In 1994 Governor E. Benjamin Nelson assembled a task force to come up with a solution to address the growing problem of insurance fraud in Nebraska. The task force consisted of members from the insurance industry, law enforcement, prosecutors, the Department of Insurance, the Attorney General, the trial lawyers association, regional and national insurance organizations. Through their collective efforts emerged the Insurance Fraud Act, which went into effect September 13, 1995.
The purpose of the Insurance Fraud Act is to confront the problem of insurance fraud in Nebraska by:
- Detecting insurance fraud
- Developing fraud prevention programs
- Investigating complaints of suspicious insurance activity
- Seeking prosecution of individuals committing insurance fraud
- Obtaining restitution of fraudulently obtained benefits
The ultimate goal is to reduce the amount of premium dollars used to pay fraudulent claims.
The Insurance Fraud Act also provides immunity from civil liability to any person or entity that reports suspected insurance fraud, without malice, fraudulent intent, or bad faith. The Insurance Fraud Act also provides insurer to insurer immunity. Insurance companies are immune from civil liability when they communicate amongst themselves regarding suspicious claims and insurance activity. This benefits not only insurance companies, but law enforcement as well. Sharing of information avoids the duplication of efforts. §44-6605
Insurance Fraud Violations (Criminal Prosecution)
The Insurance Fraud Act sets forth 12 separate acts which constitute insurance fraud. These 12 violations are set forth in the insurance code Neb.Rev.Stat. §44-6604 and repeated in the criminal code, Neb.Rev.Stat. §28-631.
- Claims Fraud
- Aid and Abetting Claims Fraud
- False Statement to Insurer (death/disability)
- False Statement to Insurer (contract, agreement, or instrument)
- Conversion of Premiums
- Embezzlement from Insurer
- Issuing or Possessing Fake Policies, Certificates, Identification Cards, Binders
- Filing False Documents with the Nebraska Department of Insurance
- Removes, Alters, Diverts, or Destroys Records of an Insurer or Agent
- Worker's Compensation Premium Avoidance
- Discount Medical Plan Operation
- Discount Medical Plan Fee Collection Failure to Provide Benefits
The Insurance Fraud Act follows the same grading of offenses as theft. Any violation under $500 is a misdemeanor and any violation $500 or greater is a felony. §28-631(2)(a)
In lieu of criminal prosecution, the imposition of civil fines is another remedy that can be employed in an insurance fraud investigation. A person or entity that is found to have committed a fraudulent insurance act by a court of law pursuant to an action initiated by the Director of Insurance is subject to a civil penalty. The civil penalty for the first violation shall not exceed $5,000, $10,000 for the second violation, and $15,000 for each subsequent violation.
Costs and expenses incurred in any investigation arising out of a violation of the Insurance Fraud Act may be sought in any court judgment. Any recovered (investigative) costs, shall be deposited back into the fund from which the costs were expended. Restitution may also be ordered to make the victim whole.
A civil proceeding does not prohibit the director of insurance and the alleged violator from entering into a written agreement upon commencement of a civil action. In this consent agreement the alleged violator does not admit or deny the charges, but consents to payment of the civil penalty.
This consent agreement may not be used in a subsequent civil or criminal proceeding relating to any violation of the Nebraska Insurance Fraud Act.