0001|                            HOUSE BILL 141
    |
0002|     43RD LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 1998
    |
0003|                            INTRODUCED BY
    |
0004|                             MIMI STEWART
    |
0005|     
    |
0006|                                   
    |
0007|     
    |
0008|     
    |
0009|     
    |
0010|                                AN ACT
    |
0011|     RELATING TO INSURANCE; ENACTING THE INSURANCE FRAUD ACT;
    |
0012|     PROVIDING FOR THE INVESTIGATION AND PROSECUTION OF INSURANCE
    |
0013|     FRAUD; REPEALING AND ENACTING SECTIONS OF THE NMSA 1978;
    |
0014|     MAKING AN APPROPRIATION. 
    |
0015|     
    |
0016|     BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
    |
0017|          Section 1.  A new section of the New Mexico Insurance
    |
0018|     Code is enacted to read:
    |
0019|          "[<u>NEW MATERIAL</u>] SHORT TITLE.--This act may be cited as
    |
0020|     the "Insurance Fraud Act"."
    |
0021|          Section 2.  A new section of the New Mexico Insurance
    |
0022|     Code is enacted to read:
    |
0023|          "[<u>NEW MATERIAL</u>] FINDINGS--PURPOSE.--
    |
0024|               A.  The legislature finds that insurance fraud is
    |
0025|     pervasive and expensive, and has the potential for increasing
    |
<center>- 1 -</center>

0001|     premium rates, placing businesses at risk, reducing the
    |
0002|     ability of consumers to raise their standard of living and
    |
0003|     decreasing the economic vitality of the state.  Therefore, the
    |
0004|     legislature believes that the state must aggressively confront
    |
0005|     the problem of insurance fraud.  
    |
0006|               B.  The purpose of the Insurance Fraud Act is to
    |
0007|     permit the full utilization of the expertise of the
    |
0008|     superintendent of insurance to investigate and detect
    |
0009|     insurance fraud more effectively, to halt insurance fraud and
    |
0010|     to work with state, local and federal law enforcement and
    |
0011|     regulatory agencies against the commission of insurance
    |
0012|     fraud." 
    |
0013|          Section 3.  A new section of the New Mexico Insurance
    |
0014|     Code is enacted to read:
    |
0015|          "[<u>NEW MATERIAL</u>] DEFINITIONS.--As used in the Insurance
    |
0016|     Fraud Act:
    |
0017|               A.  "fund" means the insurance fraud fund; 
    |
0018|               B.  "insurance fraud" means any act or practice in
    |
0019|     connection with an insurance transaction that constitutes a
    |
0020|     crime under the Criminal Code or the Insurance Code; 
    |
0021|               C.  "insurance transaction" means any act or
    |
0022|     practice relating to insurance and includes complying with the
    |
0023|     Insurance Code or any rule adopted under its authority; and
    |
0024|               D.  "superintendent" means the superintendent of
    |
0025|     insurance."
    |
<center>- 2 -</center>

0001|          Section 4.  A new section of the New Mexico Insurance
    |
0002|     Code is enacted to read:
    |
0003|          "[<u>NEW MATERIAL</u>] SUPERINTENDENT'S DUTIES.--The
    |
0004|     superintendent shall:
    |
0005|               A.  initiate inquiries and conduct investigations
    |
0006|     when the superintendent has reason to believe that insurance
    |
0007|     fraud may have been or is being committed;
    |
0008|               B.  respond to notifications or complaints of
    |
0009|     suspected insurance fraud generated by state and local police
    |
0010|     or other law enforcement authorities and governmental units,
    |
0011|     including the federal government and any other person; 
    |
0012|               C.  review notices and reports of insurance fraud
    |
0013|     submitted by authorized insurers, their employees, agents or
    |
0014|     producers and select those incidents of alleged fraud that, in
    |
0015|     his judgment, require further investigation and conduct the
    |
0016|     investigations;
    |
0017|               D.  conduct independent investigations and
    |
0018|     examinations of insurance transactions and alleged insurance
    |
0019|     fraud, conduct studies to determine the extent of insurance
    |
0020|     fraud, deceit or intentional misrepresentation of any kind in
    |
0021|     the insurance process and publish information and reports on
    |
0022|     its examinations and studies; 
    |
0023|               E.  report incidents of alleged insurance fraud
    |
0024|     supported by investigations and examinations to the
    |
0025|     appropriate district attorney and any other appropriate law
    |
<center>- 3 -</center>

0001|     enforcement, administrative, regulatory or licensing agency
    |
0002|     and assemble evidence, prepare charges and otherwise assist
    |
0003|     any prosecutorial authority having jurisdiction over insurance
    |
0004|     fraud enforcement; 
    |
0005|               F.  assist any official or agency of this state,
    |
0006|     any other state or the federal government that requests
    |
0007|     assistance in investigating insurance fraud;
    |
0008|               G.  maintain records and information in order to
    |
0009|     produce an annual report of his activities undertaken in
    |
0010|     connection with carrying out the provisions of the Insurance
    |
0011|     Fraud Act; and 
    |
0012|               H.  conduct, in cooperation with the attorney
    |
0013|     general and the department of public safety, public outreach
    |
0014|     and awareness programs on the costs of insurance fraud to the
    |
0015|     public and how members of the public can assist themselves,
    |
0016|     the superintendent and law enforcement officials in preventing
    |
0017|     and prosecuting insurance fraud."
    |
0018|          Section 5.  A new section of the New Mexico Insurance
    |
0019|     Code is enacted to read:
    |
0020|          "[<u>NEW MATERIAL</u>] SUPERINTENDENT'S AUTHORITY.--The
    |
0021|     superintendent is authorized to select and contract with
    |
0022|     investigative personnel and prosecutors to discharge his
    |
0023|     duties pursuant to the provisions of the Insurance Fraud Act."
    |
0024|          Section 6.  A new section of the New Mexico Insurance
    |
0025|     Code is enacted to read:
    |
<center>- 4 -</center>

0001|          "[<u>NEW MATERIAL</u>] NOTICE AND COOPERATION REQUIRED--
    |
0002|     TOLLING PERIOD.--
    |
0003|               A.  Every insurer or licensed insurance
    |
0004|     professional that has a reasonable belief that an act of
    |
0005|     insurance fraud will be, is being or has been committed shall
    |
0006|     furnish and disclose knowledge and information about it to the
    |
0007|     superintendent and shall cooperate fully with any
    |
0008|     investigation conducted by the superintendent.  Failure to
    |
0009|     comply with this subsection shall constitute grounds for the
    |
0010|     superintendent to impose an administrative penalty pursuant to
    |
0011|     Section 59A-1-18 NMSA 1978 in addition to any applicable
    |
0012|     suspension, revocation or denial of a license or certificate
    |
0013|     of authority.
    |
0014|               B.  A person who has a reasonable belief that an
    |
0015|     act of insurance fraud will be, is being or has been
    |
0016|     committed, or any person who collects, reviews or analyzes
    |
0017|     information concerning insurance fraud, may furnish and
    |
0018|     disclose any information in his possession concerning the
    |
0019|     insurance fraud to the superintendent or to an authorized
    |
0020|     representative of an insurer that requests the information for
    |
0021|     the purpose of detecting, prosecuting or preventing insurance
    |
0022|     fraud.
    |
0023|                C.  If an insurer has a reasonable belief or
    |
0024|     probable cause to believe that an insurance fraud has been
    |
0025|     committed and has properly notified the superintendent of its
    |
<center>- 5 -</center>

0001|     suspicion, that notification shall toll any applicable time
    |
0002|     period in any unfair claims proceeding based on the alleged
    |
0003|     fraud until thirty days after determination by the
    |
0004|     superintendent and notice to the insurer that the
    |
0005|     superintendent will not recommend action on the claim.
    |
0006|               D.  The superintendent, in cooperation with
    |
0007|     insurers or others, may establish a voluntary fund to reward
    |
0008|     persons not connected with the insurance industry who provide
    |
0009|     information or furnish evidence leading to the arrest and
    |
0010|     conviction of persons responsible for insurance fraud."
    |
0011|          Section 7.  A new section of the New Mexico Insurance
    |
0012|     Code is enacted to read:
    |
0013|          "[<u>NEW MATERIAL</u>] IMMUNITY FROM CIVIL LIABILITY--PRIVATE
    |
0014|     INSURANCE FRAUD REPORTS AND ENFORCEMENT ACTIONS.--
    |
0015|               A.  The provisions of Section 59A-4-21 NMSA 1978
    |
0016|     regarding immunity from civil liability for enforcement
    |
0017|     actions performed in good faith by the superintendent, his
    |
0018|     authorized representatives and examiners shall apply to the
    |
0019|     Insurance Fraud Act.
    |
0020|               B.  A person acting without malice, fraudulent
    |
0021|     intent or bad faith shall not be subject to liability by
    |
0022|     virtue of reporting or furnishing, orally or in writing,
    |
0023|     information concerning suspected, anticipated or completed
    |
0024|     insurance fraud acts when the report or information is
    |
0025|     provided to:
    |
<center>- 6 -</center>

0001|                    (1)  the department of insurance, the
    |
0002|     superintendent or law enforcement agencies, their officials,
    |
0003|     agents or employees; or
    |
0004|                    (2)  the national association of insurance
    |
0005|     commissioners, a federal or state governmental agency or
    |
0006|     office established to detect and prevent insurance fraud, any
    |
0007|     other organization established for the same purpose and their
    |
0008|     agents, employees or designees.
    |
0009|               C.  A person identified in Subsection B of this
    |
0010|     section or any of the person's officers, employees or agents
    |
0011|     when performing authorized activities, including the
    |
0012|     publication or dissemination of any related bulletin or
    |
0013|     reports, without malice, fraudulent intent or bad faith shall
    |
0014|     not be subject to civil liability for libel, slander or any
    |
0015|     other relevant tort and no civil cause of action of any nature
    |
0016|     shall exist against such persons.
    |
0017|               D.  This section shall not abrogate or modify in
    |
0018|     any way any privilege or immunity recognized by common law or
    |
0019|     statute.
    |
0020|               E.  The court shall award attorney fees and costs
    |
0021|     to any person identified in Subsection B of this section or
    |
0022|     any of that person's officers, employees or agents who is a
    |
0023|     prevailing party in a civil cause of action against him for
    |
0024|     libel, slander or any other relevant tort arising out of
    |
0025|     conduct pursuant to the Insurance Fraud Act if the party
    |
<center>- 7 -</center>

0001|     bringing the action was not substantially justified in
    |
0002|     bringing such action.  For the purposes of this subsection,
    |
0003|     "substantially justified" means having a reasonable basis in
    |
0004|     law or fact at the time a proceeding was initiated.
    |
0005|               F.  The relief provided in this section is in
    |
0006|     addition to remedies otherwise available against the same
    |
0007|     conduct under the common law or other laws of this state."
    |
0008|          Section 8.  A new section of the New Mexico Insurance
    |
0009|     Code is enacted to read:
    |
0010|          "[<u>NEW MATERIAL</u>] WARNING REQUIRED.--Within six months of
    |
0011|     the effective date of the Insurance Fraud Act all claim forms
    |
0012|     and applications for insurance shall contain a statement
    |
0013|     permanently affixed to the application or claim form which
    |
0014|     states substantially as follows: 
    |
0015|          "ANY PERSON WHO KNOWINGLY PRESENTS A FALSE OR FRAUDULENT
    |
0016|     CLAIM FOR PAYMENT OF A LOSS OR BENEFIT OR KNOWINGLY PRESENTS
    |
0017|     FALSE INFORMATION IN AN APPLICATION FOR INSURANCE IS GUILTY OF
    |
0018|     A CRIME AND MAY BE SUBJECT TO CIVIL FINES AND CRIMINAL
    |
0019|     PENALTIES."
    |
0020|     The failure to include that statement shall not constitute a
    |
0021|     defense against prosecution for commission of insurance
    |
0022|     fraud."
    |
0023|          Section 9.  A new section of the New Mexico Insurance
    |
0024|     Code is enacted to read:
    |
0025|          "[<u>NEW MATERIAL</u>] REPORT OF CONVICTION.--If any person
    |
<center>- 8 -</center>

0001|     licensed by any agency of any state or the federal government
    |
0002|     or holding credentials from any professional organization is
    |
0003|     convicted of insurance fraud in this state, the superintendent
    |
0004|     shall notify the appropriate licensing or credentialing
    |
0005|     authority of the judgment for appropriate disciplinary
    |
0006|     action." 

    |
0007|          Section 10.  A new section of the New Mexico Insurance
    |
0008|     Code is enacted to read:
    |
0009|          "[<u>NEW MATERIAL</u>] INSURER ANTI-FRAUD INITIATIVES--SPECIAL
    |
0010|     INVESTIGATIVE UNITS.--
    |
0011|               A.  Within six months of the effective date of the
    |
0012|     Insurance Fraud Act and by July 1 of each succeeding year
    |
0013|     every insurer who in the previous calendar year reported ten
    |
0014|     million dollars ($10,000,000) or more in direct written
    |
0015|     premiums in New Mexico shall establish, prepare, implement and
    |
0016|     submit to the superintendent an anti-fraud plan that is
    |
0017|     reasonably calculated to detect, prosecute and prevent
    |
0018|     insurance fraud.  Any subsequent amendments to the plan shall
    |
0019|     be submitted to the superintendent at the time they are
    |
0020|     adopted.
    |
0021|               B.  Each insurer's anti-fraud plan shall outline,
    |
0022|     at a minimum, specific procedures, appropriate to the type of
    |
0023|     insurance the insurer writes, to:
    |
0024|                    (1)  prevent, detect and investigate all forms
    |
0025|     of insurance fraud;  
    |
<center>- 9 -</center>

0001|                    (2)  educate appropriate employees on fraud
    |
0002|     detection and the insurer's anti-fraud plan;
    |
0003|                    (3)  provide for the hiring or contracting of
    |
0004|     fraud investigators;
    |
0005|                    (4)  report insurance fraud to appropriate law
    |
0006|     enforcement and regulatory authorities; and 
    |
0007|                    (5)  pursue restitution, where appropriate,
    |
0008|     for financial loss caused by insurance fraud.
    |
0009|               C.  The superintendent may review each insurer's
    |
0010|     anti-fraud plan to determine if it adequately complies with
    |
0011|     the requirements of this section.  The superintendent may
    |
0012|     examine the insurer to assure its compliance with anti-fraud
    |
0013|     plans submitted to the superintendent.  The superintendent may
    |
0014|     require reasonable modifications to the insurer's anti-fraud
    |
0015|     plan or may require other reasonable remedial action if the
    |
0016|     review or examination reveals substantial noncompliance with
    |
0017|     the plan.
    |
0018|               D.  The superintendent may require each insurer to
    |
0019|     file a summary of the insurer's anti-fraud activities and
    |
0020|     results.  Anti-fraud plans and summaries submitted to the
    |
0021|     superintendent shall be privileged and confidential, shall not
    |
0022|     be a public record and shall not be subject to discovery or
    |
0023|     subpoena in any civil or criminal action; provided, however,
    |
0024|     that the superintendent may make summaries of aggregate data
    |
0025|     available to the public.  
    |
<center>- 10 -</center>

0001|               E.  This section confers no private right of
    |
0002|     action."
    |
0003|          Section 11.  A new section of the New Mexico Insurance
    |
0004|     Code is enacted to read:
    |
0005|          "[<u>NEW MATERIAL</u>] INVESTIGATORS' POWERS.--The
    |
0006|     superintendent's investigators shall be peace officers
    |
0007|     pursuant to the provisions of Chapter 29, Article 1 NMSA 1978,
    |
0008|     except that they shall not be authorized to carry firearms."
    |
0009|          Section 12.  A new section of the New Mexico Insurance
    |
0010|     Code is enacted to read:
    |
0011|          "[<u>NEW MATERIAL</u>] ATTORNEY GENERAL'S DUTIES.--When so
    |
0012|     requested by the superintendent, the attorney general shall
    |
0013|     commission as a special assistant attorney general an attorney
    |
0014|     selected by and contracted with by the superintendent and
    |
0015|     approved by the attorney general to assist the superintendent
    |
0016|     in carrying out his duties, including providing legal advice
    |
0017|     and prosecuting offenders.  The actual costs associated with
    |
0018|     the assignment of assistant attorneys general to the
    |
0019|     superintendent shall be paid out of the fund."
    |
0020|          Section 13.  A new section of the New Mexico Insurance
    |
0021|     Code is enacted to read:
    |
0022|          "[<u>NEW MATERIAL</u>] INSURANCE FRAUD POLICY ADVISORY GROUP.-
    |
0023|     -The superintendent may create an insurance fraud policy
    |
0024|     advisory group consisting of representatives of authorized
    |
0025|     insurers, consumers of insurance products not otherwise
    |
<center>- 11 -</center>

0001|     connected with the insurance industry and other appropriate
    |
0002|     persons.  The superintendent shall appoint the members of the
    |
0003|     advisory group and shall provide by rule for the creation,
    |
0004|     governance, duties and termination of the advisory group.  Any
    |
0005|     advisory group so created shall advise the superintendent with
    |
0006|     respect to the implementation of and other matters related to
    |
0007|     the Insurance Fraud Act when so requested by the
    |
0008|     superintendent." 
    |
0009|          Section 14.  A new section of the New Mexico Insurance
    |
0010|     Code is enacted to read:
    |
0011|          "[<u>NEW MATERIAL</u>] INSURANCE FRAUD FUND CREATED--
    |
0012|     APPROPRIATION.-- 
    |
0013|               A.  There is hereby created an "insurance fraud
    |
0014|     fund" in the state treasury.  All fees collected under the
    |
0015|     provisions of the Insurance Fraud Act shall be deposited in
    |
0016|     the fund and are subject to appropriation for use in paying
    |
0017|     the expenses incurred by the superintendent in carrying out
    |
0018|     the provisions of the Insurance Fraud Act.  Interest on the
    |
0019|     fund shall be credited to the fund.  The fund is a continuing,
    |
0020|     nonreverting fund.
    |
0021|               B.  To implement the provisions of the Insurance
    |
0022|     Fraud Act, upon the effective date of the Insurance Fraud Act, 
    |
0023|     the superintendent shall determine a rate of assessment and
    |
0024|     collect a fee from authorized insurers in an amount not less
    |
0025|     than two hundred dollars ($200) and not exceeding one-tenth of
    |
<center>- 12 -</center>

0001|     one percent of the correctly reported gross direct written
    |
0002|     premiums on policies written in New Mexico by the authorized
    |
0003|     insurers.  The superintendent, after taking into account
    |
0004|     unexpended money produced by collection of the fee, shall
    |
0005|     adjust the rate of assessment each year to produce the amount
    |
0006|     of money that he estimates will be necessary to pay expenses
    |
0007|     incurred by the superintendent in carrying out the provisions
    |
0008|     of the Insurance Fraud Act.
    |
0009|               C.  In calculating the gross direct written
    |
0010|     premiums for an insurer pursuant to the provisions of this
    |
0011|     section, all gross direct written premiums for workers'
    |
0012|     compensation insurance shall be excluded from the calculation.
    |
0013|               D.  The fees required by this section are in
    |
0014|     addition to all other taxes and fees now imposed or that may
    |
0015|     be subsequently imposed." 
    |
0016|          Section 15.  A new section of the New Mexico Insurance
    |
0017|     Code is enacted to read: 
    |
0018|          "[<u>NEW MATERIAL</u>] APPLICATION OF ACT TO OTHER ACTS.--
    |
0019|               A.  No authority granted the superintendent under
    |
0020|     the Insurance Fraud Act shall be construed to abrogate or
    |
0021|     interfere with the authority of the safety and fraud division
    |
0022|     of the workers' compensation administration under the Workers'
    |
0023|     Compensation Act or of the medicaid fraud control unit under
    |
0024|     the Medicaid Fraud Act.       
    |
0025|               B.  Nothing in the Insurance Fraud Act shall:
    |
<center>- 13 -</center>

0001|                    (1)  preempt the authority of or relieve the
    |
0002|     duty of any other law enforcement agencies to investigate and
    |
0003|     prosecute alleged violations of law;
    |
0004|                    (2)  prevent or prohibit a person from
    |
0005|     voluntarily disclosing any information concerning insurance
    |
0006|     fraud to any law enforcement agency;
    |
0007|                    (3)  limit any of the powers granted elsewhere
    |
0008|     by law to the superintendent to investigate alleged violations
    |
0009|     of law and take appropriate action; or
    |
0010|                    (4)  interfere with the duties and authority
    |
0011|     of the workers' compensation administration."
    |
0012|          Section 16.  A new section of the New Mexico Insurance
    |
0013|     Code is enacted to read:
    |
0014|          "[<u>NEW MATERIAL</u>] RULES.--The superintendent may
    |
0015|     promulgate rules deemed necessary or appropriate by the
    |
0016|     superintendent for the administration of the Insurance Fraud
    |
0017|     Act."
    |
0018|          Section 17.  APPROPRIATION.--
    |
0019|               A.  Five hundred thousand dollars ($500,000) is
    |
0020|     appropriated from the insurance fraud fund to the
    |
0021|     superintendent of insurance for expenditure in fiscal year
    |
0022|     1999 for the purpose of carrying out the provisions of the
    |
0023|     Insurance Fraud Act.  Any unexpended or unencumbered balance
    |
0024|     remaining at the end of fiscal year 1999 shall not revert to
    |
0025|     the general fund.
    |
<center>- 14 -</center>

0001|               B.  The superintendent of insurance is authorized
    |
0002|     to employ three additional full-time employees to carry out
    |
0003|     the provisions of the Insurance Fraud Act.
    |
0004|          Section 18.  REPEAL.--Sections 59A-16A-1 through
    |
0005|     59A-16A-4 NMSA 1978 (being Laws 1991, Chapter 86, Sections 1
    |
0006|     through 4) are repealed.
    |
0007|          Section 19.  EFFECTIVE DATE.--The effective date of the
    |
0008|     provisions of this act is July 1, 1998.
    |
0009|                              
    |