Esta ley enmienda el Código de Seguros de Puerto Rico para definir claramente el fraude de seguros, exigir la participación activa de las aseguradoras y organizaciones de servicios de salud en la lucha contra el fraude, y establecer una Unidad Especial de Investigaciones Antifraude dentro de la Oficina del Comisionado de Seguros. La ley detalla diversas prácticas fraudulentas, establece sanciones penales y administrativas, y requiere que las aseguradoras y organizaciones de servicios de salud adopten planes de acción contra el fraude y proporcionen información a un banco central de datos.
(Approved January 8, 2004)
To amend Sections 11.090, 27.190 and 27.200, add Sections 27.210, 27.220, 27.230, 27.240, 27.250, 27.260, 27.270; eliminate the provisions of Section 27.280, renumber Sections 27.290, 27.300, 27.310, 27.320, 27.330 and 27.340 as $27.280,27.290,27.310,27.320$ and 27.330 and renumber Sections 27.300 and 27.400 of Act No. 77 of June 19, 1957, as amended, known as "Puerto Rico Insurance Code," for the purpose of clearly defining what shall constituted insurance fraud; require the active participation of the Insurers and Health Services Organizations in the fight against fraud; and establish an Antifraud Special Investigations Unit within the organizational structure of the Office of the Insurance Commissioner.
Insurance fraud is an illegal multimillion dollar activity that affects insurers, the government, consumers of insurance and the general public. This activity consists of numberless practices. On one hand, the voluntary destruction of insured property, false or inflated claims, the alleged theft or destruction of non-existent or unusable vehicles, feigned accidents and falls in commercial establishments and charging for procedures and services that never were performed, among others. Likewise, other practices develop within the industry itself, such as the misappropriation of money corresponding to insurance premiums, the sale of insurance and the adjustment of claims by unauthorized persons, the imposition of unwanted insurance and many others. The cost of such acts ultimately rests on the
shoulders of the Puerto Rican consumer, who suffers their effects through the imposition of higher insurance premiums.
Today, the insurance business is a service of prime importance in modern society. With the approval of a mandatory liability insurance Act for motor vehicles in Puerto Rico, the need to establish measures that discourage claims, and other equally-fraudulent acts in the insurance business becomes more pressing; so that reasonable rates may be keep without it being necessary to raise their cost.
The purpose of this measure is to expedite the investigation and processing of fraudulent activities in the insurance business through the prohibition of specific practices that constitute insurance fraud: establish a special anti-fraud investigation unit in the Office of the Insurance Commissioner; require the Board of Directors of Insurers and Health Services Organizations to adopt an action plan to detect, prevent and fight fraudulent acts in the insurance business; to grant civil immunity to insurers or other persons who provide information on supposed fraudulent acts in the insurance business; to impose heavier penalties for incurring in fraudulent activities in the insurance business.
Section 1.- Subsection (3) is hereby eliminated and subsection (1) of Section 11.090 of Act No. 77 of June 19, 1957, as amended, is hereby amended to read as follows: "Section 11.090.- Application as evidence (1) Any application for insurance shall be made a part of the policy. No insurance policy application shall be admissible as evidence in any suit or procedure related to said policy, unless a true and exact copy of the application is attached to the policy or
otherwise made a part thereof at the time it is issued and delivered; if a true and exact copy of the application is furnished to the insured party after thirty (30) days of the policy being delivered, provided it is any type of insurance other than life insurance. A photostatic, or any other copy or photographic reduction or by any other procedure, of the application, or of the medical examination, if any, may be used to such effect, if it is clearly legible. (2) ...'
Section 2.- Section 27.190 of Act No. 77 of June 19, 1957, as amended, is hereby amended to read as follows: "Section 27.190.- False reports and statements to obtain insurance. An agent, broker, solicitor, physician, or any other purveyor of health services, or other person who knowingly renders a false report, makes a misrepresentation of facts, alters or omits information, or inserts anything in an insurance application or in a report or statement with regard to said insurance, that said person knows is not true, or any person who helps or participates in rendering a false report, making a misrepresentation of facts, submitting incomplete information, altering or omitting information or inserting anything in an insurance application or in a report or statement with regard to said insurance, that said person knows is not true or any person who helped or participated in rendering a false report, making a misrepresentation of the facts, submitting incomplete information, altering or omitting information or inserting in an insurance application or in a report or statement with regard to said insurance, any matter that said person knows is not true, shall be deemed to have committed fraud, for the effects of this Chapter."
Section 3.- Paragraph (1) of Section 27.200 of Act No. 77 of June 19, 1957, as amended, is hereby amended, a new paragraph (2) is added, the present paragraph (2) is amended and renumbered as three (3) and paragraphs 4 and 5 are added, to read as follows: "Section 27.200.- False claims or evidence: It shall will be deemed that any person has committed fraud if knowingly and with the intent to defraud: (1) Presents or causes a false or fraudulent claim to be presented, or alters or omits information or any evidence in support thereof, for the payment of a loss, in reference to an insurance policy; or (2) Helps or participates in the filing of a fraudulent claim, or alters or omits information or any evidence in support thereof, for the payment of a loss, pursuant to an insurance contract; or (3) Prepares, makes, or signs or alters or omits, or helps or participates in preparing, making or signing, or altering or omitting any account, certificate, sworn statement, proof of loss or any other false document or writ, with the intention that the same be presented or used in support of said claim. (4) Files a claim that affects the subrogation right held by an insurer to recover amounts paid under an insurance contract. A subrogation right shall be deemed to be the right that the insurer has to recover the damages that it has had to pay to an insured person under his/her policy. Said right arises by function of law when the insurer makes a payment to the insured. (5) Files more than one claim for the same damage or loss on the same insured property."
Section 4.- Sections 27.210, 27.220, 27.230, 27.240, 27.250, 27.260 and 27.270 of Act No. 77 of June 19, 1957, as amended, are hereby added to read as follows: "Section 27.210.- Drafting and/or Filing False Writs; Misappropriation In addition to the actions or conduct described in Sections 27.190 and 27.200 of this Code, the following shall be considered crimes.
The preparation and /or presentation of false financial statements by any person on the economic status of an Insurer or Health Services Organization, or any person or entity bound under the provisions of this Code to file financial statements about his finances.
Section 27.210A.- Misappropriation Embezzlement or misappropriation by any person, of money corresponding to premiums received in the course of the insurance business.
Section 27.220.- Penalties for Fraud Any person who has committed fraud, as defined in Sections 27.190, 27.200 and 27.210 of this Chapter, shall incur a felony, and if convicted, shall be sanctioned for each violation by a penalty of a fine of not less than five thousand $(5,000)$ dollars, nor more than ten thousand $(10,000)$ dollars, or a penalty of imprisonment for a fixed term of three (3) years, or both penalties. If there were aggravating circumstances, the fixed penalty thus established may be increased up to a maximum of five (5) years; if extenuating circumstances are present, it may be reduced to a minimum of two (2) years. In addition to the penalties provided in this Chapter, any person who, as a result of the fraud thus committed is benefited in any way to obtain insurance, or in the payment of a loss pursuant to an insurance contract, shall be imposed the payment of restitution of the amount of money resulting from the fraud.
Every violation of the provisions of Sections 27.190, 27.200, and 27.210 shall have a prescription term of (5) five years.
Section 27.230.- Request of insurance as evidence (1) The provisions of Section 11.090 of this Code, referring to the admissibility of the application for insurance as evidence shall be applicable to this Chapter. (2) For the purposes of this Chapter, alterations of an insurance application shall be deemed to be those established in Section 11.080 of this Code. (3) For the purposes of this Chapter, misrepresentations in an insurance application shall be deemed to be those established in Section 11.100 of this Code.
Section 27.240.- Antifraud Special Investigations Unit The Commissioner, within his organizational structure, shall establish a Special Antifraud Investigation Unit, whose main purpose shall be to detect, and investigate activities or practices that constitute insurance fraud.
Section 27.250.- Additional powers In addition to the powers conferred by the provisions of the Insurance Code of Puerto Rico and its Regulations, the Commissioner of Insurance shall have the following powers:
a) Initiate and conduct investigations of individuals and entities when there has been a complaint, confidential tip, information or communication that suggests or leads to establish that any provision of this Chapter has been, shall be, or is being breached. b) Resort to the Court in coordination with the Department of Justice and/or the Police of Puerto Rico to obtain and execute
search, entry and arrest warrants for violations of Sections 27.190. 27.200 and 27.210 . c) Exchange information, files and evidence compiled, with the Department of Justice, the Federal agencies and pertinent states. To collaborate with insurance business fraud investigative units from other jurisdictions. d) Offer training sessions and workshops on fraud in the insurance business, to the personnel of the specialized unit and to the personnel that the insurers and health services organizations designate to work in this field. e) Inspect, copy and compile archives and evidence; act on citations; to take oaths or statements; and refer investigations to the auditors office. If the information that the unit needs is outside of the jurisdiction of the Commonwealth of Puerto Rico, the unit may investigate it in the place where the information is found.
Section 27.260.- Requirement to inform fraudulent acts in the insurance business.
Any insurer, health services organization, general agent, broker, solicitor, adjustor or person who has a well grounded knowledge that an act described in Sections 27.190, 27.200 and 27.210 has been committed, is being committed or shall be committed, will be bound to submit to the Commissioner the information he has available on such act, to conduct an investigation, and otherwise facilitate it. Any insurer, health service organization, agent, general agent, broker, solicitor or adjusted who fails comply with this provision shall be punished with a fine of not less than one thousand $(1,000)$ dollars, nor more than five thousand $(5,000)$ dollars.
Section 27.270.- Requirement to provide information on claims to a central data bank.
Every authorized insurer must provide information related to the claims that it receives to a central data bank, which is recognized by the Commission on the form that the Commissioner, provides from time to time. This requirement does not apply to life and disability insurers.
Section 5.- The provisions of Section 27.280 are eliminate and Sections 27.290, 27.300, 27.310, 27.330, 27.320, and 27.340 are renumbered as Sections 27.280, 27.290, 27.310, 27.320, and 27.330, to read as follows: "Section 27.280.- Right against self-incrimination. Any person upon whom an Investigation related to the possible violation of Sections 27.190, 27.200 and 27.210, is centered, shall have the right to remain silent and not self-incriminate him/herself. The provisions of Section 2.210 of the Insurance Code shall not apply to such person.
Section 27.290.- Confidentiality. Any information received by the Commissioner, or any information that arises as the result of an investigation of fraudulent actions in the insurance business shall be strictly confidential and shall not be disclosed, except in an adjudicative administrative or judicial criminal procedure, or to Federal or state government agencies, including the Legislature, involved in the investigation of fraudulent insurance actions.
Section 27.300.- Frivolity. (1) Any person who furnishes information verbally or in writing, or offers any testimony on improper or illegal actions which, due to their nature constitute fraudulent acts in the insurance business, knowing that the facts are false, or when said statements are of a defamatory, groundless or frivolous nature,
shall incur a felony and, upon conviction, shall be punished with a penalty of a fine of not less than five thousand $(5,000)$ dollars, nor more than ten thousand $(10,000)$ dollars for each violation or imprisonment for a fixed term of three (3) years, or both penalties. Should aggravating circumstances be present, the fixed penalty thus established may be increased to a maximum of five (5) years; if extenuating circumstances are present, it may be reduced to a minimum of two (2) years. (2) Any person who furnishes information verbally or in writing, or who offers any testimony on improper or illegal actions which, due to their nature, constitute fraudulent acts in the insurance business, knowing that the facts are false, or when said statements are defamatory, groundless or frivolous, shall be subject to non contractual personal liability.
Section 27.310.0.- Action plan. The Board of Directors of each insurer in the country and of each health services organization shall adopt an action plan, in writing, within a term of three (3) months after the approval of this Act, to detect, prevent and combat fraudulent actions in the insurance business.
This action plan must contain at least the following: (1) A description of the procedures established to comply with the obligation to detect and investigate possible fraudulent actions in the insurance business and to report such actions to the Special Antifraud Investigation Unit of the Office of the Insurance Commissioner. (2) A description of the education and training plan for their personnel.
(3) A description of the personnel contracted or employed to execute the procedures established to detect and investigate fraudulent actions and the functions assigned to each of them.
Section 27.320.- Notice Insurers and Health Service Organizations are bound to include in every insurance application form and in every insurance claim form, a conspicuous and legible notice with the following information: "Any person who knowingly and with the intention of defrauding presents false information in an insurance application, or presents, helps, or causes the presentation of a fraudulent claim for the payment of a loss or any other benefit, or presents more than one claim for the same damage or loss, shall incur a felony and, upon conviction, shall be sanctioned for each violation with the penalty of a fine of not less than five thousand $(5,000)$ dollars and not more than ten thousand $(10,000)$ dollars, or a fixed term of imprisonment for three (3) years, or both penalties. Should aggravating circumstances are present, the penalty thus established may be increased to a maximum of five (5) years, if extenuating circumstances are present, it may be reduced to a minimum of two (2) years."
Noncompliance of the provisions of this Section shall be about an administrative fine which shall be not be less than one $(1,000)$ thousand dollars, nor greater than five thousand $(5,000)$ dollars.
Failure to include this notice on the indicated forms shall constitute a defense for the insured or the third party claimant to fail to comply with the provisions of this Chapter.
Section 27.330.- Additional penalties. In addition to the penalties for fraud provided in Section 27.220, any person who violates the provisions of Sections 27.190, 27.200 and 27.210, shall be subject to any of the following penalties:
a) Suspension or revocation by the Commissioner of any license or certificate of authority;
b) An administrative fine that shall not exceed twenty-five thousand $(25,000)$ dollars for each violation;
c) Any person convicted for violating the provisions of Sections 27.190, 27.200 and 27.210 shall be disqualified indefinitely to engage in the insurance business."
Section 6.- The Commissioner may contract whatever professional, consulting and investigating services that are needed to execute the purposes of this Act.
Section 7.- This Act does not pretend to limit the jurisdiction of any other agency to investigate and prosecute any violation of law or limit or prohibit a person from voluntarily revealing information related to insurance fraud, or to any other inspecting agency or to limit the powers or authority conferred on the Insurance Commissioner or to the antifraud unit through the Insurance Code to investigate possible violations of the law and to take action against those who violate said provisions.
Section 8.- Insurers and authorized health services organizations are hereby granted a term of (6) six months from the date of approval of this Act, to submit the action plan required by Section 27.310 of this Chapter to the Office of the Insurance Commissioner.
Section 9.- Sections 27.300 and 27.400 are hereby renumbered as Sections 27.350 and 27.360 respectively.
Section 10.- Within a term of ninety (90) days, the Insurance Commissioner shall promulgate the regulations needed for the implementation of this Act.
Section 11.- Severability Clause. If any of the Articles, Sections, paragraphs, phrases, sentences, or provisions of this Act were declared unconstitutional by a court with jurisdiction, the rest of the provisions shall remain with full force and effect.
Section 12.- Effectiveness This Act shall take effect ninety (90) days after its approval.
I hereby certify to the Secretary of State that the following Act No. 18 (S.B. 2400) of the $6^{ ext {th }}$ Session of the $14^{ ext {th }}$ Legislature of Puerto Rico:
AN ACT to amend Sections 11.090, 27.190 and 27.200, add Sections 27.210, 27.220, 27.230, 27.240, 27.250, 27.260, 27.270; eliminate the provisions of Section 27.280, renumber Sections 27.290, 27.300, 27.310, 27.320, 27.330 and 27.340 as $27.280,27.290,27.310,27.320$ and 27.330 and renumber Sections 27.300 and 27.400 of Act No. 77 of June 19, 1957, as amended, known as "Puerto Rico Insurance Code," for the purpose of clearly defining what shall constituted insurance fraud; etc., has been translated from Spanish to English and that the English version is correct.
In San Juan, Puerto Rico, today 2nd of May of 2005.
Luis E. Fusté-Lacourt Director