HB-6491, As Passed House, December 21, 2018

HB-6491, As Passed Senate, December 19, 2018

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 6491

A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

(MCL 500.100 to 500.8302) by adding chapter 5A.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

CHAPTER 5A

DATA SECURITY

Sec. 550. This chapter does not create or imply a private

cause of action for violation of its provisions and does not

curtail a private cause of action that would otherwise exist in the

absence of this chapter. Notwithstanding any other provision of

law, this chapter establishes the exclusive standards, for this

state, applicable to licensees for data security, the investigation

of a cybersecurity event, and notification to the director.

Sec. 553. As used in this chapter:

(a) "Authorized individual" means an individual known to and

screened by the licensee and determined to be necessary and

appropriate to have access to the nonpublic information held by the

licensee and its information systems.

(b) "Consumer" means an individual, including, but not limited

to, an applicant, a policyholder, an insured, a beneficiary, a

claimant, and a certificate holder, who is a resident of this state

and whose nonpublic information is in a licensee's possession,

custody, or control.

unauthorized access to and acquisition of, or disruption or misuse

of, an information system or nonpublic information stored on an

information system. Cybersecurity event does not include either of

the following:

(i) The unauthorized acquisition of encrypted nonpublic

information if the encryption, process, or key is not also

acquired, released, or used without authorization.

(ii) The unauthorized access to data by a person if the access

meets both of the following criteria:

(A) The person acted in good faith in accessing the data.

(B) The access was related to activities of the person.

(d) "Encrypted" means the transformation of data into a form

that results in a low probability of assigning meaning without the

use of a protective process or key.

(e) "Information security program" means the administrative,

technical, and physical safeguards that a licensee uses to access,

collect, distribute, process, protect, store, use, transmit,

dispose of, or otherwise handle nonpublic information.

(f) "Information system" means a discrete set of electronic

information resources organized for the collection, processing,

maintenance, use, sharing, dissemination, or disposition of

electronic nonpublic information, as well as any specialized system

such as an industrial or process controls system, a telephone

switching and private branch exchange system, or an environmental

control system.

(g) "Licensee" means a licensed insurer or producer, and other

persons licensed or required to be licensed, authorized, or

registered, or holding or required to hold a certificate of

authority under this act. Licensee does not include a purchasing

group or a risk retention group chartered and licensed in a state

other than this state or a person that is acting as an assuming

insurer that is domiciled in another state or jurisdiction.

(h) "Multi-factor authentication" means authentication through

verification of at least 2 of the following types of authentication

factors:

(i) Knowledge factors, such as a password.

(ii) Possession factors, such as a token or text message on a

mobile phone.

(iii) Inherence factors, such as a biometric characteristic.

(i) "Nonpublic information" means electronic information that

is not publicly available information and is any of the following:

(i) Business-related information of a licensee, the tampering

with which, or unauthorized disclosure, access, or use of which,

would cause a material adverse impact to the business, operations,

or security of the licensee.

(ii) Any information concerning a consumer that because of

name, number, personal mark, or other identifier can be used to

identify the consumer, in combination with any 1 or more of the

following data elements:

(A) Social Security number.

(B) Driver license number or nondriver identification card

number.

(D) Any security code, access code, or password that would

permit access to a consumer's financial account.

(E) Biometric records.

(iii) Any information or data, except age or gender, in any

form or medium created by or derived from a health care provider or

a consumer, that can be used to identify a particular consumer, and

that relates to any of the following:

(A) The past, present, or future physical, mental, or

behavioral health or condition of any consumer or a member of the

consumer's family.

(B) The provision of health care to any consumer.

(j) "Publicly available information" means any information

that a licensee has a reasonable basis to believe is lawfully made

available to the general public from federal, state, or local

government records, by widely distributed media, or by disclosures

to the general public that are required to be made by federal,

state, or local law. A licensee has a reasonable basis to believe

that information is lawfully made available to the general public

if both of the following apply:

(i) The licensee has taken steps to determine that the

information is of the type that is available to the general public.

(ii) If an individual can direct that the information not be

made available to the general public, that the licensee's consumer

has not directed that the information not be made available to the

general public.

(k) "Risk assessment" means the risk assessment that each

licensee is required to conduct under section 555(3).

(l) "Third-party service provider" means a person that is not

a licensee and that contracts with a licensee to maintain, process,

or store, or otherwise is permitted access to nonpublic

information, through its provision of services to the licensee.

Sec. 555. (1) Commensurate with the size and complexity of the

licensee, the nature and scope of the licensee's activities,

including its use of third-party service providers, and the

sensitivity of the nonpublic information used by the licensee or in

the licensee's possession, custody, or control, each licensee shall

develop, implement, and maintain a comprehensive written

information security program, based on the licensee's risk

assessment, that contains administrative, technical, and physical

safeguards for the protection of nonpublic information and the

licensee's information system.

(2) A licensee's information security program must be designed

to do all of the following:

(a) Protect the security and confidentiality of nonpublic

information and the security of the information system.

(b) Protect against any threats or hazards to the security or

integrity of nonpublic information and the information system.

information, and minimize the likelihood of harm to any consumer.

(d) Maintain policies and procedures for the secure disposal

on a periodic basis of any nonpublic information that is no longer

necessary for business operations or for other legitimate business

purposes.

(3) A licensee shall do all of the following:

(a) Designate 1 or more employees, an affiliate, or an outside

vendor to act on behalf of the licensee that is responsible for the

information security program.

(b) Identify reasonably foreseeable internal or external

threats that could result in unauthorized access, transmission,

disclosure, misuse, alteration, or destruction of nonpublic

information, including the security of information systems and

nonpublic information that are accessible to, or held by, third-

party service providers.

threats, taking into consideration the sensitivity of the nonpublic

information.

(d) Assess the sufficiency of policies, procedures,

information systems, and other safeguards in place to manage these

threats, including consideration of threats in each relevant area

of the licensee's operations, including all of the following:

(i) Employee training and management.

(ii) Information systems, including network and software

design, as well as information classification, governance,

processing, storage, transmission, and disposal.

(iii) Detecting, preventing, and responding to attacks,

intrusions, or other systems failures.

(e) Implement information safeguards to manage the threats

identified in its ongoing assessment, and, no less than annually,

assess the effectiveness of the safeguards' key controls, systems,

and procedures.

(4) Based on its risk assessment, a licensee shall do all of

the following:

(a) Design its information security program to mitigate the

identified risks, commensurate with the size and complexity of the

licensee, the nature and scope of the licensee's activities,

including its use of third-party service providers, and the

sensitivity of the nonpublic information used by the licensee or in

the licensee's possession, custody, or control.

(b) Determine which of the following security measures are

appropriate and implement those appropriate security measures:

(i) Placing access controls on information systems, including

controls to authenticate and permit access only to authorized

individuals to protect against the unauthorized acquisition of

nonpublic information.

(ii) Identifying and managing the data, personnel, devices,

systems, and facilities that enable the organization to achieve

business purposes in accordance with their relative importance to

business objectives and the organization's risk strategy.

(iii) Restricting physical access to nonpublic information to

authorized individuals only.

(iv) Protecting by encryption or other appropriate means all

nonpublic information while being transmitted over an external

network and all nonpublic information stored on a laptop computer

or other portable computing or storage device or media.

(v) Adopting secure development practices for in-house

developed applications utilized by the licensee.

(vi) Adding procedures for evaluating, assessing, or testing

the security of externally developed applications used by the

licensee.

(vii) Modifying the information system in accordance with the

licensee's information security program.

(viii) Using effective controls, which may include multi-

factor authentication procedures for employees accessing nonpublic

information.

(ix) Regularly testing and monitoring systems and procedures

to detect actual and attempted attacks on, or intrusions into,

information systems.

(x) Including audit trails within the information security

program designed to detect and respond to cybersecurity events and

designed to reconstruct material financial transactions sufficient

to support normal operations and obligations of the licensee.

(xi) Implementing measures to protect against destruction,

loss, or damage of nonpublic information due to environmental

hazards, such as fire and water damage or other catastrophes or

technological failures.

(xii) Developing, implementing, and maintaining procedures for

the secure disposal of nonpublic information in any format.

risk management process.

(d) Stay informed regarding emerging threats or

vulnerabilities and utilize reasonable security measures when

sharing information relative to the character of the sharing and

the type of information shared.

(e) Provide its personnel with cybersecurity awareness

training that is updated as necessary to reflect risks identified

by the licensee in the risk assessment.

(5) If a licensee has a board of directors, the board or an

appropriate committee of the board shall, at a minimum, do all of

the following:

(a) Require the licensee's executive management or its

delegates to develop, implement, and maintain the licensee's

information security program.

(b) Require the licensee's executive management or its

delegates to report in writing, at least annually, all of the

following information:

(i) The overall status of the information security program and

the licensee's compliance with this chapter.

(ii) Material matters related to the information security

program, addressing issues such as risk assessment, risk management

and control decisions, results of testing, cybersecurity events or

violations, and management's responses to the material matters

described in this subparagraph, and recommendations for changes in

the information security program.

(iii) If executive management delegates any of its

responsibilities under this section, it shall oversee the

development, implementation, and maintenance of the licensee's

information security program prepared by a delegate and shall

receive a report from the delegate complying with the requirements

of the report to the board of directors.

(6) A licensee shall exercise due diligence in selecting its

third-party service provider. A licensee shall require a third-

party service provider to implement appropriate administrative,

technical, and physical measures to protect and secure the

information systems and nonpublic information that are accessible

to, or held by, the third-party service provider.

(7) A licensee shall monitor, evaluate, and adjust, as

appropriate, the information security program consistent with any

relevant changes in technology, the sensitivity of its nonpublic

information, internal or external threats to information, and the

licensee's own changing business arrangements, such as mergers and

acquisitions, alliances and joint ventures, outsourcing

arrangements, and changes to information systems.

(8) As part of its information security program, each licensee

shall establish a written incident response plan designed to

promptly respond to, and recover from, any cybersecurity event that

compromises the confidentiality, integrity, or availability of

nonpublic information in its possession, the licensee's information

systems, or the continuing functionality of any aspect of the

licensee's business or operations. An incident response plan under

this subsection must address all of the following areas:

(a) The internal process for responding to a cybersecurity

event.

(b) The goals of the incident response plan.

levels of decision-making authority.

(d) External and internal communications and information

sharing.

(e) Identification of requirements for the remediation of any

identified weaknesses in information systems and associated

controls.

(f) Documentation and reporting regarding cybersecurity events

and related incident response activities.

(g) The evaluation and revision as necessary of the incident

response plan following a cybersecurity event.

(9) By February 15 of each year, each insurer domiciled in

this state shall submit to the director a written statement,

certifying that the insurer is in compliance with the requirements

of this section. Each insurer shall maintain for examination by the

department all records, schedules, and data supporting this

certificate for 5 years. To the extent an insurer has identified

areas, systems, or processes that require material improvement,

updating, or redesign, the insurer shall document the

identification and the remedial efforts planned and underway to

address the areas, systems, or processes. The documentation

described in this subsection must be available for inspection by

the director.

Sec. 557. (1) If the licensee learns that a cybersecurity

event has or may have occurred, the licensee or an outside vendor

or service provider, or both, designated to act on behalf of the

licensee, shall conduct a prompt investigation.

(2) During the investigation under subsection (1), the

licensee, or an outside vendor or service provider, or both,

designated to act on behalf of the licensee, shall, at a minimum,

do as much of the following as possible:

(a) Determine whether a cybersecurity event has occurred.

(b) Assess the nature and scope of the cybersecurity event.

involved in the cybersecurity event.

(d) Perform or oversee reasonable measures to restore the

security of the information systems compromised in the

cybersecurity event to prevent further unauthorized acquisition,

release, or use of nonpublic information in the licensee's

possession, custody, or control.

(3) The licensee shall maintain records concerning all

cybersecurity events for at least 5 years from the date of the

cybersecurity event and shall produce those records on demand of

the director.

Sec. 559. (1) Each licensee shall notify the director as

promptly as possible but not later than 10 business days after a

determination that a cybersecurity event involving nonpublic

information that is in the possession of a licensee has occurred

when either of the following criteria has been met:

(a) This state is the licensee's state of domicile, for an

insurer, or this state is the licensee's home state, for an

insurance producer as that term is defined in section 1201, and the

cybersecurity event has a reasonable likelihood of materially

harming either of the following:

(i) A consumer residing in this state.

(ii) Any material part of a normal operation of the licensee.

(b) The licensee reasonably believes that the nonpublic

information involved is of 250 or more consumers residing in this

state and is either of the following:

(i) A cybersecurity event impacting the licensee of which

notice is required to be provided to any government body, self-

regulatory agency, or other supervisory body under any state or

federal law.

(ii) A cybersecurity event that has a reasonable likelihood of

materially harming either of the following:

(A) Any consumer residing in this state.

(B) Any material part of the normal operation of the licensee.

(2) The licensee shall provide the information under this

subsection in electronic form as directed by the director. The

licensee has a continuing obligation to update and supplement

initial and subsequent notifications to the director regarding

material changes to previously provided information relating to the

cybersecurity event. The licensee shall provide as much of the

following information as possible:

(a) The date of the cybersecurity event.

(b) A description of how the information was exposed, lost,

stolen, or breached, including the specific roles and

responsibilities of third-party service providers, if any.

(d) Whether any lost, stolen, or breached information has been

recovered and, if so, how this was done.

(e) The identity of the source of the cybersecurity event.

(f) Whether the licensee has filed a police report or has

notified any regulatory, government, or law enforcement agencies

and, if so, when the notification was provided.

(g) A description of the specific types of information

acquired without authorization. As used in this subdivision,

"specific types of information" means particular data elements

including, for example, types of medical information, types of

financial information, or types of information allowing

identification of the consumer.

(h) The period during which the information system was

compromised by the cybersecurity event.

(i) The number of total consumers in this state affected by

the cybersecurity event. The licensee shall provide the best

estimate in the initial report to the director and update this

estimate with each subsequent report to the director under this

section.

(j) The results of any internal review identifying a lapse in

either automated controls or internal procedures, or confirming

that all automated controls or internal procedures were followed.

(k) A description of efforts being undertaken to remediate the

situation that permitted the cybersecurity event to occur.

(l) A copy of the licensee's privacy policy and a statement

outlining the steps the licensee will take to investigate and

notify consumers affected by the cybersecurity event.

(m) The name of a contact person who is both familiar with the

cybersecurity event and authorized to act for the licensee.

(3) A licensee shall comply with this chapter, as applicable,

and provide a copy of the notice sent to consumers under this

chapter, if a licensee is required to notify the director under

section 559.

(4) For a cybersecurity event in a system maintained by a

third-party service provider, of which the licensee has become

aware, the licensee shall treat the event as it would under this

section. The computation of the licensee's deadlines begins on the

day after the third-party service provider notifies the licensee of

the cybersecurity event or the licensee otherwise has actual

knowledge of the cybersecurity event, whichever is earlier. This

chapter does not prevent or abrogate an agreement between a

licensee and another licensee, a third-party service provider, or

any other party to fulfill any of the investigation requirements

imposed under section 557 or notice requirements imposed under this

section.

(5) For a cybersecurity event involving nonpublic information

that is used by the licensee that is acting as an assuming insurer

or in the possession, custody, or control of a licensee that is

acting as an assuming insurer and that does not have a direct

contractual relationship with the affected consumers, the assuming

insurer shall notify its affected ceding insurers and the director

of its state of domicile within 10 business days after making the

determination that a cybersecurity event has occurred. The ceding

insurers that have a direct contractual relationship with affected

consumers shall fulfill the consumer notification requirements

imposed under this section. For a cybersecurity event involving

nonpublic information that is in the possession, custody, or

control of a third-party service provider of a licensee that is an

assuming insurer, the assuming insurer shall notify its affected

ceding insurers and the director of its state of domicile within 10

business days after receiving notice from its third-party service

provider that a cybersecurity event has occurred. The ceding

insurers that have a direct contractual relationship with affected

consumers shall fulfill the consumer notification requirements

imposed under this chapter.

(6) A licensee acting as an assuming insurer does not have

other notice obligations relating to a cybersecurity event or other

data breach under this section or any other law of this state.

(7) For a cybersecurity event involving nonpublic information

that is in the possession, custody, or control of a licensee that

is an insurer or its third-party service provider for which a

consumer accessed the insurer's services through an independent

insurance producer, and for which consumer notice is required under

this chapter, the insurer shall notify the producers of record of

all affected consumers of the cybersecurity event not later than

the time at which notice is provided to the affected consumers. The

insurer is excused from this obligation for any producer who is not

authorized by law or contract to sell, solicit, or negotiate on

behalf of the insurer, and in those instances in which the insurer

does not have the current producer of record information for any

individual consumer.

Sec. 561. (1) Unless the licensee determines that the

cybersecurity event has not or is not likely to cause substantial

loss or injury to, or result in identity theft with respect to, 1

or more residents of this state, a licensee that owns or licenses

data that are included in a database that discovers a cybersecurity

event, or receives notice of a cybersecurity event under subsection

(2), shall provide a notice of the cybersecurity event to each

resident of this state who meets 1 or more of the following:

(a) That resident's unencrypted and unredacted personal

information was accessed and acquired by an unauthorized person.

(b) That resident's personal information was accessed and

acquired in encrypted form by a licensee with unauthorized access

to the encryption key.

(2) Unless the licensee determines that the cybersecurity

event has not or is not likely to cause substantial loss or injury

to, or result in identity theft with respect to, 1 or more

residents of this state, a licensee that maintains a database that

includes data that the licensee does not own or license that

discovers a breach of the security of the database shall provide a

notice to the owner or licensor of the information of the

cybersecurity event.

(3) In determining whether a cybersecurity event is not likely

to cause substantial loss or injury to, or result in identity theft

with respect to, 1 or more residents of this state under subsection

(1) or (2), a licensee shall act with the care an ordinarily

prudent person or agency in like position would exercise under

similar circumstances.

(4) A licensee shall provide any notice required under this

section without unreasonable delay. A licensee may delay providing

notice without violating this subsection if either of the following

is met:

(a) A delay is necessary in order for the licensee to take any

measures necessary to determine the scope of the cybersecurity

event and restore the reasonable integrity of the database.

However, the licensee shall provide the notice required under this

subsection without unreasonable delay after the licensee completes

the measures necessary to determine the scope of the cybersecurity

event and restore the reasonable integrity of the database.

(b) A law enforcement agency determines and advises the

licensee that providing a notice will impede a criminal or civil

investigation or jeopardize homeland or national security. However,

the licensee shall provide the notice required under this section

without unreasonable delay after the law enforcement agency

determines that providing the notice will no longer impede the

investigation or jeopardize homeland or national security.

(5) A licensee shall provide any notice required under this

section by providing 1 or more of the following to the recipient:

(a) Written notice sent to the recipient at the recipient's

postal address in the records of the licensee.

(b) Written notice sent electronically to the recipient if any

of the following are met:

(i) The recipient has expressly consented to receive

electronic notice.

(ii) The licensee has an existing business relationship with

the recipient that includes periodic electronic mail communications

and based on those communications the licensee reasonably believes

that it has the recipient's current electronic mail address.

(iii) The licensee conducts its business primarily through

internet account transactions or on the internet.

notice given by telephone by an individual who represents the

licensee if all of the following are met:

(i) The notice is not given in whole or in part by use of a

recorded message.

(ii) The recipient has expressly consented to receive notice

by telephone, or if the recipient has not expressly consented to

receive notice by telephone, the licensee also provides notice

under subdivision (a) or (b) if the notice by telephone does not

result in a live conversation between the individual representing

the licensee and the recipient within 3 business days after the

initial attempt to provide telephonic notice.

(d) Substitute notice, if the licensee demonstrates that the

cost of providing notice under subdivision (a), (b), or (c) will

exceed $250,000.00 or that the licensee has to provide notice to

more than 500,000 residents of this state. A licensee provides

substitute notice under this subdivision by doing all of the

following:

(i) If the licensee has electronic mail addresses for any of

the residents of this state who are entitled to receive the notice,

providing electronic notice to those residents.

(ii) If the licensee maintains a website, conspicuously

posting the notice on that website.

(iii) Notifying major statewide media. A notification under

this subparagraph must include a telephone number or a website

address that a person may use to obtain additional assistance and

information.

(6) A notice under this section must do all of the following:

(a) For a notice provided under subsection (5)(a) or (b), be

written in a clear and conspicuous manner and contain the content

required under subdivisions (c) to (g).

(b) For a notice provided under subsection (5)(c), clearly

communicate the content required under subdivisions (c) to (g) to

the recipient of the telephone call.

(d) Describe the type of personal information that is the

subject of the unauthorized access or use.

(e) If applicable, generally describe what the licensee

providing the notice has done to protect data from further security

breaches.

(f) Include a telephone number where a notice recipient may

obtain assistance or additional information.

(g) Remind notice recipients of the need to remain vigilant

for incidents of fraud and identity theft.

(7) A licensee may provide any notice required under this

section under an agreement between the licensee and another

licensee, if the notice provided under the agreement does not

conflict with this section.

(8) Except as provided in this subsection, after a licensee

provides a notice under this section, the licensee shall notify

each consumer reporting agency that compiles and maintains files on

consumers on a nationwide basis, as defined in 15 USC 1681a(p), of

the cybersecurity event without unreasonable delay. A notification

under this subsection must include the number of notices that the

licensee provided to residents of this state and the timing of

those notices. This subsection does not apply if either of the

following is met:

(a) The licensee is required under this section to provide

notice of a cybersecurity event to 1,000 or fewer residents of this

state.

(b) The licensee is subject to 15 USC 6801 to 6809.

(9) A licensee that is subject to and complies with the health

insurance portability and accountability act of 1996, Public Law

104-191, and with regulations promulgated under that act, 45 CFR

parts 160 and 164, for the prevention of unauthorized access to

customer information and customer notice is considered to be in

compliance with this section.

(10) A person that provides notice of a cybersecurity event in

the manner described in this section when a cybersecurity event has

not occurred, with the intent to defraud, is guilty of a

misdemeanor punishable as follows:

(a) Except as otherwise provided under subdivisions (b) and

(c), by imprisonment for not more than 93 days or a fine of not

more than $250.00 for each violation, or both.

(b) For a second violation, by imprisonment for not more than

93 days or a fine of not more than $500.00 for each violation, or

both.

not more than 93 days or a fine of not more than $750.00 for each

violation, or both.

(11) Subject to subsection (12), a person that knowingly fails

to provide a notice of a cybersecurity event required under this

section may be ordered to pay a civil fine of not more than $250.00

for each failure to provide notice. The attorney general or a

prosecuting attorney may bring an action to recover a civil fine

under this section.

(12) The aggregate liability of a person for civil fines under

subsection (11) for multiple violations of subsection (11) that

arise from the same cybersecurity event must not exceed

$750,000.00.

(13) Subsections (10) and (11) do not affect the availability

of any civil remedy for a violation of state or federal law.

(14) This section applies to the discovery or notification of

a breach of the security of a database that occurs after December

31, 2019.

(15) This section does not apply to the access or acquisition

by a person or agency of federal, state, or local government

records or documents lawfully made available to the general public.

(16) This section deals with subject matter that is of

statewide concern, and any charter, ordinance, resolution,

regulation, rule, or other action by a municipal corporation or

other political subdivision of this state to regulate, directly or

indirectly, any matter expressly set forth in this section is

preempted.

(17) As used in this section:

(a) "Data" means computerized information.

(b) "Identity theft" means a person doing any of the

following:

(i) With intent to defraud or violate the law, using or

attempting to use the personal information of another person to do

either of the following:

(A) Obtain credit, goods, services, money, property, a vital

record, a confidential telephone record, medical records or

information, or employment.

(B) Commit another unlawful act.

(ii) By concealing, withholding, or misrepresenting the

person's identity, using or attempting to use the personal

information of another person to do either of the following:

(A) Obtain credit, goods, services, money, property, a vital

record, a confidential telephone record, medical records or

information, or employment.

(B) Commit another unlawful act.

initial and last name linked to 1 or more of the following data

elements of a resident of this state:

(i) A Social Security number.

(ii) A driver license number or state personal identification

card number.

(iii) A demand deposit or other financial account number, or

credit card or debit card number, in combination with any required

security code, access code, or password that would permit access to

any of the resident's financial accounts.

Sec. 563. (1) Any documents, materials, or other information

in the control or possession of the department that is furnished by

a licensee or an employee or agent of the licensee acting on behalf

of the licensee under section 555(9), section 559(2)(b), (c), (d),

(e), (h), (i), and (j), or that is obtained by the director in an

investigation or examination by the director is confidential by law

and privileged, is not subject to the freedom of information act,

1976 PA 442, MCL 15.231 to 15.246, is not subject to subpoena, and

is not subject to discovery or admissible in evidence in any

private civil action. However, the director is authorized to use

the documents, materials, or other information in the furtherance

of any regulatory or legal action brought as a part of the

director's duties. The director shall not otherwise make the

documents, materials, or other information public.

(2) Neither the director nor any person that received

documents, materials, or other information while acting under the

authority of the director is permitted or required to testify in

any private civil action concerning any confidential documents,

materials, or information under subsection (1).

(3) To assist in the performance of the director's duties

under this chapter, the director may do any of the following:

(a) Share documents, materials, or other information,

including the confidential and privileged documents, materials, or

information subject to subsection (1), with other state, federal,

and international regulatory agencies, with the National

Association of Insurance Commissioners, its affiliates, or its

subsidiaries, and with state, federal, and international law

enforcement authorities, if the recipient agrees in writing to

maintain the confidentiality and privileged status of the document,

material, or other information.

(b) Receive documents, materials, or information, including

otherwise confidential and privileged documents, materials, or

information, from the National Association of Insurance

Commissioners, its affiliates, or its subsidiaries, and from

regulatory and law enforcement officials of other foreign or

domestic jurisdictions, and shall maintain as confidential or

privileged any document, material, or information received with

notice or the understanding that it is confidential or privileged

under the laws of the jurisdiction that is the source of the

document, material, or information.

to subsection (1) with a third-party consultant or vendor if the

consultant agrees in writing to maintain the confidentiality and

privileged status of the document, material, or other information.

(d) Enter into agreements governing sharing and use of

information consistent with this subsection.

(4) A waiver of any applicable privilege or claim of

confidentiality in the documents, materials, or information does

not occur as a result of disclosure to the director under this

section or as a result of sharing as authorized under subsection

(3).

(5) This chapter does not prohibit the director from releasing

final, adjudicated actions that are open to public inspection

pursuant to the freedom of information act, 1976 PA 442, MCL 15.231

to 15.246, to a database or other clearinghouse service maintained

by the National Association of Insurance Commissioners, its

affiliates, or its subsidiaries.

(6) Any documents, materials, or other information in the

possession or control of the National Association of Insurance

Commissioners or a third-party consultant or vendor under this

chapter is confidential by law and privileged, is not subject to

the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246,

is not subject to subpoena, and is not subject to discovery or

admissible in evidence in any private civil action.

Sec. 565. (1) A licensee that has fewer than 25 employees,

including any independent contractors, is exempt from section 555.

(2) A licensee subject to and in compliance with the health

insurance portability and accountability act of 1996, Public Law

104–191, and with regulations promulgated under that act, is not

required to comply with this chapter except for the requirements

under sections 559 and 561.

(3) An employee, agent, representative, or designee of a

licensee, who is also a licensee, is exempt from section 555 and

does not need to develop its own information security program to

the extent that the employee, agent, representative, or designee is

covered by the information security program of the other licensee.

(4) If a licensee ceases to qualify for the exception under

subsection (1), the licensee has 180 days to comply with this

chapter.

(5) This chapter takes effect on January 20, 2021. A licensee

shall implement section 555 by January 20, 2022. However, a

licensee has until January 20, 2023 to implement section 555(6).

Enacting section 1. This amendatory act does not take effect

unless House Bill No. 6406 of the 99th Legislature is enacted into

law.