At first blush, the Violent Crime Control and Law Enforcement Act of 1994, P. L. 103-322, ("the Act") seems to have no relevance to the insurance industry. A quick glance at the ActAca,!a,,cs title would cause most in the industry to pass right on by without a thought as to its application to the insurance industry. However, mixed in with bans on assault weapons, newly designated capital crimes and designation of funds to enlarge police forces are two sections that have had, and continue to have, a profound effect on the insurance industry.

Sections 1033 and 1034 of the Act, which became effective September 13, 1994, provides for criminal and civil enforcement provisions for insurance fraud committed by persons "in the insurance industry." The Act also provides penalties for any person who has been convicted of certain prior criminal acts and willfully engages "in the business of insurance" affecting interstate commerce, unless that person receives written consent from the appropriate regulatory official. While those in the insurance industry have been operating under this statute for the past 13 years and should not be surprised to learn about this statute a reminder of the regulations and potential sanctions are needed from time to time.

The sections cited above made it illegal for any individual convicted of a crime involving dishonesty, breach of trust or a violation of the Act work or continue to work "in the business of insurance" affecting interstate commerce. The term "in the business of insurance" is defined as:

In short, the Act is applicable to anyone that is employed in a position that has anything to do with insurance. The Act is very strict in that it also did not provide for a "grandfather clause" for individuals that had such convictions but were employed "in the business of insurance" prior to its enactment. Further, it should be noted that any such individual must immediately cease acting in their employed capacity until they receive written consent from the appropriate insurance regulator prior to engaging in the business of insurance.

Anyone that suspects that they may be a "prohibited person" under the Act should immediately seek written consent to work in the business of insurance. The proper insurance regulator from who to seek permission is the Insurance Commissioner for the state the person is domiciled and licensed. Once written consent is received, that consent will be accepted by the insurance departments of all other states rendering the need to apply in several states moot.

Keep in mind that while the onus is on the individual to apply for written consent, insurance companies and agencies will be held responsible for willfully employing any "prohibited persons." As such, a proactive approach such as mandatory criminal background checks prior to hiring any individual for employment is advised.