2005 California Insurance Code Sections 1872-1872.96 Article 2. Bureau of Fraudulent Claims

INSURANCE CODE
SECTION 1872-1872.96

1872.  There is created within the department the Fraud Division to
enforce the provisions of Sections 549, and 550 of the Penal Code,
and to administer the provisions of Article 3 (commencing with
Section 1873).
1872.1.  (a) There is created within the Fraud Division an advisory
committee on automobile insurance fraud and economic automobile theft
prevention, investigation, and prosecution, as provided in this
chapter. The committee shall be composed of the Chief of the Fraud
Division, a representative from the Department of Justice, the
Department of Motor Vehicles, the Division of Investigation of the
Department of Consumer Affairs, the Department of the California
Highway Patrol, the Bureau of Automotive Repair, the Parole and
Community Services Division of the Department of Corrections, the
State Bar of California, the Medical Board of California, the State
Board of Chiropractic Examiners, two representatives from local law
enforcement agencies, one of whom shall be a prosecutor, and
representatives of three insurers assessed pursuant to Section
1872.8, and a representative of a labor organization with members in
the automotive repair business.
   (b) The commissioner shall select representatives from local law
enforcement agencies from names submitted from local law enforcement
agencies. The commissioner shall select one insurer representative
from each of the following three categories from nominees submitted
by insurers in each category: one representative of insurers with
average annual automobile liability premiums in California of less
than one hundred million dollars ($100,000,000) in the preceding
three years; one representative of insurers with average annual
automobile liability premiums in California between one hundred
million dollars ($100,000,000) and seven hundred million dollars
($700,000,000) in the preceding three years; and one representative
of insurers with average annual automobile liability premiums in
California exceeding seven hundred million dollars ($700,000,000) in
the preceding three years. At least one insurer representative shall
be employed by an insurer having its principal headquarters in
California. Members appointed by the commissioner shall serve at the
pleasure of the commissioner. Representatives from other agencies
shall be selected by the agencies represented.
   (c) The advisory committee shall elect one of its members annually
to chair its meetings. The chair shall conduct quarterly meetings of
the committee in California and at such other times as he or she
deems appropriate. Members of the committee shall serve without
compensation except for expenses incidental to attendance at meetings
called by the chair. A report of the committee's activities shall be
included in the report required under Section 1872.9.
   (d) The purpose and goals of the advisory committee are as
follows:
   (1) Recommend to the Fraud Division and other appropriate public
agencies and private sector entities ways to coordinate the
investigation, prosecution, and prevention of automobile insurance
claims fraud, including economic automobile theft.
   (2) Provide assistance to the Fraud Division towards implementing
the goal of reducing the frequency and severity of fraudulent
automobile insurance claims (adjusted for population growth and
inflation) of 20 percent in urban areas and 10 percent in rural areas
of the state within a 24-month period from the effective date of
this chapter by utilizing resources set forth in Section 1872.8.
   (3) Assure that preventive, investigative, prosecutive, and data
collection efforts undertaken by the Fraud Division pursuant to this
chapter are efficient, cost-effective, and complement similar efforts
undertaken by law enforcement agencies and insurers.
   (4) Make recommendations for inclusion in the Fraud Division's
annual report required by Section 1872.9.
1872.2.  For purposes of this article, "insurer" means any person
who undertakes to indemnify another against loss, damage, or
liability arising from a contingent or unknown event, including
reciprocals and interinsurance exchanges.
1872.3.  (a) If, by its own inquiries or as a result of complaints,
the Fraud Division has reason to believe that a person has engaged
in, or is engaging in, an act or practice that violates Section
1871.4 of this code, or Section 549 or 550 of the Penal Code, the
commissioner in his or her discretion may do either or both of the
following:
   (1) Make those public or private investigations within or outside
of this state that he or she deems necessary to determine whether any
person has violated or is about to violate any provision of Section
1871.4 of this code, or Section 549 or 550 of the Penal Code, or to
aid in the enforcement of this chapter.
    (2) Publish information concerning any violation of this chapter
or Section 550 of the Penal Code.
   (b) For purposes of any investigation under this section, the
commissioner or any officer designated by the commissioner may
administer oaths and affirmations, subpoena witnesses, compel their
attendance, take evidence, and require the production of any books,
papers, correspondence, memoranda, agreements, or other documents or
records that the commissioner deems relevant or material to the
inquiry, as provided by Section 12924.
   (c) If any matter that the commissioner seeks to obtain by request
is located outside the state, the person so requested may make it
available to the commissioner or his or her representative to be
examined at the place where it is located. The commissioner may
designate representatives, including officials of the state in which
the matter is located, to inspect the matter on his or her behalf,
and he or she may respond to similar requests from officials of other
states.
   (d) Except as provided in subdivision (e), the department's
papers, documents, reports, or evidence relative to the subject of an
investigation under this section shall not be subject to public
inspection for so long a period as the commissioner deems reasonably
necessary to complete the investigation, to protect the person
investigated from unwarranted injury, or to serve the public
interest. Furthermore, those papers, documents, reports, or evidence
shall not be subject to subpoena or subpoena duces tecum until opened
for public inspection by the commissioner, unless the commissioner
otherwise consents or, after notice to the commissioner and a
hearing, the superior court determines that the public interest and
any ongoing investigation by the commissioner would not be
unnecessarily jeopardized by compliance with the subpoena duces
tecum.
   (e) The Fraud Division shall furnish all papers, documents,
reports, complaints, or other facts or evidence to any police,
sheriff, or other law enforcement agency, when so requested, and
shall assist and cooperate with those law enforcement agencies.
1872.4.  (a) Any company licensed to write insurance in this state
that reasonably believes or knows that a fraudulent claim is being
made shall, within 60 days after determination by the insurer that
the claim appears to be a fraudulent claim, send to the Fraud
Division, on a form prescribed by the department, the information
requested by the form and any additional information relative to the
factual circumstances of the claim and the parties claiming loss or
damages that the commissioner may require. The Fraud Division shall
review each report and undertake further investigation it deems
necessary and proper to determine the validity of the allegations.
Whenever the commissioner is satisfied that fraud, deceit, or
intentional misrepresentation of any kind has been committed in the
submission of the claim, he or she shall report the violations of law
to the insurer, to the appropriate licensing agency, and to the
district attorney of the county in which the offenses were committed,
as provided by Sections 12928 and 12930. If the commissioner is
satisfied that fraud, deceit, or intentional misrepresentation has
not been committed, he or she shall report that determination to the
insurer. If prosecution by the district attorney concerned is not
begun within 60 days of the receipt of the commissioner's report, the
district attorney shall inform the commissioner and the insurer as
to the reasons for the lack of prosecution regarding the reported
violations.
   (b) This section shall not require an insurer to submit to the
Fraud Division the information specified in subdivision (a) in either
of the following instances:
   (1) The insurer's initial investigation indicated a potentially
fraudulent claim but further investigation revealed that it was not
fraudulent.
   (2) The insurer and the claimant have reached agreement as to the
amount of the claim and the insurer does not have reasonable grounds
to believe that claim to be fraudulent.
   (c) Nothing contained in this article shall relieve an insurer of
its existing obligations to also report suspected violations of law
to appropriate local law enforcement agencies.
   (d) Any police, sheriff, disciplinary body governed by the
provisions of the Business and Professions Code, or other law
enforcement agency shall furnish all papers, documents, reports,
complaints, or other facts or evidence to the Fraud Division, when so
requested, and shall otherwise assist and cooperate with the
division.
   (e) If an insurer, at the time the insurer, pursuant to
subdivision (a) forwards to the Fraud Division information on a claim
that appears to be fraudulent, has no evidence to believe the
insured on that claim is involved with the fraud or the fraudulent
collision, the insurer shall take all necessary steps to assure that
no surcharge is added to the insured's premium because of the claim.
1872.45.  A district attorney who files a criminal complaint
pursuant to Section 549 or 550 of the Penal Code shall promptly do
all of the following:
   (a) Notify each insurer affected by the acts that are the subject
of the criminal complaint of the existence of the complaint and the
names of all persons insured by the insurer who are the victims.
   (b) Notwithstanding any other provision of law, when an insurer
receives notification pursuant to subdivision (a), and the insurer
has increased the premiums of a person who is a victim because of a
claim that is the subject of the criminal complaint, the insurer
shall promptly rebate to that person the increased premiums that were
charged to and paid by that person.
   (c) Notify the Department of Motor Vehicles of the criminal
complaint and the names of all persons who are the victims.
   (d) Notify all the persons who are the victims in simple
understandable language that a criminal complaint has been filed and
that subdivision (b) of Section 1806 of the Vehicle Code requires the
Department of Motor Vehicles not to record the accident on the
record of the victim.
1872.5.  No insurer, or the employees or agents of any insurer,
shall be subject to civil liability for libel, slander, or any other
relevant tort cause of action by virtue of providing any of the
following without malice:
   (a) Any information or reports relating to suspected fraudulent
insurance transaction furnished to law enforcement officials, or
licensing officials governed by the Business and Professions Code.
   (b) Any reports or information relating to suspected fraudulent
insurance transaction furnished to other persons subject to this
chapter.
   (c) Any information or reports required by this article or
required by the commissioner under the authority granted in this
chapter.
1872.6.  Nothing contained in this article shall:
   (a) Preempt the authority of other law enforcement or licensing
agencies to investigate and prosecute suspected violations of law.
   (b) Prevent or prohibit a person from voluntarily disclosing any
information concerning violations of this chapter to any law
enforcement or licensing agency governed by the Business and
Professions Code.
   (c) Limit any of the powers granted to the department or the
commissioner to investigate possible violations of the chapter and
take appropriate action against wrongdoers.
1872.7.  The costs of administration and operation of the Fraud
Division shall be borne by all of the insurers admitted to transact
insurance in this state. The commissioner shall divide those costs
among all of those insurers, assessing each company an identical
amount adequate to provide the funds for each fiscal year of
operation of the division. However, the assessment for each company
shall not exceed one thousand three hundred dollars ($1,300) in each
fiscal year. All moneys received by the commissioner from insurers
pursuant to this section shall be transmitted to the Treasurer to be
deposited in the State Treasury to the credit of the Insurance Fund.
All moneys that are deposited in the fund after receipt by the
commissioner from insurers pursuant to this section are to be
exclusively used for the support of the Fraud Division. To the extent
the assessments against insurers made pursuant to this section are
not sufficient to fund the entire operations of the division, other
moneys appropriated to the department, if available, may be used, at
the commissioner's discretion, to fund those operations not covered
by the assessments. The total budget of the Fraud Division shall be
as determined annually in the Budget Act.
1872.8.  (a) Each insurer doing business in this state shall pay an
annual fee to be determined by the commissioner, but not to exceed
one dollar ($1) annually for each vehicle insured under an insurance
policy it issues in this state, in order to fund increased
investigation and prosecution of fraudulent automobile insurance
claims and economic automobile theft. Thirty-four percent of those
funds received from ninety-five cents ($0.95) of the assessment fee
per insured vehicle shall be distributed to the Fraud Division for
enhanced investigative efforts, 15 percent of that ninety-five cents
($0.95) 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 the funds 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. Each 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) 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.
   Any district attorney who fails to submit an application within 90
days of the commissioner's deadline for applications shall be
subject to loss of distribution of the money. 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. Any district attorney that 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 commissioner shall conduct a fiscal audit of the
programs administered under this subdivision at least once every
three years. The cost 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) The Department of the California Highway Patrol shall submit
to the commissioner, for informational purposes only, a report
detailing the department's proposed use of funds under this section
and an annual report in the same format as required of district
attorneys under paragraph (1).
   (c) The remaining five cents ($0.05) shall be spent for enhanced
automobile insurance fraud investigation by the Fraud Division.
   (d) 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 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) In the course of its investigations, the Fraud Division shall
aggressively pursue all reported incidents of probable fraud and, in
addition, shall forward to the appropriate disciplinary body the
names of any individuals licensed under the Business and Professions
Code who are suspected of actively engaging in fraudulent activity
along with all relevant supporting evidence.
   (f) 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 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.
1872.81.  In addition to the fee imposed pursuant to Section 1872.8,
each insurer doing business in this state shall pay to the
commissioner an annual fee of thirty cents ($0.30) for each vehicle
insured under an insurance policy it issues in this state, for
expenditure as follows:
   (a) An amount equivalent to twenty cents ($0.20) of the fee
imposed per insured vehicle by this section shall be used for the
purpose of paying for consumer service functions of the department
that are related to automobile insurance. The revenues under this
subdivision shall be used to improve service to consumers through the
rating and underwriting services bureau, the claims services bureau,
the investigations bureau, or any successor bureaus of the
department that may assume the consumer service functions of these
bureaus, and legal services in support of these bureaus. The
department shall develop a plan for the use of the revenues available
under this subdivision for the purposes authorized, and shall submit
the plan to the Assembly and Senate Committees on Insurance.
    (b) An amount equivalent to ten cents ($0.10) of the fee imposed
per insured vehicle by this section shall be used for the purpose of
improving consumer functions of the department related to automobile
insurance. Revenues available under this subdivision shall be used to
improve consumer functions through one or more of the following:
   (1) The rating and underwriting services bureau.
   (2) The claims services bureau.
   (3) The investigations bureau.
   (4) Any successor bureau of the department that may assume
automobile insurance consumer functions of these bureaus, and legal
services in support of these bureaus. These revenues may also be used
for improving the ability of the department to respond to consumer
complaints and information requests through the department's
toll-free telephone number, and for improving the ability of the
department to offer information about automobile insurance rates to
the public. The department shall develop a plan for the use of the
revenues available under this subdivision for the purpose authorized,
and shall submit the plan to the Assembly and Senate Committees on
Insurance.
   (c) Notwithstanding subdivision (b), the Department of Insurance,
after January 1, 2006, and the Department of Motor Vehicles, after
that date, may propose to the budget committees of the Legislature a
proposed use of up to five cents ($0.05) of the 10-cent fee levied
pursuant to subdivision (b) related to informing consumers about the
existence of any low cost automobile insurance program authorized in
law pursuant to Section 11629.7 or other statutes that also establish
a program of the type identified in Section 11629.7. No funds for
this purpose may be expended without prior budget approval. The total
amount of funds authorized to both departments in total, or to one
department in total, for this purpose shall not exceed five cents
($0.05). The departments shall explain, with as much specificity as
is reasonably possible, the objectives for the use of the funds and
quantitative criteria by which the Legislature may evaluate the
effectiveness of the department's use of funds.
   (d) At least five cents ($0.05) of the 10-cent fee shall be
directed to the purpose set forth in subdivision (a) until January 1,
2009, and to the degree that funding for low cost auto insurance is
not fully appropriated up to five cents ($0.05), the difference
thereof shall be additionally allocated to purposes set forth in
subdivision (a).
   (e) This section shall remain in effect only until January 1,
2010, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2010, deletes or extends
that date.
1872.83.  (a) The commissioner shall ensure that the Fraud Division
aggressively pursues all reported incidents of probable workers'
compensation fraud, as defined in Sections 11760 and 11880, in
subdivision (a) of Section 1871.4, and in Section 549 of the Penal
Code, and forwards to the appropriate disciplinary body the names,
along with all supporting evidence, of any individuals licensed under
the Business and Professions Code who are suspected of actively
engaging in fraudulent activity. The Fraud Division shall forward to
the Insurance Commissioner or the Director of Industrial Relations,
as appropriate, the name, along with all supporting evidence, of any
insurer, as defined in subdivision (c) of Section 1877.1, suspected
of actively engaging in the fraudulent denial of claims.
   (b) To fund increased investigation and prosecution of workers'
compensation fraud, and of willful failure to secure payment of
workers' compensation, in violation of Section 3700.5 of the Labor
Code, there shall be an annual assessment as follows:
   (1) The aggregate amount of the assessment shall be determined by
the Fraud Assessment Commission, which is hereby established. The
commission shall be composed of seven members consisting of two
representatives of organized labor, two representatives of
self-insured employers, one representative of insured employers, one
representative of workers' compensation insurers, and the President
of the State Compensation Insurance Fund, or his or her designee.
   The Governor shall appoint members representing organized labor,
self-insured employers, insured employers, and insurers. The term of
office of members of the commission shall be four years, and a member
shall hold office until the appointment of a successor. The
President of the State Compensation Insurance Fund shall be an ex
officio, voting member of the commission. Members of the commission
shall receive one hundred dollars ($100) for each day of actual
attendance at commission meetings and other official commission
business, and shall also receive their actual and necessary traveling
expenses incurred in the performance of commission duties. Payment
of per diem and travel expenses shall be made from the Workers'
Compensation Fraud Account in the Insurance Fund, established in
paragraph (4), upon appropriation by the Legislature.
   (2) In determining the aggregate amount of the assessment, the
Fraud Assessment Commission shall consider the advice and
recommendations of the Fraud Division and the commissioner.
   (3) The aggregate amount of the assessment shall be collected by
the Director of Industrial Relations pursuant to Section 62.6 of the
Labor Code. The Fraud Assessment Commission shall annually advise the
Director of Industrial Relations, not later than March 15, of the
aggregate amount to be assessed for the next fiscal year.
   (4) The amount collected, together with the fines collected for
violations of the unlawful acts specified in Sections 1871.4, 11760,
and 11880, Section 3700.5 of the Labor Code, and Section 549 of the
Penal Code, shall be deposited in the Workers' Compensation Fraud
Account in the Insurance Fund, which is hereby created, and may be
used, upon appropriation by the Legislature, only for enhanced
investigation and prosecution of workers' compensation fraud and of
willful failure to secure payment of workers' compensation as
provided in this section.
   (c) For each fiscal year, the total amount of revenues derived
from the assessment pursuant to subdivision (b) shall, together with
amounts collected pursuant to fines imposed for unlawful acts
described in Sections 1871.4, 11760, and 11880, Section 3700.5 of the
Labor Code, and Section 549 of the Penal Code, not be less than
three million dollars ($3,000,000). Any funds appropriated by the
Legislature pursuant to subdivision (b) that are not expended in the
fiscal year for which they have been appropriated, and that have not
been allocated under subdivision (f), shall be applied to satisfy for
the immediately following fiscal year the minimum total amount
required by this subdivision. In no case may that money be
transferred to the General Fund.
   (d) After incidental expenses, at least 40 percent of the funds to
be used for the purposes of this section shall be provided to the
Fraud Division of the Department of Insurance for enhanced
investigative efforts, and at least 40 percent of the funds shall be
distributed to district attorneys, pursuant to a determination by the
commissioner with the advice and consent of the division and the
Fraud Assessment Commission, as to the most effective distribution of
moneys for purposes of the investigation and prosecution of workers'
compensation fraud cases and cases relating to the willful failure
to secure the payment of workers' compensation. Each district
attorney seeking a portion of the funds shall submit to the
commissioner an application setting forth in detail the proposed use
of any funds provided. A district attorney receiving funds pursuant
to this subdivision shall submit an annual report to the commissioner
with respect to the success of his or her efforts. Upon receipt, the
commissioner shall provide copies to the Fraud Division and the
Fraud Assessment Commission of any application, annual report, or
other documents with respect to the allocation of money pursuant to
this subdivision. Both the application for moneys and the
distribution of moneys shall be public documents. Information
submitted to the commissioner pursuant to this section concerning
criminal investigations, whether active or inactive, shall be
confidential.
   (e) If a district attorney is determined by the commissioner to be
unable or unwilling to investigate and prosecute workers'
compensation fraud claims or claims relating to the willful failure
to secure the payment of workers' compensation, the commissioner
shall discontinue distribution of funds allocated for that county and
may redistribute those funds according to this subdivision.
   (1) The commissioner shall promptly determine whether any other
county could assert jurisdiction to prosecute the fraud claims or
claims relating to the willful failure to secure the payment of
workers' compensation that would have been brought in the
nonparticipating county, and if so, the commissioner may award funds
to conduct the prosecutions redirected pursuant to this subdivision.
These funds may be in addition to any other fraud prosecution funds
or claims relating to the willful failure to secure the payment of
workers' compensation prosecution otherwise awarded under this
section. Any district attorney receiving funds pursuant to this
subdivision shall first agree that the funds shall be used solely for
investigating and prosecuting those cases of workers' compensation
fraud or claims relating to the willful failure to secure the payment
of workers' compensation that are redirected pursuant to this
subdivision and submit an annual report to the commissioner with
respect to the success of the district attorney's efforts. The
commissioner shall keep the Fraud Assessment Commission fully
informed of all reallocations of funds under this paragraph.
   (2) If the commissioner determines that no district attorney is
willing or able to investigate and prosecute the workers'
compensation fraud claims or claims relating to the willful failure
to secure the payment of workers' compensation arising in the
nonparticipating county, the commissioner, with the advice and
consent of the Fraud Assessment Commission, may award to the Attorney
General some or all of the funds previously awarded to the
nonparticipating county. Before the commissioner may award any funds,
the Attorney General shall submit to the commissioner an application
setting forth in detail his or her proposed use of any funds
provided and agreeing that any funds awarded shall be used solely for
investigating and prosecuting those cases of workers' compensation
fraud or claims relating to the willful failure to secure the payment
of workers' compensation that are redirected pursuant to this
subdivision. The Attorney General shall submit an annual report to
the commissioner with respect to the success of the fraud prosecution
efforts of his or her office.
   (3) Neither the Attorney General nor any district attorney shall
be required to relinquish control of any investigation or prosecution
undertaken pursuant to this subdivision unless the commissioner
determines that satisfactory progress is no longer being made on the
case or the case has been abandoned.
   (4) A county that has become a nonparticipating county due to the
inability or unwillingness of its district attorney to investigate
and prosecute workers' compensation fraud or the willful failure to
secure the payment of workers' compensation shall not become eligible
to receive funding under this section until it has submitted a new
application that meets the requirements of subdivision (d) and the
applicable regulations.
   (f) If in any fiscal year the Fraud Division does not use all of
the funds made available to it under subdivision (d), any remaining
funds may be distributed to district attorneys pursuant to a
determination by the commissioner in accordance with the same
procedures set forth in subdivision (d).
   (g) The commissioner shall adopt rules and regulations to
implement this section in accordance with the rulemaking provisions
of the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code). Included in the rules and regulations shall be the criteria
for redistributing funds to district attorneys and the Attorney
General. The adoption of the rules and regulations shall be deemed to
be an emergency and necessary for the immediate preservation of the
public peace, health, and safety, or general welfare.
   (h) The department shall report on an annual basis to the
Legislature and the Fraud Assessment Commission on the activities of
the Fraud Division and district attorneys supported by the funds
provided by this section.
   The annual report shall include, but is not limited to, all of the
following information for the department and each district attorney'
s office:
   (1) All allocations, distributions, and expenditures of funds.
   (2) The number of search warrants issued.
   (3) The number of arrests and prosecutions, and the aggregate
number of parties involved in each.
   (4) The number of convictions and the names of all convicted fraud
perpetrators.
   (5) The estimated value of all assets frozen, penalties assessed,
and restitutions made for each conviction.
   (6) Any additional items necessary to fully inform the Fraud
Assessment Commission and the Legislature of the fraud-fighting
efforts financed through this section.
   (i) In order to meet the requirements of subdivision (g), the
department shall submit a biannual information request to those
district attorneys who have applied for and received funding through
the annual assessment process under this section.
   (j) Assessments levied or collected to fight workers' compensation
fraud and insurance fraud are not taxes. Those funds are entrusted
to the state to fight fraud and the willful failure to secure the
payment of workers' compensation by funding state and local
investigation and prosecution efforts. Accordingly, any funds
resulting from assessments, fees, penalties, fines, restitution, or
recovery of costs of investigation and prosecution deposited in the
Insurance Fund shall not be deemed "unexpended" funds for any purpose
and, if remaining in that account at the end of any fiscal year,
shall be applied as provided in subdivision (f) and to offset or
augment subsequent years' program funding.
   (k) The Bureau of State Audits shall evaluate the effectiveness of
the efforts of the Fraud Assessment Commission, the Fraud Division,
the Department of Insurance, and the Department of Industrial
Relations, as well as local law enforcement agencies, including
district attorneys, in identifying, investigating, and prosecuting
workers' compensation fraud and the willful failure to secure payment
of workers' compensation. The report shall specifically identify
areas of deficiencies. Included in this report shall be
recommendations on whether the current program provides the
appropriate levels of accountability for those responsible for the
allocation and expenditure of funds raised from the assessment
provided in this section. The Bureau of State Audits shall submit a
report to the Chairperson of the Senate Committee on Labor and
Industrial Relations and the Chairperson of the Assembly Committee on
Insurance on or before May 1, 2004.
1872.84.  The commissioner shall ensure that the Fraud Division
forwards to the appropriate disciplinary body, in addition to the
names and supporting evidence of individuals described in subdivision
(a) of Section 1872.83, the names, along with all supporting
evidence, of any individuals licensed under the Chiropractic
Initiative Act who are suspected of actively engaging in fraudulent
activity.
1872.85.  (a) Every admitted disability insurer or other entity
liable for any loss due to health insurance fraud doing business in
this state shall pay an annual fee to be determined by the
commissioner, but not to exceed ten cents ($0.10) annually for each
insured under an individual or group insurance policy it issues in
this state, in order to fund increased investigation and prosecution
of fraudulent disability insurance claims. After incidental expenses,
50 percent of those funds received from the assessment fee per
insured shall be distributed to the Fraud Division of the Department
of Insurance for enhanced investigative efforts, and 50 percent of
the funds shall be distributed to local district attorneys, pursuant
to subdivisions (b) and (c), for investigation and prosecution of
disability insurance fraud cases. The funds received under this
section shall be deposited into the Disability Insurance Fraud
Account, which is hereby created in the Insurance Fund, and shall be
expended and distributed, when appropriated by the Legislature, only
for enhanced investigation and prosecution of disability insurance
fraud.
   In the course of its investigation, the Fraud Division shall
aggressively pursue all reported incidents of probable fraud and, in
addition, shall forward to the appropriate disciplinary body the
names of any individuals licensed under the Business and Professions
Code who are convicted of engaging in fraudulent activity along with
all relevant supporting evidence.
   (b) The commissioner shall distribute funds pursuant to
subdivision (a) to district attorneys who are able to show a likely
positive outcome that will enhance the prosecution of disability
insurance fraud in their jurisdiction based on specific criteria
promulgated by the commissioner. A district attorney desiring funds
pursuant to subdivision (a) shall submit to the commissioner an
application that includes, but is not limited to, all of the
following:
   (1) The proposed use of the moneys and the anticipated outcome.
   (2) A list of all prior cases or projects in the district attorney'
s jurisdiction that have been funded under the provisions of this
section, and a copy of the final accounting for each case or project.
If a case or project is ongoing, the most recent accounting shall be
provided.
   (3) A detailed budget for the moneys, including salaries and
general expenses, that specifically identifies the purchase or rental
cost of equipment or supplies.
   (c) (1) A district attorney who receives moneys pursuant to this
section shall submit a final detailed accounting at the conclusion of
each case or project funded. For a case or project that continues
for longer than six months, an interim accounting shall be submitted
every six months, or as otherwise directed by the commissioner.
   (2) A district attorney who receives moneys pursuant to this
section shall submit a final report to the commissioner, which may be
made public, as to the success of each case or project funded by
this section. The report shall provide information and statistics on
the number of active investigations, arrests, indictments, and
convictions associated with a case or project. The applications for
moneys, the distribution of moneys, and the annual report required by
Section 1872.9 shall be public documents.
   (3) Notwithstanding any other provision of this section,
information submitted to the commissioner pursuant to this section
concerning criminal investigations, whether active or inactive, shall
be confidential.
   (4) The commissioner may conduct a fiscal audit of the programs
administered under this subdivision. The fiscal audit shall be
conducted by an internal audit unit of the department. The cost of
fiscal audits shall be paid from the Disability Insurance Fraud Fund,
upon appropriation by the Legislature.
   (5) If the commissioner determines that a district attorney is
unable or unwilling to investigate or prosecute a relevant disability
insurance fraud case, the commissioner may discontinue distribution
of moneys allocated for that matter pursuant to this section, and may
redistribute moneys to other eligible district attorneys.
   (d) Activities of the Fraud Division with regard to investigating
and prosecuting fraudulent disability insurance claims pursuant to
this section shall be included in the report required by Section
1872.9.
   (e) This section shall not apply to policies issued by a
reciprocal or interinsurance exchange, as defined by Sections 1303
and 1350, or coverage provided by or through a motor club, as defined
by Section 12142, affiliated with a reciprocal or interinsurance
exchange, if the annual premium charged for the coverage or the
annual cost to the insurer for providing that coverage does not
exceed one dollar ($1) per insured.
1872.9.  The Fraud Division shall annually compile and report, as a
part of the commissioner's annual report as required by Section
12922, the following information:
   (a) The number of cases reported to the division pursuant to this
chapter.
   (b) The number of cases rejected for which an investigation was
not initiated by the division due to insufficient evidence to proceed
and the number of cases rejected for which an investigation was not
initiated by the division due to any other reason.
   (c) The number of cases that were prosecuted in cooperation with
licensing agencies governed by the Business and Professions Code.
   (d) The number and kind of cases prosecuted as a result of moneys
received under Section 1872.7.
   (e) An estimate of the economic value of insurance fraud by type
of insurance fraud.
   (f) Recommendations on ways insurance fraud may be reduced.
   (g) A summary of the division's activities with respect to
pursuing a reduction of fraud with all of the following:
   (1) Insurance companies.
   (2) The Department of Motor Vehicles.
   (3) The Department of the California Highway Patrol.
   (4) Licensing agencies governed by the Business and Professions
Code.
   (5) The Department of Insurance.
   (6) Local and state law enforcement agencies.
   (7) Employers, as defined in Section 3300 of the Labor Code, who
are self-insured for workers' compensation and doing business in the
state.
   (h) Basic claims information including trends of payments by type
of claim and other claim information that is generally provided in a
closed claim study.
   (i) A summary of the division's activities with respect to the
reduction, pursuant to Section 1871.4, of fraudulent denials and
payments of compensation.
   (j) The number and types of cases investigated and prosecuted with
funds specified in Section 1872.83.
1872.95.  (a) Within existing resources, the Medical Board of
California, the Board of Chiropractic Examiners, and the State Bar
shall each designate employees to investigate and report on possible
fraudulent activities relating to workers' compensation, motor
vehicle insurance, or disability insurance by licensees of the board
or the bar. Those employees shall actively cooperate with the Fraud
Division in the investigation of those activities.
   (b) The Medical Board of California, the Board of Chiropractic
Examiners, and the State Bar shall each report annually, on or before
March 1, to the committees of the Senate and Assembly having
jurisdiction over insurance on their activities established pursuant
to subdivision (a) for the previous year. That report shall specify,
at a minimum, the number of cases investigated, the number of cases
forwarded to the Fraud Division or other law enforcement agencies,
the outcome of all cases listed in the report, and any other relevant
information concerning those cases or general activities conducted
under subdivision (a) for the previous year. The report shall include
information regarding activities conducted in connection with cases
of suspected automobile insurance fraud.
1872.96.  The commissioner shall prepare an annual report, which
shall be a public record, with respect to the receipts, expenditures,
and activities of the Fraud Division for the year just ended. The
report shall be submitted to the Governor and to the Legislature, no
later than January 31 of the following year. This report shall not
contain any individually identifiable information.


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