Enacts provisions to reduce the incidence of motor vehicle insurance fraud

Summary of provisions

Section 1: Adds a new Insurance Law section 401(d) to explicitly expand the authority of the Superintendent of Financial Services, under the Insurance Fraud prevention Article, to investigate fraudulent activities with regard to motor vehicle operators who have not secured automobile insurance coverage or who misrepresent the principle place where such automobiles are garaged and operated. The bill was amended to make some changes to this bill section with regards to insureds and operators of motor vehicles.

Section 2: Amends Insurance Law section 405(a) to authorize the Insurance 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 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 4: 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 identification card.

Section 5: 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 6: 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 automobile shall be a class E felony.

Section 7: 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 8: Amends Penal Law section 176.15 to expand the scope of insurance fraud in the 4th degree to include the operation of a motor vehicle on a public highway when such operator is insured by a policy issued under the laws of another state, but such person in fact principally lives and garages their vehicle in New York.

Section 9: 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 information 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 10: 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 11: 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 12 and 13: Amends Vehicle & Traffic law section 502 to make technical conforming changes to this section based on inconsistent provisions added by Chapters 465 and 487 of the Laws of 2012.

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 upstate 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 premium 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 upstate counties that have much lower incidents of motor vehicle theft, car accidents or judgments relegated to motor vehicle accidents. This issue was a topic of a report released in 2006 by the State Commission on Investigations. Since 2006, the commission has sunsetted, however, senator Klein is revising end updating this report. The new Report "Auto Insurance Rate Evasion" was released in February 2011. This bill implements many of the suggested changes contained in that Report.

This situation or rate evasion, 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 truthfully 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 automobiles, risk of personal injury or liability exposure due to judgments obtain in local courts.

Legislative history

This bill passed the Senate in 2013, 2011-2012 - S. 4847 - Passed Senate in 2011, and reported to Sen. Calendar in 2012 Similar to S.988 of 2011 - Similar to S.7091 of 2010 - Referred to Insurance

Fiscal implications

None

Effective date

180 days after it shall have become law, provided however, that sections 4, 5, 6, 7, and 8 shall go into effect on November 1, next succeeding the date on which it shall have become law.