Bill Text: PA HB1750 | 2009-2010 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Further providing for insurance fraud; consolidating Article XI of The Insurance Department Act of 1921, further providing for purpose, for definitions, for Insurance Fraud Prevention Trust Fund, for powers and duties and for duties of insurance licensees and their employees; and making a repeal.

Spectrum: Moderate Partisan Bill (Democrat 16-2)

Status: (Engrossed - Dead) 2010-10-12 - Referred to BANKING AND INSURANCE [HB1750 Detail]

Download: Pennsylvania-2009-HB1750-Introduced.html

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PRINTER'S NO. 2227
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 1750 Session of2009
INTRODUCED BY BARBIN, DeLUCA, CARROLL, D. COSTA, FABRIZIO, KORTZ, KOTIK, MANDERINO, MELIO, MENSCH, PASHINSKI, READSHAW, SWANGER, R. TAYLOR AND WALKO, JUNE 22, 2009
REFERRED TO COMMITTEE ON INSURANCE, JUNE 22, 2009
AN ACT
Amending Titles 18 (Crimes and Offenses) and 40 (Insurance) of
the Pennsylvania Consolidated Statutes, further providing for
insurance fraud; consolidating Article XI of The Insurance
Department Act of 1921, further providing for purpose, for
definitions, for Insurance Fraud Prevention Trust Fund, for
powers and duties and for duties of insurance licensees and
their employees; and making a repeal.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 4117(a)(1), (2), (3), (4) and (7),
(b)(4), (f) and (k)(1) of Title 18 of the Pennsylvania
Consolidated Statutes are amended to read:
§ 4117. Insurance fraud.
(a) Offense defined.--A person commits an offense if the
person does any of the following:
(1) Knowingly and with the intent to defraud a State or
local government agency files, presents or causes to be filed
with or presented to the government agency a document that
contains false, incomplete or misleading information
concerning any fact or thing material to the agency's
determination in approving or disapproving [a motor vehicle]
an insurance rate filing[, a motor vehicle insurance
transaction] or other [motor vehicle insurance] action
requiring insurance which is [required or] filed in response
to an agency's request.
(2) Knowingly and with the intent to defraud any insurer
[or], self-insured, insurance licensee, person or the public,
presents or causes to be presented [to any insurer or self-
insured] any statement forming a part of, or in support of,
[a claim] an insurance transaction that contains any false,
incomplete or misleading information concerning any fact or
thing material to [the claim.] any of the following:
(i) Issue by an insurer or self-insured of an
insurance policy, rider, endorsement or a certificate of
insurance.
(ii) Determination of insurance premium.
(iii) Payment of any commission, benefit, claim or
other funds, under a policy of insurance or a certificate
of insurance.
(3) Knowingly and with the intent to defraud any insurer
[or], self-insured, insurance licensee, person or the public,
assists, abets, solicits or conspires with another to prepare
or make any statement that is intended to be presented [to
any insurer or self-insured] in connection with, or in
support of, [a claim] an insurance transaction that contains
any false, incomplete or misleading information concerning
any fact or thing material to [the claim, including
information which documents or supports an amount claimed in
excess of the actual loss sustained by the claimant.] any of
the following:
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(i) Issue by an insurer or self-insured of an
insurance policy, rider, endorsement or a certificate of
insurance.
(ii) Determination of insurance premium.
(iii) Payment of any commission, benefit, claim or
other funds under a policy of insurance or a certificate
of insurance.
(4) Engages in unlicensed [agent, broker] or
unauthorized [insurer] insurance activity as defined by the
act of May 17, 1921 (P.L.789, No.285), known as The Insurance
Department Act of one thousand nine hundred and twenty-one,
knowingly and with the intent to defraud an insurer, a self-
insured, an insurance licensee or the public.
* * *
(7) [Borrows] Makes, solicits, negotiates, sells,
distributes, possesses false insurance documents or uses
another person's [financial responsibility or other]
insurance [identification card or permits his financial
responsibility or other insurance identification card to be
used by another] documents, knowingly and with intent to
[present a fraudulent claim to an] defraud any insurer, self-
insured, insurance licensee, person or the public.
* * *
(b) Additional offenses defined.--
* * *
[(4) A person may not knowingly and with intent to
defraud any insurance company, self-insured or other person
file an application for insurance containing any false
information or conceal for the purpose of misleading
information concerning any fact material thereto.]
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* * *
(f) Immunity.--[An] Any insurer, self-insured, insurance
licensee or person, and any agent, servant or employee thereof
acting in the course and scope of [his] employment, shall be
immune from civil or criminal liability arising from the supply
or release of written or oral information to any entity duly
authorized to receive such information by Federal or State law,
or by Insurance Department regulations.
* * *
(k) Insurance forms and verification of services.--
(1) All applications for insurance and all claim forms
shall contain or have attached thereto a notice substantially
similar to the following notice:
Any person who knowingly and with intent to defraud
any [insurance company or other] insurer, self-
insured, insurance licensee, person or the public
files an application for insurance or statement of
claim containing any materially false information or
conceals for the purpose of misleading, information
concerning any fact material thereto commits a
fraudulent insurance act, which is a crime and
subjects such person to criminal and civil penalties.
* * *
Section 2. Part II heading of Title 40 is amended to read:
PART II
REGULATION OF INSURERS AND RELATED
PERSONS GENERALLY
[(Reserved)]
Section 3. Title 40 is amended by adding an article to read:
ARTICLE A
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INSURANCE FRAUD
Chapter
11. Insurance Fraud Prevention Authority
CHAPTER 11
INSURANCE FRAUD PREVENTION AUTHORITY
Subchapter
A. Preliminary Provisions
B. Insurance Fraud Prevention Authority
C. Section of Insurance Fraud
D. Antifraud Plans and Reporting
E. Penalties
F. Miscellaneous Provisions
SUBCHAPTER A
PRELIMINARY PROVISIONS
Sec.
1101. Scope of chapter.
1102. Purpose.
1103. Definitions.
§ 1101. Scope of chapter.
This chapter deals with insurance fraud prevention.
§ 1102. Purpose.
The purpose of this chapter is to do all of the following:
(1) Establish, coordinate and fund activities in this
Commonwealth to prevent, combat and reduce insurance fraud.
(2) To require insurers to implement antifraud plans
increasing the prevention, detection, investigation and
reporting of insurance fraud.
(3) To require insurers to annually certify antifraud
plans and report activity under those plans to the
commissioner.
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(4) To improve and support insurance fraud law
enforcement and administration.
(5) To improve and support insurance fraud prosecution.
§ 1103. Definitions.
The following words and phrases when used in this chapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Antifraud plan" or "plan." The written procedures of an
insurer for preventing, detecting, investigating and reporting
insurance fraud.
"Authority." The Insurance Fraud Prevention Authority.
"Board." The board of directors of the Insurance Fraud
Prevention Authority.
"Commissioner." The Insurance Commissioner of the
Commonwealth.
"Department." The Insurance Department of the Commonwealth.
"Fund." The Insurance Fraud Prevention Trust Fund.
"Identified fraud cost." The dollar amount of loss caused by
insurance fraud as admitted by a fraud suspect, alleged by an
insurer in civil or criminal legal proceedings or found by a
court of law, including insurer losses associated with insurance
premium, commission, policy benefits, claim payments or
policyholder or insurer funds.
"Insurance fraud." An activity defined as an offense under
18 Pa.C.S. § 4117 (relating to insurance fraud).
"Insurance licensee." A person holding a license to engage
in the business of insurance.
"Insurance producer." A person that sells, solicits or
negotiates contracts of insurance.
"Insurer." An insurance company, association, exchange,
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interinsurance exchange, health maintenance organization,
preferred provider organization, a hospital plan corporation
subject to Chapter 61 (relating to hospital plan corporations),
professional health services plan corporation subject to Chapter
63 (relating to professional health services plan corporations),
fraternal benefits society, beneficial association, Lloyd's
insurer or health plan corporation.
"Section of Insurance Fraud." The Section of Insurance Fraud
in the Office of Attorney General.
SUBCHAPTER B
INSURANCE FRAUD PREVENTION AUTHORITY
Sec.
1121. Establishment of authority.
1122. Powers and duties.
1123. Insurance Fraud Prevention Trust Fund.
1124. Immunity.
§ 1121. Establishment of authority.
(a) Establishment.--There is established a body corporate
and politic to be known as the Insurance Fraud Prevention
Authority. The purposes, powers and duties of the authority
shall be vested in and exercised by a board of directors.
(b) Composition.--The board of the authority shall consist
of the following members composed and appointed in accordance
with the following:
(1) The Attorney General or his designee.
(2) A representative of the Philadelphia Federal
Insurance Fraud Task Force.
(3) Four representatives of insurers, one of whom shall
be appointed by the President pro tempore of the Senate, one
of whom shall be appointed by the Minority Leader of the
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Senate, one of whom shall be appointed by the Speaker of the
House of Representatives and one of whom shall be appointed
by the Minority Leader of the House of Representatives. Each
of the four members shall be, respectively, a representative
of an insurer writing workers compensation, accident and
health, automobile or general commercial liability insurance
in this Commonwealth.
(4) One representative of purchasers of insurance in
this Commonwealth who is not employed by or connected with
the business of insurance and is appointed by the Governor.
(c) Terms.--With the exception of the Attorney General and
the representative of the Philadelphia Federal Insurance Fraud
Task Force, members of the board shall serve for terms of four
years. No appointed member shall be eligible to serve more than
two full consecutive terms.
(d) Compensation.--Members of the board shall serve without
compensation but shall receive reimbursement for all reasonable
and necessary expenses incurred in connection with their duties
in accordance with the rules of the executive board.
(e) Quorum.--A majority of the members of the board shall
constitute a quorum for the transaction of business at a meeting
or the exercise of a power or function of the authority.
Notwithstanding any other provision of law, action may be taken
by the board at a meeting upon a vote of the majority of its
members present in person or through the use of amplified
telephonic equipment if authorized by the bylaws of the board.
The board shall meet at the call of the chairperson or as may be
provided in the bylaws of the board. The board shall meet at
least quarterly. Meetings of the board may be held anywhere
within this Commonwealth. The board shall elect its own
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chairperson.
§ 1122. Powers and duties.
The authority shall have the powers necessary and convenient
to carry out and effectuate the purposes and provisions of this
chapter and the purposes of the authority and the powers
delegated by other laws, including:
(1) Employ administrative, professional, clerical and
other personnel as may be required and organize the staff as
may be appropriate to effectuate the purposes of this
chapter.
(2) Have a seal and alter the same at pleasure, have
perpetual succession, make, execute and deliver contracts,
conveyances and other instruments necessary or convenient to
the exercise of its powers and make and amend bylaws.
(3) Procure insurance against any loss in connection
with its property, assets or activities.
(4) Apply for, solicit, receive, establish priorities
for, allocate, disburse, contract for, administer and spend
funds in the fund and other funds that are made available to
the authority from any source consistent with the purposes of
this chapter.
(5) Make grants to and provide financial support for the
Section of Insurance Fraud, the Unit for Insurance Fraud in
the Philadelphia District Attorney's Office, other county
district attorneys' offices, other government agencies,
community, consumer and business organizations consistent
with the purposes of this chapter and consider the extent of
the insurance fraud problem in each county of this
Commonwealth.
(6) Advise the State Treasurer in relation to the
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investment of any money held in the fund and any funds held
in reserve or sinking funds and any money not required for
immediate use or disbursement and to advise the State
Treasurer in relation to the use of depositories for money of
the fund.
(7) Assess the scope of the problem of insurance fraud,
including areas of this Commonwealth where the problem is
greatest, and review State and local criminal justice
policies, programs and plans dealing with insurance fraud.
(8) Develop and sponsor the implementation of Statewide
plans, programs and strategies to combat insurance fraud,
improve the administration of the insurance fraud laws and
provide a forum for identification of critical problems for
those persons dealing with insurance fraud.
(9) Coordinate the development, adoption and
implementation of plans, programs and strategies relating to
interagency and intergovernmental cooperation with respect to
insurance fraud law enforcement.
(10) Promulgate rules or regulations related to the
expenditure of money held in the fund in order to assist and
support those agencies, units of government, county district
attorneys' offices and other organizations charged with the
responsibility of reducing insurance fraud or interested and
involved in achieving this goal.
(11) Audit at its discretion the plans and programs that
it has funded in whole or in part in order to evaluate the
effectiveness of the plans and programs and withdraw funding
should the authority determine that a plan or program is
ineffective or is no longer in need of further financial
support from the fund.
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(12) Report annually on or before the first day of April
to the Governor and the General Assembly on the authority's
activities in the preceding period of operation.
(13) Meet with the Section of Insurance Fraud on at
least a quarterly basis in order to advise and assist it in
implementing its statutory mandate.
(14) Advise the General Assembly on matters relating to
insurance fraud and recommend to the General Assembly on an
annual basis any changes to the operation of the Section of
Insurance Fraud. The report shall be available for public
inspection.
(15) Establish, either alone or in cooperation with
authorized insurance companies and licensed agents and
producers, a fund to reward persons not connected with the
insurance industry who provide information or furnish
evidence leading to the arrest and conviction of persons
responsible for insurance fraud.
(16) Require as a condition of every application and
request for financial support, including every application
for ongoing renewal of a multiyear grant under section
1123(f) (relating to Insurance Fraud Prevention Trust Fund),
that the applicant described both the nature of and the
amount of funding for the activities, if any, devoted to the
investigation and prosecution of insurance fraud at the time
of the application or request.
(17) Require as a condition of every application and
request for financial support that every recipient of funding
report annually within four months of the close of each
funding cycle to the authority on the use of the funds
obtained from the authority during the previous year,
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including a description of programs implemented and results
obtained. The authority shall include this information on the
use of funds by grantees in its annual report under paragraph
(12) and send a copy specifically to the chairman and the
minority chairman of the standing committees of the Senate
and the chairman and the minority chairman of the standing
committees of the House of Representatives with jurisdiction
over insurance matters.
§ 1123. Insurance Fraud Prevention Trust Fund.
(a) Establishment.--There is established a separate account
in the State Treasury to be known as the Insurance Fraud
Prevention Trust Fund. This fund shall be administered by the
State Treasurer with the advice of the authority. All interest
earned from the investment or deposit of money accumulated in
the fund shall be deposited in the fund for the same use.
(b) Funds.--All money deposited into the fund shall be held
in trust and shall not be considered general revenue of the
Commonwealth but shall be used only to effectuate the purposes
of this chapter as determined by the authority and shall be
subject to audit by the Auditor General.
(c) Assessment.--
(1) Annually on or before the first day of April, each
insurer engaged in the writing of the insurance listed under
paragraph (2), as a condition of its authorization to
transact business in this Commonwealth, shall pay into the
fund in trust an amount equal to the product obtained by
multiplying $8,000,000 by a fraction, the numerator of which
is the direct premium written for those types of insurance
listed under paragraph (2) by that insurer in this
Commonwealth during the preceding calendar year and the
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denominator of which is the direct premium written on the
insurance in this Commonwealth by all insurers in the same
period.
(2) All Commonwealth property, casualty, life, accident
and health, and title insurance written by insurers, except
premiums written for federally mandated health insurance,
excess insurance, reinsurance and surplus lines insurance, as
listed in annual statutory financial statements filed with
the department or the National Association of Insurance
Commissioners, shall be considered in determining
assessments. Assessments made under this section shall not be
considered burdens and prohibitions under section 212 of the
act of May 17, 1921 (P.L.789, No.285), known as The Insurance
Department Act of 1921.
(3) Assessments for health plan corporations,
professional health services plan corporations and health
insurers not licensed as property, casualty or life insurers,
if added together, shall not be more than 10% of the total
assessment authorized under this subsection. If the total
assessment for these organizations is more than 10%, the
organizations shall share the assessment up to the 10% limit
among themselves in the same proportion as they would
otherwise have shared their calculated assessment absent this
limit. Any deficiency in the total assessment caused by the
application of this limit will be shared by all other
entities being assessed in the same proportions as they are
sharing the rest of the assessment.
(4) Assessments for insurers licensed as life insurers
if added together shall not be more than 10% of the total
assessment authorized under this subsection. If the total
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assessment for these organizations is more than 10%, the
organizations shall share the assessment up to the 10% limit
among themselves in the same proportion as they would
otherwise have shared their calculated assessment absent this
limit. Any deficiency in the total assessment caused by the
application of this limit will be shared by all other
entities being assessed in the same proportions as they are
sharing the rest of the assessment.
(d) Base amount.--In succeeding years, the authority may
vary the base amount of $8,000,000, except that any increase
which on an annual basis exceeds the increase in the Consumer
Price Index for this Commonwealth must be approved by three of
the four insurance representatives on the board.
(e) Expenditures.--Money in the fund may be expended by the
authority for the following purposes:
(1) Effectuate the powers, duties and responsibilities
of the authority as set forth under this chapter.
(2) Pay the costs of administration and operation of the
Section of Insurance Fraud and the Unit for Insurance Fraud
in the Philadelphia District Attorney's Office.
(3) Provide financial support to law enforcement,
correctional agencies and county district attorneys' offices
for programs designed to reduce insurance fraud and to
improve the administration of insurance fraud laws.
(4) Provide financial support for other governmental
agencies, community, consumer and business organizations for
programs designed to reduce insurance fraud and to improve
the administration of insurance fraud laws.
(5) Provide financial support to programs designed to
inform insurance consumers about the costs of insurance fraud
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to individuals and to society and to suggest methods for
preventing insurance fraud.
(6) Provide financial support for reward programs
leading to the arrest and conviction of persons and
organizations engaged in insurance fraud.
(7) Provide financial support for other plans, programs
and strategies consistent with the purposes of this chapter.
(f) Multiyear grants.--In funding the Section of Insurance
Fraud, the Unit for Insurance Fraud in the Philadelphia District
Attorney's Office and in funding grant requests, the authority
may consider and approve requests for multiyear grants of not
more than four years in length, although extensions of the
multiyear commitments may be renewed from year to year. No
funding reduction under subsection (d) may be imposed by the
authority in any given year which would operate to reduce
funding for any multiyear approved program for which persons
have been hired for full-time positions to a funding level where
the positions must be terminated unless the organization
employing the persons certifies either that other equivalent
positions are available or that the positions with the antifraud
program can be funded from other sources.
(g) Dissolution.--If the trust fund is discontinued or the
authority is dissolved by operation of law, any balance
remaining in the fund, after deducting administrative costs for
liquidation, shall be returned to insurers in proportion to
their financial contributions to the fund in the preceding
calendar year.
§ 1124. Immunity.
In the absence of malice, no board member and no employee of
the authority may be subject to any civil or criminal liability
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for receiving or disclosing information related to insurance
fraud or the activities of the authority. In the absence of
malice, persons or organizations shall not be subject to civil
or criminal liability for providing information relating to
insurance fraud to the authority, its employees, agents or
designees. This section shall not abrogate or modify in any way
any common law or statutory privilege or immunity heretofore
enjoyed by any person.
SUBCHAPTER C
SECTION OF INSURANCE FRAUD
Sec.
1141. Establishment.
1142. Powers and duties.
1143. Document confidentiality and immunity from subpoena.
1144. Duties of insurance licensees and their employees.
1145. Persons not connected with insurance industry.
1146. Refusal to cooperate with investigation.
1147. Immunity.
§ 1141. Establishment.
(a) Establishment.--There is established within the Office
of Attorney General a Section of Insurance Fraud to investigate
and prosecute insurance fraud in accordance with jurisdictional
mandates as specified under the act of October 15, 1980
(P.L.950, No.164), known as the Commonwealth Attorneys Act, and
18 Pa.C.S. § 4117 (relating to insurance fraud).
(b) Funding.--All costs of administration and operation of
the Section of Insurance Fraud shall be borne by the fund. Any
money or other property awarded to the Section of Insurance
Fraud as costs of investigation or as a fine shall be credited
to the fund.
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§ 1142. Powers and duties.
The Section of Insurance Fraud shall have the powers
necessary and convenient to carry out and effectuate the
purposes and provisions of this chapter and the powers delegated
under other laws, including the power:
(1) To employ administrative, professional, clerical and
other personnel as may be required and organize the staff as
may be appropriate to effectuate the purposes of this
chapter.
(2) To initiate inquiries and conduct investigations if
the Section of Insurance Fraud has reason to believe that
insurance fraud may have been or is being committed.
(3) To respond to notifications or complaints of
suspected insurance fraud generated by State and local
police, other law enforcement authorities, governmental
units, including the Federal Government, and the general
public.
(4) To review notices and reports of insurance fraud and
to select those incidents of suspected fraud as, in its
judgment, require further investigation, undertake the
investigation and issue subpoena for records and testimony
relating to insurance fraud.
(5) To conduct independent examination of insurance
fraud, conduct studies to determine the extent of insurance
fraud, deceit or intentional misrepresentation of any kind in
the insurance process and publish information and reports on
the examinations or studies.
(6) To prosecute, both on its own and in conjunction
with other sections and divisions within the Office of
Attorney General, any incidents of insurance fraud involving
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more than one county of this Commonwealth or involving any
county of this Commonwealth and another state disclosed by
its investigations and to assemble evidence, prepare charges,
bring charges or, upon request of any other prosecutorial
authority, otherwise assist that prosecutory authority having
jurisdiction over the incidents.
(7) To report incidents of insurance fraud disclosed by
its investigations to any other appropriate law enforcement,
administrative, regulatory or licensing agency.
(8) To pay over all civil and criminal fines and
penalties collected for violations and acts subject to
investigation and prosecution into the fund.
(9) To undertake programs to investigate insurance fraud
and to meet, at least on a quarterly basis, with the
Insurance Fraud Prevention Authority.
(10) To employ investigators trained in accordance with
53 Pa.C.S. Ch. 21 Subch. D (relating to municipal police
education and training). The laws applicable to law
enforcement officers of this Commonwealth shall be applicable
to the investigators. Investigators of the Section of
Insurance Fraud shall have the following additional powers:
(i) To make arrests in accordance with existing
jurisdictional rules for criminal violations established
as a result of their investigations.
(ii) To execute arrest and search warrants in
accordance with existing jurisdictional rules for the
same criminal violations.
(11) To designate, if evidence, documentation and
related materials sought are located outside of this
Commonwealth, representatives, including officials of the
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state where the matter is located, to secure the matter or
inspect the matter on its behalf. The person so requested
shall either make the matter available to the Section of
Insurance Fraud or shall make the matter available for
inspection or examination by a designated representative of
the Section of Insurance Fraud.
§ 1143. Document confidentiality and immunity from subpoena.
(a) General rule.--Papers, records, documents, reports,
materials or other evidence relative to the subject of an
insurance fraud investigation shall remain confidential and
shall not be subject to public inspection for so long as the
Section of Insurance Fraud deems it reasonably necessary to
complete its investigation or for so long as the Section of
Insurance Fraud deems it reasonably necessary to protect the
privacy of the person investigated, to protect the person
furnishing the matter or to be in the public interest.
(b) Subpoena.--
(1) Papers, records, documents, reports, materials or
other evidence relative to the subject of an insurance fraud
investigation shall not be subject to subpoena until opened
for public inspection by the Section of Insurance Fraud
unless the Office of Attorney General consents or until,
after notice to the Section of Insurance Fraud and a hearing,
a court of record determines that the Section of Insurance
Fraud will not be unnecessarily hindered by compliance with a
subpoena.
(2) Investigators employed by the Section of Insurance
Fraud shall not be subject to subpoena in civil actions by
any court in this Commonwealth to testify concerning any
matter of which they have knowledge under a pending or
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continuing insurance fraud investigation being conducted by
the Section of Insurance Fraud unless the Office of Attorney
General consents or until, after notice to the Office of
Attorney General and a hearing, a court of record determines
that the investigation will not be hindered by the
appearance.
§ 1144. Duties of insurance licensees and their employees.
Every insurer, every employee of an insurer, every producer
and its employees and any other insurance licensee and its
employees shall cooperate fully with the Section of Insurance
Fraud. If an insurer, producer, any other insurance licensee or
employee of an insurer or insurance licensee who believes that
an insurance fraud has been or is being committed notifies the
Section of Insurance Fraud, the notification shall toll any
applicable time period in the act of July 22, 1974 (P.L.589,
No.205), known as the Unfair Insurance Practices Act, or any
other law or regulation.
§ 1145. Persons not connected with insurance industry.
Any person having knowledge of or who believes that an
insurance fraud is being or has been committed may send to the
Section of Insurance Fraud a report or information pertinent to
the knowledge and belief.
§ 1146. Refusal to cooperate with investigation.
It is unlawful for any person to resist an arrest authorized
under this chapter or in any manner to interfere either by
abetting or assisting the resistance or otherwise interfere with
Section of Insurance Fraud investigators in the duties imposed
upon them under this chapter or under any other applicable law.
§ 1147. Immunity.
(a) General rule.--In the absence of malice, persons or
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organizations providing information to or otherwise cooperating
with the Section of Insurance Fraud, its employees, agents or
designees, shall not be subject to civil or criminal liability
for supplying the information.
(b) Civil and criminal liability.
(1) In the absence of malice, persons or organizations
shall not be subject to civil or criminal liability for
complying with an order issued by a court of competent
jurisdiction acting in response to a request by the Section
of Insurance Fraud.
(2) In the absence of malice, the Attorney General and
any employee, agent or designee of the Office of Attorney
General and the Section of Insurance Fraud shall not be
subject to civil or criminal liability for the execution of
official activities or duties of the Section of Insurance
Fraud by virtue of the publication of any report or bulletin
related to the official activities or duties of the Section
of Insurance Fraud.
(c) Construction of section.--This section shall not
abrogate or modify any common law or statutory privilege or
immunity enjoyed by any person before December 6, 2002.
SUBCHAPTER D
ANTIFRAUD PLANS AND REPORTING
Sec.
1151. Scope.
1152. Purpose.
1153. Antifraud plans.
1154. Antifraud certification and statistical reporting.
1155. Information sharing.
1156. Rate inclusion or exclusion.
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1157. Fraud investigation resources.
1158. Fraud warning notice.
1159. Reporting of insurance fraud.
1160. Cooperation.
1161. Immunity.
1162. Confidentiality.
§ 1151. Scope.
This subchapter provides for implementation of antifraud
plans by insurers and reporting of insurance fraud by insurance
licensees and their employees. Excess insurers, reinsurers,
surplus lines insurers, self-insurers and nonrisk assuming
health plans shall be exempt from the provisions of this
subchapter.
§ 1152. Purpose.
The purpose of this subchapter is to require the development
of antifraud plans by insurers and reporting of insurance fraud
by all insurers, insurance licensees and their respective
employees and to encourage the prevention, detection,
investigation and reporting of insurance fraud.
§ 1153. Antifraud plans.
(a) Written procedures.--An insurer licensed for and
conducting an insurance business in this Commonwealth shall, by
itself or as part of a group of affiliated insurers, implement
and maintain written procedures to prevent, detect, investigate
and report suspected insurance fraud. The conducting of the
business of insurance shall be considered to include the sale,
solicitation, negotiating or writing of new business, the
renewal of existing business, the collection of premium, the
appointment of producers, the payment of commissions, the
processing of claims or the settlement of claims made against
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policies insuring risks located in or residing in this
Commonwealth.
(b) Contents of procedures.--The written antifraud
procedures of each insurer or group of affiliated insurers shall
at a minimum provide for the:
(1) Education of the insurer's officers, employees,
insurance producers, policyholders and business partners as
to the insurer's Commonwealth antifraud effort and
requirements.
(2) Detection of insurance fraud or other criminal acts
occurring within or affecting the insurer's underwriting,
premium collection, agency, commission payment, policyholder
services, vendor relations, provider relations, claims or
claim payment areas.
(3) Reporting of underwriting and claims information to
insurance industry database systems permitting access to such
information by insurers and law enforcement.
(4) Establishment of fraud investigation units,
employing or contracting with persons qualified by education
and experience to do the insurer's investigation of insurance
fraud.
(5) Reporting of insurance fraud to Federal, State or
local criminal law enforcement authorities for consideration
of investigation and prosecution.
(6) Insurer's cooperation with Federal, State or local
criminal law enforcement agencies in investigation and
prosecution of insurance fraud.
(7) Release to Federal, State or local criminal law
enforcement agencies upon their request all information
relating to reported insurance fraud.
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(8) Pursuit of civil recovery of fraud-related costs and
expenses.
(9) Removal of identified fraud costs from ratemaking
and thereby the insurance premiums charged to insurance
consumers in this Commonwealth.
(c) Filing.--By the first business day of April, an insurer
shall annually file with the commissioner a certification of
antifraud procedures or a certification of no business in this
Commonwealth. Where an insurer participates in an antifraud plan
of a group of affiliated insurers, the parent company of the
group shall make a separate certification for each member of its
group.
(d) Statistical reporting.--By the first business day of
April, an insurer shall file with the commissioner an annual
statistical report of antifraud activity for the preceding
calendar year. Where an insurer participates in an antifraud
plan of a group of affiliated insurers, the parent company of
the group may make a consolidated statistical reporting that
separately identifies each member of its group.
§ 1154. Antifraud certification and statistical reporting.
(a) Forms.--The department shall annually, by December 31,
make available to insurers annual certification and statistical
reporting forms.
(b) Mandatory information.--The annual statistical reporting
of each insurer or group of insurers for the previous calendar
year shall include the following:
(1) The identity of each certifying and reporting
insurer, listing each insurer's full company name, National
Association of Insurance Commissioners' (NAIC) company code
and NAIC group code.
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(2) The name, title, address, telephone and e-mail
address of the individual responsible for the insurer's or
group's Commonwealth insurance fraud matters.
(3) The total dollar amount cost of the insurer's or
group of insurers' Commonwealth antifraud effort.
(4) The name, address, telephone and e-mail address of
the fraud investigators employed or contracted with for
implementation of the insurer's or group of insurers'
Commonwealth antifraud plan.
(5) The total dollar amount of fraud identified only
within reports of insurance fraud made to criminal law
enforcement agencies. Identified fraud shall include:
(i) For application or premium fraud, the dollar
amount of premium which would have been charged by the
insurer had the true nature of the risk been known to the
insurer less the amount charged without knowledge of the
true nature of the risk.
(ii) For attempted application or premium fraud, the
dollar amount of premium which would have been charged by
the insurer had the true nature of the risk been known to
the insurer less the amount that would have been charged
without knowledge of the true nature of the risk.
(iii) For theft of premium, commission or other
funds, the dollar amount of such funds unlawfully
obtained by the fraud suspect.
(iv) For attempted theft of premium, commission or
other funds, the dollar amount which would have been
obtained by the fraud suspect had the theft not been
detected.
(v) For claim fraud where a specific dollar amount
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was demanded by or obtained by a fraud suspect, that
dollar amount.
(vi) For claim fraud where a specific dollar amount
was not demanded or obtained by the fraud suspect, the
policy limits for coverages subject to the claim.
(6) The dollar amount of restitution ordered and the
dollar amount of restitution received from civil and criminal
prosecutions of insurance fraud involving Commonwealth
business.
(7) Summary of investigations:
(i) For false insurance applications made to defraud
an insurer or another person, or attempts thereof, the
number of investigations by line of business opened,
investigations closed and investigations referred to
criminal law enforcement agencies.
(ii) For theft or embezzlement of premium,
commission or other funds of the company, or attempts
thereof, the number of investigations by line of business
opened, investigations closed and investigations referred
to criminal law enforcement agencies.
(iii) For false claims, or attempts thereof, made to
defraud an insurer or other person, the number of
investigations by line of business opened, investigations
closed and investigations referred to criminal law
enforcement agencies.
(8) A summary of the insurer's or group's Commonwealth
fraud concerns, including the identification and proposal of
remedies for any fraud scheme or method detected.
§ 1155. Information sharing.
(a) Duties.--Each insurer or group of affiliated insurers
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subject to the antifraud plan provisions of this subchapter
shall do one of the following:
(1) Obtain and maintain membership in one or more
database systems supporting the insurance industry for the
purpose of indexing, querying, retrieval or sharing of
insurance information with other insurers and law
enforcement.
(2) Maintain its own database of insurance information
upon which other insurers and law enforcement may inquire and
be provided information.
(b) Cooperation.--Each insurer and group of affiliated
insurers subject to the antifraud plan provisions of this
subchapter shall cooperate fully with other insurers and law
enforcement in the exchange of information relating to
investigation of suspected insurance fraud or other criminal
offenses.
§ 1156. Rate inclusion or exclusion.
(a) Prohibition.--An insurer shall not pay and knowingly
pass on identified fraud costs to its policyholders, subscribers
or certificate holders.
(b) Exclusion.--An insurer shall exclude all identified
fraud cost from its ratemaking or the ratemaking of any rating
organization to which it subscribes.
(c) Requirement.--An amount included in ratemaking by an
insurer prior to recognition of the amount as an identified
fraud cost shall have a like amount excluded from the insurer's
current ratemaking.
(d) Cost of antifraud plan.--Any expense or cost incurred by
an insurer in implementing its Commonwealth antifraud plan may
be included in its ratemaking.
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§ 1157. Fraud investigation resources.
(a) Units.--An insurer or group of affiliated insurers shall
maintain one or more Commonwealth fraud investigation units to
implement its Commonwealth antifraud plan.
(b) Qualifications of investigators.--Persons employed or
contracted with by the insurer or group of insurers as fraud
investigators shall be qualified by reason of experience and
training to do fraud awareness training, the investigation of
insurance fraud and the communication of insurance fraud to
criminal law enforcement authorities.
(c) Limitation.--Unless an insurer has obtained the written
approval of the commissioner, persons employed or contracted
with or by the insurer or group of insurers as fraud
investigators shall do only the insurer's fraud investigation.
(d) Continuing education requirement.--Persons employed as
fraud investigators shall have or obtain within one year of
employment a professional fraud investigation designation having
an annual continuing education requirement through an
organization or association offering such designation.
§ 1158. Fraud warning notice.
(a) Notice requirements.--Insurers shall use with all
insurance applications, on the face of each new or renewed
policy or certificate of insurance and on all claim documents
asking or requiring information of a claimant, a fraud warning
notice as required by 18 Pa.C.S. § 4117(k)(1) (relating to
insurance fraud).
(b) Information requested.--An insurance application shall
include any written, electronic or oral information requested by
an insurer of an applicant or enrollee for insurance for issue
or amendment of a policy or certificate of insurance.
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(c) Claims.--An insurance claim includes any written,
electronic or oral information requested of a person seeking
compensation, a service or payment of a benefit under a policy
of insurance.
(d) Satisfaction.--Insurers may satisfy the requirements of
this subchapter, as to oral communications with applicants and
claimants, by reading or providing a copy of the required fraud
warning notice to the applicant or claimant.
§ 1159. Reporting of insurance fraud.
(a) Written report requirement.--All insurers and insurance
licensees and their officers, employees and agents, having
credible evidence that insurance fraud or other criminal offense
involving insurance has occurred, is occurring or will occur,
shall make a written report of that belief to a Federal, State
or local criminal law enforcement agency having jurisdiction
over the matter within 30 days of receiving the evidence.
Reports of insurance fraud or other criminal offenses to a
criminal law enforcement agency by officers, employees or agents
of an insurer or insurance licensee may be made through the
insurer or insurance licensee.
(b) Copy of report.--For any report of insurance fraud or
other criminal offense involving insurance made to a criminal
law enforcement agency, the insurer or insurance licensee shall
concurrently provide a copy of the report to the department.
§ 1160. Cooperation.
An insurer making a report of suspected insurance fraud or
other criminal offense involving insurance to a criminal law
enforcement agency shall, upon the written request of that
agency, release to that agency all documentation or information
relating to alleged crime or crimes and cooperate fully in the
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subsequent production of any requested evidence or testimony
deemed by that agency as necessary for prosecution.
§ 1161. Immunity.
Insurers and insurance licensees and their officers and
employees shall be exempt from both civil and criminal liability
for requesting or providing information required by this
subchapter to other insurers, to other insurance licensees, to
any criminal law enforcement authority, to the authority, to any
grantee or designee of the authority, to the department, to the
National Association of Insurance Commissioners, to any industry
database system utilized by an insurer in compliance with this
chapter or to any other entity authorized by Federal, State or
local law or insurance regulation to receive such information.
§ 1162. Confidentiality.
Antifraud plan certifications and reports filed with the
department and any reports or materials related to such reports
shall be given confidential treatment and are not subject to
subpoena and may not be made public by the department or any
other person. The information shall be exempt from disclosure
under the act of February 14, 2008 (P.L.6, No.3), known as the
Right-to-Know Law.
SUBCHAPTER E
PENALTIES
Sec.
1171. Violations.
1172. Other violations.
§ 1171. Violations.
Insurers violating any provision of this chapter shall, in
addition to any penalty that may be imposed under any other law,
be subject to all of the following:
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(1) Payment of a penalty of $10,000 per violation for
failing to implement or maintain a Commonwealth antifraud
plan, for failing to make or making a false antifraud
certification or annual antifraud statistical report, for
failing to make a required report of insurance fraud to a
criminal law enforcement authority or for failing to remove
identified fraud costs from ratemaking.
(2) Upon notice by the commissioner of violation of this
chapter, payment of a penalty of $500 per day, for each day
of continuing violation.
§ 1172. Other violations.
Insurance licensees other than insurers violating any
provision of this chapter shall, in addition to any penalty that
may be imposed under any other law, be subject to:
(1) payment of a penalty of $5,000 per violation for
failing to make a required report of insurance fraud to a
criminal law enforcement authority; and
(2) upon notice by the commissioner of violation of this
chapter, payment of a penalty of $500 per day, for each day
of continuing violation.
SUBCHAPTER F
MISCELLANEOUS PROVISIONS
Sec.
1181. Other law enforcement authority.
§ 1181. Other law enforcement authority.
This chapter shall not:
(1) Preempt the authority of or relieve the duty of any
other law enforcement agencies to investigate and prosecute
suspected violations of law.
(2) Prevent or prohibit a person from voluntarily
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disclosing any information concerning insurance fraud to any
law enforcement agency other than the Section of Insurance
Fraud.
(3) Limit any of the powers granted to the commissioner
to investigate possible violations of law and to take
appropriate action against wrongdoers.
Section 4. Repeals are as follows:
(1) The General Assembly declares that the repeal under
paragraph (2) is necessary to effectuate the addition of 40
Pa.C.S. Ch. 11, Subchs. A, B, C and F.
(2) Article XI of the act of May 17, 1921 (P.L.789,
No.285), known as The Insurance Department Act of 1921, is
repealed.
Section 5. 40 Pa.C.S. Ch. 11, Subchs. A, B, C and F is a
continuation of Article XI of the act of May 17, 1921 (P.L.789,
No.285), known as The Insurance Department Act of 1921. The
following apply:
(1) Except as otherwise provided under 40 Pa.C.S. Ch.
11, Subchs. A, B, C and F, all activities initiated under
Article XI of The Insurance Department Act of 1921, shall
continue and remain in full force and effect and may be
completed under 40 Pa.C.S. Ch. 11, Subchs. A, B, C and F.
Orders, regulations, rules and decisions which were made
under Article XI of The Insurance Department Act of 1921 and
which are in effect on the effective date of this section
shall remain in full force and effect until revoked, vacated
or modified under 40 Pa.C.S. Ch. 11, Subchs. A, B, C and F.
Contracts, obligations and collective bargaining agreements
entered into under Article XI of The Insurance Department Act
of 1921 are not affected nor impaired by the repeal of
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Article XI of The Insurance Department Act of 1921.
(2) Except as set forth in paragraph (3), any difference
in language between 40 Pa.C.S. Ch. 11, Subchs. A, B, C and F
and the Article XI of The Insurance Department Act of 1921 is
intended only to conform to the style of the Pennsylvania
Consolidated Statutes and is not intended to change or affect
the legislative intent, judicial construction or
administration and implementation of Article XI of The
Insurance Department Act of 1921.
(3) Paragraph (2) does not apply to the addition of the
following:
(i) 40 Pa.C.S. § 1102.
(ii) 40 Pa.C.S. § 1103, except for the definition of
"authority."
(iii) 40 Pa.C.S. § 1123(c) and (d).
(iv) 40 Pa.C.S. § 1142(4).
(v) 40 Pa.C.S. § 1144.
Section 6. This act shall take effect in 60 days.
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