The Absolute Immunity To Report Fraud

The 1996 decision of the California Court of Appeal, Fremont Compensation Ins. Co. v. Superior Court (Gopinath), 44 Cal.App.4th 867, 52 Cal.Rptr.2d 211(Cal.App. 4 Dist. 1996) is important to every person involved in the fight against insurance fraud. It emphasizes the importance of the common-law right and obligation every citizen has to report a crime without fear of civil or criminal penalties.

 

In Fremont a lawsuit was filed by a doctor who alleged that two workers' compensation insurers acted in bad faith in reporting the doctor to the authorities for over billing. The Court of Appeal, found that the Insurance Frauds Prevention Act (IFPA) does not provide insurers with less protection to report insurance fraud to police and prosecutors than they had before the legislation was enacted, and that California Civil Code § 47 provides absolute immunity for a report to the police.

 

The U.S. Supreme Court stated the duty of all citizens as follows  "[G]ross indifference to the duty to report known criminal behavior remains a badge of irresponsible citizenship. [¶] This deeply rooted social obligation is not diminished when the witness to crime is involved in illicit activities himself." [Roberts v. United States (1980) 445 U.S. 552, 100 S.Ct. 1358, 63 L.Ed.2d 622].

 

The obligation of insurers to report insurance fraud and other crimes they become aware of while investigating a claim is a mark of good citizenship. Failure to report fraud or other crimes, for fear of bad faith litigation is not practical good-business but a mark of irresponsible citizenship.

 

In my opinion the covenant of good faith and fair dealing requires an insurer to follow the requirements of the U.S. Supreme Court and be a good citizen. Failing or consciously refusing to report a claimant or insured the insurer believes has committed a crime is a breach of the covenant of good faith and fair dealing and the insurers duty as a citizen.

 

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