[First Reprint]

SENATE, No. 754

STATE OF NEW JERSEY

INTRODUCED FEBRUARY 15, 1996

By Senators CARDINALE and Ciesla

An Act concerning insurance fraud and certain self-insurance funds and amending P.L.1983, c.320 ¹and P.L.1993, c.362¹.

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

    1. Section 3 of P.L.1983, c.320 (C.17:33A-3) is amended to read as follows:

    3. As used in this act:

    "Attorney General" means the Attorney General of New Jersey or his designated representatives.

    "Commissioner" means the Commissioner of ¹the Department of Banking and¹ Insurance.

    "Director" means the Director of the Division of Insurance Fraud Prevention in the Department of ¹Banking and¹ Insurance.

    "Division" means the Division of Insurance Fraud Prevention established by this act.

    "Hospital" means any general hospital, mental hospital, convalescent home, nursing home or any other institution, whether operated for profit or not, which maintains or operates facilities for health care.

    "Insurance company" means:

    a. Any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes (C.17:17-1 et seq.), or Subtitle 3 of Title 17B of the New Jersey Statutes (C.17B:17-1 et seq.);

    b. Any medical service corporation operating pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.);

    c. Any hospital service corporation operating pursuant to P.L.1938, c.366 (C.17:48-1 et seq.);

    d. Any health service corporation operating pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.);

    e. Any dental service corporation operating pursuant to P.L.1968, c.305 (C.17:48C-1 et seq.);

    f. Any dental plan organization operating pursuant to P.L.1979, c.478 (C.17:48D-1 et seq.);

    g. Any insurance plan operating pursuant to P.L.1970, c.215 (C.17:29D-1);

    h. The New Jersey Insurance Underwriting Association operating pursuant to P.L.1968, c.129 (C.17:37A-1 et seq.);

    i. The New Jersey Automobile Full Insurance Underwriting Association operating pursuant to P.L.1983, c.65 (C.17:30E-1 et seq.) and the Market Transition Facility operating pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11); [and]

    j. Any risk retention group or purchasing group operating pursuant to the "Liability Risk Retention Act of 1986," 15 U.S.C.§3901 et seq.;

    k. Any fund or joint self-insurance fund operating pursuant to Article 1 of chapter 10 of Title 40A of the New Jersey Statutes (N.J.S.40A:10-1 et seq.), Article 3 of chapter 10 of Title 40A of the New Jersey Statutes (N.J.S.40A:10-6 et seq.), Article 4 of chapter 10 of Title 40A of the New Jersey Statutes (N.J.S.40A:10-12 et seq.), P.L.1983, c.372 (C.40A:10-36 et seq.), P.L.1983, c.108 (C.18A:18B-1 et seq.), or P.L.1992, c.51 (C.40A:10-52 et seq.); and

    l. The New Jersey State Health Benefits Program operating pursuant to P.L.1961, c.49 (C.52:14-17.25 et seq.).

    "Person" means a person as defined in R.S.1:1-2, and shall include, unless the context otherwise requires, a practitioner.

    "Practitioner" means a licensee of this State authorized to practice medicine and surgery, psychology, chiropractic, or law or any other licensee of this State whose services are compensated, directly or indirectly, by insurance proceeds, or a licensee similarly licensed in other states and nations or the practitioner of any nonmedical treatment rendered in accordance with a recognized religious method of healing.

    "Producer" means an insurance producer as defined in section 2 of P.L.1987, c.293 (C.17:22A-2), licensed to transact the business of insurance in this State pursuant to the provisions of the "New Jersey Insurance Producer Licensing Act," P.L.1987, c.293 (C.17:22A-1 et seq.).

    "Statement" includes, but is not limited to, any application, writing, notice, expression, statement, proof of loss, bill of lading, receipt, invoice, account, estimate of property damage, bill for services, diagnosis, prescription, hospital or physician record, X-ray, test result or other evidence of loss, injury or expense.

(cf: P.L.1991, c.331, s.1)

    2. Section 8 of P.L.1983, c.320 (C.17:33A-8) is amended to read as follows:

    8. a. There is established in the Department of ¹Banking and¹ Insurance the Division of Insurance Fraud Prevention. The division shall assist the commissioner in administratively investigating allegations of insurance fraud and in developing and implementing programs to prevent insurance fraud and abuse. The division shall promptly notify the Attorney General of any insurance application or claim which involves criminal activity. When so required by the commissioner and the Attorney General, the division shall cooperate with the Attorney General in the investigation and prosecution of criminal violations.

    b. The commissioner shall appoint the full-time supervisory and investigative personnel of the division, including the director, who shall hold their employment at the pleasure of the commissioner without regard to the provisions of Title 11A of the New Jersey Statutes and shall receive such salaries as the commissioner from time to time designates, and who shall be qualified by training and experience to perform the duties of their position.

    c. When so requested by the commissioner, the Attorney General may assign one or more deputy attorneys general to assist the division in the performance of its duties.

    d. The commissioner shall also appoint the clerical and other staff necessary for the division to fulfill its responsibilities under this act. The personnel shall be employed subject to the provisions of Title 11A of the New Jersey Statutes, and other applicable statutes.

    e. The commissioner shall appoint an insurance fraud advisory board consisting of eight representatives from insurers doing business in this State. The members of the board shall serve for two year terms and until their successors are appointed and qualified. The members of the board shall receive no compensation. The board shall advise the commissioner with respect to the implementation of this act, when so requested by the commissioner.

    f. The Director of the Division of Budget and Accounting in the Department of the Treasury shall, on or before September 1 in each year, ascertain and certify to the commissioner the total amount of expenses incurred by the State in connection with the administration of this act during the preceding fiscal year, which expenses shall include, in addition to the direct cost of personal service, the cost of maintenance and operation, the cost of retirement contributions made and the workers' compensation paid for and on account of personnel, rentals for space occupied in State owned or State leased buildings and all other direct and indirect costs of the administration thereof.

    g. The commissioner shall, on or before October 15 in each year, apportion the amount so certified to him among all of the ¹insurance¹ companies writing ¹or providing¹ the class or classes of insurance described in Subtitle 3 of Title 17 of the Revised Statutes (C.17:17-1 et seq.), and Subtitle 3 of Title 17B of the New Jersey Statutes (C.17B:17-1 et seq.), within this State in the proportion that the net premiums received by each of them for such insurance written ¹or provided ¹ or renewed on risks within this State during the calendar year immediately preceding, as reported to him, bears to the sum total of all such net premiums received by all companies writing ¹or providing¹ that insurance within the State during the year, as reported, except that no one company shall be assessed for more than 5% of the amount apportioned. The commissioner shall certify the sum apportioned to each company on or before November 15 next ensuing, and to the Division of Taxation in the Department of the Treasury. Each company shall pay the amount so certified as apportioned to it to the said Division of Taxation on or before December 31 next ensuing, and the sum paid shall be paid into the State Treasury in reimbursement to the State for the expenses paid.

    "Net premiums received" means gross premiums written, less return premiums thereon and dividends credited or paid to policyholders and also means and includes contributions made to funds and joint self-insurance funds which are included in the definition of an insurance company pursuant to section 3 of P.L.1983, c.320 (C.17:33A-3) and the New Jersey State Health Benefits Program, less return contributions.

    h. The total appropriations recoverable under this section for the operation of the division shall not exceed $500,000.00 during its first full fiscal year of operation.

(cf: P.L.1991, c.331, s.5)

    ¹3. Section 4 of P.L.1983, c.320 (C.17:33A-4) is amended to read as follows:

    4. a. A person or a practitioner violates this act if he:

    (1) Presents or causes to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy or coverage, or the "Unsatisfied Claim and Judgment Fund Law," P.L.1952, c.174 (C.39:6-61 et seq.), knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim; or

    (2) Prepares or makes any written or oral statement that is intended to be presented to any insurance company, the Unsatisfied Claim and Judgment Fund or any claimant thereof in connection with, or in support of or opposition to any claim for payment or other benefit pursuant to an insurance policy or coverage, or the "Unsatisfied Claim and Judgment Fund Law," P.L.1952, c.174 (C.39:6-61 et seq.), knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim; or

    (3) Conceals or knowingly fails to disclose the occurrence of an event which affects any person's initial or continued right or entitlement to (a) any insurance benefit or payment or (b) the amount of any benefit or payment to which the person is entitled;

    (4) Prepares or makes any written or oral statement, intended to be presented to any insurance company or producer for the purpose of obtaining:

    (a) a motor vehicle insurance policy, that the person to be insured resides or is domiciled in this State when, in fact, that person resides or is domiciled in a state other than this State; or

    (b) an insurance policy or coverage, knowing that the statement contains any false or misleading information concerning any fact or thing material to an insurance application or contract; or

    (5) Conceals or knowingly fails to disclose any evidence, written or oral, which may be relevant to a finding that a violation of the provisions of paragraph (4) of this subsection a. has or has not occurred.

    b. A person or practitioner violates this act if he knowingly assists, conspires with, or urges any person or practitioner to violate any of the provisions of this act.

    c. A person or practitioner violates this act if, due to the assistance, conspiracy or urging of any person or practitioner, he knowingly benefits, directly or indirectly, from the proceeds derived from a violation of this act.

    d. A person or practitioner who is the owner, administrator or employee of any hospital violates this act if he knowingly allows the use of the facilities of the hospital by any person in furtherance of a scheme or conspiracy to violate any of the provisions of this act.

    e. A person or practitioner violates this act if, for pecuniary gain, for himself or another, he directly or indirectly solicits any person or practitioner to engage, employ or retain either himself or any other person to manage, adjust or prosecute any claim or cause of action, against any person, for damages for negligence, or, for pecuniary gain, for himself or another, directly or indirectly solicits other persons to bring causes of action to recover damages for personal injuries or death, or for pecuniary gain, for himself or another, directly or indirectly solicits other persons to make a claim for personal injury protection benefits pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.); provided, however, that this subsection shall not apply to any conduct otherwise permitted by law or by rule of the Supreme Court.¹

(cf: P.L.1995, c.132, s.1)

    ¹4. Section 6 of P.L.1983, c.320 (C.17:33A-6) is amended to read as follows:

    6. a. Insurance claim forms shall contain a statement in a form approved by the commissioner that clearly states in substance the following: "Any person who knowingly files a statement of claim containing any false or misleading information is subject to criminal and civil penalties."

    b. (Deleted by amendment, P.L.1987, c.342.)

    c. Insurance application forms shall contain a statement in a form approved by the commissioner that clearly states in substance the following: "Any person who includes any false or misleading information on an application for an insurance policy or coverage is subject to criminal and civil penalties."¹

(cf: P.L.1995 ,c.132, s.2)

    ¹5. Section 1 of P.L.1993, c.362 (C.17:33A-15) is amended to read as follows:

    1. a. Every insurer writing or providing health insurance in this State shall, within 120 days of the adoption of regulations by the commissioner pursuant to this act, file with the commissioner a plan for the prevention of fraudulent health insurance claims. The plan shall be deemed approved by the commissioner if not affirmatively approved or disapproved by the commissioner within 90 days of the date of filing. The commissioner may call upon the expertise of the director in his review of plans filed pursuant to this subsection. During the 90-day approval period the commissioner may request such amendments to the plan as he deems necessary. Any subsequent amendments to a plan filed with and approved by the commissioner shall be submitted for filing and deemed approved if not affirmatively approved or disapproved within 90 days from the filing date.

    b. The implementation of plans filed and approved pursuant to subsection a. of this section shall be monitored by the division. The division shall promptly notify the Attorney General of any evidence of criminal activity encountered in the course of monitoring the implementation and execution of the plans. Each insurer writing or providing health insurance in this State shall report to the director on an annual basis, beginning January 1, 1994, on the experience in implementing its fraud prevention plan.

    c. In addition to any other penalties provided pursuant to P.L.1983, c.320 (C.17:33A-1 et seq.), the commissioner may impose a penalty of up to $5,000 per day on any insurer for: failure to submit a plan; failure to submit any amendments to an approved plan; failure to properly implement an approved plan in a reasonable manner and within a reasonable time period; failure to provide a report pursuant to subsection b. of this section; or for any other violation of the provisions of this section. Any penalty imposed and collected pursuant to this subsection shall be deposited in the unemployment compensation fund created pursuant to R.S.43:21-9 and shall be dedicated exclusively to the purposes stated therein.

    d. For the purposes of this section, "insurer" means an insurance company as defined in subsections a., b., c., d., e., [and] f. ,k.and l. of section 3 of P.L.1983, c.320 (C.17:33A-3).¹

(cf: P.L.1993,c.362,s.1)

    ¹[3.] 6.¹ This act shall take effect immediately.

Includes self-insurance funds of public entities under the "New Jersey Insurance Fraud Prevention Act."