SENATE, No. 2039
STATE OF NEW JERSEY
INTRODUCED MAY 8, 1997
By Senator ADLER
An Act concerning automobile insurance fraud and revising various parts of the statutory law.
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 Banking and Insurance.
"Director" means the Director of the Division of Insurance Fraud Prevention in the Department of Banking and 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.
"Pattern" means five or more related violations of P.L.1983, c.320 (C.17:33A-1 et seq.). Violations are related if they involve either the same victim, or same or similar actions on the part of the person or practitioner charged with violating P.L.1983, c.320 (C.17:33A-1 et seq.).
"Person" means a person as defined in R.S.1:1-2, and shall include, unless the context otherwise requires, a practitioner.
"Principal residence" means that residence at which a person spends the majority of his time. Principal residence may be a place of abode separate and distinct from a person's domicile. Mere seasonal or weekend residence within this State does not constitute principal residence within this State.
"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 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 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 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] maintains a principal residence in this State when, in fact, that [person resides or is domiciled] person's principal residence is in a state other than this State; or
(b) an insurance policy, 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.
(cf: P.L.1995, c.132, s.1)
3. Section 5 of P.L.1983, c.320 (C.17:33A-5) is amended to read as follows:
5. a. [If a person or practitioner is found by a court of competent jurisdiction, pursuant to a claim initiated by the commissioner, to have violated any provision of this act, the person or practitioner shall be subject to a civil penalty not to exceed $5,000.00 for the first violation, $10,000.00 for the second violation and $15,000.00 for each subsequent violation.] Whenever the commissioner determines that a person has violated any provision of P.L.1983, c.320 (C.17:33A-1 et seq.), the commissioner shall either:
(1) bring a civil action in accordance with subsection b. of this section; or
(2) levy a civil administrative penalty and order restitution in accordance with subsection c. of this section.
In addition to or as an alternative to the remedies provided in this section, the commissioner may request the Attorney General to bring a criminal action under applicable criminal statutes. Additionally, nothing in this section shall be construed to preclude the commissioner from referring the matter to appropriate state licensing authorities, including the insurance producer licensing section in the Department of Banking and Insurance, for consideration of licensing actions, including license suspension or revocation.
b. Any person who violates any provision of P.L.1983, c.320 (C.17:33A-1 et seq.) shall be liable, in a civil action brought by the commissioner in a court of competent jurisdiction, for a penalty of not more than $10,000 for the first violation, $20,000 for the second violation and $30,000 for each subsequent violation. The penalty shall be paid to the commissioner to be used in accordance with subsection [b.] e. of this section. The court [may] shall also award court costs and reasonable attorneys' fees to the commissioner.
c. The commissioner is authorized to assess a civil and administrative penalty of not more than $10,000 for the first violation, $20,000 for the second violation and $30,000 for each subsequent violation of any provision of P.L.1983, c.320 (C.17:33A-1 et seq.) and to order restitution to any insurance company or other person who has suffered a loss as a result of a violation of P.L.1983, c.320 (C.17:33A-1 et seq.). No assessment shall be levied pursuant to this subsection until the violator has been notified by certified mail or personal service. The notice shall contain a concise statement of facts providing the basis for the determination of a violation of P.L.1983, c.320 (C.17:33A-1 et seq.), the provisions of that act violated, a statement of the amount of civil penalties assessed and a statement of the party’s right to a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The noticed party shall have 20 calendar days from receipt of the notice within which to deliver to the commissioner a written request for a hearing containing an answer to the statement of facts contained in the notice. After the hearing and upon a finding that a violation has occurred, the commissioner may issue a final order assessing up to the amount of the penalty in the notice, restitution, and costs of prosection, including attorneys' fees. If no hearing is requested, the notice shall become a final order after the expiration of the 20-day period. Payment of the assessment is due when a final order is issued or the notice becomes a final order.
Any penalty imposed pursuant to this subsection may be collected with costs in a summary proceeding pursuant to “the penalty enforcement law,” N.J.S.2A:58-1 et seq. The Superior Court shall have jurisdiction to enforce the provisions of “the penalty enforcement law” in connection with P.L.1983, c.320 (C.17:33A-1 et seq.). Any penalty collected pursuant to this subsection shall be used in accordance with subsection e. of this section.
d. Nothing in this [subsection] section shall be construed to prohibit the commissioner and the person or practitioner alleged to be guilty of a violation of this act from entering into a written agreement in which the person or practitioner does not admit or deny the charges but consents to payment of the civil penalty. A consent agreement may contain a provision that it shall not be used in a subsequent civil or criminal proceeding relating to any violation of this act, but notification thereof shall be made to a licensing authority in the same manner as required pursuant to subsection c. of section 10 of P.L.1983, c.320 (C.17:33A-10). The existence of a consent agreement under this subsection shall not preclude any licensing authority from taking appropriate administrative action against a licensee over which it has regulatory authority, nor shall such a consent agreement preclude referral to law enforcement for consideration of criminal prosecution.
[b.] e. The New Jersey Automobile Full Insurance Underwriting Association and Market Transition Facility Auxiliary Fund (hereinafter referred to as the "fund") is established as a nonlapsing, revolving fund into which shall be deposited all revenues from the civil penalties imposed pursuant to this section. Interest received on moneys in the fund shall be credited to the fund. The fund shall be administered by the Commissioner of Banking and Insurance and shall be used to help defray the operating expenses of the New Jersey Automobile Full Insurance Underwriting Association created pursuant to P.L.1983, c.65 (C.17:30E-1 et seq.) or shall be used to help defray the operating expenses of the Market Transition Facility created pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11).
(cf: P.L.1994, c.57, s.19)
4. Section 7 of P.L.1983, c.320 (C.17:33A-7) is amended to read as follows:
7. a. Any insurance company damaged as the result of a violation of any provision of this act may sue therefor in any court of competent jurisdiction to recover compensatory damages, which [may] shall include reasonable investigation expenses, costs of suit and attorneys fees.
b. A successful claimant under subsection a. shall recover treble damages if the court determines that the defendant has engaged in a pattern of violating this act.
c. A claimant under this section shall mail a copy of the initial claim, amended claim, counterclaims, briefs and legal memoranda to the commissioner at the time of filing of such documents with the court wherein the matter is pending. A successful claimant shall report to the commissioner, on a form prescribed by the commissioner, the amount recovered and such other information as is required by the commissioner.
d. Upon receipt of notification of the filing of a claim by an insurer, the commissioner may join in the action for the purpose of seeking judgment for the payment of a civil penalty authorized under section 5 of this act. If the commissioner prevails, the court may also award court costs and reasonable attorney fees actually incurred by the commissioner.
e. No action shall be brought by an insurance company under this section more than six years after the cause of action has accrued.
(cf: P.L.1983, c.320, s.7)
5. Section 10 of P.L.1983, c.320 (C.17:33A-10) is amended to read as follows:
10. a. If the division has reason to believe that a person has engaged in, or is engaging in, an act or practice which violates this act, or any other relevant statute or regulation, the commissioner or his designee may administer oaths and affirmations, request or compel the attendance of witnesses or the production of documents. The commissioner may issue, or designate another to issue, subpenas to compel the attendance of witnesses and the production of books, records, accounts, papers and documents. Witnesses who are not licensees of the Department of Banking and Insurance shall be entitled to receive the same fees and mileage as persons summoned to testify in the courts of the State.
If a person subpenaed pursuant to this section shall neglect or refuse to obey the command of the subpena, a judge of the Superior Court may, on proof by affidavit of service of the subpena, of payment or tender of the fees required and of refusal or neglect by the person to obey the command of the subpena, issue a warrant for the arrest of said person to bring him before the judge, who is authorized to proceed against the person as for a contempt of court.
b. If matter that the division seeks to obtain by request is located outside the State, the person so required may make it available to the division or its representative to examine the matter at the place where it is located. The division may designate representatives, including officials of the state in which the matter is located, to inspect the matter on its behalf, and it may respond to similar requests from officials of other states.
c. If (1) a practitioner, (2) an owner, administrator or employee of any hospital, (3) an insurance company, agent, broker, solicitor or adjuster, or (4) any other person licensed by a licensing authority of this State, or an agent, representative or employee of any of them is found to have violated any provision of this act, the commissioner or the Attorney General shall notify the appropriate licensing authority of the violation so that the licensing authority may take appropriate administrative action. The licensing authority shall report quarterly to the commissioner through the Division of Insurance Fraud Prevention about the status of all pending referrals.
(cf: P.L.1983, c.320, s.10)
6. Section 11 of P.L.1983, c.320 (C.17:33A-11) is amended to read as follows:
11. Papers, documents, reports, or evidence relative to the subject of an investigation under this act shall not be subject to public inspection except as specifically provided in this act. The commissioner shall not detain subpenaed records after an investigation is closed or, if a claim for a civil penalty is filed by the commissioner pursuant to section 5 or subsection d. of section 7, upon final disposition of the claim by a court of competent jurisdiction, whichever shall be the later date. Subpenaed records shall be returned to the persons from whom they were obtained. The commissioner may, in his discretion, make relevant papers, documents, reports, or evidence available to the Attorney General, an appropriate licensing authority, law enforcement agencies, an insurance company or insurance claimant injured by a violation of this act, consistent with the purposes of this act and under such conditions as he deems appropriate. Such papers, documents, reports, or evidence shall not be subject to subpena, unless the commissioner consents, or until, after notice to the commissioner and a hearing, a court of competent jurisdiction determines that the commissioner would not be unnecessarily hindered by such subpena. Division investigators and insurance company fraud investigators shall not be subject to subpena in civil actions by any court of this State to testify concerning any matter of which they have knowledge pursuant to a pending insurance fraud investigation by the division, or a pending claim for civil penalties initiated by the commissioner.
(cf: P.L.1983, c.320, s.11)
7. Section 1 of P.L.1993, c.362 (C.17:33A-15) is amended to read as follows:
1. a. Every insurer writing health insurance or private passenger automobile 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 and detection of fraudulent [health] insurance applications and 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] 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 health insurance or private passenger automobile insurance in this State shall report to the director on an annual basis, [beginning January 1, 1994] on January 1st of each year, 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] shall impose a penalty of up to [$5,000 per day] $25,000 per violation 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. of section 3 of P.L.1983, c.320 (C.17:33A-3).
(cf: P.L.1993, c.362, s.1)
8. Section 15 of P.L.1972, c.70 (C.39:6A-15) is amended to read as follows:
15. In any claim or action arising under section 4 of this act wherein any person, obtains or attempts to obtain from any other person, insurance company or Unsatisfied Claim and Judgment Fund any money or other thing of value by (1) falsely or fraudulently representing that such person is entitled to benefits under section 4 or, (2) falsely and fraudulently making statements or presenting documentation in order to obtain or attempt to obtain benefits under section 4 or, (3) cooperates, conspires or otherwise acts in concert with any person seeking to falsely or fraudulently obtain, or attempt to obtain, benefits under section 4 may upon conviction be fined not more than $5,000.00, or imprisoned for not more than 3 years or both, or in the event the sum so obtained or attempted to be obtained is not more than $500.00, may upon conviction, be fined not more than $500.00, or imprisoned for not more than 6 months or both, as a disorderly person.
In addition to any penalties imposed by law, any person who is either found by a court of competent jurisdiction to have violated any provision of P.L. 1983 c.320 (C. 17:33A-1 et seq.) pertaining to automobile insurance or convicted of any violation of Title 2C of the New Jersey Statutes arising out of automobile insurance fraud shall not operate a motor vehicle over the highways of this State for a period of one year from the date of judgment or conviction.
(cf: P.L.1973, c.298, s.1)
9. Section 8 of P.L.1978, c.73 (C.45:1-21) is amended to read as follows:
8. A board may refuse to admit a person to an examination or may refuse to issue or may suspend or revoke any certificate, registration or license issued by the board upon proof that the applicant or holder of such certificate, registration or license
a. Has obtained a certificate, registration, license or authorization to sit for an examination, as the case may be, through fraud, deception, or misrepresentation;
b. Has engaged in the use or employment of dishonesty, fraud, deception, misrepresentation, false promise or false pretense;
c. Has engaged in gross negligence, gross malpractice or gross incompetence;
d. Has engaged in repeated acts of negligence, malpractice or incompetence;
e. Has engaged in professional or occupational misconduct as may be determined by the board;
f. Has been convicted of any crime involving moral turpitude or any crime relating adversely to the activity regulated by the board. For the purpose of this subsection a plea of guilty, non vult, nolo contendere or any other such disposition of alleged criminal activity shall be deemed a conviction;
g. Has had his authority to engage in the activity regulated by the board revoked or suspended by any other state, agency or authority for reasons consistent with this section;
h. Has violated or failed to comply with the provisions of any act or regulation administered by the board;
i. Is incapable, for medical or any other good cause, of discharging the functions of a licensee in a manner consistent with the public's health, safety and welfare;
j. Has repeatedly failed to submit completed applications, or parts of, or documentation submitted in conjunction with, such applications, required to be filed with the Department of Environmental Protection;
k. Has violated any provision of P.L.1983, c.320 (C.17:33A-1 et seq.) or any insurance fraud prevention law or act of another jurisdiction.
For purposes of this act:
"Completed application" means the submission of all of the information designated on the checklist, adopted pursuant to section 1 of P.L.1991, c.421 (C.13:1D-101), for the class or category of permit for which application is made.
"Permit" has the same meaning as defined in section 1 of P.L.1991, c.421 (C.13:1D-101).
(cf: P.L.1991, c.420, s.1)
10. Section 3 of P.L.1983, c.248 (C.45:9-19.3) is amended to read as follows:
3. Any information concerning the conduct of a physician or surgeon provided to the State Board of Medical Examiners pursuant to section 1 of P.L.1983, c.248 (C.45:9-19.1), section 5 of P.L.1978, c.73 (C.45:1-18) or any other provision of law, is confidential pending final disposition of the inquiry or investigation by the board, except for that information required to be shared with the Insurance Fraud Prevention Division of the Department of Banking and Insurance to comply with the provisions of section 9 of P.L.1983, c.320 (C.17:33A-9) or with any other law enforcement agency. If the result of the inquiry or investigation is a finding of no basis for disciplinary action by the board, the information shall remain confidential, except that the board may release the information to a government agency, for good cause shown, upon an order of the Superior Court after notice to the physician or surgeon who is the subject of the information and an opportunity to be heard. The application for the court order shall be placed under seal.
(cf: P.L.1989, c.300, s.21)
11. Section 5 of P.L.1988, c.156 (C.17:29A-44) is repealed.
12. This act shall take effect immediately.
This bill amends the New Jersey Insurance Fraud Prevention Act to raise the maximum penalties under that act from $5,000 to $10,000 for a first violation, from $10,000 to $20,000 for a second violation, and from $15,000 to $30,000 for a subsequent violation, and to provide that the Commissioner of Banking and Insurance shall enforce these penalties administratively or through the courts. The bill provides for a fine of $25,000 per violation for any health or automobile insurer that fails to submit a plan for the prevention and detection of fraudulent insurance applications and claims or for violating any other provision of the law requiring the submission of a fraud plan by those insurers.
In addition, the bill: prohibits a person from operating a motor vehicle for a year if he violates the New Jersey Insurance Fraud Prevention Act or the criminal code in regard to automobile insurance fraud; provides for revocation of professional licenses of persons convicted of insurance fraud; and repeals the flex rating law.
Concerns automobile insurance fraud and repeals flex rating.