AN ACT MODERNIZING INSURANCE DEPARTMENT FINES AND MAKING MINOR TECHNICAL REVISIONS TO THE INSURANCE STATUTES

PA 08-178—sHB 5159

Insurance and Real Estate Committee

Judiciary Committee

AN ACT MODERNIZING INSURANCE DEPARTMENT FINES AND MAKING MINOR TECHNICAL REVISIONS TO THE INSURANCE STATUTES

SUMMARY: This act generally increases fines the insurance commissioner may assess against insurance companies, related companies, and people for violating Connecticut's insurance laws, including those related to utilization review, unauthorized insurers, producer and company licensing, unfair and prohibited practices, and fraud. It leaves unchanged most fines enacted since 1996, including those related to privacy, preferred provider networks, and self-insured workers' compensation laws.

The act requires insurers to pay claims from Department of Public Health-licensed emergency medical service personnel and organizations in accordance with the law's prompt claim payment requirements. An insurer's failure to pay claims as specified by law is an unfair and deceptive insurance act, for which the commissioner may assess fines as shown in the table below (see § 39).

It also makes technical changes.

EFFECTIVE DATE: October 1, 2008

INSURANCE FINES INCREASED

Act §	Description	Prior Fine	New Fine
1	General penalty – Violation of any Title 38a provision when no other penalty is provided	Up to $7,500	Up to $15,000
2	Company license suspension, revocation, or non-renewal for cause shown (Fine is in addition to, or in lieu of, license action. )	Up to $10,000	Up to $50,000
3	Assessments on domestic insurers – Failure to pay when due	$10 plus 6% annual interest	$25 plus 6% annual interest
4	Annual and quarterly financial reports of insurers and HMOs – Filing late	$100 per day for each day overdue	$175 per day for each day overdue
5	Managing General Agents Act – Violating the act (Fine is in addition to license revocation or suspension. )	$10,000 for each violation	$15,000 for each violation
6	Insurance Holding Company Act – An individual's willful violation of the act (If intentional fraud, the fine is in addition to, or in lieu of, up to two years in prison. )	Up to $3,000	Up to $15,000
6	Insurance Holding Company Act – An insurance company's willful violation of the act	Up to $10,000	Up to $50,000
6	Insurance Holding Company Act – Willfully and knowingly making a false statement or report to deceive the commissioner	Up to $25,000, up to five years in prison, or both	Up to $50,000, up to five years in prison, or both
6	Insurance Holding Company Act – An insurance company, without just cause, does not file a required registration statement	$100 each day, up to $10,000 maximum	$150 each day, up to $15,000 maximum
6	Insurance Holding Company Act – A director or officer willfully violates the act or agrees to engage in transactions or investments not properly reported or permitted	Up to $5,000 for each violation	Up to $7,500 for each violation
7	Insurance Premium Finance Companies – Violating act (Fine is in addition to, or in lieu of, license suspension or revocation. )	Up to $1,000 for each violation	Up to $5,000 for each violation
8	Utilization Review (UR) – Violating the UR law (Fine is in addition to license suspension or revocation. ) If company knew or should have known of violation.	Up to $1,000 for each violation and $10,000 maximum Up to $5,000 for each violation and $50,000 maximum in any six-month period	Up to $1,500 for each violation and $15,000 maximum Up to $7,500 for each violation and $75,000 maximum in any six-month period
8	Utilization Review – Violating commissioner's cease and desist order (Fine is in lieu of license suspension or revocation. )	Up to $50,000	Up to $75,000
9	Utilization Review – Providing fraudulent or misleading information to a UR company	Up to $5,000 or equal to the value of services provided due to the fraud	Up to $7,500 or equal to the value of services provided due to the fraud
10	Unauthorized Insurers Act– Not paying premium tax on time	The greater of 10% of the tax or $50, plus 1% interest per month	The greater of 10% of the tax or $75, plus 1% interest per month
11	Unauthorized Insurers Act—Any unauthorized insurer doing insurance business	Up to $10,000	Up to $50,000
11	Unauthorized Insurers Act—Violating the specific provisions of the act	$500 for first offense and $500 for each month it continues	$2,500 for first offense and $2,500 for each month it continues
12	Defrauding a life or accident insurance company	If less than $100 obtained due to fraud: up to $500, up to one year in prison, or both (If more: up to 10 years in prison)	If less than $2,000 obtained due to fraud: up to $10,000, up to one year in prison, or both (If more: up to 10 years in prison)
13	Standard Form of Fire Insurance Policy – Making, issuing, or delivering a fire insurance policy that is not the statutorily required standard policy	Up to $200 for each offense	Up to $1,000 for each offense
14	Group Life Insurance – Failure to give an insured a notice of insurance cancellation or discontinuance	Up to $1,000 for each violation	Up to $2,000 for each violation
15	Burial Contracts – Issuing burial contracts without a license or without the required provisions	Up to $500, up to one year in prison, or both	Up to $6,000, up to one year in prison, or both
16	Individual Health Insurance – Delivering an individual policy that does not meet statutory requirements	Up to $500 for each offense	Up to $10,000 for each offense
17	Group Health Insurance – Failure to give an insured a notice of insurance cancellation or discontinuance	Up to $1,000 for each violation	Up to $2,000 for each violation
18	Group Health Insurance – Delivering a group policy that does not meet statutory requirements	Up to $500 for each offense	Up to $1,000 for each offense
19	Consumer Dental Plans – Not complying with statutory requirements	Up to $1,000 for each violation	Up to $1,500 for each violation
20	Fraternal Benefit Societies– Making false or misleading statements regarding the insurance contract or knowingly receiving compensation because of such violation	$100 to $500 fine, 30 days to one year in prison, or both	$2,000 to $10,000 fine, 30 days to one year in prison, or both
21	Fraternal Benefit Societies– Willfully making a false or fraudulent statement on a membership application	$100 to $500 fine, 30 days to one year in prison, or both	$2,000 to $10,000 fine, 30 days to one year in prison, or both
21	Fraternal Benefit Societies– Soliciting membership for unlicensed fraternal benefit society	$50 to $200	$1,000 to $4,000
21	Fraternal Benefit Societies– Willfully violating, neglecting, or refusing to comply with fraternal benefit society statutes when no other penalty is specified	Up to $200	Up to $4,000
22	Credit Life, Accident and Health Insurance – Violating statutory requirements	Up to $250, two years in prison, or both	Up to $1,500, two years in prison, or both
23	Personal and Commercial Risk Insurance Rating Practices – Not complying with the commissioner's final order	Up to $1,000, but if willful, up to $10,000, up to one year in prison, or both	Up to $2,000, but if willful, up to $20,000, up to one year in prison, or both
24	Insurance Producers – Soliciting business for unlicensed insurance company	Up to $100, up to six months in prison, or both	Up to $2,000, up to six months in prison, or both
25	Insurance Producers – Acting without a license	Up to $500, up to three months in prison, or both	Up to $10,000, up to three months in prison, or both
26	Insurance Producers – Signing or countersigning insurance policies in blank by an insurance producer (Fine is in addition to license revocation. )	Up to $100	Up to $1,000
27	Public Adjusters – Acting as a public adjuster without a license	Up to $500, up to three months in prison, or both	Up to $10,000, up to three months in prison, or both
28	Certified Insurance Consultants – Not acknowledging or giving receipt for services	$50 to $500	$250 to $2,500
29	Certified Insurance Consultants – Receiving compensation in violation of law	$50 to $500 fine, 30 to 90 days in prison, or both	$250 to $2,500 fine, 30 to 90 days in prison, or both
30	Certified Insurance Consultants – Acting as certified insurance consultant without a license	$50 to $500 fine, up to six months in prison, or both	$250 to $2,500 fine, up to six months in prison, or both
31	Fraternal Agents –Acting as fraternal agent without a license	Up to $100	Up to $10,000
32	Licensing in General – Willful misrepresentation on a license application	Up to $500, up to six months in prison, or both	Up to $4,000, up to six months in prison, or both
33	Licensing in General – Impersonating another person when taking an insurance license examination	Up to $500, up to six months in prison, or both	Up to $4,000, up to six months in prison, or both
34	Licensing in General – For cause shown (Fine is in addition to or in lieu of license suspension or revocation. )	Up to $1,000	Up to $5,000
35	Surplus Lines Broker – Not making and filing an affidavit or willfully making a false affidavit	Up to $500, up to six months in prison, or both	Up to $4,000, up to six months in prison, or both
36	Certified Insurance Consultants – Not giving commissioner information within 10 days	$50 to $500	$250 to $2,500
37	Motor Vehicle Physical Damage Appraisers – Acting without a license	Up to $500, up to one year in prison, or both	Up to $2,500, up to one year in prison, or both
38	Casualty Claim Adjusters– Acting without a license	Up to $200, up to one year in prison, or both	Up to $2,000, up to one year in prison, or both
39	Unfair and Prohibited Practices – Committing an unfair or prohibited practice (Fine is in addition to, or in lieu of, license suspension or revocation and restitution. )	Up to $1,000 for each violation, $10,000 maximum	Up to $5,000 for each violation, $50,000 maximum
39	Unfair and Prohibited Practices – Knowingly committing an unfair or prohibited practice (Fine is in addition to, or in lieu of, license suspension or license revocation and restitution. )	Up to $5,000 for each violation, $50,000 maximum in any six-month period	Up to $25,000 for each violation, $250,000 maximum in any six-month period
39	Unfair and Prohibited Practices – Violating a cease and desist order (Fine is in addition to, or in lieu of, license suspension or revocation. )	Up to $10,000 for each violation	Up to $50,000 for each violation
40	Unfair and Prohibited Practices – Any misrepresentation to convince an insured to surrender a policy and replace it with another	Up to $500, up to 30 days in prison, or both	Up to $5,000, up to 30 days in prison, or both
41	Unfair and Prohibited Practices – Publishing a false statement of assets or one that does not meet statutory requirements	$500 for first offense, $1,000 for each subsequent offense	$10,000 for first offense, $20,000 for each subsequent offense
42	Connecticut Insurance Guaranty Association – Not paying assessment when due (Fine is in lieu of license suspension or revocation. )	Up to 5% of the unpaid amount per month, but at least $100 a month	Up to 5% of the unpaid amount per month, but at least $500 a month
43	Connecticut Life & Health Insurance Guaranty Association – Failure to pay when due (Fine is in lieu of license suspension or revocation. )	Up to 5% of the unpaid amount per month, but at least $100 a month	Up to 5% of the unpaid amount per month, but at least $500 a month
44	Brokered Transactions Guaranty Fund – Penalty for filing a document that is false or untrue or has a material misrepresentation	At least $200	At least $300
45	Brokered Transactions Guaranty Fund – Penalty for embezzlement (Penalty is in addition to restitution, attorney costs and fees, and other relief a court may order)	Up to $1,000	Up to $1,500
46	Rehabilitation and Liquidation Act – Failure to cooperate with the commissioner	Up to $10,000, up to one year in prison, or both; or up to $10,000 and suspended or revoked license	Up to $10,000, up to one year in prison, or both; or up to $25,000 and suspended or revoked license
47	Rehabilitation and Liquidation Act – Any agent not giving required notice of policies written for an insurer subject to liquidation or not filing a compliance report (Fine is in addition to, or in lieu of, license suspension or revocation. )	Up to $1,000	Up to $2,500
48	Rehabilitation and Liquidation Act – Not paying collected premiums and unearned commissions to the liquidator (Fine is in addition to, or in lieu of, license suspension, revocation, or non-renewal. )	Up to $1,000 for each violation	Up to $2,500 for each violation
49	Connecticut Insurance Information and Privacy Protection Act – Obtaining information from an insurance institution under false pretenses	Up to $10,000	Up to $20,000
51	Medical Discount Plans – Knowingly operating as a medical discount plan organization in violation of law	Up to $10,000	Up to $15,000
51	Medical Discount Plans – Knowingly aiding or abetting someone who the person knew or reasonably should have known was operating as a medical discount plan organization in violation of law	Up to $10,000	Up to $15,000
52	Medical Discount Plans – Violating any provision of the law regulating such plans	Up to $2,000	Up to $3,000

BACKGROUND

Prompt Claim Payment

Connecticut law requires insurers to pay claims within 45 days after receiving a (1) claimant's proof of loss (i. e. , claim form) or (2) health care provider's request for payment. When the insurer determines a deficiency in the claim or request prevents it from processing the claim, it must (1) send the claimant or provider written notice of all alleged deficiencies within 30 days of receiving the claim and (2) pay the claim within 30 days after receiving the requested information.

An insurer that fails to pay a claim in a timely manner must include 15% interest with the claim payment. The interest payment is in addition to other penalties that may apply by law. For any interest payments under $1, the insurer must instead deposit the interest in a separate, interest-bearing account and donate the account balance to the University of Connecticut Health Center at year end.

The law already includes as a “health care provider,” for purposes of prompt claims payment, physicians and surgeons, chiropractors, naturopaths, podiatrists, athletic trainers, physical therapists, occupational therapists, alcohol and drug counselors, radiologists, midwives, nurses, nurse's aides, dentists, dental hygienists, optometrists, opticians, respiratory care practitioners, perfusionists, pharmacists, psychologists, marital and family therapists, clinical social workers, professional counselors, massage therapists, dietician-nutritionists, and acupuncturists.

It also includes licensed health care institutions such as hospitals; residential care homes; health care facilities for the handicapped; nursing homes; rest homes; home health care agencies; homemaker-home health aide agencies; mental health facilities; substance abuse treatment facilities; student infirmaries; facilities providing services for the prevention, diagnosis, and treatment of human health conditions; and Medicaid-certified residential facilities for the mentally retarded.

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