Bill Text: AZ HB2560 | 2014 | Fifty-first Legislature 2nd Regular | Engrossed
Bill Title: Insurance; self evaluative privilege
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2014-04-22 - Chapter 154 [HB2560 Detail]
Download: Arizona-2014-HB2560-Engrossed.html
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Senate Engrossed House Bill |
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State of Arizona House of Representatives Fifty-first Legislature Second Regular Session 2014
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HOUSE BILL 2560 |
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AN ACT
Amending title 20, Arizona Revised Statutes, by adding chapter 23; relating to the insurance compliance self‑evaluative privilege.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 20, Arizona Revised Statutes, is amended by adding chapter 23, to read:
CHAPTER 23
INSURANCE COMPLIANCE SELF‑EVALUATIVE PRIVILEGE
ARTICLE 1. GENERAL PROVISIONS
20-3301. Definitions; applicability
A. In this article, unless the context otherwise requires:
1. "Insurance compliance audit" means a voluntary, internal evaluation, review, assessment, audit or investigation that follows adopted written standards and criteria for the purpose of identifying or preventing noncompliance with or promoting compliance with laws, regulations, orders or industry or professional standards that is conducted by or on behalf of a company licensed or regulated under this title and specified in subsection B of this section, or that involves an activity regulated under this title. An audit shall establish a start and end date.
2. "Insurance compliance self‑evaluative audit document":
(a) Means documents prepared as a result of or in connection with an insurance compliance audit and identified specifically as part of an insurance compliance audit.
(b) Includes any of the following:
(i) An insurance compliance audit report prepared by an auditor, who may be an employee of the company or an independent contractor, which may include the scope of the audit, the information gained in the audit and conclusions and recommendations, with exhibits and appendices.
(ii) Memoranda and documents analyzing portions or all of the insurance compliance audit report and discussing potential implementation issues.
(iii) An implementation plan that addresses correcting past noncompliance, improving current compliance and preventing future noncompliance.
(iv) Analytic data generated in the course of conducting the insurance compliance audit.
(c) May include a written response to the findings of an insurance compliance audit and field notes and records of observations, findings, opinions, suggestions, conclusions, drafts, memoranda, drawings, photographs, exhibits, computer‑generated or electronically recorded information, phone records, maps, charts, graphs and surveys if this supporting information is collected or developed for the primary purpose and in the course of an insurance compliance audit.
B. THIS ARTICLE APPLIES TO INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT DOCUMENTS PREPARED AND INSURANCE COMPLIANCE AUDITS CONDUCTED BY OR ON BEHALF OF AN INSURER LICENSED OR REGULATED UNDER THIS TITLE INCLUDING ANY:
1. STOCK, MUTUAL, RECIPROCAL OR TITLE INSURER.
2. FRATERNAL BENEFIT SOCIETY.
3. HEALTH CARE SERVICES ORGANIZATION.
4. HOSPITAL SERVICE CORPORATION, MEDICAL SERVICE CORPORATION, DENTAL SERVICE CORPORATION, OPTOMETRIC SERVICE CORPORATION OR HOSPITAL, MEDICAL, DENTAL AND OPTOMETRIC SERVICE CORPORATION.
5. PREPAID DENTAL PLAN ORGANIZATION.
6. MECHANICAL REIMBURSEMENT REINSURER.
7. PREPAID LEGAL PLAN.
8. LLOYD'S ASSOCIATION.
9. SERVICE COMPANY AS DEFINED IN THIS TITLE.
20-3302. Insurance compliance self‑evaluative privilege; requirements
A. Except as provided in subsections B and C of this section, an insurance compliance self‑evaluative audit document is privileged information and is not discoverable or admissible as evidence in any legal action in any civil or administrative proceeding other than a regulatory or legal action brought as part of the director's duties. This privilege is a matter of substantive law of this State and is not merely a procedural matter governing civil proceedings in the courts of this State. The following provisions apply to the privilege:
1. If any company, person or entity performs or directs the performance of an insurance compliance audit, an officer, employee or agent involved with the insurance compliance audit or any consultant who is hired for the purpose of performing the insurance compliance audit may not be examined in any civil or administrative proceeding as to the insurance compliance audit or any insurance compliance self‑evaluative audit document.
2. In connection with examinations conducted under this title, a company may submit an insurance compliance self‑evaluative audit document to the director or the director's designee as a confidential document without waiving the privilege set forth under this subsection to which the company would otherwise be entitled. any such report furnished to the director may not be provided to any other person or entity and shall be accorded the same confidentiality and other protections as provided for submitted documents.
3. If a company submits an insurance compliance self‑evaluative audit document to the director, the document remains CONFIDENTIAL AND PRIVILEGED AND:
(a) Subject to all applicable statutory or common law privileges, including THE SELF-CRITICAL AUDIT PRIVILEGE, the work product doctrine, attorney‑client privilege or the subsequent remedial measures exclusion.
(b) Is not subject to any further disclosure or production.
(c) Not subject to title 39, chapter 1, article 2, not subject to subpoena and not subject to discovery or admissible in a private administrative proceeding other than conducted by the director, or in a private civil action.
4. Disclosure of an insurance compliance self‑evaluative audit document to a governmental agency, whether voluntary or pursuant to compulsion of law, does not constitute a waiver of the privilege set forth under this subsection with respect to any other person or governmental agency.
5. a company shall notify the director prior to the initiation of an insurance compliance audit and, at the conclusion of the insurance compliance audit, notify the director and make all insurance compliance audit documents available to the director. THE DIRECTOR MAY OBTAIN AUDIT DOCUMENTS AT ANY TIME.
6. THE DIRECTOR MAY USE THE AUDIT DOCUMENTS IN THE FURTHERANCE OF ANY REGULATORY OR LEGAL ACTION BROUGHT AS PART OF the director's duties. the company shall comply with any compliance dates set by the director with respect to the audit.
7. IN ORDER TO FACILITATE IDENTIFICATION, AUDIT DOCUMENTS PRODUCED FOR THE AUDIT SHALL BE LABELED "COMPLIANCE REPORT: PRIVILEGED DOCUMENT."
8. THE PRIVILEGE DESCRIBED IN THIS ARTICLE DOES NOT APPLY TO:
(a) A DOCUMENT, COMMUNICATION, DATA OR REPORT OR OTHER INFORMATION REQUIRED BY THE DEPARTMENT OR OTHER REGULATORY AGENCY TO BE COLLECTED, DEVELOPED, MAINTAINED OR REPORTED UNDER APPLICABLE LAW.
(b) INFORMATION OBTAINED BY OBSERVATION, SAMPLING OR MONITORING BY THE DEPARTMENT OR OTHER REGULATORY AGENCY.
(c) INFORMATION OBTAINED FROM A SOURCE NOT INVOLVED IN THE PREPARATION OF THE INSURANCE COMPLIANCE AUDIT REPORT.
(d) Documents, communications, data, spreadsheets, reports, memoranda, drawings, photographs, exhibits, computer records, maps, charts, graphs, reCorDings and surveys kept or prepared in the ordinary course of business.
9. IF AN AUDIT REPORT IS OBTAINED, REVIEWED OR USED IN A CRIMINAL PROCEEDING, THE PRIVILEGE DESCRIBED IN THIS ARTICLE IS NOT WAIVED OR ELIMINATED FOR ANY OTHER PURPOSE.
10. THIS ARTICLE DOES NOT PROVIDE CIVIL OR CRIMINAL IMMUNITY TO AN ORGANIZATION OR TO AFFECT ANY OTHER PRIVILEGE THAT MAY BE AVAILABLE BY LAW.
11. A PERSON WHO CONDUCTS OR PARTICIPATES IN THE PREPARATION OF A COMPLIANCE AUDIT AND WHO HAS ACTUALLY OBSERVED PHYSICAL EVENTS MAY TESTIFY REGARDING THOSE EVENTS, BUT MAY NOT BE COMPELLED TO TESTIFY OR PRODUCE DOCUMENTS RELATED TO ANY PRIVILEGED PART OF THE AUDIT OR ANY ITEM LISTED IN section 20-3301, subsection a, paragraph 2.
12. THE AUDIT SHALL NOT PREVENT THE DISCOVERY OF A DOCUMENT OR OTHER EVIDENCE, OTHERWISE DISCOVERABLE, MAINTAINED BY AN INSURER THAT WAS NOT DEVELOPED FOR THE AUDIT PURSUANT TO THIS ARTICLE.
B. The privilege set forth under subsection A of this section does not apply under the following circumstances:
1. To the extent that it is expressly waived by the company that prepared or caused to be prepared the insurance compliance self‑evaluative audit document.
2. In a civil or administrative proceeding OTHER THAN a regulatory or legal action brought as part of the director's duties, a court of record, after an in camera review, may require disclosure of material for which the privilege set forth under subsection A of this section is asserted if the court determines one of the following:
(a) The privilege is asserted for a fraudulent purpose.
(b) The material is not subject to the privilege.
(c) the privileged material shows evidence of noncompliance with applicable state or federal laws, rules, regulations or orders of the department and the company, person or entity fails to undertake corrective action or eliminate the noncompliance within the compliance date set by the director.
C. except for the director's authority under sections 20-156, 20-157, 20-157.01, 20-160 and 20-466, Within thirty days after an insurer is served a written request by certified mail for disclosure of an insurance compliance self‑evaluative audit document, the insurer may file with the appropriate court a petition requesting an in camera hearing on whether the insurance compliance self‑evaluative audit document or portions of the document are privileged under this section or subject to disclosure. The court has jurisdiction over a petition filed by a company under this subsection requesting an in camera hearing on whether the insurance compliance self‑evaluative audit document or portions of the document are privileged or subject to disclosure. The company's failure to file a petition waives the privilege for this request only. If a company files a petition for an in camera hearing pursuant to this subsection, the following apply:
1. The petition shall include all of the information set forth in paragraph 4 of this subsection.
2. the court shall issue an order scheduling an in camera hearing to determine whether the insurance compliance self‑evaluative audit document or portions of the document are privileged under this section or subject to disclosure.
3. After an in camera review, the court may require disclosure of material for which the privilege under subsection A of this section is asserted if the court determines, based on its in camera review, that any one of the conditions set forth in subsection B, paragraph 2 applies to a civil or administrative proceeding. On making this determination, the court may only compel the disclosure of those portions of an insurance compliance self‑evaluative audit document that are relevant to issues in dispute in the underlying proceeding. Any compelled disclosure will not be considered to be a public document or be deemed to be a waiver of the privilege for any other civil or administrative proceeding. A party unsuccessfully opposing disclosure may apply to the court for an appropriate order protecting the document from further disclosure.
4. At the time of filing an objection to the disclosure, the company shall provide all of the following information:
(a) The date of the insurance compliance self-evaluative audit document.
(b) The identity of the entity conducting the audit.
(c) The general nature of the activities covered by the insurance compliance audit.
(d) An identification of the portions of the insurance compliance self‑evaluative audit document for which the privilege is being asserted.
D. A company asserting the insurance compliance self‑evaluative privilege set forth under subsection A of this section has the burden of demonstrating the applicability of the privilege. Once a company has established the applicability of the privilege, the party seeking disclosure under subsection B, paragraph 2, subdivision (a) of this section has the burden of proving that the privilege is asserted for a fraudulent purpose. The director or attorney general seeking disclosure under subsection B, paragraph 3 of this section has the burden of proving the elements set forth in subsection B, paragraph 3 of this section.
E. At any time, the parties may stipulate in proceedings under subsection B of this section to entry of an order directing that specific information contained in an insurance compliance self‑evaluative audit document is or is not subject to the privilege provided under subsection A of this section. The stipulation may be limited to the instant proceeding and, absent specific language to the contrary, is not applicable to any other proceeding.
F. This section or the release of any self‑evaluative audit document under this section does not limit, waive or abrogate the scope or nature of any statutory or common law privilege including the work product doctrine, the attorney‑client privilege or the subsequent remedial measures exclusion.
Sec. 2. Applicability
The insurance compliance self‑evaluative privilege established in title 20, chapter 23, Arizona Revised Statutes, as added by this act, applies to all litigation and administrative proceedings pending on the effective date of this act.
