Insurance Code Section 1871.7 allows a party to file a qui tam action for violations of certain insurance claim related conduct described in the rule itself. Section 1871.7 also incorporates prohibited conduct from other statutes, such as California Penal Code Section 550, as permissible bases for the qui tam action. A person who violates Section 1871.7 is subject to “a civil penalty of not less than five thousand dollars ($5,000) nor more than ten thousand dollars ($10,000), plus an assessment of not more than three times the amount of each claim for compensation . . .”The central issue in Ellinger was whether an insurer and its agents are subject to Section 1871.7.

What is unusual here is that the claims are brought under state insurance fraud laws with the participation of the state Insurance Commissioner, and they are based on allegations that private insurance plans – not government programs – have been defrauded. According to the complaint, BMS caused false claims to be submitted to insurance policies in violation of Cal. Penal Code Section 550. The plaintiffs also make creative use of California’s runners and cappers statute, Cal. Ins. Code § 1871.7, which prohibits the knowing employment of “runners, cappers, steerers … to procure clients or patients … to perform or obtain services or benefits under a contract of insurance or that will be the basis for a claim against an insured individual or his or her insurer.”