Senate Bill No. 270

Introduced By benedict



A Bill for an Act entitled: "An Act expanding insurance fraud to cover an act of actual fraud or constructive fraud by an insurer or purported insurer against an insured or prospective insured; and amending section

33-1-1202, MCA. CLARIFYING AND EXPANDING INSURANCE AND SECURITIES FRAUD; CREATING AN INSURANCE AND SECURITIES FRAUD EDUCATION AND PREVENTION PROGRAM; REQUIRING DISCLOSURE OF SUSPECTED INSURANCE AND SECURITIES FRAUD TO THE COMMISSIONER OF INSURANCE AND COMMISSIONER OF SECURITIES; CLARIFYING THE OFFENSE OF THEFT; AND PROVIDING PENALTIES FOR INSURANCE AND SECURITIES FRAUD."



Be it enacted by the Legislature of the State of Montana:

(Refer to Introduced Bill)

Strike everything after the enacting clause and insert:



NEW SECTION. Section 1. Insurance and securities fraud education AND PREVENTION program. The commissioner may:

(1) establish an INSURANCE AND SECURITIES FRAUD education and prevention program for those people who are affected by insurance or securities fraud; and

(2) conduct investigations of insurance and securities fraud.



NEW SECTION. Section 2. Insurance fraud. (1) A person commits the act of insurance fraud when in the course of offering or selling insurance, the person misrepresents a material fact, known to the person to be untrue or made with reckless indifference as to whether it is true, with the intention of causing another person to rely upon the misrepresentation to that relying person's detriment.

(2) The commissioner may, after having conducted a hearing pursuant to 33-1-701, impose the penalties provided for in 33-1-317 for a violation of this section. Failure to pay a fine under this section results in a lien upon the assets and property of the person as provided in 33-1-318(3).

(3) In addition to any penalty provided for in 33-1-317, the commissioner may require a person REGULATED UNDER THIS TITLE who commits insurance fraud to make full restitution to the victim for all financial losses sustained as a result of the fraud with interest of 10% a year from the date of the fraud plus any costs and reasonable attorney fees, less the amount of any income or refund received by the victim from the insurance.

(4) The commissioner may require a person who commits insurance fraud to make full restitution to any insurer, purported insurer, or insurance producer who may have sustained any losses as a result of the fraud with interest of 10% a year from the date of the loss plus any costs and reasonable attorney fees.

(5) An insurer, insurance producer, or other person who sustained any losses and who was awarded restitution may, in addition to the commissioner, bring suit to recover those sums, including any attorney fees, interest at 10% a year, and costs incurred in obtaining a judgment.

(6) Failure of a person to pay any amount ordered under this section constitutes a forfeiture of the right to do business in this state.

(7) A person who purposely or knowingly is involved in the misappropriation or theft of insurance premiums or proceeds commits the offense of theft and is punishable as provided in 45-6-301, and the commissioner may refer evidence concerning the violation to the attorney general or other appropriate prosecuting attorney.



NEW SECTION. Section 3. Reporting requirements. (1) An insurer, insurance producer, or other person who has reason to believe insurance fraud has occurred shall report the suspected fraud to the commissioner or to the insurance producer's or other person's insurer within 60 days of discovery of the occurrence. An insurer shall forward TO THE COMMISSIONER any reports from a producer or employee that it receives within 30 days of receipt.

(2) In the absence of malice, an insurer, insurance producer, or other person may not be subjected to civil liability for reporting or providing information or otherwise cooperating with an investigation of insurance fraud.



NEW SECTION. Section 4. Securities restitution. (1) The commissioner may, after conducting a hearing pursuant to 30-10-305, require a person found to have committed a violation of 30-10-301 to make restitution for all financial losses sustained by any person as a result of the violation. The commissioner may further require a person found to have violated 30-10-301 to pay 10% annual interest on the amount of restitution from the date of the violation, reasonable attorney fees, and costs associated with bringing the administrative action.

(2) An amount required to be paid under this section is in addition to all other penalties imposed by law. If a person fails to pay an amount referred to in this section, the amount required to be paid is a lien upon all of the assets and property of the person in this state and may be recovered by suit by the commissioner and remitted to the person ordered to receive restitution.

(3) The commissioner or a person awarded restitution may bring suit in a court of competent jurisdiction to recover the sums awarded, attorney fees, and costs incurred in obtaining a judgment.

(4) Failure of a person to pay any amount ordered under this section constitutes a forfeiture of the right to do business in this state.



NEW SECTION. Section 5. Reporting requirements. (1) A broker-dealer, investment adviser, investment adviser representative, or other person who has reason to believe fraud has occurred shall report the suspected fraud to the commissioner within 60 days of discovery of the occurrence.

(2) In the absence of malice, a broker-dealer, investment adviser, investment adviser representative, or other person may not be subjected to civil liability for reporting or providing information or otherwise cooperating with an investigation of fraud under this chapter.



NEW SECTION. Section 6. Codification instruction. (1) [Sections 1 through 3] are intended to be codified as an integral part of Title 33, chapter 1, and the provisions of Title 33, chapter 1, apply to [sections 1 through 3].

(2) [Sections 4 and 5] are intended to be codified as an integral part of Title 30, chapter 10, part 3, and the provisions of Title 30, chapter 10, part 3, apply to [sections 4 and 5].

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