Identifying key emerging trends impacting insurance fraud investigation is crucial. A court decision in one state may spark a wave of change that soon sweeps over other jurisdictions — and those who are unprepared.
Being “ahead of the curve” is key to success in fighting fraud. That's why PropertyCasualty360.com has launched the “Fraud Law Watch” column, which highlights how the law affects the battle against insurance fraud across our nation. Each quarter we will keep you fully informed of — and prepared for — positive and negative court actions.
The column will mainly review notable civil court decisions (state and federal). Yet all three branches of our government impact fraud-fighting efforts. Thus we will apprise you of new judicial, legislative and administrative actions of note as well.
The Coalition Against Insurance Fraud (the Coalition), often in partnership with other respected groups such as the National Insurance Crime Bureau (NICB) and International Association of Special Investigation Units Inc. (IASIU), is a leader in filing amicus curiae briefs on key court cases across the nation. These “friend of the court” briefs educate state and federal courts about fraud issues, and insurance fraud's impact on American society. We invite you to let us know about cases important to fraud fighters. We can monitor them, and file an amicus brief when necessary.
|Kentucky Supreme Court upholds EUOs
A recent amicus case illustrates the reason for alertness. The Kentucky Supreme Court correctly upheld an insurer's right to conduct all-important Examinations Under Oath. The August decision was long-awaited after contentious court battles.
The issue was whether auto insurers have the right to take EUO testimony under Kentucky's mandatory PIP coverage.
Most insurers believe they have an absolute right under the policy contract. Yet that argument failed in Kentucky lower courts. Why?
Opposing attorneys successfully argued: The legislature did not specifically include EUO rights in the state's PIP statute. So insurers could not take an EUO, even though the policy explicitly required it. The EUO policy provision thus was void. The legislature possesses sole decision-making power over the PIP statute. Once signed by the governor, only the statute controls PIP claims.
Near-bedlam reigned in the state's largest county, Jefferson County, while this case wound through the courts. Questionable PIP claims have exploded. Insurers found EUOs were crucial tools for gaining intelligence that could help dismantle staged-crash rings.
A lower court upheld EUOs. Another court denied the right unless it was specifically referenced in the state's PIP law. Insurers must petition the court every time they want an EUO, a third court ruled. Insurers and claimants had no clear decision nor direction.
Under Kentucky state low, insurers were unable to use EUOs as part of their investigation of an auto insurance claim. (Photo: Shutterstock)
|Defending EUOs in court
The Coalition Against Insurance Fraud and NICB jointly filed an amicus brief with the Kentucky Supreme Court. The Justices should consider the need and importance of EUOs as a fraud-fighting tool, we urged. The majority opinion upheld EUOs, specifically referencing that point.
How state lawmakers write and pass legislation can have a direct and dramatic impact on insurance policies and fraud investigations. State and federal judges are bound to follow the laws as drafted by the legislature and signed by the executive branch, unless the law is unconstitutional or otherwise unenforceable. The Adams decision illustrates clearly how all three branches of government influence how we fight fraud.
Equally, the Adams case is nationally important. Opponents of EUOs could have used an adverse decision to challenge this crime-fighting tool in other state courts.
Vigilance in state legislatures proved equally important in defending EUOs. A bill in Washington state sought to greatly limit insurer use of EUOs earlier this year. The Coalition and insurance department opposed the measure. It died under the weight of our opposition. Had the bill become law in Washington, EUO opponents might have been emboldened to seek restrictive laws in other states.
The Adams decision and Washington outcomes mean we can win crucial battles — and preempt future challenges — by working through courts and with state legislatures for stronger anti-fraud protections.
In future columns, we will address notable court cases or legal issues. The Adams case and Washington outcome merit singular attention because of their potentially far-reaching impact. They show the need to stop a challenge in one state from becoming a tsunami of bad laws across the nation.
Matthew J. Smith, Esq., ([email protected]) is transitioning from his role as founder and president of Smith, Rolfes & Skavdahl Company, L.P.A. to his new career as associate director of government affairs for the Coalition Against Insurance Fraud. Smith welcomes your feedback and suggestions for future issues for this column.
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