The Illinois General Assembly’s recent enactment of SB 879 creates the Insurance Claims Prevention Act that gives insurance companies and private citizens an effective tool to identify all forms of insurance fraud, take the perpetrators to court and receive a significant portion of the settlement. In addition, if state and local prosecutors bring suit, those agencies are also entitled to a share of the proceeds.
The whistleblower statute is modeled after the Federal False Claims Act, a Civil War-era law that the government used to stamp out fraud by offering a percentage of the bounty to willing whistleblowers. Today, instead of a bounty, parties who bring suit are entitled to a percentage of the damages. While insurance companies such as Allstate have primarily been the plaintiffs in the California cases, private citizens can also get involved–and be rewarded.
The Illinois Department of Insurance sponsored the legislation in response to extensive studies and key recommendations made by the Illinois Insurance Fraud Task Force. The task force, which included representatives from the Department, NAII and other insurers, was formed as a result of a 1999 law sponsored by State Senator O’Malley.
“Insurance fraud has been a very serious problem in Illinois for all too long. Illinois consumers and businesses pay significantly higher insurance rates because of the millions of dollars lost each year to insurance fraud,” Senator O’Malley said. “The Insurance Claims Prevention Act was adopted to help protect Illinois citizens from insurance fraud by creating an exceptionally hostile environment for such crimes to take place.”
Senator O’Malley will discuss details of the recently enacted anti-fraud bill at the upcoming NAII 2001 Fall Legislative Meeting in Chicago. He will participate as a panelist in a discussion of Fraud and Abuse in Medical Pay.
Estimates from the Coalition Against Insurance Fraud indicate that insurance fraud costs Americans at least $80 billion a year, or nearly $950 for each family. “What often happens when you shut down a fraud ring is that they pack up, move to another state and start all over again. That is why it is essential for other states to adopt similar laws, so the crooks encounter the same show of force wherever they go,” Kotelman said.
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