N.Y. Insurance Law § 409: Fraud prevention plans and special investigations units

§ 409. Fraud prevention plans and special investigations units. (a)

Every insurer writing private or commercial automobile insurance,

workers' compensation insurance, or individual, group or blanket

accident and health insurance policies issued or issued for delivery in

this state, except for insurers that write less than three thousand of

such policies, issued or issued for delivery in this state annually, and

every entity licensed pursuant to article forty-four of the public

health law except those entities with an enrolled population of less

than sixty thousand persons in the aggregate and, except those entities

licensed pursuant to sections forty-four hundred three-a, forty-four

hundred three-c, forty-four hundred-d, forty-four hundred three-f and

forty-four hundred eight-a of the public health law shall, within one

hundred twenty days of the effective date of this amended section to be

promulgated by the superintendent to implement this section, file with

the superintendent a plan for the detection, investigation and

prevention of fraudulent insurance activities in this state and those

fraudulent insurance activities affecting policies issued or issued for

delivery in this state. The superintendent may accept programs and

processes implemented pursuant to section forty-four hundred fourteen of

the public health law as satisfying the obligations of this section and

regulations promulgated thereunder.

(b) (1) The plan shall provide the time and manner in which such plan

shall be implemented, including provisions for a full-time special

investigations unit and staffing levels within such unit. Such unit

shall be separate from the underwriting or claims functions of an

insurer, and shall be responsible for investigating information on or

cases of suspected fraudulent activity and for effectively implementing

fraud prevention and reduction activities pursuant to the plan filed

with the superintendent. An insurer shall include in such plan staffing

levels and allocations of resources in such full-time special

investigations unit as may be necessary and appropriate for the proper

implementation of the plan and approval of such plan pursuant to

subsection (d) of this section.

(2) In lieu of a special investigations unit, an insurer may contract

with a provider of services related to the investigation of information

on or cases of suspected fraudulent activities; provided, however, that

an insurer which opts for contracting with a separate provider of

services, shall provide to the superintendent a detailed plan therefor,

pursuant to requirements set forth in regulation by the superintendent.

(3) Persons employed by special investigations units as investigators

or by an independent provider of investigative services under contract

with an insurer shall be qualified by education or experience which

shall include an associate's or bachelor's degree in criminal justice or

related field, or five years of insurance claims investigation

experience or professional investigation experience with law enforcement

agencies, or seven years of professional investigation experience

involving economic or insurance related matters. For the purposes of

evaluation of medical related claims insurers may employ or retain duly

licensed or authorized medical professionals. Notwithstanding these

minimum requirements anyone employed as an investigator in a special

investigation unit or by a provider of investigative services under

contract to an insurer as of the effective date of this paragraph and

who was also so employed on or before September tenth, nineteen hundred

ninety-six may continue in such employment provided the insurer

identifies such person in writing to the superintendent giving the date

such employment began and a description of the person's qualifications,

employment history and current job duties.

(c) The plan shall provide for the following:

(1) interface of special investigation unit personnel with law

enforcement and prosecutorial agencies and with the financial frauds and

consumer protection unit of the department of financial services;

(2) reporting of fraud data to a central organization approved by the

superintendent;

(3) in-service education and training for underwriting and claims

personnel in identifying and evaluating instances of suspected

fraudulent activity in underwriting or claims activities;

(4) coordination with other units of an insurer for the investigation

and initiation of civil actions based upon information received by or

through the special investigation unit;

(5) public awareness of the cost and frequency of fraudulent

activities, and the methods of preventing fraud;

(6) development and use of a fraud detection and procedures manual to

assist in the detection and elimination of fraudulent activity; and

(7) the time and manner in which such plan shall be implemented and a

demonstration that the fraud prevention and reduction measures outlined

in the plan will be fully implemented.

(d) (1) A fraud detection and prevention plan filed by an insurer with

the superintendent pursuant to this section shall be deemed approved by

the superintendent if not returned by the superintendent for revision

within one hundred twenty days of the date of filing. If the

superintendent returns a plan for revision, the superintendent shall

state the points of objection with such plan, and any amendments as the

superintendent may require consistent with the provisions of this

section, including, but not limited to, staffing levels, resource

allocation, or other policy or operational considerations. An amended

plan reflecting the changes shall be filed with the superintendent

within forty-five days from the date of return.

(2) If the superintendent has returned a plan for revision more than

one time, the insurer shall be entitled to a hearing pursuant to the

provisions of article three of this chapter and regulations promulgated

thereunder.

(3) If an insurer fails to submit a final plan within thirty days

after a determination of the superintendent after the hearing held

pursuant to paragraph two of this subsection, or otherwise fails to

submit a plan, or fails to implement the provisions of a plan in a time

and manner provided for in such plan, or otherwise refuses to comply

with the provisions of this section, the superintendent may: (i) impose

a fine of not more than two thousand dollars per day for such failure by

an insurer until the superintendent deems the insurer to be in

compliance; or (ii) impose upon the insurer a fraud detection and

prevention plan deemed to be appropriate by the superintendent which

shall be implemented by the insurer; or (iii) impose the provisions of

both subparagraphs (i) and (ii) of this paragraph.

(e) Any plan, the information contained therein, or correspondence

related thereto, or any other information furnished pursuant to this

section shall be deemed to be a confidential communication and shall not

be open for review or be subject to a subpoena except by a court order

or by request from any law enforcement agency or authority.

(f) For purposes of this section, the term "policies" shall refer to

individuals covered if coverage is issued on a group basis.

(g) Every insurer required to file a fraud prevention plan shall

report to the superintendent on an annual basis, no later than March

fifteenth, describing the insurer's experience, performance and cost

effectiveness in implementing the plan, utilizing such forms as the

superintendent may prescribe. Upon consideration of such reports, the

superintendent may require amendments to the insurer's fraud prevention

plan as deemed necessary.