BILL REQ. #:  Z-0605.1 

Read first time 02/04/2003.   Referred to Committee on Financial Institutions & Insurance.

     AN ACT Relating to civil and criminal penalties for the unlawful transaction of insurance or health coverage; amending RCW 48.15.020, 48.17.060, 48.44.015, 48.44.060, 48.46.027, and 48.46.420; adding a new section to chapter 48.15 RCW; adding new sections to chapter 48.17 RCW; adding a new section to chapter 48.44 RCW; adding a new section to chapter 48.46 RCW; and prescribing penalties.

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

Sec. 1   RCW 48.15.020 and 1992 c 149 s 1 are each amended to read as follows:
     (1) An insurer ((not thereunto)) that is not authorized by the commissioner ((shall)) may not solicit insurance business in this state((, nor)) or transact insurance business in this state, except as provided in this chapter.
     (2)(a) ((No)) A person ((shall)) may not, in this state, represent an unauthorized insurer except as provided in this chapter. This ((provision shall)) subsection not apply to any adjuster or attorney at law representing ((such)) an unauthorized insurer from time to time in this state in his or her professional capacity.
     (b) A person, other than a duly licensed surplus line broker acting in good faith under his or her license, who makes a contract of insurance in this state, directly or indirectly, on behalf of an unauthorized insurer, without complying with the provisions of this chapter, is personally liable for the performance of such contract.
     (3) Each violation of subsection (2) of this section shall constitute a separate offense punishable by a fine of not more than twenty-five thousand dollars, and the commissioner, at the commissioner's discretion, may order replacement of policies improperly placed with an unauthorized insurer with policies issued by an authorized insurer. Violations may result in suspension or revocation of a license.

NEW SECTION.  Sec. 2   A new section is added to chapter 48.15 RCW to read as follows:
     (1) As used in this section, "person" has the same meaning as in RCW 48.01.070.
     (2) For the purpose of this section, an act is committed in this state if it is committed, in whole or in part, in the state of Washington, or affects persons or property within the state and relates to or involves an insurance contract.
     (3) Any person who knowingly solicits insurance business in this state or transacts insurance business in this state in violation of RCW 48.15.020(1) is guilty of a class B felony as provided in chapter 9A.20 RCW.
     (4) Any person who attempts or conspires to violate subsection (3) of this section is guilty of a class C felony as provided in chapter 9A.20 RCW.
     (5) Any criminal penalty imposed under this section is in addition to, and not in lieu of, any other civil or administrative penalty or sanction otherwise authorized under state law.
     (6)(a) If the commissioner has cause to believe that any person has violated the provisions of RCW 48.15.020(1), the commissioner may:
     (i) Issue and enforce a cease and desist order in accordance with the provisions of RCW 48.02.080; or
     (ii) Assess a civil penalty of not more than twenty-five thousand dollars for each violation, after providing notice and an opportunity for a hearing in accordance with chapters 34.05 and 48.04 RCW.
     (b) Upon failure to pay a civil penalty when due, the attorney general may bring a civil action on behalf of the commissioner to recover the unpaid penalty. Any amounts collected by the commissioner must be paid to the state treasurer for the account of the general fund.

Sec. 3   RCW 48.17.060 and 1995 c 214 s 1 are each amended to read as follows:
     (1) ((No)) A person ((shall in this state)) may not act as or hold himself or herself out to be an agent, broker, solicitor, or adjuster in this state unless ((then)) licensed ((therefor by this state)) by the commissioner.
     (2) ((No)) An agent, solicitor, or broker ((shall)) may not solicit or take applications for, procure, or place for others any kind of insurance for which he or she is not then licensed.
     (3) This section ((shall)) does not apply with respect to any person securing and forwarding information required for the purposes of group credit life and credit disability insurance or credit casualty insurance against loss or damage resulting from failure of debtors to pay their obligations in connection with an extension of credit and such other credit life and disability insurance or credit casualty insurance against loss or damage resulting from failure of debtors to pay their obligations as the commissioner shall determine, and where no commission or other compensation is payable on account of the securing and forwarding of such information. However, the reimbursement of a creditor's actual expenses for securing and forwarding information required for the purposes of such group insurance ((shall)) will not be considered a commission or other compensation if such reimbursement does not exceed three dollars per certificate issued, or in the case of a monthly premium plan extending beyond twelve months, not to exceed three dollars per loan transaction revision per year.
     (4) Any person violating subsection (3) of this section ((shall be liable)) is subject to a fine of not ((to exceed)) more than five hundred dollars and imprisonment for not ((to exceed)) more than six months for each ((instance of such)) violation.

NEW SECTION.  Sec. 4   A new section is added to chapter 48.17 RCW to read as follows:
     (1) As used in this section, "person" has the same meaning as in RCW 48.01.070.
     (2) For the purpose of this section, an act is committed in this state if it is committed, in whole or in part, in the state of Washington, or affects persons or property within the state and relates to or involves an insurance contract, health care services contract, or health maintenance agreement.
     (3) Any person who knowingly violates the provisions of RCW 48.17.060 (1) or (2) is guilty of a class B felony as provided in chapter 9A.20 RCW.
     (4) Any person who attempts or conspires to violate the provisions of RCW 48.17.060 (1) or (2) is guilty of a class C felony as provided in chapter 9A.20 RCW.
     (5) Any criminal penalty imposed under this section is in addition to, and not in lieu of, any other civil or administrative penalty or sanction otherwise authorized under state law.
     (6)(a) If the commissioner has cause to believe that any person has violated the provisions of RCW 48.17.060 (1) or (2), the commissioner may:
     (i) Issue and enforce a cease and desist order in accordance with the provisions of RCW 48.02.080;
     (ii) Suspend or revoke a license; or
     (iii) Assess a civil penalty of not more than twenty-five thousand dollars for each violation, after providing notice and an opportunity for a hearing in accordance with chapters 34.05 and 48.04 RCW.
     (b) Upon failure to pay a civil penalty when due, the attorney general may bring a civil action on behalf of the commissioner to recover the unpaid penalty. Any amounts collected by the commissioner must be paid to the state treasurer for the account of the general fund.

NEW SECTION.  Sec. 5   A new section is added to chapter 48.17 RCW to read as follows:
     (1) Any solicitor, agent, or broker soliciting, negotiating, or procuring an application for insurance or health care services in this state must make a good faith effort to determine whether the entity that is issuing the coverage is:
     (a) Authorized to transact insurance or health coverage in this state; or
     (b) Conducting business through a surplus lines broker licensed under chapter 48.15 RCW.
     (2) Any person investigating or adjusting a loss or claim on a subject of insurance in this state must make a good faith effort to determine whether the entity that has issued the coverage is:
     (a) Authorized to transact insurance or health coverage in this state; or
     (b) Conducting business through a surplus lines broker licensed under chapter 48.15 RCW.

Sec. 6   RCW 48.44.015 and 1983 c 202 s 2 are each amended to read as follows:
     (1) ((No)) A person ((shall)) may not in this state, by mail or otherwise, act as or hold himself or herself out to be a health care service contractor, as defined in RCW 48.44.010 without first being ((duly)) registered ((therefor)) with the commissioner.
     (2) The issuance, sale, or offer for sale in this state of securities of its own issue by any health care service contractor domiciled in this state other than the memberships and bonds of a nonprofit corporation shall be subject to the provisions of chapter 48.06 RCW relating to obtaining solicitation permits the same as if health care service contractors were domestic insurers.
     (3) Any person violating any provision of subsection (((1) or)) (2) of this section ((shall be liable)) is subject to a fine of not ((to exceed)) more than one thousand dollars and imprisonment for not ((to exceed)) more than six months for each ((instance of such)) violation.

NEW SECTION.  Sec. 7   A new section is added to chapter 48.44 RCW to read as follows:
     (1) As used in this section, "person" has the same meaning as in RCW 48.01.070.
     (2) For the purpose of this section, an act is committed in this state if it is committed, in whole or in part, in the state of Washington, or affects persons or property within the state and relates to or involves a health care services contract.
     (3) Any person who knowingly violates the provisions of RCW 48.44.015(1) is guilty of a class B felony as provided in chapter 9A.20 RCW.
     (4) Any person who attempts or conspires to violate the provisions of RCW 48.44.015(1) is guilty of a class C felony as provided in chapter 9A.20 RCW.
     (5) Any criminal penalty imposed under this section is in addition to, and not in lieu of, any other civil or administrative penalty or sanction otherwise authorized under state law.
     (6)(a) If the commissioner has cause to believe that any person has violated the provisions of RCW 48.44.015(1), the commissioner may:
     (i) Issue and enforce a cease and desist order in accordance with the provisions of RCW 48.02.080; or
     (ii) Assess a civil penalty of not more than twenty-five thousand dollars for each violation, after providing notice and an opportunity for a hearing in accordance with chapters 34.05 and 48.04 RCW.
     (b) Upon failure to pay a civil penalty when due, the attorney general may bring a civil action on behalf of the commissioner to recover the unpaid penalty. Any amounts collected by the commissioner must be paid to the state treasurer for the account of the general fund.

Sec. 8   RCW 48.44.060 and 1947 c 268 s 6 are each amended to read as follows:
     Except as otherwise provided in this chapter, any person who violates any of the provisions of this chapter ((shall be)) is guilty of a gross misdemeanor.

Sec. 9   RCW 48.46.027 and 1983 c 202 s 9 are each amended to read as follows:
     (1) ((No)) A person ((shall)) may not in this state, by mail or otherwise, act as or hold himself or herself out to be a health maintenance organization as defined in RCW 48.46.020 without first being ((duly)) registered ((therefor)) with the commissioner.
     (2) The issuance, sale, or offer for sale in this state of securities of its own issue by any health maintenance organization domiciled in this state other than the memberships and bonds of a nonprofit corporation ((shall be)) is subject to the provisions of chapter 48.06 RCW relating to obtaining solicitation permits the same as if health maintenance organizations were domestic insurers.
     (3) Any person violating any provision of subsection (((1) or)) (2) of this section ((shall be liable)) is subject to a fine of not ((to exceed)) more than one thousand dollars and imprisonment for not ((to exceed)) more than six months for each ((instance of such)) violation.

NEW SECTION.  Sec. 10   A new section is added to chapter 48.46 RCW to read as follows:
     (1) As used in this section, "person" has the same meaning as in RCW 48.01.070.
     (2) For the purpose of this section, an act is committed in this state if it is committed, in whole or in part, in the state of Washington, or affects persons or property within the state and relates to or involves a health maintenance agreement.
     (3) Any person who knowingly violates the provisions of RCW 48.46.027(1) is guilty of a class B felony as provided in chapter 9A.20 RCW.
     (4) Any person who attempts or conspires to violate the provisions of RCW 48.46.027(1) is guilty of a class C felony as provided in chapter 9A.20 RCW.
     (5) Any criminal penalty imposed under this section is in addition to, and not in lieu of, any other civil or administrative penalty or sanction otherwise authorized under state law.
     (6)(a) If the commissioner has cause to believe that any person has violated the provisions of RCW 48.46.027(1), the commissioner may:
     (i) Issue and enforce a cease and desist order in accordance with the provisions of RCW 48.02.080; or
     (ii) Assess a civil penalty of not more than twenty-five thousand dollars for each violation, after providing notice and an opportunity for a hearing in accordance with chapters 34.05 and 48.04 RCW.
     (b) Upon failure to pay a civil penalty when due, the attorney general may bring a civil action on behalf of the commissioner to recover the unpaid penalty. Any amounts collected by the commissioner must be paid to the state treasurer for the account of the general fund.

Sec. 11   RCW 48.46.420 and 1990 c 119 s 10 are each amended to read as follows:
     (1) Except as otherwise provided in this chapter, any health maintenance organization which, or person who, violates any provision of this chapter ((shall be)) is guilty of a gross misdemeanor.
     (2) A health maintenance organization that fails to comply with the net worth requirements of this chapter must cure that defect in compliance with an order of the commissioner rendered in conformity with rules adopted pursuant to chapter 34.05 RCW. The commissioner is authorized to take appropriate action to assure that the continued operation of the health maintenance organization will not be hazardous to its enrolled participants.

NEW SECTION.  Sec. 12   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.