STAND. COM. REP. NO.  493

Honolulu, Hawaii

                , 2009

RE:   H.B. No. 262

      H.D. 1

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Fifth State Legislature

Regular Session of 2009

State of Hawaii

Sir:

     Your Committees on Consumer Protection & Commerce and Judiciary, to which was referred H.B. No. 262 entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE FRAUD,"

beg leave to report as follows:

     The purpose of this bill is to enable the Department of Commerce and Consumer Affairs' (DCCA) Insurance Division to investigate and prosecute insurance fraud beyond motor vehicle insurance fraud, to cover fraud in all lines of insurance except cases and violations arising out of the Workers' Compensation Law, Chapter 386, Hawaii Revised Statutes (HRS).  This bill also expands the definition of insurance fraud and allows the filing of administrative and civil insurance fraud actions.

     DCCA, the National Association of Insurance and Financial Advisors – Hawaii, American Council of Life Insurers, Hawaii Medical Service Association, State Farm Insurance Companies, and GEICO testified in support of this bill.  The Hawaii Association for Justice opposed this measure.  The Department of the Attorney General and Hawaii Association of Health Plans provided comments.

     Your Committees have amended this bill by:

     (1)  Clarifying that the Attorney General has the discretion to designate as special deputy attorneys general, any attorney employed or retained by the newly established Insurance Fraud Investigations Branch (Branch) and representing the State in any criminal, civil, or administrative proceeding relating to insurance fraud;

     (2)  Providing that only Branch investigators will have the same powers and authority as police officers and deputy sheriffs under this measure;

     (3)  Providing that the administrative penalties established by this measure apply to insurance fraud committed "knowingly," as that term is defined in the Hawaii Penal Code under section 702-206, HRS;

     (4)  Replacing the provisions relating to the civil service status, salaries, benefits, and privileges of employees transferred by this measure from the existing Insurance Fraud Investigations Unit to the Branch, with language suggested by DCCA; and

     (5)  Making technical, nonsubstantive amendments for clarity, consistency, and style.

     As affirmed by the records of votes of the members of your Committees on Consumer Protection & Commerce and Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 262, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 262, H.D. 1, and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committees on Consumer Protection & Commerce and Judiciary,

____________________________ JON RIKI KARAMATSU, Chair

____________________________ ROBERT N. HERKES, Chair