California’s Insurance Frauds Prevention Act (IFPA) Insurance Code § 1871-1871.10 provides tools to address insurance fraud, but it distinguishes between specific types of fraud:

Section 1871.4 is limited exclusively to workers’ compensation fraud. It criminalizes making knowingly false or fraudulent statements or representations to obtain, deny, or influence workers’ compensation benefits, as defined under Labor Code section 3200 (which covers employee injuries arising out of employment).

Section 1871.7, in contrast, is a broader qui tam provision allowing private relators (like Jerilyn Henggeler below to sue on behalf of the state for general insurance fraud. It incorporates violations of Penal Code sections 549 (soliciting or referring business for fraudulent claims), 550 (presenting false claims or concealing facts to defraud insurers), and 551 (fraudulent auto insurance claims).

In October 2009, Omar Dauod was involved in a car accident while driving at high speed, colliding with another vehicle exiting a private community without fully stopping. The other driver’s insurer, Farmers Insurance, paid Omar $100,000 after arbitration determined fault. Omar and his wife Gina, represented by attorney James Ballidis of the Law Offices of Allen, Flatt, Ballidis & Leslie, then pursued an underinsured motorist claim against their own insurer, Geico, seeking $400,000 – the policy limit. After arbitration in 2013 awarded them that amount, the Dauods sued Geico in December 2014 for breach of contract, bad faith, and emotional distress, alleging Geico’s delays caused emotional harm, loss of two homes, and Omar’s business losses as a real estate developer. Ballidis testified at the trial supporting these claims, though he did not represent them in court. A jury awarded Omar $22.9 million.

Jerilyn Henggeler, a former neighbor and social acquaintance of the Dauods, learned of the verdict over a year later through news reports. Appalled, she believed the claims were fraudulent based on personal knowledge: she had observed Omar uninjured and active post-accident, knew he was a real estate salesman – not a developer – and learned from tenants that home losses stemmed from pocketing rent, not injuries. Henggeler’s research into public records, including Colorado business filings, bankruptcies, lawsuits, property titles, and licenses, contradicted Omar’s and Ballidis’s representations about Omar’s businesses, properties, and licenses. She also identified forged documents submitted to Geico, such as a letter purportedly from Omar’s brother-in-law and a nonexistent entity’s escrow agreement.

Henggeler filed a qui tam action under Insurance Code section 1871.7 on behalf of the State of California, alleging the Dauods, Ballidis, and the Law Firm defrauded Geico through false claims and testimony. The second amended complaint included four causes: three under section 1871.4 (workers’ compensation fraud statutes) for false statements, and one under section 1871.7 incorporating Penal Code violations for presenting fraudulent claims and concealing facts. The Dauods and Ballidis/Law Firm demurred, arguing the court lacked jurisdiction under the public disclosure bar (section 1871.7, subd. (h)(2)(A)), as Henggeler’s claims relied on public information from news, court files, and records.

The trial court sustained the demurrers without leave to amend, ruling it lacked jurisdiction due to the public disclosure bar. It found Henggeler’s claims were based on publicly disclosed information: she learned of the verdict from news media, incorporated trial testimony from Omar and Ballidis, and used public records like court files and Colorado documents.

The Court of Appeal reversed in the partially published case of People ex rel. Henggeler v. Dauod -G064064 (January 2026) and remanding with directions to sustain demurrers on the first three causes (workers’ compensation fraud statutes) but overrule on the fourth based upon Penal Code violation. This distinction was based upon balancing qui tam policy goals. By narrowly interpreting the bar to exclude reliance on neutral public information, the court preserved Henggeler’s suit as original, promoting IFPA’s anti-fraud aims. Dismissing workers’ compensation claims aligned with statutory limits, ensuring only valid insurance fraud allegations proceeded. This first-impression ruling clarified the bar’s scope, certifying partial publication to guide future cases.

The appellate court concluded that the trial court misinterpreted the public disclosure bar. It clarified the bar applies only to qui tam suits based on publicly disclosed “allegations” of fraud or specific fraudulent “transactions,” not mere “information” even if related to fraud.

Drawing from legislative history of the IFPA, CFCA, and federal False Claims Act, the court noted the bar’s purpose: to prevent parasitic suits copying public fraud allegations while encouraging original whistleblowers. Congress and California rejected broader bars prohibiting use of public “information” or “evidence,” opting for narrow limits on “allegations or transactions.”

Henggeler’s complaint used public records (e.g., business filings, bankruptcies) and trial testimony as evidence to prove fraud, not as pre-existing fraud allegations. Testimony from Omar and Ballidis supported their claims against Geico, not accusations of fraud. No prior public disclosure alleged Respondents’ fraud; Henggeler’s firsthand knowledge and research formed the basis.

The court upheld demurrers on the first three causes under section 1871.4, as they pertained to workers’ compensation fraud without relevant allegations. It rejected other defenses: no prefiling under Civil Code section 1714.10 was needed due to Ballidis’s independent duty not to defraud nonclients like Geico; collateral estoppel failed for lack of privity between the state/Henggeler and Geico.