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AB-1679 Motor vehicle insurance: fraud.(2019-2020)

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Date Published: 03/21/2019 09:00 PM
AB1679:v98#DOCUMENT

Amended  IN  Assembly  March 21, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 1679


Introduced by Assembly Member Daly

February 22, 2019


An act to amend Section 1780.64 Sections 1872.8 and 1874.8 of the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 1679, as amended, Daly. Surplus line advisory organization. Motor vehicle insurance: fraud.
Existing law creates the Department of Insurance and generally regulates the business of insurance in the state. Existing law requires an insurer doing business in California to pay an annual special purpose assessment, in an amount to be determined by the commissioner, but not to exceed $1, for each vehicle insured under a policy it issues in this state, which is used to fund increased investigation and prosecution of fraudulent automobile insurance claims and economic automobile theft. Under existing law, $0.05 of that assessment is required to be spent for enhanced automobile insurance fraud investigation by the department’s Fraud Division. Existing law also requires an insurer doing business in California to pay an annual special purpose assessment to fund the Organized Automobile Fraud Activity Interdiction Program, in an amount to be determined by the commissioner, but not to exceed $0.50, for each vehicle insured under a policy it issues in this state.
This bill would increase those maximum special purpose assessments to $1.36 annually per insured vehicle to fund increased investigation and prosecution of fraudulent automobile insurance claims and economic automobile theft and $0.74 annually per insured vehicle to fund the Organized Automobile Fraud Activity Interdiction Program. The bill would eliminate the requirement that $0.05 of the first assessment described above be spent for enhanced automobile insurance fraud investigation by the Fraud Division, and would adjust the distribution of those assessment funds, as specified.

Existing law regulates the business of insurance with regard to surplus lines insurers and nonadmitted insurers. Existing law authorizes a surplus line advisory organization to perform specified duties delegated to it by the Insurance Commissioner, including to receive, review, and record documents filed with the commissioner by a nonadmitted insurer. Existing law requires the commissioner to collect a fine not to exceed $100 if the surplus line advisory organization, or one of its officers, committee members, agents, or employees, fails to comply with a final order of the commissioner, unless the failure is willful, in which case the commissioner is required to collect a fine not to exceed $5,000.

This bill would increase those maximum fine amounts to $175 for a failure to comply and $9,000 for a willful failure to comply with a final order of the commissioner.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 1872.8 of the Insurance Code is amended to read:

1872.8.
 (a) An insurer doing business in this state shall pay an annual special purpose assessment to be determined by the commissioner, but not to exceed one dollar ($1) one dollar and thirty-six cents ($1.36) annually, for each vehicle insured under an insurance policy it the insurer issues in this state, in order to fund increased investigation and prosecution of fraudulent automobile insurance claims and economic automobile theft. Thirty-four Thirty-eight percent of those funds received from ninety-five cents ($0.95) of the special purpose assessment per insured vehicle shall be distributed to the Fraud Division for enhanced investigative efforts, 15 percent of that ninety-five cents ($0.95) 14 percent shall be deposited in the Motor Vehicle Account for appropriation to the Department of the California Highway Patrol for enhanced prevention and investigative efforts to deter economic automobile theft, and 51 percent of that ninety-five cents ($0.95) 48 percent shall be distributed to district attorneys for purposes of investigation and prosecution of automobile insurance fraud cases, including fraud involving economic automobile theft.
(b) (1) The commissioner shall award funds to district attorneys according to population. The commissioner may alter this distribution formula as necessary to achieve the most effective distribution of funds. A local district attorney desiring a portion of those funds shall submit to the commissioner an application detailing the proposed use of any moneys that may be provided. The application shall include a detailed accounting of assessment funds received and expended in prior years, including, at a minimum, all of the following:
(A) The amount of funds received and expended.
(B) The uses to which those funds were put, including payment of salaries and expenses, purchase of equipment and supplies, and other expenditures by type.
(C) The results achieved as a consequence of expenditures made, including the number of investigations, arrests, complaints filed, convictions, and the amounts originally claimed in cases prosecuted compared to payments actually made in those cases.
(D) Other relevant information as the commissioner may reasonably require.

A

(2) A district attorney who fails to submit an application by the deadline set by the commissioner shall be subject to loss of distribution of the moneys. The commissioner may consider recommendations and advice of the Fraud Division and the Commissioner of the California Highway Patrol in allocating moneys to local district attorneys. A
(3) A district attorney that who receives funds shall submit an annual report to the commissioner, which may be made public, as to the success of the program administered. The report shall provide information and statistics on the number of active investigations, arrests, indictments, and convictions. Both the application for moneys and the distribution of moneys shall be public documents. The
(4) The commissioner shall conduct a fiscal audit of the programs administered under this subdivision at least once every three years. The costs of a fiscal audit shall be shared equally between the department and the district attorney. Information submitted to the commissioner pursuant to this section concerning criminal investigations, whether active or inactive, shall be confidential. If the commissioner determines that a district attorney is unable or unwilling to investigate and prosecute automobile insurance fraud claims as provided by this subdivision or Section 1874.8, the commissioner may discontinue the distribution of funds allocated for that county and may redistribute those funds to other eligible district attorneys.

(2)

(5) The Department of the California Highway Patrol shall submit to the commissioner, for informational purposes only, a report detailing the department’s its proposed use of funds under this section and an annual report in the same format as required of district attorneys under paragraph (1). (3).

(c)The remaining five cents ($0.05) shall be spent for enhanced automobile insurance fraud investigation by the Fraud Division.

(d)

(c) Except for funds to be deposited in the Motor Vehicle Account for allocation to the Department of the California Highway Patrol for purposes of the Motor Vehicle Theft Prevention Act (Chapter 5 (commencing with Section 10900) of Division 4 of the Vehicle Code), the funds received under this section shall be deposited in the Insurance Fund and be expended and distributed when appropriated by the Legislature.

(e)

(d) In the course of its investigations, the Fraud Division shall pursue aggressively all reported incidents of probable fraud and, in addition, shall forward to the appropriate disciplinary body the names of individuals licensed under the Business and Professions Code who are suspected of actively engaging in fraudulent activity along with all relevant supporting evidence.

(f)

(e) As used in this section, “economic automobile theft” means automobile theft perpetrated for financial gain, including, but not limited to, the following:
(1) Theft of a motor vehicle for financial gain.
(2) Reporting that a motor vehicle has been stolen for the purpose of filing a false insurance claim.
(3) Engaging in any an act prohibited by Chapter 3.5 (commencing with Section 10801) of Division 4 of the Vehicle Code.
(4) Switching of vehicle identification numbers to obtain title to a stolen motor vehicle.

SEC. 2.

 Section 1874.8 of the Insurance Code is amended to read:

1874.8.
 (a) Each An insurer doing business in this state shall pay an annual special purpose assessment to be determined by the commissioner in an amount not to exceed fifty cents ($0.50) seventy-four cents ($0.74) for each vehicle insured under an insurance policy it issues in this state, in order to fund the Fraud Division and the Organized Automobile Fraud Activity Interdiction Program.
(b) (1) From the funds to be distributed to district attorneys under this section, the commissioner shall fund between three and 10 grants at any one time for a coordinated program targeted at the successful prosecution and elimination of organized automobile fraud activity. These grants may be awarded only to district attorneys.
(2) In determining whether to award a district attorney a grant pursuant to this subdivision, the commissioner shall consider factors indicating organized automobile fraud activity in the district attorney’s county, including, but not limited to, the county’s level of general criminal activity, population density, automobile insurance claims frequency, number of suspected fraudulent claims, and prior and current evidence of organized automobile fraud activity. Funding priority shall be given to those grant applications with the potential to have the greatest impact on reducing organized automobile insurance fraud activity committed by an insurer’s employees or agents, brokers, insureds, and others, and lessening the economic losses realized by insurers from that fraud.
(3) All participants of a grant under this subdivision shall coordinate their efforts and work in conjunction with the Fraud Division, other participating agencies, and all interested insurers in this regard.
(c) Of the funds collected pursuant to this section, upon appropriation by the Legislature, 42.5 percent shall be distributed to district attorneys, 42.5 percent shall be distributed to the Fraud Division, and 15 percent shall be distributed to the Department of the California Highway Patrol. Funds distributed pursuant to this section to the Fraud Division and to the Department of the California Highway Patrol shall be used to fund Fraud Division and Department of the California Highway Patrol investigators to work in conjunction with district attorneys who are awarded grants. Each grantee shall be notified by the Fraud Division of the identity of the investigators assigned to work with the grantee. In accordance with the terms and conditions of the applicable grant, each grantee shall provide the Fraud Division with information resulting from the investigations the grantee conducts pursuant to this section. This section does not prohibit the referral of any cases developed by the Fraud Division to any appropriate prosecutorial entity.
(d) A grant under this section shall be awarded on the basis of a single application for a period of three years and shall be subject where applicable to the requirements of subdivision (b) of Section 1872.8, except for the requirement that grants be awarded according to population. Continued funding of a grant shall be contingent upon a grantee’s successful performance, as determined by an annual review by the commissioner. Any redirection of grant funds under this section shall be made only for good cause. The Department of the California Highway Patrol shall submit to the commissioner, for informational purposes only, an annual report on its expenditure of funds under this section in the same format as is required of grantees under this section.
(e) Two or more district attorneys may submit a joint application for a grant award under this section.
(f) The Fraud Division shall report to the Governor, the Legislature, and to the committees of the Senate and Assembly having jurisdiction over insurance on the results of the grant program established by this section, including funding distributed to the Department of the California Highway Patrol Patrol, in the annual report submitted pursuant to Section 12922.
(g) For purposes of this section, “organized automobile fraud activity” means two or more persons who conspire, aid and abet, or in any other manner act together, to engage in economic automobile theft as defined in subdivision (f) of Section 1872.8, or to violate any of the following sections in a manner that involved an automobile insurance claim:
(1) Section 650 or 6152 of the Business and Professions Code.
(2) Section 750.
(3) Section 549, 550, or 551 of the Penal Code.

SECTION 1.Section 1780.64 of the Insurance Code is amended to read:
1780.64.

(a)If the surplus line advisory organization, or any of its officers, committee members, agents, or employees, fails to comply with a final order of the commissioner under this chapter, the advisory organization or the person shall be liable to the state in an amount not exceeding one hundred seventy-five dollars ($175), but if the failure is willful, the advisory organization or the person shall be liable to the state in an amount not exceeding nine thousand dollars ($9,000) for the failure. The commissioner shall collect the amount so payable and may bring an action in the name of the people of the State of California to enforce collection. These penalties may be in addition to any other penalties provided by law.

(b)A willful violation of any provision of this chapter by any person is a misdemeanor.