Senate Bill No. 75
(By Senators Dugan, Kimble and Buckalew)
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[Introduced February 20, 1997; referred to the Committee
on the Judiciary; and then to the Committee on Finance.]
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A BILL to amend and reenact section two, article twenty-two,
chapter thirty-three of the code of West Virginia, one
thousand nine hundred thirty-one, as amended; to amend and
reenact section four, article twenty-four of said chapter;
to amend and reenact section six, article twenty-five of
said chapter; to amend and reenact section twenty-four,
article twenty-five-a of said chapter; to further amend said
chapter by adding thereto a new article, designated article
forty-one; and to amend chapter sixty-one of said code by
adding thereto a new article, designated article five-b, all
relating to insurance fraud; subjecting farmers' mutual
insurance companies, 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; outlining
investigative powers and procedures; providing
confidentiality and immunity; prohibiting insurance fraud;
establishing penalties and fines; authorizing prosecution
for fraudulent acts; authorizing special prosecutors;
specifying duties of insurers; authorizing funding by an
assessment of insurers and insurance representatives;
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 section two, article twenty-two, chapter thirty-three
of the code of West Virginia, one thousand nine hundred
thirty-one, as amended, be amended and reenacted; that section
four, article twenty-four of said chapter be amended and
reenacted; that section six, article twenty-five of said chapter
be amended and reenacted; that section twenty-four, article twenty-five-a of said chapter be amended and reenacted; that said
chapter be further amended by adding thereto a new article,
designated article forty-one; and that chapter sixty-one of said
code be amended by adding thereto a new article, designated
article five-b, all to read as follows:
CHAPTER 33. INSURANCE.
ARTICLE 22. FARMERS' MUTUAL FIRE INSURANCE COMPANIES.
§33-22-2. Applicability of other provisions.
Each company to the same extent the provisions are
applicable to domestic mutual insurers shall be governed by and
be subject to the following articles of this chapter: Article
one (definitions); article two (insurance commissioner); article
four (general provisions) except that section sixteen of article
four may not be applicable thereto; article seven (assets and
liabilities); article ten (rehabilitation and liquidation) except
that under the provisions of section thirty-two of said article
ten assessments may not be levied against any former member of a
farmers' mutual fire insurance company who is no longer a member
of the company at the time the order to show cause was issued;
article eleven (unfair trade practices); article twelve (agents,
brokers and solicitors) except that the agent's license fee shall
be five dollars; article twenty-six (West Virginia Insurance
Guaranty Association Act); article twenty-seven (insurance holding company systems); article thirty (mine subsidence
insurance) except that under the provisions of section six,
article thirty, a farmers' mutual insurance company shall have
the option of offering mine subsidence coverage to all of its
policyholders but may not be required to do so; article thirty- three (annual audited financial report); article thirty-four
(administrative supervision); article thirty-four-a (standards
and commissioner's authority for companies deemed to be in
hazardous financial condition); article thirty-five (criminal
sanctions for failure to report impairment); article thirty-six
(business transacted with producer-controlled property/casualty
insurer); article thirty-seven (managing general agents); article
thirty-nine (disclosure of material transactions);
and article
forty (risk based capital for insurers);
and article forty-one
(insurance fraud unit); but only to the extent these provisions
are not inconsistent with the provisions of this article.
ARTICLE 24. HOSPITAL SERVICE CORPORATIONS, MEDICAL SERVICE
CORPORATIONS, DENTAL SERVICE CORPORATIONS AND
HEALTH SERVICE CORPORATIONS.
§33-24-4. Exemptions; applicability of insurance laws.
Every corporation defined in section two of this article is
hereby declared to be a scientific, nonprofit institution and
exempt from the payment of all property and other taxes. Every corporation, to the same extent the provisions are applicable to
insurers transacting similar kinds of insurance and not
inconsistent with the provisions of this article, shall be
governed by and be subject to the provisions as hereinbelow
indicated, of the following articles of this chapter: Article
two (insurance commissioner), except that, under section nine of
said article, examinations shall be conducted at least once every
four years; article four (general provisions), except that
section sixteen of said article may not be applicable thereto;
section thirty-four article six (fee for form and rate filing);
article six-c (guaranteed loss ratio); article seven (assets and
liabilities); article eleven (unfair trade practices); article
twelve (agents, brokers and solicitors), except that the agent's
license fee shall be five dollars; section fourteen, article
fifteen (individual accident and sickness insurance); section
sixteen, article fifteen (coverage of children); section
eighteen, article fifteen (equal treatment of state agency);
section nineteen, article fifteen (coordination of benefits with
medicaid); article fifteen-a (long-term care insurance); article
fifteen-c (diabetes insurance); section three, article sixteen
(required policy provisions); section three-a article sixteen
(mental illness); section three-c, article sixteen (group
accident and sickness insurance); section three-d, article
sixteen (medicare supplement insurance); section three-f, article sixteen (treatment of temporomandibular joint disorder
and craniomandibular disorder); section eleven, article sixteen
(coverage of children); section thirteen, article sixteen (equal
treatment of state agency); section fourteen, article sixteen
(coordination of benefits with medicaid); section sixteen,
article sixteen (diabetes insurance); article sixteen-a,(group
health insurance conversion); article sixteen-c,(small employer
group policies); article sixteen-d (marketing and rate practices
for small employers); article twenty-six-a,(West Virginia life
and health insurance guaranty association act), after the first
day of October, one thousand nine hundred ninety-one; article
twenty-seven (insurance holding company systems); article
twenty-eight (individual accident and sickness insurance minimum
standards); article thirty-three, annual audited financial
report); article thirty-four, (administrative supervision);
article thirty-four-a, (standards and commissioner's authority
for companies deemed to be in hazardous financial condition);
article thirty-five, (criminal sanctions for failure to report
impairment);
and article thirty-seven (managing general agents);
and article forty-one (insurance fraud unit); and no other
provision of this chapter may apply to these corporations unless
specifically made applicable by the provisions of this article.
If, however, the corporation is converted into a corporation
organized for a pecuniary profit or if it transacts business without having obtained a license as required by section five of
this article, it shall thereupon forfeit its right to these
exemptions.
ARTICLE 25. HEALTH CARE CORPORATIONS.
§33-25-6. Supervision and regulation by insurance commissioner;
exemption from insurance laws.
Corporations organized under this article are subject to
supervision and regulation of the insurance commissioner. The
corporations organized under this article, to the same extent
these provisions are applicable to insurers transacting similar
kinds of insurance and not inconsistent with the provisions of
this article,
shall be are governed by and be subject to the
provisions as hereinbelow indicated of the following articles of
this chapter: Article four (general provisions), except that
section sixteen of said article
shall may not be applicable
thereto; article six-c (guaranteed loss ratio); article seven
(assets and liabilities); article eight (investments); article
ten (rehabilitation and liquidation); section fourteen, article
fifteen (individual accident and sickness insurance); section
sixteen, article fifteen (coverage of children); section
eighteen, article fifteen (equal treatment of state agency);
section nineteen, article fifteen (coordination of benefits with
medicaid); article fifteen-c (diabetes insurance); section three, article sixteen (required policy provisions); section eleven,
article sixteen (coverage of children); section thirteen, article
sixteen (equal treatment of state agency); section fourteen,
article sixteen (coordination of benefits with medicaid); section
sixteen, article sixteen (diabetes insurance); article sixteen-a
(health insurance conversion); article sixteen-c (small employer
group policies); article sixteen-d (marketing and rate practices
for small employers); article twenty-six-a (West Virginia life
and health insurance guaranty association act); article
twenty-seven (insurance holding company systems); article
thirty-three (annual audited financial report); article
thirty-four-a (standards and commissioner's authority for
companies
deemed determined to be in hazardous financial
condition); article thirty-five (criminal sanctions for failure
to report impairment);
and article thirty-seven (managing general
agents);
and article forty-one (insurance fraud unit); and no
other provision of this chapter may apply to these corporations
unless specifically made applicable by the provisions of this
article.
ARTICLE 25A. HEALTH MAINTENANCE ORGANIZATION ACT.
§33-25A-24. Statutory construction and relationship to other
laws.
(a) Except as otherwise provided in this article, provisions of the insurance laws and provisions of hospital or medical
service corporation laws are not applicable to any health
maintenance organization granted a certificate of authority under
this article. The provisions of this article
shall may not apply
to an insurer or hospital or medical service corporation licensed
and regulated pursuant to the insurance laws or the hospital or
medical service corporation laws of this state except with
respect to its health maintenance corporation activities
authorized and regulated pursuant to this article. The
provisions of this article
shall may not apply to an entity
properly licensed by a reciprocal state to provide health care
services to employer groups, where residents of West Virginia are
members of an employer group, and the employer group contract is
entered into in the reciprocal state. For purposes of this
subsection, a "reciprocal state" means a state which physically
borders West Virginia and which has subscriber or enrollee
hold
that holds harmless requirements substantially similar to those
set out in section seven-a of this article.
(b) Factually accurate advertising or solicitation regarding
the range of services provided, the premiums and copayments
charged, the sites of services and hours of operation, and any
other quantifiable, nonprofessional aspects of its operation by
a health maintenance organization granted a certificate of
authority, or its representative
shall may not be construed to violate any provision of law relating to solicitation or
advertising by health professions:
Provided, That nothing
contained in this subsection shall be construed as authorizing
any solicitation or advertising which identifies or refers to any
individual provider or makes any qualitative judgment concerning
any provider.
(c) Any health maintenance organization authorized under this
article
shall may not be considered to be practicing medicine and
is exempt from the provisions of chapter thirty of this code,
relating to the practice of medicine.
(d) The provisions of section fifteen article four (general
provisions); section seventeen, article six (noncomplying
forms); article six-c (guaranteed loss ratio); article seven
(assets and liabilities); article eight (investments); article
nine (administration of deposits); article twelve (agents,
brokers, solicitors and excess line); section fourteen, article
fifteen (individual accident and sickness insurance); section
sixteen, article fifteen (coverage of children); section
eighteen, article fifteen (equal treatment of state agency);
section nineteen, article fifteen (coordination of benefits with
medicaid); article fifteen-b(uniform health care administration
act); article fifteen-c (diabetes insurance); section three ,
article sixteen (required policy provisions); section three-f, article sixteen (treatment of temporomandibular disorder and
craniomandibular disorder); section eleven, article sixteen
(coverage of children); section thirteen, article sixteen (equal
treatment of state agency); section fourteen, article sixteen
(coordination of benefits with medicaid); section sixteen,
article sixteen (diabetes insurance); article sixteen-a (group
health insurance conversion); article sixteen-c (small employer
group policies); article sixteen-d (marketing and rate practices
for small employers); article twenty-seven (insurance holding
company systems); article thirty-four-a (standards and
commissioner's authority for companies deemed to be in hazardous
financial condition); article thirty-five (criminal sanctions for
failure to report impairment); article thirty-seven (managing
general agents);
and article thirty-nine (disclosure of material
transactions);
and article forty-one (insurance fraud unit) shall
be applicable to any health maintenance organization granted a
certificate of authority under this article. In circumstances
where the code provisions made applicable to health maintenance
organizations by this section refer to the "insurer", the
"corporation" or words of similar import, the language shall be
construed to include health maintenance organizations.
(e) Any long-term care insurance policy delivered or issued
for delivery in this state by a health maintenance organization
shall comply with the provisions of article fifteen-a of this chapter.
(f) A health maintenance organization granted a certificate of
authority under this article shall be exempt from paying
municipal business and occupation taxes on gross income it
receives from its enrollees, or from their employers or others on
their behalf, for health care items or services provided directly
or indirectly by the health maintenance organization. This
exemption applies to all taxable years through the thirty-first
day of December, one thousand nine hundred ninety-six. The
commissioner and the tax department shall conduct a study of the
appropriations of imposition of the municipal business and
occupation tax or other tax on health maintenance organizations,
and shall report to the regular session of the Legislature, one
thousand nine hundred ninety-seven, on their findings,
conclusions and recommendations, together with drafts of any
legislation necessary to effectuate their recommendations.
ARTICLE 41. INSURANCE FRAUD UNIT.
§33-41-1. Legislative purpose and findings.
It is the finding of the Legislature that the business of
insurance involves many transactions that have potential for
fraud, abuse and other illegal activities. It is the purpose of
this article to permit full utilization of the expertise of the
commissioner by the establishment of an insurance fraud unit within the division of insurance and to provide it with the
responsibility and authority for detecting, investigating and
controlling fraudulent insurance acts more effectively, halting
fraudulent insurance acts, and assisting and receiving assistance
from state, local and federal law-enforcement and regulatory
agencies in enforcing laws prohibiting fraudulent insurance acts
and thereby ultimately reducing the costs of insurance fraud to
insurers and consumers.
§33-41-2. Definitions.
The following words when used in this article shall have the
meanings set forth in this section, unless the context clearly
indicates otherwise:
(a) "Authorized agency" means:
(1) The state police, the police department of any
municipality, any county sheriff's department, and any duly
constituted criminal investigative department or agency of the
United States or of this state;
(2) The prosecuting attorney of any county of this state or of
the United States or any district thereof; or
(3) The state insurance commissioner.
(b) "Benefits" means money payments, goods, services or any
other thing of value.
(c) "Claim" means an application for payment for goods or services provided under any insurance policy issued to any person
in this state.
(d) "Commissioner" means the insurance commissioner of the
state of West Virginia.
(e) "Director" means the director of the insurance fraud unit
established pursuant to this article.
(f) "Financial loss" includes, but is not limited to, loss of
earnings, out-of-pocket and other expenses, repair and
replacements costs and claims payments made by any insurer,
provider or person.
(g) "Health care provider" means any person, firm or
corporation rendering health care services.
(h) "Insured" means any person, as defined herein, who is
entitled to insurance coverage, benefits or protection pursuant
to a policy of insurance issued by any insurer, including, but
not limited to, the policyholder, family members included as
insureds or beneficiaries and any person entitled to health,
property or liability coverage pursuant to the terms of the
policy.
(i) "Insurer" means any person engaging in or proposing or
attempting to engage in any transaction or kind of insurance or
surety business and any person or group of persons who may
otherwise be subject to the administrative, regulatory or taxing
authority of the commissioner, including, but 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) "Person" means any individual, partnership, firm,
association, corporation, company, insurer, organization,
society, reciprocal, business trust or any other legal entity.
"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.
(l) "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.
(m) "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. Insurance fraud unit established; director to be
appointed; office space and staff provisions; promulgation of rules; annual report.
(a) There is hereby established an insurance fraud unit within
the division of insurance. The commissioner shall appoint a
full-time director of the insurance fraud unit. The director
shall serve at the pleasure of the commissioner and shall be
qualified by training and experience to perform the duties of the position. The commissioner shall provide the clerical and other
staff appropriate for the unit to fulfill its responsibilities
under this article.
(b) The insurance commissioner shall provide office space,
hearing rooms, equipment and supplies for the insurance fraud
unit and its staff.
(c) The commissioner may propose legislative rules for
legislative approval pursuant to article three, chapter twenty- nine-a of this code in order to effect the purposes of this
article.
(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 actions taken by the insurance fraud unit in
the preceding fiscal year.
§33-41-4. Powers and duties.
(a) The insurance fraud unit created pursuant to this article
shall have the following powers and duties:
(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) To initiate independent inquiries and conduct independent
investigations when the director has cause to believe that an act
of insurance fraud has been, or is currently being committed;
(3) To review reports or complaints of alleged insurance fraud
from federal, state and local police, other law-enforcement
authorities, governmental agencies or units, insurers and the
general public; determine whether the reports require further
investigation; and conduct the investigations;
(4) To administer oaths or affirmations;
(5) To issue subpoenas for witnesses and documents relevant to
an investigation, including information concerning the existence,
description, nature, custody, condition and location of any book,
record, document or other tangible thing and the identity and
location of persons having knowledge of relevant facts or any
matter reasonably calculated to lead to the discovery of
admissible evidence;
(6) To refer to the appropriate prosecuting authority all
violations of applicable state and federal laws which arise out
of the provision of insurance benefits to any person, firm or
corporation;
(7) To petition any judge or court in this state for the
appointment of a special prosecutor on a case-by-case basis as
the need arises;
(8) To cooperate with federal or state government officials and insurers to investigate, detect, deter and prosecute fraud
and abuse in the insurance industry of the state; and
(9) To communicate and exchange data and information with
federal or state agencies, divisions, departments or officers and
with health care providers, insurers or other interested parties
regarding insurance fraud issues.
(b) The insurance fraud unit is further empowered to perform
other duties as may be necessary to effect the purposes of the
unit or as may be prescribed by the insurance commissioner.
§33-41-5. Investigations; procedures; subpoena powers.
(a) When the unit has probable cause to believe that a person
has engaged in an act or activity which is subject to prosecution
under this article, the unit shall make an investigation to
determine if the act has been committed and report the findings
of the investigation to the director.
(b) If the unit seeks evidence, documentation or related
materials located within this state pertinent to an investigation
or examination, the unit may by request or subpoena gain access
to the material. The material shall be made available to the
unit or shall be made available for inspection or examination by
a designated representative of the unit.
(c) If documents necessary to an investigation of the unit
shall appear to be located outside the state, the documents shall be made available by the person or entity within the jurisdiction
of the state having control over the documents either at a
convenient location within the state or, upon payment of
reasonable and necessary expenses to the unit for transportation
and inspection, at the place outside the state where the
documents are maintained.
(d) Upon failure of a person to comply with a subpoena or
subpoena duces tecum or failure of a person to give testimony
without lawful excuse and upon reasonable notice to all persons
affected thereby, the unit may apply to the circuit court of the
county in which compliance is sought for appropriate orders to
compel obedience with the provisions of this section.
§33-41-6. Confidentiality and immunity from subpoena.
(a) The unit may not make public the name or identity of a
person whose acts or conduct is investigated pursuant to this
section or the facts disclosed in the investigation except as the
same may be used in any legal action or enforcement proceeding
brought pursuant to this article or any other provision of this
code.
(b) All papers, records, documents, reports, materials or
other evidence relevant to an insurance fraud investigation or
examination shall remain confidential and may not be subject to
public inspection so long as the director determines it is reasonably necessary to protect the privacy of the person or
matter investigated or examined, to protect the person furnishing
the material, or to be in the public interest.
(c) The papers, records, documents, reports, materials or
other evidence relevant to an insurance fraud investigation or
examination may not be subject to subpoena until opened for
public inspection by the director.
§33-41-7. Insurance fraud.
(a) It is a fraudulent insurance act for any person, with the
intent to injure, defraud or deceive any person or insurer, to
present or cause to be presented to any insurer or insurance
representative, any written or oral statement as part of or in
support of an application for insurance or a claim for payment or
other benefit pursuant to an insurance policy, knowing that the
statement contains any false, incomplete or misleading
information concerning any fact or thing material to the
application, claim or benefit.
(b) It is a fraudulent insurance act for any person, with the
intent to injure, defraud or deceive any person or insurer, to
assist, abet, solicit or conspire with another to prepare or make
any written or oral statement that is intended to be presented to
any insurer in connection with or in support of any application
for insurance or any claim for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any
false, incomplete or misleading information concerning any fact
or thing material to the application, claim or benefit.
(c) It is a fraudulent insurance act for any insurer or
insurance representative, with the intent to injure, defraud or
deceive any person or authorized agency, to submit or cause to be
submitted to any authorized government agency, any written or
oral statement as part of or in support of any application,
audit, report, valuation, statement, appraisal, estimation of
loss, publication, certificate, actuarial report or study,
filing, financial statement, tax return, rate request, petition
or any other document knowing that the statement contains any
false, incomplete or misleading information concerning any fact
or thing material to the application, report or other document
being submitted.
(d) It is a fraudulent act for any insurer or insurance
representative, with the intent to injure, defraud or deceive any
person or authorized agency, to present or submit, or cause to be
presented or submitted, to any person or authorized agency any
written or oral statement in connection with any insurance
application, claim or other benefit, knowing that the statement
contains any false, incomplete or misleading information
regarding any fact or thing material to the application, claim or
benefit.
(e) It is a fraudulent act for any person to solicit, offer or
receive any remuneration, including any kickback, rebate or
bribe, directly or indirectly, with the intent of causing an
expenditure of moneys from any person or insurer which would not
otherwise be payable under the applicable policy.
(f) It is a fraudulent insurance act for any person to remove,
conceal, alter or destroy the assets or records of an insurer,
reinsurer or other person engaged in the business of insurance
with the intent to interfere with or to obstruct any
investigation or examination conducted under this article.
(g) Any person found to be in violation of the provisions of
this section is guilty of a felony or misdemeanor, as determined
by the provisions of sections four and five, article five-b,
chapter sixty-one of this code and, upon conviction thereof,
shall be fined, imprisoned or both, as more particularly provided
in those sections. In addition to any fine or imprisonment, any
person found to be in violation of the provisions of this section
is required to make full restitution to the person injured or
damaged by the fraudulent act in a manner to be determined by the
court.
§33-41-8. Prosecution for fraudulent acts; special prosecutors;
director's report to the commissioner.
(a) If, upon review of any report submitted by the unit, the director determines that adequate evidence exists to believe that
an act of insurance fraud has been committed, the director shall
present any evidence of alleged insurance fraud to the prosecutor
in the jurisdiction where the alleged acts of insurance fraud
took place and request appropriate criminal prosecution.
(b) Upon receipt of the report and request from the
director, the prosecutor may, where deemed appropriate,
criminally prosecute any person for insurance fraud or other
appropriate criminal offenses.
(c) Upon application of the prosecutor or the director, the
court of appropriate jurisdiction may appoint a special
prosecutor to criminally prosecute any person for insurance fraud
or other appropriate criminal offenses.
(d) The director shall annually report to the insurance
commissioner as to all referred fraud cases and the results or
status of the cases. The commissioner shall include the
director's report in the annual report to the governor and the
Legislature required pursuant to section three of this article.
§33-41-9. Duties of insurers.
(a) Any insurer which has a reasonable belief that an act of
insurance fraud is being, or has been, committed with a payment,
benefit or loss or with a potential payment, benefit or loss of
one thousand dollars or greater shall send to the director, on a form prescribed by the commissioner, any and all information and
additional information relating to the act as the director or
unit may require.
(b) Insurers are required to give or deliver to persons
residing in this state or upon claims arising in this state in a
form and manner as prescribed by the commissioner 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 material to an application for insurance is
guilty of a crime and may be subject to fines and confinement in
prison."
§33-41-10. Privileges and immunity.
(a) Any person who makes a report or furnishes information,
written or oral, concerning suspected fraudulent insurance acts
to appropriate governmental agencies, the insurance fraud unit or
any other agency established to detect and prevent fraudulent
insurance acts, shall be entitled to those privileges and
immunities heretofore existing under the common or statutory law
of this state, as well as the immunity established herein.
(b) In the absence of fraud, malice or bad faith, no person
is subject to civil liability for libel, slander or any other
relevant tort cause of action by virtue of filing reports or furnishing other information, written or oral, to any authorized
agency, as may be required by the provisions of this article:
Provided, That nothing herein abrogates or modifies the duties
or liabilities of insurers regarding bad faith or unfair claims
settlement practices pursuant to applicable statutes or case law.
(c) In the absence of fraud, malice or bad faith, no person
or their agents, employees or designees is subject to civil
liability of any nature arising out of such person's providing
any information related to suspected fraudulent insurance acts
furnished to or received from any authorized government agency,
the insurance fraud unit, the insurance commissioner, the
national association of insurance commissioners, or any other
organization established to detect and prevent fraudulent
insurance acts:
Provided, That nothing herein abrogates or
modifies the duties or liabilities of insurers regarding bad
faith or unfair claims settlement practices pursuant to
applicable statutes or case law.
(d) In the absence of fraud or malice, the commissioner, the
director, and any employee, agent, representative or staff member
are not subject to civil liability of any nature arising out of
any official activities of their respective offices:
Provided,
That nothing herein abrogates or modifies in any manner any
constitutional immunity or common law or statutory privilege or immunity heretofore enjoyed by any person identified in this
subsection.
§33-41-11. Other law-enforcement authorities.
Nothing in this article preempts the authority or relieves
the duty of any other law-enforcement agency to investigate,
examine and prosecute suspected violations of law; prevents or
prohibits a person from voluntarily disclosing any information
concerning insurance fraud to any law-enforcement agency other
than the unit; or limits any of the powers granted elsewhere by
the laws of this state to the commissioner of insurance or the
state police to investigate and examine possible violations of
law and to take appropriate action.
§33-41-12. Remedies and penalties not exclusive.
The remedies and penalties provided in this article are in
addition to those remedies and penalties provided elsewhere by
law.
§33-41-13. Funding.
All insurers and insurance representatives shall annually
pay to the commissioner on or before the first day of July, one
thousand nine hundred ninety-seven and every first day of July
thereafter, a fraud unit assessment fee of three hundred fifty
dollars. This fee shall be paid to the treasurer of the state to
the credit of a special revolving fund to be known as the "Commissioner's Fraud Unit Revolving Fund" which is hereby
established. The commissioner may at his or her discretion, upon
notice to the insurers subject to this section, increase this
fraud unit assessment fee by one hundred fifty dollar increments
on an annual basis or levy an additional fraud unit assessment
fee of one hundred fifty dollars in any calendar year. In no
event may the total fraud unit assessment fee levied exceed eight
hundred dollars per insurer in any calendar year.
The moneys collected by the commissioner from an increase or
additional fraud unit assessment fee shall be paid to the
treasurer of the state to be credited to the "Commissioner's
Fraud Unit Revolving Fund." Any funds expended or obligated by
the commissioner from the "Commissioner's Fraud Unit Revolving
Fund" may be expended or obligated solely for defrayment of the
costs of performing the duties set forth in this article.
Any balance in the "Commissioner's Fraud Unit Revolving
Fund" at the end of any fiscal year shall remain in the revolving
account for use by the insurance fraud unit within the division
of insurance for defrayment of the costs of performing the duties
set forth in this article in the ensuing fiscal year.
CHAPTER 61. CRIMES AND THEIR PUNISHMENT.
ARTICLE 5B. WEST VIRGINIA INSURANCE FRAUD PREVENTION ACT.
§61-5B-1. Short title.
This article may be known and cited as the "West Virginia
Insurance Fraud Prevention Act."
§61-5B-2. Legislative intent.
The Legislature of the state of West Virginia hereby
recognizes that insurance fraud results in increased insurance
costs which are ultimately borne by the consumers of this state.
The intent of the "West Virginia Insurance Fraud Act" is to
prohibit the giving of false or fraudulent information by any
person in any capacity; to assist public officials, government
agencies and insurers in the detection and investigation of
fraudulent activities; reduce the occurrence of fraud through
administrative enforcement and deterrence; require restitution of
fraudulently obtained insurance benefits; and establish penalties
for violation of this article, all in an effort to deter the
activities and reduce costs to the consumers of this state.
§61-5B-3. Definitions.
For purposes of this article the following definitions shall
apply:
(a) "Authorized agency" means:
(1) The state police, the police department of any
municipality, any county sheriff's department, and any duly
constituted criminal investigative department or agency of the
United States or of this state;
(2) The prosecuting attorney of any county of this state or
of the United States or any district thereof; or
(3) The state insurance commissioner.
(b) "Claimant" means any person, as defined herein, who
submits a claim for payment to an insurer as either an insured
under an insurance policy, a beneficiary of the policy or a
provider of goods or services to an insured, including, but not
limited to, policyholders and family members included as insureds
in the policy; persons entitled to payment under health, property
or liability coverage provisions; administrators, devisees and
legatees of a deceased policyholder; hospitals, physicians and
other providers of medical services; and banks, credit unions,
lienholders or other creditors of an insured.
(c) "Commissioner" means the insurance commissioner of West
Virginia.
(d) "Financial loss" includes, but is not limited to, loss
of earnings, out-of-pocket and other expenses, repair and
replacement costs and claims payments incurred by any person or
insurer.
(e) "Insured" means any person, as defined herein, who is
entitled to insurance coverage, benefits or protection pursuant
to a policy of insurance issued by any insurer, including, but
not limited to, the policyholder, family members included as
insureds or beneficiaries and any person entitled to health, property or liability coverage pursuant to the terms of the
policy.
(f) "Insurer" means any person engaging in or proposing or
attempting to engage in any transaction or kind of insurance or
surety business and any person or group of persons who may
otherwise be subject to the administrative, regulatory or taxing
authority of the commissioner, including, but 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.
(g) "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.
(h) "Person" means any individual, partnership, firm,
association, corporation, company, insurer, organization, society, reciprocal, business trust or any other legal entity.
"Person" also includes hospital service corporations, medical
service corporations and dental service corporations as defined
in article twenty-four, chapter thirty-three of this code; health
care corporations as defined in article twenty-five of said
chapter; or a health maintenance organization organized pursuant
to article twenty-five-a of said chapter.
(i) "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 or written 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 of 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.
§61-5B-4. Fraudulent acts prohibited; penalties.
(a) Any person who, with the intent to injure, defraud or
deceive any person or insurer, presents or causes to be presented
to any insurer or insurance representative any written or oral statement as part of or in support of an application for
insurance or a claim for payment or other benefit pursuant to an
insurance policy, knowing that the statement contains any false,
incomplete or misleading information concerning any fact or thing
material to the application, claim or benefit, is guilty of a
misdemeanor or felony, as determined by the provisions of section
five of this article and, upon conviction thereof, shall be
fined, imprisoned or both, as more particularly provided in
section five.
(b) Any person who, with the intent to injure, defraud or
deceive any person or insurer, assists, abets, solicits or
conspires with another to prepare or make any written or oral
statement that is intended to be presented to any insurer in
connection with or in support of any application for insurance or
any claim for payment or other benefit pursuant to an insurance
policy, knowing that the statement contains any false, incomplete
or misleading information concerning any fact or thing material
to the application, claim or benefit, is guilty of a misdemeanor
or felony, as determined by the provisions of section five of
this article and, upon conviction thereof, shall be fined,
imprisoned or both, as more particularly provided in section
five.
(c) Any insurer or insurance representative who, with the
intent to injure, defraud or deceive any person, submits or causes to be submitted to any authorized government agency any
written or oral statement as part of or in support of any
application, audit, report, valuation, statement, appraisal,
estimation of loss, publication, certificate, actuarial report or
study, filing, financial statement, tax return, rate request,
petition of any other document knowing that the statement
contains any false, incomplete or misleading information
concerning any fact or thing material to the application, report
or other document, is guilty of a felony and, upon conviction
thereof, shall be fined not more than five thousand dollars, or
confined in the penitentiary for a definite term of years of not
less than one year nor more than five years, or both fined and
imprisoned:
Provided, That the commissioner may, after notice
and hearing, refuse to renew or revoke or suspend the license of
any insurer or insurance representatives convicted of a violation
of this subsection as provided by article three, chapter thirty- three of this code.
(d) Any person, insurer or insurance representative who,
with intent to injure, defraud or deceive any person or
authorized agency, presents or submits, or causes to be presented
or submitted, to any person or authorized agency any written or
oral statement in connection with any insurance application,
policy, claim or benefit, knowing that the statement contains any false, incomplete or misleading information regarding any fact or
thing material to the application, policy, claim or benefit, is
guilty of a felony and, upon conviction thereof, shall be fined
not more than five thousand dollars, or confined in the
penitentiary for a definite term of years of not less than one
year nor more than five years, or both fined and imprisoned:
Provided, That the commissioner may, after notice and hearing,
refuse to renew, revoke or suspend the license of any insurer or
insurance representatives convicted of a violation of this
subsection as provided by article three, chapter thirty-three of
this code.
(e) Any person who, with the intent to injure, defraud or
deceive any person, insurer or agency, solicits, offers or
receives any remuneration, including any kickback, rebate or
bribe, directly or indirectly, with the intent of causing an
expenditure of moneys from any person or insurer which would not
otherwise be payable under an applicable insurance policy, is
guilty of a misdemeanor or felony, as determined by the
provisions of section five of this article and, upon conviction
thereof, shall be fined, imprisoned or both, as more particularly
provided in said section five.
§61-5B-5. Penalties.
(a) Except as otherwise provided, if any person violates the provisions of this article or of article forty-one, chapter
thirty-three of this code, and the act results in a payment,
benefit or loss to any person with a value of one thousand
dollars or more, the person is guilty of a felony and, upon
conviction thereof, shall be fined not less than five hundred
dollars nor more than five thousand dollars, or confined in the
penitentiary for a definite term of years of not less than one
year nor more than five years, or both fined and imprisoned. In
addition to any fine or imprisonment, any person subject to the
provisions of this section shall be required to make full
restitution to the person injured or damaged by the fraudulent
act in a manner to be determined by the court.
(b) Except as otherwise provided, if any person violates the
provisions of this article or of article forty-one, chapter
thirty-three of this code, and the act results in a payment,
benefit or loss to any person with a value of less than one
thousand dollars, such person is guilty of a misdemeanor and,
upon conviction thereof, shall be fined not more than five
hundred dollars, or confined in the county jail for a term not to
exceed one year, or both fined and imprisoned. In addition to
any fine or imprisonment, any person subject to the provisions of
this section shall be required to make full restitution to the
person injured or damaged by the fraudulent insurance act in a
manner to be determined by the court.
§61-5B-6. Immunities and exceptions.
The provisions of section four of this article are not
applicable to a person in the relation of husband and wife,
parent or grandparent, child or grandchild, brother or sister, by
consanguinity or affinity, of an accused in any criminal case,
when the person, after the commission of an offense, shall aid or
assist the accused to avoid or escape from prosecution or
punishment.
NOTE: This bill creates a new fraud unit within the
division of insurance. The goal of the fraud unit is to protect
the public from fraudulent acts relating to the insurance
industry. Information gathering abilities and penalty provisions
are established to speak to the concern.
Strike-throughs indicate language that would be deleted from
present law and underscoring indicates language that would be
added.
§33-41 and §61-5B are new; therefore, strike-throughs and
underscoring have been omitted.
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