Insurance companies pay prosecutors for fraud prosecutions

Funding deals between insurance companies and prosecutors to finance the costs of fraud investigations have blossomed around the nation in recent decades as lawmakers look for ways to help cash-strapped prosecutors pursue complex crimes that ultimately cause premiums to rise for everyone, reported the Texas Tribune.
But typically those financing schemes rely on pooled or industrywide assessments — with multiple insurance companies paying taxes or fees into a government fund. A public agency then disburses the money to state or local prosecutors.
However, a single county in Texas, Travis County, and Texas Mutual Insurance have an agreement that Texas Mutual will pay for all costs related to insurance fraud investigations and prosecutions.
Such arrangements in Massachusetts, California and other states have drawn criticism from defense lawyers and legal scholars who say the prosecutions lean too heavily in favor of insurer interests while offering too few protections for defendants.
Colorado’s government-run workers’ compensation provider once had a similar arrangement with the state attorney general’s office, but it was replaced in 2012 with pooled funding from all insurers, officials say.
None of the myriad public-private partnerships examined by the Tribune and the Statesman are as direct and intimate as the one in the Texas capital. In Travis County, the arrangement is singularly focused on one company: Texas Mutual makes the referrals, provides the investigators and directly pays all the bills. At one time the company even provided office space for the lead prosecutor. The Travis County DA has statewide authority over such cases because Texas Mutual is headquartered in Austin.
Prosecutors say Texas Mutual gets special treatment because of its history as a state-created entity, but the Legislature turned it into a regulated mutual insurance company — owned by policyholders — in 2001, and it’s no longer a state entity “for any purpose.”
Still, in exchange for guaranteed payments from Texas Mutual of more than $400,000 a year, the Travis County district attorney’s office prosecutes alleged “crimes committed against the company,” according to their contract.
“He who pays the fiddler sets the tune,” said Aviva Abramovsky, a law professor at Syracuse University and former chair of the Association of American Law Schools’ insurance law section. “What makes it problematic, particularly in an insurance case like this, is it’s only for this company. They’re the only ones who get private justice. And that’s unfair.”
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