Current Status Introducing Body:House Bill Number:3977 Primary Sponsor:Meacham Committee Number:02 Type of Legislation:GB Subject:Insurance Fraud Bureau Residing Body:Senate Current Committee:Banking and Insurance Computer Document Number:BBM/10337JM.93 Introduced Date:19930414 Date of Last Amendment:19940324 Last History Body:Senate Last History Date:19940329Z Last History Type:Introduced, read first time, referred to Committee Scope of Legislation:Statewide All Sponsors:Meacham Type of Legislation:General Bill
Bill Body Date Action Description CMN Leg Involved
____ ______ ____________ ______________________________ ___ ____________
3977 Senate 19940329 Introduced, read first time, 02
referred to Committee
3977 House 19940325 Read third time, sent to
Senate
3977 House 19940324 Amended, read second time,
unanimous consent for third
reading on next Legislative
day
3977 House 19940223 Committee Report: Favorable 26
with amendment
3977 House 19930414 Introduced, read first time, 26
referred to Committee
View additional legislative information at the LPITS web site.
AMENDED
March 24, 1994
H. 3977
S. Printed 3/24/94--H.
Read the first time April 14, 1993.
1. Estimated Cost to State-First Year$842,926
2. Estimated Cost to State-Annually Thereafter$602,337
House Bill 3977, as amended by the House Labor, Commerce and Industry Committee amends Chapter 55 of Title 38 of the S.C. Code of Laws, 1976, by adding Article 5, Insurance Fraud and Reporting Immunity act; and, by adding Section 42-9-440.
The purpose of establishing the Insurance Fraud and Reporting Immunity Act is to allow reporting of suspected insurance fraud; to grant immunity for reporting the suspected fraud; to prescribe penalties; to require restitution for victims of fraud; to establish a division within the Office of the Attorney General to prosecute insurance fraud; and, to require the investigation of alleged insurance fraud by the State Law Enforcement Division (SLED).
Enactment of House Bill 3977 will necessitate expenditures from the general fund of $842,926 for the first year of operation and $602,337 annually thereafter.
Sections 38-55-540 and 38-55-550 establish fines and civil penalties for violating this act. Fines are not to exceed $50,000 upon conviction of insurance fraud.
The Attorney General's Office estimates a cost of $373,210 with 7 positions will be required to establish the Insurance Fraud Division with $326,000 in recurring costs. Revenue estimates generated by convictions cannot be determined by the Attorney General's Office since authority regarding penalties does not reside with them.
ATTORNEY GENERAL'S COST
Personal Service $196,000
(3 attorneys; 3 clerical; 1 paralegal)
Employer Contributions (25%) 49,000
Operating-Recurring 81,000
TOTAL RECURRING $326,000
Operating-Non-Recurring 47,210
TOTAL COST - ATTORNEY GENERAL'S OFFICE$373,210
Section 38-55-560 requires SLED to investigate all claims or allegations of violations of Sections 38-55-170 and 38-55-540 of the Code of Laws, 1976, and related criminal insurance activity received from the Attorney General pursuant to this section.
SLED estimates the proposed legislation will cost between $400,000-$500,000 which includes 5 positions. Identified below are SLED's approximate costs required to implement House Bill 3977. First year costs are estimated at $469,716 with recurring costs of $276,337.
STATE LAW ENFORCEMENT DIVISION'S COST
Personal Service $155,163
(4 special agents III; 1 adm asst II)
Employer Contributions 45,059
Operating-Recurring 76,115
TOTAL RECURRING $276,337
Operating-Non-Recurring 193,379
TOTAL COST - SLED $469,716
Section 42-9-440 is added to the 1976 Code whereby the Workers' Compensation Commission shall refer all cases of suspected false statement or misrepresentation to the Insurance Fraud Division of the office of the Attorney General for investigation and prosecution.
Prepared By: Approved By:
Cheryl H. Morris George N. Dorn, Jr.
State Budget Analyst State Budget Division
Kenneth Brown
State Budget Analyst
TO ESTABLISH WITHIN THE SOUTH CAROLINA DEPARTMENT OF INSURANCE AN INSURANCE FRAUD BUREAU, PROVIDE FOR THE POWERS AND DUTIES OF THE BUREAU, AND PROVIDE FOR RELATED MATTERS, INCLUDING A PROVISION THAT A PERSON CONVICTED FOR THE VIOLATION OF ANY LAW CONCERNING INSURANCE FRAUD, FOLLOWING THE INVESTIGATION AND REFERRAL FOR PROSECUTION BY THE BUREAU, SHALL BE ORDERED TO MAKE RESTITUTION FOR FINANCIAL LOSS SUSTAINED AS A RESULT OF THAT VIOLATION.
Amend Title To Conform
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Chapter 55 of Title 38 of the 1976 Code is amended by adding:
Section 38-55-510. This article is known and may be cited as the `Omnibus Insurance Fraud and Reporting Immunity Act'.
Section 38-55-520. The purpose of this article is to confront aggressively the problem of insurance fraud in South Carolina by facilitating the detection of insurance fraud; to allow reporting of suspected insurance fraud; to grant immunity for reporting suspected insurance fraud; to prescribe penalties for insurance fraud; to require restitution for victims of insurance fraud; to establish a division within the Office of the Attorney General to prosecute insurance fraud; and to require the investigation of alleged insurance fraud by State Law Enforcement Division.
Section 38-55-530. As used in this article:
(a) `Authorized agency' means any duly constituted criminal investigative department or agency of the United States or of this State; the Department of Insurance; the Department of Revenue and Taxation, Division of Motor Vehicles; the Workers' Compensation Commission; the Office of the Attorney General of this State; or the prosecuting attorney of any judicial circuit, county, municipality, or political subdivision of this State or of the United States, and their respective employees or personnel acting in their official capacity.
(b) `Insurer' shall have the meaning set forth in Section 38-1-20(25) and includes any authorized insurer, self-insurer, reinsurer, broker, producer, or any agent thereof.
(c) `Person' means any natural person, company, corporation, unincorporated association, partnership, professional corporation, or other legal entity and includes any applicant, policyholder, claimant, medical provider, vocational rehabilitation provider, attorney, agent, insurer, fund, or advisory organization.
(d) `False statement and misrepresentation' means a statement or representation made by a person that is false, material, made with the person's knowledge of the falsity of the statement and made for the purpose of obtaining or denying or causing another to obtain or deny any benefit or payment in connection with an insurance transaction and such shall constitute fraud.
(e) `Immune' means that neither a civil action nor a criminal prosecution may arise from any action taken pursuant to this article unless actual malice on the part of the reporting person or gross negligence or reckless disregard for the rights of the reported person is present.
Section 38-55-540. Any person or insurer who makes a false statement or misrepresentation, and any other person knowingly, with an intent to injure, defraud or deceive, who assists, abets, solicits, or conspires with such person or insurer to make a false statement or misrepresentation, is guilty of a:
(1) misdemeanor, for a first offense violation, if the amount of the benefit received is less than one thousand dollars. Upon conviction, the person must be punished by a fine not to exceed five hundred dollars or by imprisonment not to exceed thirty days;
(2) misdemeanor, for a first offense violation, if the amount of the benefit received is one thousand dollars or more. Upon conviction, the person must be punished by a fine not to exceed fifty thousand dollars or by imprisonment for a term not to exceed three years, or by both such fine and imprisonment;
(3) felony, for a second or subsequent violation, regardless of the amount of the benefit received. Upon conviction, the person must be punished by a fine not to exceed fifty thousand dollars or by imprisonment for a term not to exceed ten years, or by both such fine and imprisonment.
Any person or insurer convicted under this section must be ordered to make full restitution to the victim or victims for any economic benefit or advantage which has been obtained by the person or insurer as a result of that violation.
Section 38-55-550. (A) In addition to any criminal liability, any person who is found by a court of competent jurisdiction to have violated any provision of this act, including Section 38-55-170, must be subject to a civil penalty for each violation as follows:
(1) for a first offense, a fine not to exceed five thousand dollars;
(2) for a second offense, a fine not less than five thousand dollars but not to exceed ten thousand dollars;
(3) for a third and subsequent offense, a fine not less than ten thousand dollars but not to exceed fifteen thousand dollars.
(B) The civil penalty shall be paid to the director of the Insurance Fraud Division to be used in accordance with subsection (D) of this section. The court may also award court costs and reasonable attorneys' fees to the director. When requested by the director, the Attorney General may assign one or more deputy attorney generals to assist the bureau in any civil court proceedings against the person.
(C) Nothing in subsections (A) and (B) shall be construed to prohibit the director of the Insurance Fraud Division and the person alleged to be guilty of a violation of this act from entering into a written agreement in which the person does not admit or deny the charges but consents to payment of the civil penalty. A consent agreement may not be used in a subsequent civil or criminal proceeding relating to any violation of this act.
(D) All revenues from the civil penalties imposed pursuant to this section shall be used to provide funds for the costs of enforcing and administering the provisions of this act.
Section 38-55-560. (a) There is established in the Office of the Attorney General a division to be known as the Insurance Fraud Division, which must prosecute violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity. Upon receipt of any claims or allegations of violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity, the Attorney General shall forward the information to the State Law Enforcement Division for investigation.
(b) The Attorney General, upon receipt of any claims or allegations of violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity, is empowered to:
(1) refer the matter for investigation to the State Law Enforcement Division;
(2) prosecute persons determined to be in violation of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity in a court of appropriate jurisdiction; and
(3) collect fines and restitution ordered by such courts. Where deemed appropriate, the Attorney General may use the Setoff Debt Collection Act to collect fines and restitution ordered as a result of actions brought pursuant to Sections 38-55-170 and 38-55-540.
(c) The State Law Enforcement Division shall investigate thoroughly all claims or allegations of violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity received from the Attorney General pursuant to this section.
(d) The Insurance Fraud Division of the Office of Attorney General and the investigative services of the State Law Enforcement Division as provided by this section must be funded by an appropriation of not less than two hundred thousand dollars annually from the general revenues of the State derived from the insurance premium taxes collected by the Department of Insurance and/or from fines assessed under Sections 38-55-170 and 38-55-540 which shall be deposited in the general revenue fund to the credit of the Office of the Attorney General and the State Law Enforcement Division to offset the costs of this program;provided that the funds generated from these fines, to be utilized by either the Office of the Attorney General or SLED, shall not total more than $500,000. These monies shall be shared equally on a fifty-fifty basis by the Office of the Attorney General and the State Law Enforcement Division, and the balance must go to the general fund of the State.
Section 38-55-570. (a) Any person, insurer, or authorized agency having reason to believe that another has made a false statement or misrepresentation or has knowledge of a suspected false statement or misrepresentation shall, for purposes of reporting and investigation, notify the Insurance Fraud Division of the Office of the Attorney General of the knowledge or belief and provide any additional information within his possession relative thereto.
(b) Upon request by the Insurance Fraud Division, any person, insurer, or authorized agency shall release to the Insurance Fraud Division any or all information relating to any suspected false statement or misrepresentation including, but not limited to:
(1) insurance policy information relevant to the investigation, including any application for such a policy;
(2) policy premium payment records, audits, or other documents which are available;
(3) history of previous claims, payments, fees, commissions, service bills, or other documents which are available; and
(4) other information relating to the investigation of the suspected false statement or misrepresentation.
(c) Any authorized agency provided with or obtaining information relating to a suspected false statement or misrepresentation as provided for above may release or provide the information to any other authorized agency. The Department of Insurance, the Department of Revenue and Taxation, Division of Motor Vehicles, and the Workers' Compensation Commission shall refer, but not adjudicate, all cases of suspected or reported false statement or misrepresentation to the Insurance Fraud Division of the Office of Attorney General for appropriate investigation or prosecution, or both.
(d) Except as otherwise provided by law, any information furnished pursuant to this section shall be privileged and shall not be part of any public record. Any information or evidence furnished to an authorized agency pursuant to this section shall not be subject to subpoena or subpoena duces tecum in any civil or criminal proceeding unless, after reasonable notice to any person, insurer, or authorized agency which has an interest in the information and after a subsequent hearing, a court of competent jurisdiction determines that the public interest and any ongoing investigation will not be jeopardized by obeyance of the subpoena or subpoena duces tecum.
Section 38-55-580. (a) A person, insurer, or authorized agency, when acting without malice or in good faith, is immune from any liability arising out of filing reports, cooperating with investigations by any authorized agency, or furnishing other information, whether written or oral, and whether in response to a request by an authorized agency or upon their own initiative, concerning any suspected, anticipated, or completed insurance fraud, when such reports or information are provided to or received by any authorized agency.
(b) Nothing herein abrogates or modifies in any way common law or statutory privilege or immunity heretofore enjoyed by any person, insurer, or authorized agency.
(c) Nothing herein limits the liability of any person or insurer who, with malice or in bad faith, makes a report of suspected fraud under the provisions of this article.
Section 38-55-590. The director of the Insurance Fraud Division in the Office of the Attorney General shall annually report to the General Assembly regarding:
(a) the status of matters reported to the division, if not privileged information by law;
(b) the number of allegations or reports received;
(c) the number of matters referred to SLED for investigation;
(d) the outcome of all investigations and prosecutions under this act, if not privileged by law;
(e) the total amount of fines levied by the court and paid to or deposited by the division; and
(f) patterns and practices of fraudulent insurance transactions identified in the course of performing its duties. The director shall also periodically report this information to insurers transacting business in this State, health maintenance organizations transacting business in this State, and other persons, including the State of South Carolina, which provide benefits for health care in this State, whether these benefits are administered directly or through a third person."
SECTION 2. The 1976 Code is amended by adding:
"Section 42-9-440. The commission shall refer all cases of suspected false statement or misrepresentation to the Insurance Fraud Division of the Office of the Attorney General for investigation and prosecution, if warranted, pursuant to the Omnibus Insurance Fraud and Reporting Immunity Act.
For the purposes of this section, `false statement and misrepresentation' means a statement or representation made by a person that is false, material, made with the person's knowledge of the falsity of the statement and made for the purpose of obtaining or denying or causing another to obtain or deny any benefit or payment in connection with an insurance transaction and such shall constitute fraud."
SECTION 3. This act takes effect July 1, 1994.