Thursday, 30 September 2004 17:00

Farmers files suit against LA shop for fraud

Farmers Insurance Exchange has begun serving civil summons and complaints upon a Los Angeles body shop and its director, accusing them of taking part in a scheme designed to defraud Farmers and its policyholders. The civil complaint, which is similar to prior suits filed against shops, seeks damages for the fraud committed. 

Farmers answers FAQs about lawsuit

Why has Farmers chosen to pursue a civil lawsuit?

Farmers is doing its part to fight body shop and other forms of insurance fraud. A successful fight against fraud requires a multifaceted approach. The efforts of the Department of Insurance and the Local District Attorneys are necessary to fight fraud. Now insurance companies can join the fight, with laws that allow the carriers to recoup money, obtain other damages and get court orders preventing future fraud.

Under what legal provisions are you filing this suit?

The lawsuit is filed under the California Insurance Fraud Prevention Act, Insurance Code §1871.7, as well as Business and Professions Code §17200 for unfair business practices. The California Insurance Fraud Prevention Act has enacted a novel, anti-fraud law that was designed to help combat insurance fraud. The law allows for a penalty of $5,000 - $10,000 per false claim, three times the false claim for compensation, all attorney fees, expenses and costs, as well an injunction against further fraud.

How did the insurance fraud scheme operate?

As is alleged in Farmers' Complaint, this was a complex and sophisticated scheme that involved billing for parts and labor that were never provided. Specifically, as explained in the civil complaint, the defendants billed for repair work that was not done at all; they billed to replace parts which they did not replace; they repaired parts and billed to replace those parts; they billed for OEM parts, but did not use them; and on certain occasions, they paid the insured back their deductible and "adjusted" their invoice accordingly, charging back Farmers for that amount.

How long had the Farmers investigation been going on?

Farmers has a team, which specializes in detecting insurance fraud who conducted a detailed and comprehensive investigation, including a full inspection of the cars at issue here. The investigation revealed that the defendants were attempting to pass off false claims to Farmers. Farmers' investigation is continuing at this time. More claims may be added to the lawsuit and the claim for damages may grow further.

Will these defendants be prosecuted as criminals?

Farmers has offered its full cooperation to the California Department of Insurance and the Los Angeles District Attorney who have the authority to make these decisions.

Is the Farmers investigation complete?

No. By its very nature, fraud is deceptive. Farmers has a statewide special investigative unit who focuses on individuals who are attempting to submit fraudulent claims.

Farmers is represented by Dennis B. Kass, Manning & Marder, Kass, Ellrod, Ramirez, LLP.

Farmers' Special Investigations Unit, which includes body shop experts, inspected 10 vehicles repaired by Bracha, Inc., DBA Best of the West Carstar Auto Body and DBA Exclusive Collision Center, and claims it found fraud in the repair invoice for each vehicle. Farmers is seeking over $250,000 in statutory damages for the intentional actions of the defendants.

The lawsuit claims the body shop billed Farmers for services that were never performed. This includes billing for parts and labor that were never provided. Once Farmers suspected fraud, it immediately inspected the cars involved and exposed physical evidence of fraud.

"When faced with concrete evidence that someone has tried to defraud Farmers and its policyholders, Farmers faces a choice: Do nothing or take action against such unscrupulous individuals. Farmers will not sit idly by and allow profiteers to succeed with their schemes," said Doug Ashbridge, director of Special Investigations

"We want the word to get out that Farmers will fight insurance fraud no matter what form it takes. Farmers will work with law enforcement, as well as institute its own civil actions in hopes of deterring these individuals, and anyone else who is contemplating submitting fraudulent insurance claims. It is our commitment to our policyholders to take fraud out of their premium dollars."

Billing for parts not used

The Farmers' Complaint also alleges billing for OEM parts, but not using them and claims that, on certain occasions, the shop paid the insured back their deductible and "adjusted" their invoice accordingly, charging back Farmers for that amount.

Ashbridge went on to state: "Farmers has developed a statewide team that is designed to detect precisely this type of fraudulent activity. Our investigators' efforts and expertise exposed the fraud being perpetrated here and developed the physical evidence of fraud. Lawsuits such as this are part of a nationwide commitment to stem the tide of insurance fraud."


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