Department of Financial Services Florida Insurance Fraud: Proposed Rule 69D-2 2/28/2006

On Monday, February 27, 2006, the second workshop on Proposed Rule 69D-2 was held in Tallahassee, Florida.  A copy of the proposed rule is here.

Assistant general counsels Beverly Hayes and Charles Gowland attended, as well as representatives from Market Conduct and DIF.

Mr. Gowland opened discussion by explaining changes to the Rule made in response to comments at the first workshop. Specifically, the time frame for reporting different types of suspicious claims has been modified. SIUs/insurers have six months to make referrals on standard claims, 12 months on workers’ compensation claims and eighteen months for natural emergencies as defined by s. 252.34(7), F.S.

These time frames are “triggered” when the SIU/insurer identifies “suspicious” behavior.  According to the panel, what constitutes “suspicious” behavior is to be determined by the SIUs not by DFS or OIR. The panel agreed, however, that “suspicious” activity constitutes something more than a “questionable claim.” Language acknowledging that distinction is not currently part of the Rule.

If an insurer is audited, it must show that it is complying with its own standards. Market Conduct will come in to confirm that insurers are adhering to the plans they submitted pursuant to 69D-2.003(1), F.A.C. Thus, Market Conduct will not judge whether claim activity is suspicious, but rather whether the insurer has followed its own guidelines and reported activity that meets the insurer’s definition of “suspicious” activity. However, Market Conduct will have problems with insurers that delay claims and fail to report suspicious activity. Insurers may also run into trouble if one department treats a claim like fraud without making the required referral.

Concern was expressed over the potential bad faith exposure created by this Rule. It was suggested that language be added to the rule prohibiting the use of any referral information in civil law suits. The panel noted that DFS and OIR lack the authority to insert such privilege language, but that the legislature is currently considering same. The panel referenced House Bill 561, sponsored by Rivera, and Senate Bill 1596.

The record will remain open for comments through the end of business Friday, March 3, 2006.  Any additional changes will be made the following week, at which point the matter will be noticed for hearing.  Demand for hearing must be made in writing within 21 days of the notice publication.