Introduced Version






SENATE BILL No. 214

_____


DIGEST OF INTRODUCED BILL



Citations Affected: IC 27-2-22; IC 34-46-2-25.4.

Synopsis: Internal insurance compliance audits. Provides that certain information related to voluntary, internal insurance compliance audits is privileged information.

Effective: July 1, 2005.





Young R Michael




    January 4, 2005, read first time and referred to Committee on Corrections, Criminal, and Civil Matters.







Introduced

First Regular Session 114th General Assembly (2005)


PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
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SENATE BILL No. 214



    A BILL FOR AN ACT to amend the Indiana Code concerning insurance.

Be it enacted by the General Assembly of the State of Indiana:

SOURCE: IC 27-2-22; (05)IN0214.1.1. -->     SECTION 1. IC 27-2-22 IS ADDED TO THE INDIANA CODE AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2005]:
    Chapter 22. 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 for the purpose of:
        (1) identifying noncompliance;
        (2) preventing noncompliance; or
        (3) promoting 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 in subsection (a) does not include original underlying corporate records and documents described in section 17 of this chapter.
    (c) An insurance compliance audit document includes any of the following:
        (1) An insurance compliance audit report that:
            (A) is prepared by an employee of the insurer or an independent contractor; and
            (B) may include 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) corrections 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, where applicable, 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 an 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 an administrative proceeding. However, if the insurance compliance audit, insurance compliance audit document, or a part of the 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 act 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 commissioner.
    (d) An individual who knowingly fails to make a report under subsection (b) commits a Class A misdemeanor.
    Sec. 8. (a) The commissioner:
        (1) shall not provide to a person an insurance compliance audit document 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 under 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 commissioner is subject to applicable statutory or

common law privilege, including:
        (1) the work product doctrine;
        (2) attorney-client privilege; or
        (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 under section 6 or 7 of this chapter with respect to any other person or governmental entity.
    Sec. 11. A privilege established under 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 under section 6 or 7 of this chapter does not apply if a court, after an in camera review, requires disclosure in a civil or an 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 provided under 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 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 provided 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 under 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 the insurance compliance audit document or parts of the audit document are privileged or are subject to disclosure.
    Sec. 14. An insurer asserting a privilege established under section 6 or 7 of this chapter in response to a request for disclosure under section 13 of this chapter shall provide to the 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 under 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 commissioner or attorney general, that seeks disclosure 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 provided under 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 under 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 under 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 under section 6 or 7 of this chapter does not apply as described in sections 11 and 12 of this chapter, a court may compel the disclosure of only the parts of an insurance compliance audit document 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 under 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 under 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.

SOURCE: IC 34-46-2-25.4; (05)IN0214.1.2. -->     SECTION 2. IC 34-46-2-25.4 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2005]: Sec. 25.4. IC 27-2-22 (Concerning

certain information related to internal insurance compliance audits).