SB1332

Report Title:

Insurance Claims Fraud Prevention Act

Description:

Creates a new chapter to prevent insurance claims fraud.

THE SENATE	S.B. NO.	1332
TWENTY-THIRD LEGISLATURE, 2005
STATE OF HAWAII

A BILL FOR AN ACT

RElating to fraudulent insurance claims.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

Insurance claims fraud prevention act

§ -1 Patient and client procurement. (a) Except as permitted by law, it is unlawful to knowingly offer or pay any compensation directly or indirectly, in cash or in-kind, to induce any person to procure clients or patients to obtain services or benefits under a contract of insurance or that will be the basis for a false claim against an insured person or the person's insurer. Nothing in this chapter shall be construed to affect any contracts or arrangements between or among insuring entities including health maintenance organizations, health care professionals, or health care facilities.

(b) Any person who violates this chapter shall be subject to all penalties prescribed by law, as well as to a civil penalty of not less than $5,000 and not more than $10,000, plus an assessment of not more than three times the amount of each claim for compensation under a contract of insurance. The court shall have the power to grant other equitable relief, including temporary injunctive relief, as is necessary to prevent the transfer, concealment, or dissipation of illegal proceeds, or to protect the public. The civil penalty prescribed in this subsection shall be assessed for each fraudulent claim upon a person in which the defendant participated.

(c) The penalties in subsection (b) are remedial rather than punitive, and shall not preclude, nor be precluded by, a criminal prosecution for the same conduct. If the court finds, after considering the goals of disgorging unlawful profit that such penalty would be punitive and would preclude, or be precluded by, a criminal prosecution, the court shall reduce that penalty appropriately.

§ -2 Civil actions; attorney general; interested person. (a) The attorney general may bring a civil action for a violation of this chapter.

(b) An interested person, including an insurer, may bring a civil action for a violation of this chapter on behalf of both the interested person and the State of Hawaii. Any action shall be brought in the name of the State. The action may be dismissed only if the court and the attorney general give written consent to the dismissal stating their reason for consenting.

(c) A copy of the complaint and a written disclosure of substantially all material evidence and information the person possesses shall be served on the attorney general. The complaint shall be filed in camera, shall remain under seal for at least sixty days, and shall not be served on the defendant until the court so orders. The attorney general may elect to intervene and proceed with the action within sixty days after the receipt of both the complaint and the material evidence and information.

(d) The attorney general, for good cause shown, may move the court for extensions of time during which the complaint shall remain under seal under subsection (c). The motion may be supported by affidavits or other submissions in camera. The defendant shall not be required to respond to any complaint filed under this chapter until twenty days after the complaint is unsealed and the defendant is served.

(e) Before the expiration of the sixty-day period or any extensions obtained under subsection (d), the attorney general shall either:

(1) Proceed with the action, in which case the action shall be conducted by the attorney general; or

(2) Notify the court that it declines to take over the action, in which case the person bringing the action, if any, shall have the right to conduct the action.

(f) When an action is brought under this chapter, no person other than the attorney general may intervene or bring a related action based on the facts underlying the pending action unless another statute or common law authorizes that action.

	(g)  Whether or not the attorney general proceeds with the action, if the court finds that the action was brought by a person who planned and initiated the violation of this chapter, that person shall be dismissed from the civil action.  The dismissal shall not prejudice the right of the attorney general to continue the action on behalf of the State.

(h) Notwithstanding this section, the attorney general may elect to pursue its claim through any alternate remedy available to the attorney general.

§ -3 Attorney general; duties. (a) If the attorney general proceeds with the action, the attorney general shall have the primary responsibility for prosecuting the action and shall not be bound by an act of the person initiating the action. That person shall have the right to continue as a party to the action, subject to the limitations set forth in subsection (b).

(b) The attorney general may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the attorney general of the filing of the motion, and the court has provided the person with an opportunity for a hearing on the motion.

The attorney general may settle the action with the defendant notwithstanding the objections of the person initiating the action if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances. Upon showing good cause, the hearing may be held in camera.

Upon showing by the attorney general that unrestricted participation during the course of the litigation by the person initiating the action would interfere with or unduly delay the attorney general's prosecution of the case, or would be repetitious, irrelevant, or for purposes of harassment, the court may restrict the person's participation by limiting the:

(1) Number of witnesses the person may call;

(2) Length of testimony of those witnesses;

(3) Person's cross-examination of witnesses; and

(4) Participation by the person in the litigation.

Upon showing by the defendant that unrestricted participation during the course of the litigation in which the attorney general has primary responsibility by the person initiating the action would be for purposes of harassment or would cause the defendant undue burden or unnecessary expense, the court may limit the participation by the person in the litigation.

(c) If the attorney general elects not to proceed with the action, under section -2(e), at the request of the attorney general, the attorney general shall be served with copies of all pleadings filed in the action and shall be supplied with copies of all deposition transcripts, at the attorney general's expense. When a person proceeds with the action, the court, without limiting the status and rights of the person initiating the action, may nevertheless permit the attorney general to intervene at a later date upon a showing of good cause.

(d) If at any time both a civil action pursuant to this chapter and a criminal action are pending against a defendant for substantially the same conduct, whether brought by the government or a private party, the civil action shall be stayed until the criminal action has been concluded at the trial court level. The stay shall not preclude the court from granting or enforcing temporary equitable relief while the actions are pending. Whether or not the attorney general proceeds with the action, upon a showing by the attorney general that certain actions of discovery by the person initiating the action would interfere with a law enforcement or governmental agency investigation or prosecution of a criminal or civil matter arising out of the same facts, the court may stay discovery by the person for a period of not more than one hundred eighty days. A hearing on a request for the stay shall be conducted in camera. The court may extend the one-hundred-eight-day period upon a further showing in camera that the agency has pursued the criminal or civil investigation or proceedings with reasonable diligence and any proposed discovery in the civil action will interfere with the ongoing criminal or civil investigation or proceedings.

§ -4 Costs and proceeds of action. (a) If the attorney general proceeds with an action brought by a person under section -2, that person is entitled to receive an amount that the court determines is reasonable based upon the extent to which the person contributed to the prosecution of the action. If the claim ends in a settlement, the amount awarded to the person who brought the action shall not be less than thirty per cent of the settlement amount and shall be:

(1) Paid from the proceeds; and

(2) Subject to subsection (d).

(b) If the attorney general does not proceed with an action brought by a person under section -2, that person shall receive an amount that the court decides is reasonable for collecting the civil penalty and damages. If the claim ends in a settlement, the amount awarded to the person who brought the action shall not be less than forty per cent of the settlement amount and shall be:

(1) Paid from the proceeds; and

(2) Subject to subsection (d).

(c) If the person bringing the action as a result of a violation of this chapter has paid money to the defendant or to an attorney acting on behalf of the defendant in the underlying claim, then the person shall be entitled to up to double the amount paid to the defendant or the attorney.

	(d)  Where the action is one that the court finds to be based primarily on sources, other than information provided by the person bringing the action under section    -2, such as specific information arising in a criminal, civil, or administrative hearing, in a legislative or administrative report, hearing, audit, or investigation, or from the news media, the court may award to the person initiating the action only those sums that it considers appropriate, but in no case more than ten per cent of the proceeds, taking into account the significance of the information and the role of the person initiating the action in advancing the case to litigation. 
	(e)  Any payment to a person under subsection (a), (b), (c), or (d) shall be made from the proceeds of the litigation, including any settlement.  The person shall also receive an amount for reasonable expenses that the court finds to have been necessarily incurred, plus reasonable attorney's fees and costs.  All of those expenses, fees, and costs shall be awarded against the defendant.
	(f)  If the attorney general has proceeded with an action under this chapter, all funds not awarded to a private party shall go to the State and be deposited in the general fund. 
	(g)  Any person found by the court to have planned and initiated the violation of this chapter shall not receive any share of any settlement or judgment from the action.  
	(h)  If the attorney general does not proceed with the action, and the person initiating the action conducts the action, the court may award to the defendant reasonable attorney's fees and expenses if the defendant prevails in the action and the court finds that the person's claim was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.

§ -5 Limitations on actions. (a) A person may not bring an action under this chapter that is based upon allegations or transactions that are the subject of a civil suit or an administrative proceeding in which the attorney general is already a party.

(b) No court shall have jurisdiction over an action under this chapter based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing in a legislative or administrative report, hearing, audit, or investigation, or from the news media, unless the action is brought by the attorney general or the person bringing the action is an original source of the information.

§ -6 Expenses and sanctions. (a) Except as provided in subsection (b), the attorney general is not liable for expenses that a person incurs in bringing an action under this chapter.

(b) In civil actions brought under this chapter, in which the attorney general is a party, the court shall retain discretion to impose sanctions otherwise allowed by law, including the ability to order a party to pay expenses as provided by the Hawaii Rules of Civil Procedure.

§ -7 Retaliatory discharge; remedy. An employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by the employer because of lawful acts done by the employee on behalf of the employee or others in furtherance of an action under this chapter shall be entitled to all relief necessary to make the employee whole.

Relief shall include reinstatement with the same seniority status the employee would have had but for the discrimination, two times the amount of backpay, interest on the backpay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorney's fees. An employee may bring an action in the appropriate court for the relief provided in this chapter. The remedies under this chapter are in addition to any other remedies provided by law.

§ -8 Time limitations. (a) Except as provided in subsection (b), an action pursuant to this chapter may not be filed more than three years after the discovery of the fact constituting the grounds for commencing the action.

(b) Notwithstanding subsection (a), an action may be filed pursuant to this chapter within eight years after the commission of an act constituting a violation of this chapter."

SECTION 2. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________