An Unholy Alliance: Perceptions of Influence in Insurance Fraud Prosecutions and the Need for Real Safeguards

Article excerpt


For the past three decades, most state legislatures (1) have enacted (2) criminal statutes specifically targeted at deterring insurance fraud. (3) Unlike most criminal statutes, these insurance fraud laws not only delineate the unlawful conduct sought to be deterred, but also generally restrict the scope of potential victims to insurance carriers. (4) The expressed intent of the new legislation was to provide a specific vehicle for the prosecution of those who attempted to or actually filed false, fraudulent, or exaggerated claims with their insurance companies. (5) In addition to deterring future offenders, legislators hoped that these statutes would result in a public benefit of smaller insurance premiums. (6)

Financial fraud prosecutions are complex and frequently expensive, with all jurisdictions dedicating substantial resources to combating white collar crime. Unlike most other criminal prosecutions, insurance fraud prosecutions are increasingly being brought by prosecutors funded separately from the state's general revenues. These prosecutors' salaries are either entirely or in large part paid by monies obtained by direct assessments on the insurance industry. (7) The adoption of this prosecution funding method allows insurance fraud prosecution programs to exhibit the most comprehensive presence of any private industry in the enforcement of relevant criminal laws. (8)

The enforcement of the criminal laws is a public trust. (9) It is generally accepted that criminal defendants are entitled to a certain amount of neutrality and disinterestedness on the part of the prosecutor, particularly as a part of defendant's right to a fair trial. (10) The prosecutor's office is seen as representing the people, and the office seeks justice within the confines of governmental impartiality. (11) As such, it is important to examine these new institutionalized structures and their entwinement with private interests as potential sources of risk to that notion of impartial justice. (12)

Moreover, the consequences of even a perception of improper influence on fraud prosecutions implicate other relevant policy considerations. The existence of statutory schemes which offer even the reasonable inference of injustice, such as perceptions of conflicts of interests, may themselves have undesirable consequences. (13) Attorneys have been criminally prosecuted under these systems for actions undertaken during civil cases adverse to insurance industry financial interests. (14) Such prosecutions, without sufficient prophylactic safeguards, may result in chilling the representation available to claimants and implicate issues of zealous advocacy. (15)

It is well understood that the threat of criminal prosecution is an effective restriction on the bounds of zealousness. As Professor John C. Coffee has recognized, between the alternatives of engaged advocacy or self-preservation from criminal prosecution, the rational lawyer would not likely risk his liberty in favor of his aspirational duty of zealousness. (16) Fear of a non-neutral or otherwise influenced prosecutor implicates issues beyond the prosecution of any specific criminal defendant. (17) Even the mere appearance of influence and the concomitant perceived increased risk of triggering an unjust prosecution have the capacity to affect the availability and efficacy of legitimate advocacy adversely. (18)

Those familiar with the relationship between tort law and insurance (19) have long understood the insurance industry's financial interest in the cost of tort recoveries (20) and the relationship of those costs to claimants' legal representation. Plaintiffs' lawyer advocacy is strongly correlated with an adverse effect on insurance industry financial interests. (21) If lawyers are deterred from representing clients against the insurance industry, the implications for the tort system and clients are extensive. Moreover, as some members of the trial bar have recognized, the actual motivation of a prosecution is irrelevant to that prosecution's ability to chill advocacy. …