Professional Conspiracies to Commit Insurance Fraud

The Doctor Lawyer Conspiracy

The doctor–lawyer conspiracy will often begin in one of two ways. An attorney uses individuals, called “chasers,” “runners,” or “cappers,” to recruit a clientele of auto accident victims, usually for a flat fee. They look for victims of actual automobile accidents and convince these individuals to visit the attorney, who is, in fact, running a personal injury mill. The recruit may either be solicited to become a knowing participant in the scheme and receive payment for his or her involvement, or can remain an unwitting participant, unaware that his or her claim has been manipulated for fraudulent purposes. Some of the “victims” are paid a flat fee of $100 to $500 and are never heard of again, while the physicians create fake reports of injuries and treatments and the unscrupulous lawyer presents the claim on behalf of his “victim” client and shares any settlement equally with the physician.

Organizers of such schemes may also recruit friends, acquaintances or illegal aliens to play the role of victims in staged automobile accidents. In this type of scheme, the claimant is a knowing, cooperative participant in the fraudulent activity and may be involved in many different claims involving the same corrupt professionals. The attorney refers the accident victim to a cooperating medical practitioner who fabricates medical diagnoses and reports and prepares false bills.

Fraud in the Medical Profession

A doctor can initiate a medical fraud scheme by having a patient schedule a number of visits even though the actual medical treatment is minimal or non-existent. The doctor then bills as if the services were rendered.

In another version of the scheme, a physician will “rent” Social Security numbers from economically disadvantaged people who are not even ill, and bill for services that they did not receive. There have been cases where a medical provider purchases computer records of legitimate patients from a hospital employee, submits invoices to Medicare or Medicaid, which wires funds to the provider for the services claimed—although not rendered—and then disappears only to obtain a Medicaid and Medicare provider number under a different name.

Fraud in the Legal Profession

Attorneys conspire with insureds and other attorneys to bring suit and counter suit against each other, with allegations that require a defense under a reservation of rights. Then, demanding independent counsel because of the conflict caused by the reservation of rights, the so-called “independent” counsel run up excessive billing to be paid by the insurer. The lawsuits seem to never be in a position to settle and the attorneys’ billings often exceed the amounts claimed in the lawsuits. The billings may be for legal work not done at all or be simply excessive for the work done. One attorney regularly billed various insurers more than 80 hours for work allegedly done in a single day, although he never billed a single client more than eight hours in any one day, he billed ten or more clients each day.

The most notorious example of this kind of fraud is often called “Cumis” fraud because of a decision in the California Court of Appeal case, San Diego Navy Fed. Credit Union v. Cumis Ins. Soc’y Inc., 208 Cal. Rptr. 494 (Cal. Ct. App. 1984) involving an attorney named Lynn Boyd Stites.

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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