HB 480: "An Act relating to voluntary self-evaluative audits by insurers and providing for an insurance compliance self-evaluative privilege; and indirectly amending Rules 104, 402, and 501, Alaska Rules of Evidence, Rules 16, 26, 30, 31, 33, 34, 36, and 40, Alaska Rules of Civil Procedure, and Rules 15, 16, and 17, Alaska Rules of Criminal Procedure."
00 HOUSE BILL NO. 480 01 "An Act relating to voluntary self-evaluative audits by insurers and providing for an 02 insurance compliance self-evaluative privilege; and indirectly amending Rules 104, 402, 03 and 501, Alaska Rules of Evidence, Rules 16, 26, 30, 31, 33, 34, 36, and 40, Alaska Rules 04 of Civil Procedure, and Rules 15, 16, and 17, Alaska Rules of Criminal Procedure." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 07 to read: 08 FINDINGS. The legislature finds that 09 (1) an insurance compliance self-evaluative privilege will encourage insurance 10 regulated companies and persons to conduct voluntary internal audits of their compliance 11 programs and management systems and to assess and improve compliance with state and 12 federal statutes, rules, and orders; 13 (2) protection of insurance consumers is enhanced by companies' voluntary 14 compliance with this state's insurance laws and other laws, and that the public will benefit
01 from incentives to identify and remedy insurance and other compliance problems. 02 (3) protection against inappropriate disclosure of insurance company internal 03 compliance audit information will encourage voluntary compliance and improve insurance 04 market conduct; and 05 (4) the voluntary provisions of this Act will not inhibit the exercise of the 06 regulatory authority by those entrusted with protecting insurance consumers. 07 * Sec. 2. AS 21.06.060(e) is amended to read: 08 (e) In the performance of duties under this title, except as provided in 09 AS 21.06.175, the director may 10 (1) disclose confidential information or records to the legislature, state, 11 federal, and international regulatory or law enforcement agencies, or the National 12 Association of Insurance Commissioners if the recipient will maintain the 13 confidentiality of the information or records; 14 (2) receive information or records from state, federal, and international 15 regulatory or law enforcement authorities or the National Association of Insurance 16 Commissioners and maintain the confidentiality of the information or records if 17 requested to do so or given notice that the information or records are confidential 18 under the law of the jurisdiction supplying them; and 19 (3) enter into agreements consistent with this section governing the 20 sharing of information or records that are confidential under this title with other state, 21 federal, and international regulatory or law enforcement agencies or the National 22 Association of Insurance Commissioners for the purpose of furthering any regulatory 23 or legal action that may be taken as part of the recipient's official duties. 24 * Sec. 3. AS 21.06.060(f) is amended to read: 25 (f) The following information or records submitted to or obtained by the 26 director are confidential: 27 (1) personally identifiable consumer information; however, the director 28 may disclose the information or records for the purpose of attempting to resolve a 29 consumer complaint; 30 (2) information or records established by a showing satisfactory to the 31 director to be a trade secret or proprietary business information, including
01 (A) detailed health insurance claim cost data; and 02 (B) justification for usual, customary, and reasonable charge 03 determinations; 04 (3) information or records provided by a person not subject to this title 05 at the request of the director if the information or records are identified as confidential 06 by the director; [AND] 07 (4) financial analysis ratios and examination synopses concerning 08 insurance companies that are submitted to the director by the National Association of 09 Insurance Commissioners; and 10 (5) information related to the insurance compliance self-evaluative 11 privilege under AS 21.06.175. 12 * Sec. 4. AS 21.06.080(c) is amended to read: 13 (c) The director may conduct examinations and investigations of insurance 14 matters, in addition to examinations and investigations expressly authorized, 15 considered proper to determine whether any person has violated a provision of this 16 title or to secure information useful in the lawful administration of its provisions. The 17 provisions of this subsection do not apply to insurance compliance audits 18 conducted under AS 21.06.175. 19 * Sec. 5. AS 21.06.120(a) is amended to read: 20 (a) The director may examine the affairs, transactions, accounts, records, and 21 assets of each authorized and formerly authorized insurer and each licensed and 22 formerly licensed managing general agent, reinsurance intermediary broker, 23 reinsurance intermediary manager, surplus lines broker, and surplus lines association 24 as often as the director considers advisable. In scheduling and determining the nature, 25 scope, and frequency of examinations, the director may consider any factor or material 26 that the director determines is appropriate, including the results of financial statement 27 analysis and ratios, competency of management or change of ownership, actuarial 28 opinions, reports of independent certified public accountants, number and nature of 29 consumer complaints, results of prior examinations, frequency of prior violations of 30 statute and regulation, and criteria set out in the Examiners' Handbook most recently 31 approved by the National Association of Insurance Commissioners and in effect when
01 the director conducts an examination. Examination of an alien insurer may be limited 02 to its insurance transactions and affairs in the United States. Examination of a 03 reciprocal insurer may also include examination of its attorney-in-fact to the extent 04 that the transactions of the attorney-in-fact relate to the insurer. The provisions of this 05 subsection do not apply to insurance compliance audits conducted under 06 AS 21.06.175. 07 * Sec. 6. AS 21.06.120(f) is amended to read: 08 (f) For the purpose of completing an examination of a person under this title, 09 except as provided in AS 21.06.175(b), the director may examine or investigate any 10 person, or the business of any person, if the director determines that the examination 11 or investigation is necessary or material to the examination of the person. 12 * Sec. 7. AS 21.06.150(d) is amended to read: 13 (d) The director may disclose the content of an examination report, 14 preliminary examination report or results, or a matter relating to it to the insurance 15 division of this or another state or country and to law enforcement officers of this or 16 another jurisdiction. Except as allowed by this section or other provision of law, the 17 director may not disclose the contents of a preliminary examination report before the 18 report is filed in the office of the director under AS 21.06.060. The provisions of this 19 subsection do not apply to insurance compliance audits conducted under 20 AS 21.06.175(b). 21 * Sec. 8. AS 21.06.170(a) is amended to read: 22 (a) With respect to the subject of an examination, investigation, or hearing 23 being conducted by the director or an examiner, if general written authority has been 24 given the examiner by the director, the director or the examiner may subpoena 25 witnesses and administer oaths or affirmations and examine any person under oath, 26 and may compel the production of records, books, papers, contracts, and other 27 documents by attachments, if necessary. If, in connection with an examination of an 28 insurer, the director desires to examine an officer, director, or manager who is then 29 outside this state, the director is authorized to conduct and to enforce by appropriate 30 and available means an examination under oath in another state or a territory of the 31 United States in which the officer, director, or manager may then presently be, to the
01 full extent permitted by the laws of the other state or territory, this special 02 authorization considered. An administrative law judge from the office of 03 administrative hearings (AS 44.64.010) conducting a hearing under this title may, in 04 the course of the hearing, exercise the powers granted to the director under this 05 subsection. The provisions of this subsection do not apply to insurance compliance 06 audits conducted under AS 21.06.175. 07 * Sec. 9. AS 21.06 is amended by adding a new section to read: 08 Sec. 21.06.175. Insurance compliance self-evaluative privilege. (a) Except 09 as otherwise provided in this section, an insurance compliance audit document is 10 privileged and is not discoverable or admissible as evidence in a legal action in a civil, 11 criminal, or administrative proceeding. The privilege created is a matter of substantive 12 law of this state and is not merely a procedural matter governing civil or criminal 13 procedures in the courts of this state. 14 (b) Except as otherwise provided in this section, if a company, person, or 15 entity performs or directs the performance of an insurance compliance audit, an 16 officer, employee, or agent involved with the insurance compliance audit or a 17 consultant who is hired for the purpose of performing the insurance compliance audit 18 may not be examined in a civil, criminal, or administrative proceeding regarding the 19 insurance compliance audit or any insurance compliance audit. The privilege in this 20 subsection may be expressly waived by the company that prepared or caused to be 21 prepared the insurance compliance audit document. 22 (c) An insurer may voluntarily submit a confidential insurance compliance 23 audit document to the director in connection with examinations conducted under this 24 chapter without waiving a privilege to which the insurer would otherwise be entitled. 25 (d) A document made confidential under (a) or (b) of this section may not be 26 disclosed as provided under AS 21.06.060(e)(1) and 21.06.060(e)(3). To the extent the 27 director has the authority to compel the disclosure of an insurance compliance audit 28 document under the other provisions of applicable law, the report furnished to the 29 director may not be provided to any other person or entity and shall be given the same 30 confidentiality and other protection as provided for voluntarily submitted documents. 31 (e) The director may use an insurance compliance audit document furnished as
01 a result of a request of the director only to determine whether a disclosed defect in an 02 insurer's policies and procedures or inappropriate treatment of a customer has been 03 remedied or whether an appropriate plan for its remedy is in place. 04 (f) An insurance compliance audit document submitted to the director shall 05 remain subject to all applicable statutory or common law privileges, including the 06 attorney-client privilege, the work product doctrine, and subsequent remedial 07 measures under Rule 407, Alaska Rules of Evidence. Nothing in this section, 08 including the release of an insurance compliance audit document limits, waives, or 09 abrogates the scope or nature of a statutory or common law privilege, including the 10 attorney-client privilege, the work product doctrine, and subsequent remedial 11 measures under Rule 407, Alaska Rules of Evidence. 12 (g) An insurance compliance audit document submitted to the director remains 13 the property of the insurer and may not be subject to disclosure or production under 14 AS 40.25.110 - 40.25.220. 15 (h) Disclosure of an insurance compliance audit document to a governmental 16 agency does not waive the privilege set out in (a) and (b) of this section with respect to 17 another person or governmental agency. 18 (i) A court of record, after an in camera review, may 19 require disclosure of privileged material under (a) or (b) of this section 20 if the court determines 21 (1) in a civil or administrative proceeding, that 22 (A) the privilege is asserted for a fraudulent purpose; or 23 (B) the material is not subject to the privilege; or 24 (2) in a criminal proceeding, that 25 (A) the privilege is asserted for a fraudulent purpose; 26 (B) the material is not subject to the privilege; or 27 (C) the material contains evidence relevant to the commission 28 of a criminal offense under this title and 29 (i) the director or attorney general has a compelling 30 need for the information; 31 (ii) the information is not otherwise available; and
01 (iii) the director or attorney general is unable to obtain 02 substantially equivalent information by another means without 03 incurring unreasonable cost and delay. 04 (j) Within 30 days after the director or attorney general serves on an insurer by 05 certified mail a written request for disclosure of an insurance compliance audit 06 document, the insurer that prepared the document or caused the document to be 07 prepared may file a complaint with the appropriate court requesting an in camera 08 hearing on whether the insurance compliance audit document or portions of the 09 document are privileged or subject to disclosure. The following apply to a complaint 10 under this subsection: 11 (1) if the insurer does not file a complaint for in camera review, the 12 privilege is waived only for the particular request; 13 (2) an insurer asserting the insurance compliance self-evaluative 14 privilege in response to a request for disclosure under this subsection shall include in 15 its request for an in camera hearing 16 (A) the date of the insurance compliance audit document; 17 (B) the identity of the entity conducting the audit; 18 (C) the general nature of the activities covered by the insurance 19 compliance audit; and 20 (D) an identification of the portions of the insurance 21 compliance audit document for which the privilege is being asserted; 22 (3) within 45 days after the filing of the complaint in this subsection, 23 the court shall issue an order scheduling the requested in camera hearing; 24 (4) the court, after an in camera review, may require disclosure of the 25 material for which the privilege is asserted if the court determines that the conditions 26 set out in (i) of this section apply. Upon making its determination, the court may only 27 compel the disclosure of those portions of an insurance compliance audit document 28 relevant to issues in dispute in the underlying proceeding. A compelled disclosure is 29 not considered to be a public document or a waiver of the privilege for any other civil, 30 criminal, or administrative proceeding. 31 (k) At any time during a proceeding, the parties may stipulate to the entry of
01 an order directing that specific information contained in an insurance compliance audit 02 document is or is not subject to the privileges under this section. The stipulation may 03 be limited to the proceeding and, absent specific language to the contrary, may not be 04 applicable to any other proceeding. 05 (l) An insurer asserting the insurance compliance self-evaluative privilege 06 under (a) or (b) of this section has the burden of demonstrating the applicability of the 07 privilege. Once an insurer has established it is qualified for the privilege, the party 08 seeking disclosure has the burden of proving that the privilege is not available because 09 the provisions of (i) of this section apply. 10 (m) The privileges set out in (a) and (b) of this section may not extend to 11 (1) documents, communications, data, reports, or other information 12 expressly required to be collected, developed, maintained, or reported to a regulatory 13 agency under this title; 14 (2) information obtained by observation or monitoring by a regulatory 15 agency; 16 (3) information obtained from a source independent of the insurance 17 compliance audit. 18 (n) In this section, 19 (1) "insurance compliance audit" means a voluntary, internal 20 evaluation, review, assessment, audit, or investigation for the purpose of identifying or 21 preventing noncompliance with, or promoting compliance with laws, regulations, 22 orders, or industry or professional standards conducted by or on behalf of an insurer 23 licensed or regulated under this title; 24 (2) "insurance compliance audit document" means a 25 (A) a document prepared as a result of or in connection with an 26 insurance compliance audit; 27 (B) a written response to the findings of an insurance 28 compliance audit, together with related field notes, records of observations, 29 findings, opinions, suggestions, conclusions, drafts, memoranda, drawings, 30 photographs, exhibits, computer-generated or electronically recorded 31 information, telephone records, maps, charts, graphs, and surveys collected or
01 developed for the primary purpose and in the course of the audit; 02 (C) an insurance compliance audit report prepared by an 03 auditor, who may be an employee of the insurer or an independent contractor, 04 which may include the scope of the audit, the information gained in the audit, 05 and the conclusions and recommendations, with exhibits and appendices; 06 (D) a memorandum or document analyzing portions or all of 07 the insurance compliance audit report and discussing potential implementation 08 issues; 09 (E) an implementation plan that addresses correcting past 10 noncompliance, improving current compliance, and preventing future 11 noncompliance; and 12 (F) analytic data generated in the course of conducting the 13 insurance compliance audit; 14 (3) "insurer" has the meaning given in AS 21.90.900. 15 * Sec. 10. AS 21.06.210(a) is amended to read: 16 (a) The administrative law judge or director shall allow a party to the hearing 17 to appear in person and by counsel, to be present during the giving of all evidence, to 18 have a reasonable opportunity to inspect all documentary evidence and to examine 19 witnesses, except as provided by AS 21.06.175, to present evidence in support of the 20 party's interest, and to have subpoenas issued by the administrative law judge or 21 director to compel attendance of witnesses and production of evidence in the party's 22 behalf, except as provided under AS 21.06.175. 23 * Sec. 11. The uncodified law of the State of Alaska is amended by adding a new section to 24 read: 25 INDIRECT COURT RULE AMENDMENT. The provisions of AS 21.06.175, as 26 enacted by sec. 9 of this Act, have the effect of amending Rules 104, 402, and 501, Alaska 27 Rules of Evidence, Rules 26, 30, 31, 33, 34, and 36, Alaska Rules of Civil Procedure, and 28 Rules 15, 16, and 17, Alaska Rules of Criminal Procedure, by making undiscoverable and 29 inadmissible in court, except under certain circumstances, an insurance compliance audit 30 document and related testimony. AS 21.06.175(j) amends Rules 16 and 40, Alaska Rules of 31 Civil Procedure, requiring certain matters to be included in the complaint, and requiring a
01 hearing to be scheduled within a certain time. 02 * Sec. 12. The uncodified law of the State of Alaska is amended by adding a new section to 03 read: 04 CONDITIONAL EFFECT. This Act takes effect only if sec. 11 of this Act receives 05 the two-thirds majority vote of each house required by art. IV, sec. 15, Constitution of the 06 State of Alaska.