As Reported by the House Insurance Committee 1
122nd General Assembly 4
Regular Session Sub. H. B. No. 248 5
1997-1998 6
REPRESENTATIVES REID-O'BRIEN-GARCIA-MOTTLEY-FOX-VESPER-NETZLEY- 8
HAINES-HOTTINGER-BATCHELDER 9
11
A B I L L
To amend sections 3901.44, 3905.49, and 3999.31 and 14
to enact sections 3905.491, 3999.41, and 3999.42 15
of the Revised Code to require insurers to adopt 16
an antifraud program that includes written 17
procedures for pursuing insurance fraud; to 18
require insurers to report persons suspected of 19
insurance fraud to the Department of Insurance; 20
to require persons convicted of a felony while 21
licensed as agents or solicitors to report the 22
conviction to the Department; and to make other 23
changes related to insurance fraud 24
investigations. 25
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 27
Section 1. That sections 3901.44, 3905.49, and 3999.31 be 30
amended and sections 3905.491, 3999.41, and 3999.42 of the 31
Revised Code be enacted to read as follows:
Sec. 3901.44. (A) AS USED IN THIS SECTION, "INSURANCE 40
FRAUD INVESTIGATION" MEANS ANY INVESTIGATION CONDUCTED BY THE 41
SUPERINTENDENT OF INSURANCE OR A DESIGNEE OF THE SUPERINTENDENT 42
THAT RELATES TO A FRAUDULENT INSURANCE ACT AS DEFINED IN SECTION 43
3999.31 OF THE REVISED CODE. 44
(B) All papers, documents, reports, and evidence in the 47
possession of the division of insurance fraud of the department 48
of insurance SUPERINTENDENT OR THE SUPERINTENDENT'S DESIGNEE that 49
pertain to an INSURANCE FRAUD investigation conducted or 50
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authorized by the division are confidential law enforcement 51
investigatory records under section 149.43 of the Revised Code. 52
Notwithstanding such section, the division SUPERINTENDENT shall 53
not prohibit public inspection of such records that pertain to an 54
INSURANCE FRAUD investigation after the expiration of all federal 56
and state statutes of limitations applicable to the particular 57
offense to which the papers, documents, reports, and evidence 58
relate.
(B)(C) All papers, documents, reports, and evidence in the 61
possession of the division of insurance fraud SUPERINTENDENT that 63
do not pertain to such an INSURANCE FRAUD investigation are 64
public records under section 149.43 of the Revised Code, and are 66
not by such possession alone confidential law enforcement 67
investigatory records.
(C)(D) All papers, documents, reports, and evidence in the 69
possession of the division of insurance fraud SUPERINTENDENT OR 70
THE SUPERINTENDENT'S DESIGNEE that pertain to such an INSURANCE 72
FRAUD investigation are not subject to subpoena in civil actions 74
by any court of this state until opened for public inspection by 75
the division SUPERINTENDENT in accordance with division (A)(B) of 76
this section or with section 149.43 of the Revised Code, unless 77
the superintendent of insurance or his THE SUPERINTENDENT'S 79
designee consents, or until after reasonable notice to the 81
division SUPERINTENDENT and opportunity for hearing, the court 83
determines the division SUPERINTENDENT would not be hindered 84
unnecessarily by such subpoena. 85
(D) Investigators who are employees of the division (E) 88
THE SUPERINTENDENT AND THE SUPERINTENDENT'S DESIGNEE are not 89
subject to subpoena in civil actions by any court of this state 90
to testify concerning any matter of which they have knowledge 91
pursuant to a pending insurance fraud investigation by the 92
division SUPERINTENDENT.
Sec. 3905.49. (A) The superintendent of insurance may 101
suspend, revoke, refuse to continue or renew, or refuse to issue 102
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any license as an agent or solicitor under this chapter, if the 103
superintendent finds any one or more of the following: 104
(1) The person has made a false statement with respect to 106
a material matter in the license application; 107
(2) Any cause for which issuance of the license could have 109
been refused had it existed and been known to the superintendent 110
at the time of issuance; 111
(3) The person has violated or failed to comply with any 113
insurance law or any lawful rule or order of the superintendent 114
or the commissioner of insurance of another state; 115
(4) The person has obtained or attempted to obtain any 117
such license through mispresentation MISREPRESENTATION or fraud; 118
(5) The person has improperly withheld, misappropriated, 120
or converted to the person's own use any moneys belonging to 121
policyholders, insurers, beneficiaries, or others received in the 122
course of the person's insurance business; 123
(6) The person has knowingly misrepresented the terms of 125
any actual or proposed insurance policy or contract; 126
(7) The person has been convicted of a felony. If a 128
person has been convicted of a felony based on evidence of acts 129
or omissions related to the insurance business, the 130
superintendent shall revoke any license issued to such person for 131
a period of not less than two years. If the person did not hold 132
a license at the time of the conviction, no license shall be 133
issued to the person for a period of two years after the date of 134
the conviction. 135
(8) The person is guilty of an unfair or deceptive trade 137
act OR practice or fraud under any section of Title XXXIX of the 138
Revised Code; 139
(9) In the conduct of the person's affairs under a 141
license, the person has used fraudulent, coercive, or dishonest 142
practices, or is incompetent, untrustworthy, or financially 143
irresponsible; 144
(10) The person's license has been suspended or revoked in 146
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any other state, province, district, or territory; 147
(11) The person has forged another's name to an 149
application for insurance; 150
(12) The person has cheated on an examination for an 152
insurance license; 153
(13) THE PERSON HAS FAILED TO REPORT A FELONY CONVICTION 155
AS REQUIRED UNDER SECTION 3905.491 OF THE REVISED CODE. 157
(B) The license of a partnership or corporation may be 159
suspended, revoked, or refused if the superintendent finds, after 160
notice and hearing under Chapter 119. of the Revised Code, that 161
an individual licensee's violation was known or should have been 162
known by one or more of the partners, officers, directors, or 163
managers acting on behalf of the partnership or corporation and 164
such violation was not reported to the department of insurance or 165
corrective action taken in relation to the violation. 166
(C) Before denying, revoking, suspending, or refusing to 168
continue or renew any license or imposing any penalty under this 169
section, the superintendent shall provide notice and an 170
opportunity for hearing, under Chapter 119. of the Revised Code, 171
to the licensee or applicant and any insurer represented by the 172
licensee or applicant. 173
(D) The superintendent may modify any order under this 175
section and restore a license of or issue a license to a person 176
if the superintendent finds, after notice and opportunity for 177
hearing provided to affected parties, that the person can 178
demonstrate all of the following: 179
(1) The person has made restitution for all pecuniary 181
losses caused by his THE PERSON'S violation; 182
(2) The person's character and reputation have been 184
rehabilitated so that the person possesses the personal 185
qualifications required for the initial issuance of a license; 186
(3) If the order was an order of revocation based on a 188
conviction for felony based on evidence of acts or omissions 189
related to the insurance business, that two years have elapsed 190
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since the effective date of the order, or if the order was an 191
order denying a license because of such a conviction, that two 192
years have elapsed since the date of the conviction; 193
(4) If required by the superintendent, the person passes 195
the examination required for an initial issuance of the license. 196
(E) The superintendent shall consider the following 198
standards in denying a license, imposing suspensions, 199
revocations, or refusals of continuations or renewals of 200
licenses: 201
(1) Whether the person acted in good faith and without 203
knowledge of his THE violation and makes restitution for any 204
pecuniary losses suffered by other persons as a result of his THE 205
PERSON'S actions. In such cases, the maximum suspension shall be 206
ninety days. 207
(2) Whether, within the meanings defined in section 209
2901.22 of the Revised Code, the person acted purposely, 210
knowingly, recklessly, or negligently; 211
(3) Whether the amount of money or the nature of the 213
property involved in the violation would, if it were the subject 214
of a criminal offense, make a theft offense a misdemeanor or a 215
felony; 216
(4) The degree of trust placed in the person by, and the 218
incompetency, inexperience, or susceptibility to undue influence 219
or duress of, any other person involved; 220
(5) The effect of the violation upon the perception by 222
insureds and insurance customers of the ethics and integrity of 223
the insurance industry; 224
(6) The extent to which the person's conduct departed from 226
the customary and usual ethical standards of persons engaged in 227
the insurance business; 228
(7) Such other factors as the superintendent determines to 230
be appropriate under the circumstances. 231
Sec. 3905.491. ANY PERSON WHO IS CONVICTED OF A FELONY 233
WHILE LICENSED AS AN AGENT OR SOLICITOR UNDER THIS CHAPTER SHALL 234
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REPORT THE CONVICTION TO THE SUPERINTENDENT OF INSURANCE WITHIN 235
THIRTY DAYS OF THE ENTRY DATE OF THE JUDGMENT OF CONVICTION. 236
WITHIN THAT THIRTY-DAY PERIOD, THE PERSON SHALL ALSO PROVIDE THE 237
SUPERINTENDENT WITH A COPY OF THE JUDGMENT, THE PROBATION OR 238
COMMITMENT ORDER, AND ANY OTHER RELEVANT DOCUMENTS. 239
Sec. 3999.31. (A) As used in this section: 249
(1) "Fraudulent insurance act" means an act committed by a 251
person who, knowingly and with intent to defraud, presents, 252
causes to be presented, or prepares with knowledge or belief that 253
it will be presented to or by an insurer, purported insurer, 254
broker, or any agent thereof, any written statement as part of, 255
or in support of, an application for the issuance of, or the 256
rating of a policy or contract for property insurance, casualty 257
insurance, life insurance, sickness and accident insurance, or an 258
annuity, or a claim for payment or other benefit pursuant to such 259
a policy or contract, that the person knows to contain materially 260
false information concerning any fact material thereto, or 261
conceals, for the purpose of misleading, information concerning 262
any fact material thereto. "Fraudulent insurance act" also 263
includes any such written statement, claim, or concealment in 264
relation to such an insurance policy or contract that constitutes 265
a criminal offense under Title XXIX or XXXIX of the Revised Code. 266
(2) "Person" includes, but is not limited to, the 268
superintendent of insurance, the national association of 269
insurance commissioners, any insurer, any organization 270
established to detect or prevent fraudulent insurance acts, and 271
any officer, director, trustee, representative, agent, broker, or 272
employee of the superintendent, association, insurer, 273
organization, or person. 274
(B) In the absence of fraud or bad faith, no person is 276
subject to liability for damages or any other civil liability for 277
libel, slander, or other relevant tort cause of action by virtue 278
of filing reports, without malice, or furnishing other 279
information, without malice, required under Title XXXIX of the 280
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Revised Code or required by the superintendent under authority 281
granted by that title, and no liability for damages or any other 282
civil cause of action of any nature arises against a person for 283
providing or receiving information relating to suspected 284
fraudulent INSURANCE acts that is furnished to or received from 285
any of the following: 286
(1) Any law enforcement official, or any agent or employee 288
of such official; 289
(2) Other persons subject to the provisions of Title xxxix 292
XXXIX of the Revised Code;
(3) The division of insurance fraud of the department of 294
insurance SUPERINTENDENT AND ANY DESIGNEE OF THE SUPERINTENDENT, 295
any insurance frauds bureau, the national association of 297
insurance commissioners, or any organization established to
detect and prevent fraudulent insurance acts; or 298
(4) Any other person involved in the detection or 300
prevention of fraudulent insurance acts. 301
(C) The superintendent of insurance and any agent, 303
employee, or designee of the superintendent or any personnel of 304
the division of insurance fraud of the department of insurance, 305
or any insurance frauds bureau, in the absence of malice, fraud, 306
or bad faith, is not subject to civil liability for libel, 307
slander, or other relevant tort and no civil cause of action of 308
any nature arises against such a person by virtue of the 309
publication of any report or bulletin related to the official 310
activities of the superintendent or of the division of insurance 311
fraud of the department of insurance, or of any insurance frauds 312
bureau in relation to fraudulent insurance acts. 313
(D) Nothing in this section is intended to abrogate or 315
modify in any way any common law or statutory privilege or 316
immunity enjoyed by any person. 317
(E) Nothing in this section shall be construed to negate, 319
supersede, or otherwise affect section 3911.06, 3911.07, 3915.05, 320
or 3923.04 of the Revised Code. 321
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(F) This section may be cited as the conference of 323
insurance legislators/national association of insurance 324
commissioners model immunity act. 325
Sec. 3999.41. (A) EXCEPT AS PROVIDED IN DIVISION (D) OF 327
THIS SECTION, EVERY INSURER, AS DEFINED IN DIVISION (A) OF 329
SECTION 3999.36 OF THE REVISED CODE, SHALL ADOPT AN ANTIFRAUD 330
PROGRAM AND SHALL SPECIFY IN A WRITTEN PLAN THE PROCEDURES IT 331
WILL FOLLOW WHEN INSTANCES OF INSURANCE FRAUD OR SUSPECTED 332
INSURANCE FRAUD ARE BROUGHT TO ITS ATTENTION. THE INSURER SHALL 333
IDENTIFY IN THE WRITTEN PLAN THE PERSON OR PERSONS RESPONSIBLE 334
FOR THE INSURER'S ANTIFRAUD PROGRAM.
(B)(1) AN INSURER SHALL PRODUCE THE WRITTEN PLAN REQUIRED 337
BY DIVISION (A) OF THIS SECTION WITHIN NINETY DAYS AFTER 338
OBTAINING ITS LICENSE TO TRANSACT BUSINESS WITHIN THIS STATE OR 339
WITHIN NINETY DAYS AFTER BEGINNING TO ENGAGE IN THE BUSINESS OF 340
INSURANCE WITHIN THIS STATE AND SHALL THEREAFTER MAINTAIN SUCH A 341
WRITTEN PLAN.
(2) AN INSURER ENGAGED IN THE BUSINESS OF INSURANCE WITHIN 343
THIS STATE ON THE EFFECTIVE DATE OF THIS SECTION SHALL PRODUCE 344
THE WRITTEN PLAN REQUIRED BY DIVISION (A) OF THIS SECTION WITHIN 346
NINETY DAYS AFTER THE EFFECTIVE DATE OF THIS SECTION AND SHALL
THEREAFTER MAINTAIN SUCH A WRITTEN PLAN. 347
(C) IF AN INSURER MODIFIES THE PROCEDURES IT FOLLOWS FOR 349
INSTANCES OF INSURANCE FRAUD OR SUSPECTED INSURANCE FRAUD, OR IF 350
THERE IS A CHANGE IN THE PERSON OR PERSONS RESPONSIBLE FOR THE 351
INSURER'S ANTIFRAUD PROGRAM, THE INSURER SHALL MODIFY THE WRITTEN 352
PLAN IT MAINTAINS PURSUANT TO THIS SECTION. 353
(D) THE REQUIREMENTS OF THIS SECTION ARE NOT APPLICABLE TO 355
ANY INSURER IDENTIFIED IN DIVISION (A) OF THIS SECTION THAT IS 356
NOT ENGAGED IN DIRECTLY WRITING INSURANCE IN THIS STATE. 357
Sec. 3999.42. (A) IF AN INSURER, AS DEFINED IN DIVISION 360
(A) OF SECTION 3999.36 OF THE REVISED CODE, HAS A REASONABLE 361
BELIEF THAT A PERSON IS PERPETRATING OR FACILITATING AN INSURANCE 362
FRAUD, AS ESTABLISHED BY SECTION 2913.47 OF THE REVISED CODE, OR 363
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HAS DONE SO, THE INSURER SHALL NOTIFY THE DEPARTMENT OF 364
INSURANCE.
(B) THE NOTIFICATION REQUIRED BY DIVISION (A) OF THIS 367
SECTION SHALL BE MADE IN ACCORDANCE WITH RULES ADOPTED BY THE 368
DEPARTMENT OF INSURANCE.
(C) DIVISION (A) OF THIS SECTION DOES NOT REQUIRE 370
NOTIFICATION OF THE DEPARTMENT OF INSURANCE IF THE INSURANCE 371
FRAUD INVOLVES A CLAIM OF AN AMOUNT LESS THAN ONE THOUSAND 372
DOLLARS. 373
(D) THIS SECTION APPLIES TO INSURANCE FRAUD PERPETRATED OR 376
FACILITATED BY ANY PERSON, INCLUDING, BUT NOT LIMITED TO, ANY
APPLICANT, POLICYHOLDER, SUBSCRIBER, OR ENROLLEE, OR ANY OFFICER, 378
DIRECTOR, MANAGER, EMPLOYEE, REPRESENTATIVE, OR AGENT OF THE 379
INSURER.
Section 2. That existing sections 3901.44, 3905.49, and 382
3999.31 of the Revised Code are hereby repealed.