But too close a
relationship could harm public interest
Accused fraudster Harshad Patel said his rights were
violated because New Jersey’s anti-fraud agency works
too closely with insurers to root out fraud. The Office of Insurance Fraud
Prosecutor “outsources” investigations to insurers because it lacks financial
resources to fully investigate on its own, Patel contended.
So he sued the state, alleging his constitutional rights
were violated.
A U.S. Court of Appeals tossed the case this week. Patel
didn’t prove he was harmed by the relationship between the fraud bureau and
insurers, the court ruled. But the judge left the door open to revisit this
issue in the future.
Other fraud defendants have claimed a fraud bureau has
gotten too chummy with insurer investigators to beat up on citizens. Yet their
legal challenges all failed.
Still, future challenge could succeed if fraud bureaus and
insurers cross a line in working together. As state agencies, fraud bureaus
need to make their own decisions about which cases to investigate. And they
must conduct their own investigations.
Insurers can and should provide case information and offer
assistance, such as providing pretext policies and bait cars.
But insurers should never attempt to direct a fraud bureau
investigation or in effect, become an investigative arm of the state. It’s bad
public policy. The legal and public-relations consequences also could be
disastrous.
Patel’s ill-conceived challenge was a stretch. Yet it
reminds us that state and private investigators must stay vigilant.
About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.
