Gov. Bush Signs Florida Auto Insurance Fraud Legislation

June 26, 2006

Anti-fraud legislation that cracks down on and reins in auto insurance fraud was signed June 26 by Gov. Jeb Bush. The action applauded by Tom Gallagher, Florida CFO, who oversees law enforcement agencies involved in investigating the crime.

“The anti-fraud legislation will allow us to continue an aggressive crackdown on auto fraud that already has led to increased arrests and jail time and reductions in premiums in the last three years,” Gallagher said. This legislation is a big win for the people of Florida.”

House Bill 561, sponsored by Rep. David Rivera and Sen. J.D. Alexander, tightens the grip on fraud artists who steal from Florida’s hard-working families by staging or fabricating auto crashes and making fraudulent auto insurance claims.

Senate Bill 1596 enhances penalties for the newest twists on auto insurance fraud – “phantom” and “paper” auto accidents that never actually occur – making either a second-degree felony punishable by a two-year minimum mandatory prison sentence.

Florida law requires drivers to carry a minimum of $10,000 in Personal Injury Protection (or PIP) coverage and $10,000 in property-damage liability coverage. Many auto insurance fraud cases involve unscrupulous lawyers, doctors and clinic owners who illegally bill for services covered by PIP, which provides coverage for medical bills from an auto accident, regardless of who is at fault.

Auto insurance fraud has been estimated to cost the average Florida family as much as $250 a year, but tough legislation passed in 2001 and 2003 in tandem with increased arrests and prosecutions have led to lower premiums in recent years.

“Fraud has driven up insurance rates for far too long. This legislation sends the message that fraud will no longer be tolerated,” said Sen. Alexander. “Those who participate in auto insurance fraud will pay for their crimes.”

Rep. Rivera said the legislation also will help fight insurance fraud by providing for a forfeiture fund to help finance ongoing investigations into PIP fraud.

“The work being done by the Division of Insurance Fraud and law enforcement agencies around the state to combat insurance fraud is commendable,” Rep. Rivera said. “As a result of aggressive investigations and prosecutions, auto insurance premiums are decreasing and that’s good news for Florida’s families.”

This corresponds with a 2003 law that established a two-year minimum sentence for anyone organizing or participating in an actual staged auto crash. The legislation also:

• Provides for revocation of the driver’s license of anyone convicted of auto insurance fraud.

• Makes it a third-degree felony for any service provider, such as a clinic or body shop, to waive insurance deductibles as a general business practice. Waiving deductibles makes it easier for individuals to profit from insurance fraud schemes.

• Requires medical clinics to post the state’s Fraud Fighters hotline and reward program information.

• Clarifies that kickbacks for patient referrals are illegal whether the patient is being referred to or from a medical clinic, and provides that patients themselves may be punished for soliciting kickbacks for their cooperation in fraudulent billing schemes against the insurer.

Gallagher has overseen the department’s Division of Insurance Fraud for the past five years, during which time the department has made more than 3,200 insurance fraud arrests including more than 1,000 PIP fraud arrests. The division has consistently led the nation’s insurance fraud bureaus in arrests and convictions. The new legislation becomes effective July 1.

Source: Florida Department of Financial Services

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