THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY BARBIN, DeLUCA, CARROLL, D. COSTA, FABRIZIO, KORTZ, KOTIK, MANDERINO, MELIO, MENSCH, PASHINSKI, READSHAW, SWANGER, R. TAYLOR, WALKO, BURNS AND HORNAMAN, JUNE 22, 2009

AS REPORTED FROM COMMITTEE ON INSURANCE, HOUSE OF REPRESENTATIVES, AS AMENDED, MARCH 23, 2010   

AN ACT

Amending Titles 18 (Crimes and Offenses) and 40 (Insurance) of

the Pennsylvania Consolidated Statutes, further providing for

insurance fraud; consolidating Article XI of The Insurance

Department Act of 1921, further providing for purpose, for

definitions, for Insurance Fraud Prevention Trust Fund, for

powers and duties and for duties of insurance licensees and

their employees; and making a repeal.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 4117(a)(1), (2), (3), (4) and (7),

(b)(4), (f) and (k)(1) of Title 18 of the Pennsylvania

Consolidated Statutes are amended to read:

§ 4117.  Insurance fraud.

(a)  Offense defined.--A person commits an offense if the

person does any of the following:

(1)  Knowingly and with the intent to defraud a State or

local government agency files, presents or causes to be filed

with or presented to the government agency a document that

contains false, incomplete or misleading information

concerning any fact or thing material to the agency's

determination in approving or disapproving [a motor vehicle] 

an insurance rate filing[, a motor vehicle insurance

transaction] or other [motor vehicle insurance] action

requiring insurance which is [required or] filed in response

to an agency's request.

(2)  Knowingly and with the intent to defraud any insurer

[or], self-insured, insurance licensee, person or the public, 

presents or causes to be presented [to any insurer or self-

insured] any statement forming a part of, or in support of,

[a claim] an insurance transaction that contains any false,

incomplete or misleading information concerning any fact or

thing material to [the claim.] any of the following:

(i)  Issue by an insurer or self-insured of an

insurance policy, rider, endorsement or a certificate of

insurance.

(ii)  Determination of insurance premium.

(iii)  Payment of any commission, benefit, claim or

other funds, under a policy of insurance or a certificate

of insurance.

(3)  Knowingly and with the intent to defraud any insurer

[or], self-insured, insurance licensee, person or the public,

assists, abets, solicits or conspires with another to prepare

or make any statement that is intended to be presented [to

any insurer or self-insured] in connection with, or in

support of, [a claim] an insurance transaction that contains

any false, incomplete or misleading information concerning

any fact or thing material to [the claim, including

information which documents or supports an amount claimed in

excess of the actual loss sustained by the claimant.] any of

the following:

(i)  Issue by an insurer or self-insured of an

insurance policy, rider, endorsement or a certificate of

insurance.

(ii)  Determination of insurance premium.

(iii)  Payment of any commission, benefit, claim or

other funds under a policy of insurance or a certificate

of insurance.

(4)  Engages in unlicensed [agent, broker] or

unauthorized [insurer] insurance activity as defined by the

act of May 17, 1921 (P.L.789, No.285), known as The Insurance

Department Act of one thousand nine hundred and twenty-one,

knowingly and with the intent to defraud an insurer, a self-

insured, an insurance licensee or the public.

* * *

(7)  [Borrows] Makes, solicits, negotiates, sells,

distributes, possesses false insurance documents or uses

another person's [financial responsibility or other] 

insurance [identification card or permits his financial

responsibility or other insurance identification card to be

used by another] documents, knowingly and with intent to

[present a fraudulent claim to an] defraud any insurer, self-

insured, insurance licensee, person or the public.

* * *

(b)  Additional offenses defined.--

* * *

[(4)  A person may not knowingly and with intent to

defraud any insurance company, self-insured or other person

file an application for insurance containing any false

information or conceal for the purpose of misleading

information concerning any fact material thereto.]

* * *

(f)  [Immunity.--[An] Any insurer, self-insured, insurance

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licensee or person, and any agent, servant or employee thereof

acting in the course and scope of [his] employment, shall be

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immune from civil or criminal liability arising from the supply

or release of written or oral information to any entity duly

authorized to receive such information by Federal or State law,

or by Insurance Department regulations] (Reserved).

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* * *

(k)  Insurance forms and verification of services.--

(1)  All applications for insurance and all claim forms

shall contain or have attached thereto a notice substantially

similar to the following notice:

Any person who knowingly and with intent to defraud

any [insurance company or other] insurer, self-

insured, insurance licensee, person or the public 

files an application for insurance or statement of

claim containing any materially false information or

conceals for the purpose of misleading, information

concerning any fact material thereto commits a

fraudulent insurance act, which is a crime and

subjects such person to criminal and civil penalties.

* * *

Section 2.  Part II heading of Title 40 is amended to read:

PART II

REGULATION OF INSURERS AND RELATED

PERSONS GENERALLY

[(Reserved)]

Section 3.  Title 40 is amended by adding an article to read:

ARTICLE A

INSURANCE FRAUD

Chapter

11.  Insurance Fraud Prevention Authority

CHAPTER 11

INSURANCE FRAUD PREVENTION AUTHORITY

Subchapter

A.  Preliminary Provisions

B.  Insurance Fraud Prevention Authority

C.  Section of Insurance Fraud

D.  Antifraud Plans and Reporting

E.  Penalties

F.  Miscellaneous Provisions

SUBCHAPTER A

PRELIMINARY PROVISIONS

Sec.

1101.  Scope of chapter.

1102.  Purpose.

1103.  Definitions.

§ 1101.  Scope of chapter.

This chapter deals with insurance fraud prevention.

§ 1102.  Purpose.

The purpose of this chapter is to do all of the following:

(1)  Establish, coordinate and fund activities in this

Commonwealth to prevent, combat and reduce insurance fraud.

(2)  To require insurers to implement antifraud plans

increasing the prevention, detection, investigation and

reporting of insurance fraud.

(3)  To require insurers to annually certify antifraud

plans and report activity under those plans to the

commissioner.

(4)  To improve and support insurance fraud law

enforcement and administration.

(5)  To improve and support insurance fraud prosecution.

§ 1103.  Definitions.

The following words and phrases when used in this chapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Antifraud plan" or "plan."  The written procedures of an

insurer for preventing, detecting, investigating and reporting

insurance fraud.

"Authority."  The Insurance Fraud Prevention Authority.

"Board."  The board of directors of the Insurance Fraud

Prevention Authority.

"Commissioner."  The Insurance Commissioner of the

Commonwealth.

"Department."  The Insurance Department of the Commonwealth.

"Fund."  The Insurance Fraud Prevention Trust Fund.

"Identified fraud cost."  The dollar amount of loss caused by

insurance fraud as admitted by a fraud suspect, alleged by an

insurer in civil or criminal legal proceedings or found by a

court of law, including insurer losses associated with insurance

premium, commission, policy benefits, claim payments or

policyholder or insurer funds.

"Insurance fraud."  An activity defined as an offense under

18 Pa.C.S. § 4117 (relating to insurance fraud).

"Insurance licensee."  A person holding a license to engage

in the business of insurance.

"Insurance producer."  A person that sells, solicits or

negotiates contracts of insurance.

"Insurer."  An insurance company, association, exchange,

interinsurance exchange, health maintenance organization,

preferred provider organization, a hospital plan corporation

subject to Chapter 61 (relating to hospital plan corporations),

professional health services plan corporation subject to Chapter

63 (relating to professional health services plan corporations),

fraternal benefits society, beneficial association, Lloyd's

insurer or health plan corporation.

"Section of Insurance Fraud."  The Section of Insurance Fraud

in the Office of Attorney General.

SUBCHAPTER B

INSURANCE FRAUD PREVENTION AUTHORITY

Sec.

1121.  Establishment of authority.

1122.  Powers and duties.

1123.  Insurance Fraud Prevention Trust Fund.

1124.  Immunity.

§ 1121.  Establishment of authority.

(a)  Establishment.--There is established a body corporate

and politic to be known as the Insurance Fraud Prevention

Authority. The purposes, powers and duties of the authority

shall be vested in and exercised by a board of directors.

(b)  Composition.--The board of the authority shall consist

of the following members composed and appointed in accordance

with the following:

(1)  The Attorney General or his designee.

(2)  A representative of the Philadelphia Federal

Insurance Fraud Task Force.

(3)  Four representatives of insurers, one of whom shall

be appointed by the President pro tempore of the Senate, one

of whom shall be appointed by the Minority Leader of the

Senate, one of whom shall be appointed by the Speaker of the

House of Representatives and one of whom shall be appointed

by the Minority Leader of the House of Representatives. Each

of the four members shall be, respectively, a representative

of an insurer writing workers compensation, accident and

health, automobile or general commercial liability insurance

in this Commonwealth.

(4)  One representative of purchasers of insurance in

this Commonwealth who is not employed by or connected with

the business of insurance and is appointed by the Governor.

(c)  Terms.--With the exception of the Attorney General and

the representative of the Philadelphia Federal Insurance Fraud

Task Force, members of the board shall serve for terms of four

years. No appointed member shall be eligible to serve more than

two full consecutive terms.

(d)  Compensation.--Members of the board shall serve without

compensation but shall receive reimbursement for all reasonable

and necessary expenses incurred in connection with their duties

in accordance with the rules of the executive board.

(e)  Quorum.--A majority of the members of the board shall

constitute a quorum for the transaction of business at a meeting

or the exercise of a power or function of the authority.

Notwithstanding any other provision of law, action may be taken

by the board at a meeting upon a vote of the majority of its

members present in person or through the use of amplified

telephonic equipment if authorized by the bylaws of the board.

The board shall meet at the call of the chairperson or as may be

provided in the bylaws of the board. The board shall meet at

least quarterly. Meetings of the board may be held anywhere

within this Commonwealth. The board shall elect its own

chairperson.

§ 1122.  Powers and duties.

The authority shall have the powers necessary and convenient

to carry out and effectuate the purposes and provisions of this

chapter and the purposes of the authority and the powers

delegated by other laws, including:

(1)  Employ administrative, professional, clerical and

other personnel as may be required and organize the staff as

may be appropriate to effectuate the purposes of this

chapter.

(2)  Have a seal and alter the same at pleasure, have

perpetual succession, make, execute and deliver contracts,

conveyances and other instruments necessary or convenient to

the exercise of its powers and make and amend bylaws.

(3)  Procure insurance against any loss in connection

with its property, assets or activities.

(4)  Apply for, solicit, receive, establish priorities

for, allocate, disburse, contract for, administer and spend

funds in the fund and other funds that are made available to

the authority from any source consistent with the purposes of

this chapter.

(5)  Make grants to and provide financial support for the

Section of Insurance Fraud, the Unit for Insurance Fraud in

the Philadelphia District Attorney's Office, other county

district attorneys' offices, other government agencies,

community, consumer and business organizations consistent

with the purposes of this chapter and consider the extent of

the insurance fraud problem in each county of this

Commonwealth.

(6)  Advise the State Treasurer in relation to the

investment of any money held in the fund and any funds held

in reserve or sinking funds and any money not required for

immediate use or disbursement and to advise the State

Treasurer in relation to the use of depositories for money of

the fund.

(7)  Assess the scope of the problem of insurance fraud,

including areas of this Commonwealth where the problem is

greatest, and review State and local criminal justice

policies, programs and plans dealing with insurance fraud.

(8)  Develop and sponsor the implementation of Statewide

plans, programs and strategies to combat insurance fraud,

improve the administration of the insurance fraud laws and

provide a forum for identification of critical problems for

those persons dealing with insurance fraud.

(9)  Coordinate the development, adoption and

implementation of plans, programs and strategies relating to

interagency and intergovernmental cooperation with respect to

insurance fraud law enforcement.

(10)  Promulgate rules or regulations related to the

expenditure of money held in the fund in order to assist and

support those agencies, units of government, county district

attorneys' offices and other organizations charged with the

responsibility of reducing insurance fraud or interested and

involved in achieving this goal.

(11)  Audit at its discretion the plans and programs that

it has funded in whole or in part in order to evaluate the

effectiveness of the plans and programs and withdraw funding

should the authority determine that a plan or program is

ineffective or is no longer in need of further financial

support from the fund.

(12)  Report annually on or before the first day of April

to the Governor and the General Assembly on the authority's

activities in the preceding period of operation.

(13)  Meet with the Section of Insurance Fraud on at

least a quarterly basis in order to advise and assist it in

implementing its statutory mandate.

(14)  Advise the General Assembly on matters relating to

insurance fraud and recommend to the General Assembly on an

annual basis any changes to the operation of the Section of

Insurance Fraud. The report shall be available for public

inspection.

(15)  Establish, either alone or in cooperation with

authorized insurance companies and licensed agents and

producers, a fund to reward persons not connected with the

insurance industry who provide information or furnish

evidence leading to the arrest and conviction of persons

responsible for insurance fraud.

(16)  Require as a condition of every application and

request for financial support, including every application

for ongoing renewal of a multiyear grant under section

1123(f) (relating to Insurance Fraud Prevention Trust Fund),

that the applicant described both the nature of and the

amount of funding for the activities, if any, devoted to the

investigation and prosecution of insurance fraud at the time

of the application or request.

(17)  Require as a condition of every application and

request for financial support that every recipient of funding

report annually within four months of the close of each

funding cycle to the authority on the use of the funds

obtained from the authority during the previous year,

including a description of programs implemented and results

obtained. The authority shall include this information on the

use of funds by grantees in its annual report under paragraph

(12) and send a copy specifically to the chairman and the

minority chairman of the standing committees of the Senate

and the chairman and the minority chairman of the standing

committees of the House of Representatives with jurisdiction

over insurance matters.

§ 1123.  Insurance Fraud Prevention Trust Fund.

(a)  Establishment.--There is established a separate account

in the State Treasury to be known as the Insurance Fraud

Prevention Trust Fund. This fund shall be administered by the

State Treasurer with the advice of the authority. All interest

earned from the investment or deposit of money accumulated in

the fund shall be deposited in the fund for the same use.

(b)  Funds.--All money deposited into the fund shall be held

in trust and shall not be considered general revenue of the

Commonwealth but shall be used only to effectuate the purposes

of this chapter as determined by the authority and shall be

subject to audit by the Auditor General.

(c)  Assessment.--

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(1)  Annually on or before the first day of April, each

insurer engaged in the writing of the insurance listed under

paragraph (2), as a condition of its authorization to

transact business in this Commonwealth, shall pay into the

fund in trust an amount equal to the product obtained by

multiplying $8,000,000 by a fraction, the numerator of which

is the direct premium written for those types of insurance

listed under paragraph (2) by that insurer in this

Commonwealth during the preceding calendar year and the

denominator of which is the direct premium written on the

insurance in this Commonwealth by all insurers in the same

period.

(2)  All Commonwealth property, casualty, life, accident

and health, and title insurance written by insurers, except

premiums written for federally mandated health insurance,

excess insurance, reinsurance and surplus lines insurance, as

listed in annual statutory financial statements filed with

the department or the National Association of Insurance

Commissioners, shall be considered in determining

assessments. Assessments made under this section shall not be

considered burdens and prohibitions under section 212 of the

act of May 17, 1921 (P.L.789, No.285), known as The Insurance

Department Act of 1921.

(3)  Assessments for health plan corporations,

professional health services plan corporations and health

insurers not licensed as property, casualty or life insurers,

if added together, shall not be more than 10% of the total

assessment authorized under this subsection. If the total

assessment for these organizations is more than 10%, the

organizations shall share the assessment up to the 10% limit

among themselves in the same proportion as they would

otherwise have shared their calculated assessment absent this

limit. Any deficiency in the total assessment caused by the

application of this limit will be shared by all other

entities being assessed in the same proportions as they are

sharing the rest of the assessment.

(4)  Assessments for insurers licensed as life insurers

if added together shall not be more than 10% of the total

assessment authorized under this subsection. If the total

assessment for these organizations is more than 10%, the

organizations shall share the assessment up to the 10% limit

among themselves in the same proportion as they would

otherwise have shared their calculated assessment absent this

limit. Any deficiency in the total assessment caused by the

application of this limit will be shared by all other

entities being assessed in the same proportions as they are

sharing the rest of the assessment.

(c)  Assessment.--

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(1)  Annually on or before the first day of April, each

insurer engaged in the writing of the insurance coverages

listed below, as a condition of its authorization to transact

business in this Commonwealth, shall pay into the fund in

trust an amount equal to the product obtained by multiplying

$8,000,000 by a fraction, the numerator of which is the

direct premium collected for those coverages listed below by

that insurer in this Commonwealth during the preceding

calendar year and the denominator of which is the direct

premium written on such coverages in this Commonwealth by all

insurers in the same period.

(2)  The following coverages, as listed in the Annual

Statistical Report of the Insurance Department, shall be

considered in determining assessments: all fire and casualty

direct business written and accident and health and credit

accident and health written under life/annuity/accident and

health direct business written. Assessments made under this

section shall not be considered burdens and prohibitions

under section 212.

(3)  Assessments for health plan corporations and

professional health services plan corporations when added

together shall not be more than 10% of the total assessment

authorized by this subsection. If the total assessment for

these organizations is more than 10%, such organizations will

share the assessment up to the 10% limit among themselves in

the same proportion as they would otherwise have shared their

calculated assessment absent this limit. Any deficiency in

the total assessment caused by the application of this limit

will be shared by all other entities being assessed in the

same proportions as they are sharing the rest of the

assessment.

(d)  Base amount.--In succeeding years, the authority may

vary the base amount of $8,000,000, except that any increase

which on an annual basis exceeds the increase in the Consumer

Price Index for this Commonwealth must be approved by three of

the four insurance representatives on the board.

(e)  Expenditures.--Money in the fund may be expended by the

authority for the following purposes:

(1)  Effectuate the powers, duties and responsibilities

of the authority as set forth under this chapter.

(2)  Pay the costs of administration and operation of the

Section of Insurance Fraud and the Unit for Insurance Fraud

in the Philadelphia District Attorney's Office.

(3)  Provide financial support to law enforcement,

correctional agencies and county district attorneys' offices

for programs designed to reduce insurance fraud and to

improve the administration of insurance fraud laws.

(4)  Provide financial support for other governmental

agencies, community, consumer and business organizations for

programs designed to reduce insurance fraud and to improve

the administration of insurance fraud laws.

(5)  Provide financial support to programs designed to

inform insurance consumers about the costs of insurance fraud

to individuals and to society and to suggest methods for

preventing insurance fraud.

(6)  Provide financial support for reward programs

leading to the arrest and conviction of persons and

organizations engaged in insurance fraud.

(7)  Provide financial support for other plans, programs

and strategies consistent with the purposes of this chapter.

(f)  Multiyear grants.--In funding the Section of Insurance

Fraud, the Unit for Insurance Fraud in the Philadelphia District

Attorney's Office and in funding grant requests, the authority

may consider and approve requests for multiyear grants of not

more than four years in length, although extensions of the

multiyear commitments may be renewed from year to year. No

funding reduction under subsection (d) may be imposed by the

authority in any given year which would operate to reduce

funding for any multiyear approved program for which persons

have been hired for full-time positions to a funding level where

the positions must be terminated unless the organization

employing the persons certifies either that other equivalent

positions are available or that the positions with the antifraud

program can be funded from other sources.

(g)  Dissolution.--If the trust fund is discontinued or the

authority is dissolved by operation of law, any balance

remaining in the fund, after deducting administrative costs for

liquidation, shall be returned to insurers in proportion to

their financial contributions to the fund in the preceding

calendar year.

§ 1124.  Immunity.

In the absence of malice, no board member and no employee of

the authority may be subject to any civil or criminal liability

for receiving or disclosing information related to insurance

fraud or the activities of the authority. In the absence of

malice, persons or organizations shall not be subject to civil

or criminal liability for providing information relating to

insurance fraud to the authority, its employees, agents or

designees. This section shall not abrogate or modify in any way

any common law or statutory privilege or immunity heretofore

enjoyed by any person.

SUBCHAPTER C

SECTION OF INSURANCE FRAUD

Sec.

1141.  Establishment.

1142.  Powers and duties.

1143.  Document confidentiality and immunity from subpoena.

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1144.  Duties of insurance licensees and their employees.

1145.  Persons not connected with insurance industry.

1146.  Refusal to cooperate with investigation.

1147.  Immunity.

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§ 1141.  Establishment.

(a)  Establishment.--There is established within the Office

of Attorney General a Section of Insurance Fraud to investigate

and prosecute insurance fraud in accordance with jurisdictional

mandates as specified under the act of October 15, 1980

(P.L.950, No.164), known as the Commonwealth Attorneys Act, and

18 Pa.C.S. § 4117 (relating to insurance fraud).

(b)  Funding.--All costs of administration and operation of

the Section of Insurance Fraud shall be borne by the fund. Any

money or other property awarded to the Section of Insurance

Fraud as costs of investigation or as a fine shall be credited

to the fund.

§ 1142.  Powers and duties.

The Section of Insurance Fraud shall have the powers

necessary and convenient to carry out and effectuate the

purposes and provisions of this chapter and the powers delegated

under other laws, including the power:

(1)  To employ administrative, professional, clerical and

other personnel as may be required and organize the staff as

may be appropriate to effectuate the purposes of this

chapter.

(2)  To initiate inquiries and conduct investigations if

the Section of Insurance Fraud has reason to believe that

insurance fraud may have been or is being committed.

(3)  To respond to notifications or complaints of

suspected insurance fraud generated by State and local

police, other law enforcement authorities, governmental

units, including the Federal Government, and the general

public.

(4)  To review notices and reports of insurance fraud and

to select those incidents of suspected fraud as, in its

judgment, require further investigation, undertake the

investigation and issue subpoena for records and testimony

relating to insurance fraud.

(5)  To conduct independent examination of insurance

fraud, conduct studies to determine the extent of insurance

fraud, deceit or intentional misrepresentation of any kind in

the insurance process and publish information and reports on

the examinations or studies.

(6)  To prosecute, both on its own and in conjunction

with other sections and divisions within the Office of

Attorney General, any incidents of insurance fraud involving

more than one county of this Commonwealth or involving any

county of this Commonwealth and another state disclosed by

its investigations and to assemble evidence, prepare charges,

bring charges or, upon request of any other prosecutorial

authority, otherwise assist that prosecutory authority having

jurisdiction over the incidents.

(7)  To report incidents of insurance fraud disclosed by

its investigations to any other appropriate law enforcement,

administrative, regulatory or licensing agency.

(8)  To pay over all civil and criminal fines and

penalties collected for violations and acts subject to

investigation and prosecution into the fund.

(9)  To undertake programs to investigate insurance fraud

and to meet, at least on a quarterly basis, with the

Insurance Fraud Prevention Authority.

(10)  To employ investigators trained in accordance with

53 Pa.C.S. Ch. 21 Subch. D (relating to municipal police

education and training). The laws applicable to law

enforcement officers of this Commonwealth shall be applicable

to the investigators. Investigators of the Section of

Insurance Fraud shall have the following additional powers:

(i)  To make arrests in accordance with existing

jurisdictional rules for criminal violations established

as a result of their investigations.

(ii)  To execute arrest and search warrants in

accordance with existing jurisdictional rules for the

same criminal violations.

(11)  To designate, if evidence, documentation and

related materials sought are located outside of this

Commonwealth, representatives, including officials of the

state where the matter is located, to secure the matter or

inspect the matter on its behalf. The person so requested

shall either make the matter available to the Section of

Insurance Fraud or shall make the matter available for

inspection or examination by a designated representative of

the Section of Insurance Fraud.

§ 1143.  Document confidentiality and immunity from subpoena.

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(a)  General rule.--Papers, records, documents, reports,

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materials or other evidence relative to the subject of an

insurance fraud investigation shall remain confidential and

shall not be subject to public inspection for so long as the

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Section of Insurance Fraud deems it reasonably necessary to

complete its investigation or for so long as the Section of

Insurance Fraud deems it reasonably necessary to protect the

privacy of the person investigated, to protect the person

furnishing the matter or to be in the public interest.

(b)  Subpoena.--

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(1)  Papers, records, documents, reports, materials or

other evidence relative to the subject of an insurance fraud

investigation shall not be subject to subpoena until opened

for public inspection by the Section of Insurance Fraud

unless the Office of Attorney General consents or until,

after notice to the Section of Insurance Fraud and a hearing,

a court of record determines that the Section of Insurance

Fraud will not be unnecessarily hindered by compliance with a

subpoena.

(2)  Investigators employed by the Section of Insurance

Fraud shall not be subject to subpoena in civil actions by

any court in this Commonwealth to testify concerning any

matter of which they have knowledge under a pending or

continuing insurance fraud investigation being conducted by

the Section of Insurance Fraud unless the Office of Attorney

General consents or until, after notice to the Office of

Attorney General and a hearing, a court of record determines

that the investigation will not be hindered by the

appearance.

§ 1144.  Duties of insurance licensees and their employees.

Every insurer, every employee of an insurer, every producer

and its employees and any other insurance licensee and its

employees shall cooperate fully with the Section of Insurance

Fraud. If an insurer, producer, any other insurance licensee or

employee of an insurer or insurance licensee who believes that

an insurance fraud has been or is being committed notifies the

Section of Insurance Fraud, the notification shall toll any

applicable time period in the act of July 22, 1974 (P.L.589,

No.205), known as the Unfair Insurance Practices Act, or any

other law or regulation.

§ 1145.  Persons not connected with insurance industry.

Any person having knowledge of or who believes that an

insurance fraud is being or has been committed may send to the

Section of Insurance Fraud a report or information pertinent to

the knowledge and belief.

§ 1146.  Refusal to cooperate with investigation.

It is unlawful for any person to resist an arrest authorized

under this chapter or in any manner to interfere either by

abetting or assisting the resistance or otherwise interfere with

Section of Insurance Fraud investigators in the duties imposed

upon them under this chapter or under any other applicable law.

§ 1147.  Immunity.

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(a)  General rule.--In the absence of malice, persons or

organizations providing information to or otherwise cooperating

with the Section of Insurance Fraud, its employees, agents or

designees, shall not be subject to civil or criminal liability

for supplying the information.

(b)  Civil and criminal liability.

(1)  In the absence of malice, persons or organizations

shall not be subject to civil or criminal liability for

complying with an order issued by a court of competent

jurisdiction acting in response to a request by the Section

of Insurance Fraud.

(2)  In the absence of malice, the Attorney General and

any employee, agent or designee of the Office of Attorney

General and the Section of Insurance Fraud shall not be

subject to civil or criminal liability for the execution of

official activities or duties of the Section of Insurance

Fraud by virtue of the publication of any report or bulletin

related to the official activities or duties of the Section

of Insurance Fraud.

(c)  Construction of section.--This section shall not

abrogate or modify any common law or statutory privilege or

immunity enjoyed by any person before December 6, 2002.

SUBCHAPTER D

ANTIFRAUD PLANS AND REPORTING

Sec.

1151.  Scope.

1152.  Purpose.

1153.  Antifraud plans.

1154.  Antifraud certification and statistical reporting.

1155.  Information sharing.

1156.  Rate inclusion or exclusion.

1157.  Fraud investigation resources.

1158.  Fraud warning notice.

1159.  Reporting of insurance fraud.

1160.  Cooperation.

1161.  Immunity.

1162.  Confidentiality.

§ 1151.  Scope.

This subchapter provides for implementation of antifraud

plans by insurers and reporting of insurance fraud by insurance

licensees and their employees. Excess insurers, reinsurers,

surplus lines insurers, self-insurers and nonrisk assuming

health plans shall be exempt from the provisions of this

subchapter.

§ 1152.  Purpose.

The purpose of this subchapter is to require the development

of antifraud plans by insurers and reporting of insurance fraud

by all insurers, insurance licensees and their respective

employees and to encourage the prevention, detection,

investigation and reporting of insurance fraud.

§ 1153.  Antifraud plans.

(a)  Written procedures.--An insurer licensed for and

conducting an insurance business in this Commonwealth shall, by

itself or as part of a group of affiliated insurers, implement

and maintain written procedures to prevent, detect, investigate

and report suspected insurance fraud. The conducting of the

business of insurance shall be considered to include the sale,

solicitation, negotiating or writing of new business, the

renewal of existing business, the collection of premium, the

appointment of producers, the payment of commissions, the

processing of claims or the settlement of claims made against

policies insuring risks located in or residing in this

Commonwealth.

(b)  Contents of procedures.--The written antifraud

procedures of each insurer or group of affiliated insurers shall

at a minimum provide for the:

(1)  Education of the insurer's officers, employees,

insurance producers, policyholders and business partners as

to the insurer's Commonwealth antifraud effort and

requirements.

(2)  Detection of insurance fraud or other criminal acts

occurring within or affecting the insurer's underwriting,

premium collection, agency, commission payment, policyholder

services, vendor relations, provider relations, claims or

claim payment areas.

(3)  Reporting of underwriting and claims information to

insurance industry database systems permitting access to such

information by insurers and law enforcement.

(4)  Establishment of fraud investigation units,

employing or contracting with persons qualified by education

and experience to do the insurer's investigation of insurance

fraud.

(5)  Reporting of insurance fraud to Federal, State or

local criminal law enforcement authorities for consideration

of investigation and prosecution.

(6)  Insurer's cooperation with Federal, State or local

criminal law enforcement agencies in investigation and

prosecution of insurance fraud.

(7)  Release to Federal, State or local criminal law

enforcement agencies upon their request all information

relating to reported insurance fraud.

(8)  Pursuit of civil recovery of fraud-related costs and

expenses.

(9)  Removal of identified fraud costs from ratemaking

and thereby the insurance premiums charged to insurance

consumers in this Commonwealth.

(c)  Filing.--By the first business day of April, an insurer

shall annually file with the commissioner a certification of

antifraud procedures or a certification of no business in this

Commonwealth. Where an insurer participates in an antifraud plan

of a group of affiliated insurers, the parent company of the

group shall make a separate certification for each member of its

group.

(d)  Statistical reporting.--By the first business day of

April, an insurer shall file with the commissioner an annual

statistical report of antifraud activity for the preceding

calendar year. Where an insurer participates in an antifraud

plan of a group of affiliated insurers, the parent company of

the group may make a consolidated statistical reporting that

separately identifies each member of its group.

§ 1154.  Antifraud certification and statistical reporting.

(a)  Forms.--The department shall annually, by December 31,

make available to insurers annual certification and statistical

reporting forms.

(b)  Mandatory information.--The annual statistical reporting

of each insurer or group of insurers for the previous calendar

year shall include the following:

(1)  The identity of each certifying and reporting

insurer, listing each insurer's full company name, National

Association of Insurance Commissioners' (NAIC) company code

and NAIC group code.

(2)  The name, title, address, telephone and e-mail

address of the individual responsible for the insurer's or

group's Commonwealth insurance fraud matters.

(3)  The total dollar amount cost of the insurer's or

group of insurers' Commonwealth antifraud effort.

(4)  The name, address, telephone and e-mail address of

the fraud investigators employed or contracted with for

implementation of the insurer's or group of insurers'

Commonwealth antifraud plan.

(5)  The total dollar amount of fraud identified only

within reports of insurance fraud made to criminal law

enforcement agencies. Identified fraud shall include:

(i)  For application or premium fraud, the dollar

amount of premium which would have been charged by the

insurer had the true nature of the risk been known to the

insurer less the amount charged without knowledge of the

true nature of the risk.

(ii)  For attempted application or premium fraud, the

dollar amount of premium which would have been charged by

the insurer had the true nature of the risk been known to

the insurer less the amount that would have been charged

without knowledge of the true nature of the risk.

(iii)  For theft of premium, commission or other

funds, the dollar amount of such funds unlawfully

obtained by the fraud suspect.

(iv)  For attempted theft of premium, commission or

other funds, the dollar amount which would have been

obtained by the fraud suspect had the theft not been

detected.

(v)  For claim fraud where a specific dollar amount

was demanded by or obtained by a fraud suspect, that

dollar amount.

(vi)  For claim fraud where a specific dollar amount

was not demanded or obtained by the fraud suspect, the

policy limits for coverages subject to the claim.

(6)  The dollar amount of restitution ordered and the

dollar amount of restitution received from civil and criminal

prosecutions of insurance fraud involving Commonwealth

business.

(7)  Summary of investigations:

(i)  For false insurance applications made to defraud

an insurer or another person, or attempts thereof, the

number of investigations by line of business opened,

investigations closed and investigations referred to

criminal law enforcement agencies.

(ii)  For theft or embezzlement of premium,

commission or other funds of the company, or attempts

thereof, the number of investigations by line of business

opened, investigations closed and investigations referred

to criminal law enforcement agencies.

(iii)  For false claims, or attempts thereof, made to

defraud an insurer or other person, the number of

investigations by line of business opened, investigations

closed and investigations referred to criminal law

enforcement agencies.

(8)  A summary of the insurer's or group's Commonwealth

fraud concerns, including the identification and proposal of

remedies for any fraud scheme or method detected.

§ 1155.  Information sharing.

(a)  Duties.--Each insurer or group of affiliated insurers

subject to the antifraud plan provisions of this subchapter

shall do one of the following:

(1)  Obtain and maintain membership in one or more

database systems supporting the insurance industry for the

purpose of indexing, querying, retrieval or sharing of

insurance information with other insurers and law

enforcement.

(2)  Maintain its own database of insurance information

upon which other insurers and law enforcement may inquire and

be provided information.

(b)  Cooperation.--Each insurer and group of affiliated

insurers subject to the antifraud plan provisions of this

subchapter shall cooperate fully with other insurers and law

enforcement in the exchange of information relating to

investigation of suspected insurance fraud or other criminal

offenses.

§ 1156.  Rate inclusion or exclusion.

(a)  Prohibition.--An insurer shall not pay and knowingly

pass on identified fraud costs to its policyholders, subscribers

or certificate holders.

(b)  Exclusion.--An insurer shall exclude all identified

fraud cost from its ratemaking or the ratemaking of any rating

organization to which it subscribes.

(c)  Requirement.--An amount included in ratemaking by an

insurer prior to recognition of the amount as an identified

fraud cost shall have a like amount excluded from the insurer's

current ratemaking.

(d)  Cost of antifraud plan.--Any expense or cost incurred by

an insurer in implementing its Commonwealth antifraud plan may

be included in its ratemaking.

§ 1157.  Fraud investigation resources.

(a)  Units.--An insurer or group of affiliated insurers shall

maintain one or more Commonwealth fraud investigation units to

implement its Commonwealth antifraud plan.

(b)  Qualifications of investigators.--Persons employed or

contracted with by the insurer or group of insurers as fraud

investigators shall be qualified by reason of experience and

training to do fraud awareness training, the investigation of

insurance fraud and the communication of insurance fraud to

criminal law enforcement authorities.

(c)  Limitation.--Unless an insurer has obtained the written

approval of the commissioner, persons employed or contracted

with or by the insurer or group of insurers as fraud

investigators shall do only the insurer's fraud investigation.

(d)  Continuing education requirement.--Persons employed as

fraud investigators shall have or obtain within one year of

employment a professional fraud investigation designation having

an annual continuing education requirement through an

organization or association offering such designation.

§ 1158.  Fraud warning notice.

(a)  Notice requirements.--Insurers shall use with all

insurance applications, on the face of each new or renewed

policy or certificate of insurance and on all claim documents

asking or requiring information of a claimant, a fraud warning

notice as required by 18 Pa.C.S. § 4117(k)(1) (relating to

insurance fraud).

(b)  Information requested.--An insurance application shall

include any written, electronic or oral information requested by

an insurer of an applicant or enrollee for insurance for issue

or amendment of a policy or certificate of insurance.

(c)  Claims.--An insurance claim includes any written,

electronic or oral information requested of a person seeking

compensation, a service or payment of a benefit under a policy

of insurance.

(d)  Satisfaction.--Insurers may satisfy the requirements of

this subchapter, as to oral communications with applicants and

claimants, by reading or providing a copy of the required fraud

warning notice to the applicant or claimant.

§ 1159.  Reporting of insurance fraud.

(a)  Written report requirement.--All insurers and insurance

licensees and their officers, employees and agents, having

credible evidence that insurance fraud or other criminal offense

involving insurance has occurred, is occurring or will occur,

shall make a written report of that belief to a Federal, State

or local criminal law enforcement agency having jurisdiction

over the matter within 30 days of receiving the evidence.

Reports of insurance fraud or other criminal offenses to a

criminal law enforcement agency by officers, employees or agents

of an insurer or insurance licensee may be made through the

insurer or insurance licensee.

(b)  Copy of report.--For any report of insurance fraud or

other criminal offense involving insurance made to a criminal

law enforcement agency, the insurer or insurance licensee shall

concurrently provide a copy of the report to the department.

§ 1160.  Cooperation.

An insurer making a report of suspected insurance fraud or

other criminal offense involving insurance to a criminal law

enforcement agency shall, upon the written request of that

agency, release to that agency all documentation or information

relating to alleged crime or crimes and cooperate fully in the

subsequent production of any requested evidence or testimony

deemed by that agency as necessary for prosecution.

§ 1161.  Immunity.

Insurers and insurance licensees and their officers and

employees shall be exempt from both civil and criminal liability

for requesting or providing information required by this

subchapter to other insurers, to other insurance licensees, to

any criminal law enforcement authority, to the authority, to any

grantee or designee of the authority, to the department, to the

National Association of Insurance Commissioners, to any industry

database system utilized by an insurer in compliance with this

chapter or to any other entity authorized by Federal, State or

local law or insurance regulation to receive such information.

§ 1162.  Confidentiality.

Antifraud plan certifications and reports filed with the

department and any reports or materials related to such reports

shall be given confidential treatment and are not subject to

subpoena and may not be made public by the department or any

other person. The information shall be exempt from disclosure

under the act of February 14, 2008 (P.L.6, No.3), known as the

Right-to-Know Law.

SUBCHAPTER E

PENALTIES

Sec.

1171.  Violations.

1172.  Other violations.

§ 1171.  Violations.

Insurers violating any provision of this chapter shall, in

addition to any penalty that may be imposed under any other law,

be subject to all of the following:

(1)  Payment of a penalty of $10,000 per violation for

failing to implement or maintain a Commonwealth antifraud

plan, for failing to make or making a false antifraud

certification or annual antifraud statistical report, for

failing to make a required report of insurance fraud to a

criminal law enforcement authority or for failing to remove

identified fraud costs from ratemaking.

(2)  Upon notice by the commissioner of violation of this

chapter, payment of a penalty of $500 per day, for each day

of continuing violation.

§ 1172.  Other violations.

Insurance licensees other than insurers violating any

provision of this chapter shall, in addition to any penalty that

may be imposed under any other law, be subject to:

(1)  payment of a penalty of $5,000 per violation for

failing to make a required report of insurance fraud to a

criminal law enforcement authority; and

(2) upon notice by the commissioner of violation of this

chapter, payment of a penalty of $500 per day, for each day

of continuing violation.

SUBCHAPTER D

<--

ANTIFRAUD PLANS

Sec.

1151.  Scope.

1151.1.  Definition.

1152.  Filing of plans.

1153.  Content of plans.

1154.  Review by department.

1155.  Report on antifraud activities.

1156.  Penalties.

1157.  Confidentiality of plans and reports.

1158.  Reporting of insurance fraud.

1159.  Civil immunity.

§ 1151.  Scope.

This subchapter provides for implementation of antifraud

plans by insurers not presently required to develop antifraud

plans.

§ 1151.1.  Definition.

The following words and phrases when used in this subchapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Insurer."  A company or health insurance entity licensed in

this Commonwealth to issue an individual or group health,

sickness or accident policy or subscriber contract or

certificate or plan that provides medical or health care

coverage by a health care facility or licensed health care

provider that is offered or governed under the act of May 17,

1921 (P.L.682, No.284), known as The Insurance Company Law of

1921, or any of the following:

(1)  The act of December 29, 1972 (P.L.1701, No.364),

known as the Health Maintenance Organization Act.

(2)  The act of May 18, 1976 (P.L.123, No.54), known as

the Individual Accident and Sickness Insurance Minimum

Standards Act.

(3)  Chapter 61 (relating to hospital plan corporations)

or 63 (relating to professional health services plan

corporations).

(4)  Article XXIV of The Insurance Company Law of 1921.

§ 1152.  Filing of plans.

Each insurer shall institute and maintain an insurance

antifraud plan. The antifraud plan of insurers licensed on the

effective date of this subchapter shall be filed with the

department on or before December 31, 2011. Insurers licensed

after the effective date of this subchapter shall file within

six months of licensure. Changes to the antifraud plan shall be

filed with the department within 30 days after it has been

modified.

§ 1153.  Content of plans.

The antifraud plans of each insurer shall establish specific

procedures:

(1)  To prevent insurance fraud, including internal fraud

involving employees or company representatives, fraud

resulting from misrepresentation on applications for

insurance coverage and claims fraud.

(2)  To review claims in order to detect evidence of

possible insurance fraud and to investigate claims where

fraud is suspected.

(3)  To report fraud to appropriate law enforcement

agencies and to cooperate with the agencies in their

prosecution of fraud cases.

(4)  To undertake civil actions against persons who have

engaged in fraudulent activities.

(5)  To report fraud-related data to comprehensive

databased systems approved by the department.

(6)  To ensure that costs incurred as a result of

detected insurance fraud are not included in a rate base

affecting the premiums of policyholders, subscribers and

certificate holders.

§ 1154.  Review by department.

Antifraud plans shall be filed with the department. If, after

review, the department finds that the antifraud plan does not

comply with section 1153 (relating to content of plans), the

antifraud plan may be disapproved. Notice of disapproval shall

include a statement of the specific reasons for the disapproval.