The fight against insurance fraud remains an uphill battle in New York because, according to most within the industry, the Legislature has failed to agree on an effective legislative package that would deter criminals. This, however, is not the case across the river in New Jersey.

Howard Goldblatt, director of Government Affairs of the Coalition Against Insurance Fraud, noted three areas where New Jersey has pulled ahead of New York with respect to combating fraud. First and foremost, he pointed out that New Jersey has in place a felony anti-runner law. Despite many attempts, this measure has failed to pass in New York, and both Goldblatt and New York State Insurance Department Superintendent Howard Mills have been at a loss to explain why the Legislature cannot push it through.

Goldblatt said that New Jersey also has effective laws that address fraud perpetrated by health care providers. The state had a law that stated that providers convicted of health care insurance fraud in New Jersey, or in any other state, would lose their license in New Jersey. Goldblatt said that this law has been expanded to include all insurance fraud, so that medical providers who are convicted of any type of insurance fraud will be stripped of their license.

Perhaps the most effective tool that New Jersey added to its fraud-fighting arsenal was the formation of the Office of the Insurance Fraud Prosecutor (OIFP), currently headed by Greta Gooden Brown. John Smith, deputy insurance fraud prosecutor, said that the office was created in 1998, primarily due to the recognition that insurance fraud of every kind was a continuing problem in the state. He added that, previously, the state had resources to address the problem, but those resources were spread throughout several departments within the government. The OIFP, he said, brought together all of those resources under one office.

Partnerships

As far as no-fault fraud in New Jersey goes, the state faces many of the same schemes that plague New York. Smith said that staged accidents remain a problem, but he said that schemes perpetrated by medical providers are becoming increasingly sophisticated. Though significant gains have been made, Smith conceded that a number of challenges remain in front of us.

To help combat these evolving schemes, Smith explained that the OIFP works with law enforcement agencies in New York in what has become a mutually beneficial relationship. Additionally, New Jersey works with other Mid-Atlantic states and with insurance fraud groups to exchange information and tactics. If one state should have success in a certain area, or come across a new scheme, that state shares the information with the others.

Educating the Bench

Perhaps the area that has been the most difficult to reform in the state has been the courts. If the Legislature and law enforcement have recognized insurance fraud as a serious problem, the courts have been slow to come around. But Smith indicated that there has been some progress in this area. He noted that, as far as judges are concerned, white collar crime pales in comparison to violent crimes. But he also said that, because the Legislature has passed statutes toughening the penalties for fraud doers, the judges are beginning to come around. As an example, Smith noted that people are now being sentenced to prison for insurance fraud crimes. You did not see that 10 years ago, he explained.

However, Smith cited another example which shows that there is still work to be done with respect to educating the courts. Schemes that involve give-ups, or falsely reporting stolen vehicles for the purposes of collecting insurance money, previously were considered third degree crimes, which carried light sentences. That crime was upgraded to second degree, however Smith referenced a case where the judge did not agree with that assessment. The appellate division was not much more helpful, and upheld the judges decision. The OIFP, Smith said then had to petition the Supreme Court in an attempt to properly categorize the crime.

Smith said that civil judges, as opposed to criminal judges, have been more receptive to dealing with insurance fraud. He noted that civil judges see more fraud trends, and so they deal with it more aggressively.

Greta Gooden Brown noted that one civil judge in particular, who had been retired but was then recalled, was dubbed the insurance fraud judge because of his experience in that area. Gooden Brown noted that the judges jurisdiction included Morristown, which, she said is home to a high degree of fraud activity. His docket dealt almost exclusively with civil insurance fraud cases, Gooden Brown said, adding that when a judge sees a type of case more often, he/she gains an understanding of the crime, thus increasing the likelihood of successful prosecution. Other judges, Gooden Brown explained, are not as familiar with the problem of insurance fraud.

The OIFP has made an effort to educate the bench, Smith and Gooden Brown said, including distributing copies of the OIFPs annual report. The report, said Gooden Brown, is not just an account of the year, but rather it should serve as a reference manual for insurance fraud prosecution.

Consumer Reactions to Fraud

Efforts are being made to educate the bench, but what about the public. Is the average New Jerseyan aware of the pervasiveness of insurance fraud? I believe that the word is out there, Smith said, adding that without question they recognize it as a crime. He referenced an ad campaign launched to increase awareness of insurance fraud, and he noted that polling before and after the campaign indicated that afterwards, more people were prone to embrace it as a crime.

If there is one knock on fraud fighting efforts in New Jersey, it is that despite the success that the state has had, insurance rates remain the highest in the nation. Golblatts response: Rates would have been higher without the fraud fighting. Smith expanded on this, noting that there have been tangible benefits for consumers. He said that new insurance companies have returned to the state in part because of the tougher fraud statutes. This has increased competition among insurers and has increased choices for consumers.

As far as staying ahead of evolving schemes perpetrated by criminals, Goldblatt explained that simply passing a law is not good enough. These laws need to be evaluated and adjusted over time. Questions need to be answered, he said: are the laws working? Do they need to be tweaked? Are there loopholes that criminals can exploit? At least for New Jersey, the state is well-positioned to address these questions.