BILL ANALYSIS
C.S.H.B. 1487
By: Counts
April 19, 1995
Committee Report (Substituted)
BACKGROUND
During the 73rd Session, the Legislature enacted Section 32.55 of
the Penal Code, "Insurance Claim Fraud." The goal of Section 32.55
was to counter the growing number and magnitude of accident
insurance fraud rings, which often included the involvement of
unscrupulous doctors, attorneys, physical therapists, runners and
law clerks among the perpetrators, operating sophisticated
conspiracies churning out false claims. Yet, Section 32.55 was not
included in the revised Penal Code.
The illegal activity targeted by Section 32.55 was the knowing
participation of filing a false claim for insurance proceeds, which
was a more comprehensive method for police and prosecutors to use
in processing cases than employing Theft or other existing Fraud
statutes. Under the older statutes, a cooperating victimized
insurance company might be required to disburse proceeds to the
criminals in order to prove a completed theft. This action did not
guarantee prosecution of all those involved.
C.S.H.B. 1487 is based largely upon the old statute, with some
additions to improve prosecution of this type of crime. The
aggregate amounts for separate claims as well as increased
punishment for repetitive offenders are included.
A problem in the past has been that police and insurance companies
would investigate suspicious claims and bring them to the attention
of prosecutors, only to have prosecution declined due to
complications or the "white collar" nature of the crime.
Permitting the attorney general to prosecute at the request of a
local prosecutor would create a means to correct this situation, as
well as a means to handle conspiracies that involve multi-county or
multi-state crimes.
This particular criminal activity has the capacity to generate
large amounts of illegally obtained money, which in turn creates
the need for perpetrators to launder their proceeds. The attorney
general's existing ability to investigate and prosecute felony
Money Laundering under Chapter 34 of the Penal Code can be utilized
to attack the entire conspiracy.
PURPOSE
If enacted, C.S.H.B. 1487 would re-establish the felony crimes of
Insurance Fraud. The bill would also confer authority on the
attorney general to prosecute at the request of the local
prosecutor.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency, or institution.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Title 7, Penal Code, by adding Chapter 35 as
follows:
CHAPTER 35. INSURANCE FRAUD.
Sec. 35.01. DEFINITIONS.
(1) defines "health care goods."
(2) defines "health care provider."
(3) defines "health care service."
(4) defines "insurer."
(5) defines "statement."
Sec. 35.02. INSURANCE FRAUD.
(a) provides that a person commits the offense of insurance
fraud when he acts with intent to defraud or deceive an
insurer by knowingly preparing or presenting any statement to
the insurer that is false or misleading and that affects a
person's right to a payment or the amount of payment to which
a person is entitled.
(b) provides that a person commits an offense if he solicits,
offers, pays, or receives a benefit in connection with the
provision of health care services if the intent is to defraud
an insurer.
(c) lists the type of information considered material to a
claim for payment for purposes of Subsection (a).
(d) classifies offenses under this section as:
(1) a state jail felony if the value of the claim is
between $1,500 and $20,000;
(2) a 3rd degree felony if the value of the claim is
between $20,000 and $100,000;
(3) a 2nd degree felony if the value of the claim is
between $100,000 and $200,000; or
(4) a 1st degree felony if the value of the claim is
$200,000 or more.
Sec. 35.03. AGGREGATION AND MULTIPLE OFFENSES.
(a) provides that, to the exclusion of subsection (b), that
section allows for aggregation of amounts claimed when done in
one scheme or continuing course of conduct, for purposes of
establishing the punishment range.
(b) provides that, to the exclusion of the subsection (a),
this section increases the punishment range one category
higher when one perpetrator is involved in three or more
fraudulent claims, regardless of whether the claims are made
to the same or separate insurers. If both of these
subsections apply to one defendant, the range can only be
increased one category.
(c) prohibits the state from aggregating amounts under
Subsection (a) for prosecution if the state's attorney seeks
enhancement under Subsection (b).
Sec. 35.04. JURISDICTION OF ATTORNEY GENERAL.
(a) allows the attorney general to offer assistance of his
office in any prosecution of alleged violations brought by
local prosecutors.
(b) allows the attorney general, if requested by local
prosecutors, to prosecute or assist in prosecution of offenses
under this chapter.
SECTION 2. Amends Article 2.12, Code of Criminal Procedure (WHO
ARE PEACE OFFICERS), by expanding the definition under this section
to include investigators commissioned by the commissioner of
insurance under Article 1.10D, Insurance Code.
SECTION 3. Amends Article 59.01(2), Code of Criminal Procedure
(DEFINITIONS), by expanding the definition of contraband to include
property used or intended to be used in the commission of any
felony under the Insurance Fraud statute.
SECTION 4. Amends Article 59.06, Code of Criminal Procedure
(DISPOSITION OF FORFEITED PROPERTY), by adding Subsection (j) as
follows:
(j) outlines the disposition of contraband property used in
the commission of an offense under Chapter 35, Penal Code:
(1) to the attorney general, if the attorney general has
investigated, prosecuted, or assisted in the prosecution
of the offense;
(2) to the attorney representing the state; and
(3) to the insurer defrauded as a result of the offense.
SECTION 5. Amends Section 2, Article 1.10D, Insurance Code
(DUTIES OF THE BOARD), by amending Subsections (b) and (e) and
adding Subsections (f) and (g) as follows:
(b) replaces "fraudulent insurance act" with "insurance
fraud"; deletes limitations on the commissioner's authority to
initiate investigations in regard to allegations of fraud on
the part of a policyholder or claimant under this subsection.
(e) deletes limitations on the commissioner's authority to
initiate investigations in regard to an insurer's request for
investigation under this subsection.
(f) allows the commissioner to employ investigators as he or
she considers necessary to enforce this article; requires an
investigator employed by the department as a peace officer to
meet the requirements for peace officers under Chapter 415,
Government Code; requires the commissioner, if he elects peace
officers to the commission, to appoint a chief investigator
who is commissioned as a peace officer and who is qualified by
training and experience in law enforcement.
(g) allows an investigator employed by the department to
request the assistance of local law enforcement officers in
conducting an investigation authorized by this article.
SECTION 6.
(a) Changes in law made by Chapter 35, Penal Code, as added by
this Act, applies only to an offense committed on after the
effective date of the Act.
(b) Makes effects of this Act prospective.
SECTION 7. Effective date: September 1, 1995.
SECTION 8. Emergency clause.
COMPARISON OF SUBSTITUTE TO ORIGINAL
SECTION 1 of substitute.
Sec. 35.02. INSURANCE FRAUD.
Subsection (a)(2) of original is deleted. This section
created an offense for presenting a statement to an insurer
that the person knows conceals or fails to disclose a material
fact that affects a person's right to payment or the amount of
payment.
Subsections (d)(1) - (d)(3) of original are deleted. These
sections classified as misdemeanors those offenses with the
value of the claim or benefit solicited being less than
$1,500.
Subsection (e) of original is deleted. This section stated
that a person subject to prosecution under both this section
and another section of this code could be prosecuted under
either or both sections.
Sec. 35.03. AGGREGATION AND MULTIPLE OFFENSES.
Subsection (c) is added. This section prohibits the state's
attorney from aggregating amounts under Subsection (a) in the
prosecution of the case if seeking enhancement under
Subsection (b).
Sec. 35.05 of original (PROPERTY DISTRIBUTION UNDER ASSET
FORFEITURE) deleted.
SECTION 2 of substitute is added to amend Article 2.12, Code of
Criminal Procedure.
SECTION 4 of substitute is added to amend Article 59.06, Code of
Criminal Procedure.
SECTION 3 (SEVERABILITY) and SECTION 5 (APPROPRIATION OF FEES) of
original deleted.
SECTION 5 of substitute is added to amend Section 2, Article 1.10D,
Insurance Code.
SUMMARY OF COMMITTEE ACTION
HB 1487 was considered by the full committee in a public hearing on
March 27, 1995. The following persons testified in favor of the
bill:
Michael Guttierrez, representing Nationwide Insurance Company;
Special Agent Aaron Foster, representing the National
Insurance Crime Bureau;
Steve Bright, representing USAA Insurance Company; and
Stephen C. Dye, representing the CNA Insurance Companies.
The following person who testified on the bill:
Don Clemmer, representing the Office of the Attorney General.
H.B. 1487 was left pending in committee. HB 1487 was considered by
the full committee in a public hearing on April 3, 1995. HB 1487
was referred to a subcommittee consisting of: Pitts, Chair; Nixon,
Pickett. HB 1487 was considered by the subcommittee in a formal
meeting on April 10, 1995. The subcommittee considered a complete
committee substitute for the bill. The substitute was adopted by
a non-record vote. The bill was reported favorably as substituted
to the full committee by a record vote of 2 ayes, 0 nays, 0 pnv,
and 1 absent.
HB 1487 was considered on subcommittee report by the committee in
a public hearing on April 19, 1995. The committee considered a
complete committee substitute. One amendment was offered to the
substitute. The amendment was adopted without objection. The
substitute as amended was adopted by a non-record vote. The chair
directed the staff to incorporate the amendment into the
substitute. HB 1487 was reported favorably as substituted, with
the recommendation that it do pass and be printed, by a record vote
of 5 ayes, 0 nays, 0 pnv, and 4 absent.