Senate Bill No. 507
(By Senator Jenkins)
____________
[Introduced February 11, 2004; referred to the Committee on the
Judiciary; and then to the Committee on Finance.]
____________
A BILL to amend the code of West Virginia, 1931, as amended, by
adding thereto a new section, designated §33-22-2a
; to amend
said code by adding thereto a new section, designated
§33-23-2a
; to amend said code by adding thereto a new section,
designated §33-24-4a
; to amend said code by adding thereto a
new section, designated §33-25-6a
; to amend said code by
adding thereto a new section, designated §33-25A-24a
; and to
amend and reenact §33-41-1,
§33-41-2,
§33-41-3,
§33-41-4,
§33-41-5,
§33-41-6,
§33-41-7,
§33-41-8,
§33-41-9,
§33-41-10,
§33-41-11,
§33-41-12,
§33-41-13 and
§33-41-14
, all relating to
insurance fraud; subjecting farmers mutual insurance
companies, fraternal benefit societies, certain hospital,
medical, dental and health services corporations, health care corporations and health maintenance organizations to insurance
fraud provisions; defining terms; establishing an insurance
fraud unit within the division of insurance; authorizing the
promulgation of rules and requiring the filing of annual
reports; establishing powers and duties of the unit; outlining
investigative powers and procedures; providing confidentiality
and immunity of the unit operations; prohibiting insurance
fraud; establishing criminal penalties and fines; authorizing
prosecution for fraudulent acts; authorizing special
prosecutors; specifying duties of insurers; authorizing
funding by an assessment of insurers; establishing the West
Virginia insurance fraud prevention act; defining legislative
intent and terms; creating misdemeanor and felony offenses for
the commission of fraudulent acts; and creating penalties,
exceptions and immunities.
Be it enacted by the Legislature of West Virginia:
That the code of West Virginia, 1931, as amended, be amended
by adding thereto a new section, designated §33-22-2a
; that said
code be amended by adding thereto a new section, designated
§33-23-2a;
that said code be amended by adding thereto a new
section, designated §33-24-2a
; that said code be amended by adding
thereto a new section, designated §33-25-6a
;
that said code be amended by adding thereto a new section, designated §33-25A-24a
;
and to amend and reenact §33-41-1,
§33-41-2,
§33-41-3,
§33-41-4,
§33-41-5,
§33-41-6,
§33-41-7,
§33-41-8,
§33-41-9,
§33-41-10,
§33-41-11,
§33-41-12,
§33-41-13 and
§33-41-14
, all to read as
follows:
ARTICLE 22. FARMERS' MUTUAL FIRE INSURANCE COMPANIES.
§33-22-2a. Applicability of Insurance Fraud Prevention Act.
Notwithstanding any provision of this code to the contrary,
article forty-one, chapter thirty-three is applicable to farmers?
mutual fire insurance companies.
ARTICLE 23. FRATERNAL BENEFIT SOCIETIES.
§33-23-2a. Applicability of Insurance Fraud Prevention Act.
Notwithstanding any provision of this code to the contrary,
article forty-one, chapter thirty-three is applicable to fraternal
benefit societies.
ARTICLE 24. HOSPITAL SERVICE CORPORATIONS, MEDICAL SERVICE
CORPORATIONS, DENTAL SERVICE CORPOR4TIONS AND
HEALTH SERVICE CORPORATIONS.
§33-24-4a. Applicability of Insurance Fraud Prevention Act.
Notwithstanding any provision of this code to the contrary,
article forty-one, chapter thirty-three is applicable to hospital
service corporations, medical service corporations, dental service corporations and health service corporations.
ARTICLE 25. HEALTH CARE CORPORATIONS.
§33-25-6a. Applicability of Insurance Fraud Prevention Act.
Notwithstanding any provision of this code to the contrary,
article forty-one, chapter thirty-three is applicable to health
care corporations.
ARTICLE 25A. HEALTH MAINTENANCE ORGANIZATION ACT.
§33-25A-24a. Applicability of Insurance Fraud Prevention Act.
Notwithstanding any provision of this code to the contrary,
article forty-one, chapter thirty-three is applicable to health
maintenance organizations.
ARTICLE 41. INSURANCE FRAUD PREVENTION ACT.
§33-41-1. Legislative purpose and findings.
This article may be cited as the "West Virginia Insurance
Fraud Prevention Act." The West Virginia Legislature finds that
the business of insurance involves many transactions that have
potential for fraud, abuse and other illegal activities. This
article is intended to permit full utilization of the expertise of
the commissioner to investigate and discover fraudulent insurance
acts more effectively, halt fraudulent insurance acts and assist
and receive assistance from state, local and federal
law-enforcement and regulatory agencies in enforcing laws prohibiting fraudulent insurance acts.
§33-41-2. Definitions.
As used in this article:
(a) "Benefits" mean money payments, goods, services or any
other thing of value.
(b) "Business of insurance" means the writing of insurance or
the reinsuring of risks by an insurer, including acts necessary or
incidental to writing insurance or reinsuring risks and the
activities of persons who act as or are officers, directors, agents
or employees of insurers, or who are other persons authorized to
act on their behalf.
(c) "Claim" means an application or request for payment or
benefits provided under an insurance policy.
(d) "Commissioner" means the commissioner of insurance, the
commissioner?s designees or the office of the insurance
commissioner.
(e) "Financial loss" includes, but is not limited to, loss of
earnings, out-of-pocket and other expenses, repair and replacement
costs and claims payments made by any insurer, provider or person.
(f) "Fraudulent insurance act" means an act or omission
committed by a person who, knowingly and with intent to injure,
defraud, or deceive any person commits, or conceals any material information concerning, one or more of the following:
(1) Presenting, causing to be presented or preparing with
knowledge or belief that it will be presented to or by an insurer,
a reinsurer, broker or its agent, false information as part of, in
support of or concerning a fact material to one or more of the
following:
(A) An application for the issuance or renewal of an insurance
policy or reinsurance contract;
(B) The rating of an insurance policy or reinsurance contract;
(C) A claim for payment or benefit pursuant to an insurance
policy or reinsurance contract;
(D) Premiums paid on an insurance policy or reinsurance
contract;
(E) Payments made in accordance with the terms of an insurance
policy or reinsurance contract;
(F) A document filed with the commissioner or the chief
insurance regulatory official of another jurisdiction;
(G) The financial condition of an insurer or reinsurer;
(H) The formation, acquisition, merger, reconsolidation,
dissolution or withdrawal from one or more lines of insurance or
reinsurance in all or part of this state by an insurer or
reinsurer;
(I) The issuance of written evidence of insurance; or
(J) The reinstatement of an insurance policy;
(2) Solicitation or acceptance of new or renewal insurance
risks on behalf of an insurer, reinsurer or other person engaged in
the business of insurance by a person who knows or should know that
the insurer or other person responsible for the risk is insolvent
at the time of the transaction;
(3) Removal, concealment, alteration or destruction of the
assets or records of an insurer, reinsurer or other person engaged
in the business of insurance;
(4) Willful embezzlement, abstracting, purloining or
conversion of moneys, funds, premiums, credits or other property of
an insurer, reinsurer or person engaged in the business of
insurance;
(5) Transaction of the business of insurance in violation of
laws requiring a license, certificate of authority or other legal
authority for the transaction of the business of insurance;
(6) Soliciting, offering or receiving any remuneration,
including any kickback, rebate or bribe, directly or indirectly,
with the intent of causing an expenditure of moneys from any person
which would not otherwise be payable under an applicable insurance
policy; or
(7) Attempting to commit, aiding or abetting in the commission
of; or conspiracy to commit the acts or omissions specified in this
subsection.
(g) "Health care provider" means any person, firm or
corporation rendering health care services or goods.
(h) "Insurance" means a contract or arrangement in which one
undertakes to:
(1) Pay or indemnity another as to loss from certain
contingencies called "risks," including through reinsurance;
(2) Pay or grant a specified amount or determinable benefit to
another in connection with ascertainable risk contingencies;
(3) Pay an annuity to another; or
(4) Act as surety.
(i) "Insurer" means a person entering into arrangements or
contracts of insurance or reinsurance. Insurer includes, but is
not limited to, any domestic or foreign stock company, mutual
company, mutual protective association, farmers' mutual fire
companies, fraternal benefit society, reciprocal or interinsurance
exchange, nonprofit medical care corporation, nonprofit health care
corporation, nonprofit hospital service association, nonprofit
dental care corporation, health maintenance organization, captive
insurance company, risk retention group or other insurer, regardless of the type of coverage written, benefits provided or
guarantees made by each. A person is an insurer regardless of
whether the person is acting in violation of laws requiring a
certificate of authority or regardless of whether the person denies
being an insurer.
(j) "Insurance representative" means any person, firm or
corporation acting on an insurer?s behalf, including, but not
limited to, any agent, adjuster, officer, director, employee or
investigator.
(k) "NAIC" means the national association of insurance
commissioners.
(l) "Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a joint stock
company, a trust, trustees, an unincorporated organization, or any
similar business entity or any combination of the foregoing.
"Person" also includes hospital service corporations, medical
service corporations and dental service corporations as defined in
article twenty-four of this chapter, health care corporations as
defined in article twenty-five of this chapter, or a health
maintenance organization organized pursuant to article
twenty-five-a of this chapter.
(m) "Policy" means an individual or group policy, group certificate, contract or arrangement of insurance or reinsurance
affecting the rights of a resident of this state or bearing a
reasonable relation to this state, regardless of whether delivered
or issued for delivery in this state.
(n) "Reinsurance" means a contract, binder of coverage
(including placement slip) or arrangement under which an insurer
procures insurance for itself in another insurer as to all or part
of an insurance risk of the originating insurer.
(o) "Statement" means any written or oral representation made
to any person, insurer or authorized agency. A statement includes,
but is not limited to, any oral report or representation; any
insurance application, policy, notice or statement; any proof of
loss, bill of lading, receipt for payment, invoice, account,
estimate of property damages, or other evidence of loss, injury or
expense; any bill for services, diagnosis, prescription, hospital
or doctor record, x-ray, test result or other evidence of
treatment, services or expense; and any application, report,
actuarial study, rate request or other document submitted or
required to be submitted to any authorized agency. A statement
also includes any of the above recorded by electronic or other
media.
(p) "Unit" means the insurance fraud unit established pursuant to the provisions of this article acting collectively or by its
duly authorized representatives.
§33-41-3. Fraudulent insurance acts, interference and
participation of convicted felons prohibited.
(a) A person may not commit a fraudulent insurance act.
(b) A person may not knowingly or intentionally interfere with
the enforcement of the provisions of this article or investigations
of suspected or actual violations of this article.
(c)(l) A person convicted of a felony involving dishonesty or
breach of trust may not participate in the business of insurance.
(2) A person in the business of insurance may not knowingly or
intentionally permit a person convicted of a felony involving
dishonesty or breach of trust to participate in the business of
insurance.
§33-41-4. Fraud warning required.
(a) Claim forms and applications for insurance, regardless of
the form of transmission, shall contain the following statement or
a substantially similar statement:
"Any person who knowingly presents a false or fraudulent claim
for payment of a loss or benefit or knowingly presents false
information in an application for insurance is guilty of a crime
and may be subject to fines and confinement in prison."
(b) The lack of a statement as required in subsection (a) of
this section does not constitute a defense in any prosecution for
a fraudulent insurance act.
(c) Policies issued by nonadmitted insurers pursuant to
article twelve-c of this chapter shall contain a statement
disclosing the status of the insurer to do business in the state
where the policy is delivered or issued for delivery or the state
where coverage is in force. The requirement of this subsection may
be satisfied by a disclosure specifically required by section five,
article twelve-c of this chapter; section nine, article thirty-two
of this chapter; and section eighteen, article thirty-two for this
chapter.
(d) The requirements of this section shall not apply to
reinsurance claim forms or reinsurance applications.
§33-41-5. Investigative and prosecution authority of the
commissioner.
(a) The commissioner may investigate suspected fraudulent
insurance acts and persons engaged in the business of insurance.
(b) The commissioner may employ attorneys to assist in the
prosecution of violations of this article. If the commissioner
finds that the prosecuting attorney of the county in which the
violation occurred is, for some reason, unable or unwilling to take appropriate action, the commissioner may petition the appropriate
circuit court for the appointment of the commissioner?s attorney as
a special prosecutor. An attorney appointed as a special
prosecutor shall have the same authority as a county prosecutor to
investigate and prosecute criminal violations of this article.
(c) Funds allocated for insurance fraud prevention may be
dispersed by the commissioner, at his or her discretion, to
prosecution authorities for the purpose of insurance fraud
enforcement as identified in this article.
(d) The commissioner may negotiate with an attorney
representing the state to prosecute violations of the article, to
provide technical and litigation assistance to the Department of
Insurance, and to allocate resources for the purpose of insurance
fraud prosecution as identified in this article.
(e) It shall be the duty of the West Virginia state police,
municipal police departments and the sheriffs of the counties in
West Virginia to assist fraud investigators in making arrests and
the duty of the prosecuting attorneys of the several counties to
assist in the prosecution of all violations of this chapter and of
other chapters governing the regulatory authority of the office of
the insurance commissioner.
(f) The commissioner is hereby authorized to apply for and the court to grant a temporary or permanent injunction, to be issued
without bond, restraining any person from violating or continuing
to violate any provision of this article or rule promulgated
thereunder notwithstanding the existence of other remedies at law.
§33-41-6. Mandatory reporting of fraudulent insurance acts.
(a) A person engaged in the business of insurance having
knowledge or a reasonable belief that a fraudulent insurance act is
being, will be or has been committed shall provide to the
commissioner the information required by, and in a manner
prescribed by, the commissioner.
(b) Any other person having knowledge or a reasonable belief
that a fraudulent insurance act is being, will be or has been
committed may provide to the commissioner the information required
by, and in a manner prescribed by, the commissioner.
§33-41-7. Immunity from liability.
(a) There shall be no civil liability imposed on and no cause
of action shall arise from a person furnishing information
concerning suspected, anticipated or completed fraudulent insurance
acts, if the information is provided to or received from:
(1) The commissioner or the commissioner?s employees, agents
or representatives;
(2) Federal, state, or local law enforcement or regulatory officials or their employees, agents or representatives;
(3) A person involved in the prevention and detection of
fraudulent insurance acts or that person?s agents, employees or
representatives; or
(4) The national association of insurance commissioners or its
employees, agents or representatives.
(b) Subsection (a) of this section shall not apply to
statements made with actual malice. In an action brought against
a person for filing a report or furnishing other information
concerning a fraudulent insurance act, the party bringing the
action shall plead specifically any allegation that subsection (a)
of this section does not apply because the person filing the report
or furnishing the information did so with actual malice.
(c) This section does not abrogate or modify common law or
statutory privileges or immunities.
§33-41-8. Confidentiality.
(a) Documents, materials or other information in the
possession or control of the office of the insurance commissioner
that are provided pursuant to section six of this article or
obtained by the commissioner in an investigation of suspected or
actual fraudulent insurance acts shall be confidential by law and
privileged, may not be subject to article one, chapter twenty-nine-b of the West Virginia code, 1931, as amended, are not
open to public inspection, may not be subject to subpoena, and may
not be subject to discovery or admissible in evidence in any
private civil action. However, the commissioner is authorized to
use the documents, materials or other information in the
furtherance of any regulatory or legal action brought as a part of
the commissioner?s official duties. The commissioner is authorized
to use the documents, materials or other information if they are
required for evidence in criminal proceedings or other action by
the state.
(b) Neither the commissioner nor any person who receives
documents, materials or other information while acting under the
authority of the commissioner may be permitted or required to
testify in any private civil action concerning any confidential
documents, materials or information subject to subsection (a) of
this section.
(c) In order to assist in the performance of the
commissioner?s duties, the commissioner:
(1) May share documents, materials or other information,
including the confidential and privileged documents, materials or
information subject to subsection (a) of this section with other
state, federal and international regulatory agencies, with the national association of insurance commissioners and its affiliates
and subsidiaries, and with local, state, federal and international
law-enforcement authorities, provided that the recipient agrees to
maintain the confidentiality and privileged status of the document,
material or other information;
(2) May receive documents, materials or information, including
otherwise confidential and privileged documents, materials or
information, from the national association of insurance
commissioners and its affiliates and subsidiaries, and from
regulatory and law-enforcement officials of other foreign or
domestic jurisdictions, and shall maintain as confidential or
privileged any document, material or information received with
notice or the understanding that it is confidential or privileged
under the laws of the jurisdiction that is the source of the
document, material or information;
(3) May enter into agreements governing sharing and use of
information including the furtherance of any regulatory or legal
action brought as part of the recipient?s official duties; and
(d) No waiver of any applicable privilege or claim of
confidentiality in the documents, materials or information shall
occur as a result of disclosure to the commissioner under this
section or as a result of sharing as authorized in subsection (c) of this section.
§33-41-9. Creation and purpose of the insurance fraud unit.
(a) The West Virginia insurance fraud investigation unit is
established within the office of the insurance commissioner. The
director of the insurance fraud investigation unit shall be a
full-time position and shall be appointed by the commissioner. The
commissioner shall provide office space, equipment, supplies,
clerical and other staff necessary for the insurance fraud
investigation unit to carry out its duties and responsibilities
under this article. The investigative personnel shall be qualified
by training and experience to perform the duties of their
positions.
(b) The fraud unit may:
(1) Initiate independent inquiries and conduct independent
investigations when the insurance fraud unit has cause to believe
that a fraudulent insurance act may be, is being or has been
committed;
(2) Review reports or complaints of alleged fraudulent
insurance activities from federal, state and local law-enforcement
and regulatory agencies, persons engaged in the business of
insurance, and the public to determine whether the reports require
further investigation and to conduct these investigations; and
(3) Conduct independent examinations of alleged fraudulent
insurance acts and undertake independent studies to determine the
extent of fraudulent insurance acts.
(c) The insurance fraud investigation unit shall have the
authority to:
(1) To employ and train personnel to achieve the purposes of
this article and to employ legal counsel, investigators, auditors
and clerical support personnel and other personnel as the
commissioner determines necessary from time to time to accomplish
the purposes herein;
(2) Inspect, copy or collect records and evidence;
(3) Serve subpoenas;
(4) Administer oaths and affirmations;
(5) Share records and evidence with federal, state or local
law-enforcement or regulatory agencies;
(6) Make criminal referrals to the county prosecuting
authorities; and
(7) Conduct investigations outside of this state. If the
information the insurance fraud unit seeks to obtain is located
outside this state, the person from whom the information is sought
may make the information available to the insurance fraud unit to
examine at the place where the information is located. The insurance fraud unit may designate representatives, including
officials of the state in which the matter is located, to inspect
the information on behalf of the insurance fraud unit, and the
insurance fraud unit may respond to similar requests from officials
of other states.
(d) On or before the first day of each regular session of the
Legislature, the commissioner shall file with the governor, the
clerk of the Senate and the clerk of the House of Delegates a
report detailing the finalized actions taken by the insurance fraud
unit in the preceding fiscal year.
§33-41-10. Other law-enforcement or regulatory authority.
This article shall not:
(a) Preempt the authority or relieve the duty of other
law-enforcement or regulatory agencies to investigate, examine and
prosecute suspected violations of law;
(b) Prevent or prohibit a person from disclosing voluntarily
information concerning insurance fraud to a law-enforcement or
regulatory agency other than the insurance fraud unit; or
(c) Limit the powers granted elsewhere by the laws of this
state to the commissioner or the insurance fraud unit to
investigate and examine possible violations of law and to take
appropriate action against wrongdoers.
§33-41-11. Fraudulent claims investigation unit of insurers.
(a) Every insurer admitted to do business in the state shall
maintain effective procedures and resources to deter and
investigate fraudulent insurance acts prohibited by this article,
including a unit that will investigate suspected fraudulent
insurance acts. For the purpose of this section, "insurer" does
not include reinsurers or reinsurance as defined in section eleven,
article one of this chapter.
(b) Insurers may maintain the unit required by subsection (a)
of this section, using its employees or by contracting with others
for that purpose.
(c) Insurers shall establish the unit required by this section
no later than the first day of July, two thousand four.
(d) The unit may include the assignment of fraud investigation
to employees whose principal responsibilities are the investigation
and disposition of claims. If an insurer creates a distinct unit,
hires additional employees, or contracts with another entity to
fulfill the requirements of this article, the additional cost
incurred shall be included as an administrative expense.
(e) Insurers shall make personnel involved in investigating
insurance fraud and any files relating to insurance fraud
investigation available to the commissioner, local prosecuting officials, special prosecuting attorneys, or other law-enforcement
agencies as needed in order to further the investigation and
prosecution of insurance fraud. Information supplied by an insurer
and contained in such files shall upon receipt become part of the
investigative file and subject to the provisions of section eight
of this article. The insurer and its employees and agents shall be
entitled to immunity as provided in section seven of this article.
(f) Any expenses incurred by insurers as a result of this
article shall be defrayed by such insurers from their own funds and
shall not be borne by the state or by the special insurance fraud
fund.
§33-41-12. Rules.
The insurance commissioner may, in accordance with article
three, chapter twenty-nine-a of this code, promulgate reasonable
rules as are necessary or proper to carry out the purposes of this
article.
§33-41-13. Penalties.
A person who violates this article is subject to the
following:
(a) Suspension or revocation of license or certificate of
authority, civil penalties of up to ten thousand dollars per
violation, or both. Suspension or revocation of license or certificate of authority and imposition of civil penalties shall be
pursuant to an order of the commissioner issued under section
thirteen, article two of this chapter. The commissioner?s order
may require a person found to be in violation of this article to
make restitution to persons aggrieved by violations of this
article; or
(b) (1) If a person commits a fraudulent insurance act of the
value of one thousand dollars or more, such person is guilty of a
felony and, upon conviction thereof, shall be imprisoned in the
state correctional facility not less than one nor more than ten
years, and shall be fined not more than ten thousand dollars.
(2) If a person commits a fraudulent insurance act of the
value of less than one thousand dollars, such person is guilty of
a misdemeanor and, upon conviction thereof, shall be confined in a
county or regional jail for a term not to exceed one year or fined
not to exceed two thousand five hundred dollars, or both, in the
discretion of the court.
(c) A person convicted of a violation of section three of this
article shall be ordered to pay restitution to persons aggrieved by
the violation of this article. Restitution shall be ordered in
addition to a fine or imprisonment, but not in lieu of a fine or
imprisonment; and
(d) A person convicted of a felony violation of this article
pursuant to subsection (b) of this section shall be disqualified
from engaging in the business of insurance.
(e) Any money or other property that is awarded to the
insurance fraud investigation unit as costs of investigation, shall
be credited to the special revenue fund established in section
thirteen, article three of this chapter.
§33-41-14. Violations of article; penalties for misdemeanor.
(a) It is a misdemeanor for any person to violate any of the
provisions of this article unless such violation is by this chapter
or other law of this state declared to be a felony.
(b) Every person convicted of a misdemeanor for a violation of
any of the provisions of this article for which another penalty is
not provided shall for a first conviction thereof be punished by a
fine of not more than one hundred dollars or by imprisonment for
not more than ten days; for a second such conviction within one
year thereafter such person shall be punished by a fine of not more
than two hundred dollars or by imprisonment for not more than
twenty days or by both such fine and imprisonment; upon a third or
subsequent conviction such person shall be punished by a fine of
not more than five hundred dollars or by imprisonment for not more
than six months or both such fine and imprisonment.
NOTE: The purpose of this bill is to include farmers' mutual
insurance companies, fraternal benefit societies, certain hospital,
medical, dental and health services corporations, health care
corporations, and health maintenance organizations to insurance
fraud provisions of the code. The bill establishes an insurance
fraud unit within the division of insurance and gives it authority
to promulgate rules, and require the filing of annual reports. The
bill also sets forth powers and duties of the fraud unit including
investigative powers and procedures, confidentiality and immunity
for the unit's operations.
Under the bill, insurance fraud is prohibited, criminal
penalties and fines are established and special prosecutors are
provided to prosecute violations.
§33-22-2a
, §33-23-2a
, §33-24-4a
, §33-25-6a
and §33-25A-24a
are
new and §33-41-1 et seq. has been completely rewritten
; therefore,
strike-throughs and underscoring have been omitted.