SENATE BILL NO. 497 Offered January 11, 2006 Prefiled January 11, 2006 A BILL to amend the Code of Virginia by adding in Chapter 6 of Title 18.2 an article numbered 11, consisting of sections numbered  18.2-246.16 through 18.2-246.20, relating to the creation of the Insurance Fraud Act; penalty. ---------- Patron-- Puckett ---------- Referred to Committee for Courts of Justice ----------

Be it enacted by the General Assembly of Virginia:

1.  That the Code of Virginia is amended by adding in Chapter 6 of Title 18.2 an article numbered 11, consisting of sections numbered 18.2-246.16 through 18.2-246.20, as follows:

Article 11. Insurance Fraud Act.

§ 18.2-246.16. Title.

This article shall be known and may be cited as the "Virginia Insurance Fraud Act."

§ 18.2-246.17. Definitions.

As used in this article, the following words shall mean:

"Commission" means the State Corporation Commission.

"Department" means the Department of State Police.

"Insurance policy" means a contract or other written instrument between an insured and insurer setting forth the obligations and responsibilities of each party.

"Insurance professional" means adjusters, agents, managing general agents, surplus line brokers, reinsurance intermediaries, insurance consultants, brokers, attorneys-in-fact, and third party administrators. Insurance transaction, insurance business, and business of insurance include solicitation, negotiations preliminary to execution of an insurance contract, execution of an insurance contract and the transaction of matters subsequent to execution of a contract and arising out of it, and matters arising out of any relationship among or between an insured, an insurer and a third party for which an insurance policy provides coverage.

"Insurance Premium Finance Company" means the same as specified in § 38.2-4700.

"Insured" means any person covered by an insurance policy.

"Insurer" means any person subject to regulation pursuant to Title 38.2, 46.2, or 65.2 engaged in the business of making, or purporting to make annuity contracts, subscription contracts, or contracts of insurance, except that this term shall not include:

1. Any person licensed by or subject to regulation pursuant to Chapter 18 (§ 38.2-1800 et seq.) of Title 38.2,

2. Title insurers subject to regulation pursuant to Chapter 46 (§ 38.2-4600 et seq.) of Title 38.2,

3. Continuing care providers subject to registration pursuant to Chapter 49 (§ 38.2-4900 et seq.) of Title 38.2, and

4. Purchasing groups authorized by Chapter 51 (§ 38.2-5100 et seq.) of Title 38.2.

"Superintendent" means the Superintendent of the Department of State Police.

§ 18.2-246.18. Insurance fraud by a person.

A. A person is guilty of insurance fraud if, in connection with any insurance transaction involving any type of insurance as defined in §§ 38.2-110 through 38.2-122 and 38.2-124 through 38.2-138, and for the purpose of depriving another of property or for pecuniary gain, he intentionally misrepresents or fails to disclose any material fact concerning:

1. The application for, rating of, or renewal of any insurance policy;

2. A claim for payment or benefit pursuant to any insurance policy; or

3. Payments made in accordance with the terms of any insurance policy; and the application used in any insurance premium finance transaction.

B. Any person convicted of a violation of this section shall be deemed guilty of larceny, and such individual may be indicted as for larceny, and upon conviction be punished as prescribed in §§ 18.2-95 and 18.2-96. In addition to the penalties prescribed in §§ 18.2-95 and 18.2-96, but not in lieu thereof, a person convicted of a violation of this section may be ordered to make restitution for any financial loss or damage sustained by any other person as a result of the violation.

C. Any person convicted of a violation of this section who is licensed to engage in any professional occupation pursuant to the Code of Virginia shall be deemed to have committed an act involving moral turpitude. The court shall notify any appropriate licensing authority in the Commonwealth of the conviction, and may notify the appropriate licensing authorities in any other jurisdiction where the licensee holds any similar license.

§ 18.2-246.19. Insurance fraud by an insurer, insurance professional, or insurance premium finance company.

A. An insurer, insurance professional, or insurance premium finance company is guilty of insurance fraud if, in connection with an insurance transaction involving any type of insurance as defined in §§ 38.2-110 through 38.2-122 and 38.2-124 through 38.2-138, and for the purpose of depriving another of property or for pecuniary gain, the person or company intentionally misrepresents or fails to disclose any material fact concerning:

1. The solicitation or sale of any reported insurance policy or premium finance transaction;

2. An application for certificate of authority from the Commission;

3. The solicitation, negotiation, procuring or effecting of a new or renewal insurance risk on behalf of an unlicensed insurer where a license is required;

4. The removal of assets or records of assets, transactions or affairs or a material part thereof, from the home office or other place of business of the insurer, or from the place of safekeeping of the insurer, or the destruction or sequestration of the same from the Bureau of Insurance;

5. The operation of an unlicensed insurer;

6. The financial condition of any insurer; or

7. Payments or claim denials made pursuant to the terms of an insurance policy.

B. Any conviction of a violation of this section by an individual shall be punishable as a Class 4 felony. In the case of a conviction of a legal entity other than an individual, it shall be subject to a fine not to exceed $100,000. Nothing herein shall be deemed to preclude the imposition of any penalty by the State Corporation Commission as set forth in Title 38.2 or regulations issued pursuant thereto.

C. In addition to the penalties prescribed in subsection B, but not in lieu thereof, any person or entity convicted of a violation of this section may be ordered to make monetary restitution for any financial loss or damage sustained by any other person as a result of the violation.

D. Any person convicted of a violation of this section who is licensed to engage in any professional occupation pursuant to the Code of Virginia shall be deemed to have committed an act involving moral turpitude. The court shall notify any appropriate licensing authority in the Commonwealth of the conviction, and may notify appropriate licensing authorities in any other jurisdiction where the licensee holds any similar license.

§ 18.2-246.20. Insurance fraud; where prosecuted.

For the purpose of venue, any violation of § 18.2-246.18 or 18.2-246.19 shall be considered to have been committed in any county or city:

1. In which an act was performed in furtherance of a violation of this article; or

2. In which the offender resides.

2.  That the provisions of this act may result in a net increase in periods of imprisonment or commitment. Pursuant to § 30-19.1:4, the estimated amount of the necessary appropriation is $0 for periods of imprisonment in state adult correctional facilities and is $0 for periods of commitment to the custody of the Department of Juvenile Justice.