ARIZONA STATE SENATE
Phoenix, Arizona
Purpose
Permits interested persons to bring a civil action on
behalf of the State for insurance fraud involving multiple claims.
Background
Currently,
statute defines insurance fraud and outlines different instances in which civil
remedies may result. For the most part,
insurance companies report fraud to appropriate law enforcement or government
entities and the perpetrators are prosecuted.
Insurers are left to recoup their losses by filing suit in civil court
for restitution of fees and costs and then must collect judgements. In Arizona,
insurance fraud is a class six-felony and S.B. 1077 outlines civil actions and
procedures available to interested parties who wish to take action on behalf of
the state.
This
measure enables insurance companies or other interested parties to sue on
behalf of the State for criminal offenses relating to insurance fraud. The bill also contains language that
effectively constrains the courts to civil case procedures or variations of
civil case procedures.
The
impact to the state general fund currently is not discernible.
Provisions
1. Permits interested parties to bring a civil action on behalf of the State for insurance fraud involving more than one claim.
2. Requires the interested party file the suit in secret (in camera) and under seal for at least 60 days and that the suit remains under seal until the court orders service.
3. Grants the defendant 20 days to respond and requires the interested party prove their case with a preponderance of evidence.
4. Requires the interested party to submit a copy of the action with both the Director of the Department of Insurance (DOI) and the Attorney General (AG) and stipulates that the records associated with the action retain attorney-client privilege.
5. Requires, within the 60-day time period, that:
a)
The AG or DOI decide to
intervene and proceed with the action or decline to join the action;
b)
The government has precedence
and primary responsibility for prosecuting the case, if they elect to proceed;
c)
The AG has precedence, should
more than one government entity elect to intervene; and,
d)
The interested party decide
whether to continue with the action if the government elects NOT to proceed.
6. Permits the party initiating the action to remain as a party to the action subject to certain limitations, when the government elects to intervene.
7. Permits the party initiating the action to remain as a party to the action without any limitations when the government elects to intervene and the party is the victim of the alleged violation.
8. Allows the AG or DOI to join the action at a later date, on a showing of good cause.
9. Requires the civil action brought under this bill be stayed if a criminal action is pending, until that criminal action is concluded at the trial court level.
10. Provides recourse when a government body discovers that a private party’s action under this bill interferes with criminal investigations into essentially the same conduct and that continuing civil action would interfere with the government’s ability to collect evidence.
11. Authorizes the AG or DOI to pursue claims through alternative remedies as available.
12. Allocates proceeds for party initiating the action as follows:
a)
Intervention by a government
entity:
1.
30 to 40 percent of any
proceeds or settlement;
2.
50 to 60 percent, when the
party paid money to the defendant or the defendant’s attorney; and,
3.
Reasonable expenses, fees and
costs.
b)
No intervention by a
government entity:
1.
40 to 50 percent of any
action or settlement of the claim;
2.
60 to 70 percent, when the
party paid money to the defendant or the defendant’s attorney; and,
3.
Reasonable amounts for
collecting the penalty and damages associated with the action.
13. Stipulates that the initiating party is entitled to up to double the amount of money that was paid to the defendant or the defendant’s attorney, if certain percentage thresholds are met.
14. Requires the court to take into account the amount of help given by the initiating party, the significance of their information and their role in advancing the case when making an award.
15. Provides for recourse should the person initiating the action, have planned and initiated the violation.
16. Prohibits a party from bringing an action based on allegations or transactions that are the subject of hearings or trials in which the AG, a county attorney, or DOI is part of.
17. Limits ability to utilize public information, like media reports, to bring civil actions against a defendant.
18. Prohibits employee discrimination based on actions associated with this measure and outlines relief available to victims of such discrimination.
19. Prohibits courts from dismissing a case unless the AG or DOI (whomever is involved in the action) consents in writing and gives the reasons for that consent.
20. Provides for a general effective date.
Prepared by Senate Staff
January 22, 2002