HB 1164 - AS INTRODUCED
2000 SESSION
HOUSE BILL 1164
AN ACT relative to insurance compliance self audits.
SPONSORS: Rep. Russell, Ches 15
This bill establishes an insurance compliance self-audit privilege to protect the confidentiality of communications relating to voluntary internal compliance audits.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
00-2226
01/10
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand
AN ACT relative to insurance compliance self audits.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Statement of Purpose. The general court hereby finds and declares that protection of insurance consumers is enhanced by vigorous voluntary compliance by insurers with this state's insurance and other laws and that the public will benefit from incentives to identify and remedy insurance and other compliance issues. The general court further finds that limited expansion of the protection against disclosure will encourage voluntary compliance and improve insurance market conduct quality and that the voluntary provisions of this act will not inhibit the exercise of regulatory authority by those entrusted with protecting insurance consumers. To encourage insurers and persons conducting activities regulated under this title to conduct voluntary internal audits of their compliance programs and management systems and to assess and improve compliance with state and federal statutes, rules, and orders, this act establishes an insurance compliance self-audit privilege to protect the confidentiality of communications relating to voluntary internal compliance audits.
2 New Chapter; Insurance Compliance Self Audits. Amend RSA by inserting after chapter 402-I the following new chapter:
CHAPTER 402-J
INSURANCE COMPLIANCE SELF AUDITS
402-J:1 Definitions. In this chapter:
I. "Commissioner" means the insurance commissioner.
II. "Insurance compliance self-audit" means a process of voluntary internal evaluation, review, assessment, or audit not otherwise expressly required by law of an insurer, or of an activity regulated under the insurance laws or other laws of New Hampshire or other states or federal law applicable to an insurer, or of management systems related to the insurer or activity, which process is designed to identify and prevent noncompliance and to improve compliance with such statutes, rules, or orders. An insurance compliance self-audit may be conducted by the insurer, its employees, or by independent contractors or agents.
III. "Insurance compliance self-audit document" means any document prepared as a result of, or in connection with an insurance compliance self-audit. An insurance compliance self-audit document includes written response to the findings of an insurance compliance self-audit. An insurance compliance self-audit document includes, but is not limited to, field notes and records of observations, findings, opinions, suggestions, conclusions, drafts, memoranda, drawings, photographs, computer-generated or electronically recorded information, phone records, maps, charts, graphs, and surveys, provided this supporting information is collected or developed for the primary purpose and in the course of an insurance compliance self-audit. An insurance compliance self-audit document also includes any of the following:
(a) A report prepared by an auditor, who may be an employee of the insurer 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;
(b) Memoranda and documents analyzing portions or all of the report and discussing potential implementation issues;
(c) An implementation plan that addresses correction of past noncompliance, improvement of current compliance, or prevention of future noncompliance; or
(d) Analytic data generated in the course of conducting the insurance compliance self-audit.
402-J:2 Scope of Privilege.
I. An insurance compliance self-audit document is privileged information and is not discoverable or admissible as evidence in any civil or criminal legal action, or in any administrative proceeding, except as otherwise expressly provided in this chapter. In the event that any insurance compliance self-audit document provided by an insurer to the commissioner is disclosed to a third party by the commissioner's office, that document shall not be admissible as evidence in any civil or criminal legal action or administrative proceeding. The privilege set forth in this paragraph is a matter of the substantive law.
II. If the privilege set forth in paragraph I of this section applies, no insurer, person, or entity performing or directing the performance of an insurance compliance self-audit, no officer or employee participating therein, nor any consultant retained to participate therein, may be examined in any civil, criminal, or administrative proceeding as to the insurance compliance self-audit or any insurance compliance self-audit document.
402-J:3 Waiver of Privilege; Order for Disclosure.
I. The privilege set forth in RSA 402-J:2 shall not apply to the extent the insurer that prepared or caused to be prepared the insurance compliance self-audit document expressly waives the privilege by so stating its intent in writing.
II. In a civil or administrative proceeding, the presiding justice or officer may, after an in camera review, require disclosure of material for which the privilege set forth in RSA 402-J:2 is asserted, if the justice or officer determines one of the following:
(a) The privilege is asserted for a fraudulent purpose; or
(b) The material is not subject to the privilege.
III. The privilege set forth in RSA 402-J:2 does not apply if the material contains evidence relevant to commission of a criminal offense under the New Hampshire insurance laws, and all of the following factors are present:
(a) The commissioner or attorney general has a compelling need for the information;
(b) The information is not otherwise available; and
(c) The commissioner or attorney general is unable to obtain the substantial equivalent of the information by any means without incurring unreasonable cost and delay.
IV. In ordering disclosure under this section, the presiding justice or officer shall compel the disclosure of only those portions of an insurance compliance self-audit document relevant to issues in dispute in the underlying proceeding. A party unsuccessfully opposing disclosure may apply for an appropriate order protecting the document from further disclosure.
V. An insurer asserting the insurance compliance self-audit privilege in response to a request for disclosure under this section shall provide at the time of filing any objection to the disclosure, all of the following information:
(a) The date of the insurance compliance self-audit document.
(b) The identity of the entity conducting the audit.
(c) The general nature of the activities covered by the insurance compliance self-audit.
(d) An identification of the portions of the insurance compliance self-audit document for which the privilege is being asserted.
VI. An insurer asserting the insurance compliance self-audit privilege in response to a request under this section has the burden of demonstrating the applicability of the privilege. A party seeking disclosure under paragraph III of this section has the burden of proving that the privilege is asserted for a fraudulent purpose or that the privilege is not available. The commissioner or attorney general seeking disclosure under paragraph IV of this section has the burden of proving the elements set forth in that paragraph.
VII. The parties may at any time stipulate to entry of an order directing that specific information contained in an insurance compliance self-audit document is or is not subject to the privilege provided under RSA 402-J:2.
402-J:4 Submission to Commissioner.
I. In connection with examinations conducted under RSA 400-A, an insurer may voluntarily submit an insurance compliance self-audit document to the commissioner, or designee, as a confidential document under the provisions of RSA 400-A:37, IV(d) without waiving the privilege set forth in RSA 402-J:2.
II. Upon order of the commissioner, an insurer shall submit an insurance compliance self-audit document to the commissioner, or the commissioner's designee, as a confidential document under the provisions of RSA 400-A:37, IV(d) without waiving the privilege set forth in RSA 402-J:2.
III. Any provision of law or rule permitting the commissioner to make records and reports public, as well as provisions permitting the commissioner to exchange information and data with the National Association of Insurance Commissioners, shall not apply to any insurance compliance self-audit document submitted to the commissioner under this section. Any insurance compliance self-audit document so submitted to the commissioner shall remain the property of the insurer. To the extent the commissioner has the authority to compel the disclosure of an insurance compliance self-audit document under other provisions of applicable law, any report furnished to the commissioner may not be provided to any other person or entity and must be accorded the same confidentiality and other protections as provided for documents submitted to the commissioner under this section.
IV. Any use of an insurance compliance self-audit document furnished to the commissioner under this section, whether under a claim of authority to compel disclosure or not, is limited to determining whether any disclosed defects in an insurer's policies or procedures or inappropriate treatment of customers has been remedied or that an appropriate plan for their remedy is in place. The commissioner may not impose any type of administrative fine or penalty as to any subject addressed or matter covered in an insurance compliance self-audit document so furnished, except where there is clear and convincing evidence that the insurer has failed to undertake reasonable corrective action, failed to eliminate inappropriate treatment of customers, or failed to implement an appropriate plan to rectify any noncompliance with state and federal statutes, rules, and orders.
V. An insurance compliance self-audit document submitted to the commissioner under this section remains subject to all applicable privileges existing under statute, common law or rule, such as the work product doctrine, attorney-client privilege, or the subsequent remedial measures exclusion. An insurance compliance self-audit document submitted to the commissioner under this section is not subject to any disclosure or production under RSA 91-A.
VI. Disclosure of an insurance compliance self-audit document to a governmental agency, whether voluntary or pursuant to compulsion of law, does not constitute a waiver of the privilege with respect to any other person or any other government agency. To the extent any provision of law shall permit the commissioner to disclose to another governmental agency an insurance compliance self-audit document obtained under this section, such disclosure shall not be made without first verifying that the recipient governmental agency has the legal authority to protect the document consistent with the operation of this chapter, and in the case of a law enforcement agency, shall not be made in the absence of a duly issued subpoena.
402-J:5 Exceptions to Privilege. The privilege set forth in RSA 402-J:2 shall not extend to any of the following:
I. Documents, communications, data, reports, or other information required to be collected, developed, maintained, reported, or otherwise made available to a regulatory agency pursuant to New Hampshire law or rule, or other federal or state law, rule, or order. However, submission to the commissioner under RSA 402-J:4 shall not in and of itself make this exception applicable;
II. Information obtained by observation or monitoring by any regulatory agency; or
III. Information obtained from a source independent of the insurance compliance audit.
402-J:6 No Limitation of Privileges. Nothing in this chapter shall limit, waive, or abrogate the scope or nature of any privilege existing under statute, rule or common law including, but not limited to, the work product doctrine, the attorney-client privilege, or the subsequent remedial measures exclusion.
402-J:7 Non-Disclosure of Information. The commissioner shall maintain the confidentiality of information protected under this chapter, subject to the specific exceptions set forth in RSA 402-J:5.
3 Effective Date. This act shall take effect 60 days after its passage.