BILL ANALYSIS
AB 802
Page 1
Date of Hearing: May 6, 2009
ASSEMBLY COMMITTEE ON INSURANCE
Joe Coto, Chair
AB 802 (Duvall) - As Amended: April 21, 2009
SUBJECT : Insurance fraud and release of information.
SUMMARY : Requires insurers to release to specified
governmental agencies any unlawful activity recovered in the
course of an insurance fraud investigation, when requested.
Specifically, this bill :
1)Requires that each insurer and agent release to the requesting
authorized governmental agency any other unlawful activity
recovered in the course of an insurance fraud investigation,
when the insurer receives a written request by specified peace
officers.
2)Specifies that the definition of "authorized governmental
agency" includes the Bureau of Automotive Repair, the Medical
Board of California, and the State Bar of California as
licensing agencies governed by the Business and Professions
Code.
EXISTING LAW :
1)Requires that each insurer and agent release to the requesting
"authorized governmental agency" "relevant information"
regarding insurance fraud, when the insurer receives a written
request by specified peace officers. Peace officers include
police officers, police chiefs, deputy sheriffs, sheriffs, and
numerous other law enforcement personnel.
2)Defines "authorized governmental agency" as the California
Highway Patrol, the Department of Insurance, the Department of
Justice, the Department of Justice, the police department of a
city, the sheriff's office of a county, a federal law
enforcement agency, a county district attorney, and any
licensing agency governed by the Business and Professions Code
or the Chiropractic Initiative Act.
3)Defines "relevant information" to include: (a) insurance
policy information relevant to the insurance fraud under
investigation, including the application for a policy; (b)
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policy premium payment records; (c) history of previous claims
made; (d) information relating to the investigation of the
insurance fraud, including statements of any person, proof of
loss, and notice of loss; and (e) complete copies of both
sides of payment drafts.
4)Specifies that the definition of "relevant information" does
not authorize the disclosure of medical information not
otherwise authorized for disclosure pursuant to law.
FISCAL EFFECT : None.
COMMENTS :
1)Purpose . The author states that this bill will provide
immunity for agents or insurers who report information
concerning unlawful activity that is uncovered in the course
of an insurance fraud investigation, but is unrelated to the
alleged insurance fraud.
2)Background . The author's office provides the following
background information:
a) Insurance fraud is a significant and ongoing problem in
the insurance industry. In addition to breaking the law,
fraud perpetrators also drive up costs for honest
policyholders through cost shifting and increased risk.
Property casualty insurers employ personnel, known as
Special Investigation Units (SIUs), to conduct
investigations of alleged insurance fraud. Insurers
utilize the information obtained by SIU investigations to
decide whether or not to pursue and prosecute instances of
alleged fraud.
b) Existing law grants SIU personnel with legal immunity
for their reporting of the data and evidence collected
through investigations. This immunity is crucial, as it
allows insurers to thoroughly research suspected fraud
without worry of legal prosecution for the very act of
obtaining information.
c) In the course of conducting these investigations, many
SIU personnel encounter evidence of other types of unlawful
activity on the part of the insured or related parties.
Because this activity is not directly related to the
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specific alleged fraud, SIUs are not provided the same
reporting immunity.
3)Support arguments. According to the author, the bill's
sponsor, the following are reasons to support the bill:
a) Insurers have a duty to both their policyholders and the
public at large to protect against fraud, and the
activities of SIU personnel in furtherance of that goal
should not be hindered by unnecessary and burdensome legal
challenges.
b) Under existing law, although significant evidence of
unlawful activity may be revealed, SIUs often do not report
this information to the appropriate law enforcement
authorities due to the real threat of lawsuits from
defendants in fraud cases alleging defamation of character
and other malicious intent on the part of insurers.
c) Rooting out unlawful activity and punishing its
perpetrators is in the best interest of the public, and it
makes no sense for this information to be stopped due to
the lack of appropriate immunity for SIU informants and
their insurer employers.
4)Clarifying amendment . Existing law defines the meaning of
"relevant information" as described on page 2 of this
analysis. The definition focuses on insurance information.
It would add clarity if this definition were expanded to add a
reference to information concerning the unrelated unlawful
acts addressed by the bill. This can be accomplished by
adding the following language on page 2, after line 22:
(6) Information about an unlawful activity not related to
insurance fraud that is uncovered when investigating an
allegation of insurance fraud.
5)Unnecessary language. The bill adds a reference to the
Medical Board, the Bureau of Automotive Repair, and the State
Bar of California in a sentence that broadly includes
licensing agencies governed by the Business and Professions
Code. These agencies are already included in the law. A
specific reference to only a few of the entities already
covered by the broad language only confuses the scope of
existing law. The reference in Section 2 of the bill (page 3,
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lines 10 to 11) should be stricken.
6)Technical correction . The bill would allow the release of any
other unlawful activity "recovered" in the course of an
insurance fraud investigation. As a technical correction, it
is recommended that the word "recovered" be replaced with the
word "uncovered." (See page 2, line 11 of bill.)
REGISTERED SUPPORT / OPPOSITION :
Support
California State Sheriffs' Association
San Bernardino County Sheriff's Department
Opposition
None received.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086