680 - INSURANCE FRAUD PREVENTION MODEL ACT

H. B. 3119

(By Delegate Michael, Boggs, Leach and H. White)

[Introduced February 21, 2003; referred to the

Committee on Banking and Insurance then the Judiciary.]

A BILL to amend and reenact section two, article twenty-two, chapter thirty-three of the code of West Virginia, one thousand nine hundred thirty-one, as amended; to amend and reenact section two, article twenty-three of said chapter; to amend and reenact section four, article twenty-four of said chapter; to amend and reenact section six, article twenty-five of said chapter; to amend and reenact section twenty-four, article twenty-five-a of said chapter; to amend and reenact article forty-one of said chapter, all relating to insurance fraud; subjecting farmers' mutual insurance companies, fraternal benefit societies, certain hospital, medical, dental and health services corporations, health care corporations, and health maintenance organizations to insurance fraud provisions; defining terms; establishing an insurance fraud unit within the division of insurance; authorizing the promulgation of rules and requiring the filing of annual reports; establishing powers and duties of the unit; outlining investigative powers and procedures; providing confidentiality and immunity of the unit operations; prohibiting insurance fraud; establishing criminal penalties and fines; authorizing prosecution for fraudulent acts; authorizing special prosecutors; specifying duties of insurers; authorizing funding by an assessment of insurers; establishing the West Virginia insurance fraud prevention act; defining legislative intent and terms; creating misdemeanor and felony offenses for the commission of fraudulent acts; and creating penalties, exceptions and immunities.

Be it enacted by the Legislature of West Virginia:

That section two, article twenty-two, chapter thirty-three of the code of West Virginia, one thousand nine hundred thirty- one, as amended, be amended and reenacted; that section two, article twenty-three of said chapter be amended and reenacted; that section four, article twenty-four of said chapter be amended and reenacted; that section six, article twenty-five of said chapter be amended and reenacted; that section twenty-four, article twenty-five-a of said chapter be amended and reenacted; and that article forty-one of said chapter be amended and reenacted, all to read as follows:
ARTICLE 22. FARMERS' MUTUAL FIRE INSURANCE COMPANIES.
§33-22-2. Applicability of other provisions.

Each company to the same extent that provisions are applicable to domestic mutual insurers shall be governed by and be subject to the following articles of this chapter: Article one(definitions); article two(insurance commissioner); article four(general provisions) except that section sixteen of said article may not be applicable thereto; article seven(assets and liabilities); article eight-a(use of clearing corporations and federal reserve book-entry system); article ten(rehabilitation and liquidation) except that under the provisions of section thirty-two of said article assessments may not be levied against any former member of a farmers' mutual fire insurance company who is no longer a member of the company at the time the order to show cause was issued; article eleven (unfair trade practices); article twelve (agents, brokers and solicitors) except that the agent's license fee shall be five dollars; article twenty-six (West Virginia insurance guaranty association act); article twenty-seven (insurance holding company systems); article thirty (mine subsidence insurance) except that under the provisions of section six of said article, a farmers' mutual insurance company shall have the option of offering mine subsidence coverage to all of its policyholders but may not be required to do so; article thirty-three(annual audited financial report); article thirty- four(administrative supervision); article thirty-four-a [§§ 33- 34A-1 et seq.] (standards and commissioner's authority for companies considered to be in hazardous financial condition); article thirty-five(criminal sanctions for failure to report impairment); article thirty-six (business transacted with producer-controlled property-casualty insurer); article thirty- seven(managing general agents); article thirty-nine(disclosure of material transactions); article forty(risk-based capital for insurers); and article forty-one ~~(privileges and~~ ~~immunity)~~ (insurance fraud); but only to the extent these provisions are not inconsistent with the provisions of this article. ARTICLE 23. FRATERNAL BENEFIT SOCIETIES.
§33-23-2. Applicability of other provisions.
Every fraternal benefit society shall be governed and be subject to the same extent as other insurers transacting like kinds of insurance, to the following articles of this chapter: Article one (definitions); article two (insurance commissioner); article four (general provisions); section thirty, article six (fee for form and rate filing); article seven (assets and liabilities); article ten (rehabilitation and liquidation); article eleven (unfair trade practices); article twelve (agents, brokers, solicitors and excess lines); article thirteen (life insurance); article thirteen-a (variable contracts); article fifteen-a (long-term care insurance); article twenty-seven (insurance holding company systems); article thirty-three (annual audited financial report); article thirty-four (administrative supervision); article thirty-four-a (standards and commissioner's authority for companies considered to be in hazardous financial condition); article thirty-five (criminal sanctions for failure to report impairment); article thirty-seven (managing general agents); ~~and~~ article thirty-nine (disclosure of material transactions); and article forty-one (insurance fraud).
ARTICLE 24. HOSPITAL SERVICE CORPORATIONS, MEDICAL SERVICE CORPORATIONS, DENTAL SERVICE CORPORATIONS AND HEALTH SERVICE CORPORATIONS.
§33-24-4. Exemptions; applicability of insurance laws.

Every corporation defined in section two of this article is hereby declared to be a scientific, nonprofit institution and exempt from the payment of all property and other taxes. Every corporation, to the same extent the provisions are applicable to insurers transacting similar kinds of insurance and not inconsistent with the provisions of this article, shall be governed by and be subject to the provisions as herein below indicated, of the following articles of this chapter: Article (insurance commissioner), except that, under section nine of said article, examinations shall be conducted at least once every four years; article four (general provisions), except that section sixteen of said article may not be applicable thereto; section twenty, article five (borrowing by insurers); section thirty- four, article six (fee for form and rate filing); article six-c (guaranteed loss ratio); article seven (assets and liabilities); article eight-a (use of clearing corporations and federal reserve book-entry system); article eleven (unfair trade practices); article twelve (agents, brokers and solicitors), except that the agent's license fee shall be twenty-five dollars; section two-a, article fifteen (definitions); section two-b, article fifteen (guaranteed issue); section two-d, article fifteen (exception to guaranteed renewability); section two-e, article fifteen (discontinuation of coverage); section two-f, article fifteen (certification of creditable coverage); section two-g, article fifteen (applicability); section four-e, article fifteen (benefits for mothers and newborns); section fourteen, article fifteen (individual accident and sickness insurance); section sixteen, article fifteen (coverage of children); section eighteen, article fifteen (equal treatment of state agency); section nineteen, article fifteen (coordination of benefits with medicaid); article fifteen-a (long-term care insurance); article fifteen-c (diabetes insurance); section three, article sixteen (required policy provisions); section three-a, article sixteen (mental health); section three-c, article sixteen (group accident and sickness insurance); section three-d, article sixteen (medicare supplement insurance); section three-f, article sixteen (treatment of temporomandibular joint disorder and craniomandibular disorder); section three-j, article sixteen (benefits for mothers and newborns); section three-k, article sixteen (preexisting condition exclusions); section three-l, article sixteen (guaranteed renewability); section three-m, article sixteen (creditable coverage); section three-n, article sixteen (eligibility for enrollment); section eleven, article sixteen (coverage of children); section thirteen, article sixteen (equal treatment of state agency); section fourteen, article sixteen (coordination of benefits with medicaid); section sixteen, article sixteen (diabetes insurance); article sixteen-a (group health insurance conversion); article sixteen-c , (small employer group policies); article sixteen-d, (marketing and rate practices for small employers); article twenty-six-a (West Virginia life and health insurance guaranty association act), after the first day of October, one thousand nine hundred ninety- one; article twenty-seven (insurance holding company systems); article twenty-eight (individual accident and sickness insurance minimum standards); article thirty-three (annual audited financial report); article thirty-four (administrative supervision); article thirty-four-a (standards and commissioner's authority for companies considered to be in hazardous financial condition); article thirty-five (criminal sanctions for failure to report impairment); article thirty-seven (managing general agents); and article forty-one ~~(privileges and immunity)~~ (insurance fraud); and no other provision of this chapter may apply to these corporations unless specifically made applicable by the provisions of this article. If, however, the corporation is converted into a corporation organized for a pecuniary profit or if it transacts business without having obtained a license as required by section five of this article, it shall thereupon forfeit its right to these exemptions.
ARTICLE 25. HEALTH CARE CORPORATIONS.
§33-25-6. Supervision and regulation by insurance commissioner; exemption from insurance laws.
Corporations organized under this article are subject to supervision and regulation of the insurance commissioner. The corporations organized under this article, to the same extent these provisions are applicable to insurers transacting similar kinds of insurance and not inconsistent with the provisions of this article, shall be governed by and be subject to the provisions as hereinbelow indicated of the following articles of this chapter: Article four (general provisions), except that section sixteen of said article shall not be applicable thereto; article six-c (guaranteed loss ratio); article seven (assets and liabilities); article eight (investments); article ten (rehabilitation and liquidation); section two-a, article fifteen (definitions); section two-b, article fifteen (guaranteed issue); section two-d, article fifteen (exception to guaranteed renewability); section two-e, article fifteen (discontinuation of coverage); section two-f, article fifteen (certification of creditable coverage); section two-g, article fifteen (applicability); section four-e, article fifteen (benefits for mothers and newborns); section fourteen, article fifteen (individual accident and sickness insurance); section sixteen, article fifteen (coverage of children); section eighteen, article fifteen (equal treatment of state agency); section nineteen, article fifteen (coordination of benefits with medicaid); article fifteen-c (diabetes insurance); section three, article sixteen (required policy provisions); section three-a, article sixteen (mental health); section three-j, article sixteen (benefits for mothers and newborns); section three-k, article sixteen (preexisting condition exclusions); section three-l, article sixteen (guaranteed renewability); section three-m, article sixteen (creditable coverage); section three-n, article sixteen (eligibility for enrollment); section eleven, article sixteen (coverage of children); section thirteen, article sixteen (equal treatment of state agency); section fourteen, article sixteen (coordination of benefits with medicaid); section sixteen, article sixteen (diabetes insurance); article sixteen-a (group health insurance conversion); article sixteen-c, repealed] (small employer group policies); article sixteen-d (marketing and rate practices for small employers); article twenty-six-a (West Virginia life and health insurance guaranty association act); article twenty-seven (insurance holding company systems); article thirty-three (annual audited financial report); article thirty- four-a (standards and commissioner's authority for companies deemed to be in hazardous financial condition); article thirty- five (criminal sanctions for failure to report impairment); article thirty-seven (managing general agents); and article forty-one ~~(privileges and immunity)~~ (insurance fraud); and no other provision of this chapter may apply to these corporations unless specifically made applicable by the provisions of this article.
ARTICLE 25A. HEALTH MAINTENANCE ORGANIZATION ACT.
§33-25A-24. Statutory construction and relationship to other laws.

(a) Except as otherwise provided in this article, provisions of the insurance laws and provisions of hospital or medical service corporation laws are not applicable to any health maintenance organization granted a certificate of authority under this article. The provisions of this article shall not apply to an insurer or hospital or medical service corporation licensed and regulated pursuant to the insurance laws or the hospital or medical service corporation laws of this state except with respect to its health maintenance corporation activities authorized and regulated pursuant to this article. The provisions of this article may not apply to an entity properly licensed by a reciprocal state to provide health care services to employer groups, where residents of West Virginia are members of an employer group, and the employer group contract is entered into in the reciprocal state. For purposes of this subsection, a "reciprocal state" means a state which physically borders West Virginia and which has subscriber or enrollee hold harmless requirements substantially similar to those set out in section seven-a of this article.

(b) Factually accurate advertising or solicitation regarding the range of services provided, the premiums and copayments charged, the sites of services and hours of operation and any other quantifiable, nonprofessional aspects of its operation by a health maintenance organization granted a certificate of authority, or its representative may not be construed to violate any provision of law relating to solicitation or advertising by health professions: Provided, That nothing contained in this subsection shall be construed as authorizing any solicitation or advertising which identifies or refers to any individual provider or makes any qualitative judgment concerning any provider.

(c) Any health maintenance organization authorized under this article may not be considered to be practicing medicine and is exempt from the provisions of chapter thirty of this code, relating to the practice of medicine.

(d) The provisions of sections fifteen and twenty, article four (general provisions); section seventeen, article six (noncomplying forms); section twenty, article five (borrowing by insurers); article six-c (guaranteed loss ratio); article seven (assets and liabilities); article eight (investments); article eight-a (use of clearing corporations and federal reserve book- entry system); article nine (administration of deposits); article twelve (agents, brokers, solicitors and excess line); section fourteen, article fifteen (individual accident and sickness insurance); section sixteen, article fifteen (coverage of children); section eighteen, article fifteen (equal treatment of state agency); section nineteen, article fifteen (coordination of benefits with medicaid); article fifteen-b(uniform health care administration act); section three, article sixteen (required policy provisions); section three-f, article sixteen (treatment of temporomandibular disorder and craniomandibular disorder); section eleven, article sixteen (coverage of children); section thirteen, article sixteen (equal treatment of state agency); section fourteen, article sixteen (coordination of benefits with medicaid); article sixteen-a (group health insurance conversion); article sixteen-d (marketing and rate practices for small employers); article twenty-five-c (health maintenance organization patient bill of rights); article twenty-seven (insurance holding company systems); article thirty-four-a (standards and commissioner's authority for companies considered to be in hazardous financial condition); article thirty-five (criminal sanctions for failure to report impairment); article thirty-seven (managing general agents); article thirty-nine (disclosure of material transactions); article forty-one ~~(privileges and immunity)~~ (insurance fraud); and article forty- two (women's access to health care) shall be applicable to any health maintenance organization granted a certificate of authority under this article. In circumstances where the code provisions made applicable to health maintenance organizations by this section refer to the "insurer", the "corporation" or words of similar import, the language shall be construed to include health maintenance organizations.

(e) Any long-term care insurance policy delivered or issued for delivery in this state by a health maintenance organization shall comply with the provisions of article fifteen-a of this chapter.
ARTICLE 41. INSURANCE FRAUD PREVENTION ACT.
§33-41-1. Legislative purpose and findings.

This article may be cited as the West Virginia Insurance Fraud Prevention Act. The West Virginia Legislature finds that the business of insurance involves many transactions that have potential for fraud, abuse and other illegal activities. This article is intended to permit full utilization of the expertise of the commissioner to investigate and discover fraudulent insurance acts more effectively, halt fraudulent insurance acts and assist and receive assistance from state, local and federal law-enforcement and regulatory agencies in enforcing laws prohibiting fraudulent insurance acts.
§33-41-2. Definitions.
As used in this article:

(a) "Benefits" means money payments, goods, services or any other thing of value.

(b) "Business of insurance" means the writing of insurance or the reinsuring of risks by an insurer, including acts necessary or incidental to writing insurance or reinsuring risks and the activities of persons who act as or are officers, directors, agents or employees of insurers, or who are other persons authorized to act on their behalf.

(d) "Commissioner" means the commissioner of insurance, the commissioner's designees or the office of the insurance commissioner.

(e) "Financial loss" includes, but is not limited to, loss of earnings, out-of-pocket and other expenses, repair and replacement costs and claims payments made by any insurer, provider or person.

(f) "Fraudulent insurance act" means an act or omission committed by a person who, knowingly and with intent to injure, defraud, or deceive any person commits, or conceals any material information concerning, one or more of the following:

(1) Presenting, causing to be presented or preparing with knowledge or belief that it will be presented to or by an insurer, a reinsurer, broker or its agent, false information as part of, in support of or concerning a fact material to one or more of the following:

(A) An application for the issuance or renewal of an insurance policy or reinsurance contract;

(B) The rating of an insurance policy or reinsurance contract;

(D) Premiums paid on an insurance policy or reinsurance contract;

(E) Payments made in accordance with the terms of an insurance policy or reinsurance contract;

(F) A document filed with the commissioner or the chief insurance regulatory official of another jurisdiction;

(G) The financial condition of an insurer or reinsurer;

(H) The formation, acquisition, merger, reconsolidation, dissolution or withdrawal from one or more lines of insurance or reinsurance in all or part of this state by an insurer or reinsurer;

(I) The issuance of written evidence of insurance; or

(J) The reinstatement of an insurance policy;

(2) Solicitation or acceptance of new or renewal insurance risks on behalf of an insurer, reinsurer or other person engaged in the business of insurance by a person who knows or should know that the insurer or other person responsible for the risk is insolvent at the time of the transaction;

(3) Removal, concealment, alteration or destruction of the assets or records of an insurer, reinsurer or other person engaged in the business of insurance;

(4) Willful embezzlement, abstracting, purloining or conversion of moneys, funds, premiums, credits or other property of an insurer, reinsurer or person engaged in the business of insurance;

(5) Transaction of the business of insurance in violation of laws requiring a license, certificate of authority or other legal authority for the transaction of the business of insurance;

(6) Soliciting, offering or receiving any remuneration, including any kickback, rebate or bribe, directly or indirectly, with the intent of causing an expenditure of moneys from any person which would not otherwise be payable under an applicable insurance policy; or

(7) Attempting to commit, aiding or abetting in the commission of, or conspiracy to commit the acts or omissions specified in this subsection.

(g) "Health care provider" means any person, firm or corporation rendering health care services or goods.

(h) "Insurance" means a contract or arrangement in which one undertakes to:

(1) Pay or indemnify another as to loss from certain contingencies called "risks," including through reinsurance;

(2) Pay or grant a specified amount or determinable benefit to another in connection with ascertainable risk contingencies;

(3) Pay an annuity to another; or

(4) Act as surety.

(i) "Insurer" means a person entering into arrangements or contracts of insurance or reinsurance and who agrees to perform any of the acts set forth in subsection (f) of this section. Insurer includes, but is not limited to, any domestic or foreign stock company, mutual company, mutual protective association, farmers' mutual fire companies, fraternal benefit society, reciprocal or interinsurance exchange, nonprofit medical care corporation, nonprofit health care corporation, nonprofit hospital service association, nonprofit dental care corporation, health maintenance organization, captive insurance company, risk retention group or other insurer, regardless of the type of coverage written, benefits provided or guarantees made by each. A person is an insurer regardless of whether the person is acting in violation of laws requiring a certificate of authority or regardless of whether the person denies being an insurer.

(j) "Insurance representative" means any person, firm or corporation acting on an insurer's behalf, including, but not limited to, any agent, adjuster, officer, director, employee or investigator.

(k) "NAIC" means the national association of insurance commissioners.

(l) "Person" means an individual, a corporation, a limited liability company, a partnership, an association, a joint stock company, a trust, trustees, an unincorporated organization, or any similar business entity or any combination of the foregoing. "Person" also includes hospital service corporations, medical service corporations and dental service corporations as defined in article twenty-four of this chapter, health care corporations as defined in article twenty-five of this chapter, or a health maintenance organization organized pursuant to article twenty- five-a of this chapter.

(m) "Policy" means an individual or group policy, group certificate, contract or arrangement of insurance or reinsurance affecting the rights of a resident of this state or bearing a reasonable relation to this state, regardless of whether delivered or issued for delivery in this state.

(n) "Reinsurance" means a contract, binder of coverage (including placement slip) or arrangement under which an insurer procures insurance for itself in another insurer as to all or part of an insurance risk of the originating insurer.

(o) "Statement" means any written or oral representation made to any person, insurer or authorized agency. A statement includes, but is not limited to, any oral report or representation; any insurance application, policy, notice or statement; any proof of loss, bill of lading, receipt for payment, invoice, account, estimate of property damages, or other evidence of loss, injury or expense; any bill for services, diagnosis, prescription, hospital or doctor record, Xray, test result or other evidence of treatment, services or expense; and any application, report, actuarial study, rate request or other document submitted or required to be submitted to any authorized agency. A statement also includes any of the above recorded by electronic or other media.

(p) "Unit" means the insurance fraud unit established pursuant to the provisions of this article acting collectively or by its duly authorized representatives.
§33-41-3. Fraudulent insurance acts, interference and participation of convicted felons prohibited.

(a) A person shall not commit a fraudulent insurance act.

(b) A person shall not knowingly or intentionally interfere with the enforcement of the provisions of this article or investigations of suspected or actual violations of this article.

(c)(1) A person convicted of a felony involving dishonesty or breach of trust shall not participate in the business of insurance.

(2) A person in the business of insurance shall not knowingly or intentionally permit a person convicted of a felony involving dishonesty or breach of trust to participate in the business of insurance.
§33-41-4. Fraud warning required.

(a) Claim forms and applications for insurance, regardless of the form of transmission, shall contain the following statement or a substantially similar statement:

"Any person who knowingly presents a false or fraudulent claim for payment of a loss or benefit or knowingly presents false information in an application for insurance is guilty of a crime and may be subject to fines and confinement in prison."

(b) The lack of a statement as required in subsection (a) of this section does not constitute a defense in any prosecution for a fraudulent insurance act.

(c) Policies issued by nonadmitted insurers pursuant to article twelve-c of this chapter shall contain a statement disclosing the status of the insurer to do business in the state where the policy is delivered or issued for delivery or the state where coverage is in force. The requirement of this subsection may be satisfied by a disclosure specifically required by section five, article twelve-c of this chapter; section nine, article thirty-two of this chapter; and section eighteen, article thirty- two for this chapter.

(d) The requirements of this section shall not apply to reinsurance claim forms or reinsurance applications.
§33-41-5. Investigative and prosecution authority of the commissioner.

The commissioner may investigate suspected fraudulent insurance acts and persons engaged in the business of insurance.

(a) The commissioner may investigate suspected fraudulent insurance acts.

(b) The commissioner may employ attorneys to assist in the prosecution of violations of this article. If the commissioner finds that the prosecuting attorney of the county in which the violation occurred is, for some reason, unable or unwilling to take appropriate action, the commissioner may petition the appropriate circuit court for the appointment of the commissioner's attorney as a special prosecutor. An attorney appointed as a special prosecutor shall have the same authority as a county prosecutor to investigate and prosecute criminal violations of this article.

(c) Funds allocated for insurance fraud prevention may be dispersed by the commissioner, at his or her discretion, to prosecution authorities for the purpose of insurance fraud enforcement as identified in this article.

(d) The commissioner may negotiate with an attorney representing the state to prosecute violations of the article, to provide technical and litigation assistance to the department of insurance, and to allocate resources for the purpose of insurance fraud prosecution as identified in this article.

(e) It shall be the duty of the West Virginia state police, municipal police departments and the sheriffs of the counties in West Virginia to assist fraud investigators in making arrests and the duty of the prosecuting attorneys of the several counties to assist in the prosecution of all violations of this chapter and of other chapters governing the regulatory authority of the office of the insurance commissioner.

(f) The commissioner is hereby authorized to apply for and the court to grant a temporary or permanent injunction, to be issued without bond, restraining any person from violating or continuing to violate any provision of this article or rule promulgated thereunder notwithstanding the existence of other remedies at law.
§33-41-6. Mandatory reporting of fraudulent insurance acts.

(a) A person engaged in the business of insurance having knowledge or a reasonable belief that a fraudulent insurance act is being, will be or has been committed shall provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.

(b) Any other person having knowledge or a reasonable belief that a fraudulent insurance act is being, will be or has been committed may provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.
§33-41-7. Immunity from liability.

(a) There shall be no civil liability imposed on and no cause of action shall arise from a person's furnishing information concerning suspected, anticipated or completed fraudulent insurance acts, if the information is provided to or received from:

(1) The commissioner or the commissioner's employees, agents or representatives;

(2) Federal, state, or local law-enforcement or regulatory officials or their employees, agents or representatives;

(3) A person involved in the prevention and detection of fraudulent insurance acts or that person's agents, employees or representatives; or

(4) The national association of insurance commissioners or its employees, agents or representatives.

(b) Subsection (a) of this section shall not apply to statements made with actual malice. In an action brought against a person for filing a report or furnishing other information concerning a fraudulent insurance act, the party bringing the action shall plead specifically any allegation that subsection (a) of this section does not apply because the person filing the report or furnishing the information did so with actual malice.

(c) This section does not abrogate or modify common law or statutory privileges or immunities enjoyed by a person described in subsection (a) of this section.
§33-41-8. Confidentiality.

(a) Documents, materials or other information in the possession or control of the office of the insurance commissioner that are provided pursuant to section six of this article or obtained by the commissioner in an investigation of suspected or actual fraudulent insurance acts shall be confidential by law and privileged, shall not be subject to article one, chapter twenty- nine-b of the West Virginia code, one thousand nine hundred thirty-one, as amended, are not open to public inspection, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the commissioner is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties. The commissioner is authorized to use the documents, materials or other information if they are required for evidence in criminal proceedings or other action by the state.

(b) Neither the commissioner nor any person who received documents, materials or other information while acting under the authority of the commissioner may be permitted or required to testify in any private civil action concerning any confidential documents, materials or information subject to subsection (a) of this section.

(1) May share documents, materials or other information, including the confidential and privileged documents, materials or information subject to subsection (a) of this section with other state, federal and international regulatory agencies, with the national association of insurance commissioners and its affiliates and subsidiaries, and with local, state, federal and international law-enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material or other information;

(2) May receive documents, materials or information, including otherwise confidential and privileged documents, materials or information, from the national association of insurance commissioners and its affiliates and subsidiaries, and from regulatory and law-enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or information;

(3) May enter into agreements governing sharing and use of information including the furtherance of any regulatory or legal action brought as part of the recipient's official duties; and

(d) No waiver of any applicable privilege or claim of confidentiality in the documents, materials or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection (c) of this section.
§33-41-9. Creation and purpose of the insurance fraud unit.
(a) The West Virginia insurance fraud investigation unit is established within the office of the insurance commissioner. The director of the insurance fraud investigation unit shall be a full-time position and shall be appointed by the commissioner. The commissioner shall provide office space, equipment, supplies, clerical and other staff necessary for the insurance fraud investigation unit to carry out its duties and responsibilities under this article. The investigative personnel shall be qualified by training and experience to perform the duties of their positions.

(b) The fraud unit may:

(1) Initiate independent inquiries and conduct independent investigations when the insurance fraud unit has cause to believe that a fraudulent insurance act may be, is being or has been committed;

(2) Review reports or complaints of alleged fraudulent insurance activities from federal, state and local law- enforcement and regulatory agencies, persons engaged in the business of insurance, and the public to determine whether the reports require further investigation and to conduct these investigations; and

(3) Conduct independent examinations of alleged fraudulent insurance acts and undertake independent studies to determine the extent of fraudulent insurance acts.

(1) To employ and train personnel to achieve the purposes of this article and to employ legal counsel, investigators, auditors and clerical support personnel and other personnel as the commissioner determines necessary from time to time to accomplish the purposes herein;

(2) Inspect, copy or collect records and evidence;

(3) Serve subpoenas;

(4) Administer oaths and affirmations;

(5) Share records and evidence with federal, state or local law-enforcement or regulatory agencies;

(6) Make criminal referrals to the county prosecuting authorities; and

(7) Conduct investigations outside of this state. If the information the insurance fraud unit seeks to obtain is located outside this state, the person from whom the information is sought may make the information available to the insurance fraud unit to examine at the place where the information is located. The insurance fraud unit may designate representatives, including officials of the state in which the matter is located, to inspect the information on behalf of the insurance fraud unit, and the insurance fraud unit may respond to similar requests from officials of other states.

(d) On or before the first day of each regular session of the Legislature, the commissioner shall file with the governor, the clerk of the Senate and the clerk of the House of Delegates a report detailing the finalized actions taken by the insurance fraud unit in the preceding fiscal year.
§33-41-10. Other law-enforcement or regulatory authority.
This article shall not:

(a) Preempt the authority or relieve the duty of other law enforcement or regulatory agencies to investigate, examine and prosecute suspected violations of law;

(b) Prevent or prohibit a person from disclosing voluntarily information concerning insurance fraud to a law enforcement or regulatory agency other than the insurance fraud unit; or

(c) Limit the powers granted elsewhere by the laws of this state to the commissioner or the insurance fraud unit to investigate and examine possible violations of law and to take appropriate action against wrongdoers.
§33-41-11. Fraudulent claims investigation unit of insurers.

(a) Every insurer admitted to do business in the state shall maintain effective procedures and resources to deter and investigate fraudulent insurance acts prohibited by this article, including a unit that will investigate suspected fraudulent insurance acts. For the purpose of this section, "insurer" does not include reinsurers or reinsurance as defined in section eleven, article one of this chapter.

(b) Insurers may maintain the unit required by subsection (a) of this section, using its employees or by contracting with others for that purpose.

(d) The unit may include the assignment of fraud investigation to employees whose principal responsibilities are the investigation and disposition of claims. If an insurer creates a distinct unit, hires additional employees, or contracts with another entity to fulfill the requirements of this article, the additional cost incurred shall be included as an administrative expense.

(e) Insurers shall make personnel involved in investigating insurance fraud and any files relating to insurance fraud investigation available to the commissioner, local prosecuting officials, special prosecuting attorneys, or other law- enforcement agencies as needed in order to further the investigation and prosecution of insurance fraud. Information supplied by an insurer and contained in such files shall upon receipt become part of the investigative file and subject to the provisions of section eight of this article. The insurer and its employees and agents shall be entitled to immunity as provided in section seven of this article.

(f) Any expenses incurred by insurers as a result of this article shall be defrayed by such insurers from their own funds and shall not be borne by the state or by the special insurance fraud fund.
§33-41-12. Rules.

The insurance commissioner may, in accordance with article three, chapter twenty-nine-a of this code, promulgate reasonable rules as are necessary or proper to carry out the purposes of this article.
§33-41-13. Penalties.

A person who violates this article is subject to the following:

(a) Suspension or revocation of license or certificate of authority, civil penalties of up to ten thousand dollars per violation, or both. Suspension or revocation of license or certificate of authority and imposition of civil penalties shall be pursuant to an order of the commissioner issued under section thirteen, article two of this chapter. The commissioner's order may require a person found to be in violation of this article to make restitution to persons aggrieved by violations of this article; or

(b)(1) If a person commits a fraudulent insurance act of the value of one thousand dollars or more, such person is guilty of a felony and, upon conviction thereof, shall be imprisoned in the penitentiary not less than one nor more than ten years, and shall be fined not more than ten thousand dollars.

(2) If a person commits a fraudulent insurance act of the value of less than one thousand dollars, such person is guilty of a misdemeanor and, upon conviction thereof, shall be confined in jail for a term not to exceed one year or fined not to exceed two thousand five hundred dollars, or both, in the discretion of the court.

(c) A person convicted of a violation of section three of this article shall be ordered to pay restitution to persons aggrieved by the violation of this article. Restitution shall be ordered in addition to a fine or imprisonment, but not in lieu of a fine or imprisonment; and

(d) A person convicted of a felony violation of this article pursuant to subsection (b) of this section shall be disqualified from engaging in the business of insurance.

(e) Any money or other property that is awarded to the insurance fraud investigation unit as costs of investigation, shall be credited to the special revenue fund established in section thirteen, article three of this chapter.
§33-41-14. Violations of chapter; penalties for misdemeanor.

(a) It is a misdemeanor for any person to violate any of the provisions of this article unless such violation is by this chapter or other law of this state declared to be a felony.

(b) Every person convicted of a misdemeanor for a violation of any of the provisions of this article for which another penalty is not provided shall for a first conviction thereof be punished by a fine of not more than one hundred dollars or by imprisonment for not more than ten days; for a second such conviction within one year thereafter such person shall be punished by a fine of not more than two hundred dollars or by imprisonment for not more than twenty days or by both such fine and imprisonment; upon a third or subsequent conviction such person shall be punished by a fine of not more than five hundred dollars or by imprisonment for not more than six months or both such fine and imprisonment.
§33-41-15. Severability.

If any provisions of this article, or the application of a provision to any person or circumstances, shall be held invalid, the remainder of the article and the application of the provision to persons or circumstances other than those to which it is held invalid, shall not be affected.

NOTE: The purpose of this bill is to create a new fraud unit within the office of the insurance commissioner. The goal of the fraud unit is to protect the public and insurers from fraudulent acts relating to the insurance industry and the goal of controlling the increases in premiums charged attributable to insurance fraud. Information gathering abilities and penalty provisions are established to speak to the concern.

Strike-throughs indicate language that would be deleted from present law and underscoring indicates language that would be added.

Sections four through fifteen, article forty-one, chapter thirty-three (§§33-41-4 through 33-41-15) are new; therefore strike-throughs and underscoring have been omitted.