MODIFY CRIM PENALTIES/NAIC FRAUD ACT-AB. (NEW)

View NCGA Bill Details2019-2020 Session
House Bill 222 (Public) Filed Wednesday, February 27, 2019
AN ACT TO INCORPORATE PORTIONS OF THE NAIC'S INSURANCE FRAUD PREVENTION MODEL ACT LANGUAGE INTO NORTH CAROLINA'S INSURANCE LAWS AND TO MODIFY CRIMINAL PENALTIES ASSOCIATED WITH CERTAIN INSURANCE FRAUD STATUTES, AS RECOMMENDED BY THE DEPARTMENT OF INSURANCE.
Intro. by Setzer, Bumgardner, Corbin.

Status: Re-ref to Commerce and Insurance. If fav, re-ref to Rules and Operations of the Senate (Senate action) (Jun 19 2019)

SOG comments (1):

Title changes

The committee substitute to the 1st edition change the act's short and long titles. The previous long title was AN ACT TO MAKE TECHNICAL AND CLARIFYING CHANGES TO THE INSURANCE LAWS, AS RECOMMENDED BY THE DEPARTMENT OF INSURANCE.

H 222

Bill Summaries:

  • Summary date: Apr 29 2019 - More information

    House committee substitute to the 2nd edition makes the following changes to Part I of the act. Modifies the proposed changes to GS 58-2-50, concerning examinations, hearings, and investigations under GS Chapter 58. Now authorizes the Commissioner of Insurance (Commissioner) to investigate and assist in the prosecution of, rather than prosecute, suspected fraudulent insurance acts and persons engaged in the business of insurance. Modifies the authorities granted to the Commissioner to now include the authority to issue and serve subpoenas (rather than serve, only), and the authority to obtain and execute search warrants and arrest warrants for criminal violations of the Chapter (rather than execute, only).


  • Summary date: Mar 11 2019 - More information

    House committee substitute to the 1st edition deletes the previous provisions and now provides the following.

    Part I

    Amends GS 58-1-5, defining fraudulent insurance act to mean an act or omission affecting the business of insurance committed by a person with the intent to injure, defraud, or deceive another person in violation of GS Chapter 58 (Insurance).

    Amends GS 58-2-50, concerning examinations, hearing, and investigations under GS Chapter 58. Authorizes the Commissioner of Insurance (Commissioner) to investigate and prosecute suspected fraudulent insurance acts and persons engaged in the business of insurance. Grants the Commissioner eight specified authorities, including the authority to inspect, copy, and collect records and evidence; serve subpoenas; execute search warrants and arrest warrants for criminal violations of the Chapter; arrest, upon probably cause, without warrant a person found in the act of violating or attempting to violate a Chapter provision; make criminal referrals to prosecuting authorities; and conduct investigations outside of the State. Deletes the previous provision authorizing the Commissioner to arrest with warrant or cause a person or persons to be arrested when the Commissioner or any investigator appointed to conduct the investigation believes evidence exists to charge with a criminal violation of the Chapter. Prohibits any person from knowingly or intentionally interfering with the enforcement of the Chapter's provisions or investigations of suspected or actual violations of the Chapter.

    Makes conforming changes to GS 58-2-160 to refer to fraudulent insurance acts.

    Enacts GS 58-2-166 to require claims for payment or other benefits or applications for issuance of an insurance policy to contain a warning statement regarding fraudulent insurance acts, as provided. Adds that the lack of the required statement is not a defense to any prosecution for a fraudulent insurance act. Requires policies issued by nonadmitted insurers to contain a disclosure statement of the insurer's status to do business in the State where the policy is delivered, issued for delivery, or the state where covereage is in force; provides for satisfaction of this disclosure by satisfying the requirements of GS 58-21-45 or GS 58-22-20. Excludes from the statute's requirements reinsurance claims forms and resinsurance applications. Enacts GS 58-2-167 to require insurers to have in place antifraud initiatives reasonably calculated to detect, prosecute, and prevent fraudulent insurance acts. Sets parameters for the initiatives and their modification, including requiring an antifraud plan meeting specified criteria submitted to the Commissioner. Specifies that antifraud plans submitted to the Commissioner are proprietary, privileged, confidential, and not public records under specified statutes, and are not subject to discovery or subpoena in a civil or criminal action. Effective January 1, 2020.

    Enacts GS 58-2-168, specifying that information and evidence provided under GS 58-2-160 and GS 58-2-163 or obtained by the Commissioner in an investigation of suspected or actual fraudulent insurance acts are privileged, confidential, not public records, and not subject to discovery or subpoena in a civil or criminal action. Authorizes the Commissioner to share/receive documents, materials, or other information with/from specified entities, so long as confidentiality and privilege is maintained, as specified. Clarifies that the Commissioner is not prohibited from providing information to or receiving information from any law enforcement authority or from complying with subpoenas or other lawful process in criminal actions, or as otherwise provided in Article 2 of GS Chapter 58. Deems there to be no waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information disclosed to the Commissioner or as a result of sharing authorized by the statute.

    Enacts GS 58-2-169, specifying that Article 2 does not preempt, prevent, or limit other law enforcement or regulatory authority, as specified.

    Retitles GS 58-58-267 Fraudulent viatical settlement act warning required (was Fraud warning required).

    Makes clarifying change to GS 58-58-285 (regarding the effects of Part 5, Viatical Settlements, of Article 58 on other law enforcement or regulatory authority).

    Part II

    Amends GS 58-2-161 (False statement to procure or deny benefit of insurance policy or certificate), narrowing the offenses set out in subdivision (b)(2). Now provides for the offense of assisting or abetting (previously additionally included soliciting or conspiring with) another person in preparing or making a false or misleading statement to procure or deny a benefit of an insurance policy or certificate with the intent to defraud or deceive the insurer or insurance claimant. Provides new criminal penalties for subsection (b) offenses, which include making or assisting or abetting another to make a false or misleading statement to procure or deny a benefit of an insurance policy or certificate with the intent to defraud or deceive the insurer or insurance claimant. Now provides for the person to be guilty of a Class 1 misdemeanor if the value of the claim for payment or other benefit sought is less than $1,000, a Class H felony if the value of the claim for payment or other benefit sought is more than $1,000, a Class E felony if the value of the claim for the payment sought is $50,000 or more, and a Class C felony if the value of the claim for payment or the benefit sought is $100,000 or more (previously, all violations were a Class H felony). Additionally, authorizes a fine of no more than $10,000 for each violation of the statute. Lastly, permits each claim to be considered a separate count (previously mandated). Makes organizational changes.

    Amends GS 58-2-164, increasing the penalty for rate evasion fraud from a Class 3 misdemeanor to a Class 1 misdemeanor. Additionally, modifies the offense language to include assisting or abetting another person as previously specified in existing language (previously included soliciting or conspiring with another person). Adds a new provision making it a Class H felony if a violation of subsection (b) is committed with respect to an application for insurance or amendment to a policy of auto insurance for more than one passenger vehicle. Makes organizational changes.

    Adds to GS 58-3-150, making it unlawful for any person, with the intent to injure, defraud, or deceive, who prepares, issues, or requests a certificate of insurance that meets the criteria of subdivisions (f)(2) or (f)(3) (contains any false or misleading information, or purports to alter, amend, or extend the coverage provided by the policy of insurance to which the certificate of insurance makes reference); punishable as a Class 1 misdemeanor if the value of the certificate of insurance is less than $5,000, or a Class I felony if the value of the certificate of insurance is $5,000 or more.

    Provides Part II is effective December 1, 2019.


  • Summary date: Feb 28 2019 - More information

    Part I. Captive Insurance

    Amends GS 58-10-395, concerning changes to a captive insurance company’s plan of operation, to make GS 58-10-345(f), making information confidential, applicable to information filed under this statute.

    Amends GS 58-10-415(c) to allow the Commissioner of Insurance (Commissioner) to grant an exemption from the statute (concerning annual audits and statement of actuarial opinion) if compliance would constitute a financial or organizational hardship upon the insurer.

    Amends GS 58-10-430 by allowing the Commissioner to conduct a financial analysis of information submitted to or obtained by the Commissioner and provides that the captive insurance company does not have to pay the expense of the analysis. Makes conforming changes.

    Amends GS 58-10-340 by adding and defining governing board as it applies to captive insurance companies, as the board of directors or officials possessing similar authority. Amends various statutes to reflect this change.

    Amends GS 58-10-380 by requiring at least one member of the governing board be a state resident; removes requirements that were dependent on how the company was formed.

    Amends GS 58-10-380 to allow a captive insurance company’s organizational documents (was, articles of incorporation or bylaws) to authorize a quorum of its governing board to consist of no fewer than one-third of the fixed or prescribed number.

    Amends GS 105-228.4A to exclude two or more protected cell captive insurance companies or special purpose captive insurance companies with a cell or series structure that are under common ownership from those that are taxed as single captive insurance companies. Amends GS 105-228.4A further to provide that the aggregate amount of tax payable under the statute by a special purpose captive insurance company with a cell or series structure with 10 or more cells or series may not be less than $10,000 and may not exceed the lesser of (1) $100,000 plus $5,000 multiplied by the number of cells or series over 10 and (2) $200,000. Effective for premium taxes imposed for taxable years beginning on or after January 1, 2020.

    Amends GS 105-228.4A by adding an exemption from prorated premium taxes for the year in which the redomestication occurs and the premium taxes imposed for the calendar year following the redomestication if the specified conditions are met. Effective for premium taxes imposed for taxable years beginning on or after January 1, 2019, and expires for taxable years beginning on or after January 1, 2022.

    Part II.  Holding Company Act

    Amends GS 58-19-10 to amend the investments that a domestic insurer may make to include investments in securities of affiliates as well as subsidiaries.

    Part III. Surplus Lines

    Repeals GS 58-21-40(b)(3), which required the North Carolina Surplus Lines Association (NCSLA) to file with the Commissioner an annually updated list of surplus lines licensees.

    Amends GS 58-21-75 by amending the records that are to be kept by surplus lines licensees to require records to include a copy of the compliance agreement. Removes reference to the licensee’s office being in the state.

    Repeals GS 58-21-80, which required surplus lines licensees to file quarterly reports on specified information. Makes conforming changes to GS 58-21-35.

    Amends GS 58-21-95 to allow the Commissioner to take specified disciplinary actions upon failure to pay the stamping fee; removes the authority to act upon removal of the surplus lines licensee’s office from the state.

    Part IV. Align State law to the NAIC Model Law

    Amends GS 58-30-71 (immunity and indemnification of the receiver and employees) as follows. Clarifies who is entitled to protection under the statute. Provides that a receiver’s contractors have official immunity. Extends immunity for all listed individuals so that it applies to any matters that have been subject to review by the court after notice and opportunity to be heard if the act error, or omission was not disapproved or disallowed by the court. Makes conforming changes.

    Part V. Consent to Rate

    Amends GS 58-36-30 by adding that a rate exceeding the rate promulgated by the Bureau may be charged on any specific risk if the higher rate is charged in accordance with rules adopted by the Commissioner. Makes additional clarifying and technical changes.

    Part VI. Fast Act

    Amends GS 58-39-26 by adding that an insurance institution or agent is not required to provide the privacy notice annually if: (1) the insurance institution or agent provides nonpublic personal information only in accordance with the specified provisions and (2) the insurance institution or agent has not changed its policies and practices with regard to disclosing nonpublic personal information from those that were disclosed in the most recent disclosure sent to consumers.

    Part VII. Expedited External Review

    Amends GS 58-50-82 by amending the four options available when a request is eligible for external review and the covered person’s treating provider requesting the service that is the subject of the external review has certified the request. Effective October 1, 2019, and applies to requests for expedited review submitted on or after that date.

    Amends GS 58-50-89 by removing the hold harmless provision for medical professionals rendering advice to the Commissioner.

    Part VIII. Exclusive Provider Benefit Plans

    Amends GS 58-50-56 by removing the provision allowing a person enrolled in a preferred provider benefit plan to obtain covered health care services from a provider who does not participate in the plan. Makes the preferred provider benefit plan coverage limitations subject to GS 58-3-190 (coverage required for emergency care).

    Enacts new GS 58-50-56.1 providing that if (1) a contract between an insurer and a health care  provider offering an exclusive provider benefit plan is terminated by the provider or by the insurer, or benefits or coverage provided by the insurer are terminated because of a change in the terms of provider participation in an insurer's exclusive provider benefit plan and (2) an insured is undergoing treatment from the provider for an ongoing special condition on the date of termination, then: (1) upon termination of the contract by the insurer or receipt by the insurer of written notification of termination by the provider, the insurer must notify the insured of the termination and of the right to continuation of coverage of treatment by the provider and (2) the insurer must allow an insured to elect to continue to be covered with respect to the treatment by the terminated provider for the ongoing special condition during a transitional period. Sets out transitional periods in general, for scheduled surgery, organ transplantation, or inpatient care; for pregnancy; and for terminal illness.

    Requires each exclusive provider benefit plan offered by an insurer to provide transition coverage to individuals who (1) are newly covered under an exclusive provider benefit plan because the individual's employer has changed benefit plans and (2) are undergoing treatment from a provider for an ongoing special condition.

    Allows an insurer to condition coverage of continued treatment on six specified terms and conditions. Requires insurers to include a description of an insured’s rights in its evidence of coverage and summary plan description.

    Allows the Department of Insurance to adopt temporary rules to implement the statute.

    Part IX. Bail Bondsman

    Amends GS 58-71-1 which defines terms for use in Article 71, Bail Bondsmen and Runners, by adding and defining premium.

    Amends GS 58-71-45 to provide that a license to a bail bondsman or a runner authorizes the licensee to act until the license is lapsed (in addition to when it is suspended or revoked). Requires that a license be returned to the Commissioner within 10 working days of the lapse, suspension, or revocation.

    Amends GS 58-71-165 by amending and adding to the items that must be included in the bail bondman’s monthly report.

    Amends GS 58-71-167 to require that a copy of the specified agreement and memorandum between the principal and surety for deferral of premium payments be provided to the principal (was, provided only upon request).

    Part X. State and Fire Rescue Commission

    Amends GS 58-78-5 to allow the State and Fire Rescue Commission to adopt, modify, or repeal any rules and regulations necessary to carry out Article 78 (State and Fire Rescue Commission).

    Part XI. Prepaid Health Plan

    Amends GS 58-93-20 to make a clarifying change.

    Amends GS 58-93-30 to set the specified fees at the listed amounts instead of capping the allowable fee at that amount.

    Amends GS 58-93-60 by requiring the Commissioner to notify DHHS before examining a PHP and requires providing DHHS with the results of the examination.

    Amends GS 58-93-90 by requiring the Commissioner to provide DHHS with notice before applying for an order to rehabilitate or liquidate a PHP; allows for notice as soon as possible after seeking the order if prior notice is not possible.

    Amends GS 58-93-95 to require that a copy of a notice that there are grounds to deny, suspend, or revoke a license for a PHP be given to DHHS.

    Amends a statutory cross-reference in GS 58-90-120.

    Part XII. Application to NC Self-Insurance Security Association

    Amends GS 97-170 to require that a copy of an application for licensure as a self-insurer be filed with the NC Self-Insurance Security Association at the same time as the application is filed.


  • Summary date: Feb 27 2019 - More information

    To be summarized.


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