Enacts provisions to reduce the incidence of motor vehicle insurance fraud

Summary of provisions

Section 1: Adds a new Insurance Law section 401(e) to explicitly expand the authority of the Superintendent of Insurance, under the Insurance Fraud Prevention Article, to investigate fraudulent activities with regard to motor vehicle operators who have not secured automobile insur- ance coverage or who misrepresent the principle place where such automo- biles are garaged and operated.

Section 2: Amends Insurance Law section 405(a) to authorize the Insur- ance Frauds Bureau to accept reports of suspected fraudulent insurance transactions from any self insurer with regard to health insurance coverage, motor vehicle liability coverage, or workers compensation coverage.

Section 3: Amends Insurance Law section 405(d)(11) to authorize the Superintendent of Insurance in preparing its Annual Insurance Frauds Report for the Governor and State Legislature, to include an evaluation of law enforcement and insurance company activities to detect and curtail incidences of misrepresentation by motor vehicle insureds of the principle place of their residence and where such motor vehicles are garaged and operated.

Section 4: Adds a new Insurance Law section 405-a to be included within Insurance Fraud Prevention Article of the Insurance Law. This new section allows members of the general public, if they believe that a fraudulent insurance act has been committed or is about to take place to report such activity or transaction to the Attorney General, local District Attorney or the Insurance Fraud Bureau of the Insurance Depart- ment. If the Insurance Frauds Bureau recommends to the Attorney General or local District Attorney to commence an enforcement action or the Attorney General or District Attorney commences an action based on the information provided by the member of the general public, then such person is entitled to receive a cash award. The award can be up to 15% of the proceeds of the action or settlement not to exceed $ 25,000. The

court shall base such award decision on the extent such person substan- tially contributed to the prosecution of the action.

Section 5: Amends Insurance Law section 406 to add the Attorney General and District Attorney to the class of agencies that are included within the purview of this section of the law.

Section 6: Amends Insurance Law section 2133 to expand the scope of prohibition for any insurance company, insurance agent, broker, or other person who knowingly possesses, transfers or uses a forged insurance identification card to also include other false insurance documents which purports to evince insurance coverage when it is not in effect or is at limits less than those stated on the document.

Section 7: Adds a new Executive Law 231 to establish the Insurance Fraud Reward Program under the supervision of the State Police. This section establishes a state-wide Insurance Fraud Reward Program to pay awards to persons who provide information that leads to the arrest and conviction of persons guilty of fraudulent insurance acts. The Superintendent of Police shall establish a toll-free hotline and website to collect tips and information from the general public to assist the State Police in the investigation and prosecution of insurance fraud crimes. Awards from $ 1,000 up to $ 5,000 can be paid for information leading to the arrest and conviction of insurance fraud crimes. The State Police shall obtain money to finance this award program from the State Police Motor Vehicle Law Enforcement Account. Money from this account is received in part from surcharges levied on all motor vehicle insurance policies issued in New York pursuant to Insurance Law section 9110.

Section 8: Amends Executive Law section 846-m(2)(a) to provide that at least 1/4 of the money received by the State Police Motor Vehicle Law Enforcement Account (collected from a surcharge placed on all auto insurance policies sold in New York to combat auto insurance fraud) after January 1, 2011 shall be used to support activities undertaken by local District Attorney's to combat auto insurance fraud.

Section 9: Amends State Finance Law section 97-mm(3), the State Police Motor Vehicle Law Enforcement Account, to authorize funds to be used for the Insurance Fraud Reward Program established pursuant to Executive Law section 231.

Section 10: Amends State Finance Law section 97-mm(4) to require that the State Police Annual Auto Theft Prevention Report also include its efforts to curb automobile insurance fraud.

Section 11: Amends Penal Law section 170.10 to add a new (6) to the list of documents that the forgery of is considered to be forgery in the Second Degree. The new document that, if forged, would be forgery in the Second Degree are certificates of insurance or an insurance identifica- tion card.

Section 12: Amends Penal Law section 170.15 (Forgery in the First Degree) to include as forgery in the first degree, the fraudulent making, completion, or alteration of 10 or more written instruments such as certificates of insurance or insurance identification cards.

Section 13: Adds a new Penal Law section 175.50 to make it a class E felony to offer a false application for motor vehicle insurance or registration. Under this provision, anyone who submits to the Department of Motor Vehicles or to an auto insurer (to obtain an auto insurance policy or insurance identification card) any document that contains a false statement or information with regard to where such applicant resides or where such applicant's motor vehicle is garaged or operated and such document is used directly or indirectly to register an automo- bile shall be a class E felony.

Section 14: Amends Penal Law section 176.05 which defines the term "insurance fraud". Under this bill, the term "insurance fraud" is expanded to include any false document used to secure either insurance coverage, file an insurance policy claim, or obtain payment for personal lines insurance coverages (i.e. auto and homeowners insurance). Under current law, only false documents that are used to secure commercial lines policies or money for claims against a commercial lines policy (i.e general liability or business property policies) are considered to be insurance fraud. This bill expands the types of insurance policies that persons cannot lie about to obtain coverage or claims payment to include personal lines coverages such as motor vehicle liability or homeowners insurance.

Section 15: Amends CPLR section 1310(4-b) to include within the defi- nition of "specified felony offense" the conviction of a person of crimes of Insurance Fraud pursuant to Article 176 of the Penal Law. CPLR Article 13-A (of which section 1310 is the definitions section of this Article) lays out the procedure to seize ill-gotten profits from crimi- nal activity. Hence, illegally secured profits obtained by persons from fraudulent insurance acts can be seized and used for other law enforce- ment purposes.

Section 16: Amends CPLR section 1311(3-a) to add the commission of crimes of insurance fraud to the list of crimes in which forfeiture actions may be taken to seize illegally secured assets or fruits of the crime.

Section 17: Amends CPLR section 1311(11) to give the Insurance Frauds Bureau notice of a forfeiture of assets proceeding and stipulation or settlement agreement of such action which is based on a felony of insur- ance fraud.

Section 18: Amends CPLR section 1349(4) which deals with the disposal of property obtained from a criminal activity forfeiture action so that the Insurance Frauds Bureau of the Insurance Department can obtain those assets. Funds secured from this source can be used to finance the oper-

ations of the Insurance Fraud Bureau or the Insurance Fraud Prevention program established by Insurance Law section 405-a.

Section 19: A new Vehicle & Traffic Law section 201-a is added to give law enforcement personnel access to any individual's street address provided to the Department of Motor Vehicles to register a motor vehicle in this state or to obtain a driver's license in this State. This infor- mation can be used to ensure that those who submit information to the Department submit accurate information of their residence and where they operate and garage their motor vehicle for auto insurance premium rating purposes.

Section 20: Amends Vehicle & Traffic Law section 401(1) to require that all those who file an application to register an automobile in New York must provide their street address where they reside if such person uses a Post Office box for their location of residence. The purpose of this provision is to curtail those that submit fraudulent information on where such applicants truly reside.

Section 21: Amends Vehicle & Traffic Law section 502(1) to require that all those who file an application for a driver's license must provide their street address where they reside if such person uses a Post Office box for their location of residence.

Section 22: Creates a Temporary Task Force on Motor Vehicle Insurance Fraud. The Superintendent of Insurance and Commissioner of Motor Vehi- cles shall establish a working group to examine the feasibility and cost effectiveness of developing methodologies to identify owners and opera- tors of motor vehicles who misrepresent the principle place of their residence and where they operate and garage their automobiles.

The Task Force shall have 13 members, with the Superintendent of Insur- ance and Commissioner of Motor Vehicles to act as Co-Chairs. The remaining members are to be appointed as follows: four by the Governor, 2 by the Temporary President of the Senate, 2 by the Speaker of the Assembly, one each respectively by each chambers minority leaders. Task Force members should include representatives of insurers actively writ- ing motor vehicle insurance, insurance agents and brokers that actively sell automobile insurance, 2 representatives of companies that collect, disperse and synthesize data, and 2 representatives of the motor vehicle insurance buying public. The Task Force should have its recommendations and report completed within 15 months of the effective date of this act.

Justification

The purpose of this bill is to address the ever increasing incidence of auto insurance fraud in this state. More particularly, this bill seeks to address insurance fraud that is perpetrated against those law abiding operators of motor vehicles that accurately and truthfully disclose where they reside and operate and garage their vehicles, regardless of where they live. Some who live in high auto insurance rate areas, such as the New York City metropolitan area, misrepresent where they live, garage and operate their automobiles and fraudulently maintain that they

live in low insurance premium rate areas that are either Up-state or out of state.

There is a prevalence of in-state residents misrepresenting their true place of residence so that they can obtain much lower auto insurance rates. Instead of disclosing their true address in high insurance premi- um places such as, for example, Bronx or Kings Counties, they state that they live in lower insurance premium rated territories such as North Carolina, Pennsylvania, or Up-state counties that have much lower inci- dents of motor vehicle theft, car accidents and judgments relegated to motor vehicle accidents. This report is currently being updated.

This situation while artificially lowering the insurance rates of those who fraudulently do not disclose their true residential address, substantially increases the insurance premiums paid by those who truth- fully disclose their actual place of residence and where they operated and garaged their cars. This bill should bring more equity to those who purchase auto insurance coverages in this state and ensure that everyone pays their fair share for auto insurance coverages that matches their actuarial risk of potential physical damage or theft of their automo- biles, risk of personal injury or liability exposure due to judgments obtain in local courts.

Legislative history

New Bill.

Fiscal implications

To be determined.

Effective date

The 60th day after becoming law with provisions.