00                            SENATE BILL NO. 229                                                                         
01 "An Act relating to self-audits by insurers; amending Rule 402, Alaska Rules of                                         
02 Evidence; and providing for an effective date."                                                                         
03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
04    * Section 1.  AS 21.09 is amended by adding new sections to read:                                                  
05            Sec. 21.09.330.  Insurer self-audit.  (a)  An insurer, or an insurer's agent,                              
06       officer, employee, or contractor, may conduct a self-audit.  A self-audit by an insurer                           
07       is privileged, and a communication relating to a self-audit is not subject to discovery                           
08       or admissible as evidence in a civil or administrative proceeding except as otherwise                             
09       expressly provided in this section.                                                                               
10            (b)  If the privilege under (a) of this section applies, an insurer or person may                            
11       not be examined in a civil or administrative proceeding regarding a self-audit or a                               
12       communication relating to a self-audit.                                                                           
13            (c)  The provisions of this section do not apply to the extent that                                          
14                 (1)  the insurer that conducted or caused to be conducted the self-audit                                

01       expressly waives the privilege in writing; or                                                                     
02                 (2)  in a civil or administrative proceeding, the court or hearing officer                              
03       determines that the self-audit privilege is asserted for a fraudulent purpose; before                             
04       making a determination under this paragraph, the court or hearing officer shall                                   
05       privately review the matter.                                                                                      
06            (d)  A court or hearing officer may only compel the disclosure of a                                          
07       communication privileged under (a) of this section that is relevant to an issue in                                
08       dispute in the underlying proceeding.  A party unsuccessfully opposing disclosure may                             
09       apply for an appropriate order protecting the communication from further disclosure.                              
10            (e)  An insurer asserting a self-audit privilege under this section in response to                           
11       a request for disclosure shall provide, at the time of filing of any objection to the                             
12       disclosure, the following information:                                                                            
13                 (1)  the identity of the person that conducted the self-audit;                                          
14                 (2)  the general nature of the activities covered by the self-audit;                                    
15                 (3)  an identification of the communications for which the privilege is                                 
16       being asserted; and                                                                                               
17                 (4)  the date of the communications.                                                                    
18            (f)  A party seeking disclosure under (c)(2) of this section has the burden of                               
19       proving that the privilege is asserted for a fraudulent purpose.                                                  
20            (g)  A person may at any time stipulate to entry of an order directing that a                                
21       specific communication relating to a self-audit is or is not subject to the privilege                             
22       described in this section.                                                                                        
23            (h)  This section does not apply to                                                                          
24                 (1)  documents, data, reports, or other information required to be                                      
25       collected, developed, maintained, or reported to an agency under state or federal law                             
26       or order; however, a disclosure under this section does not by itself make this                                   
27       paragraph applicable;                                                                                             
28                 (2)  information obtained by observation, investigation, or monitoring                                  
29       by an agency; or                                                                                                  
30                 (3)  a communication obtained by examination or investigation                                           
31       authorized by the director if the communication is obtained independently from a self-                            

01       audit and even if the communication duplicates information, in whole or in part,                                  
02       contained within a self-audit.                                                                                    
03            Sec. 21.09.340.  Authority of director over self-audit privilege.  The self-                               
04       audit privilege described in AS 21.09.330 does not impair the authority of the director                           
05       to conduct an examination of an insurer under this title, to require disclosure of a                              
06       communication, or to examine a person.  However,                                                                  
07                 (1)  a communication that is privileged under AS 21.09.330 must be                                      
08       treated by the director as confidential;                                                                          
09                 (2)  disclosure of a communication to the director does not constitute a                                
10       waiver of privilege; in the event that a privileged communication is disclosed by the                             
11       insurer to a third person, that communication is also considered to be privileged;                                
12                 (3)  a provision of law allowing the director to make information,                                      
13       records, and reports public, and a provision permitting the director to exchange                                  
14       information and data with the National Association of Insurance Commissioners, does                               
15       not apply to a communication relating to a self-audit disclosed to the director under                             
16       AS 21.09.330; a communication disclosed to the director remains the property of the                               
17       insurer; to the extent that the director has the authority to compel disclosure of a                              
18       communication relating to a self-audit under other provisions of law, a communication                             
19       disclosed to the director may not be disclosed to another person and must also be                                 
20       treated as confidential;                                                                                          
21                 (4)  the director may not impose an administrative fine, penalty, or                                    
22       other sanction based solely upon disclosure of a communication; before imposing an                                
23       administrative fine, penalty, or other sanction, the director shall consider any                                  
24       reasonable corrective measures undertaken by the insurer; the imposition of an                                    
25       administrative sanction is subject to applicable hearing procedures provided under this                           
26       title; and                                                                                                        
27                 (5)  a communication disclosed to the director under this section is                                    
28       subject to applicable privileges existing under law.                                                              
29            Sec. 21.09.349.  Definitions.  In AS 21.09.330 - 21.09.349,                                                
30                 (1)  "communication" means an oral or written communication and                                         
31       information relating to a self-audit, and includes a self-audit document;                                         

01                 (2)  "self-audit" means a process of voluntary internal evaluation,                                     
02       review, assessment, or audit not expressly required by law designed to identify and                               
03       prevent noncompliance or to improve compliance with law;                                                          
04                 (3)  "self-audit document" means a document prepared as a result of or                                  
05       in connection with a self-audit by an insurer; "self-audit document" does not include                             
06       documents existing before the beginning of a self-audit.                                                          
07    * Sec. 2.  The uncodified law of the State of Alaska is amended by adding a new section to                         
08 read:                                                                                                                   
09       INDIRECT COURT RULE AMENDMENT.  The provisions of AS 21.09.330, as                                                
10 enacted by sec. 1 of this Act, have the effect of amending Rule 402, Alaska Rules of                                    
11 Evidence, by making inadmissible in court, except under certain circumstances, a self-audit                             
12 and related self-audit materials.                                                                                       
13    * Sec. 3.  The uncodified law of the State of Alaska is amended by adding a new section to                         
14 read:                                                                                                                   
15       CONDITIONAL EFFECT.  This Act takes effect only if sec. 2 of this Act receives the                                
16 two-thirds majority vote of each house required by art. IV, sec. 15, Constitution of the State of                       
17 Alaska.                                                                                                                 
18    * Sec. 4.  This Act takes effect July 1, 2002.