Dennis Kass's Appellate Win Helps Clarify California Anti-Fraud Statute

Congratulations to Dennis B. Kass on obtaining a published appellate decision in State ex rel Geico v. Thrive et al ((2016) 244 Cal. App. 4th 1184). This case is the first to make clear that California’s anti-fraud statute, Insurance Code section 1871.7, does not require damages or detrimental reliance.

Insurance Code section 1871.7, passed in 1993 and loosely modeled after the Federal False Claims Act, allows insurance companies or third-party whistleblowers to sue defrauders. A successful plaintiff, which is usually an insurance company, receives up to three times the claim for compensation plus a penalty of $5,000-$10,000 per false claim. For years, defendants have wrongfully argued that this statute depended on false claims being paid, not merely submitted. This is significant issue, as Mr. Kass explains  "…if detrimental reliance and damages are considered required elements under Insurance Code 1871.7, it opens up much more broad and intrusive discovery directed at insurers, makes proof that much more difficult at trial, and limits recoverable sums at trial."

Background
In December 2011, GEICO began investigating Dr. Cruz and the other defendants for insurance fraud. GEICO filed a complaint against defendants in January 2013, and filed its operative first amended complaint (complaint) in July 2013. This complaint alleged that Dr. Cruz and others provided chiropractic and other medical services to persons injured in automobile accidents involving GEICO policyholders, and that Dr. Cruz, Dr. Tomassetti, and Dr. Brizzie submitted a combined total of 188 false and improper claims to GEIGO on behalf of 181 claimants.

Before our office came into the case, Dr. Cruz served 99 requests for admissions asking GEICO to admit, for example, that she did not submit false claims or conspire with other defendants to do so. After objecting, GEICO denied 93 of the requests and stated that it lacked sufficient information to admit or deny the remainder, stating that Discovery was ongoing and they reserved the right to supplement their response.

In April, GEICO replaced the original counsel and retained Manning & Kass founding partner Dennis B. Kass as trial counsel. Dr. Cruz moved for summary judgment, claiming that GEICO failed to show damages. The motion was granted, and judgment entered in Dr. Cruz's favor.

In January of 2016, Dennis B. Kass argued on behalf of GEICO in the Fourth District Court of Appeal, Division One. Eleven days later, the appellate justices issued an order reversing the trial court and finding that the trial court erroneously applied the law. Their reversal not only vindicated the firm's client, but resolved this longstanding issue of when 1871.7 can be applied, resulting in a published appellate decision with wide-reaching implications for shaping California insurance law.

For a copy of more detailed analysis of these implications by Mr. Kass, or to sign up for the firm's Complex Litigation Newsletter, please contact the firm's Office of Business Development at [email protected].