Report Title:

Relating to insurance.

Description:

Creates and expands the authority of the Insurance Division's insurance fraud investigations branch to prevent, investigate, and prosecute both civilly and criminally, insurance fraud relating to all lines of insurance.

THE SENATE

S.B. NO.

759

TWENTY-THIRD LEGISLATURE, 2005

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO INSURANCE.

 

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

SECTION 1. Insurance fraud is reported to cost every United States household an average of $500 per year. In Hawaii, the cost of motor vehicle insurance fraud alone has been estimated to be over $164 annually per household. In recognition of the impact that fraud has on the cost of motor vehicle insurance, Act 251, Session Laws of Hawaii 1997, was enacted to establish an insurance fraud investigations unit, and motor vehicle insurance fraud violations and penalties. Act 155 and Act 275, Session Laws of Hawaii 1998, were enacted the following year to clarify the penalties for the offense of motor vehicle insurance fraud and enhance and clarify the powers and purpose of the insurance fraud investigations unit to combat motor vehicle insurance fraud.

Insurance fraud also has increasingly affected costs within the health insurance industry. Industry health care fraud losses are estimated at three to fourteen per cent of the $1,200,000,000,000 in annual national health care costs. This is equivalent to approximately $36,000,000,000 to $144,000,000,000 annually. In Hawaii, based on the conservative estimate that insurance fraud amounts to three per cent of annual Hawaii health care costs, health insurance fraud causes losses that exceed $60,000,000 annually. Because insurance fraud is a growing problem in the area of health insurance, the legislature enacted health insurance fraud provisions in Act 125, Session Laws of Hawaii 2003. Similar fraud provisions are in place for workers' compensation insurance. None of the health care insurance fraud provisions or the provision for workers' compensation clearly designates a specific law enforcement agency responsible for the investigation and prosecution of such violations.

No line of insurance is exempt from insurance fraud. Rather than limit administrative, civil, and criminal penalties for insurance fraud to a few selected lines of insurance, Hawaii's insurance fraud law should be expanded to include all lines of insurance to deter perpetrators of insurance fraud by demonstrating that no line of insurance will be a safe haven for those who commit insurance fraud.

The purposes of this Act are to:

(1) Establish the insurance fraud investigations branch to replace the existing insurance fraud investigations unit established in Act 251, which was expanded by Acts 155 and 275, and empower that branch to investigate and prosecute insurance fraud in all lines of insurance including workers' compensation;

(2) Establish administrative, civil, and criminal penalties for offenses of insurance fraud in all lines of insurance including workers' compensation insurance fraud; and

(3) Provide that fines and settlements resulting from successful insurance fraud prosecutions are to be deposited into the compliance resolution fund to help the insurance fraud investigations branch cover some of the cost of its own operation to prevent, investigate, and prosecute insurance fraud.

SECTION 2. Chapter 386, Hawaii Revised Statutes, is amended by adding to part III four new sections to be appropriately designated and to read as follows:

"§386-A Workers' compensation insurance fraud in the first degree. (a) A person commits the offense of workers' compensation insurance fraud in the first degree if the person intentionally or knowingly violates section 386-98 and where the value of the coverage, benefits, recovery, or compensation obtained or attempted to be obtained or denied or attempted to be denied exceeds $20,000.

(b) Workers' compensation insurance fraud in the first degree is a class B felony.

(c) For the purpose of this section, "intentionally" and "knowingly" have the meanings given in section 702-206.

§386-B Workers' compensation insurance fraud in the second degree. (a) A person commits the offense of workers' compensation insurance fraud in the second degree if the person intentionally or knowingly violates section 386-98 and where the value of the coverage, benefits, recovery, or compensation obtained or attempted to be obtained or denied or attempted to be denied exceeds $300.

(b) Workers' compensation insurance fraud in the second degree is a class C felony.

(c) For the purpose of this section, "intentionally" and "knowingly" have the meanings given in section 702-206.

§386-C Workers' compensation insurance fraud in the third degree. (a) A person commits the offense of workers' compensation insurance fraud in the third degree if the person intentionally or knowingly violates section 386-98 and where the value of the coverage, benefits, recovery, or compensation obtained or attempted to be obtained or denied or attempted to be denied is $300 or less.

(b) Workers' compensation insurance fraud in the third degree is a misdemeanor.

(c) For the purpose of this section, "intentionally" and "knowingly" have the meanings given in section 702-206.

§386-D Workers' compensation insurance fraud; administrative penalties. (a) In lieu of or in addition to the criminal penalties set forth in section 386-A, 386-B, or 386-C, a person who commits workers' compensation insurance fraud as defined under section 386-98 may be subject to the administrative penalties of restitution of the value of benefits or payments fraudulently received under this chapter, whether received from an employer, insurer, or the special compensation fund, to be made to the employer, insurer, or the special compensation fund from which the compensation was received, and one or more of the following:

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

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

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

(4) Suspension or termination of payments for medical, vocational rehabilitation, or any other service rendered under this chapter;

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

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

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

(c) For the purpose of this section, "knowingly" means that a person has actual knowledge of the facts; and

(1) Acts in deliberate ignorance of the truth or falsity of the facts; or

(2) Acts in reckless disregard of the truth or falsity of the facts.

No proof of specific intent to defraud is required to prove that a person acted "knowingly" with respect to the facts."

SECTION 3. Chapter 431, Hawaii Revised Statutes, is amended by adding to article 2 a new part to be appropriately designated and to read as follows:

"PART . INSURANCE FRAUD

§431:2-A Definitions. As used in this part:

"Branch" means the insurance fraud investigations branch of the insurance division.

"Insurer" shall have the meaning as defined in section 431:1-202.

"Person" means any individual, company, association, organization, group, partnership, business, trust, or corporation; but shall exclude an insurer, as defined in section 431:1-202.

§431:2-B Insurance fraud investigations branch. (a) There is established within the insurance division the insurance fraud investigations branch.

(b) The branch shall:

(1) Conduct a statewide program for the prevention of insurance fraud relating, but not limited to, title 24 and chapter 386;

(2) Notwithstanding any other law to the contrary, the branch shall investigate and prosecute via administrative hearings and courts of competent jurisdiction all persons or insurers involved in insurance fraud violations arising out of but not limited to chapters 386 to include both self-insured employers and fully insured employers, 431, 432, and 432D; and

(3) Promote public and industry-wide education about insurance fraud.

(c) For the purpose of this section, person shall have the meaning as defined in section 431:1-212 and shall include insurer as defined in section 431:1-202.

(d) The branch may review and take appropriate action on complaints relating to insurance fraud.

(e) The commissioner shall employ or retain, by contract or otherwise, attorneys, investigators, investigator-auditors, accountants, auditors, physicians, health care professionals, paralegals, consultants, experts, and other professional, technical, and support staff as necessary to promote the effective and efficient conduct of the branch's activities. The commissioner may hire these employees without regard to chapter 76.

(f) Notwithstanding any other law to the contrary, an attorney employed or retained by the branch may represent the State in any criminal, civil, or administrative proceeding to enforce all applicable state laws relating to insurance fraud, including, but not limited to, criminal prosecutions, disciplinary actions, and actions for declaratory and injunctive relief. Each attorney representing the State in such a proceeding shall be designated by the attorney general as a special deputy attorney general. The decision to designate an attorney as a special deputy attorney general shall be solely within the discretion of the attorney general.

(g) Investigators, investigator-auditors, and auditors appointed and commissioned under this part shall have and may exercise all of the powers and authority of a police officer or of a deputy sheriff.

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

§431:2-C Insurance fraud. (a) A person commits the offense of insurance fraud if the person knowingly misrepresents or conceals a material fact, opinion, or intention in order to obtain or attempt to obtain coverage, benefits, recovery, or compensation for services if the person does any of the following:

(1) When presenting or causing or permitting to be presented an application, whether written, typed, or transmitted through electronic media, for the issuance or renewal of an insurance policy or reinsurance contract;

(2) When presenting or causing or permitting to be presented false information on a claim for payment whether typed, written, or transmitted through electronic media;

(3) When presenting or causing or permitting to be presented a claim for the payment of a loss;

(4) When presenting or causing or permitting to be presented improper multiple duplicative claims for the same loss or injury, including knowingly presenting such multiple and duplicative claims to more than one insurer;

(5) When presenting or causing or permitting to be presented any claim for payment of a health care benefit;

(6) When presenting or causing or permitting to be presented a claim for a health care benefit that was not used by or provided on behalf of the claimant;

(7) When presenting or causing or permitting to be presented improper multiple and duplicative claims for payment of the same health care benefit;

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

(9) When fabricating, altering, concealing, making a false entry in, or destroying a document whether typed, written, or through an audio or video tape or electronic media;

(10) When presenting or causing or permitting to be presented to a person or insurer false, incomplete, or misleading information regarding the nature, extent, and terms of an insurance policy, and the benefits under any policy of insurance, whether first or third party;

(11) When presenting or causing or permitting to be presented to a person or producer false or misleading information about a person’s status as a licensed producer that induces a person or insurer to purchase an insurance policy or reinsurance contract;

(12) When making or causing or permitting to be made any statements, either typed, written, or through audio or video tape or electronic media, or claims by the person or on behalf of a person with regard to obtaining legal recovery or benefits;

(13) In addition, a person commits the offense of insurance fraud:

(A) If the person knowingly aids, agrees, or attempts to aid, solicit, or conspire with any person who engages in an unlawful act as defined under this section; or

(B) Knowingly makes, causes, or permits to be presented any false statements or claims by any person or on behalf of any person during an official proceeding as defined by section 710-1000.

(b) This section shall not supersede any other law relating to theft, fraud, or deception. Insurance fraud may be prosecuted under this part or any other applicable statute or common law and all penalties and remedies shall be cumulative.

(c) In prosecutions for insurance fraud or related offenses including theft in sections 708-830, 708-830.5, 708-831, 708-832, and 708-833, the offense charged shall be considered an "offense an element of which is either fraud or a breach of fiduciary obligation" for the purposes of extending, pursuant to section 701-108(3)(a), the time limitations for prosecutions set forth in section 701-108.

§431:2-D Insurance fraud in the first degree. (a) A person commits the offense of insurance fraud in the first degree if the person intentionally or knowingly violates section 431:2-C and where the value of the coverage, benefits, recovery, or compensation obtained or attempted to be obtained exceeds $20,000.

(b) Insurance fraud in the first degree is a class B felony.

(c) For the purpose of this section, "intentionally" and "knowingly" have the meanings given in section 702-206.

§431:2-E Insurance fraud in the second degree. (a) A person commits the offense of insurance fraud in the second degree if the person intentionally or knowingly violates section 431:2-C and where the value of the coverage, benefits, recovery, or compensation obtained or attempted to be obtained exceeds $300.

(b) Insurance fraud in the second degree is a class C felony.

(c) For the purpose of this section, "intentionally" and "knowingly" have the meanings given in section 702-206.

§431:2-F Insurance fraud in the third degree. (a) A person commits the offense of insurance fraud in the third degree if the person intentionally or knowingly violates section 431:2-C and where the value of the coverage, benefits, recovery, or compensation obtained or attempted to be obtained is $300 or less.

(b) Insurance fraud in the third degree is a misdemeanor.

(c) For the purpose of this section, "intentionally" and "knowingly" have the meanings given in section 702-206.

§431:2-G Restitution. Where the ability to make restitution is demonstrated, any person convicted under this part shall be ordered by a court to make restitution to any insurer employer, special compensation fund, or any other person for any financial loss sustained by the insurer or that other person caused by the act or acts for which the person was convicted.

§431:2-H Insurance fraud; administrative penalties. (a) In addition to or in lieu of criminal penalties under section 431:2-D, 431:2-E, or 431:2-F, a person who commits insurance fraud as defined under section 431:2-C, may be subject to the administrative penalties of this section.

(b) If a person is found to have knowingly committed insurance fraud under section 431:2-C or any other applicable fraudulent or deceptive act or practice under title 24, the commissioner may assess a penalty including one or all of the following:

(1) Restitution to any insurer or any other person of benefits or payments fraudulently received or other damages or costs incurred;

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

(3) Reimbursement of attorneys' fees and costs of the party sustaining a loss under this part, except that the State shall be exempt from paying attorney fees and costs to other parties.

(c) Administrative actions brought for insurance fraud under this part shall be brought within six years after the insurance fraud is discovered or by exercise of reasonable diligence should have been discovered and, in any event, no more than ten years after the date on which a violation of this part is committed.

(d) For the purpose of this section, "knowingly" means that a person, has actual knowledge of the facts; and

(1) Acts in deliberate ignorance of the truth or falsity of the facts; or

(2) Acts in reckless disregard of the truth or falsity of the facts.

No proof of specific intent to defraud is required to prove that a person acted "knowingly" with respect to the facts.

(e) An administrative penalty may be imposed based upon a judgment by a court of competent jurisdiction or upon an order by the commissioner.

(f) The commissioner shall hold a hearing in accordance with chapter 91.

§431:2-I Acceptance of payment. A health care provider's failure to dispute a reduced payment by an insurer shall not constitute an implied admission that a fraudulent billing had been submitted.

§431:2-J Civil cause of action for insurance fraud; exemption. (a) An insurer shall have a civil cause of action to recover payments or benefits from any person who has violated any practice prohibited by section 431:2-C. No recovery shall be allowed if the person has made restitution under sections 431:2-G or 431:2-H(b)(1).

(b) A person, insurer or self-insurer, including their respective adjusters, bill reviewers, producers, representatives, or common-law agents, if acting without malice or fraudulent intent, shall not be subject to civil liability for providing information, including filing a report, furnishing oral, written, audio taped, video taped, or electronic media evidence, providing documents, or giving testimony concerning suspected, anticipated, or completed insurance fraud to:

(1) A court;

(2) The commissioner;

(3) The insurance fraud investigations branch;

(4) The National Association of Insurance Commissioners;

(5) The National Insurance Crime Bureau;

(6) Any federal, state, or county law enforcement or regulatory agency; or

(7) Another insurer;

if the information is provided for the purpose of preventing, investigating, or prosecuting insurance fraud, except if the person commits perjury.

(c) Civil actions brought for insurance fraud under this part shall be brought within six years after the insurance fraud is discovered or by exercise of reasonable diligence should have been discovered and, in any event, no more than ten years after the date on which a violation of this part is committed.

§431:2-K Application notification. All applications for insurance under title 24 and chapter 386, and all claim forms prepared by an insurer or self-insurer, regardless of the means of transmission, shall contain or have attached to them, the following or a substantially similar statement, in a prominent location and typeface: "For your protection, Hawaii law requires you to be informed that presenting a fraudulent application for insurance or a fraudulent claim for payment of a loss or benefit is a crime punishable by fines, imprisonment, or both." The absence of the warning in any application or claim form shall not constitute a defense to a charge of insurance fraud under this part or chapter 386 or a civil cause of action under section 431:2-J.

§431:2-L Mandatory reporting. (a) Within sixty days of an insurer or self-insurer or their respective employee or agent discovering information indicating that a violation of section 386-98 or 431:2-C is occurring or has occurred or as soon thereafter as practicable, the insurer or self-insurer shall provide to the insurance fraud investigations branch information, including documents and other evidence, regarding the alleged violation of section 386-98 or 431:2-C.

(b) Information provided pursuant to this section shall be protected from public disclosure to the extent authorized by chapter 92F and section 431:2-209; provided that the branch may release the information in an administrative or judicial proceeding to enforce this part or chapter 386, to federal, state, or local law enforcement or regulatory authorities, to the National Association of Insurance Commissioners, to the National Insurance Crime Bureau, or to an insurer or self-insurer aggrieved by the alleged violation of section 386-98 or 431:2-C.

§431:2-M Deposit into the compliance resolution fund. All moneys that have been recovered by the department of commerce and consumer affairs as a result of prosecuting insurance fraud violations pursuant to this part, including civil fines, criminal fines, administrative fines, and settlements, except for restitution made pursuant to section 431:2-G, 431:2-H(b)(1), or 431:2-J, shall be deposited into the compliance resolution fund established pursuant to section 26-9(o)."

SECTION 4. Section 386-98, Hawaii Revised Statutes, is amended to read as follows:

"§386-98 [Fraud violations and penalties.] Workers' compensation insurance fraud. (a) [A fraudulent insurance act, under this chapter, shall include acts or omissions committed by any person who intentionally or] A person commits the offense of workers' compensation insurance fraud if the person knowingly [acts or omits to act so as] misrepresents or conceals a material fact, opinion, or intention in order to obtain [benefits, deny benefits, obtain benefits compensation for services provided, or provides legal assistance or counsel to obtain benefits or recovery through fraud or deceit by doing] or attempts to obtain or to deny coverage, benefits, recovery, or compensation for services, or provides legal assistance or counsel to obtain benefits through fraud or deceit if the person does any of the following:

(1) Presenting or causing to be presented any false information on an application;

(2) Presenting or causing to be presented any false or fraudulent claim for the payment of a loss;

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

(4) Making or causing to be made any false or fraudulent claim for payment or denial of a health care benefit;

(5) Submitting a claim for a health care benefit that was not used by, or on behalf of, the claimant;

(6) Presenting multiple claims for payment of the same health care benefit;

(7) Presenting for payment any undercharges for health care benefits on behalf of a specific claimant unless any known overcharges for health care benefits for that claimant are presented for reconciliation at that same time;

(8) Misrepresenting or concealing a material fact;

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

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

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

(b) [No] A person, who is an employer [shall wilfully make] or employer’s representative, commits the offense of workers' compensation insurance fraud if the person knowingly makes a false statement or representation to avoid the impact of past adverse claims experience through change of ownership, control, management, or operation to directly obtain any workers' compensation insurance policy.

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

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

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

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

for investigation and, if appropriate, disciplinary action.

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

(1) Class C felony if the value of the moneys obtained or denied is not less than $2,000;

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

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

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

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

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

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

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

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

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

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

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

(d) This section shall not supersede any other law relating to theft, fraud, or deception. Workers' compensation insurance fraud may be prosecuted under this chapter or any other applicable statute or common law and all penalties and remedies shall be cumulative.

(e) In prosecutions for workers' compensation insurance fraud or related offenses including theft in sections 708-830, 708-830.5, 708-831, and 708-833, the offense charged shall be considered an "offense an element of which is either fraud or breach of fiduciary obligation" for the purposes of extending, pursuant to section 701-108(3)(a), the time limitations for prosecutions set forth in section 701-108.

(f) The insurance fraud investigations branch of the department of commerce and consumer affairs shall investigate and initiate legal proceedings to enforce workers' compensation insurance fraud relating to both self-insured employers and fully insured employers."

SECTION 5. Section 431:2-203, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read as follows:

"(a) The commissioner may investigate complaints and prosecute an action in any court of competent jurisdiction to enforce chapter 386 as it pertains solely to workers' compensation fraud, and any order or fine made by the commissioner pursuant to any provisions of this code [.], including workers' compensation insurance fraud against both self-insured employers or fully insured employers."

2. By amending subsection (b) to read as follows:

"(b) (1) A person who intentionally or knowingly violates, intentionally or knowingly permits any person over whom the person has authority to violate, or intentionally or knowingly aids any person in violating any insurance rule or statute of this State or any effective order issued by the commissioner, shall be subject to any penalty or fine as [stated in] provided by this code or the penal code of the Hawaii Revised Statutes.

(2) If the commissioner has cause to believe that any person has violated any penal provision of this code or of other laws relating to insurance, the commissioner may proceed against that person or shall certify the facts of the violation to the public prosecutor of the jurisdiction in which the offense was committed.

(3) Violation of any provision of this code is punishable by a fine of not less than $100 nor more than $10,000 per violation, or by imprisonment for not more than one year, or both, in addition to any other penalty or forfeiture provided herein or otherwise by law.

(4) The terms "intentionally" and "knowingly" have the meanings given in section 702-206(1) and (2)."

SECTION 6. Section 431:2-204, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) When the commissioner, through the insurance fraud investigations [unit,] branch, is conducting an investigation of possible violations of [section 431:10C-307.7,] part , the commissioner shall pay to a financial institution that is served a subpoena issued under this section a fee for reimbursement of such costs as are necessary and which have been directly incurred in searching for, reproducing, or transporting books, papers, documents, or other objects designated by the subpoena. Reimbursement shall be paid at a rate not to exceed the rate set forth in section 28-2.5(d)."

SECTION 7. Section 432:2-102, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Nothing in this article shall exempt fraternal benefit societies from the provisions and requirements of part____of article 2 of chapter 431 and section 431:2-215."

SECTION 8. Section 431:10A-131, Hawaii Revised Statutes, is repealed.

["[§431:10A-131] Insurance fraud; penalties. (a) A person commits the offense of insurance fraud if the person acts or omits to act with intent to obtain benefits or recovery or compensation for services provided, or provides legal assistance or counsel with intent to obtain benefits or recovery, through the following means:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SECTION 9. Section 431:10C-307.7, Hawaii Revised Statutes, is repealed.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(d) Funding for the insurance fraud investigations unit shall come from the motor vehicle insurance administration revolving fund."]

SECTION 11. Section 432:1-106, Hawaii Revised Statutes, is repealed.

["[§432:1-106] Insurance fraud; penalties. (a) A person commits the offense of insurance fraud if the person acts or omits to act with intent to obtain benefits or recovery or compensation for services provided, or provides legal assistance or counsel with intent to obtain benefits or recovery, through the following means:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SECTION 12. Section 432D-18.5, Hawaii Revised Statutes, is repealed.

["[§432D-18.5] Insurance fraud; penalties. (a) A person commits the offense of insurance fraud if the person acts or omits to act with intent to obtain benefits or recovery or compensation for services provided, or provides legal assistance or counsel with intent to obtain benefits or recovery, through the following means:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SECTION 13. All rights, powers, functions, and duties of the insurance fraud investigations unit are transferred to the insurance fraud investigations branch.

All officers and employees whose functions are transferred by this Act shall be transferred with their functions and shall continue to perform their regular duties upon their transfer, subject to the state personnel laws and this Act.

SECTION 14. In codifying the new sections added by section 2 and section 3 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 15. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 16. This Act shall take effect on July 1, 2005.

INTRODUCED BY:

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BY REQUEST