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Insurance Department seeks explicit restitution authority; insurers warn against broad discretionary power
Summary
House Bill 1088 would give the Insurance Department explicit authority to require restitution to victims of unlawful acts by licensed insurance entities. The department said the change would help return money to harmed consumers; insurers warned the proposal creates broad discretionary authority and may overlap existing fraud statutes.
Johannes “Johnny” Palsgraf, general counsel for the Insurance Department, testified in support of House Bill 1088, a commissioner-sponsored bill that would give the department explicit authority to order restitution to victims of violations by licensees under the insurance title.
Paulsgraf described a recent case in which a seller of a self-insured arrangement sold a policy that the department and federal regulators later determined was unenforceable; a farmer incurred roughly $500,000 in medical costs that were not covered, and a veterans’ group provided assistance that the department said might otherwise have been recovered through restitution if statutory authority had been explicit. The bill would add restitution as a potential remedy following administrative proceedings and would require due process and an opportunity for hearing before any order.
Committee members asked detailed procedural questions. Representative Jim Casper asked whether the proposal would let the insurance commissioner unilaterally order restitution without a court judgment; Paulsgraf said administrative hearings and due process are required and orders could be challenged in district court. Representative Ben Koppelman and others asked whether the bill’s language should define eligible recipients more clearly; Paulsgraf said “person” in North Dakota case law is interpreted broadly enough to encompass partnerships, trusts and corporations.
The Association of North Dakota Insurers, represented by attorney John Ward, testified in opposition and asked for more work on the bill. Ward said the department already has restitution authority for insurance fraud under existing law and that the new language creates ambiguity and a broad discretionary power to order restitution outside typical court processes; he asked the department to work with industry on targeted amendments.
Paulsgraf and other agency witnesses said they are willing to work with insurers on clarifying language. The committee closed the hearing after receiving both supportive and opposing testimony and signaled it would consider amendments.
