New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

 The Office of General Counsel issued the following opinion on November 20, 2003, representing the position of the New York State Insurance Department.

Re: Insurance Fraud

Questions Presented

1. Is there a requirement for a licensee to report a fraudulent claim?

2. Is there a requirement for a licensee to report premium payments that were not remitted?

3. Is there a requirement for a licensee to report applicants who submit applications containing fraudulent facts?

4. Is there a required manner in which a licensee must report fraud?

5. Is there a required time frame in which a licensee must report fraud?

6. Is there a statute that provides, to a person who reports fraud, immunity from civil liability or civil cause of action in connection with a fraud investigation?

Conclusions

1. Yes, pursuant to N.Y. Ins. Law § 405 (McKinney 2000) there is a requirement for a licensee to report a fraudulent insurance claim for commercial, health and personal insurance.

2. No, there is no requirement for a licensee to report to the Frauds Bureau a premium payment that an insured, or agent or broker, fails to remit; however, one may contact the Department’s Consumer Services Bureau for assistance in addressing a situation where an agent or broker fails to remit a premium payment.

3. Materially false statements by prospective insureds in support of an application for commercial insurance and/or health insurance policies, that are not excluded by N.Y. Penal Law §176.05 (2)(b) (McKinney Supp. 2003), must be reported pursuant to N.Y. Ins. Law § 405 (McKinney 2000). However, materially false statements by prospective insureds in support of an application for "personal insurance" policies need not be reported. This is because "insurance fraud", as it is defined in N.Y. Penal Law § 176.05 (1) (McKinney Supp. 2003) and adopted by Article 4 in N.Y. Ins. Law § 403 (a) (McKinney 2000), does not apply to applications for "personal insurance" as defined in N.Y. Penal Law § 176.00 (4) (McKinney 1999) and adopted by Article 4 in N.Y. Ins. Law § 403 (a) (McKinney 2000).

4. Yes, there is a required manner for a licensee to report suspected fraud; pursuant to N.Y. Ins. Law § 405 (McKinney 2000) and 11 NYCRR Part 86.5 (2002), Regulation 95, a licensee must send the report to the Frauds Bureau on a form prescribed by the Superintendent.

5. Yes, pursuant to N.Y. Ins. Law § 405 (McKinney 2000) there is a time frame for a licensee to report fraud; a licensee must report fraud within 30 days of suspecting it.

6. Yes, N.Y. Ins. Law § 406 (McKinney 2000) provides to a person who reports fraud, immunity from civil liability or civil cause of action in connection with a fraud investigation.

Facts

No additional facts were provided.

Analysis

N.Y. Ins. Law § 405(a) (McKinney 2000) states in relevant part:

Any person licensed pursuant to the provisions of this chapter, and any person engaged in the business of insurance in this state who is exempted from compliance with the licensing requirements of this chapter, including the state insurance fund of this state, who has reason to believe that an insurance transaction may be fraudulent, or has knowledge that a fraudulent insurance transaction is about to take place, or has taken place shall, within thirty days after determination by such person that the transaction appears to be fraudulent, send to the insurance frauds bureau on a form prescribed by the superintendent, the information requested by the form and such additional information relative to the factual circumstances of the transaction and the parties involved as the superintendent may require. . . .

N.Y. Ins. Law § 406 (McKinney 2000) states:

In the absence of fraud or bad faith, no person shall be subject to civil liability, and no civil cause of action of any nature shall arise against such person (i) for any information relating to suspected fraudulent insurance transactions furnished to law enforcement officials, their agents and employees; and (ii) for any information relating to suspected fraudulent insurance transactions furnished to other persons subject to the provisions of this chapter; and (iii) for any such information furnished in reports to the insurance frauds bureau, its agents or employees or the workers’ compensation fraud inspector general, its agents or employees. Nor shall the superintendent or any employee of the insurance frauds bureau, in the absence of fraud or bad faith, be subject to civil liability and no civil cause of action of any nature shall arise against them by virtue of the publication of any report or bulletin related to the official activities of the insurance frauds bureau. Nothing herein is intended to abrogate or modify in any way any common law privilege of immunity heretofore enjoyed by any person.

Specifically, N.Y. Penal Law § 176.05 (McKinney Supp. 2003) states:

(1) A fraudulent insurance act is committed by any person who, knowingly and with intent to defraud presents, causes to be presented, or prepares with knowledge or belief that it will be presented to or by an insurer, self insurer, or purported insurer, or purported self insurer, or any agent thereof, any written statement as part of, or in support of, an application for the issuance of, or the rating of a commercial insurance policy, or certificate or evidence of self insurance for commercial insurance or commercial self insurance, or a claim for payment or other benefit pursuant to an insurance policy or self insurance program for commercial or personal insurance which he knows to: (i) contain materially false information concerning any fact material thereto; or (ii) conceal, for the purpose of misleading, information concerning any fact material thereto.

(2) A fraudulent health care insurance act is committed by any person who, knowingly and with intent to defraud, presents, causes to be presented, or prepares with knowledge or belief that it will be presented to, or by, an insurer or purported insurer or self-insurer, or any agent thereof, any written statement or other physical evidence as part of, or in support of, an application for the issuance of a health insurance policy, or a policy or contract or other authorization that provides or allows coverage for, membership or enrollment in, or other services of a public or private health plan, or a claim for payment, services or other benefit pursuant to such policy, contract or plan, which he knows to:

(a) contain materially false information concerning any material fact thereto; or

(b) conceal, for the purpose of misleading, information concerning any fact material thereto. Such policy or contract or plan or authorization shall include, but not be limited to, those issued or operating pursuant to any public or governmentally-sponsored or supported plan for health care coverage or services or those otherwise issued or operated by entities authorized pursuant to the public health law. For purposes of this subdivision an "application for the issuance of a health insurance policy" shall not include (a) any application for a health insurance policy or contract approved by the superintendent of insurance pursuant to the provisions of sections three thousand two hundred sixteen, four thousand three hundred four, four thousand three hundred twenty-one or four thousand three hundred twenty-two of the insurance law or any other application for a health insurance policy or contract approved by the superintendent of insurance in the individual or direct payment market; and (b) any application for a certificate evidencing coverage under a self-insured plan or under a group contract approved by the superintendent of insurance.

Pursuant to N.Y. Ins. Law § 405 (McKinney 2000), a licensee must report that a fraudulent insurance transaction has occurred within 30 days of suspecting it. Such transactions include both claims for commercial, health and/or personal insurance, and applications containing materially false statements in support of an application for commercial insurance and/or health insurance policies that are not excluded by N.Y. Penal Law §176.05 (2)(b) (McKinney Supp. 2003). However, materially false statements by prospective insureds in support of an application for "personal insurance" policies need not be reported. This is because "insurance fraud", as it is defined in N.Y. Penal Law § 176.05 (1) (McKinney Supp. 2003) and adopted by Article 4 in N.Y. Ins. Law § 403 (a) (McKinney 2000), does not apply to applications for "personal insurance" as defined in N.Y. Penal Law

§ 176.00 (4) (McKinney 1999) and adopted by Article 4 in N.Y. Ins. Law § 403 (a) (McKinney 2000).

Pursuant to both N.Y. Ins. Law § 405 (McKinney 2000) and 11 NYCRR Part 86.5 (2002), Regulation 95, the licensee must report the suspected fraudulent transaction on a form prescribed by the Superintendent. N.Y. Ins. Law § 406 (McKinney 2000) provides to a person who reports fraud, immunity from civil liability or civil cause of action in connection with a fraud investigation.

Regarding premium payments that were not remitted, there is no requirement for a licensee to report to the Frauds Bureau a premium payment that an insured, or agent or broker, fails to remit; however, one may contact the Department’s Consumer Services Bureau for assistance in addressing a situation where an agent or broker fails to remit a premium payment.

For further information one may contact Senior Attorney Susan A. Dess at the New York City Office.