More than 100 insurance-fraud bills are already in the hopper for state action. Three major state supreme court cases also could have a dramatic impact on combatting fraud. Privacy of consumer data — and how it affects fraud investigations — will figure big this year as well.

Privacy and cybersecurity. Data breaches and theft of personal information continue mounting as our nation moves deeper into electronic and digital communication. Medical ID theft remains a thriving insurance-fraud crime.

Yet fraud fighters across all lines of insurance should stay alert. Will well-intended state privacy laws require disclosure of investigative materials to fraud suspects while investigations remain open? The Coalition Against Insurance Fraud (the Coalition) will watch closely to ensure privacy laws protect consumers while preserving fraud investigations.

Insurers and their policyholders remain vulnerable to data breaches. We learned this, especially with the hack of 80 million of Anthem's member and employee records. Legislators and regulators have raced into action.

The NAIC approved its model data security law. The model already was adopted last year by South Carolina, Ohio, and Michigan. Look for many states to debate adopting versions of the NAIC model this year.

The California legislature also rushed through the nation's most sweeping data privacy law last June. The law takes effect Jan. 1, 2020. So in the meantime, expect major amendments to be debated this year. Legislators in other states also will watch closely for how California's more-sweeping law moves forward.

Storm chasers. Natural disasters inevitably will rear up in 2019. Shady contractors will try to take advantage of homeowners damaged by high winds, floodwaters, hail and fire.

Shady contractors will roll into town, often from out of state. They may buy magnetic signs and trac phones so they seem like reputable local firms. Storms like Hurricane Michael inflicted nearly $5 billion of property damage in Florida last October. So it's easy to see why greedy contractors move quickly to prey on homeowners after catastrophes.

Already Missouri and New York have introduced bills to thwart storm chasers. Consumers would be protected by requirements such as:

• Registration of contractors (mandatory or voluntary) with the state.
• Requiring written contracts with cancelation provisions.
• Disclosure of liability and workers-comp coverage.
• Prohibiting contractors from registering in a state if they're convicted of fraud in another state.

A similar bill died in Ohio in 2018. The Coalition is helping lead the drive to re-file legislation this year. Colorado and Texas also are hotbeds for possible contractor bills. Alabama enacted its own law to protect residents in 2018.

Counterfeit airbags. Consumers have no way of knowing or checking for bogus airbags until they crash and their airbags fail to deploy. Crooked repair shops rip off insurers by charging for real airbags while installing cheap internet knockoffs.

The Coalition partners with Honda North America for strong state airbag laws. The goal is for all states to prohibit the manufacture, sale and installation of counterfeit airbags. To date, 18 states have enacted airbag-counterfeiting fraud laws supported by the Coalition and our partners.

More airbag-fraud laws likely will be enacted in 2019. Five states already have introduced these public-safety measures (Delaware, Nebraska, Virginia, North Dakota and Hawaii). The Coalition will support bills by encouraging legislators to vote for protecting drivers and their passengers. It's a life-and-death issue, as well as insurance fraud. We anticipate this year will end with more than half of states having airbag laws on their books.

Amicus briefs: your voice to America's courts

Three court cases could have a large impact on the fraud fight. At stake are:

• Illegal ownership of crooked no-fault clinics in New York.
• Personal liability of fraud fighters to be sued for alleged bad faith.
• Abuse of assigning of insurance benefits to contractors in Florida.

Fraud fighters are weighing in with amicus “friend of the court” briefs to support allies who are direct parties to the actions. Amicus briefs are advisory, though can influence the court's final decision.

These cases are important. Negative rulings could spread the damage by encouraging court challenges in other states. Positive rulings will defend the fraud fight and consumers.

Corporate medicine. A court fight is underway to undermine New York's prohibition against the corporate practice of medicine and stop insurers from suspending PIP payments when they suspect fraud in good faith.

The Empire State's highest court will consider Carothers v. Progressive Insurance Company. A jury and the state's court of appeals found Dr. Andrew Carothers was a sham owner of MRI clinics in the New York City area. That violated state law requiring owners to be licensed medical personnel instead of mere fronts for shady lay owners.

The clinics billed PIP carriers large sums of money, and the insurers investigated. When deposed, Carothers couldn't name his employees and had little knowledge of the clinics' finances. Nor could he explain his meager salary, compared to his non-physician “landlord” and “bookkeeper.” That pair raked in $11-$12 million from the clinics' suspect insurance billings.

Insurers stopped paying the clinics, invoking anti-fraud statutes and the Mallela court decision. The state's high court should uphold the laws prohibiting non-physician owned — or corporate — medical services, the Coalition's amicus brief urges.

Insurers should be authorized to suspend PIP payments after conducting thorough investigations and reasonably believing they, and consumers, are being defrauded. A decision is expected later this year.

Personal bad-faith liability. Insurer employees can be sued personally for bad faith in Washington state, a lower court ruled. Liability also would extend to outside experts who assist insurers, such as IME physicians, third-party investigators and defense attorneys.

Keodalah v. Allstate Insurance arose from a motorcycle collision with a pickup truck in Seattle, resulting in an uninsured motorist claim.

The Allstate adjuster can be sued personally, including claims for treble damages and attorney fees, the appeals court ruled. The result will be fewer referrals to the state fraud bureau. This ruling will roll out a welcome mat to fraudsters in the state, the Coalition warns in its amicus brief to the state Supreme Court.

Investigators, adjusters and others on the front line must decide whether to make fraud referrals, or risk being sued for bad faith (often by fraudsters themselves). The damage to their careers and personal lives could be substantial. Suits would appear on credit reports and background searches for future jobs. Thus these individuals may pass over suspect claims, and have their insurers pay them.

IME physicians and other outside experts may dry up if they also fear bad-faith liability. Fraud would increase in Washington, with consumers paying higher premiums. Insurers must act with good faith in claims, though holding individuals personally liable goes too far. Oral arguments are set for late February.

Assignment of benefits. The debate continues over contractors and their attorneys abusing Florida's unique assignment-of-benefits law to take over home repair claims and defraud insurers. Pressure for action is mounting in the state legislature and courts. The state Supreme Court has agreed to hear a landmark case and clear up confusion over conflicting lower-court rulings.

Insurers cannot require all policyholders to sign AOBs for them to be effective, a state appeals court ruled in 2017. Another appeals court reached the opposite decision: All policyholders and lienholders must approve the AOB for it to be valid.

All policyholders must approve an AOB, the Coalition agrees. This will help prevent insurance scams by those who work behind the homeowner's back to take over repair claims and commit fraud. Consumers and insurers aren't protected by allowing merely one insured at the start of a claim to surrender both the entire claim and right to sue the insurer. We plan to file an amicus brief.

This year holds much promise for reforms that strengthen anti-fraud efforts in state legislatures and courts. The key will be vigorous leadership by fraud fighters and their allies in every venue, throughout the year.

Matthew J. Smith, Esq. is the director of government affairs and general counsel for the Coalition Against Insurance Fraud. To contact him or submit cases to consider for Coalition amicus briefs, email him at [email protected].