II 

108TH CONGRESS 

2D SESSION S. 2728

To create a penalty for automobile insurance fraud, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 22, 2004

Mr. SCHUMER introduced the following bill; which was read twice and referred 

to the Committee on the Judiciary 

A BILL

To create a penalty for automobile insurance fraud, and 

for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Cheaper Car Insurance 

5 Act of 2004’’. 

6 SEC. 2. AUTOMOBILE INSURANCE FRAUD. 

7 (a) IN GENERAL.—Chapter 47 of title 18, United 

8 States Code, is amended by inserting at the end the fol9 lowing: 
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1 ‘‘SEC. 1038. AUTOMOBILE INSURANCE FRAUD. 

2 ‘‘(a) Whoever knowingly commits automobile insur3 ance fraud shall be punished as provided in subsection (e). 

4 ‘‘(b) Whoever knowingly acts as a runner, capper, or 

5 steerer shall be punished as provided in subsection (e). 

6 ‘‘(c) Whoever knowingly acts as an organizer of an 

7 auto insurance fraud operation shall be punished as pro8 vided in subsection (e). 

9 ‘‘(d) Whoever knowingly acts as a mastermind or 

10 leader of an auto insurance fraud operation shall be pun11 ished as provided in subsection (e). 

12 ‘‘(e) The punishment for an offense under sub13 sections (a), (b), (c), or (d) shall be as follows: 

14 ‘‘(1) For any violation of subsection (a) in 

15 which the defendant is not also convicted of being a 

16 runner, capper, or steerer under subsection (b), an 

17 organizer under subsection (c), or a leader or master 

18 mind under subsection (d), such person shall be 

19 fined not more than $100,000, imprisoned not more 

20 than 5 years, or both. If the defendant has a prior 

21 conviction under subsection (a), such person shall be 

22 fined not more than $100,000, imprisoned not more 

23 than 10 years, or both. 

24 ‘‘(2) For any violation of subsection (b), such 

25 person shall be fined not more than $100,000, im26 prisoned not more than 5 years, or both. 
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1 ‘‘(3) For any violation of subsection (c), such 

2 person shall be fined not more than $100,000, im3 prisoned not more than 10 years, or both. 

4 ‘‘(4) For any violation of subsection (d), such 

5 person shall be fined not more than $100,000, im6 prisoned not more than 15 years, or both. 

7 ‘‘(f) If a violation of subsection (a), (b), (c), or (d) 

8 results in costs that exceed $100,000, the fine imposed 

9 under subsection (b) may be in an amount greater than 

10 $100,000 in order to cover the resulting cost. 

11 ‘‘(g) In this section— 

12 ‘‘(1) the term ‘automobile insurance fraud’ 

13 means fraud committed by any person who know14 ingly and intentionally presents a written statement 

15 or claim, causes a written statement or claim to be 

16 presented, or prepares a written statement or claim 

17 with knowledge or belief that it will be presented to 

18 or by an insurer, self-insurer, or any agent thereof, 

19 that such person knows— 

20 ‘‘(A) contains materially false information 

21 concerning any fact material to an application, 

22 certificate, evidence, or claim referred to in 

23 paragraph (2); or 

24 ‘‘(B) conceals, for the purpose of mis25 leading, information concerning any fact mate-
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1 rial to an application, certificate, evidence, or 

2 claim referred to in paragraph (2); 

3 ‘‘(2) the term ‘mastermind’ or ‘leader’ means 

4 any individual who knowingly solicits or employs 2 

5 or more people, or conspires with 2 or more people, 

6 to engage in automobile insurance fraud, and who is 

7 not also a runner, capper, steerer, or an organizer; 

8 ‘‘(3) the term ‘organizer’ means any individual 

9 who knowingly solicits or employs a runner, capper, 

10 or steerer, or acts as a runner, capper, or steerer, 

11 with the intent of seeking to falsely or fraudulently 

12 obtain benefits under a contract of insurance, or to 

13 falsely or fraudulently assert a claim against an in14 sured or an insurer for providing services to a client, 

15 patient, or customer; 

16 ‘‘(4) the term ‘runner, capper, or steerer’ 

17 means any person who, for either direct or indirect 

18 pecuniary benefit, knowingly procures or attempts to 

19 procure a client, patient, or customer at the direc20 tion of, or in cooperation with, a person committing 

21 automobile insurance fraud under subsection (b), re22 gardless of whether or not the person otherwise par23 ticipates in the fraud; and 

24 ‘‘(5) the term ‘written statement or claim’ 

25 means a written statement or submission by tele-
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1 phone, computer, or in any other electronic or digital 

2 form, that is part of, or in support of— 

3 ‘‘(A) an application for the issuance of or 

4 the rating of a commercial insurance policy; 

5 ‘‘(B) a certificate or evidence of self-insur6 ance for commercial insurance or commercial 

7 self-insurance; or 

8 ‘‘(C) a claim for payment or other benefit 

9 pursuant to an insurance policy or self-insur10 ance program for commercial or personal insur11 ance.’’. 

12 (b) CONFORMING AMENDMENT.—The chapter anal13 ysis for chapter 47 of title 18, United States Code, is 

14 amended by adding at the end the following:

‘‘1038. Automobile insurance fraud’’.

15 SEC. 3. BEST PRACTICES. 

16 (a) IN GENERAL.—The Department of Justice shall 

17 publish best practices for the States to use— 

18 (1) in licensing auto body shops that perform 

19 work paid for by insurers; and 

20 (2) in licensing medical treatment provided to 

21 people who are injured in automobile accidents. 

22 (b) GOAL.—The goal of publishing best practices as 

23 required under subsection (a) is to encourage the States 

24 to adopt such practices to limit the feasibility of commit25 ting insurance fraud.
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1 SEC. 4. INVESTIGATION OF FRAUDULENT PRACTICES. 

2 (a) IN GENERAL.—The Attorney General shall co3 operate with the offices of the United States Attorneys 

4 to— 

5 (1) aggressively investigate fraudulent chop 

6 shops and salvage yards; 

7 (2) aggressively prosecute automobile insurance 

8 fraud (as defined in section 1037 of title 18, United 

9 States Code); and 

10 (3) report statistics on investigations, prosecu11 tions, and convictions of automobile insurance fraud. 

12 (b) REPORTING.—Statistics referred to in subsection 

13 (a)(3) shall be reported to the Subcommittee on Adminis14 trative Oversight and the Courts of the Committee on the 

15 Judiciary of the Senate and the appropriate Committee 

16 of the House of Representatives. 

17 SEC. 5. FEDERAL-STATE-LOCAL ANTI-AUTO INSURANCE 

18 TASK FORCE. 

19 (a) ESTABLISHMENT OF UNITS.—The Attorney Gen20 eral shall establish Federal-State-Local Anti-Auto Insur21 ance Fraud Task Forces in the offices of the United 

22 States Attorneys in the 10 cities in the United States that 

23 are most severely affected, as determined by the Attorney 

24 General, by automobile insurance fraud (as defined in sec25 tion 1037 of title 18, United States Code). 
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1 (b) PURPOSE.—The special units established under 

2 subsection (a) shall investigate and prosecute automobile 

3 insurance fraud. 

4 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

5 are authorized to be appropriated to carry out this section 

6 $25,000,000 in fiscal year 2005, and such sums or fiscal 

7 years thereafter as determined by Congress. 

8 SEC. 6. INSURANCE COMPANY RIGHT TO MANDATORY IN9 SPECTION BEFORE INSURING. 

10 (a) RIGHT OF INSPECTION.—An insurance company 

11 shall have the right to require a mandatory inspection by 

12 an insurance company representative or agent of any 

13 motor vehicle prior to agreeing to provide insurance cov14 erage, except as provided under subsection (b). 

15 (b) EXEMPTION FROM PRE-INSURANCE INSPEC16 TION.—The right to inspect under subsection (a) may be 

17 waived by an insurance company under the following cir18 cumstances: 

19 (1) The motor vehicle is already insured under 

20 the policy for either comprehensive or collision cov21 erage. 

22 (2) The motor vehicle is a new vehicle pur23 chased from a retail dealership, and the insurer is 

24 provided with— 
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1 (A) a copy of the bill of sale containing a 

2 full description of the motor vehicle, including 

3 options and accessories, and a statement from 

4 the seller that the motor vehicle has no damage; 

5 or 

6 (B) a copy of the Manufacturer Statement 

7 of Origin, a statement from the seller that the 

8 motor vehicle has no damage, and a copy of the 

9 window sticker or dealer invoice containing a 

10 full description of the motor vehicle, including 

11 options or accessories. 

12 (3) An insured named in the policy has been in13 sured by the same insurer for 1 or more policy years 

14 under a policy that has continuously provided phys15 ical damage coverage. 

16 (4) The motor vehicle is rented or leased for 

17 less than 6 months, provided that the insurer is 

18 given a copy of the lease or rental agreement, and 

19 that the document contains a complete description of 

20 the rented or leased motor vehicle, including its con21 dition at the time of lease or rental. 

22 (5) The motor vehicle is rated or insured under 

23 a commercial automobile insurance policy. 

24 (6) When pre-insurance inspection would cause 

25 serious hardship to the insured or applicant for in-
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1 surance, and the hardship is documented in records 

2 maintained by the insurer. 

3 (c) NON-DISCRIMINATION OF PRE-INSURANCE IN4 SPECTIONS.—An insurer may require a pre-insurance in5 spection of an otherwise exempt motor vehicle. The deci6 sion to require a pre-insurance inspection of an exempt 

7 vehicle shall not be based on the age, race, sex, religion, 

8 or marital status of the applicant or insured, or the fact 

9 that the motor vehicle has been insured through a residual 

10 or non-voluntary insurance market.

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