S 0157 General Bill, By Reese
 A BILL TO AMEND SECTION 38-55-530, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA,
 1976, RELATING TO DEFINITIONS USED IN CONNECTION WITH INSURANCE FRAUD, SO AS
 TO DEFINE "PATTERN OR PRACTICE"; TO AMEND SECTION 38-55-540, RELATING TO
 CRIMINAL PENALTIES FOR AN INSURER MAKING A FALSE STATEMENT OR
 MISREPRESENTATION, SO AS TO CREATE A FELONY FOR SECOND OR SUBSEQUENT
 VIOLATIONS AND TO PROVIDE A PENALTY; AND TO AMEND SECTION 38-55-550, RELATING
 TO CIVIL PENALTIES FOR AN INSURER MAKING A FALSE STATEMENT OR
 MISREPRESENTATION, SO AS TO CREATE A CAUSE OF ACTION, OTHER THAN A CLASS
 ACTION, FOR INJURY RESULTING FROM SUCH CONDUCT, TO AUTHORIZE AN AWARD OF
 TREBLE DAMAGES, TO PROVIDE FOR THE DISPOSITION OF SUCH A JUDGMENT, AND TO
 FURTHER PROVIDE FOR THE PROCEDURES APPLICABLE TO THIS CIVIL REMEDY.

   01/18/01  Senate Introduced and read first time SJ-5
   01/18/01  Senate Referred to Committee on Banking and Insurance SJ-5

TO AMEND SECTION 38-55-530, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO DEFINITIONS USED IN CONNECTION WITH INSURANCE FRAUD, SO AS TO DEFINE "PATTERN OR PRACTICE"; TO AMEND SECTION 38-55-540, RELATING TO CRIMINAL PENALTIES FOR AN INSURER MAKING A FALSE STATEMENT OR MISREPRESENTATION, SO AS TO CREATE A FELONY FOR SECOND OR SUBSEQUENT VIOLATIONS AND TO PROVIDE A PENALTY; AND TO AMEND SECTION 38-55-550, RELATING TO CIVIL PENALTIES FOR AN INSURER MAKING A FALSE STATEMENT OR MISREPRESENTATION, SO AS TO CREATE A CAUSE OF ACTION, OTHER THAN A CLASS ACTION, FOR INJURY RESULTING FROM SUCH CONDUCT, TO AUTHORIZE AN AWARD OF TREBLE DAMAGES, TO PROVIDE FOR THE DISPOSITION OF SUCH A JUDGMENT, AND TO FURTHER PROVIDE FOR THE PROCEDURES APPLICABLE TO THIS CIVIL REMEDY.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1. Section 38-55-530 of the 1976 Code, as last amended by Act 459 of 1996, is further amended by adding at the end:

"(F) 'Pattern or practice' means repeated, routine, or generalized in nature and not merely isolated or sporadic."

SECTION 2. Section 38-55-540 of the 1976 Code, as added by Section 31A, Part II, Act 497 of 1994, is amended to read:

"Section 38-55-540. Any a person or insurer who makes a false statement or misrepresentation, and any other person knowingly, with an intent to injure, defraud, or deceive, who assists, abets, solicits, or conspires with such person or insurer to make a false statement or misrepresentation, is guilty of a:

(1) misdemeanor, for a first offense violation, if the amount of the economic advantage benefit received is less than one thousand dollars. Upon conviction, the person must be punished by a fine fined not to exceed more than five hundred dollars or by imprisonment imprisoned not to exceed more than thirty days;

(2) misdemeanor, for a first offense violation, if the amount of the economic advantage benefit received is one thousand dollars or more. Upon conviction, the person must be punished by a fine fined not to exceed more than fifty thousand dollars or by imprisonment for a term imprisoned not to exceed more than three years, or by both such fine and imprisonment;

(3) felony, for a second or subsequent violation, regardless of the amount of the economic advantage benefit received. Upon conviction, the person must be punished by a fine fined not to exceed more than fifty thousand dollars or by imprisonment for a term imprisoned not to exceed more than ten years, or by both such fine and imprisonment.;

(4) felony, for a second or subsequent violation, regardless of the amount of the economic advantage benefit received or attempted to receive or any action which places any person at risk of death or serious bodily injury. Upon conviction, the person must be fined not more than fifty thousand dollars or imprisoned not more than ten years, or both.

Any A person or insurer convicted under this section must be ordered to make full restitution to the victim or victims for any economic advantage or benefit which has been obtained by the person or insurer as a result of that violation."

SECTION 3. Section 38-55-550 of the 1976 Code as added by Section 31A, Part II, Act 497 of 1994, is amended to read:

"Section 38-55-550. (A) In addition to any criminal liability, any person who is found by a court of competent jurisdiction to have violated any provision of this article, including Section 38-55-170, is subject to a civil penalty for each violation as follows:

(1) for a first offense, a fine not to exceed five thousand dollars;

(2) for a second offense, a fine of not less than five thousand dollars but not to exceed ten thousand dollars;

(3) for a third and subsequent offense, a fine of not less than ten thousand dollars but not to exceed fifteen thousand dollars.

A person injured in his business or property by reason of a violation of this article may recover from the person violating the article, in any appropriate court the following:

(1) return of any profit, benefit, compensation, payment, or unpaid premium received or retained by the person violating this article directly resulting from the violation;

(2) reasonable attorney's fees and related legal expenses, including internal legal expenses and court costs, not to exceed five thousand dollars, and reasonable investigative fees.

An action maintain under this subsection may not be certified as a class action or made part of a class action.

(B) The civil penalty must be paid to the director of the Insurance Fraud Division to be used in accordance with subsection (D) of this section. The court may also award court costs and reasonable attorneys' fees to the director. When requested by the director, the Attorney General may assign one or more deputies attorneys general to assist the bureau in any civil court proceedings against the person. A person injured in his or her business or property by a person violating this article, upon a showing of clear and convincing evidence that the violation was part of a pattern or practice of such violations, is entitled to recover threefold the injured person's economic damages. One-third of the treble damages awarded is payable to the Department of Insurance to be used solely for the purpose of investigation and prosecution of violations of this article or other fraudulent behavior relating to insurance transactions or for public education relating to insurance fraud or any combination of these. An action maintained under this subsection may not be certified as a class action or made part of a class action, unless the violations of this article giving rise to the action resulted in criminal conviction of the violator under this article.

(C) Nothing in subsections (A) and (B) shall be construed to prohibit the director of the Insurance Fraud Division and the person alleged to be guilty of a violation of this article from entering into a written agreement in which the person does not admit or deny the charges but consents to payment of the civil penalty. A consent agreement may not be used in a subsequent civil or criminal proceeding relating to any violation of this article.

(D) All revenues from the civil penalties imposed pursuant to this section must be used to provide funds for the costs of enforcing and administering the provisions of this article. The Insurance Fraud Division has the authority to maintain civil proceedings on behalf of any victims of violations of this article. In any such action, the court shall proceed as soon as practicable to the hearing and determination. Pending final determination, the court may at any time enter restraining orders or prohibitions or take other actions, including the acceptance of satisfactory performance bonds, as it considers proper.

The courts of this State have jurisdiction to prevent and restrain violations of this article by issuing appropriate orders.

In an action commenced under this subsection, the court, upon finding that a person has violated this article, shall impose a fine of up to five thousand dollars for each violation.

A court in which a prosecution for violation of this article is pending has authority to stay or limit proceedings in any civil action regarding the same or related conduct. A court in which is pending a civil action brought pursuant to this subsection may stay or limit proceedings in actions brought pursuant to this section regarding the same or related conduct or may transfer these actions or consolidate them or allow the plaintiffs in these actions to participate in the action brought pursuant to this subsection, as it prescribes.

A cause of action under this section for violation of this article must be brought within three years of the time the plaintiff discovered, or with reasonable diligence could have discovered the acts constituting a violation of this article, whichever is later.

An insurer shall not pay damages awarded under this section, or provide a defense or money for a defense, on behalf of an insured under a contract of insurance or indemnification. A third party who has asserted a claim against an insured shall have no cause of action under this section against the insurer of the insured arising out of the insurer's processing or settlement of the third party's claim. An obligee under a surety bond does not have a cause of action under this section against the surety arising out of the surety's processing or settlement of the obligee's claim against the bond.

A person injured in his business or property by reason of a violation of this article may recover under only one of the subsections of this section."

SECTION 4. This act takes effect upon approval by the Governor.