HOUSE SUBSTITUTE NO. 1
HOUSE BILL NO. 344
AS AMENDED BY HOUSE AMENDMENT NO. 1 AND SENATE AMENDMENT NOS. 2 AND 3
AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE RELATING TO INSURANCE FRAUD.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (Three—fifths of each House concurring therein):
Section 1. Amend Title 18 of the Delaware Code, by adding thereto a new Chapter, designated as Chapter 24, which new chapter shall read as follows:
"Chapter 24. Insurance Fraud
§2404. Establishment of Delaware Insurance Fraud Prevention Bureau; Delaware Insurance Fraud Auxiliary Fund.
§2405. Evidence, documentation, and related materials.
§2406. Confidentiality. §2407. Insurance fraud. §2408. Duties of Insurers. §2409. Immunity.
§2410. Other law enforcement authorities.
§2411. Enforcement, investigations, hearings, administrative penalties, and appeals.
§2412. Consent Orders.
§2413. Criminal prosecution.
§2414. Application of Administrative Procedures Act. §2401. Title.
This Chapter shall be known as and may be cited as the Delaware Insurance Fraud Prevention Act.
The purpose of this Chapter is to confront aggressively the problem of insurance fraud in the State of Delaware by facilitating the detection of
insurance fraud, reducing the occurrence of such fraud through administrative enforcement and deterrence, requiring the restitution of fraudulently obtained insurance benefits, and reducing the amount of premium dollars used to pay fraudulent claims.
(a) "Attorney General" means the Attorney General of the State of Delaware or his/her designated representatives.
(b) "Authorized agency" means any appropriate law enforcement
(c) "Bad Faith" means without any reasonable justification.
(a) "Bureau" means the Delaware Insurance Fraud Prevention Bureau established by this Chapter.
(b) "Director" means the Director of the Delaware Insurance Fraud Prevention Bureau.
(a) "Financial loss" includes, but Is not limited to, loss of earnings, out of pocket and other expenses, repair and replacement costs and claims payments.
(a) "Insurer" includes, but is not limited to, an authorized insurer, self-insurer, reinsurer, broker, producer, or any agent thereof.
(a) "Practitioner" means a licensee of this State authorized to practice medicine, surgery, psychology, chiropractic or law or any other licensee or business of this State whose services are compensated, directly or indirectly, by insurance proceeds, or a licensee similarly licensed In any other state, or the practitioner of any non-medical treatment rendered in accordance with a recognized religious method of healing.
(I) "Statement" includes, but Is not limited to, any notice statement, proof of loss, bill of lading, receipt for payment, invoice, account, estimate of property damages, bill for services, diagnosis, prescription, hospital or doctor records, x-rays, test result or other evidence of loss, injury or expense.
§2404. Establishment of Delaware Insurance Fraud Prevention Bureau: Delaware Insurance Fraud Auxiliary Fund.
(a) The Delaware Insurance Fraud Prevention Bureau is hereby
established within the Department of Insurance and authorized to employ investigators and appropriate support staff as is necessary to carry out its mandate.
(b) The Commissioner shall appoint the full time supervisory and
investigative personnel of the Bureau including the Director and Chief Investigator, who shall hold their employment at the pleasure of the Commissioner and who shall be qualified by training and experience to perform the duties of their positions. The Commissioner shall also appoint the
clerical and other staff necessary for the Bureau to fulfill its
responsibilities under this Chapter.
(c) It shall be the duty of the Bureau:
(1) To initiate independent inquiries and conduct independent
investigations when the Bureau has cause to believe that an act of Insurance fraud has been, or is currently being committed;
(1) To review reports or complaints of alleged insurance fraud from federal, state and local police, other law enforcement authorities, governmental agencies or units, insurers, and the general public and to determine whether such reports require further investigation and to conduct such investigations;and
(1) To conduct independent examinations of insurance fraud, and undertake independent studies to determine the extent of Insurance fraud.
(d) There is hereby created within the Bureau a special revolving fund to be designated as the Delaware Insurance Fraud Auxiliary Fund which shall be used by the Bureau in the performance of the various functions and duties required of the- Bureau by law.
§2405. Evidence—documentation. and related materials.
(a) If the Bureau seeks evidence, documentation, or related materials located within this State pertinent to an investigation or examination which
is in the possession or control of an insurer or an employee of an insurer. the Bureau may by request or subpoena gain access to the material. The person so requested or subpoened shall either make the material available to the Bureau, or shall make the matter available for inspection or examination by a designated representative of the Bureau. In the event of non-compliance with the Bureau's subpoena, the Superior Court of the State of Delaware shall have exclusive jurisdiction to enforce such subpoena in appropriate circumstances on proper application of the Bureau. In such enforcement proceedings the Respondent may assert, and the Superior Court shall honor, any claims of privilege otherwise available to the Respondent under the statutory and common law of the State of Delaware.
(b) If the Bureau seeks evidence, documentation, or related materials located outside this State pertinent to an investigation or examination, the Bureau may designate representatives or deputies, including officials of the State where the matter is located, to secure or inspect the evidence, documentation or materials on its behalf.
§2406. Confidentiality and immunity from subpoena.
(a) All papers, records, documents, reports, materials or other
evidence relevant to an insurance fraud investigation or examination shall remain confidential and shall not be subject to public inspection so long as the Bureau deems it is reasonably necessary to protect the privacy of the person or matter investigated or examined, to protect the person furnishing the material, or to be in the public interest.
(b) Such papers, records, documents, reports, materials or other
evidence relevant to an insurance fraud investigation or examination shall not be subject to subpoena until opened for public inspection by the Bureau.
§2407. Insurance fraud.
(a) It shall be a fraudulent insurance act for a person to knowingly, by act or omission, with intent to injure, defraud or deceive:
(1) Present, cause to be presented, prepare, assist, abet,
solicit, or conspire with another to prepare or make any oral or written statement with knowledge or belief that it will be presented to an insurer in connection with, or in support of, any application for the issuance of an insurance policy, containing false, incomplete, or misleading information concerning any fact material to the application for issuance of an insurance policy;
(1) Prepare, present or cause to be presented to any insurer, any oral or written statement including computer-generated documents as part of, or in support of, a claim for payment or other benefit pursuant to an insurance policy, containing false, incomplete or misleading information concerning any fact material to such claims; or
(1) Assist, abet, solicit, or conspire with another to prepare or present any oral or written statement, including computer-generated documents, that is intended to be presented to any insurer in connection with, or in support of, any claim for payment or other benefit pursuant to an insurance policy,which contains false, incomplete or misleading information concerning any fact material to the claim.
(b) It shall be a fraudulent insurance act for a practitioner to
knowingly and willfully assist, conspire with, or urge any person to violate any of the provisions of this Chapter, or for any person who due to such assistance, conspiracy or urging by said practitioner, knowingly and willfully benefits from the proceeds derived from the use of the fraud.
(c) It shall be a fraudulent insurance act for any insurer or any
person acting on behalf of such insurer to knowingly, by act or omission, with intent to injure, defraud or deceive:
(1) Present or cause to be presented to an insurance claimant
false, incomplete or misleading information regarding the nature, extent and terms of Insurance coverage which may or might be available to such claimant under any policy of insurance, whether first or third party.
(2) Present or cause to be presented to any insurance claimant false, incomplete or misleading information regarding or affecting in any fashion the extent of any claimant's right to benefit under, or to make a claim against, any policy of insurance whether first or third party.
§2408. Duties of Insurers.
Any insurer which has a reasonable belief that an act of insurance fraud is being, or has been, committed shall send to the Bureau, on a form prescribed by the Bureau, any and all information and such additional information relating to such act as the Bureau may require.
(a) In the absence of fraud or bad faith, no person shall be subject to civil liability (for libel, slander or any other relevant tort cause of action by virtue of filing reports, without malice, or furnishing other information, written or oral, without malice, required by this Chapter or required by the Commissioner under the authority granted in this Title), and no civil cause of action of any nature shall arise against such person:
(1) acts furnished employees; or
Insurance acts for any information relating to suspected fraudulent insurance
to or received from law-enforcement officials, their agents and
for any information relating to the suspected fraudulent furnished to or received from other persons in this Title; or
(1) for any such information furnished in reports to the Insurance Department, the National Association of Insurance Commissioners or any organization established to detect and prevent fraudulent insurance acts, their agents, employees, or designees, nor shall the Commissioner or any employee of the Insurance Department, (acting without malice) in the absence of fraud or bad faith, be subject to civil liability (for libel, slander or any other relevant tort) and no civil cause of action of any nature shall arise against such person by virtue of publication of any report or bulletin related to the official activities of the Insurance Department. Nothing
herein is intended to abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person.
§2410. Other law enforcement authorities This Chapter shall not:
(1) Pre-empt the authority or relieve the duty of any other law enforcement agency to investigate, examine, and prosecute suspected violations of law;
(2) Prevent or prohibit a person from voluntarily disclosing any information concerning insurance fraud to any law enforcement agency other than the Bureau; or
(1) Limit any of the powers granted elsewhere by the laws of this State to the Commissioner of Insurance or the Department of Insurance to investigate and examine possible violations of law and to take appropriate action.
§2411. Enforcement. Investigations. hearings. administrative
penalties. and appeals.
(a) The matters of enforcement, investigations, hearings,
administrative penalties and appeals shall be conducted in accordance with Chapter 3 of this Title and Chapter 101 of Title 29 of the Delaware Code to the extent that such provisions are not in conflict with the provisions set forth in this Chapter.
(a) Upon a showing by a clear and convincing evidence that a violation of this Chapter has occurred, the Commissioner may impose an administrative penalty of not more than $10,000 for each act of insurance fraud. An act of insurance fraud may be one of several such acts which taken
together comprise a fraudulent insurance scheme. Assessment of the
administrative penalty shall be determined by the nature, circumstances, extent and gravity of the act or acts of insurance fraud, any prior history of such act or acts, the degree of culpability, and such other matters as justice may require.
(c) In the event of nonpayment of the administrative penalty after all rights of appeal have been waived or exhausted, a civil action may be brought by the Commissioner in Superior Court for the collection of the administrative penalty, including interest, attorneys' fees and costs, in the following manner:
(1) A praecipe and complaint shall be filed setting forth that
Administrative action was taken against the Defendant in accordance with this Chapter, that the Defendant either voluntarily entered into a Consent Order which called for the payment of a specified monetary penalty, or in the alternative, that after proper notice and hearing, the Defendant was determined to be in violation of this Chapter and that by Order of the Commissioner a specified monetary penalty had been assessed against the Defendant, that all rights of appeal have been waived or exhausted, and that payment in full has not been made in accordance with the terms of the Consent Order or other Order of the Commissioner. The Department shall attach to the complaint a certified copy of that Consent Order or other Order of the Commissioner.
(2) The Court shall enter judgment in favor of the Department for the amount specified in the Complaint upon the Department establishing the following:
a. The Defendant is the same person against whom the Consent Order or other Order of the Commissioner applies; and
b. Payment in full has not been made by or on behalf of the Defendant according to the terms of the Consent or other Order of the Commissioner.
(3) Any judgment entered shall be final to the same extent as a judgment entered after trial.
(4) Except as otherwise provided in this section the Superior Court Civil Rules shall govern these proceedings.
(d) Any person who is found to have committed an act of insurance fraud, or violated an order of the Commissioner pursuant to a hearing, shall be liable for costs incurred by the Bureau. The assessment for costs shall be ln of each penalty assessed pursuant to this section.
(e) In addition to the above, the Commissioner shall have
authority to order restitution to the insurer of any insurance proceeds paid pursuant to a fraudulent claim.
(f) The expenses or administrative penalties collected by the
Bureau under this Chapter are appropriated to the Bureau in accordance with §2404 of this Chapter. All monies received by the Commissioner from insurers and agents pursuant to this Chapter shall be transmitted to the State Treasurer to be deposited in the State Treasury to the credit of the Delaware Insurance Fraud Auxiliary Fund. All such monies which are deposited in the Auxiliary Fund shall be appropriated to the Bureau to be used exclusively for the support of the Bureau.
§2412. Consent Orders
Any person so requested may enter into a Consent Order whereby such person, without admitting the conduct complained of, consents to the imposition of an administrative penalty and when so requested agrees to cease and desist the acts or omissions complained of.
§2413. Criminal Prosecution.
The imposition of any fine or other sanction under this Chapter shall not preclude prosecution for a violation of any of the criminal laws of this State.
§2414. Analtcation of Administrative_Procedures Act.
Except as otherwise provided in this Chapter, the State Administrative Procedures Act (Chapter 101 Of Title 29 of the Delaware Code) applies to and governs all administrative actions taken by the Bureau."
Section 2. The provisions of this Act shall expire three years from the effective date of its enactment.
Section 3. Amend Chapter 5, Title 18 of the Delaware Code by striking in its entirety section 533 thereof.
Section 4 Assessments. The costs of administration and operation of the Delaware Insurance Fraud Prevention Bureau shall be borne by all of the insurers and agents admitted to transact the business of insurance in this State. The Commissioner shall divide these costs among all of the insurers and agents, assessing $250 annually against each insurer and $10 annually against each agent to provide the funds necessary for three fiscal years of operation of the Bureau after its initial start—up date. To the extent the assessments against insurers and agents are not sufficient to fund the entire operation of the Bureau, other monies appropriated to the Department, if available, may be used, at the Commissioner's discretion, to fund those operations not covered by the assessments.
Section 5. 5.0verabilttY. If any provision of this Act or application thereof to any person, entity or circumstance is held invalid, the invalidity shall not affect other provisions or applications of this Act and to this end the provisions of this Act are severable.
Section 6. Authorization. The Controller General and the Budget
Director shall be authorized to create the positions necessary to carry out the mandate of this Act.
Approved July 22, 1994.