California Insurance Commissioner Steve Poizner and a property-casualty insurance coalition say California lawmakers’ proposal to downgrade 73 felony crimes, including insurance fraud, to misdemeanors could “severely erode” the state’s efforts to fight insurance fraud and convictions.

Arnold Schwarzenegger

Meanwhile, the insurance trade groups sent a joint letter to California Gov. Arnold Schwarzenegger, urging him to halt the proposed change.

“On behalf of the insurance fraud fighting community, we strongly recommend you reconsider your recommendation to reclassify property and drug related crimes to misdemeanors as a means to reduce spending and balance the state budget,” said the letter. It was signed by Dennis Jay, executive director of the Coalition Against Insurance Fraud; Joseph H. Wehrle Jr., CEO of National Insurance Crime Bureau; Louis Saccoccio, executive director of the National Health Care Anti-Fraud Association; and David J. Rioux, president of the International Association of Special Investigation Units.

“Reclassifying 73 crimes including ‘false insurance claims’ is a disservice to the consumers and businesses in the state of California,” the letter said. “In addition, taking the power out of the hands of the public prosecutor to charge someone with a felony crime will have a serious impact on public safety. Insurance fraud is a serious crime that demands serious consequences.”

Poizner called the fight against insurance fraud “a complex and time-consuming task. This proposal would severely limit their ability to go after career criminals, making simple and complex illegal enterprises much harder to prosecute — and in the process let criminals off the hook.”

Poizner warned of unintended consequences, including the inability to obtain search warrants for misdemeanor cases and a shortening of the statute of limitations from three years to one year. Both changes would occur because misdemeanor offenses are treated as lesser offenses. Among the 73 charges that would be reclassified would be insurance fraud, false claims, conspiracy to defraud, providing unlawful statements on a workers’ compensation policy and a collection of automobile fraud charges.