BILL REQ. #:  Z-1056.1 

Prefiled 1/6/2006. Read first time 01/09/2006.   Referred to Committee on Financial Institutions & Insurance.

     AN ACT Relating to insurance fraud; amending RCW 10.93.020; adding a new chapter to Title 48 RCW; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The purpose of this act is to confront the problem of insurance fraud in this state by making a concerted effort to detect insurance fraud, reduce the occurrence of fraud through criminal enforcement and deterrence, require restitution of fraudulently obtained insurance benefits, and reduce the amount of premium dollars used to pay fraudulent claims. The primary focus of the insurance fraud program is on organized fraudulent activities committed against insurance companies.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Insurance fraud" means an act or omission committed by a person who, knowingly, and with intent to defraud, commits, or conceals any material information concerning, one or more of the following:
     (a) Presenting, causing to be presented, or preparing with knowledge or belief that it will be presented to or by an insurer, broker, or its agent, false information as part of, in support of, or concerning a fact material to one or more of the following:
     (i) An application for the issuance or renewal of an insurance policy;
     (ii) The rating of an insurance policy or contract;
     (iii) A claim for payment or benefit pursuant to an insurance policy;
     (iv) Premiums paid on an insurance policy;
     (v) Payments made in accordance with the terms of an insurance policy; or
     (vi) The reinstatement of an insurance policy;
     (b) Willful embezzlement, abstracting, purloining, or conversion of moneys, funds, premiums, credits, or other property of an insurer or person engaged in the business of insurance; or
     (c) Attempting to commit, aiding or abetting in the commission of, or conspiracy to commit the acts or omissions specified in this subsection.
     (2) "Insurer" means an insurance company authorized under chapter 48.05 RCW, a health care service contractor registered under chapter 48.44 RCW, and a health care maintenance organization registered under chapter 48.46 RCW.

NEW SECTION.  Sec. 3   (1) There is established an insurance fraud program within the office of the insurance commissioner. The commissioner may employ supervisory, legal, and investigative personnel for the program, who must be qualified by training and experience in the areas of detection, investigation, or prosecution of fraud against the insurance industry. The chief of the fraud program is a full-time position that is appointed by the commissioner. The chief serves at the pleasure of the commissioner. The commissioner shall provide office space, equipment, supplies, investigators, clerical staff, and other staff that are necessary for the program to carry out its duties and responsibilities under this chapter.
     (2) The commissioner may fund one or more state patrol officers to work with the insurance fraud program and the funding for the officers must be paid out of the budget of the insurance fraud program.
     (3) The commissioner may fund one or more assistant attorney generals and support staff to work with the insurance fraud program and the funding for the assistant attorney generals and support staff must be paid out of the budget of the insurance fraud program.
     (4) The commissioner may make grants to or reimburse local prosecuting attorneys to assist in the prosecution of fraud. The grants must be paid out of the budget of the insurance fraud program.

NEW SECTION.  Sec. 4   The annual cost of operating the fraud program is funded from the insurance commissioner's regulatory account under RCW 48.02.190.

NEW SECTION.  Sec. 5   (1) The commissioner may:
     (a) Employ and train personnel to achieve the purposes of this chapter 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 of this chapter;
     (b) Initiate inquiries and conduct investigations when the commissioner has cause to believe that insurance fraud may have been or is being committed;
     (c) Conduct independent examinations of alleged insurance fraud;
     (d) Review notices, reports, or complaints of suspected insurance fraud activities from federal, state, and local law enforcement and regulatory agencies, persons engaged in the business of insurance, and any other person to determine whether the reports require further investigation;
     (e) Share records and evidence with federal, state, or local law enforcement or regulatory agencies, and enter into interagency agreements;
     (f) Conduct investigations outside this state. If the information the commissioner seeks to obtain is located outside this state, the person from whom the information is sought may make the information available to the commissioner to examine at the place where the information is located. The commissioner may designate representatives, including officials of the state in which the matter is located, to inspect the information on behalf of the commissioner, and the commissioner may respond to similar requests from officials of other states;
     (g) Administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records that the commissioner deems relevant or material to an inquiry concerning insurance fraud;
     (h) Report incidents of alleged insurance fraud disclosed by its investigations to the appropriate prosecutorial authority, including but not limited to the attorney general and to any other appropriate law enforcement, administrative, regulatory, or licensing agency;
     (i) Assemble evidence, prepare charges, and work closely with any prosecutorial authority having jurisdiction to pursue prosecution of insurance fraud; and
     (j) Undertake independent studies to determine the extent of fraudulent insurance acts.
     (2) The fraud program investigators who have obtained certification as a peace officer under RCW 43.101.095 have the powers and status of a limited authority Washington peace officer.

NEW SECTION.  Sec. 6   (1) Any insurer or licensee of the commissioner that has reasonable belief that an act of insurance fraud will be, is being, or has been committed shall furnish and disclose the knowledge and information to the commissioner or the national insurance crime bureau, the national association of insurance commissioners, or similar organization, who shall disclose the information to the commissioner, and cooperate fully with any investigation conducted by the commissioner.
     (2) Any person that has a reasonable belief that an act of insurance fraud will be, is being, or has been committed; or any person who collects, reviews, or analyzes information concerning insurance fraud may furnish and disclose any information in its possession concerning such an act to the commissioner or to an authorized representative of an insurer that requests the information for the purpose of detecting, prosecuting, or preventing insurance fraud.
     (3) If an insurer has a good faith belief that an insurance fraud has been committed in connection with an insurance claim, and has properly notified the commissioner of its suspicions, the notification serves to toll any applicable time period in any unfair claims practices statute or related regulation, or any action on the claim against the insurer to whom such a claim has been presented for bad faith, until thirty days after determination by the commissioner and notice to the insurer that the commissioner will not recommend further investigation of the claim.

NEW SECTION.  Sec. 7   Any licensed insurance agent, any licensed insurance broker, any insurer or person acting in the insurer's behalf, health maintenance organization or person acting in the behalf of the health maintenance organization, health care service contractor or person acting in the behalf of the health care service contractor, or other person who discloses information to the commissioner, the national insurance crime bureau, the national association of insurance commissioners, or other law enforcement agent or agency under section 5 of this act is immune from liability in any civil or criminal action, suit, or prosecution arising from providing the information, unless actual malice on the part of the agent, broker, insurer, or other person is shown.

NEW SECTION.  Sec. 8   (1) Any documents, materials, or other information in the possession or control of the commissioner and prosecutors that are provided or obtained by the commissioner in an investigation of suspected or actual fraudulent insurance acts are confidential by law, privileged, not subject to public disclosure under chapter 42.17 or 42.56 RCW, not subject to subpoena, and not subject to discovery or admissible in evidence in any private civil action. However, the commissioner and prosecutors are authorized to use the documents, materials, or other information in the furtherance of (a) any regulatory or legal action brought as part of the commissioner's official duties, or (b) criminal prosecution.
     (2) Neither the commissioner nor any person who received the documents, materials, or other information while acting under the authority of this chapter may be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (1) of this section.
     (3) In order to assist in the performance of the commissioner's duties under this chapter, the commissioner may:
     (a) Share documents, materials, or other information, including confidential and privileged documents, material, or information subject to subsection (1) 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, and the national insurance crime bureau provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information;
     (b) 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 the 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; and
     (c) Enter into agreements governing sharing and use of information consistent with this section.
     (4) A privilege or claim of confidentiality in the documents, materials, or information is not waived as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection (3) of this section.
     (5) Any investigative information gathered under this chapter is criminal investigative information and may not be disclosed except as provided in this chapter.

NEW SECTION.  Sec. 9   (1) In a criminal prosecution for insurance fraud under Washington law the court, in addition to the criminal penalty imposed, shall assess against the defendant convicted for such a violation:
     (a) Double the amount of the fraud; and
     (b) The costs of investigating and prosecuting.
     (2) Payment of the amounts levied under subsection (1) this section must first be paid to the victim of the fraud, until paid in full, and then to the costs of investigating and prosecuting the defendant. An insurance company is a victim under this subsection. The restitution for the costs of investigating and prosecuting insurance fraud recovered under subsection (1) of this section must be paid to the commissioner's regulatory account under RCW 48.02.190.
     (3) The civil forfeiture provisions of RCW 10.105.010 must be used to the fullest extent possible to recover assets obtained as a result of insurance fraud.

NEW SECTION.  Sec. 10   This chapter does not:
     (1) Preempt the authority or relieve the duty of any other general authority law enforcement agencies to investigate, examine, and prosecute suspected violations of law;
     (2) Prevent or prohibit a person from voluntarily disclosing any information concerning insurance fraud to any law enforcement agency other than the commissioner; or
     (3) Limit any of the powers granted elsewhere in this title to the commissioner to investigate and examine possible violations of the law and to take appropriate action.

NEW SECTION.  Sec. 11   No later than six months after the effective date of this section, all applications for insurance, and all claim forms regardless of the form of transmission provided and required by an insurer or required by law as condition of payment of a claim, must contain a statement, permanently affixed to the application or claim form, that clearly states in substance the following:
     "It is a crime to knowingly provide false, incomplete, or misleading information to an insurance company for the purpose of defrauding the company. Penalties include imprisonment, fines, and denial of insurance benefits."
     The lack of a statement required in this section does not constitute a defense in any criminal prosecution nor any civil action.

NEW SECTION.  Sec. 12   The commissioner shall appoint an insurance fraud advisory board. The board shall consist of eight members. Two members shall be representatives from insurers doing business in this state, two members shall represent consumers, one member shall represent the national insurance crime bureau or successor organization, two members shall represent prosecutors, and one member shall represent other law enforcement agencies. The members of the board serve four-year terms and until their successors are appointed and qualified. Two of the original members must be appointed to serve an initial term of four years, two must be appointed to serve an initial term of three years, two must be appointed to serve an initial term of two years, and two must be appointed to serve an initial term of one year. The members of the board receive no compensation. The board advises the commissioner with respect to the effectiveness and resources allocated to the fraud program.

NEW SECTION.  Sec. 13   The commissioner shall prepare an annual report of the activities of the fraud program. The report shall be submitted to the legislature no later than March 1st for the prior calendar year. The report shall, at a minimum, include information as to the number of cases reported to the commissioner, the number of cases referred for prosecution, the number of convictions obtained, and the amount of money recovered.

NEW SECTION.  Sec. 14   The commissioner may adopt rules to implement and administer this chapter.

Sec. 15   RCW 10.93.020 and 2002 c 128 s 1 are each amended to read as follows:
     As used in this chapter, the following terms have the meanings indicated unless the context clearly requires otherwise.
     (1) "General authority Washington law enforcement agency" means any agency, department, or division of a municipal corporation, political subdivision, or other unit of local government of this state, and any agency, department, or division of state government, having as its primary function the detection and apprehension of persons committing infractions or violating the traffic or criminal laws in general, as distinguished from a limited authority Washington law enforcement agency, and any other unit of government expressly designated by statute as a general authority Washington law enforcement agency. The Washington state patrol and the department of fish and wildlife are general authority Washington law enforcement agencies.
     (2) "Limited authority Washington law enforcement agency" means any agency, political subdivision, or unit of local government of this state, and any agency, department, or division of state government, having as one of its functions the apprehension or detection of persons committing infractions or violating the traffic or criminal laws relating to limited subject areas, including but not limited to, the state departments of natural resources and social and health services, the state gambling commission, the state lottery commission, the state parks and recreation commission, the state utilities and transportation commission, the state liquor control board, the office of the insurance commissioner, and the state department of corrections.
     (3) "General authority Washington peace officer" means any full-time, fully compensated and elected, appointed, or employed officer of a general authority Washington law enforcement agency who is commissioned to enforce the criminal laws of the state of Washington generally.
     (4) "Limited authority Washington peace officer" means any full-time, fully compensated officer of a limited authority Washington law enforcement agency empowered by that agency to detect or apprehend violators of the laws in some or all of the limited subject areas for which that agency is responsible. A limited authority Washington peace officer may be a specially commissioned Washington peace officer if otherwise qualified for such status under this chapter.
     (5) "Specially commissioned Washington peace officer", for the purposes of this chapter, means any officer, whether part-time or full-time, compensated or not, commissioned by a general authority Washington law enforcement agency to enforce some or all of the criminal laws of the state of Washington, who does not qualify under this chapter as a general authority Washington peace officer for that commissioning agency, specifically including reserve peace officers, and specially commissioned full-time, fully compensated peace officers duly commissioned by the states of Oregon or Idaho or any such peace officer commissioned by a unit of local government of Oregon or Idaho. A reserve peace officer is an individual who is an officer of a Washington law enforcement agency who does not serve such agency on a full-time basis but who, when called by the agency into active service, is fully commissioned on the same basis as full-time peace officers to enforce the criminal laws of the state.
     (6) "Federal peace officer" means any employee or agent of the United States government who has the authority to carry firearms and make warrantless arrests and whose duties involve the enforcement of criminal laws of the United States.
     (7) "Agency with primary territorial jurisdiction" means a city or town police agency which has responsibility for police activity within its boundaries; or a county police or sheriff's department which has responsibility with regard to police activity in the unincorporated areas within the county boundaries; or a statutorily authorized port district police agency or four-year state college or university police agency which has responsibility for police activity within the statutorily authorized enforcement boundaries of the port district, state college, or university.
     (8) "Primary commissioning agency" means (a) the employing agency in the case of a general authority Washington peace officer, a limited authority Washington peace officer, an Indian tribal peace officer, or a federal peace officer, and (b) the commissioning agency in the case of a specially commissioned Washington peace officer (i) who is performing functions within the course and scope of the special commission and (ii) who is not also a general authority Washington peace officer, a limited authority Washington peace officer, an Indian tribal peace officer, or a federal peace officer.
     (9) "Primary function of an agency" means that function to which greater than fifty percent of the agency's resources are allocated.
     (10) "Mutual law enforcement assistance" includes, but is not limited to, one or more law enforcement agencies aiding or assisting one or more other such agencies through loans or exchanges of personnel or of material resources, for law enforcement purposes.

NEW SECTION.  Sec. 16   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 17   Sections 1 through 14 and 16 of this act constitute a new chapter in Title 48 RCW.