Survival — continued from Previous Page
government. The purpose of the act was to ferret out fraud by unscrupulous mer- chants that sold shoddy defective goods to the Union army. The person that brought the fraud to the government’s attention was known as the relator. To encourage persons with knowledge of fraud to come forward, the relators were awarded a share of the proceeds recov- ered from the wrongdoer. The federal False Claims Act was amended several times – most significantly in 1986 – which had the intended effect of putting new teeth into the act and encouraging whistleblowers to bring their claims. (United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Provident Life & Accident Insurance Company (S.D.Fla., 1989) 721 F. Supp. 1247, 1249-50.) Congress intended to provide the Government with a ‘more useful tool against fraud in modern times’ and ‘to encourage any individual knowing of government fraud to bring that informa- tion forward.’ (Id. at 1248-49 quoting S. Rep. No. 99-345 at 2, 1986 U.S. Code Cong & Ad. News 5266-67.) The California False Claims Act
(“CFCA”) (Gov. Code, § 12650 et. seq.) closely mirrors the Federal False Claims
Act. To identify and prosecute fraudulent claims made against state and local gov- ernmental entities, in 1987 the California Legislature enacted the False Claims Act patterned on the federal scheme. The purpose of the CFCA is to supplement the government’s own efforts to combat fraud by allowing private parties known as relators to bring actions on behalf of the state against private parties who defraud the government. (American Combat Services v. Allied Mold and Die, Inc. (2001) 94 Cal.App.4th 854, 858.) The False Claims Acts, both federal
and state, have significant differences from Insurance Code section 1871.7. The most important difference is the victim of fraud the statutes were enacted to pro- tect. The goal of the false claim statutes is to recover government funds obtained by fraud usually by government contrac- tors. The government is the victim, not any individual or the relator. Money recovered goes to the federal or state treasury. The relator receives a percent- age of the recovery as a reward for expos- ing the fraud. In contrast, although modeled on
the federal False Claims Act, the purpose of section 1871.7 is to prevent fraud
upon insurers such as insurance compa- nies. In these cases, the insurers, not the government, are being defrauded often in the context of automobile insurance fraud. (See People ex rel. Allstate Insurance Company v. Weitzman (2nd Dist 2003) 107 Cal.App.4th 534, 561-2.) The insurer is the direct victim, and the insured is an indirect victim. Therefore, this statute may not be used to bring an action against an insurer even if one is aware of fraud being committed by a particular insurance company. (State of California ex rel. Metz v. Farmers Group, Inc. (App. 2 Dist. 2007) 67 Cal.Rptr.3d 842, 846.) The statute was designed to prohibit submis- sion of fraudulent claims to insurers which ultimately impacts all Californians. (Ibid.) However, anyone that has knowl- edge of fraud under section 1871.7 may bring an action and, if successful, be enti- tled to a percentage of the recovery. In addition to the insurers, the state and local governments share in the recovery from a successful section 1871.7 action even though they are not the direct or even indirect victims of the fraud. These recoveries by the government are meant for the prevention, investigation and prosecution of insurance fraud.
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