BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 156|
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UNFINISHED BUSINESS
Bill No: SB 156
Author: Wright (D)
Amended: 6/30/09
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 5/12/09
AYES: Corbett, Harman, Florez, Leno, Walters
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 11-0, 5/6/09
AYES: Calderon, Cogdill, Correa, Cox, Florez, Harman,
Kehoe, Liu, Lowenthal, Padilla, Wolk
NO VOTE RECORDED: Runner
SENATE FLOOR : 35-0, 5/21/09
AYES: Aanestad, Alquist, Ashburn, Benoit, Calderon,
Cogdill, Corbett, Correa, Cox, Denham, DeSaulnier,
Ducheny, Dutton, Florez, Hancock, Hollingsworth, Huff,
Kehoe, Leno, Liu, Lowenthal, Maldonado, Negrete McLeod,
Padilla, Pavley, Runner, Simitian, Steinberg, Strickland,
Walters, Wiggins, Wolk, Wright, Wyland, Yee
NO VOTE RECORDED: Cedillo, Harman, Oropeza, Romero,
Vacancy
ASSEMBLY FLOOR : 77-0, 8/20/09 - See last page for vote
SUBJECT : Insurance: fraud prevention and detection
SOURCE : Los Angeles Attorneys Office
DIGEST : This bill authorizes the Insurance Commissioner
CONTINUED
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to convene meetings with representatives of insurers to
discuss suspected or completed acts of insurance fraud.
Assembly Amendments specify that only the Insurance
Commissioner may call the meeting with insurance
representatives instead of both the Insurance Commission or
District Attorney, and recast and clarify the liability
provisions of the bill.
ANALYSIS :
Existing law:
1. Imposes upon insurers an obligation to report suspected
violations of law to appropriate local law enforcement
agencies.
2. Provides immunity from civil liability to insurers who
provide information concerning specific instances of
insurance fraud in response to a written request from
specified law enforcement officials.
3. This provision applies to all classes of insurance fraud
other than workers compensation fraud and auto insurance
fraud.
4. Information provided to a law enforcement officer
pursuant to this law is not a part of any public record
and shall not be released until released as part of a
criminal or civil proceeding.
This bill:
1. States legislative intent that a Department of Insurance
Advisory Task Force on Fraud reported in 2008 that
insurance fraud costs Californians 15 billion dollars
per year, or an average of more than $500 dollars per
resident per year, and makes related findings.
2. Authorizes the Insurance Commissioner to convene
meetings with representatives of insurance companies to
discuss specific information concerning suspected,
anticipated, or completed acts of insurance fraud.
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3. Specifies that information shared during the course of
those meetings regarding specific suspected,
anticipated, or completed acts of insurance fraud, in
the absence of fraud or malice, shall not make a person
subject to civil liability for libel, slander, or any
other relevant cause of action.
Background
In May 2008 the Advisory Task Force on Insurance Fraud of
the Department of Insurance issued a report on "Reducing
Insurance Fraud in California". Its notable findings
included: (1) statewide cost of fraud is over 15 Billion
dollars per year or more than 500 dollars per resident;
(2)fraud results in higher insurance premiums, higher
taxes, higher prices and lower levels of government
services; (3) insurance fraud is the second most
costly crime in our country, after tax evasion, according
to the National Insurance Crime Bureau; (4)there is no
stereotype or profile of people who commit insurance fraud
and can be committed in many forms by individuals,
businesses and criminal organizations.
A specific recommendation of the Advisory Task Force was to
"strengthen the immunity provisions for companies that
report suspected fraud and cooperate in investigations in
accordance with the National Association of Insurance
Commissioners Insurance Fraud Prevention Model Act.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 8/24/09)
Los Angeles District Attorney's Office (source)
California Peace Officer's Association
California Police Chief's Association
Employers' Fraud Task Force
Integrated Healthcare Services
Personal Insurance Federation of California
San Diego District Attorney
ARGUMENTS IN SUPPORT : The author's office writes:
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"According to a May 2008, report by the Insurance
Commissioner's Advisory Task Force on Insurance Fraud,
insurance fraud in California totals over $15 billion each
year, costing each resident an average of more than $500
per year. Many cases of suspected fraud go undetected or
unprosecuted due to a lack of information. The language as
introduced is based on the Model Act of the National
Association of Insurance Commissioners (NAIC).
"These discussions among insurers will be convened by the
Department of Insurance or a District Attorney. Because
everything occurs in the presence of law enforcement, these
discussions will not devolve into conspiracies among
insurers. These are not a threat to the legitimate
interests of employers, workers, trial attorneys, or
medical providers. The purpose of the bill is to allow
people who see different parts of a puzzle to put their
pieces together to reveal patterns of fraud. It is
understandable that someone who is usually on the opposing
side from the insurers to be concerned about their acting
in concert. These meetings convened by law enforcement
will not become conspiracies but will help to fight
insurance fraud.
The San Diego County District Attorney supports the measure
and writes that it "will provide the Department of
Insurance and prosecutors with a new tool to help deter and
discover insurance fraud." The office "handles hundreds of
these cases. Typically, they are complex, time-consuming,
and expensive to investigate and prosecute. [SB 156] gives
us a specific tool to prevent, detect and investigate these
costly crimes by allowing certain persons to share
information about fraud while being protected from civil
liability."
ARGUMENTS IN OPPOSITION : The Consumer Attorneys of
California opposes this bill, writing: "This bill would
create an unnecessary immunity to protect meetings convened
by the Department of Insurance or a district attorney to
discuss trends in insurance fraud with private insurers.
While we appreciate the desire for frank and open
discussions, it is not at all clear why an immunity is
necessary. First, we have not heard of any other code
section where discussions of this sort are immunized. This
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seems a rather novel and sweeping immunity that would be
quite unusual. Second, we are not aware of any litigation
in this area that should prompt a statutory response; it
appears to be addressing a problem that has never arisen.
Third, the bill's findings refer to the need to have frank
discussions about workers' compensation fraud, yet the bill
does not actually cover discussions about workers'
compensation. Fourth, the bill immunizes all information
shared, including "possible evidence of other criminal
activity." This broad language goes well beyond the topic
of insurance fraud.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,
Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,
Huber, Huffman, Jeffries, Jones, Knight, Krekorian, Lieu,
Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning,
Nava, Nestande, Niello, Nielsen, John A. Perez, V. Manuel
Perez, Portantino, Ruskin, Salas, Saldana, Silva,
Skinner, Smyth, Solorio, Audra Strickland, Swanson,
Torlakson, Torres, Torrico, Tran, Villines, Yamada
NO VOTE RECORDED: Duvall, Bass, Vacancy
JJA:do 8/24/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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