§ 409. Fraud prevention plans and special investigations units. (a)
Every insurer writing private or commercial automobile insurance,
workers' compensation insurance, or individual, group or blanket
accident and health insurance policies issued or issued for delivery in
this state, except for insurers that write less than three thousand of
such policies, issued or issued for delivery in this state annually, and
every entity licensed pursuant to article forty-four of the public
health law except those entities with an enrolled population of less
than sixty thousand persons in the aggregate and, except those entities
licensed pursuant to sections forty-four hundred three-a, forty-four
hundred three-c, forty-four hundred-d, forty-four hundred three-f and
forty-four hundred eight-a of the public health law shall, within one
hundred twenty days of the effective date of this amended section to be
promulgated by the superintendent to implement this section, file with
the superintendent a plan for the detection, investigation and
prevention of fraudulent insurance activities in this state and those
fraudulent insurance activities affecting policies issued or issued for
delivery in this state. The superintendent may accept programs and
processes implemented pursuant to section forty-four hundred fourteen of
the public health law as satisfying the obligations of this section and
regulations promulgated thereunder.

(b) (1) The plan shall provide the time and manner in which such plan
shall be implemented, including provisions for a full-time special
investigations unit and staffing levels within such unit. Such unit
shall be separate from the underwriting or claims functions of an
insurer, and shall be responsible for investigating information on or
cases of suspected fraudulent activity and for effectively implementing
fraud prevention and reduction activities pursuant to the plan filed
with the superintendent. An insurer shall include in such plan staffing
levels and allocations of resources in such full-time special
investigations unit as may be necessary and appropriate for the proper
implementation of the plan and approval of such plan pursuant to
subsection (d) of this section.

(2) In lieu of a special investigations unit, an insurer may contract
with a provider of services related to the investigation of information
on or cases of suspected fraudulent activities; provided, however, that
an insurer which opts for contracting with a separate provider of
services, shall provide to the superintendent a detailed plan therefor,
pursuant to requirements set forth in regulation by the superintendent.

(3) Persons employed by special investigations units as investigators
or by an independent provider of investigative services under contract
with an insurer shall be qualified by education or experience which
shall include an associate's or bachelor's degree in criminal justice or
related field, or five years of insurance claims investigation
experience or professional investigation experience with law enforcement
agencies, or seven years of professional investigation experience
involving economic or insurance related matters. For the purposes of
evaluation of medical related claims insurers may employ or retain duly
licensed or authorized medical professionals. Notwithstanding these
minimum requirements anyone employed as an investigator in a special
investigation unit or by a provider of investigative services under
contract to an insurer as of the effective date of this paragraph and
who was also so employed on or before September tenth, nineteen hundred
ninety-six may continue in such employment provided the insurer
identifies such person in writing to the superintendent giving the date
such employment began and a description of the person's qualifications,
employment history and current job duties.

(c) The plan shall provide for the following:

(1) interface of special investigation unit personnel with law
enforcement and prosecutorial agencies and with the financial frauds and
consumer protection unit of the department of financial services;

(2) reporting of fraud data to a central organization approved by the
superintendent;

(3) in-service education and training for underwriting and claims
personnel in identifying and evaluating instances of suspected
fraudulent activity in underwriting or claims activities;

(4) coordination with other units of an insurer for the investigation
and initiation of civil actions based upon information received by or
through the special investigation unit;

(5) public awareness of the cost and frequency of fraudulent
activities, and the methods of preventing fraud;

(6) development and use of a fraud detection and procedures manual to
assist in the detection and elimination of fraudulent activity; and

(7) the time and manner in which such plan shall be implemented and a
demonstration that the fraud prevention and reduction measures outlined
in the plan will be fully implemented.

(d) (1) A fraud detection and prevention plan filed by an insurer with
the superintendent pursuant to this section shall be deemed approved by
the superintendent if not returned by the superintendent for revision
within one hundred twenty days of the date of filing. If the
superintendent returns a plan for revision, the superintendent shall
state the points of objection with such plan, and any amendments as the
superintendent may require consistent with the provisions of this
section, including, but not limited to, staffing levels, resource
allocation, or other policy or operational considerations. An amended
plan reflecting the changes shall be filed with the superintendent
within forty-five days from the date of return.

(2) If the superintendent has returned a plan for revision more than
one time, the insurer shall be entitled to a hearing pursuant to the
provisions of article three of this chapter and regulations promulgated
thereunder.

(3) If an insurer fails to submit a final plan within thirty days
after a determination of the superintendent after the hearing held
pursuant to paragraph two of this subsection, or otherwise fails to
submit a plan, or fails to implement the provisions of a plan in a time
and manner provided for in such plan, or otherwise refuses to comply
with the provisions of this section, the superintendent may: (i) impose
a fine of not more than two thousand dollars per day for such failure by
an insurer until the superintendent deems the insurer to be in
compliance; or (ii) impose upon the insurer a fraud detection and
prevention plan deemed to be appropriate by the superintendent which
shall be implemented by the insurer; or (iii) impose the provisions of
both subparagraphs (i) and (ii) of this paragraph.

(e) Any plan, the information contained therein, or correspondence
related thereto, or any other information furnished pursuant to this
section shall be deemed to be a confidential communication and shall not
be open for review or be subject to a subpoena except by a court order
or by request from any law enforcement agency or authority.

(f) For purposes of this section, the term "policies" shall refer to
individuals covered if coverage is issued on a group basis.

(g) Every insurer required to file a fraud prevention plan shall
report to the superintendent on an annual basis, no later than March
fifteenth, describing the insurer's experience, performance and cost
effectiveness in implementing the plan, utilizing such forms as the
superintendent may prescribe. Upon consideration of such reports, the
superintendent may require amendments to the insurer's fraud prevention
plan as deemed necessary.