New Jersey-2010-A2054-Introduced

An Act concerning insurance fraud, amending P.L.1985, c.179, and amending and supplementing P.L.1983, c.320.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 2 of P.L.1985, c.179 (C.17:23A-2) is amended to read as follows:

2. [Definitions.] As used in this act:

a. "Adverse underwriting decision" means:

(1) Any of the following actions with respect to insurance transactions involving insurance coverage which is individually underwritten for an individual:

(a) A declination of insurance coverage,

(b) A termination of insurance coverage,

(c) Failure of an agent to apply for insurance coverage with a specific insurance institution which the agent represents and which is requested by an applicant,

(d) In the case of a property or casualty insurance coverage:

(i) Placement by an insurance institution or agent of a risk with a residual market mechanism or an unauthorized insurer, or

(ii) The charging of a higher rate on the basis of information which differs from that which the applicant or policyholder furnished,

(e) In the case of a life, health or disability insurance coverage, an offer to insure at a higher rate than the insurance institution's table of premium rates applicable to the age and class of risk of each person to be covered under that coverage and to the type and amount of insurance provided.

(2) Notwithstanding paragraph (1) above, the following actions, if permitted by law, shall not be considered adverse underwriting decisions but the insurance institution or agent responsible for their occurrence shall nevertheless provide the applicant or policyholder with the specific reason or reasons for their occurrence:

(a) The termination of an individual policy form on a class or Statewide basis,

(b) A declination of insurance coverage solely because such coverage is not available on a class or Statewide basis, or

b. "Affiliate" or "affiliated" means a person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with another person.

c. "Agent" means any person defined in chapter 22 of Title 17 of the Revised Statutes [, chapter 22 of Title 17B of the New Jersey Statutes] and in R.S.17:35-23. "Agent" includes an insurance producer as defined in section 3 of P.L.2001, c.210 (C.17:22A-28).

d. "Applicant" means a person who seeks to contract for insurance coverage other than a person seeking group insurance that is not individually underwritten.

e. "Commissioner" means the Commissioner of Banking and Insurance.

f. "Consumer report" means any written, oral or other communication of information bearing on a natural person's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living which is used or expected to be used in connection with an insurance transaction.

g. "Consumer reporting agency" means any person who:

(1) Regularly engages, in whole or in part, in the practice of assembling or preparing consumer reports, for a monetary fee, [and]

(2) Obtains information primarily from sources other than insurance institutions, and

(3) Furnishes consumer reports to other persons.

h. "Control," including the terms "controlled by" or "under common control with," means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract of goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person.

i. "Declination of insurance coverage" means a denial, in whole or in part, by an insurance institution or agent of requested insurance coverage.

j. "Individual" means any natural person who:

(1) In the case of property or casualty insurance, is a past, present or proposed named insured or certificateholder;

(2) In the case of life, health or disability insurance, is a past, present or proposed principal insured or certificateholder;

(3) Is a past, present or proposed policyowner;

(4) Is a past or present applicant; [or]

(5) Is a past or present claimant; or

(6) Derived, derives or is proposed to derive insurance coverage under an insurance policy or certificate subject to this act.

k. "Institutional source" means any person or governmental entity that provides information about an individual to an agent, insurance institution or insurance support organization, other than:

(1) An agent,

(2) The individual who is the subject of the information, or

(3) A natural person acting in a personal capacity rather than in a business or professional capacity.

l. "Insurance institution" means any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance, including health maintenance organizations, medical service corporations, hospital service corporations, health service corporations, dental service corporations, dental plan organizations and automobile insurance plans [and the New Jersey Automobile Full Insurance Underwriting Association], as defined in section 2 of P.L.1973, c.337 (C.26:2J-2), section 1 of P.L.1940, c.74 (C.17:48A-1), section 1 of P.L.1960, c.1 (C.17:48B-1), section 2 of P.L.1968, c.305 (C.17:48C-2), section 2 of P.L.1979, c.478 (C.17:48D-2), section 2 of P.L.1985, c.236 (C.17:48E-2) and P.L.1970, c.215 (C.17:29D-1 et seq.) [and P.L.1983, c.65 (C.17:29A-33 et al.)], respectively. "Insurance institution" shall not include agents or insurance-support organizations.

m. "Insurance-support organization" means:

(1) Any person who regularly engages, in whole or in part, in the practice of assembling or collecting information about [natural] persons for the primary purpose of providing the information to an insurance institution or agent for insurance transactions, including:

(a) The furnishing of consumer reports or investigative consumer reports to an insurance institution or agent for use in connection with an insurance transaction, or

(b) The collection of [personal] information from insurance institutions, agents or other insurance-support organizations for the purpose of detecting or preventing fraud, material misrepresentation or material nondisclosure in connection with insurance underwriting or insurance claim activity.

(2) Notwithstanding paragraph (1) of this subsection, the following persons shall not be considered "insurance-support organizations" for the purposes of this act: agents, government institutions, insurance institutions, medical-care institutions, medical professionals and rating organizations as defined in section 1 of P.L.1944, c.27 (C.17:29A-1).

n. "Insurance transaction" means any transaction involving insurance primarily for personal, family or household needs rather than business or professional needs which entails:

(1) The determination of an individual's eligibility for an insurance coverage, benefit or payment, or

(2) The servicing of an insurance application, policy, contract or certificate.

o. "Investigative consumer report" means a consumer report or portion thereof in which information about a natural person's character, general reputation, personal characteristics or mode of living is obtained through personal interviews with the person's neighbors, friends, associates, acquaintances or others who may have knowledge concerning those items of information.

p. "Medical-care institution" means a facility or institution that is licensed to provide health care services to natural persons, including but not limited to hospitals, skilled nursing facilities, nursing facilities, home-health agencies, medical clinics, rehabilitation agencies, public health agencies or health maintenance organizations.

q. "Medical professional" means any person providing health care services to natural persons, including but not limited to a physician, podiatrist, dentist, nurse, optometrist, chiropractor, physical therapist, occupational therapist, pharmacist, psychologist, dietitian, psychiatric social worker or speech therapist.

r. "Medical-record information" means personal information which:

(1) Relates to an individual's physical or mental condition, medical history or medical treatment, and

(2) Is obtained from a medical professional or medical-care institution, from the individual, or from the individual's spouse, parent or legal guardian.

s. "Person" means any natural person, corporation, association, partnership or other legal entity.

t. "Personal information" means any individually identifiable information gathered in connection with an insurance transaction from which judgments can be made about an individual's character, habits, avocations, finances, occupation, general reputation, credit, health or any other personal characteristics. "Personal information" includes an individual's name and address and medical-record information but does not include privileged information.

u. "Policyholder" means any person who:

(1) In the case of individual property or casualty insurance, is a present named insured;

(2) In the case of individual life, health or disability insurance, is a present policyowner; or

(3) In the case of group insurance which is individually underwritten, is a present group certificateholder.

v. "Pretext interview" means an interview whereby a person, in an attempt to obtain information about a natural person, performs one or more of the following acts:

(1) Pretends to be someone he is not,

(2) Pretends to represent a person he is not in fact representing,

(3) Misrepresents the true purpose of the interview, or

(4) Refuses to identify himself upon request.

w. "Privileged information" means any individually identifiable information that:

(1) Relates to a claim for insurance benefits or a civil or criminal proceeding involving [an individual] any person concerning an insurance transaction, and

(2) Is collected in connection with or in reasonable anticipation of a claim for insurance benefits or civil or criminal proceeding involving [an individual] any person concerning an insurance transaction; except that information otherwise meeting the requirements of this subsection shall nevertheless be considered personal information under this act if it is disclosed in violation of section 13 of this act.

x. "Residual market mechanism" means any insurance pooling mechanism, joint underwriting association, or reinsurance facility created pursuant to law or regulation which provides insurance coverage for any risk that is not insurable in the voluntary market.

y. "Termination of insurance coverage" or "termination of an insurance policy" means either a cancellation or nonrenewal of an insurance policy, in whole or in part, for any reason other than the failure to pay a premium as required by the policy.

z. "Unauthorized insurer" means an insurance institution that has not been granted a certificate of authority by the commissioner to transact the business of insurance in this State.

(cf: P.L.1985, c.179, s.2)

2. Section 13 of P.L.1985, c.179 (C.17:23A-13) is amended to read as follows:

13. [Disclosure limitations and conditions.] An insurance institution, agent or insurance-support organization shall not disclose any personal or privileged information [about an individual] collected or received in connection with, or in reasonable anticipation of, an insurance transaction, unless the disclosure is:

a. With the written authorization of the individual to whom the information relates, provided:

(1) If the authorization is submitted by another insurance institution, agent or insurance-support organization, the authorization meets the requirements of section 6 of this act, or

(2) If the authorization is submitted by a person other than an insurance institution, agent or insurance-support organization, the authorization is:

(a) Dated,

(b) Signed by the individual, and

b. To a person other than an insurance institution, agent or insurance-support organization, provided the disclosure is reasonably necessary:

(1) To enable the person to perform a business, professional or insurance function for the disclosing insurance institution, agent or insurance-support organization, and the person agrees not to disclose the information further without the individual's written authorization unless the further disclosure:

(a) Would otherwise be permitted by this section if made by an insurance institution, agent or insurance-support organization, or

(b) Is reasonably necessary for the person to perform its function for the disclosing insurance institution, agent or insurance-support organization; or

(2) To enable the person to provide information to the disclosing insurance institution, agent or insurance-support organization for the purpose of:

(a) Determining an individual's eligibility for an insurance benefit or payment, or

(b) Detecting or preventing criminal activity, fraud, material misrepresentation or material nondisclosure in connection with, or in reasonable anticipation of, an insurance transaction;

c. To an insurance institution, agent, insurance-support organization or self-insurer, if the information disclosed is limited to that which is reasonably necessary:

(1) To detect or prevent criminal activity, fraud, material misrepresentation or material nondisclosure in connection with, or in reasonable anticipation of, insurance transactions, or

(2) For either the disclosing or receiving insurance institution, agent or insurance-support organization to perform its functions in connection with an insurance transaction involving the individual;

d. To a medical-care institution or medical professional for the purpose of:

(1) Verifying insurance coverage or benefits;

(2) Informing an individual of a medical problem of which the individual may not be aware; or

(3) Conducting an operations or services audit, provided only that information is disclosed as is reasonably necessary to accomplish the foregoing purposes; [or]

e. To an insurance regulatory authority; [or]

f. To a law enforcement or other governmental authority:

(1) To protect the interests of the insurance institution, agent or insurance-support organization in preventing or prosecuting the perpetration of fraud upon it, or

(2) If the insurance institution, agent or insurance-support organization reasonably believes that illegal activities have been conducted by [the individual] any person;

g. Otherwise permitted or required by law;

h. In response to a facially valid administrative or judicial order, including a search warrant or subpena;

i. Made for the purpose of conducting actuarial or research studies, provided:

(1) No individual may be identified in any actuarial or research report,

(2) Materials allowing the individual to be identified are returned or destroyed as soon as they are no longer needed, and

(3) The actuarial or research organization agrees not to disclose the information unless the disclosure would otherwise be permitted by this section if made by an insurance institution, agent or insurance-support organization;

j. To a party or a representative of a party to a proposed or consummated sale, transfer, merger or consolidation of all or part of the business of the insurance institution, agent or insurance-support organization, except that:

(1) Prior to the consummation of the sale, transfer, merger or consolidation only such information is disclosed as is reasonably necessary to enable the recipient to make business decisions about the purchase, transfer, merger or consolidation, and

(2) The recipient agrees not to disclose the information unless the disclosure would otherwise be permitted by this section if made by an insurance institution, agent or insurance-support organization;

k. To a person whose only use of such information will be in connection with the marketing of a product or service, if:

(1) No medical-record information, privileged information, or personal information relating to an individual's character, personal habits, mode of living or general reputation is disclosed, and no classification derived from that information is disclosed,

(2) The individual has been given an opportunity to indicate that he does not want personal information disclosed for marketing purposes and has given no indication that he does not want the information disclosed, and

(3) The person receiving the information agrees not to use it except in connection with the marketing of a product or service;

l. To an affiliate whose only use of the information will be in connection with an audit of the insurance institution or agent or the marketing of an insurance product or service, if the affiliate agrees not to disclose the information for any other purpose or to unaffiliated persons;

m. By a consumer reporting agency, if the disclosure is to a person other than an insurance institution or agent;

n. To a group policyholder for the purpose of reporting claims experience or conducting an audit of the insurance institution's or agent's operations or services, if the information disclosed is reasonably necessary for the recipient to conduct the review or audit;

o. To a professional peer review organization for the purpose of reviewing the services or conduct of a medical-care institution or medical professional;

p. To a governmental authority for the purpose of determining the individual's eligibility for health benefits for which the governmental authority may be liable;

q. To a certificateholder or policyholder for the purpose of providing information regarding the status of an insurance transaction; or

r. To a lienholder, mortgagee, assignee, lessor or other person shown on the records of an insurance institution or agent as having a legal or beneficial interest in a policy of insurance, provided:

(1) No medical-record information is disclosed unless the disclosure would otherwise be permitted by this section of this act; and

(2) The information disclosed is limited to that reasonably necessary to permit the person to protect its interests in the policy.

(cf: P.L.1985, c.179, s.13)

3. Section 20 of P.L.1985, c.179 (C.17:23A-20) is amended to read as follows:

20. [Individual remedies.] a. If any insurance institution, agent or insurance-support organization fails to comply with section 8, 9 or 10 of this act with respect to the rights granted under those sections, any person whose rights are violated may apply to the Superior Court of this State, or any other court of competent jurisdiction, for appropriate equitable relief.

b. An insurance institution, agent or insurance-support organization which discloses information in violation of section 13 of this act shall be liable for damages sustained by the [individual] person about whom the information relates; except that no [individual] person shall be entitled to a monetary award which exceeds the actual damages sustained by the [individual] person as a result of a violation of section 13 of this act.

c. In any action brought pursuant to this section, the court may award the costs of the action and reasonable attorney's fees to the prevailing party.

d. An action under this section shall be brought within two years from the date the alleged violation is or should have been discovered.

e. Except as specifically provided in this section, there shall be no remedy or recovery available to [individuals] persons, in law or in equity, for occurrences constituting a violation of any provision of this act.

(cf: P.L.1985, c.179, s.20)

4. Section 21 of P.L.1985, c.179 (C.17:23A-21) is amended to read as follows:

21. [Immunity.] No civil liability shall be imposed and no cause of action [in the] of any nature [of defamation, invasion of privacy or negligence] shall arise against any person for disclosing personal or privileged information in accordance with this act, [nor shall such a cause of action arise] or against any person for furnishing personal or privileged information to an insurance institution, agent or insurance-support organization; except this section shall provide no immunity for disclosing or furnishing false information with malice or willful intent to injure any person.

(cf: P.L.1985, c.179, s.21)

5. Section 9 of P.L.1983, c.320 (C.17:33A-9) is amended to read as follows:

9. a. Any person who believes that a violation of this act has been or is being made shall notify the division immediately after discovery of the alleged violation of this act and shall send to the division, on a form and in a manner prescribed by the commissioner, the information requested and [such] any additional information relative to the alleged violation as the division may require. The division shall review the reports and select those alleged violations as may require further investigation. It shall then cause an independent examination or evaluation of the facts surrounding the alleged violation to be made to determine the extent, if any, to which fraud, deceit, or intentional misrepresentation of any kind exists.

b. No person shall be subject to civil liability [for libel, violation of privacy or otherwise] or to a cause of action of any nature by virtue of the filing of reports or furnishing of other information, in good faith and without malice, required by this section or required by the division as a result of the authority conferred upon it by law.

c. The commissioner may, by regulation, require insurance companies licensed to do business in this State to keep such records and other information as he deems necessary for the effective enforcement of this act.

(cf: P.L.1991, c.331, s.6)

6. (New section) a. In addition to the civil immunity provided to a person by subsection b. of section 9 of P.L.1983, c.320 (C.17:33A-9), a person shall also be immune from any civil liability and not subject to a cause of action of any nature for making a report or otherwise providing information to, or receiving information from, any of the following, when any party involved in the information sharing believes that a violation of the "New Jersey Insurance Fraud Prevention Act," P.L.1983, c.320 (C.17:33A-1 et seq.), has been or is being made:

(1) the commissioner, or any employee, agent, or representative of the commissioner;

(2) federal, State, or local law enforcement, including the Office of the Insurance Fraud Prosecutor, or other governmental authority;

(3) any person performing a business, professional, or insurance function concerning the detection or prevention of criminal activity, fraud, material misrepresentation, or material nondisclosure which violates the provisions of the "New Jersey Insurance Fraud Prevention Act," P.L.1983, c.320 (C.17:33A-1 et seq.);

(4) the National Association of Insurance Commissioners, or its successor organization, and its affiliates or subsidiaries, or any agency or committee thereof; or

(5) the National Insurance Crime Bureau, or its successor organization, and its affiliates or subsidiaries, or any agency or committee thereof.

b. (1) This section shall not abrogate or modify any existing statutory or common law privilege or immunity enjoyed by any person described in subsection a. of this section.

(2) This section shall not provide any immunity to any person for disclosing or furnishing false information with malice or willful intent to injure another person.

7. This act shall take effect on the first day of the fourth month next following enactment, except that the Commissioner of Banking and Insurance may take any anticipatory administrative action in advance thereof as shall be necessary for the implementation of this act.

STATEMENT

This bill broadens the scope of information a person or entity, such as an insurance carrier, may disclose to other parties related to actual or potential insurance fraud, and the scope of the related civil immunity covering the person's or entity's distribution of that information. Based upon recommended legislative reforms set forth in the 2006 Annual Report of the New Jersey Office of the Insurance Fraud Prosecutor (pages 62-65), the bill concerns information disclosure practices related to insurance fraud, with the intent of strengthening State and insurance industry efforts to hamper fraudulent activities.

To that end, the bill amends and supplements the State statutes governing insurance information practices, P.L.1985, c.179 (C.17:23A-1 et seq.), popularly referred to as the "Insurance Information Practices Act," and the "New Jersey Insurance Fraud Prevention Act," P.L.1983, c.320 (C.17:33A-1 et seq.). Specifically, the bill:

- Expands the definition of "insurance-support organization" regarding insurance information practices, to permit any such organization to collect and report information about any person or entity in connection with an insurance transaction, going beyond the current scope as expressed in the definition, which focuses only on information collecting and reporting concerning an individual insured, applicant, or claimant;

- Similarly expands the definition of "privileged information" regarding insurance information practices, to indicate that such information may relate to any person or entity concerning an insurance transaction;

- Modifies the scope of permitted information disclosures with respect to insurance information practices, so that an insurance carrier, among other insurance institutions, or an agent or insurance-support organization may disclose privileged information (as defined above) about a person or entity in connection with, or in reasonable anticipation of, an insurance transaction, to: 1) another insurance institution, agent, or insurance-support organization; 2) any other person or entity involved in detecting or preventing criminal activity or insurance fraud; or 3) a law enforcement or other governmental authority;

- Expands the existing immunity provided to any person or entity for disclosing information, as well as the existing immunity associated with the mandatory reporting requirements and information furnishings set forth under the "New Jersey Insurance Fraud Prevention Act," to apply to a cause of action "of any nature," instead of the current law's more limited immunity against causes of action in the nature of defamation, invasion of privacy, or other related actions; and

- Establishes a new, similarly expansive immunity under the "New Jersey Insurance Fraud Prevention Act" relating to making reports to, or providing information to, or receiving information from: 1) the Commissioner of Banking and Insurance, or any employee, agent, or representative of the commissioner; 2) federal, State, or local law enforcement, including the Office of the Insurance Fraud Prosecutor, or other governmental authority; 3) any person performing a business, professional, or insurance function concerning the detection or prevention of criminal activity, fraud, material misrepresentation, or material nondisclosure which violates the provisions of the "New Jersey Insurance Fraud Prevention Act"; 4) the National Association of Insurance Commissioners, a national nonprofit organization which assists state insurance regulators, individually and collectively, in serving the public interest and achieving insurance regulatory and market goals; or 5) the National Insurance Crime Bureau, a national nonprofit organization dedicated to preventing, detecting, and eliminating insurance fraud.

By establishing a legal framework for the greater flowing of information between the insurance industry and law enforcement, as well as between various parties within the insurance industry, the bill intends to strengthen the efforts of the Office of the Insurance Fraud Prosecutor and the insurance industry to hamper fraudulent activities.