2007 California Insurance Code Article 5.6. Insurer Fraud Investigation

CA Codes (ins:1875.20-1875.24)

1875.20.  Every insurer admitted to do business in this state,
except those otherwise exempted in this code, shall provide for the
continuous operation of a unit or division to investigate possible
fraudulent claims by insureds or by persons making claims for
services or repairs against policies held by insureds.



1875.21.  Insurers may maintain the unit or division required by
this article using its employees or by contracting with others for
that purpose.


1875.22.   Insurers shall establish the unit or division required by
this article no later than July 1, 1992.



1875.23.  For purposes of this article, "unit or division" may
include the assignment of fraud investigation to employees whose
principal responsibilities are the investigation and disposition of
claims.  If an insurer creates a distinct unit or division, hires
additional employees, or contracts with another entity to fulfill the
requirements of this article, the additional cost incurred shall be
included as an administrative expense for ratesetting purposes.



1875.24.  (a) If after examination, or upon the basis of other
information, the commissioner has good cause to believe that an
insurer to whom the provisions of this article apply does not comply
with the requirements of this article, or with the regulations set
forth in Article 2 (commencing with Section 2698.30) of Subchapter 9
of Chapter 5 of Title 10 of the California Code of Regulations, the
commissioner shall notify the insurer of its noncompliance.  The
notice shall state in what manner and to what extent the
noncompliance is alleged to exist, shall specify a reasonable time,
not less than 10 days thereafter, in which the noncompliance may be
corrected, and shall set forth the amount of any penalty that may be
due under subdivision (b).
   (b) Any insurer that fails to comply with the provisions of this
article or with the regulations described in subdivision (a) shall be
liable to the state for a civil penalty not to exceed five thousand
dollars (,000) for each act, or, if the act was willful, a civil
penalty not to exceed ten thousand dollars (,000) for each act.
The commissioner shall have the discretion to determine what
constitutes an act.  However, when violations relative to the
maintenance and operation of the unit or division are inadvertent,
the violations shall be considered a single act for the purpose of
this section.  Any penalty imposed by the commissioner pursuant to
this section shall be determined as provided in subdivision (d) of
this section and Article 19 (commencing with Section 2591) of
Subchapter 3 of Chapter 5 of Title 10 of the California Code of
Regulations.  Notwithstanding subdivision (c) of Section 2591.1 of
Title 10 of the California Code of Regulations, enforcement of any
provision of this section shall be deemed an enforcement action
pursuant to Article 19 (commencing with Section 2591) of Subchapter 3
of Chapter 5 of that title.
   (c) An insurer served with a notice of noncompliance described
herein shall, within the time specified therein, do one or more of
the following:
   (1) Establish to the satisfaction of the commissioner that the
noncompliance does not exist.
   (2) Request a hearing, notice of which must be given at least 30
days prior to the date set for a hearing.
   (3) Enter into a consent order with the commissioner to correct
the specified noncompliance within the time period specified in the
consent order.
   (d) If, after hearing, the commissioner finds that the facts
alleged in the notice of noncompliance are true, he or she shall
issue an order requiring compliance with the provisions of this
article within a reasonable time.  An insurer that fails to comply
with an order issued by the commissioner, including a consent order,
shall be liable to the state for a civil penalty not to exceed ten
thousand dollars (,000) for each day the insurer fails to comply
with the provisions of the order.  Any order, including any consent
order, issued pursuant to this section shall specify the amount of
the penalty due under subdivision (b), and shall indicate that an
additional penalty shall be imposed for each day the insurer fails to
comply with the order within the time specified therein.  In
addition to any other remedy provided by statute, regulation, or
otherwise, the commissioner may direct the insurer to take any other
corrective action that he or she may deem necessary and proper.
   (e) The commissioner shall adopt regulations necessary 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).