Allstate has won the case against Phone Law Firm operators to put an end to the illegal ownership, kickbacks and fraudulent operation of several law offices in the Los Angeles region that were owned, operated and controlled by unlicensed people posing as lawyers.
The verdict in a Los Angeles County Superior Court resulted in a judgment worth more than $11.5m in favor of Allstate.
Allstate's senior field vice president Phil Telgenhoff said: "Submitting even one false insurance claim is fraud and insurance fraud is a crime.
"Fraud drives up the cost we all pay for insurance by stealing millions of dollars from insurers. This cannot and will not be tolerated in California or anywhere."
Allstate alleged Christina Chang, Christine Suh and other unlicensed persons knowingly engaged in a fraud scheme in which they used the identity of practicing lawyers to create eight phony or "sham" law offices to make false, fraudulent or misleading claims against insurance companies so that settlement payments could be converted to their own use.
Evidence presented at trial showed that several California lawyers were paid $3,000 per month for the use of their names and law licenses. None of the licensed lawyers had significant direction or control over the operation of the fake law offices or the making and processing of claims.
Chang and Suh rented office space, hired staff, opened firm bank accounts, obtained clients, made demands to insurance companies for settlement and negotiated settlements, all in the name of licensed California attorneys, falsely making it appear as if a lawyer represented the client and claimant.
The evidence also showed Chang and Suh used remote check-cashing facilities including liquor stores and small local markets to convert the settlement proceeds into untraceable cash from deposits into client-trust accounts.
Allstate contended Chang and Suh knowingly concealed the fact that the law offices were owned, operated and controlled by unlicensed persons, all in violation of California's Insurance Frauds Prevention Act.
Telgenhoff said: "This is one of the first times I've seen this elaborate of an effort with setting up fake law offices and trying to defraud the industry.
"We have seen this type of operation before with shady medical clinics across the country, but this takes the scam to a different level. Rest assured, we will fight fraud wherever it lives."