BILL NUMBER: AB 1050 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 22, 1999
AMENDED IN ASSEMBLY MAY 19, 1999
AMENDED IN ASSEMBLY APRIL 27, 1999
AMENDED IN ASSEMBLY APRIL 19, 1999
AMENDED IN ASSEMBLY APRIL 12, 1999
INTRODUCED BY Assembly Member Wright
FEBRUARY 25, 1999
An act to amend Sections 1871.7, 1872.4, 1872.8 and
1872.95 of, to add Sections 1872.45, 1872.81, and 1874.9
and 1872.81 to, and to add and repeal Section
1874.8 of, the Insurance Code, and to amend Section 1806 of the
Vehicle Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 1050, as amended, R. Wright. Insurance: fraudulent claims.
(1) Existing law permits interested persons to file a civil action
for civil penalties plus an assessment, as specified, against a
person who knowingly employs runners, cappers, steerers, or other
persons to procure clients or patients to perform or obtain services
of benefits pursuant to Workers' Compensation or to obtain services
or benefits under a contract of insurance, or that will be the basis
of a claim against an insured individual or his or her insurer.
Existing law provides for specified percentages to be paid to persons
who bring an action to collect the civil penalties. Existing law
provides for a statute of limitations for fraud of 3 years from the
date of discovery of the facts constituting the fraud.
This bill would provide that civil penalties are for each
fraudulent claim presented to an insurance company by a defendant
being sued for the civil penalties. This bill would provide that for
the person filing the civil action the amount to be rewarded to the
person by the court from the proceeds of the action shall be at least
30% but not more than 40% , or a specified amount of the
proceeds, if the Attorney General, district attorney, or
Insurance Commissioner intervenes and proceeds with the action, and
at least 40% but no more than 50% if the Attorney General, district
attorney, or Insurance Commissioner does not intervene and proceed
with the action. The bill would place a maximum on the statute of
limitations for an action for the civil penalties of 8 years from the
date of specified violations.
(2) Existing law establishes the Bureau of Fraudulent
Claims within the Department of Insurance to investigate and refer to
district attorneys and other law enforcement agencies cases of
suspected insurance fraud makes it a crime to file or
aid in the filing of false insurance claims .
This bill would require a district attorney , in a case
referred under these provisions, to promptly notify an affected
insurer if the underlying claim is determined by the district
attorney as fraudulent, based upon the district attorney's
investigations. It would also require the district attorney to
promptly notify the Department of Motor Vehicles of the conviction of
a person licensed by that agency when he or she files
a criminal complaint for violation of specified Penal Code
provisions relating to false insurance claims to provide specified
notice to the affected insurers, the victims, and the Department of
Motor Vehicles. The bill would require insurers who receive the
notification to rebate any surcharges, as specified, paid by an
insured victim, and for the Department of Motor Vehicles to remove
any record of the underlying accident that is on the license record
of a victim . By requiring the district attorney to provide
notification to insurers and to the Department of Motor Vehicles in
these circumstances, this bill would impose a state-mandated local
program. By requiring premium rebates the bill would amend
Proposition 103.
(3) Existing law requires each insurer in this state to pay an
annual fee to be determined by the Insurance Commissioner, but not to
exceed $1 annually, for each vehicle insured under an insurance
policy it issues in this state in order to fund increased
investigation and prosecution efforts by district attorneys and other
law enforcement agencies of fraudulent automobile insurance claims
and economic automobile theft. Existing law requires the
commissioner to award 51% of the assessment fees to district
attorneys.
This bill would require the commissioner to establish a
program to audit conduct a fiscal and performance
audit of the programs administered by district attorneys under
these provisions at least once every 3 years. The bill would
require the cost of the fiscal and performance audit to be shared
equally between the Department of Insurance and the district
attorney, thus imposing a state-mandated local program. This
bill would also establish an advisory committee within the bureau to
make recommendations to the commissioner regarding
guidelines criteria for the administration of
assessment funds awarded to district attorneys under these
provisions.
(4) Existing law requires the Medical Board of California, the
Board of Chiropractic Examiners, and the State Bar to designate
employees to investigate and report on possible fraudulent insurance
activities. Existing law requires each of those entities to report
annually to relevant legislative committees regarding their
activities in this regard for the previous year.
This bill would specify the minimum contents required to be
included in each of those annual reports.
(5) Existing law regulates motor vehicle theft and motor vehicle
insurance fraud reporting.
This bill would establish, until January 1, 2006, a program of
3 to 6 urban grants for the targeting of
district attorneys targeted at automobile
insurance fraud rings. The program would be funded by the imposition
on each insurer doing business in the state of an annual fee, not to
exceed 50
, to be determined by the commissioner, for each vehicle insured
under an insurance policy issued by the insurer in the state.
i This bill would also require insurers to promptly rebate
to an insured any increased insurance premiums that were charged and
paid as a result of an accident that is determined by the district
attorney to have been fraudulently caused by a person or persons
other than the insured. It would require an insurer in that case to
also notify the Department of Motor Vehicles regarding the fraudulent
nature of the accident, and the department, in turn, would be
required to remove any points that were added to the insured's
driving record in that regard.
(6) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement, including the creation of a State Mandates Claims Fund
to pay the costs of mandates that do not exceed $1,000,000 statewide
and other procedures for claims whose statewide costs exceed
$1,000,000.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these
statutory provisions.
(7) This bill would declare it furthers the purposes of
Proposition 103. Because this bill would amend Proposition 103, it is
required to further the purposes of Proposition 103 and would
require a 2/3 vote for enactment.
Vote: majority 2/3 . Appropriation:
no. Fiscal committee: yes. State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) This act shall be known as the Organized Crime
Prevention and Victim Protection Act of 1999.
(b) The Legislature finds that organized automobile insurance
fraud rings operating in the major urban centers of the state
represent a significant portion of all individual fraud-related
automobile insurance cases. These cases result in artificially
higher insurance premiums for core urban areas and low-income areas
of the state than for other areas of the state. Only a focused,
coordinated effort by all appropriate agencies and organizations can
effectively deal with this problem.
SEC. 2. Section 1871.7 of the Insurance Code is amended to read:
1871.7. (a) It is unlawful to knowingly employ runners, cappers,
steerers, or other persons to procure clients or patients to perform
or obtain services or benefits pursuant to Division 4 (commencing
with Section 3200) of the Labor Code or to procure clients or
patients to perform or obtain services or benefits under a contract
of insurance or that will be the basis for a claim against an insured
individual or his or her insurer.
(b) Every person who violates any provision of this section or
Section 549, 550, or 551 of the Penal Code shall be subject, in
addition to any other penalties that may be prescribed by law, to a
civil penalty of not less than five thousand dollars ($5,000) nor
more than ten thousand dollars ($10,000), plus an assessment of not
more than three times the amount of each claim for compensation, as
defined in Section 3207 of the Labor Code or pursuant to a contract
of insurance. The court shall have the power to grant other
equitable relief, including temporary injunctive relief, as is
necessary to prevent the transfer, concealment, or dissipation of
illegal proceeds, or to protect the public. The penalty prescribed
in this paragraph shall be assessed for each fraudulent claim
presented to an insurance company by a defendant and not for each
violation.
(c) The penalties set forth in subdivision (b) are intended to be
remedial rather than punitive, and shall not preclude, nor be
precluded by, a criminal prosecution for the same conduct. If the
court finds, after considering the goals of disgorging unlawful
profit, restitution, compensating the state for the costs of
investigation and prosecution, and alleviating the social costs of
increased insurance rates due to fraud, that such a penalty would be
punitive and would preclude, or be precluded by, a criminal
prosecution, the court shall reduce that penalty appropriately.
(d) The Attorney General, district attorney, or commissioner may
bring a civil action under this section. Before the commissioner may
bring that action, the commissioner shall be required to present the
evidence obtained to the appropriate local district attorney for
possible criminal or civil filing. If the district attorney elects
not to pursue the matter due to insufficient resources, then the
commissioner may proceed with the action.
(e) (1) Any interested persons, including an insurer, may bring a
civil action for a violation of this section for the person and for
the State of California. The action shall be brought in the name of
the state. The action may be dismissed only if the court and the
Attorney General, the district attorney, or the commissioner,
whichever is participating, give written consent to the dismissal and
their reasons for consenting.
(2) A copy of the complaint and written disclosure of
substantially all material evidence and information the person
possesses shall be served on the state. The complaint shall be filed
in camera, shall remain under seal for at least 60 days, and shall
not be served on the defendant until the court so orders. The
Attorney General, local district attorney, or commissioner may elect
to intervene and proceed with the action within 60 days after he or
she receives both the complaint and the material evidence and
information. If more than one governmental entity elects to
intervene, the Attorney General shall have precedence, followed by
the district attorney.
(3) The Attorney General, district attorney, or commissioner may,
for good cause shown, move the court for extensions of the time
during which the complaint remains under seal under paragraph (2).
The motions may be supported by affidavits or other submissions in
camera. The defendant shall not be required to respond to any
complaint filed under this section until 20 days after the complaint
is unsealed and served upon the defendant.
(4) Before the expiration of the 60-day period or any extensions
obtained under paragraph (3), the Attorney General, district
attorney, or commissioner shall either:
(A) Proceed with the action, in which case the action shall be
conducted by the Attorney General, district attorney, or
commissioner.
(B) Notify the court that it declines to take over the action, in
which case the person bringing the action shall have the right to
conduct the action.
(5) When a person or governmental agency brings an action under
this section, no person other than the Attorney General, district
attorney, or commissioner may intervene or bring a related action
based on the facts underlying the pending action unless that action
is authorized by another statute or common law.
(f) (1) If the Attorney General, district attorney, or
commissioner proceeds with the action, he or she shall have the
primary responsibility for prosecuting the action, and shall not be
bound by an act of the person bringing the action. That person shall
have the right to continue as a party to the action, subject to the
limitations set forth in paragraph (2).
(2) (A) The Attorney General, district attorney, or commissioner
may dismiss the action notwithstanding the objections of the person
initiating the action if the person has been notified by the Attorney
General, district attorney, or commissioner of the filing of the
motion, and the court has provided the person with an opportunity for
a hearing on the motion.
(B) The Attorney General, district attorney, or commissioner may
settle the action with the defendant notwithstanding the objections
of the person initiating the action if the court determines, after a
hearing, that the proposed settlement is fair, adequate, and
reasonable under all the circumstances. Upon a showing of good
cause, the hearing may be held in camera.
(C) Upon a showing by the Attorney General, district attorney, or
commissioner that unrestricted participation during the course of the
litigation by the person initiating the action would interfere with
or unduly delay the Attorney General's, district attorney's, or
commissioner's prosecution of the case, or would be repetitious,
irrelevant, or for purposes of harassment, the court may, in its
discretion, impose limitations on the person's participation,
including, but not limited to, the following:
(i) Limiting the number of witnesses the person may call.
(ii) Limiting the length of the testimony of those witnesses.
(iii) Limiting the person's cross-examination of witnesses.
(iv) Otherwise limiting the participation by the person in the
litigation.
(D) Upon a showing by the defendant that unrestricted
participation during the course of the litigation by the person
initiating the action would be for purposes of harassment or would
cause the defendant undue burden or unnecessary expense, the court
may limit the participation by the person in the litigation.
(3) If the Attorney General, district attorney, or commissioner
elects not to proceed with the action, the person who initiated the
action shall have the right to conduct the action. If the Attorney
General, district attorney, or commissioner so requests, he or she
shall be served with copies of all pleadings filed in the action and
shall be supplied with copies of all deposition transcripts, at the
Attorney General's, district attorney's, or commissioner's expense.
When a person proceeds with the action, the court, without limiting
the status and rights of the person initiating the action, may
nevertheless permit the Attorney General, district attorney, or
commissioner to intervene at a later date upon a showing of good
cause.
(4) If at any time both a civil action for penalties and equitable
relief pursuant to this section and a criminal action are pending
against a defendant for substantially the same conduct, whether
brought by the government or a private party, the civil action shall
be stayed until the criminal action has been concluded at the trial
court level. The stay shall not preclude the court from granting or
enforcing temporary equitable relief during the pendency of the
actions. Whether or not the Attorney General, district attorney, or
commissioner proceeds with the action, upon a showing by the Attorney
General, district attorney, or commissioner that certain actions of
discovery by the person initiating the action would interfere with a
law enforcement or governmental agency investigation or prosecution
of a criminal or civil matter arising out of the same facts, the
court may stay discovery for a period of not more than 180 days. A
hearing on a request for the stay shall be conducted in camera. The
court may extend the 180-day period upon a further showing in camera
that the agency has pursued the criminal or civil investigation or
proceedings with reasonable diligence and any proposed discovery in
the civil action will interfere with the ongoing criminal or civil
investigation or proceedings.
(5) Notwithstanding subdivision (e), the Attorney General,
district attorney, or commissioner may elect to pursue its claim
through any alternate remedy available to the Attorney General,
district attorney, or commissioner.
(g) (1) (A) If the Attorney General, district attorney, or
commissioner proceeds with an action brought by a person under
subdivision (e), that person shall, subject to subparagraph (B),
receive at least 30 percent but not more than 40 percent or the
amount determined pursuant to subparagraph (D) of the proceeds
of the action or settlement of the claim, depending upon the extent
to which the person substantially contributed to the prosecution of
the action.
(B) Where the action is one that the court finds to be based
primarily on disclosures of specific information, other than
information provided by the person bringing the action, relating to
allegations or transactions in a criminal, civil, or administrative
hearing, in a legislative or administrative report, hearing, audit,
or investigation, or from the news media, the court may award those
sums that it considers appropriate, but in no case more than 10
percent of the proceeds, taking into account the significance of the
information and the role of the person bringing the action in
advancing the case to litigation.
(C) Any payment to a person under subparagraph (A) or under
subparagraph (B) shall be made from the proceeds. The person shall
also receive an amount for reasonable expenses that the court finds
to have been necessarily incurred, plus reasonable attorney's fees
and costs. All of those expenses, fees, and costs shall be awarded
against the defendant.
(D) If the person that brought the action as a result of a
violation of this section has paid money to the defendant or to an
attorney acting on behalf of the defendant in the underlying claim,
then he or she shall be entitled to up to double the amount paid to
the defendant or the attorney if that amount is greater than 40
percent of the proceeds.
(2) (A) If the Attorney General, district attorney, or
commissioner does not proceed with an action under this section, the
person bringing the action or settling the claim shall receive an
amount that the court decides is reasonable for collecting the civil
penalty and damages. Except as provided in subparagraph (B), the
amount shall not be less than 40 percent and not more than 50 percent
of the proceeds of the action or settlement and shall be paid out of
the proceeds.
(B) If the person bringing the action, as a result of a violation
of this section has paid money to the defendant or to an attorney
acting on behalf of the defendant in the underlying claim, then he or
she shall be entitled to up to double the amount paid to the
defendant or the attorney if that amount is greater than 50 percent
of the proceeds. That person shall also receive an amount for
reasonable expenses that the court finds to have been necessarily
incurred, plus reasonable attorney's fees and costs. All of those
expenses, fees, and costs shall be awarded against the defendant.
(3) If a local district attorney has proceeded with an action
under this section, one-half of the penalties not awarded to a
private party, as well as any costs awarded shall go to the treasurer
of the appropriate county. Those funds shall be used to investigate
and prosecute fraud, augmenting existing budgets rather than
replacing them. All remaining funds shall go to the state and be
deposited in the General Fund and, when appropriated by the
Legislature, shall be apportioned between the Department of Justice
and the Department of Insurance for enhanced fraud investigation and
prevention efforts.
(4) Whether or not the Attorney General, district attorney, or
commissioner proceeds with the action, if the court finds that the
action was brought by a person who planned and initiated the
violation of this section, that person shall be dismissed from the
civil action and shall not receive any share of the proceeds of the
action. The dismissal shall not prejudice the right of the Attorney
General, district attorney, or commissioner to continue the action on
behalf of the state.
(5) If the Attorney General, district attorney, or commissioner
does not proceed with the action, and the person bringing the action
conducts the action, the court may award to the defendant its
reasonable attorney's fees and expenses if the defendant prevails in
the action and the court finds that the claim of the person bringing
the action was clearly frivolous, clearly vexatious, or brought
primarily for purposes of harassment.
(h) (1) In no event may a person bring an action under subdivision
(e) that is based upon allegations or transactions that are the
subject of a civil suit or an administrative civil money penalty
proceeding in which the Attorney General, district attorney, or
commissioner is already a party.
(2) (A) No court shall have jurisdiction over an action under this
section based upon the public disclosure of allegations or
transactions in a criminal, civil, or administrative hearing in a
legislative or administrative report, hearing, audit, or
investigation, or from the news media, unless the action is brought
by the Attorney General or the person bringing the action is an
original source of the information.
(B) For purposes of this paragraph, "original source" means an
individual who has direct and independent knowledge of the
information on which the allegations are based and has voluntarily
provided the information to the Attorney General, district attorney,
or commissioner before filing an action under this section which is
based on the information.
(i) Except as provided in subdivision (j), the Attorney General,
district attorney, or commissioner is not liable for expenses that a
person incurs in bringing an action under this section.
(j) In civil actions brought under this section in which the
Attorney General, the Insurance Commissioner, or a district attorney
is a party, the court shall retain discretion to impose sanctions
otherwise allowed by law, including the ability to order a party to
pay expenses as provided in Sections 128.5 and 1028.5 of the Code of
Civil Procedure.
(k) Any employee who is discharged, demoted, suspended,
threatened, harassed, or in any other manner discriminated against in
the terms and conditions of employment by his or her employer
because of lawful acts done by the employee on behalf of the employee
or others in furtherance of an action under this section, including
investigation for, initiation of, testimony for, or assistance in an
action filed or to be filed under this section, shall be entitled to
all relief necessary to make the employee whole. That relief shall
include reinstatement with the same seniority status the employee
would have had but for the discrimination, two times the amount of
backpay, interest on the backpay, and compensation for any special
damages sustained as a result of the discrimination, including
litigation costs and reasonable attorney's fees. An employee may
bring an action in the appropriate superior court for the relief
provided in this subdivision. The remedies under this section are in
addition to any other remedies provided by existing law.
(l)(1) An action pursuant to this section may not be filed more
than three years after the discovery of the facts constituting the
grounds for commencing the action.
(2) Notwithstanding paragraph (1) no action may be filed pursuant
to this section more than eight years after the commission of the act
constituting a violation of this section or a violation of Section
549, 550, or 551 of the Penal Code.
SEC. 3. Section 1872.4 of the Insurance Code is amended to
read:
1872.4. (a) Any company licensed to write insurance in this state
that believes that a fraudulent claim is being made shall, within 60
days after determination by the insurer that the claim appears to be
a fraudulent claim, send to the Bureau of Fraudulent Claims, on a
form prescribed by the department, the information requested by the
form and any additional information relative to the factual
circumstances of the claim and the parties claiming loss or damages
that the commissioner may require. The Bureau of Fraudulent Claims
shall review each report and undertake further investigation it deems
necessary and proper to determine the validity of the allegations.
Whenever the commissioner is satisfied that fraud, deceit, or
intentional misrepresentation of any kind has been committed in the
submission of the claim, he or she shall report the violations of law
to the insurer, to the appropriate licensing agency, and to the
district attorney of the county in which the offenses were
committed, as provided by Sections 12928 and 12930. If the
commissioner is satisfied that fraud, deceit, or intentional
misrepresentation has not been committed, he or she shall report that
determination to the insurer. If prosecution by the district
attorney concerned is not begun within 60 days of the receipt of the
commissioner's report, the district attorney shall inform the
commissioner and the insurer as to the reasons for the lack of
prosecution regarding the reported violations.
(b) This section shall not require an insurer to submit to the
bureau the information specified in subdivision (a) in either of the
following instances:
(1) The insurer's initial investigation indicated a potentially
fraudulent claim but further investigation revealed that it was not
fraudulent.
(2) The insurer and the claimant have reached agreement as to the
amount of the claim and the insurer does not have reasonable grounds
to believe that claim to be fraudulent.
(c) Nothing contained in this article shall relieve an insurer of
its existing obligations to also report suspected violations of law
to appropriate local law enforcement agencies.
(d) Any police, sheriff, disciplinary body governed by the
provisions of the Business and Professions Code, or other law
enforcement agency shall furnish all papers, documents, reports,
complaints, or other facts or evidence to the Bureau of Fraudulent
Claims, when so requested, and shall otherwise assist and cooperate
with the bureau.
(e) If an insurer, at the time the insurer, pursuant to
subdivision (a) forwards to the Bureau of Fraudulent Claims
information on a claim that appears to be fraudulent, has no evidence
to believe the insured on that claim is involved with the fraud, the
insurer shall take all necessary steps to assure that no surcharge
is added to the insured's premium because of the claim.
SEC. 4. Section 1872.45 is added to the Insurance Code, to
read:
1872.45. A district attorney, to which a suspected case of
insurance fraud has been referred under this chapter, shall do both
of the following:
(a) Promptly notify the affected insurer if the underlying claim
is determined by the district attorney as fraudulent, based upon the
district attorney's investigations.
(b) Promptly notify the Department of Motor Vehicles of the
conviction in that case of a person licensed by that agency.
1872.45. A district attorney who files a criminal complaint
pursuant to Section 549 or 550 of the Penal Code shall promptly do
all of the following:
(a) Notify each insurer affected by the acts that are the subject
of the criminal complaint of the existence of the complaint and the
names of all persons insured by the insurer who are the victims.
(b) Notwithstanding any other provision of law, when an insurer
receives notification pursuant to subdivision (a), and the insurer
has increased the premiums of a person who is a victim because of a
claim that is the subject of the criminal complaint, the insurer
shall promptly rebate to that person the increased premiums that were
charged to and paid by that person.
(c) Notify the Department of Motor Vehicles of the criminal
complaint and the names of all persons who are the victims.
(d) Notify all the persons who are the victims in simple
understandable language that a criminal complaint has been filed and
that subdivision (b) of Section 1806 of the Vehicle Code requires the
Department of Motor Vehicles not to record the accident on the
record of the victim.
SEC. 4.
SEC. 5. Section 1872.8 of the Insurance Code is amended to
read:
1872.8. (a) Each insurer doing business in this state shall pay
an annual fee to be determined by the commissioner, but not to exceed
one dollar ($1) annually for each vehicle insured under an insurance
policy it issues in this state, in order to fund increased
investigation and prosecution of fraudulent automobile insurance
claims and economic automobile theft. Thirty-four percent of those
funds received from ninety-five cents ($0.95) of the assessment fee
per insured vehicle shall be distributed to the Bureau of Fraudulent
Claims for enhanced investigative efforts, 15 percent of that
ninety-five cents ($0.95) shall be deposited in the Motor Vehicle
Account for appropriation to the Department of the California Highway
Patrol for enhanced prevention and investigative efforts to deter
economic automobile theft, and 51 percent of the funds shall be
distributed to district attorneys for purposes of investigation and
prosecution of automobile insurance fraud cases, including fraud
involving economic automobile theft.
(b) The commissioner shall award funds to district attorneys
according to population. The commissioner may alter this
distribution formula as necessary to achieve the most effective
distribution of funds. Each local district attorney desiring a
portion of those funds shall submit to the commissioner an
application detailing the proposed use of any moneys that may be
provided. The application shall include a detailed accounting of
assessment funds received and expended in prior years, including at a
minimum (1) the amount of funds received and expended; (2) the uses
to which those funds were put, including payment of salaries and
expenses, purchase of equipment and supplies, and other expenditures
by type; (3) results achieved as a consequence of expenditures made,
including the number of investigations, arrests, complaints filed,
convictions, and the amounts originally claimed in cases prosecuted
compared to payments actually made in those cases; and (4) other
relevant information as the commissioner may reasonably require. Any
district attorney who fails to submit an application within 90 days
of the commissioner's deadline for applications shall be subject to
loss of distribution of the money. The commissioner may consider
recommendations and advice of the bureau and the Commissioner of the
California Highway Patrol in allocating moneys to local district
attorneys. Any district attorney that receives funds shall submit an
annual report to the commissioner, which may be made public, as to
the success of the program administered. The report shall provide
information and statistics on the number of active investigations,
arrests, indictments, and convictions. Both the application for
moneys and the distribution of moneys shall be public documents. The
commissioner shall establish a program to audit
conduct a fiscal and performance audit of the programs
administered under this subdivision at least once every three years.
The cost of a fiscal and performance audit shall be shared
equally between the department and the district attorney.
Information submitted to the commissioner pursuant to this section
concerning criminal investigations, whether active or inactive, shall
be confidential.
(c) The remaining five cents ($0.05) shall be spent for enhanced
automobile insurance fraud investigation by the bureau.
(d) Except for funds to be deposited in the Motor Vehicle Account
for allocation to the Department of the California Highway Patrol for
purposes of the Motor Vehicle Prevention Act, (Chapter 5 (commencing
with Section 10900) of Division 4 of the Vehicle Code), the funds
received under this section shall be deposited in the Insurance Fund
and be expended and distributed when appropriated by the Legislature.
(e) In the course of its investigations, the Bureau of Fraudulent
Claims shall aggressively pursue all reported incidents of probable
fraud and, in addition, shall forward to the appropriate disciplinary
body the names of any individuals licensed under the Business and
Professions Code who are suspected of actively engaging in fraudulent
activity along with all relevant supporting evidence.
(f) As used in this section "economic automobile theft" means
automobile theft perpetrated for financial gain, including, but not
limited to, the following:
(1) Theft of a motor vehicle for financial gain.
(2) Reporting that a motor vehicle has been stolen for the purpose
of filing a false insurance claim.
(3) Engaging in any act prohibited by Chapter 3.5 (commencing with
Section 10801) of Division 4 of the Vehicle Code.
(4) Switching of vehicle identification numbers to obtain title to
a stolen motor vehicle.
SEC. 5.
SEC. 6. Section 1872.81 is added to the Insurance Code, to
read:
1872.81. (a) There is created within the Bureau of Fraudulent
Claims an advisory committee to make recommendations to the
commissioner regarding guidelines criteria
for the administration of assessment funds
awarded to district attorneys under subdivision (b) of Section 1872.8
and Section 1874.8 . The advisory committee shall be
comprised of an equal number of representatives of the department,
the Bureau of Fraudulent Claims, the Department of the
California Highway Patrol, the district attorneys, and the automobile
insurance industry.
(b) The guidelines criteria referred
to in subdivision (a) shall include all of the following:
(1) Guidelines Criteria regarding
the ratio in a district attorney's office of investigators to
attorneys.
(2) Guidelines Criteria regarding
allowable administrative costs.
(3) Guidelines Criteria regarding
performance standards.
(4) Guidelines Criteria regarding
the standard reporting of data by all district attorneys in their
annual reports under subdivision (b) of Section 1872.8.
SEC. 6.
SEC. 7. Section 1872.95 of the Insurance Code is amended to
read:
1872.95. (a) Within existing resources, the Medical Board of
California, the Board of Chiropractic Examiners, and the State Bar
shall each designate employees to investigate and report on possible
fraudulent activities relating to workers' compensation, motor
vehicle insurance, or disability insurance by licensees of the board
or the bar. Those employees shall actively cooperate with the bureau
in the investigation of those activities.
(b) The Medical Board of California, the Board of Chiropractic
Examiners, and the State Bar shall each report annually, on or before
March 1, to the committees of the Senate and Assembly having
jurisdiction over insurance on their activities established pursuant
to subdivision (a) for the previous year. That report shall specify,
at a minimum, the number of cases investigated, the number of cases
forwarded to the bureau or other law enforcement agencies, the
outcome of all cases listed in the report, and any other relevant
information concerning those cases or general activities conducted
under subdivision (a) for the previous year. The report shall
include information regarding activities conducted in connection with
cases of suspected automobile insurance fraud.
SEC. 7.
SEC. 8. Section 1874.8 is added to the Insurance Code, to
read:
1874.8. (a) Each insurer doing business in this state shall pay
an annual fee to be determined by the commissioner, but not to exceed
fifty cents ($0.50) annually for each vehicle insured under an
insurance policy it issues in this state, in order to fund
three the Bureau of Fraudulent Claims and three to six
urban grants for the targeting of a
program targeted at automobile insurance fraud rings. The
grants may only be awarded to district attorneys.
(b) In determining whether to award a district attorney an
urban grant, the commissioner shall consider factors indicating
automobile insurance fraud ring activity in the district attorney's
county, including, but not limited to, the county's level of general
criminal activity, population density, automobile insurance claims
frequency, number of suspected fraudulent claims, and prior and
current evidence of automobile insurance fraud rings.
(c) A grantee of an urban grant referred to in subdivision
(a) shall coordinate its efforts and work in conjunction with the
bureau and all interested insurers in this regard. Of the funds
collected pursuant to this section, 25 percent shall be distributed
to the Bureau of Fraudulent Claims to be used to fund bureau
investigators that shall be assigned to work solely in conjunction
with district attorneys who are awarded urban grants pursuant to this
section. Each grantee shall be notified by the Bureau of Fraudulent
Claims of the investigators assigned to work with the grantee, and
the investigators shall be located in the office of the grantee.
(c)
(d) A grant under this section shall be for a period of
three years and shall be subject to the requirements of subdivision
(b) of Section 1872.8 , except for the requirement that funds be
awarded according to population .
(d)
(e) The bureau shall report, on or before January 1, 2005,
to the committees of the Senate and Assembly having jurisdiction over
insurance on the results of the grant program established by this
section.
(e)
(f) This section shall remain in effect only until January
1, 2006, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2006, deletes or extends
that date.
SEC. 8. Section 1874.9 is added to the Insurance Code, to read:
1874.9. (a) Notwithstanding any law to the contrary, when an
insurer receives notification pursuant to subdivision (a) of Section
1872.45, the insurer shall promptly rebate to an insured any
increased insurance premiums that were charged and paid as a result
of an accident that is determined by the district attorney to have
been fraudulently caused by a person or persons other than the
insured.
(b) An insurer in that case shall also notify the Department of
Motor Vehicles regarding the fraudulent nature of the accident, and
the department shall, in turn, remove any points that were added to
the insured's driving record in that regard.
SEC. 9.
SEC. 9. Section 1806 of the Vehicle Code is amended to read:
1806. (a) The department shall file all accident
reports and abstracts of court records of convictions received under
this code, and in connection therewith, shall maintain convenient
records or make suitable notations in order that an individual record
of each license showing the convictions of the licensee and all
traffic accidents in which the individual was involved, except those
where, in the opinion of a reporting officer, another individual was
at fault, are readily ascertainable. At its discretion the
department may file and maintain these accident reports and abstracts
by electronic recording and storage media and after transcribing
electronically all available data from the accident reports and
abstracts of conviction may destroy the original documents.
Notwithstanding any other provisions of law, the recorded facts from
any electronic recording and storage device maintained by the
department shall constitute evidence of the facts in any
administrative actions instituted by the department.
(b) When the department receives notification pursuant to
subdivision (c) of Section 1872.45 of the Insurance Code, the
department shall remove from the license record of each victim any
record of his or her involvement in the accident which is the subject
of the criminal complaint.
SEC. 10. Notwithstanding any other provision of law, the
Department of Insurance is authorized to and shall adopt emergency
regulations to implement the provisions of this act.
SEC. 11. The Legislature finds and declares that this bill
furthers the purposes of Proposition 103 as approved by the
electorate on November 8, 1988.
SEC. 12. Notwithstanding Section 17610 of the Government
Code, if the Commission on State Mandates determines that this act
contains costs mandated by the state, reimbursement to local agencies
and school districts for those costs shall be made pursuant to Part
7 (commencing with Section 17500) of Division 4 of Title 2 of the
Government Code. If the statewide cost of the claim for
reimbursement does not exceed one million dollars ($1,000,000),
reimbursement shall be made from the State Mandates Claims Fund.