BILL ANALYSIS
SB 156
Page 1
Date of Hearing: July 9, 2009
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
SB 156 (Wright) - As Amended: June 30, 2009
SENATE VOTE : 35-0
SUBJECT : INSURANCE: FRAUD PREVENTION AND DETECTION
KEY ISSUE : SHOULD THE INSURANCE COMMISSIONER AND HIS OR HER
REPRESENTATIVES, AND A REPRESENTATIVE OF AN INSURANCE COMPANY,
HAVE CONDITIONAL IMMUNITY FROM CIVIL LIABILITY, AS SPECIFIED,
FOR SHARING INFORMATION REGARDING SPECIFIC SUSPECTED,
ANTICIPATED, OR COMPLETED ACTS OF INSURANCE FRAUD DURING A
MEETING CONVENED BY THE INSURANCE COMMISSIONER TO DISCUSS THOSE
SPECIFIC ACTS OF FRAUD?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This bill seeks to authorize the Insurance Commissioner to
convene meetings with representatives of insurers to discuss
specific information concerning suspected or completed acts of
insurance fraud. In addition, the bill proposes to provide
specified immunity from civil liability for libel, slander, or
any other relevant cause of action to a person for sharing
information during the course of those meetings regarding
specific suspected, anticipated, or completed acts of insurance
fraud. This immunity from civil liability would be available
only in the absence of fraud or malice on the part of the
insurance company representative and the commissioner or his or
her designated deputy. The bill is intended to implement a
recommendation from a report by the Advisory Task Force on
Insurance Fraud of the Department of Insurance to strengthen
existing immunity provisions for companies that come forward to
share information about suspected fraud. Supporters contend
that the bill will provide law enforcement with another tool to
fight insurance fraud by encouraging the sharing of information
about specific fraud. As recently amended, the bill has no
known opposition.
SUMMARY : Seeks to authorize the Insurance Commissioner to
SB 156
Page 2
convene meetings with representatives of insurers to discuss
specific information concerning suspected or completed acts of
insurance fraud, and provides qualified immunity from civil
liability, as specified, to a person for sharing that specific
information during the course of such a meeting. Specifically,
this bill :
1)Makes legislative findings that insurance fraud of regulated
businesses amounts to costs of 15 billion dollars per year and
that an effective antifraud unit requires greater cooperation,
coordination, and communication of impacted insurers and
regulating agencies.
2)Expresses legislative intent to provide law enforcement
regulators and the regulated community with additional tools
and protections to combat insurance fraud.
3)Authorizes the Insurance Commissioner or designated deputy
commissioner to convene meetings with representatives of
insurance companies to discuss specific information concerning
suspected, anticipated, or completed acts of insurance fraud.
4)Specifies that in the absence of fraud or malice on the part
of the insurance company representative and the commissioner
or designated deputy, information regarding specific
suspected, anticipated, or completed acts of insurance fraud,
shared during the course of those meetings, shall not make a
person subject to civil liability for libel, slander, or any
other relevant cause of action.
EXISTING LAW , the Insurance Frauds Prevention Act ("the Act"),
Chapter 12 of Part 2 of Division 1 of the Insurance Code
(commencing with Section 1871):
1)Requires every insurance company doing business in this state,
unless specifically exempted, to operate a unit or division to
investigate possible fraudulent claims by insured persons or
those making claims against policies held by insured persons.
(Insurance Code Section 1875.20.)
2)Provides that no insurer, or the employees or agents of any
insurer, shall be subject to civil liability for libel,
slander, or any other relevant tort cause of action by virtue
of providing any of the following without malice:
SB 156
Page 3
a) Any information or reports relating to suspected
fraudulent insurance transaction furnished to law
enforcement officials, or licensing officials governed by
the Business and Professions Code.
b) Any reports or information relating to suspected
fraudulent insurance transaction furnished to other persons
subject to the Act.
c) Any information or reports required by this article or
required by the commissioner under authority granted by the
Act. (Insurance Code Section 1872.5.)
3)Requires an insurer, upon written request, to provide an
authorized governmental agency, as defined, with any or all
relevant information deemed important to the requesting agency
relating to any specific insurance fraud. Further provides
that such information includes, but is not limited to (a)
insurance policy information relevant to the fraud under
investigation; (b) policy premium payment records; and (c) a
history of previous claims made by the insured. (Insurance
Code Section 1873(a).)
4)Provides that, in the absence of fraud or malice, no insurer
and no authorized governmental agency shall be subject to any
civil liability for libel, slander, or any other relevant
cause of action by virtue of releasing or receiving any
information required to be disclosed under the Section 1873
requirement. (Insurance Code Section 1873.2.)
5)Provides, in Insurance Code section 19, that use of the term
"person" in this code means "any person, association,
organization, partnership, business trust, limited liability
company, or corporation."
COMMENTS : This bill seeks to authorize the Insurance
Commissioner to convene meetings with representatives of
insurers to discuss specific information concerning suspected or
completed acts of insurance fraud. In addition, this bill
proposes to provide specified immunity from civil liability for
libel, slander, or any other relevant cause of action to a
person for sharing information during the course of those
meetings regarding specific suspected, anticipated, or completed
acts of insurance fraud. This immunity from civil liability
would be available only in the absence of fraud or malice on the
SB 156
Page 4
part of the insurance company representative and the
commissioner or his or her designated deputy.
The Bill is Intended to Implement a Recommendation by the
Department of Insurance. In May 2008, the Department of
Insurance, Advisory Task Force on Insurance Fraud, issued a
report entitled "Reducing Insurance Fraud in California" which
contained 18 recommendations intended to provide the Insurance
Commissioner with "guidance and advice on reducing insurance
fraud in California." Recommendation #12 suggested that the
existing immunity provisions be strengthened for "companies that
report suspected fraud and cooperate with investigations in
accordance with the National Association of Insurance
Commissioners (NAIC) Insurance Fraud Prevention Model Act."
According to the Advisory Task Force report, "the NAIC Insurance
Fraud Prevention Model Act has been substantially updated since
a predecessor version was enacted in California. The updated
Act provides greater civil immunity for insurers sharing fraud
information." To implement Recommendation #12 from the
Department's report, this bill seeks to provide immunity to
representatives of insurers for information regarding specific
suspected, anticipated, or completed acts of insurance fraud
that is shared during a meeting convened by the insurance
commissioner, as provided.
Recent Amendments Clarify the Type of Information That, If
Shared, Shall Not Make Representatives of the Insurance
Commissioner or of Insurance Companies Subject to Civil
Liability . The author has recently amended the bill to clarify
that potential immunity from liability proposed under this bill
only pertains to information regarding specific suspected,
anticipated, or completed acts of insurance fraud that is shared
during a meeting with the insurance commissioner, as provided.
The amendment clarifies that the scope of potential immunity
tracks the "specific information concerning suspected,
anticipated, or completed acts of insurance fraud" that is the
stated basis for the insurance commissioner to convene the
meeting in the first place.
The author has also amended the bill to clarify that, with
respect to the condition of "absence of fraud or malice" (a
standard under existing law), it is the insurance company
representative and the commissioner (or his designated deputy)
whose actions must lack fraud or malice.
SB 156
Page 5
With these recent amendments, the author has addressed concerns
about the scope of immunity provided by the bill. These
concerns primarily related to (1) the specificity of the
discussions engaged in at meetings convened by the insurance
commissioner, and (2) the extension of immunity to information
not specifically involving acts of insurance fraud, but also to
"emerging trends and schemes" involving fraud. According to
representatives of the Consumer Attorneys of California, these
amendments are sufficient to address these concerns and have
removed CAOC's earlier opposition to the bill.
REGISTERED SUPPORT / OPPOSITION :
Support
California Department of Insurance
California Peace Officers' Association
California Police Chiefs' Association
Employers' Fraud Task Force
Integrated Healthcare Services
Personal Insurance Federation of California
San Diego District Attorney, Bonnie Dumanis
Opposition
None on file
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334