HB323 Alabama 2012 Session

Summary

Primary Sponsor

Yvonne Kennedy

Democrat

Co-Sponsors

James E. BuskeyMike HillChad FincherSteve McMillanJamie IsonMary Sue McClurkin

Session

Regular Session 2012

Title

Insurance fraud, defined, investigations by Insurance Department, civil immunity for reporting fraud, Insurance Fraud Unit and fund created in Insurance Department, civil and criminal penalties, six year filing limit, Secs. 27-12A-1 to 27-12A-9, incl., 27-12A-20 to 27-12A-24, incl., 27-12A-40 to 27-12A-42, incl., added; Secs. 10A-20-6.16, 27-21A-23 am'd.

Summary

HB323 creates an Insurance Fraud Unit within the Alabama Department of Insurance to detect, investigate, and prosecute insurance fraud, with new penalties, reporting requirements, and a dedicated funding mechanism.

What This Bill Does

Defines insurance fraud and creates the Insurance Fraud Unit within the Department of Insurance to investigate suspected fraud, coordinate with other law enforcement and regulatory agencies, and issue subpoenas or arrest warrants as needed. Establishes criminal penalties for fraud and related acts (felonies for larger losses and a misdemeanor for transacting insurance without a license). Funds the unit with a $200 annual insurer assessment and a new Insurance Fraud Unit Fund, with appropriations for 2012 and 2013. Requires fraud warnings on certain forms, mandates reporting by those in the business, and provides immunity from civil liability for reporting or sharing information, along with confidentiality protections for investigation documents.

Who It Affects

• Insurers authorized to write insurance in Alabama: must pay a $200 annual assessment to fund the unit; failure to pay can lead to suspension of certificate of authority.
• Insurance producers/agents: may face license suspension or revocation and civil penalties up to $5,000 per violation if involved in insurance fraud.
• Health care service plans and health maintenance organizations (HMOs) and related regulators: amendments to align with the new fraud unit and enforcement provisions.
• Licensed practitioners in Alabama (e.g., doctors, nurses, lawyers): disciplinary action by licensing boards if convicted of insurance fraud; boards may take action when services are paid with insurance proceeds.
• Public and consumers: immunity from civil liability for reporting or furnishing information about suspected fraud; confidentiality protections for investigation records.
• Department of Insurance and Insurance Fraud Unit: given new investigative powers, including subpoenas, arrests, and interagency information sharing.

Key Provisions

• Establishes the Insurance Fraud Unit within the Department of Insurance with powers to investigate, review reports, conduct independent inquiries, issue subpoenas, administer oaths, share records with other agencies, and arrest for violations of the chapter.
• Defines insurance fraud and lists specific acts that constitute fraud, including false applications, misrepresentation, record destruction, embezzlement, improper charging related to deductibles or rebates, and other fraudulent transactions.
• Sets criminal penalties: first-degree fraud is a Class B felony when losses exceed $1,000; second-degree fraud is a Class C felony when losses do not exceed $1,000; transacting insurance without a license is a Class A misdemeanor.
• Imposes enforcement and licensing penalties: violators may have licenses suspended or revoked and face civil penalties up to $5,000 per violation; practitioners convicted of fraud trigger disciplinary action by licensing authorities.
• Immunity and confidentiality provisions: reporting or furnishing information about suspected fraud generally carries civil liability immunity, while investigation documents are confidential and not public records, with allowed disclosures to enforcement and regulatory bodies or aggrieved parties under specified conditions.
• Fraud prevention measures: requires a fraud warning on key forms and documents; mandates mandatory reporting by those in the business of insurance; authorizes administrative cease-and-desist orders and court actions to enforce compliance.
• Funding and administration: insurers must pay a $200 annual assessment to fund the unit; creates the Insurance Fraud Unit Fund in the State Treasury; appropriations are made for 2012 and 2013; funds carry over and are used for unit operations.
• Related amendments: amends certain health care service plan statutes to reference the new chapter and align requirements relevant to health plans and HMOs.
• Effective date: the act takes effect on the first day of the third month after passage.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Insurance Department