The Third Circuit Court of Appeals recently issued a decision under the False Claims Act, under which an insurance agent sued an insurance company and a bank on behalf of the United States, claiming that these two companies submitted false claims to the U.S. government. Generally, if the government recovers money under a false claims suit filed by a third party, that third party may also recover money.
According to the lawsuit, the insurance company sold life insurance policies to enlisted personnel, stating that the policies were actually savings accounts to avoid military regulations limiting the use of the military allotment system to pay life insurance premiums. The insurance company argued that the conduct that the insurance agent complained of did not rise to the level of a false claim against the government – that the insurance company was not actually trying to falsely claim money from the U.S. government.
The Third Circuit agreed with the insurance company. Payments made via the military allotment system are made from the salaries of military members, not from government funds on behalf of the United States. Since the actions of the insurance company could not cause monetary loss to the United States government, those actions did not involve a claim against the U.S. government. An action under the False Claims Act must involve a claim against the U.S. government where the government might suffer economic loss. Thus, the court ruled that the claim was properly dismissed, even though there might have been fraud against members of the military.
United States of America ex rel Sanders v. American-Amicable Life Ins. Co. of Texas, et al., No. 07-3429 (3d Cir. 2008).