BILL NUMBER: AB 1427 INTRODUCED
BILL TEXT
INTRODUCED BY Committee on Insurance (Assembly Members Solorio
(Chair), Carter, Feuer, Hayashi, Skinner, Torres, and Wieckowski)
MARCH 22, 2011
An act to amend Sections 1872.83 and 11659 of the Insurance Code,
relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 1427, as introduced, Committee on Insurance. Worker's
compensation insurance: fraud.
Existing law governs the content and scope of workers' liability
insurance policies. Existing law authorizes an insurer to issue
limited workers' compensation policies, subject to prior approval as
to form and substance by the Insurance Commissioner. A workers'
compensation policy is limited only to the extent that the limitation
is in accordance with specified administrative requirements
prescribed by, and rules adopted by, the commissioner. The failure to
observe the latter requirement in purporting to issue a limited
worker's compensation policy makes any limitation on the policy
ineffective.
This bill would make technical, nonsubstantive changes to the
above-described provision imposing specified administrative
requirements.
Existing law requires the Bureau of State Audits to evaluate the
effectiveness of the efforts of various entities in identifying,
investigating, and prosecuting workers' compensation fraud and the
willful failure to secure payment of workers' compensation, and to
submit a report, as specified, to the Chairperson of the Senate
Committee on Labor and Industrial Relations and the Chairperson of
the Assembly Committee on Insurance on or before May 1, 2004.
This bill would repeal these provisions.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1872.83 of the Insurance Code is amended to
read:
1872.83. (a) The commissioner shall ensure that the Fraud
Division aggressively pursues all reported incidents of probable
workers' compensation fraud, as defined in Sections 11760 and
11880,and in subdivision (a) of Section 1871.4, and in Section 549 of
the Penal Code, and forwards to the appropriate disciplinary body
the names, along with all supporting evidence, of any individuals
licensed under the Business and Professions Code who are suspected of
actively engaging in fraudulent activity. The Fraud Division shall
forward to the Insurance Commissioner or the Director of Industrial
Relations, as appropriate, the name, along with all supporting
evidence, of any insurer, as defined in subdivision (c) of Section
1877.1, suspected of actively engaging in the fraudulent denial of
claims.
(b) To fund increased investigation and prosecution of workers'
compensation fraud, and of willful failure to secure payment of
workers' compensation, in violation of Section 3700.5 of the Labor
Code, there shall be an annual assessment as follows:
(1) The aggregate amount of the assessment shall be determined by
the Fraud Assessment Commission, which is hereby established. The
commission shall be composed of seven members consisting of two
representatives of organized labor, two representatives of
self-insured employers, one representative of insured employers, one
representative of workers' compensation insurers, and the President
of the State Compensation Insurance Fund, or his or her designee.
The Governor shall appoint members representing organized labor,
self-insured employers, insured employers, and insurers. The term of
office of members of the commission shall be four years, and a member
shall hold office until the appointment of a successor. The
President of the State Compensation Insurance Fund shall be an ex
officio, voting member of the commission. Members of the commission
shall receive one hundred dollars ($100) for each day of actual
attendance at commission meetings and other official commission
business, and shall also receive their actual and necessary traveling
expenses incurred in the performance of commission duties. Payment
of per diem and travel expenses shall be made from the Workers'
Compensation Fraud Account in the Insurance Fund, established in
paragraph (4), upon appropriation by the Legislature.
(2) In determining the aggregate amount of the assessment, the
Fraud Assessment Commission shall consider the advice and
recommendations of the Fraud Division and the commissioner.
(3) The aggregate amount of the assessment shall be collected by
the Director of Industrial Relations pursuant to Section 62.6 of the
Labor Code. The Fraud Assessment Commission shall annually advise the
Director of Industrial Relations, not later than March 15, of the
aggregate amount to be assessed for the next fiscal year.
(4) The amount collected, together with the fines collected for
violations of the unlawful acts specified in Sections 1871.4, 11760,
and 11880, Section 3700.5 of the Labor Code, and Section 549 of the
Penal Code, shall be deposited in the Workers' Compensation Fraud
Account in the Insurance Fund, which is hereby created, and may be
used, upon appropriation by the Legislature, only for enhanced
investigation and prosecution of workers' compensation fraud and of
willful failure to secure payment of workers' compensation as
provided in this section.
(c) For each fiscal year, the total amount of revenues derived
from the assessment pursuant to subdivision (b) shall, together with
amounts collected pursuant to fines imposed for unlawful acts
described in Sections 1871.4, 11760, and 11880, Section 3700.5 of the
Labor Code, and Section 549 of the Penal Code, not be less than
three million dollars ($3,000,000). Any funds appropriated by the
Legislature pursuant to subdivision (b) that are not expended in the
fiscal year for which they have been appropriated, and that have not
been allocated under subdivision (f), shall be applied to satisfy for
the immediately following fiscal year the minimum total amount
required by this subdivision. In no case may that money be
transferred to the General Fund.
(d) After incidental expenses, at least 40 percent of the funds to
be used for the purposes of this section shall be provided to the
Fraud Division of the Department of Insurance for enhanced
investigative efforts, and at least 40 percent of the funds shall be
distributed to district attorneys, pursuant to a determination by the
commissioner with the advice and consent of the division and the
Fraud Assessment Commission, as to the most effective distribution of
moneys for purposes of the investigation and prosecution of workers'
compensation fraud cases and cases relating to the willful failure
to secure the payment of workers' compensation. Each district
attorney seeking a portion of the funds shall submit to the
commissioner an application setting forth in detail the proposed use
of any funds provided. A district attorney receiving funds pursuant
to this subdivision shall submit an annual report to the commissioner
with respect to the success of his or her efforts. Upon receipt, the
commissioner shall provide copies to the Fraud Division and the
Fraud Assessment Commission of any application, annual report, or
other documents with respect to the allocation of money pursuant to
this subdivision. Both the application for moneys and the
distribution of moneys shall be public documents. Information
submitted to the commissioner pursuant to this section concerning
criminal investigations, whether active or inactive, shall be
confidential.
(e) If a district attorney is determined by the commissioner to be
unable or unwilling to investigate and prosecute workers'
compensation fraud claims or claims relating to the willful failure
to secure the payment of workers' compensation, the commissioner
shall discontinue distribution of funds allocated for that county and
may redistribute those funds according to this subdivision.
(1) The commissioner shall promptly determine whether any other
county could assert jurisdiction to prosecute the fraud claims or
claims relating to the willful failure to secure the payment of
workers' compensation that would have been brought in the
nonparticipating county, and if so, the commissioner may award funds
to conduct the prosecutions redirected pursuant to this subdivision.
These funds may be in addition to any other fraud prosecution funds
or claims relating to the willful failure to secure the payment of
workers' compensation prosecution otherwise awarded under this
section. Any district attorney receiving funds pursuant to this
subdivision shall first agree that the funds shall be used solely for
investigating and prosecuting those cases of workers' compensation
fraud or claims relating to the willful failure to secure the payment
of workers' compensation that are redirected pursuant to this
subdivision and submit an annual report to the commissioner with
respect to the success of the district attorney's efforts. The
commissioner shall keep the Fraud Assessment Commission fully
informed of all reallocations of funds under this paragraph.
(2) If the commissioner determines that no district attorney is
willing or able to investigate and prosecute the workers'
compensation fraud claims or claims relating to the willful failure
to secure the payment of workers' compensation arising in the
nonparticipating county, the commissioner, with the advice and
consent of the Fraud Assessment Commission, may award to the Attorney
General some or all of the funds previously awarded to the
nonparticipating county. Before the commissioner may award any funds,
the Attorney General shall submit to the commissioner an application
setting forth in detail his or her proposed use of any funds
provided and agreeing that any funds awarded shall be used solely for
investigating and prosecuting those cases of workers' compensation
fraud or claims relating to the willful failure to secure the payment
of workers' compensation that are redirected pursuant to this
subdivision. The Attorney General shall submit an annual report to
the commissioner with respect to the success of the fraud prosecution
efforts of his or her office.
(3) Neither the Attorney General nor any district attorney shall
be required to relinquish control of any investigation or prosecution
undertaken pursuant to this subdivision unless the commissioner
determines that satisfactory progress is no longer being made on the
case or the case has been abandoned.
(4) A county that has become a nonparticipating county due to the
inability or unwillingness of its district attorney to investigate
and prosecute workers' compensation fraud or the willful failure to
secure the payment of workers' compensation shall not become eligible
to receive funding under this section until it has submitted a new
application that meets the requirements of subdivision (d) and the
applicable regulations.
(f) If in any fiscal year the Fraud Division does not use all of
the funds made available to it under subdivision (d), any remaining
funds may be distributed to district attorneys pursuant to a
determination by the commissioner in accordance with the same
procedures set forth in subdivision (d).
(g) The commissioner shall adopt rules and regulations to
implement this section in accordance with the rulemaking provisions
of the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code). Included in the rules and regulations shall be the criteria
for redistributing funds to district attorneys and the Attorney
General. The adoption of the rules and regulations shall be deemed to
be an emergency and necessary for the immediate preservation of the
public peace, health, and safety, or general welfare.
(h) The department shall report to the Governor, the Legislature,
to the committees of the Senate and Assembly having jurisdiction over
insurance, and the Fraud Assessment Commission on the activities of
the Fraud Division and district attorneys supported by the funds
provided by this section in the annual report submitted pursuant to
Section 12922.
The annual report shall include, but is not limited to, all of the
following information for the department and each district attorney'
s office:
(1) All allocations, distributions, and expenditures of funds.
(2) The number of search warrants issued.
(3) The number of arrests and prosecutions, and the aggregate
number of parties involved in each.
(4) The number of convictions and the names of all convicted fraud
perpetrators.
(5) The estimated value of all assets frozen, penalties assessed,
and restitutions made for each conviction.
(6) Any additional items necessary to fully inform the Fraud
Assessment Commission and the Legislature of the fraud-fighting
efforts financed through this section.
(i) In order to meet the requirements of subdivision (g), the
department shall submit a biannual information request to those
district attorneys who have applied for and received funding through
the annual assessment process under this section.
(j) Assessments levied or collected to fight workers' compensation
fraud and insurance fraud are not taxes. Those funds are entrusted
to the state to fight fraud and the willful failure to secure the
payment of workers' compensation by funding state and local
investigation and prosecution efforts. Accordingly, any funds
resulting from assessments, fees, penalties, fines, restitution, or
recovery of costs of investigation and prosecution deposited in the
Insurance Fund shall not be deemed "unexpended" funds for any purpose
and, if remaining in that account at the end of any fiscal year,
shall be applied as provided in subdivision (f) and to offset or
augment subsequent years' program funding.
(k) The Bureau of State Audits shall evaluate the effectiveness of
the efforts of the Fraud Assessment Commission, the Fraud Division,
the Department of Insurance, and the Department of Industrial
Relations, as well as local law enforcement agencies, including
district attorneys, in identifying, investigating, and prosecuting
workers' compensation fraud and the willful failure to secure payment
of workers' compensation. The report shall specifically identify
areas of deficiencies. Included in this report shall be
recommendations on whether the current program provides the
appropriate levels of accountability for those responsible for the
allocation and expenditure of funds raised from the assessment
provided in this section. The Bureau of State Audits shall submit a
report to the Chairperson of the Senate Committee on Labor and
Industrial Relations and the Chairperson of the Assembly Committee on
Insurance on or before May 1, 2004.
SEC. 2. Section 11659 of the Insurance Code is amended to read:
11659. Such The approved form of
policy, limited pursuant to Section 11657, shall not be otherwise
limited except by indorsement endorsement
thereon in accordance with a form prescribed by the
commissioner or in accordance with rules adopted by the commissioner.
Such indorsement The endorseme nt
form shall not be subject to Section 11658. Before prescribing
such indorsement the endorsement form
or adopting such a rule, the
commissioner shall consult concerning it with the Workers'
Compensation Appeals Board.