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Insurers Must Demand & Prove Restitution Required to Make Them Whole\\n\\nDefendants Alfredo Ayala and Juan Luis Ayala owned farm labor \\ncontracting businesses and shared business offices and office staff. \\nDefendants were charged with insurance and tax fraud by underreporting \\ntheir payroll amounts. Alfredo and Juan pleaded no contest to workers\' \\ncompensation insurance fraud and tax fraud, agreed to pay restitution to\\n the Employment Development Department (EDD), and requested a \\nrestitution hearing to determine restitution owed to their workers\' \\ncompensation insurance companies. After a hearing, the trial court \\nawarded restitution to the insurance companies measured by the amount of\\n lost premiums caused by defendants\' false payroll reporting.\\n\\nIn The People v. Alfredo Ayala, The People v. Juan Luis Ayala, F083941, \\nF083974, California Court of Appeals, Fifth District (March 16, 2023) a \\nlengthy opinion reviewing facts in detail and evidence from the \\ndefrauded workers\' compensation insurers affirmed the restitution orders\\n based on the evidence presented by the insurers.\\n\\nFACTUAL BACKGROUND\\n\\nDefendants stipulated to a factual basis for their pleas based on police\\n reports and grand jury proceedings. Juan pleaded no contest to workers\'\\n compensation fraud and tax evasion by false statement, Alfredo pleaded \\nno contest to tax evasion by false statement.\\n\\n\\nPREMIUM FRAUD\\n\\nTypical workers\' compensation insurance policies are based on estimates.\\n The experience modification is determined by comparing a specific \\nemployer\'s payroll and losses to other similar employers. The experience\\n modification can lower the premium if the employer has good safety \\npractices but can result in a higher premium if the employer has a \\nnegative history of accidents.\\n\\nTRIAL COURT RULING\\n\\nThe trial court stated that restitution should make the victims whole \\nand not entitle them to profit but, in this case, the trial court used \\nthe findings of the insurance company auditors whom "[q]uite frankly, \\n[it] just felt ... were more credible."\\n\\nDISCUSSION\\n\\nCalifornia crime victims have a constitutional and statutory right to \\nreceive full restitution for economic losses suffered as a result of a \\ndefendant\'s criminal conduct. When a defendant is convicted and \\nsentenced to state prison, section 1202.4 limits restitution to losses \\ncaused by the criminal conduct for which the defendant was convicted.\\n\\nThe Trial Court Did Not Abuse Its Discretion In Determining that \\nDefendants\' Criminal Conduct Was Responsible for the Insurance \\nCompanies\' Lost Premiums and the Amounts of those Losses.\\n\\n\\nThe Court of Appeals, therefore, concluded that the trial court did not \\nabuse its discretion in calculating restitution in this case and affirm \\nthe judgments.\\n\\nZALMA OPINION\\n\\nInsurance fraud convictions, especially workers\' compensation insurance \\nfraud convictions are rare. The fraudsters often get away with their \\ncrime. When there is a conviction, like that of the Ayala brothers, must\\n make restitution to the workers\' compensation insurers who they \\nadmitted they defrauded. The court reviewed the testimony of each \\ninsurer and ordered restitution based upon the evidence from the \\ninsurers about the premiums they should have received. Those insurers \\nshould be emulated by every insurer that is the victim of insurance \\nfraud and provide evidence and demand full restitution, as did the \\ninsurers who were defrauded by the Ayalas. Restitution is often paid \\nbecause failure to pay defeats probation and the defendants go directly \\nto jail.\\n\\n(c) 2023 Barry Zalma & ClaimSchool, Inc.\\n\\nSubscribe and receive videos limited to subscribers of Excellence in \\nClaims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.\\n\\n\\nGo to the Insurance Claims Library \\u2013 https://zalma.com/blog/insurance-claims-library.