Bill Text: IN SB0053 | 2012 | Regular Session | Introduced
Bill Title: Internal insurance compliance audits.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2012-01-04 - First reading: referred to Committee on Insurance and Financial Institutions [SB0053 Detail]
Download: Indiana-2012-SB0053-Introduced.html
Citations Affected: IC 27-2-23; IC 34-46-2-25.3.
Synopsis: Internal insurance compliance audits. Provides that certain
information related to voluntary, internal insurance compliance audits
is privileged information.
Effective: July 1, 2012.
January 4, 2012, read first time and referred to Committee on Insurance and Financial
Institutions.
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A BILL FOR AN ACT to amend the Indiana Code concerning
insurance.
Chapter 23. Privilege Applying to Internal Insurance Compliance Audits
Sec. 1. As used in this chapter, "department" refers to the department of insurance created by IC 27-1-1-1.
Sec. 2. As used in this chapter, "insurance compliance audit" means a voluntary, internal evaluation, review, assessment, audit, or investigation to:
(1) identify noncompliance;
(2) prevent noncompliance; or
(3) promote compliance;
with laws, regulations, orders, or industry or professional standards, conducted by or on behalf of an insurer or activity licensed or regulated under this title.
Sec. 3. (a) As used in this chapter, "insurance compliance audit
document" means a document and related materials prepared in
connection with an insurance compliance audit.
(b) The term does not include original, underlying corporate
records and documents described in section 17 of this chapter.
(c) The term includes any of the following:
(1) An insurance compliance audit report that:
(A) is prepared by an employee or independent contractor
of the insurer; and
(B) may include a description of the scope of the audit, the
information gained in the audit, and conclusions and
recommendations, with exhibits and appendices.
(2) Memoranda and documents analyzing parts or all of an
insurance compliance audit report and discussing potential
implementation issues.
(3) An implementation plan that addresses:
(A) correction of previous noncompliance;
(B) improvement of current compliance; and
(C) prevention of future noncompliance.
(4) Supporting documents, notes, records, analytic data, or
other evidentiary materials generated in the course of
conducting the insurance compliance audit.
Sec. 4. As used in this chapter, "insurer" has the meaning set
forth in IC 27-1-2-3.
Sec. 5. As used in this chapter, "reasonable corrective action"
may include:
(1) reimbursement of premium payments, surcharges, or
other charges made;
(2) compensation for losses sustained;
(3) reinstatement of policies canceled; or
(4) another appropriate remedy;
with respect to persons adversely affected by an insurer's
noncompliance with a law, a regulation, an order, or an industry
or professional standard revealed by an insurance compliance
audit.
Sec. 6. Except as provided in this chapter, an insurance
compliance audit document is privileged information and is not
discoverable or admissible as evidence in a civil or administrative
proceeding.
Sec. 7. (a) Except as provided in this chapter, an individual
involved in preparation of an insurance compliance audit or
insurance compliance audit document is not subject to examination
concerning the insurance compliance audit or insurance
compliance audit document in a civil or administrative proceeding.
However, if any part of an insurance compliance audit or
insurance compliance audit document is not privileged, the
individual may be examined concerning the part of the insurance
compliance audit or insurance compliance audit document that is
not privileged.
(b) An individual involved in the preparation of an insurance
compliance audit or insurance compliance audit document who
becomes aware of an alleged criminal violation in the course of the
preparation shall report the alleged violation to the insurer.
(c) Not later than thirty (30) days after receiving a report under
subsection (b), the insurer shall provide the information to the
insurance commissioner.
(d) An individual who knowingly fails to make a report under
subsection (b) commits a Class A misdemeanor.
Sec. 8. (a) The insurance commissioner:
(1) shall not make available to any person an insurance
compliance audit document that was provided to the
commissioner:
(A) voluntarily; or
(B) at the request of the commissioner under a claim of
authority to compel disclosure under section 13 of this
chapter; and
(2) shall treat an insurance compliance audit document as
confidential information for purposes of IC 27-1-3-10.5
without waiving the privileges established by sections 6 and 7
of this chapter.
(b) An insurance compliance audit document provided as
described in subsection (a)(1) may not be used for any purpose
other than to determine:
(1) whether:
(A) disclosed defects in an insurer's policies and
procedures; or
(B) inappropriate treatment of customers;
has been remedied; or
(2) whether an appropriate plan for remedy of a defect or
inappropriate treatment specified in subdivision (1) is in
place.
Sec. 9. (a) An insurance compliance audit document that is
provided to the insurance commissioner is subject to applicable
statutory or common law privilege, including:
(1) the work product doctrine;
(2) attorney-client privilege; and
(3) the subsequent remedial measures exclusion.
(b) An insurance compliance audit document provided to the commissioner is the property of the insurer and is confidential.
Sec. 10. An insurer that discloses an internal compliance audit document to a governmental entity:
(1) voluntarily; or
(2) as required by law;
does not waive a privilege established by section 6 or 7 of this chapter with respect to any other person or governmental entity.
Sec. 11. A privilege established by section 6 or 7 of this chapter does not apply to the extent that the privilege is expressly waived by the insurer that prepared or caused to be prepared an insurance compliance audit document.
Sec. 12. A privilege established by section 6 or 7 of this chapter does not apply to material that a court, after an in camera review of the material, requires to be disclosed in a civil or administrative proceeding after determining at least one (1) of the following:
(1) The privilege is asserted for a fraudulent purpose.
(2) The material is not subject to the privilege as described in section 17 of this chapter.
(3) The insurer has failed to undertake reasonable corrective action or eliminate noncompliance with applicable laws within a reasonable period.
Sec. 13. (a) Not later than thirty (30) days after the insurance commissioner, the attorney general, or a pleading party in a civil action makes a written request by certified mail for disclosure of an insurance compliance audit document, the insurer that prepared the insurance compliance audit document or caused the insurance compliance audit document to be prepared may file a petition in a court with jurisdiction in the same venue chosen by the original pleading party requesting an in camera hearing to determine whether the insurance compliance audit document or parts of the insurance compliance audit document are subject to disclosure.
(b) Failure by an insurer to file a petition under subsection (a) waives the privilege established under this chapter for the insurance compliance audit document that is the subject of a request for disclosure under subsection (a).
(c) An insurer asserting a privilege established by section 6 or 7 of this chapter in response to a request for disclosure of an insurance compliance audit document under subsection (a) must
include in the insurer's petition for an in camera hearing, with
respect to the insurance compliance audit document, all the
information listed in section 14 of this chapter.
(d) Not later than thirty (30) days after an insurer files a
petition under subsection (a), the court shall issue an order
scheduling an in camera hearing to determine whether any part of
the insurance compliance audit document is privileged or subject
to disclosure.
Sec. 14. An insurer asserting a privilege established by section
6 or 7 of this chapter in response to a request for disclosure under
section 13 of this chapter shall provide to the insurance
commissioner, the attorney general, or a pleading party in a civil
matter, at the time the insurer files an objection to the disclosure,
the following information:
(1) The date of the insurance compliance audit document.
(2) The identity of the person who conducted the insurance
compliance audit.
(3) The general nature of the activities covered by the
insurance compliance audit.
(4) An identification of the parts of the insurance compliance
audit document for which the privilege is asserted.
Sec. 15. (a) An insurer that asserts a privilege established by
section 6 or 7 of this chapter has the burden of demonstrating the
applicability of the privilege.
(b) After an insurer has established the applicability of a
privilege under subsection (a), the pleading party in a civil action,
including the insurance commissioner or attorney general, that
seeks disclosure of material for a cause described in section 12 of
this chapter has the burden of proving that the:
(1) privilege is asserted for a fraudulent purpose;
(2) material is not subject to the privilege as described in
section 17 of this chapter; or
(3) insurer failed to undertake reasonable corrective action or
failed to eliminate noncompliance within a reasonable period.
(c) If the court finds that the privilege is asserted for a
fraudulent purpose, the court shall award reasonable attorney's
fees to be paid by the insurer to the pleading party.
Sec. 16. (a) The parties described in section 13 of this chapter
may at any time stipulate in legal proceedings before a court under
this chapter to entry of an order directing whether specific
information contained in an insurance compliance audit document
is subject to a privilege established by section 6 or 7 of this chapter.
(b) A stipulation described in subsection (a) may be limited to the instant proceeding and, absent specific language to the contrary, is not applicable in any other proceeding.
Sec. 17. A privilege established by section 6 or 7 of this chapter does not extend to the following original, underlying corporate records and documents:
(1) Documents, communications, data, reports, or other information expressly required to be collected, developed, maintained, or reported to a regulatory entity under this title, another state law, or federal law.
(2) Information obtained through observation or monitoring by a regulatory entity.
(3) Information obtained from a source independent of an insurance compliance audit.
(4) Documents, communications, data, reports, memoranda, drawings, photographs, exhibits, computer records, maps, charts, graphs, surveys, and other materials prepared or maintained in the ordinary course of insurance business and not in relation to an insurance compliance audit.
Sec. 18. (a) If a privilege established by section 6 or 7 of this chapter does not apply to an insurance compliance audit document as described in section 11 or 12 of this chapter, a court may compel the disclosure of only the parts of the insurance compliance audit document that are relevant to issues in dispute in the underlying proceeding.
(b) Information required to be disclosed under subsection (a) is confidential and not public information, and a privilege established by section 6 or 7 of this chapter that otherwise applies to the information is not waived for purposes of another civil or administrative proceeding.
Sec. 19. (a) This chapter does not limit, waive, or abrogate the scope or nature of a statutory or common law privilege other than a privilege established by this chapter.
(b) Except as provided in section 13 of this chapter, this chapter does not limit the department's authority to compel the disclosure of documents necessary to further the department's general regulatory purpose.
