Md. turns up heat on insurance fraud

LEGAL MATTERS

January 01, 1994|By Gary Cohn | Gary Cohn,Staff Writer

In more than two decades with the Maryland State Police, Lt. John R. Davis has seen more than his share of crime.

But Lieutenant Davis says he is surprised at the scope and variety of insurance fraud he's found since being named the first head of the Maryland Insurance Fraud Unit in December 1992.

"We had no idea of the overall extent of insurance fraud in the state of Maryland until we really got into it," Lieutenant Davis says. "It's just unbelievable."

Insurance fraud is a crime, Lieutenant Davis says, that affects all of us -- from teen-agers in Towson who pay more for automobile insurance to business people in Baltimore who pay higher rates for life insurance.

Insurance Commissioner Dwight K. Bartlett III estimates that insurance fraud in Maryland costs every Maryland resident more than $270 a year.

Gov. William Donald Schaefer announced this week that, during the insurance fraud unit's first year, criminal investigations had been initiated in 150 cases. So far, criminal prosecutions have been brought in about 20 of those cases.

Lieutenant Davis says that is just the beginning.

"The unit has found that reports of suspected insurance fraud continue to rise as public attention is drawn to this crime," he says. "We expect the number of complaints to continue to grow, as the fraud unit becomes more widely known."

The types of insurance fraud being investigated in Maryland include everything from agents who charge people for insurance policies and keep the money without providing insurance to fraud in such areas as workers' compensation and property and medical claims. One of the most common schemes involves fraudulent claims from staged auto accidents.

The situation in Maryland is far from unique.

Nationwide, according to some estimates, insurance companies pay out up to $100 billion annually in fraudulent claims. As a result, many states recently have established insurance fraud units.

Some states, such as New Jersey and California, have as many as 200 people assigned to anti-fraud units.

Maryland's unit has only seven people, consisting of Lieutenant Davis and two other state police officers, Assistant Attorney General Michael DiPietro, an investigator from the Maryland Insurance Administration and two secretaries.

"We need more investigators," says Lieutenant Davis, when asked if he plans to expand the unit. He says he has already asked Governor Schaefer for additional staff, and adds the governor has been "very supportive of the insurance fraud unit."

The request for additional staff is being referred to the General Assembly.

The unit emphasizes prosecution of people who commit insurance fraud, though other states handle the problem differently. In New Jersey, for example, the insurance department can assess civil penalties for insurance fraud. But Lieutenant Davis doesn't think civil fines are an adequate deterrent.

"I believe the answer is to arrest people," he says.

"They've committed a criminal offense and should be treated as such. We need to teach people it's not worth the chance. . . . That criminal record stays with them the rest of their lives."

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