Vermont Joins States Making Insurance Fraud a Specific Crime

In what supporters hope amounts to a preemptive strike on insurance schemes, Vermont’s legislature on its last day of the 2006 legislative session passed a bill making insurance fraud a specific crime.

Gov. Jim Douglas was expected to sign HB 150 into law shortly, according to the Coalition Against Insurance Fraud, which points out that would leave just three states that haven’t made insurance fraud a specific crime.

“Vermont has joined the mainstream of states that realize insurance fraud is so costly that it requires a targeted law. This will give prosecutors a surgical tool that can land convictions far better than the state’s current laws,” says Howard Goldblatt, the coalition’s director of government affairs.

The bill is based on a model law developed by the Coalition Against Insurance Fraud. Among the key provisions, HB 150 would criminalize:
• bogus claims by policyholders;
• fraud by insurers such as looting by insiders or the sale of fake insurance;
• scams by agents such as theft of client premiums; and
• schemes by public adjusters such as inflating claim;

Lying on insurance applications isn’t covered, however. Prosecutors would have to use other criminal laws to land convictions.

Insurers also must create annual anti-fraud plans, and submit them to the insurance department if requested.

Vermont has a relatively manageable problem with fraud, but the law gives prosecutors an important tool to go after insurance schemes when they do arise, says Goldblatt, who testified before the legislature several times during a two-year effort to pass the bill.

Goldblatt contends the measure also should encourage more prosecutions. Prosecutors sometimes avoid insurance cases that can be complex and highly technical. A law conforming closely to insurance crimes makes it easier to bring actions and land convictions.

If Gov. Douglas signs the measure, which was authored by Reps. Kathleen Keenan and Mark Young, it would take effect July 1.

Alabama, Oregon and Virginia would be the only states that haven’t made insurance fraud a specific crime.

“The outlook in those states is uncertain. Bills died in Alabama and Virginia this year, and there doesn’t appear to be a popular groundswell for a fraud law in either state. Oregon’s legislature doesn’t meet this year, so it’s too early to gauge the odds of passage next year, ” says Goldblatt.

Source: Coalition Against Insurance Fraud