State House passes 6-bill insurance fraud crackdown

A wave of bills passed by the Michigan House of Representatives will look to stiffen the penalties for insurance fraud.

Six bills passed by the Michigan House of Representatives will look to combat insurance fraud. House Bills 4713 to 4719 would amend the Insurance Code and related statutes to restructure penalties for acts of fraud. The bills would also make changes regarding insurance fraud reporting, enforcement and information sharing.

It is a broad insurance fraud reform package that empowers prosecutors to pursue racketeering charges against those who run auto insurance scams, file bogus claims, or manipulate vehicle titles and registrations for profit.

Rep. Ron Robinson (R-Utica) introduced House Bill 4713 as part of the package.

"Insurance fraud drives up costs for every Michigan family," Robinson said. "This bipartisan package puts consumers first by tightening loopholes, improving reporting, and ensuring real penalties for people who cheat the system. I'm proud to help lead this effort and grateful to colleagues on both sides of the aisle for moving it forward."

The package as a whole passed the Michigan House by a vote of 102-2, with seven people not voting.

Here is what each bill changes in the order of the summary reported from the Committee on Insurance:

House Bill 4716

House Bill 4716 creates a tiered system for penalties for insurance fraud.

Under current law, a person who commits a fraudulent insurance act as described in section 4503 of the code, or conspires to do so, is guilty of a felony punishable by up to four years in prison, a fine of up to $50,000, or both, and must pay restitution. The penalty is the same regardless of the scope or severity of the fraudulent act.

This bill would create graduated misdemeanor and felony penalties for fraudulent insurance acts involving a fraudulent claim. Penalties would range from a misdemeanor (up to one year of imprisonment) for the smaller offenses to a felony punishable by up to 20 years of imprisonment for the largest.

House Bill 4714

House Bill 4714 would make complementary changes to the Code of Criminal Procedure by adding the felony penalties for fraudulent insurance acts created in HB 4716 to the state's sentencing guidelines. Under the guidelines, felonies are assigned class levels that are used in determining a recommended minimum sentence. House Bill 4714 would classify the new offenses from HB 4716 as follows:

Punishable by imprisonment for up to 5 years: Class E felony

Punishable by imprisonment for up to 10 years: Class D felony

Punishable by imprisonment for up to 15 years: Class C felony

Punishable by imprisonment for up to 20 years: Class B felony

House Bill 4717

House Bill 4717 would amend the Michigan Penal Code to add fraudulent insurance acts under section 4503 of the Insurance Code, as well as falsifying or forging a vehicle title under sections 254 or 257 of the Michigan Vehicle Code, to the list of crimes that support a racketeering charge.

The bill adds insurance fraud and vehicle title forgery/falsification to crimes that qualify as racketeering. Racketeering convictions can bring up to 20 years in prison, $100,000 fines, and forfeiture of assets and would let prosecutors pursue insurance fraud as part of broader criminal enterprise cases.

House Bill 4719

House Bill 4719 would amend the Insurance Code to authorize the department to assess civil fines specifically for fraudulent insurance acts under section 4503.

The Insurance Code authorizes civil fines of up to $1,000 for violations, or $5,000 if the person knew or reasonably should have known that they were violating the code, up to a maximum of $50,000.

House Bill 4718

House Bill 4718 would amend the Insurance Code to require insurers that know or reasonably believe, after completing a good-faith investigation, that a fraudulent insurance act has occurred to report it to the Department of Insurance and Financial Services.

Applies to:

Insurance companies.

The Michigan Automobile Insurance Placement Facility.

Assigned claims administrators.

Insurers must cooperate with law enforcement investigations. This strengthens Michigan's fraud monitoring by making reporting mandatory, aligning the state with 45 others

House Bill 4715

House Bill 4715 would amend the Insurance Code to expand protections for entities that share information on suspected or confirmed insurance fraud.

Current law allows insurers, authorized agencies, and certain organizations to exchange fraud-related information in good faith and without malice, without facing civil liability, unless they knowingly share false information.

This bill would add the National Insurance Crime Bureau and its employees or agents to this list and provide that fraud-related information may be shared between insurers, the NICB, and other authorized agencies under the same liability protections.

House Bill 4713

House Bill 4713 would amend the Health Care False Claim Act to expand the definition of health care insurer by including auto insurers that provide PIP coverage under Chapter 31 of the Insurance Code.

Health care insurer now means any of the following:

An insurance company authorized to provide health insurance in this state.

An insurance company that provides personal protection insurance under Chapter 31 of the Insurance Code.

A legal entity that is self-insured and provides health care benefits to its employees.

By expanding the definition, the bill would prohibit and prescribe penalties for acts involving fraudulent auto insurance claims.