2010 -- H 7605

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LC01803

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2010

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A N A C T

RELATING TO INSURANCE - ANTI-FRAUD ACT

     Introduced By: Representatives Kennedy, Marcello, Pacheco, Carter, and Naughton

     Date Introduced: February 25, 2010

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 27 of the General Laws entitled "INSURANCE" is hereby amended

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by adding thereto the following chapter:

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     CHAPTER 29.3

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ANTI-FRAUD ACT

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     27-29.3-1. Definitions. -- As used in this chapter:

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     (1) "Business of insurance" means the writing of insurance or the reinsuring of risks by

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an insurer, including acts necessary or incidental to writing insurance or reinsuring risks and the

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activities of persons who act as or are officers, directors, agents or employees of insurers, or who

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are other persons authorized to act on their behalf.

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     (2) "Commissioner" means the director of the department of business regulation or his or

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her designee or the division of insurance.

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     (3) "Fraudulent insurance act" means an act or omission committed by a person who,

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knowingly and with intent to defraud, commits, or conceals any material information concerning,

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one or more of the following:

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     (i) Presenting, causing to be presented or preparing with knowledge or belief that it will

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be presented to or by an insurer, a reinsurer, broker or its agent, false information as part of, in

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support of or concerning a fact material to one or more of the following:

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     (A) An application for the issuance or renewal of an insurance policy or reinsurance

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contract;

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     (B) The rating of an insurance policy or reinsurance contract;

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     (C) A claim for payment or benefit pursuant to an insurance policy or reinsurance

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contract;

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     (D) Premiums paid on an insurance policy or reinsurance contract;

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     (E) Payments made in accordance with the terms of an insurance policy or reinsurance

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contract;

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     (F) A document filed with the commissioner or the chief insurance regulatory official of

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another jurisdiction;

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     (G) The financial condition of an insurer or reinsurer;

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     (H) The formation, acquisition, merger, reconsolidation, dissolution or withdrawal from

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one or more lines of insurance or reinsurance in all or part of this state by an insurer or reinsurer;

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     (I) The issuance of written evidence of insurance; or

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     (J) The reinstatement of an insurance policy;

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     (ii) Solicitation of acceptance of new or renewal insurance risks on behalf of an insurer,

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reinsurer or other person engaged in the business of insurance by a person who knows or should

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know that the insurer or other person responsible for the risk is insolvent at the time of the

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transaction;

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     (iii) Removal, concealment, alteration or destruction of the assets or records of an insurer,

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reinsurer or other person engaged in the business of insurance;

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     (iv) Willful embezzlement, abstracting, purloining, or conversion of monies, funds,

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premiums, credits or other property of an insurer, reinsurer or person engaged in the business of

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insurance;

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     (v) Transaction of the business of insurance in violation of laws requiring a license,

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certificate of authority or other legal authority for the transaction of the business of insurance; or

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     (vi) Attempt to commit, aiding or abetting in the commission of, or conspiracy to commit

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the acts or omissions specified in this subsection.

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     (4) 'Insurance" means a contract or arrangement in which one undertakes to:

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     (i) Pay or indemnify another as to loss from certain contingencies call “risks,” including

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through reinsurance;

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     (ii) Pay or grant a specified amount or determinable benefit to another in connection with

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ascertainable risk contingencies;

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     (iii) Pay an annuity to another; or

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     (iv) Act as surety.

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     (5) "Insurer" means a person entering into arrangements or contracts of insurance or

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reinsurance and who agrees to perform any of the acts set forth in subdivision (4) of this section

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or fraternal benefit societies, medical and hospital service corporations, dental service

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corporations and/or health maintenance organizations. A person is an insurer regardless of

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whether the person is acting in violation of laws requiring a certificate of authority or regardless

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of whether the person denies being an insurer.

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     (6) "NAIC" means the National Association of Insurance Commissioners.

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     (7) "Person" means an individual, a corporation, a partnership, an association, a joint

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stock company, a trust, an unincorporated organization, or any similar entity or any combination

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of the foregoing.

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     (8) "Policy" means an individual or group policy, group certificate, contract or

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arrangement of insurance or reinsurance affecting the rights of a resident of this state or bearing a

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reasonable relation to this state, regardless of whether delivered or issued for delivery in this

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state.

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     (9) "Reinsurance" means a contract, binder of coverage (including placement slip) or

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arrangement under which an insurer procures insurance for itself in another insurer as to all or

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part of an insurance risk of the originating insurer.

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     27-29.3-2. Fraudulent insurance acts, interference and participation of convicted

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felons prohibited. -- (a) A person shall not commit a fraudulent insurance act.

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     (b) A person shall not knowingly or intentionally interfere with the enforcement of the

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provisions of this chapter or investigations of suspected or actual violations of this chapter.

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     (c)(1) A person convicted of a felony involving dishonesty or breach of trust shall not

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participate in the business of insurance without the written consent of the commissioner.

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     (2) A person in the business of insurance shall not knowingly or intentionally permit a

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person convicted of a felony involving dishonesty or breach of trust to participate in the business

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of insurance without the written consent of the commissioner.

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     27-29.3-3. Fraud warning required. -- (a) Notwithstanding any similar requirements in

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title 28, every claim form and application for insurance, regardless of the form of transmission,

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shall contain the following statement or a substantially similar statement:

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     "Any person who knowingly presents a false or fraudulent claim for payment of a loss or

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benefit or knowingly presents false information in an application for insurance is guilty of a crime

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and may be subject to fines and confinement in prison."

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     (b) The lack of a statement as required in subsection (a) of this section does not constitute

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a defense in any prosecution for a fraudulent insurance act.

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     (c) The requirements of this section shall not apply to reinsurance claims forms or

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reinsurance applications.

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     (d) The requirements of this section shall not apply to any claim form for health

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insurance which is on a form promulgated by the centers for Medicare and Medicaid services or

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in electronic format pursuant to 45 CFR Part 162.

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     27-29.3-4. Other law enforcement or regulatory authority. -- This chapter shall not:

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     (1) Preempt the authority or relieve the duty of other law enforcement or regulatory

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agencies to investigate, examine and prosecute suspected violations of law;

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     (2) Prevent or prohibit a person from disclosing voluntarily information concerning

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insurance fraud to a law enforcement or regulatory agency; or

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     (3) Limit the powers granted elsewhere by the laws of this state to investigate and

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examine possible violations of law and to take appropriate action against any wrongdoing.

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     27-29.3-5. Insurer antifraud initiatives. -- (a) Insurers shall have antifraud initiatives

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reasonably calculated to detect, report, prosecute and prevent fraudulent insurance acts, antifraud

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initiatives may include:

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     (1) Fraud investigators, who may be insurer employees or independent contractors; or

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     (2) An antifraud plan.

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     (b) A person engaged in the business of insurance having knowledge or a reasonable

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belief that a fraudulent insurance act is being, will be or has been committed shall provide such

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information to the governmental unit responsible for investigation such act, or if no such unit

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exists to the commissioner.

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     27-29.3-6. Penalties. -- A person who violates this chapter is subject to suspension or

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revocation of license or certificate of authority or administrative penalties per Rhode Island

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general laws section 42-14-16 or both. Suspension or revocation of license or certificate of

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authority and imposition of administrative penalties shall be pursuant to an order of the

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commissioner issued under Rhode Island general laws section 42-35-9 and/or 42-35-12. The

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commissioner's order may require a person found to be in violation of this chapter to make

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restitution to persons aggrieved by violations of this chapter.

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     SECTION 2. This act shall take effect on January 1, 2011.

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LC01803

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE - ANTI-FRAUD ACT

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     The act would adopt portions of the National Association of Insurance Commissioners

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Model Insurance Fraud Prevention Act that would strengthen insurance regulation. In addition to

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confirming the illegality of insurance fraud, the act would require a warning on every insurance

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application and claim forms to warn the applicant or claimant that making any claim for proceeds

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of an insurance policy containing false, incomplete or misleading information is subject to

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prosecution and punishment for insurance fraud and require that all insurers have an antifraud

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plan.

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     This act would take effect on January 1, 2011.

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LC01803

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