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Insurance Fraud: Court Of Appeals Limits Scope Of Activity Covered By The Term “Fraudulent Insurance Act”


People v. Boothe

16 NY3d 195

New York Court of Appeals

February 24, 2011

?Fraudulent Insurance Act: Court of Appeals Limits Scope Of Activities Covered By Penal Law 176

Summary: Defendant was indicted on charges of insurance fraud. The indictment stated that Defendant committed fraudulent insurance acts when he submitted marketing plans to Medicaid that he knew contained materially false information.

The trial court granted Defendants motion to dismiss the insurance fraud counts and the Appellate Division affirmed. The Court of Appeals granted the People leave to appeal. ?On Appeal, Defendant argues that he did not commit a fraudulent insurance act as charged in the indictment. The People concede that the marketing plans allegedly submitted do not fall under the definition of insurance fraud. Rather, they argue that a fraudulent health care insurance act is a species of a fraudulent insurance act. ?The Court of Appeals held that the new Legislation did not include a fraudulent health care insurance act as an alternative means of committing the crime of insurance fraud under Penal Law 176.30 and because there has been no such repair by Legislation, the Defendant did not violate Penal Law 176.30.

?See Also: Defendant’s Fitness For Trial: Court Of Appeals Held That It Is Within The Sound Discretion Of The Trial Court

Issue: Whether a fraudulent health care insurance act is included in the definition of a fraudulent insurance act under Penal Law 176.05 and whether it constitutes a crime of insurance fraud under Penal Law 176.30.

Holding: The Court of Appeals held that a fraudulent health care insurance act is not included in the definition of a fraudulent insurance act under Penal Law 176.30.

A fraudulent insurance act, as defined by statue, is limited to certain defined commercial and personal insurance.

Penal Law 176.05 (2) provides that a person commits a fraudulent health care insurance act when he knowingly and with intent to defraud presents any written statement as part of, or in support of, an application for the issuance of a health insurance policy, or a policy or contract or other authorization that provides or allows coverage for, membership or enrollment in, or other services of a public or private health plan, or a claim for payment, services or other benefit pursuant to such policy, contract or plan, which he knows to contain materially false information concerning any material fact thereto.

Facts: Defendant, the Chief operating officer and executive Vice-President of a managed health care provider, was indicted on two counts of insurance fraud in the first degree, Penal Law 176.30. The indictment states that Defendant committed fraudulent insurance acts when he submitted marketing plans to Medicaid that he knew contained materially false information.

The trial court granted Defendants motion to dismiss the insurance fraud counts and the Appellate Division affirmed. The Court of Appeals granted the People leave to appeal. On Appeal, Defendant argues that he did not commit a fraudulent insurance act as?? charged in the indictment. The People concede that the marketing plans allegedly submitted by Defendant do not fall under the definition of insurance fraud. Rather, a fraudulent health care insurance act is a species of a fraudulent insurance act. The Court of Appeals held that because there has been no such repair by Legislation, a fraudulent health care insurance act is not included within the definition of a fraudulent insurance act under Law 176.30.

Legal Analysis: The Court of Appeals held that a fraudulent insurance act, as defined by the statue, is limited to certain defined commercial and personal insurance. The new Legislation did not include a fraudulent health care insurance act as an alternative means of committing the crime of insurance fraud under Penal Law 176.30 and because there has been no such repair by Legislation, the Defendant did not violate Penal Law 176.30.

In 1998, the Legislature amended a number of State laws to expand health coverage and eligibility??for children through the Child Heath Plus program and Medicaid, and together amended Penal?Law 176.05 to strengthen the States ability to deter Medicaid Fraud and abuse. As part of these amendments, the Legislature added a new subdivision to ?176.05, namely, fraudulent health care insurance act.

Penal Law 176.05 (2) provides that a person commits a fraudulent health care insurance act when he knowingly and with intent to defraud presents any written statement as part of, or in support of, an application for the issuance of a health insurance policy, or a policy or contract or other authorization that provides or allows coverage for, membership or enrollment in, or other services of a public or private health plan, or a claim for payment, services or other benefit pursuant to such policy, contract or plan, which he knows to contain materially false information concerning any material fact thereto.

In this case, the Legislature failed to amend the substantive provisions to include a fraudulent health care insurance act. The Court of Appeals held, Penal Law 176.10 through 176.35; which contain six degrees of insurance fraud, all contain the core requirement that the Defendant commit a fraudulent insurance act. The State Division of Criminal Justice Services warned the proposed amendments to section 176.05 may not accomplish their apparent objective of including certain activities related to health care insurance within the scope of existing insurance fraud offenses because the new Legislation did not include fraudulent health care insurance act as an alternative means of committing the crimes defined in sections 176.10 through 176.35.

The Defendant, noting these deficiencies, moved to dismiss the insurance fraud counts, asserting that he did not commit a fraudulent insurance act as charged in the indictment and defined by the Penal Law. The Court of Appeals held that a fraudulent insurance act is limited to certain defined commercial and personal insurance, and the marketing plans allegedly submitted by Defendant do not fall under the definition. This statutory infirmity cannot be overlooked, nor can it be remedied through statutory interpretation. The Court of Appeals held that it is well settled that courts are not to legislate under the guise of interpretation, People v. Finnegan, 9 NY2d 925, 929 1961, and if this deficiency is to be corrected, it must be done through legislative action.

? ? ?In fact, that is the precise action the Judicial Conference of the State of New York proposed. They noted that, the Chief Administrative Judge, should at the recommendation of his Advisory Committee on Criminal Law and Procedure recommend repair of this legislative oversight so that a fraudulent health care insurance act is included as a fraudulent insurance act and thereby constitutes a crime of insurance fraud. The Court of Appeals held, because there has been no such repair, a fraudulent health care insurance act is not included within the definition of fraudulent insurance act and therefore Defendant did not violate Penal Law 176.30.


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