SENATE, No. 2308
STATE OF NEW JERSEY
INTRODUCED DECEMBER 1, 1997
By Senator McGREEVEY
An Act concerning automobile insurance, creating the position of Insurance Fraud Prosecutor and revising various parts of the statutory law.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) The Legislature finds and declares:
a. Despite the repeated efforts of the Executive and Legislative Branches of State Government, automobile insurance still costs too much in New Jersey.
b. The causes and blame for the high cost of automobile insurance can be attributed to many factors. Nevertheless, the key to resolving the problems that are inherent to the system and insidious to the goal of reducing costs is to put the interests of the consumer - New Jersey’s drivers - first.
c. To that end, certain aspects of the current system need to be changed or eliminated. In other cases, checks and balances on the system, which may have been regarded as unnecessary and discarded along the way, need to be resurrected. In still other instances, new approaches to recalcitrant problems need to be tried.
d. Therefore, it is in the public interest:
(1) First and foremost, to reduce automobile insurance rates by 10 percent;
(2) To subject private passenger automobile insurers to market conduct examinations at least once every two years;
(3) To create the position of Insurance Fraud Prosecutor in the Department of Banking and Insurance to establish a coordinated insurance fraud policy and oversee all aspects of insurance fraud prosecution and enforcement;
(4) To require the permanent surrender of the license of any practitioner who commits fraud;
(5) To require a public hearing on all insurer rate change applications;
(6) To require that disputed personal injury protection claims are settled by mediation or arbitration, not at the hands of doctors or lawyers, but by professional arbitrators;
(7) To establish a program for the verification of private passenger automobile insurance coverage through a windshield sticker identification program; and
(8) To eliminate the opportunity for insurers to be granted virtually automatic rate increases through expedited rate filings by repealing the statutory authorization for that process.
2. (New section) Private passenger automobile insurance rates in effect on December 31, 1997 shall be reduced by 10 percent and the reduced rates shall become effective January 1, 1998.
3. Section 3 of P.L.1993, c. 236 (C. 17:23-22) is amended to read as follows:
3. a. The commissioner or any of his examiners may conduct an examination of the assets and liabilities, method of conducting business and all other affairs of any company as often as the commissioner in his sole discretion deems appropriate but shall at a minimum, conduct an examination of every insurer licensed in this State not less frequently than once every five years, except that, in the case of insurers licensed to transact private passenger automobile insurance in this State, the commissioner shall conduct an examination not less frequently than once every two years, which examination shall include a market conduct examination. In scheduling and determining the nature, scope and frequency of the examinations, the commissioner shall consider such matters as the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants and other criteria as set forth in the Examiners' Handbook adopted by the National Association of Insurance Commissioners and in effect when the commissioner exercises discretion under this section.
b. For purposes of completing an examination of any company under this act, the commissioner may examine or investigate any person, or the business of any person, insofar as such examination or investigation is, in the sole discretion of the commissioner, necessary or material to the examination of the company.
c. In lieu of an examination under this act of any foreign or alien insurer licensed in this State, the commissioner may accept an examination report on the company as prepared by the insurance department or other regulatory agency for the company's state of domicile or port-of-entry state until January 1, 1994. Thereafter, such reports may only be accepted if:
(1) the insurance department or other regulatory agency was at the time of the examination accredited under the National Association of Insurance Commissioners' Financial Regulation Standards and Accreditation Program; or
(2) the examination is performed under the supervision of an accredited insurance department or other regulatory agency or with the participation of one or more examiners who are employed by such an accredited state insurance department or other regulatory agency and who, after a review of the examination workpapers and report, state under oath that the examination was performed in a manner consistent with the standards and procedures required by their insurance department or other regulatory agency.
d. The reasonable expenses of any examination and any proceedings conducted under this act shall be fixed and determined by the commissioner, and he shall collect them from the company examined, which shall pay them on a presentation of an account of the expenses on such form as determined by the commissioner. If any company, after the examination, is adjudged insolvent by a court of competent jurisdiction, the expense of the examination, if unpaid, shall be ordered out of the assets of the company.
(cf: P.L.1993,c.236,s.3)
4. (New section) Notwithstanding the provisions of P.L.1944, c.20 (C.52:17A-1 et seq.) or any other law, rule or regulation to the contrary, there is created the position of Insurance Fraud Prosecutor in the Department of Banking and Insurance. The Insurance Fraud Prosecutor shall be appointed by and serve at the pleasure of the Governor, with the advice and consent of the Senate.
5. (New section) The Insurance Fraud Prosecutor shall have access to the support and resources of the Department of Banking and Insurance, including, without limitation, such clerical and support staff as may be necessary to discharge his responsibilities, and access to those units within the Department of Law and Public Safety, Department of Human Services and Department of Health and Senior Services established to enforce the criminal and civil laws with respect to insurance fraud.
6. (New section) a. The Insurance Fraud Prosecutor shall establish a coordinated insurance fraud enforcement policy, shall prosecute insurance fraud and shall oversee the prosecution of enforcement actions in priority cases.
b. In furtherance of these responsibilities, the Insurance Fraud Prosecutor shall have the following powers and obligations:
(1) The Insurance Fraud Prosecutor shall have access to all information concerning insurance fraud enforcement which is in the possession of all State agencies. Such information includes agency inspection reports and license information, individual case files, and intelligence information compiled and maintained by the Divisions of State Police and Criminal Justice.
(2) The Insurance Fraud Prosecutor shall meet on a regular basis with representatives of all State departments and agencies with insurance fraud enforcement responsibilities: (a) to identify individual matters as priority cases; (b) to set specific goals and strategies for the most effective resolution of each such case, whether by criminal, civil or administrative enforcement action or some combination thereof; and (c) to formulate and evaluate proposals for legislative, administrative and judicial initiatives to strengthen insurance fraud enforcement and to further a coordinated enforcement policy.
(3) The Insurance Fraud Prosecutor shall prosecute insurance fraud and shall oversee the processing, progress and prosecution of individual priority cases. He shall work with the Directors of the Divisions of Law and Criminal Justice when these matters are receiving, or should receive, the attention of the Attorney General. He shall also work through the heads of other departments and agencies to oversee administrative enforcement activities in priority cases which do not involve direct Attorney General attention.
(4) In connection with insurance fraud enforcement activities, the Insurance Fraud Prosecutor shall act as the liaison for the Executive Branch of government with agencies involved in insurance fraud enforcement outside the Executive Branch, including federal agencies and the judiciary.
7. (New section) a. A person or practitioner, as defined by section 3 of P.L.1983, c.320 (C.17:33A-3), who has violated any of the provisions of the “New Jersey Insurance Fraud Prevention Act,” P.L.1983, c. 320 (C. 17:33A-1 et seq.), or who has been convicted of a crime involving fraud or dishonesty with respect to a claim for payment or reimbursement under a policy of insurance, or with respect to insurance coverage, shall, immediately upon that violation or conviction, surrender his license, certificate, or other proof of authority to practice any profession or occupation issued by any licensing authority of this State to that licensing authority, which license may not be reinstated, and which person or practitioner shall not be eligible to apply again for that or any other license, certificate or authority issued by this State.
b. Notwithstanding subsection a. of this section, if the finding of a violation or conviction is reversed or overturned, the license shall be restored, in accordance with applicable procedures, unless the licensing authority determines to suspend or revoke the license.
c. Surrender of a license pursuant to this section shall be in addition to any fines or penalties, civil or criminal, imposed pursuant to the “New Jersey Insurance Fraud Prevention Act,” P.L.1983, c.320 (C.17:33A-1 et seq.); the New Jersey Code of Criminal Justice, N.J.S.2C:1-1 et seq.; or any other law, and shall be imposed notwithstanding any law, rule or regulation to the contrary.
d. Pursuant to section 6 of this amendatory and supplementary act, the Insurance Fraud Prosecutor shall have specific authority to ensure the enforcement of the provisions of this section within the Executive Branch, and to act as liaison with licensing authorities outside the Executive Branch to ensure the enforcement of the provisions of this section by them.
8. (New section) All departments and agencies of State government with insurance fraud enforcement responsibilities are hereby directed to cooperate with and to support fully the Insurance Fraud Prosecutor in the discharge of his responsibilities and obligations.
9. (New section) a. 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 of Banking and Insurance the total amount of expenses incurred by the State in connection with the administration of sections 4 through 10 of this amendatory and supplementary act during the preceding fiscal year, which expenses shall include all direct and indirect costs associated with the duties and responsibilities of the Insurance Fraud Prosecutor.
b. The commissioner shall, on or before October 15 in each year, apportion the amount so certified to him among all of the companies writing the class or classes of insurance described in Subtitle 3 of Title 17 of the Revised Statutes, and Subtitle 3 of Title 17B of the New Jersey Statutes, within this State in the proportion that the net premiums received by each of them for such insurance written 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 that insurance within the State during the year, as reported. 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 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.
c. Direct and indirect costs associated with the position of Insurance Fraud Prosecutor shall be apportioned among insurance companies pursuant to subsection b. of this section notwithstanding the provisions of P.L.1995, c.156 (C.17:1C-20 et seq.).
10. (New section) The Insurance Fraud Prosecutor shall report to the Governor after six months of service, and at reasonable and appropriate intervals thereafter, as to the progress of his work and as to whether any further administrative and legislative action would be desirable to assist in the discharge of his duties.
11. Section 14 of P.L.1944, c.27 (C.17:29A-14) is amended to read as follows:
14. a. With regard to all property and casualty lines, a filer may, from time to time, alter, supplement, or amend its rates, rating systems, or any part thereof, by filing with the commissioner copies of such alterations, supplements, or amendments, together with a statement of the reason or reasons for such alteration, supplement, or amendment, in a manner and with such information as may be required by the commissioner. If such alteration, supplement, or amendment shall have the effect of increasing or decreasing rates, the commissioner shall determine whether the rates as altered thereby are reasonable, adequate, and not unfairly discriminatory. If the commissioner shall determine that the rates as so altered are not unreasonably high, or inadequate, or unfairly discriminatory, he shall make an order approving them. If he shall find that the rates as altered are unreasonable, inadequate, or unfairly discriminatory, he shall issue an order disapproving such alteration, supplement or amendment.
b. (Deleted by amendment, P.L.1984, c.1.)
c. If an insurer or rating organization files a proposed alteration, supplement or amendment to its rating system, or any part thereof, which would result in a change in rates, the commissioner [may, or upon the request of the filer or the appropriate division or office in the Department of Insurance] shall[,] certify the matter for a hearing. The hearing shall, at the commissioner's discretion, be conducted by himself, by a person appointed by the commissioner pursuant to section 26 of P.L.1944, c.27 (C.17:29A-26), or by the Office of Administrative Law, created by P.L.1978, c.67 (C.52:14F-1 et seq.), as a contested case. The following requirements shall apply to the hearing:
(1) The hearing shall commence within 30 days of the date [of] the [request or decision that a hearing is to be held] proposed alteration, supplement or amendment is filed. The hearing shall be held on consecutive working days, except that the commissioner may, for good cause, waive the consecutive working day requirement. If the hearing is conducted by an administrative law judge, the administrative law judge shall submit his findings and recommendations to the commissioner within 30 days of the close of the hearing. The commissioner may, for good cause, extend the time within which the administrative law judge shall submit his findings and recommendations by not more than 30 days. A decision shall be rendered by the commissioner not later than 60 days, or, if he has granted a 30 day extension, not later than 90 days, from the close of the hearing. A filing shall be deemed to be approved unless rejected or modified by the commissioner within the time period provided herein.
(2) The commissioner, or the Director of the Office of Administrative Law, as appropriate, shall notify all interested parties, including the [appropriate division or office in the Department of Insurance] Public Advocate on behalf of insurance consumers as provided in P.L. , c. (C. )(now before the Legislature as Senate Bill No.1292 of 1996), of the date set for commencement of the hearing, on the date of the filing of the [request for a hearing, or within 10 days of the decision that a hearing is to be held] proposed alteration, supplement or amendment.
(3) The insurer or rating organization making a filing on which a hearing is held shall bear the costs of the hearing.
(4) The commissioner may promulgate rules and regulations (a) to establish standards for the submission of proposed filings, amendments, additions, deletions and alterations to the rating system of filers, which may include forms to be submitted by each filer; and (b) making such other provisions as he deems necessary for effective implementation of this act.
d. (Deleted by amendment, P.L.1984, c.1.)
e. [In order to meet, as closely as possible, the deadlines in section 17 of P.L.1983, c.362 (C.39:6A-23) for provision of notice of available optional automobile insurance coverages pursuant to section 13 of P.L.1983, c.362 (C.39:6A-4.3) and section 8 of P.L.1972, c.70 (C.39:6A-8), and to implement these coverages, the commissioner may require the use of rates, fixed by him in advance of any hearing, for deductible, exclusion, setoff and tort limitation options, on an interim basis, subject to a hearing and to a provision for subsequent adjustment of the rates, by means of a debit, credit or refund retroactive to the effective date of the interim rates. The public hearing on initial rates applicable to the coverages available under section 13 of P.L.1983, c.362 (C.39:6A-4.3) and section 8 of P.L.1972, c.70 (C.39:6A-8) shall not be limited by the provisions of subsection c. of this section governing changes in previously approved rates or rating systems.] (Deleted by amendment, P.L. ,c. .)]
(cf: P.L.1994,c.58,s.43)
12. Section 5 of P.L.1972, c.70 (C.39:6A-5) is amended to read as follows:
5. Payment of personal injury protection coverage benefits.
a. An insurer may require written notice to be given as soon as practicable after an accident involving an automobile with respect to which the policy affords personal injury protection coverage benefits pursuant to this act. In the case of claims for medical expense benefits, written notice shall be provided to the insurer by the treating medical provider no later than 21 days following the commencement of treatment. Notification required under this section shall be made in accordance with regulations adopted by the Commissioner of Banking and Insurance and on a form prescribed by the Commissioner of Banking and Insurance. Within a reasonable time after receiving notification required pursuant to this act, the insurer shall confirm to the treating medical provider that its policy affords the claimant personal injury protection coverage benefits as required by section 5 of P.L.1972, c.70 (C.39:6A-5).
b. For the purposes of this section, notification shall be deemed to be met if a treating medical provider submits a bill or invoice to the insurer for reimbursement of services within 21 days of the commencement of treatment.
c. In the event that notification is not made by the treating medical provider within 21 days following the commencement of treatment, the insurer shall reserve the right to deny, in accordance with regulations established by the Commissioner of Banking and Insurance, payment of the claim and the treating medical provider shall be prohibited from seeking any payment directly from the insured. In establishing the standards for denial of payment, the Commissioner of Banking and Insurance shall consider the length of delay in notification, the severity of the treating medical provider's failure to comply with the notification provisions of this act based upon the potential adverse impact to the public and whether or not the provider has engaged in a pattern of noncompliance with the notification provisions of this act. In establishing the regulations necessary to effectuate the purposes of this subsection, the Commissioner of Banking and Insurance shall define specific instances where the sanctions permitted pursuant to this subsection shall not apply. Such instances may include, but not be limited to, a treating medical provider's failure to provide notification to the insurer as required by this act due to the insured's medical condition during the time period within which notification is required.
d. A medical provider who fails to notify the insurer within 21 days and whose claim for payment has been denied by the insurer pursuant to the standards established by the Commissioner of Banking and Insurance may, in the discretion of a judge of the Superior Court, be permitted to refile such claim provided that the insurer has not been substantially prejudiced thereby. Application to the court for permission to refile a claim shall be made within 14 days of notification of denial of payment and shall be made upon motion based upon affidavits showing sufficient reasons for the failure to notify the insurer within the period of time prescribed by this act.
e. For the purposes of this section, "treating medical provider" shall mean any licensee of the State of New Jersey whose services are reimbursable under personal injury protection coverage, including but not limited to persons licensed to practice medicine and surgery, psychology, chiropractic, or such other professions as the Commissioner of Banking and Insurance determines pursuant to regulation, or other licensees similarly licensed in other states and nations, or the practitioner of any religious method of healing, or 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, whose services are compensated under personal injury protection insurance proceeds.
f. In instances when multiple treating medical providers render services in connection with emergency care, the Commissioner of Banking and Insurance shall designate, through regulation, a process whereby notification by one treating medical provider to the insurer shall be deemed to meet the notification requirements of all the treating medical providers who render services in connection with emergency care.
g. Personal injury protection coverage benefits shall be overdue if not paid within 60 days after the insurer is furnished written notice of the fact of a covered loss and of the amount of same. If such written notice is not furnished to the insurer as to the entire claim, any partial amount supported by written notice is overdue if not paid within 60 days after such written notice is furnished to the insurer. Any part or all of the remainder of the claim that is subsequently supported by written notice is overdue if not paid within 60 days after such written notice is furnished to the insurer; provided, however, that any payment shall not be deemed overdue where, within 60 days of receipt of notice of the claim, the insurer notifies the claimant or his representative in writing of the denial of the claim or the need for additional time, not to exceed 45 days, to investigate the claim, and states the reasons therefor. The written notice stating the need for additional time to investigate the claim shall set forth the number of the insurance policy against which the claim is made, the claim number, the address of the office handling the claim and a telephone number, which is toll free or can be called collect, or is within the claimant's area code. For the purpose of determining interest charges in the event the injured party prevails in a subsequent proceeding where an insurer has elected a 45-day extension pursuant to this subsection, payment shall be considered overdue at the expiration of the 45-day period or, if the injured person was required to provide additional information to the insurer, within 10 business days following receipt by the insurer of all the information requested by it, whichever is later.
For the purpose of calculating the extent to which any benefits are overdue, payment shall be treated as being made on the date a draft or other valid instrument which is equivalent to payment was placed in the United States mail in a properly addressed, postpaid envelope, or, if not so posted, on the date of delivery.
h. All overdue payments shall bear interest at the percentage of interest prescribed in the Rules Governing the Courts of the State of New Jersey for judgments, awards and orders for the payment of money. All automobile insurers shall provide any claimant with the option of submitting a dispute under this section to mediation and binding arbitration[. Arbitration] proceedings which shall be administered and subject to procedures established by the [American Arbitration Association] Commissioner of Banking and Insurance pursuant to section 13 of P.L. , c. (C. ) (now before the Legislature as this bill). If the claimant prevails in the arbitration proceedings, the insurer shall pay all the costs of the proceedings, including reasonable attorney's fees, to be determined in accordance with a schedule of hourly rates for services performed, to be prescribed by the Supreme Court of New Jersey.
(cf: P.L.1995,c.407,s.1)
13. (New section) a. The Commissioner of Banking and Insurance shall establish procedures for the settlement of disputed claims as provided in subsection h. of section 5 of P.L.1972, c.70 (C.39:6A-5) pursuant to regulations promulgated in accordance with the provisions of this section.
(1) Disputed claims shall first be submitted to mediation conducted by examiners assigned by and under the direction of the commissioner.
(2) Claims not settled by mediation within the time prescribed by the commissioner shall be submitted to binding arbitration decided by professional arbitrators assigned by and under the direction of the commissioner.
b. Examiners and arbitrators assigned to settle disputed claims pursuant to this section shall not be physicians or attorneys and shall not be employed by or in any other way affiliated with an insurance company, health care provider, attorney or other licensed practitioner who or which provides goods or services to those involved in motor vehicle accidents in this State.
14. (New section) The Commissioner of Banking and Insurance, in cooperation with the Director of the Division of Motor Vehicles, shall establish and administer by regulation a program for the verification of private passenger automobile insurance coverage by identification stickers located on the windshield of insured automobiles. The objectives of this program shall be an efficient, effective method of verifying in-force private passenger automobile insurance coverage as required by the laws of this State and of quickly identifying those automobiles that are not insured or whose coverage has lapsed or expired.
15. Section 34 of P.L.1997, c.151 (C.17:29A-46.6) is repealed.
16. This act shall take effect immediately.
STATEMENT
This bill incorporates various reforms and revisions designed to reduce costs to the automobile insurance system in New Jersey. It does so by putting the interests of automobile insurance consumers, New Jersey’s drivers, first.
Immediately, the bill reduces private passenger automobile insurance rates in effect on December 31, 1997 by 10 percent, effective January 1, 1998. It is the sponsor’s sense that this reduction is justified by the savings that will result from the rest of the bill’s provisions, and in particular, the provisions aimed at reducing fraud within the automobile insurance system.
The bill creates the position of Insurance Fraud Prosecutor within the Department of Banking and Insurance whose sole responsibility it is to establish a coordinated insurance fraud policy and oversee all aspects of insurance fraud prosecution and enforcement by and among the various State agencies charged with that responsibility already. The activities of the Insurance Fraud Prosecutor will be financed by an assessment on insurers, so that the creation of this position will not be an additional burden on State revenues. In addition, in a direct effort to combat insurance fraud, the bill requires the surrender of any license or certificate to practice a profession or occupation in this State if the practitioner commits civil or criminal fraud in relation to an insurance claim or policy.
In order to increase the opportunity for public scrutiny of insurers’ financial practices, the bill also subjects automobile insurers to financial examination, including a market conduct examination, at least once every two years, instead of the current uniform standard for all insurers of five years. The bill further requires a public hearing on all insurer rate applications.
The bill also modifies the process for arbitration of disputed personal injury protection claims to make it more objective. It directs the Commissioner of Banking and Insurance to administer mediation and arbitration of claims by examiners and professional arbitrators assigned by the commissioner, rather than doctors or lawyers chosen by the interested parties.
The bill aims to crack down on uninsured motorists by directing the Commissioner of Banking and Insurance to establish a program for the verification of in-force insurance coverage through a windshield sticker identification program.
Finally, the bill eliminates the recently-enacted expedited rate filing process. While rate increases are not automatic under this new process, it nevertheless essentially continues the “flex-rating” provisions repealed earlier this year and thus ensures quick approval of rate increases within a certain band or range.
Requires a 10% reduction in automobile insurance rates, creates office of Insurance Fraud Prosecutor and provides for certain other reforms.