0001| SENATE BILL 160 | 0002| 43RD LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 1998 | 0003| INTRODUCED BY | 0004| RICHARD M. ROMERO | 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| "[|NEW MATERIAL|] 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| "[|NEW MATERIAL|] FINDINGS--PURPOSE.-- | 0024| A. The legislature finds that insurance fraud is | 0025| pervasive and expensive, and has the potential for increasing | - 1 - 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| "[|NEW MATERIAL|] 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." | - 2 - 0001| Section 4. A new section of the New Mexico Insurance | 0002| Code is enacted to read: | 0003| "[|NEW MATERIAL|] 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 | - 3 - 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| "[|NEW MATERIAL|] 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: | - 4 - 0001| "[|NEW MATERIAL|] 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 | - 5 - 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| "[|NEW MATERIAL|] 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: | - 6 - 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 | - 7 - 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| "[|NEW MATERIAL|] 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| "[|NEW MATERIAL|] REPORT OF CONVICTION.--If any person | - 8 - 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| "[|NEW MATERIAL|] 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; | - 9 - 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. | - 10 - 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| "[|NEW MATERIAL|] 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| "[|NEW MATERIAL|] 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| "[|NEW MATERIAL|] 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 | - 11 - 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| "[|NEW MATERIAL|] 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 | - 12 - 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| "[|NEW MATERIAL|] 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: | - 13 - 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| "[|NEW MATERIAL|] 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. | - 14 - 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|  |