As Reported by the Senate Insurance, Commerce and Labor Committee 1
122nd General Assembly 4
Regular Session Am. Sub. H. B. No. 248 5
1997-1998 6
REPRESENTATIVES REID-O'BRIEN-GARCIA-MOTTLEY-FOX-VESPER-NETZLEY- 8
HAINES-HOTTINGER-BATCHELDER-GRENDELL-MYERS-MOTTL-LEWIS-BUCHY- 9
BRADING-OLMAN-SALERNO-SENATORS RAY-DIX-WATTS-GILLMOR 10
12
A B I L L
To amend sections 3901.44, 3905.49, and 3999.31 and 15
to enact sections 3905.491, 3999.41, and 3999.42 16
of the Revised Code to require insurers to adopt 17
an antifraud program that includes written 18
procedures for pursuing insurance fraud; to 19
require insurers to report persons suspected of 20
insurance fraud to the Department of Insurance; 21
to require persons convicted of a felony while 22
licensed as agents or solicitors to report the 23
conviction to the Department; and to make other 24
changes related to insurance fraud 25
investigations. 26
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 28
Section 1. That sections 3901.44, 3905.49, and 3999.31 be 31
amended and sections 3905.491, 3999.41, and 3999.42 of the 32
Revised Code be enacted to read as follows:
Sec. 3901.44. (A) AS USED IN THIS SECTION, "INSURANCE 41
FRAUD INVESTIGATION" MEANS ANY INVESTIGATION CONDUCTED BY THE 42
SUPERINTENDENT OF INSURANCE OR A DESIGNEE OF THE SUPERINTENDENT 43
THAT RELATES TO A FRAUDULENT INSURANCE ACT AS DEFINED IN SECTION 44
3999.31 OF THE REVISED CODE. 45
(B) All papers, documents, reports, and evidence in the 48
possession of the division of insurance fraud of the department 49
of insurance SUPERINTENDENT OR THE SUPERINTENDENT'S DESIGNEE that 50
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pertain to an INSURANCE FRAUD investigation conducted or 51
authorized by the division are confidential law enforcement 52
investigatory records under section 149.43 of the Revised Code. 53
Notwithstanding such section, the division SUPERINTENDENT shall 54
not prohibit public inspection of such records that pertain to an 55
INSURANCE FRAUD investigation after the expiration of all federal 57
and state statutes of limitations applicable to the particular 58
offense to which the papers, documents, reports, and evidence 59
relate.
(B)(C) All papers, documents, reports, and evidence in the 62
possession of the division of insurance fraud SUPERINTENDENT that 64
do not pertain to such an INSURANCE FRAUD investigation are 65
public records under section 149.43 of the Revised Code, and are 67
not by such possession alone confidential law enforcement 68
investigatory records.
(C)(D) All papers, documents, reports, and evidence in the 70
possession of the division of insurance fraud SUPERINTENDENT OR 71
THE SUPERINTENDENT'S DESIGNEE that pertain to such an INSURANCE 73
FRAUD investigation are not subject to subpoena in civil actions 75
by any court of this state until opened for public inspection by 76
the division SUPERINTENDENT in accordance with division (A)(B) of 77
this section or with section 149.43 of the Revised Code, unless 78
the superintendent of insurance or his THE SUPERINTENDENT'S 80
designee consents, or until after reasonable notice to the 82
division SUPERINTENDENT and opportunity for hearing, the court 84
determines the division SUPERINTENDENT would not be hindered 85
unnecessarily by such subpoena. 86
(D) Investigators who are employees of the division (E) 89
THE SUPERINTENDENT AND THE SUPERINTENDENT'S DESIGNEE are not 90
subject to subpoena in civil actions by any court of this state 91
to testify concerning any matter of which they have knowledge 92
pursuant to a pending insurance fraud investigation by the 93
division SUPERINTENDENT.
Sec. 3905.49. (A) The superintendent of insurance may 102
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suspend, revoke, refuse to continue or renew, or refuse to issue 103
any license as an agent or solicitor under this chapter, if the 104
superintendent finds any one or more of the following: 105
(1) The person has made a false statement with respect to 107
a material matter in the license application; 108
(2) Any cause for which issuance of the license could have 110
been refused had it existed and been known to the superintendent 111
at the time of issuance; 112
(3) The person has violated or failed to comply with any 114
insurance law or any lawful rule or order of the superintendent 115
or the commissioner of insurance of another state; 116
(4) The person has obtained or attempted to obtain any 118
such license through mispresentation MISREPRESENTATION or fraud; 119
(5) The person has improperly withheld, misappropriated, 121
or converted to the person's own use any moneys belonging to 122
policyholders, insurers, beneficiaries, or others received in the 123
course of the person's insurance business; 124
(6) The person has knowingly misrepresented the terms of 126
any actual or proposed insurance policy or contract; 127
(7) The person has been convicted of a felony. If a 129
person has been convicted of a felony based on evidence of acts 130
or omissions related to the insurance business, the 131
superintendent shall revoke any license issued to such person for 132
a period of not less than two years. If the person did not hold 133
a license at the time of the conviction, no license shall be 134
issued to the person for a period of two years after the date of 135
the conviction. 136
(8) The person is guilty of an unfair or deceptive trade 138
act OR practice or fraud under any section of Title XXXIX of the 139
Revised Code; 140
(9) In the conduct of the person's affairs under a 142
license, the person has used fraudulent, coercive, or dishonest 143
practices, or is incompetent, untrustworthy, or financially 144
irresponsible; 145
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(10) The person's license has been suspended or revoked in 147
any other state, province, district, or territory; 148
(11) The person has forged another's name to an 150
application for insurance; 151
(12) The person has cheated on an examination for an 153
insurance license; 154
(13) THE PERSON HAS FAILED TO REPORT A FELONY CONVICTION 156
AS REQUIRED UNDER SECTION 3905.491 OF THE REVISED CODE. 158
(B) The license of a partnership or corporation may be 160
suspended, revoked, or refused if the superintendent finds, after 161
notice and hearing under Chapter 119. of the Revised Code, that 162
an individual licensee's violation was known or should have been 163
known by one or more of the partners, officers, directors, or 164
managers acting on behalf of the partnership or corporation and 165
such violation was not reported to the department of insurance or 166
corrective action taken in relation to the violation. 167
(C) Before denying, revoking, suspending, or refusing to 169
continue or renew any license or imposing any penalty under this 170
section, the superintendent shall provide notice and an 171
opportunity for hearing, under Chapter 119. of the Revised Code, 172
to the licensee or applicant and any insurer represented by the 173
licensee or applicant. 174
(D) The superintendent may modify any order under this 176
section and restore a license of or issue a license to a person 177
if the superintendent finds, after notice and opportunity for 178
hearing provided to affected parties, that the person can 179
demonstrate all of the following: 180
(1) The person has made restitution for all pecuniary 182
losses caused by his THE PERSON'S violation; 183
(2) The person's character and reputation have been 185
rehabilitated so that the person possesses the personal 186
qualifications required for the initial issuance of a license; 187
(3) If the order was an order of revocation based on a 189
conviction for felony based on evidence of acts or omissions 190
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related to the insurance business, that two years have elapsed 191
since the effective date of the order, or if the order was an 192
order denying a license because of such a conviction, that two 193
years have elapsed since the date of the conviction; 194
(4) If required by the superintendent, the person passes 196
the examination required for an initial issuance of the license. 197
(E) The superintendent shall consider the following 199
standards in denying a license, imposing suspensions, 200
revocations, or refusals of continuations or renewals of 201
licenses: 202
(1) Whether the person acted in good faith and without 204
knowledge of his THE violation and makes restitution for any 205
pecuniary losses suffered by other persons as a result of his THE 206
PERSON'S actions. In such cases, the maximum suspension shall be 207
ninety days. 208
(2) Whether, within the meanings defined in section 210
2901.22 of the Revised Code, the person acted purposely, 211
knowingly, recklessly, or negligently; 212
(3) Whether the amount of money or the nature of the 214
property involved in the violation would, if it were the subject 215
of a criminal offense, make a theft offense a misdemeanor or a 216
felony; 217
(4) The degree of trust placed in the person by, and the 219
incompetency, inexperience, or susceptibility to undue influence 220
or duress of, any other person involved; 221
(5) The effect of the violation upon the perception by 223
insureds and insurance customers of the ethics and integrity of 224
the insurance industry; 225
(6) The extent to which the person's conduct departed from 227
the customary and usual ethical standards of persons engaged in 228
the insurance business; 229
(7) Such other factors as the superintendent determines to 231
be appropriate under the circumstances. 232
Sec. 3905.491. ANY PERSON WHO IS CONVICTED OF A FELONY 234
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WHILE LICENSED AS AN AGENT OR SOLICITOR UNDER THIS CHAPTER SHALL 235
REPORT THE CONVICTION TO THE SUPERINTENDENT OF INSURANCE WITHIN 236
THIRTY DAYS OF THE ENTRY DATE OF THE JUDGMENT OF CONVICTION. 237
WITHIN THAT THIRTY-DAY PERIOD, THE PERSON SHALL ALSO PROVIDE THE 238
SUPERINTENDENT WITH A COPY OF THE JUDGMENT, THE PROBATION OR 239
COMMITMENT ORDER, AND ANY OTHER RELEVANT DOCUMENTS. 240
Sec. 3999.31. (A) As used in this section: 250
(1) "Fraudulent insurance act" means an act committed by a 252
person who, knowingly and with intent to defraud, presents, 253
causes to be presented, or prepares with knowledge or belief that 254
it will be presented to or by an insurer, purported insurer, 255
broker, or any agent thereof, any written statement as part of, 256
or in support of, an application for the issuance of, or the 257
rating of a policy or contract for property insurance, casualty 258
insurance, life insurance, sickness and accident insurance, or an 259
annuity, or a claim for payment or other benefit pursuant to such 260
a policy or contract, that the person knows to contain materially 261
false information concerning any fact material thereto, or 262
conceals, for the purpose of misleading, information concerning 263
any fact material thereto. "Fraudulent insurance act" also 264
includes any such written statement, claim, or concealment in 265
relation to such an insurance policy or contract that constitutes 266
a criminal offense under Title XXIX or XXXIX of the Revised Code. 267
(2) "Person" includes, but is not limited to, the 269
superintendent of insurance, the national association of 270
insurance commissioners, any insurer, any organization 271
established to detect or prevent fraudulent insurance acts, and 272
any officer, director, trustee, representative, agent, broker, or 273
employee of the superintendent, association, insurer, 274
organization, or person. 275
(B) In the absence of fraud or bad faith, no person is 277
subject to liability for damages or any other civil liability for 278
libel, slander, or other relevant tort cause of action by virtue 279
of filing reports, without malice, or furnishing other 280
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information, without malice, required under Title XXXIX of the 281
Revised Code or required by the superintendent under authority 282
granted by that title, and no liability for damages or any other 283
civil cause of action of any nature arises against a person for 284
providing or receiving information relating to suspected 285
fraudulent INSURANCE acts that is furnished to or received from 286
any of the following: 287
(1) Any law enforcement official, or any agent or employee 289
of such official; 290
(2) Other persons subject to the provisions of Title xxxix 293
XXXIX of the Revised Code;
(3) The division of insurance fraud of the department of 295
insurance SUPERINTENDENT AND ANY DESIGNEE OF THE SUPERINTENDENT, 296
any insurance frauds bureau, the national association of 298
insurance commissioners, or any organization established to
detect and prevent fraudulent insurance acts; or 299
(4) Any other person involved in the detection or 301
prevention of fraudulent insurance acts. 302
(C) The superintendent of insurance and any agent, 304
employee, or designee of the superintendent or any personnel of 305
the division of insurance fraud of the department of insurance, 306
or any insurance frauds bureau, in the absence of malice, fraud, 307
or bad faith, is not subject to civil liability for libel, 308
slander, or other relevant tort and no civil cause of action of 309
any nature arises against such a person by virtue of the 310
publication of any report or bulletin related to the official 311
activities of the superintendent or of the division of insurance 312
fraud of the department of insurance, or of any insurance frauds 313
bureau in relation to fraudulent insurance acts. 314
(D) Nothing in this section is intended to abrogate or 316
modify in any way any common law or statutory privilege or 317
immunity enjoyed by any person. 318
(E) Nothing in this section shall be construed to negate, 320
supersede, or otherwise affect section 3911.06, 3911.07, 3915.05, 321
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or 3923.04 of the Revised Code. 322
(F) This section may be cited as the conference of 324
insurance legislators/national association of insurance 325
commissioners model immunity act. 326
Sec. 3999.41. (A) EXCEPT AS PROVIDED IN DIVISION (D) OF 328
THIS SECTION, EVERY INSURER, AS DEFINED IN DIVISION (A) OF 330
SECTION 3999.36 OF THE REVISED CODE, SHALL ADOPT AN ANTIFRAUD 331
PROGRAM AND SHALL SPECIFY IN A WRITTEN PLAN THE PROCEDURES IT 332
WILL FOLLOW WHEN INSTANCES OF INSURANCE FRAUD OR SUSPECTED 333
INSURANCE FRAUD ARE BROUGHT TO ITS ATTENTION. THE INSURER SHALL 334
IDENTIFY IN THE WRITTEN PLAN THE PERSON OR PERSONS RESPONSIBLE 335
FOR THE INSURER'S ANTIFRAUD PROGRAM.
(B)(1) AN INSURER SHALL DEVELOP A WRITTEN PLAN REQUIRED BY 338
DIVISION (A) OF THIS SECTION WITHIN NINETY DAYS AFTER OBTAINING 339
ITS LICENSE TO TRANSACT BUSINESS WITHIN THIS STATE OR WITHIN 340
NINETY DAYS AFTER BEGINNING TO ENGAGE IN THE BUSINESS OF 341
INSURANCE WITHIN THIS STATE AND SHALL THEREAFTER MAINTAIN SUCH A 342
WRITTEN PLAN.
(2) AN INSURER ENGAGED IN THE BUSINESS OF INSURANCE WITHIN 344
THIS STATE ON THE EFFECTIVE DATE OF THIS SECTION SHALL DEVELOP A 345
WRITTEN PLAN REQUIRED BY DIVISION (A) OF THIS SECTION WITHIN 347
NINETY DAYS AFTER THE EFFECTIVE DATE OF THIS SECTION AND SHALL
THEREAFTER MAINTAIN SUCH A WRITTEN PLAN. 348
(C) IF AN INSURER MODIFIES THE PROCEDURES IT FOLLOWS FOR 350
INSTANCES OF INSURANCE FRAUD OR SUSPECTED INSURANCE FRAUD, OR IF 351
THERE IS A CHANGE IN THE PERSON OR PERSONS RESPONSIBLE FOR THE 352
INSURER'S ANTIFRAUD PROGRAM, THE INSURER SHALL MODIFY THE WRITTEN 353
PLAN IT MAINTAINS PURSUANT TO THIS SECTION. 354
(D) THE REQUIREMENTS OF THIS SECTION ARE NOT APPLICABLE TO 356
ANY INSURER IDENTIFIED IN DIVISION (A) OF THIS SECTION THAT IS 357
NOT ENGAGED IN WRITING DIRECT INSURANCE IN THIS STATE. 358
Sec. 3999.42. (A) IF AN INSURER, AS DEFINED IN DIVISION 361
(A) OF SECTION 3999.36 OF THE REVISED CODE, HAS A REASONABLE 362
BELIEF THAT A PERSON IS PERPETRATING OR FACILITATING AN INSURANCE 363
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FRAUD, AS ESTABLISHED BY SECTION 2913.47 OF THE REVISED CODE, OR 364
HAS DONE SO, THE INSURER SHALL NOTIFY THE DEPARTMENT OF 365
INSURANCE.
(B) THE NOTIFICATION REQUIRED BY DIVISION (A) OF THIS 368
SECTION SHALL BE MADE IN ACCORDANCE WITH RULES ADOPTED BY THE 369
DEPARTMENT OF INSURANCE.
(C) DIVISION (A) OF THIS SECTION DOES NOT REQUIRE 371
NOTIFICATION OF THE DEPARTMENT OF INSURANCE IF THE INSURANCE 372
FRAUD INVOLVES A CLAIM OF AN AMOUNT LESS THAN ONE THOUSAND 373
DOLLARS. 374
(D) THIS SECTION APPLIES TO INSURANCE FRAUD PERPETRATED OR 377
FACILITATED BY ANY PERSON, INCLUDING, BUT NOT LIMITED TO, ANY
APPLICANT, POLICYHOLDER, SUBSCRIBER, OR ENROLLEE, OR ANY OFFICER, 379
DIRECTOR, MANAGER, EMPLOYEE, REPRESENTATIVE, OR AGENT OF THE 380
INSURER.
Section 2. That existing sections 3901.44, 3905.49, and 383
3999.31 of the Revised Code are hereby repealed.