SB1413

SECTION 1. Chapter 431, Hawaii Revised Statutes, is amended by adding to article 2 two new sections to be appropriately designated and to read as follows:

"§431:2-A Insurance fraud investigations unit; deposit into compliance resolution fund; funding. (a) There is established in the insurance division an insurance fraud investigations unit.

(b) The purpose of the insurance fraud investigations unit shall be to conduct a statewide program for the prevention, investigation, and prosecution of insurance fraud cases and violations relating to insurance fraud, arising from article 10C and chapter 386. The insurance fraud investigations unit may also review and take appropriate disciplinary and administrative action on complaints relating to insurance fraud arising from article 10C and chapter 386.

(c) The unit shall employ or retain by contract or otherwise, attorneys, investigators, investigator assistants, and other support staff as necessary to promote the effective and efficient conduct of the unit's activities. Notwithstanding any other law to the contrary, the attorneys may represent the State in any judicial or administrative proceeding to enforce all applicable state laws relating to insurance fraud, including but not limited to criminal prosecutions, administrative actions, disciplinary actions, and actions for declaratory and injunctive relief. Investigators may serve process and apply for and execute search warrants pursuant to chapter 803 and the rules of court but shall not otherwise have the powers of a police officer or deputy sheriff. The commissioner may hire such employees not subject to chapter 76.

(d) All moneys that have been recovered by the department of commerce and consumer affairs as a result of prosecuting insurance fraud violations pursuant to this section, including civil fines, criminal fines, administrative fines, and settlements, but not including restitution made pursuant to section 431:2-B or 386-98, shall be deposited into the compliance resolution fund established pursuant to section 26-9(o).

(e) Funding for the insurance fraud investigations unit shall come from the compliance resolution fund established pursuant to section 26-9(o).

§431:2-B Insurance fraud; penalties. (a) A person commits the offense of insurance fraud if the person acts or omits to act with intent to obtain benefits or recovery or compensation for services provided, or provides legal assistance or counsel with intent to obtain benefits or recovery, through the following means:

(1) Knowingly presenting, or causing or permitting to be presented, any false information on a claim;

(2) Knowingly presenting, or causing or permitting to be presented, any false claim for the payment of a loss;

(3) Knowingly presenting, or causing or permitting to be presented, multiple claims for the same loss or injury, including presenting multiple claims to more than one insurer, except when these multiple claims are appropriate;

(4) Knowingly making, or causing or permitting to be made, any false claim for payment of a health care benefit;

(5) Knowingly submitting, or causing or permitting to be submitted, a claim for a health care benefit that was not used by, or provided on behalf of, the claimant;

(6) Knowingly presenting, or causing or permitting to be presented, multiple claims for payment of the same health care benefit except when these multiple claims are appropriate;

(7) Knowingly presenting, or causing or permitting to be presented, for payment, any undercharges for benefits on behalf of a specific claimant unless any known overcharges for benefits under this article for that claimant are presented for reconciliation at the same time;

(8) Aiding, or agreeing or attempting to aid, soliciting, or conspiring with any person who engages in an unlawful act as defined under this section; or

(9) Knowingly making, or causing or permitting to be made, any false statements or claims by, or on behalf of, any person or persons during an official proceeding as defined by section 710-1000.

(b) A violation of subsection (a) is a criminal offense and shall constitute a:

(1) Class B felony if the value of the benefits, recovery, claim, or compensation obtained or attempted to be obtained is more than $20,000;

(2) Class C felony if the value of the benefits, recovery, claim, or compensation obtained or attempted to be obtained is more than $300; or

(3) Misdemeanor if the value of the benefits, recovery, claim, or compensation obtained or attempted to be obtained is $300 or less.

(c) Where the ability to make restitution can be demonstrated, any person convicted under this section shall be ordered by a court to make restitution to an insurer or any other person for any financial loss sustained by the insurer or other person.

(d) A person, if acting without malice, shall not be subject to civil liability for providing information, including filing a report, furnishing oral or written evidence, or giving testimony concerning suspected, anticipated, or completed insurance fraud to a court, the commissioner, the insurance fraud investigations unit, the National Association of Insurance Commissioners, any federal, state, or county law enforcement or regulatory agency, or another insurer if the information is provided only for the purpose of preventing, investigating, or prosecuting insurance fraud, except if the person commits perjury.

(e) This section shall not supersede any other law relating to theft, fraud, or deception. Insurance fraud may be prosecuted under this section, or any other applicable law, and may be enjoined by a court of competent jurisdiction.

(f) An insurer shall have a civil cause of action to recover payments or benefits from any person who has intentionally obtained payments or benefits in violation of this section; provided that no recovery shall be allowed if the person has made restitution under subsection (c).

(g) All applications for insurance under this article and all claim forms provided and required by an insurer, regardless of the means of transmission, shall contain, or have attached to them, the following or a substantially similar statement, in a prominent location and typeface as determined by the insurer: "For your protection, Hawaii law requires you to be informed that presenting a fraudulent claim for payment of a loss or benefit is a crime punishable by a fine, imprisonment, or both." The absence of such a warning in any application or claim form shall not constitute a defense to a charge of insurance fraud under this section.

(h) An insurer, or the insurer's employee or agent, having determined that there is reason to believe that a claim is being made in violation of this section, shall provide to the insurance fraud investigations unit within sixty days of that determination, information, including documents and other evidence, regarding the claim in the form and manner prescribed by the unit. Information provided pursuant to this subsection shall be protected from public disclosure to the extent authorized by chapter 92F and section 431:2-209; provided that the unit may release the information in an administrative or judicial proceeding to enforce this section, to a federal, state, or local law enforcement or regulatory authority, to the National Association of Insurance Commissioners, or to an insurer aggrieved by the claim reasonably believed to violate this section."

SECTION 2. Section 386-98, Hawaii Revised Statutes, is amended to read as follows:

"§386-98 Fraud violations and penalties. (a) A [~~fraudulent insurance act, under this chapter, shall include acts or omissions committed by any person who intentionally or knowingly~~] person commits the offense of insurance fraud if the person acts or omits to act [~~so as~~] with intent to obtain benefits, deny benefits, obtain benefits compensation for services provided, or provides legal assistance or counsel to obtain benefits [~~or recovery through fraud or deceit by doing the following:~~], deny benefits, or obtain benefits compensation through the following means:

(1) [~~Presenting,~~] Knowingly presenting, or causing or permitting to be presented, any false information on an application;

(2) [~~Presenting,~~] Knowingly presenting, or causing or permitting to be presented, any false [~~or fraudulent~~] claim for the payment of a loss;

(3) [~~Presenting~~] Knowingly presenting, or causing or permitting to be presented, multiple claims for the same loss or injury, including presenting multiple claims to more than one insurer, except when these multiple claims are appropriate [~~and each insurer is notified immediately in writing of all other claims and insurers~~];

(4) [~~Making,~~] Knowingly making, or causing or permitting to be made, any false [~~or fraudulent~~] claim for payment or denial of a health care benefit;

(5) [~~Submitting~~] Knowingly submitting, or causing or permitting to be submitted, a claim for a health care benefit that was not used by, or provided on behalf of, the claimant;

(6) [~~Presenting~~] Knowingly presenting, or causing or permitting to be presented, multiple claims for payment of the same health care benefit, except when these multiple claims are appropriate;

(7) [~~Presenting~~] Knowingly presenting, or causing or permitting to be presented, for payment any undercharges for health care benefits on behalf of a specific claimant unless any known overcharges for health care benefits for that claimant are presented for reconciliation at [~~that~~] the same time;

(8) Misrepresenting or concealing a material fact;

(9) Fabricating, altering, concealing, making a false entry in, or destroying a document;

(10) ~~[Making,~~] Knowingly making, or causing or permitting to be made, any false [~~or fraudulent~~] statements with regard to entitlements or benefits, with the intent to discourage an injured employee from claiming benefits or pursuing a workers' compensation claim; or

(11) ~~[Making,~~] Knowingly making, or causing to be made, any false [~~or fraudulent~~] statements or claims by, or on behalf of, a client with regard to obtaining legal recovery or benefits.

(b) No employer shall wilfully make a false statement or representation to avoid the impact of past adverse claims experience through change of ownership, control, management, or operation to directly obtain any workers' compensation insurance policy.

(c) It shall be inappropriate for any discussion on benefits, recovery, or settlement to include the threat or implication of criminal prosecution. Any threat or implication shall be immediately referred in writing to:

(1) The state bar if attorneys are in violation;

(2) The insurance commissioner if insurance company personnel are in violation; or

(3) The regulated industries complaints office if health care providers are in violation,

for investigation and, if appropriate, disciplinary action.

(d) An offense under subsections (a) and (b) shall constitute a:

(1) Class C felony if the value of the moneys obtained or denied is $2,000 or more;

(2) Misdemeanor if the value of the moneys obtained or denied is less than $2,000; or

(3) Petty misdemeanor if the providing of false information did not cause any monetary loss.

Any person subject to a criminal penalty under this section shall be ordered by a court to make restitution to an insurer or any other person for any financial loss sustained by the insurer or other person caused by the fraudulent act.

(e) In lieu of or in addition to the criminal penalties set forth in subsection (d), any person who violates subsections (a) and (b) may be subject to the administrative penalties of restitution of benefits or payments fraudulently received under this chapter, whether received from an employer, insurer, or the special compensation fund, to be made to the source from which the compensation was received, and one or more of the following:

(1) A fine of not more than $10,000 for each violation;

(2) Suspension or termination of benefits in whole or in part;

(3) Suspension or disqualification from providing medical care or services, vocational rehabilitation services, and all other services rendered for payment under this chapter;

(4) Suspension or termination of payments for medical, vocational rehabilitation, and all other services rendered under this chapter;

(5) Recoupment by the insurer of all payments made for medical care, medical services, vocational rehabilitation services, and all other services rendered for payment under this chapter; and

(6) Reimbursement of attorney's fees and costs of the party or parties defrauded.

(f) With respect to the administrative penalties set forth in subsection (e), no penalty shall be imposed except upon consideration of a written complaint that specifically alleges a violation of this section occurring within two years of the date of said complaint. A copy of the complaint specifying the alleged violation shall be served promptly upon the person charged. The director or board shall issue, where a penalty is ordered, a written decision stating all findings following a hearing held not fewer than twenty days after written notice to the person charged. Any person aggrieved by the decision may appeal the decision under sections 386-87 and 386-88.

(g) The insurance fraud investigations unit of the department of commerce and consumer affairs, established pursuant to section 431:2-A, may initiate investigations, prosecutions, and disciplinary and administrative actions to enforce this section, including, but not limited to, workers’ compensation fraud relating to self-insured employers."

SECTION 3. Section 431:10C-307.7, Hawaii Revised Statutes, is repealed.

["~~§431:10C-307.7 Insurance fraud; penalties.~~ (a) A person commits the offense of insurance fraud if the person acts or omits to act with intent to obtain benefits or recovery or compensation for services provided, or provides legal assistance or counsel with intent to obtain benefits or recovery, through the following means:

~~(1)~~ ~~Knowingly presenting, or causing or permitting to be presented, any false information on a claim;~~

~~(2)~~ ~~Knowingly presenting, or causing or permitting to be presented, any false claim for the payment of a loss;~~

~~(3)~~ Knowingly presenting, or causing or permitting to be presented, multiple claims for the same loss or injury, including presenting multiple claims to more than one insurer, except when these multiple claims are appropriate;

~~(4)~~ ~~Knowingly making, or causing or permitting to be made, any false claim for payment of a health care benefit;~~

~~(5)~~ ~~Knowingly submitting, or causing or permitting to be submitted, a claim for a health care benefit that was not used by, or provided on behalf of, the claimant;~~

~~(6)~~ ~~Knowingly presenting, or causing or permitting to be presented, multiple claims for payment of the same health care benefit except when these multiple claims are appropriate;~~

~~(7)~~ Knowingly presenting, or causing or permitting to be presented, for payment any undercharges for benefits on behalf of a specific claimant unless any known overcharges for benefits under this article for that claimant are presented for reconciliation at the same time;

~~(8)~~ ~~Aiding, or agreeing or attempting to aid, soliciting, or conspiring with any person who engages in an unlawful act as defined under this section; or~~

~~(9)~~ ~~Knowingly making, or causing or permitting to be made, any false statements or claims by, or on behalf of, any person or persons during an official proceeding as defined by section 710-1000.~~

~~(b) Violation of subsection (a) is a criminal offense and shall constitute a:~~

~~(1)~~ ~~Class B felony if the value of the benefits, recovery, or compensation obtained or attempted to be obtained is more than $20,000;~~

~~(2)~~ ~~Class C felony if the value of the benefits, recovery, or compensation obtained or attempted to be obtained is more than $300; or~~

~~(3)~~ ~~Misdemeanor if the value of the benefits, recovery, or compensation obtained or attempted to be obtained is $300 or less.~~

~~(c)~~ Where the ability to make restitution can be demonstrated, any person convicted under this section shall be ordered by a court to make restitution to an insurer or any other person for any financial loss sustained by the insurer or other person caused by the act or acts for which the person was convicted.

(e) This section shall not supersede any other law relating to theft, fraud, or deception. Insurance fraud may be prosecuted under this section, or any other applicable section, and may be enjoined by a court of competent jurisdiction.

(g) All applications for insurance under this article and all claim forms provided and required by an insurer, regardless of the means of transmission, shall contain, or have attached to them, the following or a substantially similar statement, in a prominent location and typeface as determined by the insurer: "For your protection, Hawaii law requires you to be informed that presenting a fraudulent claim for payment of a loss or benefit is a crime punishable by fines or imprisonment, or both." The absence of such a warning in any application or claim form shall not constitute a defense to a charge of insurance fraud under this section.

SECTION 4. Section 431:10C-307.8, Hawaii Revised Statutes, is repealed.

["~~§431:10C-307.8 Insurance fraud investigations unit.~~ ~~(a) There is established in the insurance division an insurance fraud investigations unit.~~

(b) The unit shall employ attorneys, investigators, investigator assistants, and other support staff as necessary to promote the effective and efficient conduct of the unit's activities. Notwithstanding any other law to the contrary, the attorneys may represent the State in any judicial or administrative proceeding to enforce all applicable state laws relating to insurance fraud, including but not limited to criminal prosecutions and actions for declaratory and injunctive relief. Investigators may serve process and apply for and execute search warrants pursuant to chapter 803 and the rules of court but shall not otherwise have the powers of a police officer or deputy sheriff. The commissioner may hire such employees not subject to chapter 76.

(c) The purpose of the insurance fraud investigations unit shall be to conduct a statewide program for the prevention, investigation, and prosecution of insurance fraud cases and violations of all applicable state laws relating to insurance fraud. The insurance fraud investigations unit may also review and take appropriate action on complaints relating to insurance fraud."]

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2007.

INTRODUCED BY:

_____________________________

BY REQUEST

THE SENATE	S.B. NO.	1413
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII