38 People Arrested in Calif. Insurance Scam

October 25, 2004

On Sept. 15, authorities completed arresting 38 people for alleged auto insurance fraud at more than 30 auto body shops in Riverside and San Bernardino Counties. The suspects were arrested over five days and booked into their respective county jails on one felony count each of automobile insurance fraud.

The arrests are the result of a five-month undercover investigation codenamed Operation Cash Out, which was conducted by the California Department of Insurance’s Fraud Division, the California Highway Patrol, and both the Riverside and San Bernardino District Attorney’s Offices. This collaboration constitutes the area’s Auto Insurance Fraud Task Force, created in 2000 by AB 1050 (Wright).

The District Attorney’s Offices in each county are prosecuting their respective cases. If convicted, each suspect faces up to five years in state prison and a maximum fine of $50,000.

Task force investigators visited a total of 66 auto body shops in San Bernardino and Riverside Counties. Undercover investigators approached auto body shop estimators and told them about fraudulent claims they would be making to obtain new, complete paint jobs on their vehicles. The undercover investigators also made it very clear they would return to the body shops to get the car painted once the claim had been “cashed out” by the insurance company. The estimators arrested at 35 shops subsequently supplied undercover officers written estimates supporting the fraudulent claim.

Some suspects allegedly even coached the undercover officers as to how to make the damage worse on the vehicle so the insurance company would pay to have the whole car painted. In one case, the auto body shop owner refused to conduct business fraudulently but directed the investigator to another shop that would more likely provide an estimate for false claims.

Operation Cash Out, the first ever sting of auto body shops in the Inland Empire, was named after an insurance industry term for paying the insured directly, versus paying the repair facility and the insured, for repairs done to the vehicle once an estimate for repairs is secured.

Operation Cash Out also included investigators from the California Department of Industrial Relations, which has fined three shops to date for not having workers’ compensation insurance.

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Insurance Journal West October 25, 2004
October 25, 2004
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