| Printed Page 3310, Mar. 10 | Printed Page 3330, Mar. 10 |

Amend the bill, as and if amended, by striking Amendment No. 19, Part II by adding an appropriately numbered SECTION to read:

A. Chapter 55 of Title 38 of the 1976 Code is amended by adding:

Section 38-55-510. This article is known and may be cited as the `Omnibus Insurance Fraud and Reporting Immunity Act'.

Section 38-55-520. The purpose of this article is to confront aggressively the problem of insurance fraud in South Carolina by facilitating the detection of insurance fraud; to allow reporting of suspected insurance fraud; to grant immunity for reporting suspected insurance fraud; to prescribe penalties for insurance fraud; to require restitution for victims of insurance fraud; to establish a division within the Office of the Attorney General to prosecute insurance fraud; and to require the investigation of alleged insurance fraud by State Law Enforcement Division.

Section 38-55-530. As used in this article:

(a) `Authorized agency' means any duly constituted criminal investigative department or agency of the United States or of this State; the Department of Insurance; the Department of Revenue and Taxation, Division of Motor Vehicles; the Workers' Compensation Commission; the Office of the Attorney General of this State; or the prosecuting attorney

(b) `Insurer' shall have the meaning set forth in Section 38-1-20(25) and includes any authorized insurer, self-insurer, reinsurer, broker, producer, or any agent thereof.

(c) `Person' means any natural person, company, corporation, unincorporated association, partnership, professional corporation, or other legal entity and includes any applicant, policyholder, claimant, medical provider, vocational rehabilitation provider, attorney, agent, insurer, fund, or advisory organization.

(d) `False statement and misrepresentation' means a statement or representation made by a person that is false, material, made with the person's knowledge of the falsity of the statement and made for the purpose of obtaining or denying or causing another to obtain or deny any benefit or payment in connection with an insurance transaction and such shall constitute fraud.

(e) `Immune' means that neither a civil action nor a criminal prosecution may arise from any action taken pursuant to this article unless actual malice on the part of the reporting person or gross negligence or reckless disregard for the rights of the reported person is present.

Section 38-55-540. Any 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 benefit received is less than one thousand dollars. Upon conviction, the person must be punished by a fine not to exceed five hundred dollars or by imprisonment not to exceed thirty days;

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

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

Any person or insurer convicted under this section must be ordered to make full restitution to the victim or victims for any economic benefit or

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 act, including Section 38-55-170, must be 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 not less than five thousand dollars but not to exceed ten thousand dollars;

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

(B) The civil penalty shall 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 deputy attorney generals to assist the bureau in any civil court proceedings against the person.

(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 act 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 act.

(D) All revenues from the civil penalties imposed pursuant to this section shall be used to provide funds for the costs of enforcing and administering the provisions of this act.

Section 38-55-560. (a) There is established in the Office of the Attorney General a division to be known as the Insurance Fraud Division, which must prosecute violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity. Upon receipt of any claims or allegations of violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity, the Attorney General shall forward the information to the State Law Enforcement Division for investigation.

(b) The Attorney General, upon receipt of any claims or allegations of violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity, is empowered to:

(1) refer the matter for investigation to the State Law Enforcement Division;

(3) collect fines and restitution ordered by such courts. Where deemed appropriate, the Attorney General may use the Setoff Debt Collection Act to collect fines and restitution ordered as a result of actions brought pursuant to Sections 38-55-170 and 38-55-540.

(c) The State Law Enforcement Division shall investigate thoroughly all claims or allegations of violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity received from the Attorney General pursuant to this section.

(d) The Insurance Fraud Division of the Office of Attorney General and the investigative services of the State Law Enforcement Division as provided by this section must be funded by an appropriation of not less than two hundred thousand dollars annually from the general revenues of the State derived from the insurance premium taxes collected by the Department of Insurance and/or from fines assessed under Sections 38-55-170 and 38-55-540 which shall be deposited in the general revenue fund to the credit of the Office of the Attorney General and the State Law Enforcement Division to offset the costs of this program;provided that the funds generated from these fines, to be utilized by either the Office of the Attorney General or SLED, shall not total more than $500,000. These monies shall be shared equally on a fifty-fifty basis by the Office of the Attorney General and the State Law Enforcement Division, and the balance must go to the general fund of the State.

Section 38-55-570. (a) Any person, insurer, or authorized agency having reason to believe that another has made a false statement or misrepresentation or has knowledge of a suspected false statement or misrepresentation shall, for purposes of reporting and investigation, notify the Insurance Fraud Division of the Office of the Attorney General of the knowledge or belief and provide any additional information within his possession relative thereto.

(b) Upon request by the Insurance Fraud Division, any person, insurer, or authorized agency shall release to the Insurance Fraud Division any or all information relating to any suspected false statement or misrepresentation including, but not limited to:

(1) insurance policy information relevant to the investigation, including any application for such a policy;

(2) policy premium payment records, audits, or other documents which are available;

(4) other information relating to the investigation of the suspected false statement or misrepresentation.

(c) Any authorized agency provided with or obtaining information relating to a suspected false statement or misrepresentation as provided for above may release or provide the information to any other authorized agency. The Department of Insurance, the Department of Revenue and Taxation, Division of Motor Vehicles, and the Workers' Compensation Commission shall refer, but not adjudicate, all cases of suspected or reported false statement or misrepresentation to the Insurance Fraud Division of the Office of Attorney General for appropriate investigation or prosecution, or both.

(d) Except as otherwise provided by law, any information furnished pursuant to this section shall be privileged and shall not be part of any public record. Any information or evidence furnished to an authorized agency pursuant to this section shall not be subject to subpoena or subpoena duces tecum in any civil or criminal proceeding unless, after reasonable notice to any person, insurer, or authorized agency which has an interest in the information and after a subsequent hearing, a court of competent jurisdiction determines that the public interest and any ongoing investigation will not be jeopardized by obeyance of the subpoena or subpoena duces tecum.

Section 38-55-580. (a) A person, insurer, or authorized agency, when acting without malice or in good faith, is immune from any liability arising out of filing reports, cooperating with investigations by any authorized agency, or furnishing other information, whether written or oral, and whether in response to a request by an authorized agency or upon their own initiative, concerning any suspected, anticipated, or completed insurance fraud, when such reports or information are provided to or received by any authorized agency.

(b) Nothing herein abrogates or modifies in any way common law or statutory privilege or immunity heretofore enjoyed by any person, insurer, or authorized agency.

(c) Nothing herein limits the liability of any person or insurer who, with malice or in bad faith, makes a report of suspected fraud under the provisions of this article.

Section 38-55-590. The director of the Insurance Fraud Division in the Office of the Attorney General shall annually report to the General Assembly regarding:

(b) the number of allegations or reports received;

(c) the number of matters referred to SLED for investigation;

(d) the outcome of all investigations and prosecutions under this act, if not privileged by law;

(e) the total amount of fines levied by the court and paid to or deposited by the division; and

(f) patterns and practices of fraudulent insurance transactions identified in the course of performing its duties. The director shall also periodically report this information to insurers transacting business in this State, health maintenance organizations transacting business in this State, and other persons, including the State of South Carolina, which provide benefits for health care in this State, whether these benefits are administered directly or through a third person."

B. The 1976 Code is amended by adding:

"Section 42-9-440. The commission shall refer all cases of suspected false statement or misrepresentation to the Insurance Fraud Division of the Office of the Attorney General for investigation and prosecution, if warranted, pursuant to the Omnibus Insurance Fraud and Reporting Immunity Act.

For the purposes of this section, `false statement and misrepresentation' means a statement or representation made by a person that is false, material, made with the person's knowledge of the falsity of the statement and made for the purpose of obtaining or denying or causing another to obtain or deny any benefit or payment in connection with an insurance transaction and such shall constitute fraud."

C. This section takes effect July 1, 1994./

Renumber sections & amend totals/title to conform.

Rep. HODGES explained the amendment.

The amendment was then adopted.

Reps. BAKER and CORNING proposed the following Amendment No. 334 (Doc Name L:\council\legis\amend\JIC\5766HTC.94), which was adopted.

Amend the bill, as and if amended, Part II, Permanent Provisions, by adding a new SECTION, appropriately numbered, to read:

A. Items (2) and (3) of Section 12-9-310(A) of the 1976 Code, as last amended by Section 121, Act 181 of 1993, are further amended to read:

"(2) making payments to a nonresident of rentals or royalties at the rate of eight hundred dollars or more a year for the use of or for the privilege of using property in this State, or making payments of prizes or winnings to a resident or nonresident, shall withhold seven percent of the total amount of each payment. The rental of residential housing units, when four or fewer units are owned by a nonresident, is not subject to withholding under this section. For payments to a corporation the withholding must be at the rate of six percent. In regard to bingo prizes or winnings paid to residents or nonresidents of this State, seven percent of the total amount of each payment of five hundred dollars or more must be withheld. The provisions of this item do not apply to spectator sporting events for which an admission is charged;

(c) "county" means a county of this State.
This item also does not apply to amounts paid to:
a nonresident contractor performing work under a contract with the South Carolina Department of Highways and Public Transportation; and
a nonresident subcontractor performing work for a contractor who is operating under a contract with the South Carolina Department of Highways and Public Transportation.
For purposes of this item, the term nonresident does not include motion picture companies as defined in Section 12-36-2120 nor does it include entities performing personal services for motion picture companies when the motion picture companies and the personal service companies obtain a certificate of authority from the Secretary of State pursuant to Title 33.

(2) (a) making payments of prizes or winnings of five hundred dollars or more to a resident or nonresident, shall withhold seven percent of the total amount of each payment. The provisions of this subitem do not apply to participants in spectator sporting events for which an admission is charged.

(b) making payments to a nonresident of rentals or royalties at the rate of twelve hundred dollars or more a year for the use of or for the privilege of using property in this State, shall withhold seven percent of the total amount of each payment to a person who is not a corporation, and five percent to each corporation. The rental of residential housing units, when four or fewer units are owned by a nonresident, is not subject to withholding under this section. An individual who pays rent directly to a nonresident solely for an apartment which is his legal residence is not

The department may revoke the exemption granted by the registration provided in this item if it determines that the nonresident taxpayer is not cooperating with the department in the determination of the nonresident taxpayer's correct South Carolina tax liability. The revocation does not revive the duty of a person renting from or having a royalty contract with a nonresident to withhold until the person receives notice of the revocation.

(3) hiring or contracting or having a contract with a nonresident taxpayer conducting a business or performing services of a temporary nature within this State, where payment under the contract exceeds ten thousand dollars or reasonably could be expected to exceed ten thousand dollars during any one calendar year, must withhold two percent of each payment made to these nonresidents. This item does not apply to a nonresident which has registered with the Secretary of State or the Department of Revenue and Taxation and by that registration has agreed to be subject to the jurisdiction of the department and the courts of this State to determine its South Carolina tax liability, including withholding and estimated taxes, together with any related interest and penalties, if any. Registering with the Secretary of State or the department is not an admission of tax liability nor must this act of registering be construed to require the filing of an income tax or franchise (license) tax return. If the person hiring, contracting, or having a contract with a nonresident obtains an affidavit from the nonresident stating that the nonresident is registered with the department or with the Secretary of State, the person is not responsible for the withholding.

The department may revoke the exemption granted by registering with the Secretary of State or the department if it determines that the nonresident taxpayer is not cooperating with the department in the determination of the nonresident taxpayer's correct South Carolina tax liability. This revocation does not revive the duty of a person hiring,

The department may partially or totally exempt classes of transactions from the provisions of this section and may exempt the portion of any transaction which is not taxable in this State."

B. Section 33-15-105 of the 1976 Code is amended by adding at the end:

"(d) By obtaining a certificate of authority, the foreign corporation agrees to be subject to the jurisdiction of the Department of Revenue and Taxation and the courts of this State to determine its South Carolina tax liability, including withholding and estimated taxes, together with related interest and penalties, if any. Obtaining a certificate of authority is not an admission of tax liability."

C. Section 33-42-1620 of the 1976 Code is amended by adding at the end:

"By registering, the foreign limited partnership agrees to be subject to the jurisdiction of the Department of Revenue and Taxation and the courts of this State to determine its South Carolina tax liability, including withholding and estimated taxes, together with related interest and penalties, if any. Registering is not an admission of tax liability."

D. This section takes effect July 1, 1994./

Renumber sections & amend totals/title to conform.

Rep. BAKER explained the amendment.

The amendment was then adopted.

The SPEAKER Pro Tempore granted Rep. MEACHAM a leave of absence.

Reps. FELDER, BARBER and BOAN proposed the following Amendment No. 337 (Doc Name L:\council\legis\amend\JIC\5770HTC.94), which was ruled out of order.

Amend the bill, as and if amended, Part II, Permanent Provisions, by adding a new SECTION, appropriately numbered, to read:

| Printed Page 3310, Mar. 10 | Printed Page 3330, Mar. 10 |