Proposal would cripple efforts to investigate insurance fraud, DOI says

A proposal to eliminate the discretion that prosecutors currently have to classify dozens of crimes – including types of insurance fraud – as either a felony or a misdemeanor and instead make them all misdemeanors would have the unintended consequence of severely eroding the state's efforts to fight insurance fraud and convict criminals, according to Steve Poizner, California insurance commissioner.
 
"Fighting insurance fraud is a complex and time-consuming task," says Poizner. "Luckily, we have hundreds of the most dedicated sworn police officers at the Department of Insurance who fight insurance fraud every day. This proposal would severely limit their ability to go after career criminals, making simple and complex illegal enterprises much harder to prosecute – and in the process let criminals off the hook.”

The change in the classification of crimes will have at least two unintended consequences related to fighting insurance fraud, including:
 
• Search warrants can only be served in felony cases. If types of insurance fraud are deemed a misdemeanor, search warrants cannot be issued and executed.  
• The statute of limitations is much shorter for misdemeanors. For a felony, the statute of limitations is at least three years from the date the crime was discovered. For a misdemeanor, the statute of limitation is one year from the date of the crime – in many cases the crime is not uncovered until years after the act occurred, rendering prosecution impossible.

There are a number of recent, high-profile cases that could not have been prosecuted under the new proposal, according to Poizner. He cited a $38-million workers’ compensation fraud scheme, which was the largest in state history, and a $6.3-million workers’ compensation fraud scheme.

Both cases began as premium fraud investigations and additional insurance fraud-related crimes were discovered through the execution of search warrants. Had the current proposal become law, these two cases may not have been discovered and prosecuted.

"The costs of insurance fraud are ultimately paid for by consumers," says Poizner. "I hope the policymakers carefully consider the unintended consequences of this action and ultimately remove this provision from the budget proposal. California should not send criminals the message that they have a free pass for illegal activity because of the state's budget woes."

The specific vehicle code sections affected by the change are: 4463 (a): Forgery or use of counterfeit vehicle registration or license plates; 10801: Own or operate a chop shop; 10802: Alteration or counterfeiting of VIN numbers; 10803 (a) and (b): Possession/sale of motor vehicles/parts with false/absent VIN number; and10851 (a) and (b): Auto theft.