HOUSE BILL No. 5819 May 5, 1998, Introduced by Rep. Profit and referred to the Committee on Insurance. A bill to amend 1956 PA 218, entitled "The insurance code of 1956," (MCL 500.100 to 500.8302) by adding section 221. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 SEC. 221. (1) EXCEPT AS OTHERWISE PROVIDED, AN INSURANCE 2 COMPLIANCE SELF-EVALUATIVE AUDIT DOCUMENT IS PRIVILEGED AND CON- 3 FIDENTIAL INFORMATION, IS NOT SUBJECT TO PUBLIC INSPECTION, AND 4 IS NOT ADMISSIBLE AS EVIDENCE IN ANY CIVIL, CRIMINAL, OR ADMINIS- 5 TRATIVE PROCEEDING. 6 (2) EXCEPT AS OTHERWISE PROVIDED, AN INDIVIDUAL INVOLVED IN 7 PREPARING AN INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT OR INSUR- 8 ANCE COMPLIANCE SELF-EVALUATIVE AUDIT DOCUMENT IS NOT SUBJECT TO 9 EXAMINATION CONCERNING THAT AUDIT OR AUDIT DOCUMENT IN ANY CIVIL, 10 CRIMINAL, OR ADMINISTRATIVE PROCEEDING. 05812'98 DKH 2 1 (3) AN INSURER MAY SUBMIT, IN CONNECTION WITH EXAMINATIONS 2 CONDUCTED UNDER THIS ACT, AN INSURANCE COMPLIANCE SELF-EVALUATIVE 3 AUDIT DOCUMENT TO THE COMMISSIONER OR HIS OR HER DESIGNEE AS A 4 CONFIDENTIAL DOCUMENT UNDER SECTION 222(7) WITHOUT WAIVING THE 5 PRIVILEGE IN SUBSECTION (1). THIS SUBSECTION DOES NOT GIVE THE 6 COMMISSIONER AUTHORITY TO COMPEL AN INSURER TO DISCLOSE OR OTHER- 7 WISE PROVIDE AN INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT 8 DOCUMENT. 9 (4) WITHIN 30 DAYS AFTER THE COMMISSIONER OR THE ATTORNEY 10 GENERAL MAKES A WRITTEN REQUEST BY CERTIFIED MAIL FOR DISCLOSURE 11 OF AN INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT DOCUMENT, THE 12 INSURER THAT PREPARED, OR CAUSED TO BE PREPARED, THE DOCUMENT MAY 13 FILE WITH THE INGHAM COUNTY CIRCUIT COURT A PETITION REQUESTING 14 AN IN CAMERA HEARING ON WHETHER THE INSURANCE COMPLIANCE 15 SELF-EVALUATIVE AUDIT DOCUMENT OR PORTIONS OF THE DOCUMENT ARE 16 SUBJECT TO DISCLOSURE. FAILURE BY THE INSURER TO FILE A PETITION 17 WAIVES ANY PRIVILEGE PROVIDED BY THIS SECTION. WITHIN 45 DAYS 18 AFTER THE FILING OF THE PETITION, THE COURT SHALL ISSUE AN ORDER 19 SCHEDULING AN IN CAMERA HEARING TO DETERMINE WHETHER THE INSUR- 20 ANCE COMPLIANCE SELF-EVALUATIVE AUDIT DOCUMENT OR PORTIONS OF THE 21 DOCUMENT ARE SUBJECT TO DISCLOSURE. 22 (5) THE PRIVILEGE IN SUBSECTION (1) DOES NOT APPLY AS 23 FOLLOWS: 24 (A) TO THE EXTENT THAT IT IS EXPRESSLY WAIVED BY THE INSURER 25 THAT PREPARED OR CAUSED TO BE PREPARED THE INSURANCE COMPLIANCE 26 SELF-EVALUATIVE AUDIT DOCUMENT. 05812'98 3 1 (B) IF A COURT, AFTER AN IN CAMERA REVIEW, REQUIRES 2 DISCLOSURE IN A CIVIL OR ADMINISTRATIVE PROCEEDING AFTER 3 DETERMINING 1 OR MORE OF THE FOLLOWING: 4 (i) THE PRIVILEGE IS ASSERTED FOR A FRAUDULENT PURPOSE. 5 (ii) THE MATERIAL IS NOT SUBJECT TO THE PRIVILEGE. 6 (iii) EVEN IF SUBJECT TO THE PRIVILEGE, THE MATERIAL SHOWS 7 NONCOMPLIANCE WITH STATE OR FEDERAL LAW, RULE, REGULATION, OR 8 ORDER AND THE INSURER FAILED TO UNDERTAKE REASONABLE CORRECTIVE 9 ACTION OR ELIMINATE THE NONCOMPLIANCE WITHIN A REASONABLE TIME. 10 (C) IF A COURT, AFTER AN IN CAMERA REVIEW, REQUIRES DISCLO- 11 SURE IN A CRIMINAL PROCEEDING AFTER DETERMINING 1 OR MORE OF THE 12 FOLLOWING: 13 (i) THE PRIVILEGE IS ASSERTED FOR A FRAUDULENT PURPOSE. 14 (ii) THE MATERIAL IS NOT SUBJECT TO THE PRIVILEGE. 15 (iii) EVEN IF SUBJECT TO THE PRIVILEGE, THE MATERIAL SHOWS 16 NONCOMPLIANCE WITH STATE OR FEDERAL LAW, RULE, REGULATION, OR 17 ORDER AND THE INSURER FAILED TO UNDERTAKE REASONABLE CORRECTIVE 18 ACTION OR ELIMINATE THE NONCOMPLIANCE WITHIN A REASONABLE TIME. 19 (iv) THE MATERIAL CONTAINS EVIDENCE RELATING TO THE COMMIS- 20 SION OF A CRIMINAL OFFENSE UNDER THIS ACT, THE COMMISSIONER OR 21 THE ATTORNEY GENERAL HAS A COMPELLING NEED FOR THE INFORMATION, 22 THE INFORMATION IS NOT OTHERWISE AVAILABLE, AND THE COMMISSIONER 23 OR THE ATTORNEY GENERAL IS UNABLE TO OBTAIN THE SUBSTANTIAL 24 EQUIVALENT OF THE INFORMATION BY ANY MEANS WITHOUT INCURRING 25 UNREASONABLE COST AND DELAY. 26 (6) IF THE COURT DETERMINES THAT SUBSECTION (5)(B)(i), (ii), 27 OR (iii) OR (C)(i), (ii), (iii), OR (iv) APPLIES, THE COURT MAY 05812'98 4 1 COMPEL THE DISCLOSURE OF ONLY THOSE PORTIONS OF AN INSURANCE 2 COMPLIANCE SELF-EVALUATIVE AUDIT DOCUMENT RELEVANT TO ISSUES IN 3 DISPUTE IN THE UNDERLYING PROCEEDING. INFORMATION REQUIRED TO BE 4 DISCLOSED SHALL NOT BE CONSIDERED A PUBLIC DOCUMENT. 5 (7) AN INSURER ASSERTING THE PRIVILEGE UNDER THIS SECTION IN 6 RESPONSE TO A REQUEST FOR DISCLOSURE SHALL PROVIDE TO THE COMMIS- 7 SIONER OR THE ATTORNEY GENERAL, AND TO THE COURT AT THE TIME OF 8 FILING A PETITION UNDER SUBSECTION (4), ALL OF THE FOLLOWING 9 INFORMATION: 10 (A) THE DATE OF THE INSURANCE COMPLIANCE SELF-EVALUATIVE 11 AUDIT DOCUMENT. 12 (B) THE IDENTITY OF THE ENTITY OR INDIVIDUALS CONDUCTING THE 13 AUDIT. 14 (C) THE GENERAL NATURE OF THE ACTIVITIES COVERED BY THE 15 INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT. 16 (D) AN IDENTIFICATION OF THE PORTIONS OF THE INSURANCE COM- 17 PLIANCE SELF-EVALUATIVE AUDIT DOCUMENT FOR WHICH THE PRIVILEGE IS 18 BEING ASSERTED. 19 (8) AN INSURER ASSERTING THE PRIVILEGE UNDER THIS SECTION 20 HAS THE BURDEN OF DEMONSTRATING THE APPLICABILITY OF THE 21 PRIVILEGE. ONCE AN INSURER HAS ESTABLISHED THE APPLICABILITY OF 22 THE PRIVILEGE, A PARTY SEEKING DISCLOSURE HAS THE BURDEN OF PROV- 23 ING THAT SUBSECTION (5)(B)(i), (ii), OR (iii) OR (C)(i), (ii), 24 (iii), OR (iv) IS APPLICABLE. 25 (9) THIS SECTION DOES NOT LIMIT, WAIVE, OR ABROGATE THE 26 SCOPE OR NATURE OF ANY OTHER STATUTORY OR COMMON LAW PRIVILEGE. 05812'98 5 1 (10) AS USED IN THIS SECTION: 2 (A) "INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT" MEANS A 3 VOLUNTARY, INTERNAL EVALUATION, REVIEW, ASSESSMENT, OR AUDIT THAT 4 IS NOT EXPRESSLY REQUIRED BY STATE OR FEDERAL LAW, RULE, REGULA- 5 TION, ORDER, OR PROFESSIONAL STANDARD AND THAT IS DESIGNED TO 6 IDENTIFY AND PREVENT NONCOMPLIANCE OR TO IMPROVE COMPLIANCE WITH 7 THOSE LAWS, RULES, REGULATIONS, ORDERS, OR PROFESSIONAL 8 STANDARDS. AN INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT MAY BE 9 CONDUCTED BY THE INSURER, ITS EMPLOYEES, OR INDEPENDENT 10 CONTRACTORS. 11 (B) "INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT DOCUMENT" 12 MEANS A DOCUMENT, COMMUNICATION, DATA, REPORT, OR OTHER INFORMA- 13 TION PREPARED AS A RESULT OF OR IN CONNECTION WITH AN INSURANCE 14 COMPLIANCE SELF-EVALUATIVE AUDIT. AN INSURANCE COMPLIANCE 15 SELF-EVALUATIVE AUDIT DOCUMENT MAY INCLUDE A WRITTEN RESPONSE TO 16 THE FINDINGS OF AN INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT. 17 AN INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT DOCUMENT MAY 18 INCLUDE, BUT IS NOT LIMITED TO, FIELD NOTES AND RECORDS OF OBSER- 19 VATIONS, FINDINGS, OPINIONS, SUGGESTIONS, CONCLUSIONS, DRAFTS, 20 MEMORANDA, DRAWINGS, PHOTOGRAPHS, COMPUTER-GENERATED OR ELECTRON- 21 ICALLY RECORDED INFORMATION, PHONE RECORDS, MAPS, CHARTS, GRAPHS, 22 AND SURVEYS, IF THIS SUPPORTING INFORMATION IS COLLECTED OR 23 DEVELOPED FOR THE PRIMARY PURPOSE AND IN THE COURSE OF AN INSUR- 24 ANCE COMPLIANCE SELF-EVALUATIVE AUDIT. AN INSURANCE COMPLIANCE 25 SELF-EVALUATIVE AUDIT DOCUMENT ALSO INCLUDES AN INSURANCE COMPLI- 26 ANCE SELF-EVALUATIVE AUDIT REPORT PREPARED BY AN AUDITOR, WHO MAY 27 BE AN EMPLOYEE OF THE INSURER OR AN INDEPENDENT CONTRACTOR, WHICH 05812'98 6 1 REPORT INCLUDES: THE SCOPE OF THE AUDIT; INFORMATION GAINED IN 2 THE AUDIT; CONCLUSIONS AND RECOMMENDATIONS, WITH EXHIBITS, APPEN- 3 DICES, MEMORANDA, AND DOCUMENTS ANALYZING PORTIONS OR ALL OF THE 4 INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT REPORT AND DISCUSSING 5 POTENTIAL IMPLEMENTATION ISSUES; AN IMPLEMENTATION PLAN THAT 6 ADDRESSES CORRECTING PAST NONCOMPLIANCE, IMPROVING CURRENT COM- 7 PLIANCE, AND PREVENTING FUTURE NONCOMPLIANCE; AND ANALYTIC DATA 8 GENERATED IN THE COURSE OF CONDUCTING THE INSURANCE COMPLIANCE 9 SELF-EVALUATIVE AUDIT. THE FOLLOWING ARE NOT INSURANCE COMPLI- 10 ANCE SELF-EVALUATIVE AUDIT DOCUMENTS: 11 (i) A DOCUMENT, COMMUNICATION, DATA, REPORT, OR OTHER INFOR- 12 MATION CREATED AS A RESULT OF A CLAIM INVOLVING PERSONAL INJURY 13 OR WORKERS' COMPENSATION MADE AGAINST AN INSURANCE POLICY. 14 (ii) DOCUMENTS, COMMUNICATIONS, DATA, REPORTS, OR OTHER 15 INFORMATION REQUIRED TO BE COLLECTED, DEVELOPED, MAINTAINED, 16 REPORTED, OR OTHERWISE MADE AVAILABLE TO A REGULATORY AGENCY PUR- 17 SUANT TO THIS ACT, OR OTHER FEDERAL OR STATE LAW, RULE, REGULA- 18 TION, ORDER, OR PROFESSIONAL STANDARD. 19 (iii) INFORMATION OBTAINED BY OBSERVATION OR MONITORING BY 20 ANY REGULATORY AGENCY. 21 (iv) INFORMATION OBTAINED FROM A SOURCE INDEPENDENT OF THE 22 INSURANCE COMPLIANCE SELF-EVALUATIVE AUDIT. 05812'98 Final page. DKH