Texas Civil Justice League

NEWS

03/07/2007
Seliger Files Claims Fraud Bill

Sen. Kel Seliger (R-Amarillo) filed SB 1345, which makes a statutory change providing self-insured entities same protection as insurance companies in prosecuting fraud. Texas has long imposed criminal sanctions for filing fraudulent insurance claims. Texas law recognizes that insurance fraud not only harms the public by increasing the cost of insurance for everyone, but that it undermines the integrity of the system of allocating and insuring risk in our society.

Unfortunately, no comparable criminal statute exists generally for fraudulent claims for payment of money that occur outside of a contractual insurer-insured relationship. A massive fraudulent claim against DaimlerChrysler for more than $2 billion recently exposed this weakness in Texas law. In 1998 three attorneys filed a product liability lawsuit against DaimlerChrysler in a San Antonio district court, in which the district court and Fourth Court of Appeals found that the attorneys had deliberately and with intent commit fraud tampered with evidence, attempted to bribe and threaten witnesses, filed false affidavits under oath, and lied about facts material to the claim. The district court eventually dismissed the suit with prejudice and sanctioned the attorneys for almost a million dollars. The Fourth Court of Appeals affirmed the district court’s order for sanctions, calling the attorneys’ conduct “an egregious example of the worst kind of abuse of the judicial system.”

More than six years later, however, the sanctions remain unenforced. The disciplinary process of the State Bar of Texas has been ineffectual, resulting only in a reprimands for two of the attorneys, who are still actively practicing law in San Antonio. The third attorney, while he has been disbarred, fled the country. Clearly, the lack of a penal statute subjecting this type of conduct to criminal sanctions similar to those applying to insurance claims fraud is the only way to deter such conduct. Judicial sanctions and State Bar disciplinary procedures have done nothing either to protect the public or to remedy the egregious and fraudulent abuse of the judicial system in this case.

SB 1345 imposes criminal sanctions for intentionally and with intent to defraud or deceive another person presenting a false claim for compensation for bodily injury or property damage. The bill would apply to fraudulent claims against entities that self-insure, as well as those of the type made in the DaimlerChrysler case. The bill closely tracks the existing claims fraud statute with respect to the penalties, which range from a Class C misdemeanor to a first degree felony depending on the amount of money claimed. The intent of the proposed legislation is to provide a deterrent to future misconduct and to protect the integrity of the judicial system from fraudulent acts.