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H0659...........................................................by BUSINESS
INSURANCE - Adds to and amends existing law to establish a privilege from
disclosure for insurance self-evaluative programs.
02/22 House intro - 1st rdg - to printing
02/23 Rpt prt - to Bus
H0659
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-fifth Legislature Second Regular Session - 2000
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 659
BY BUSINESS COMMITTEE
1 AN ACT
2 RELATING TO PRIVILEGE FROM DISCLOSURE FOR INSURANCE SELF-EVALUATIVE PROGRAMS;
3 AMENDING CHAPTER 3, TITLE 41, IDAHO CODE, BY THE ADDITION OF A NEW SECTION
4 41-349, IDAHO CODE, TO SET FORTH A PRIVILEGE FROM DISCLOSURE FOR VOLUNTARY
5 INTERNAL AUDITS OF COMPLIANCE PROGRAMS AND MANAGEMENT SYSTEMS FOR INSUR-
6 ERS; AND AMENDING SECTION 9-340D, IDAHO CODE, TO INCLUDE THE EXEMPTION IN
7 RECORDS EXEMPT FROM DISCLOSURE.
8 Be It Enacted by the Legislature of the State of Idaho:
9 SECTION 1. That Chapter 3, Title 41, Idaho Code, be, and the same is
10 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
11 ignated as Section 41-349, Idaho Code, and to read as follows:
12 41-349. INSURANCE COMPLIANCE SELF-EVALUATIVE PRIVILEGE. (1) To encourage
13 insurers and other persons conducting activities regulated under title 41,
14 Idaho Code, both to conduct voluntary internal audits of their compliance pro-
15 grams and management systems and to assess and improve compliance with state
16 and federal statutes, rules and orders, an insurance compliance self-
17 evaluative privilege is recognized to protect the confidentiality of communi-
18 cations relating to voluntary internal compliance audits. The Idaho legisla-
19 ture hereby finds and declares that protection of insurance consumers is
20 enhanced by insurers' and persons' voluntary compliance with this state's
21 insurance and other laws and that the public will benefit from incentives to
22 identify and remedy insurance and other compliance issues. It is further
23 declared that limited protection against disclosure will encourage voluntary
24 compliance and improve insurance market conduct quality and that the voluntary
25 provisions of this section will not inhibit the exercise of the regulatory
26 authority by those entrusted with protecting insurance consumers.
27 (2) (a) An insurance compliance self-evaluative audit document is privi-
28 leged information and is not admissible as evidence in any legal action in
29 any civil, criminal or administrative proceeding, except as provided in
30 subsections (3) and (4) of this section. Documents, communications, data,
31 reports or other information created as a result of a claim involving per-
32 sonal injury or worker's compensation made against an insurance policy are
33 not insurance compliance self-evaluative audit documents and are admissi-
34 ble as evidence in civil proceedings as otherwise provided by applicable
35 rules of evidence or civil procedure, subject to all applicable statutory
36 or common law privileges.
37 (b) If any insurer or other person performs or directs the performance of
38 an insurance compliance audit, an officer or employee involved with the
39 insurance compliance audit, or any consultant who is hired for the purpose
40 of performing the insurance compliance audit, may not be examined in any
41 civil, criminal or administrative proceeding as to the insurance compli-
42 ance audit or any insurance compliance self-evaluative audit document, as
43 defined in this section. This subsection (2)(b) does not apply if the
2
1 privilege set forth in subsection (2)(a) of this section is determined
2 under subsections (3) or (4) not to apply.
3 (c) An insurer may voluntarily submit, in connection with examinations
4 conducted under title 41, Idaho Code, an insurance compliance self-
5 evaluative audit document to the director of the department of insurance,
6 or his or her designee, as a confidential document under subsection (10)
7 of section 41-227, Idaho Code, without waiving the privilege set forth in
8 this section to which the insurer would otherwise be entitled. Nothing
9 contained in this subsection shall give the director any authority to com-
10 pel an insurer to disclose involuntarily or otherwise provide an insurance
11 compliance self-evaluative audit document, section 41-223, Idaho Code,
12 notwithstanding.
13 (3) (a) The privilege set forth in subsection (2) of this section does
14 not apply to the extent that it is expressly waived by the insurer that
15 prepared or caused to be prepared the insurance compliance self-evaluative
16 audit document.
17 (b) In a civil or administrative proceeding, a court of record may, after
18 an in camera review, require disclosure of material for which the privi-
19 lege set forth in subsection (2) of this section is asserted, if the court
20 determines one (1) of the following:
21 (i) The privilege is asserted for a fraudulent purpose;
22 (ii) The material is not subject to the privilege; or
23 (iii) Even if subject to the privilege, the material shows evidence
24 of noncompliance with state and federal statutes, rules and orders
25 and the insurer failed to undertake reasonable corrective action or
26 eliminate the noncompliance within a reasonable time.
27 (c) In a criminal proceeding, a court of record may, after an in camera
28 review, require disclosure of material for which the privilege described
29 in subsection (2) of this section is asserted, if the court determines one
30 (1) of the following:
31 (i) The privilege is asserted for a fraudulent purpose;
32 (ii) The material is not subject to the privilege;
33 (iii) Even if subject to the privilege, the material shows evidence
34 of noncompliance with state and federal statutes, rules and orders
35 and the insurer failed to undertake reasonable corrective action or
36 eliminate the noncompliance within a reasonable time; or
37 (iv) The material contained evidence relevant to commission of a
38 criminal offense under the Idaho Code and all of the following fac-
39 tors are present:
40 1. The director of the department of insurance, a prosecuting
41 attorney or the attorney general has a compelling need for the
42 information;
43 2. The information is not otherwise available; and
44 3. The director of the department of insurance, a prosecuting
45 attorney or the attorney general is unable to obtain the sub-
46 stantial equivalent of the information by any means without
47 incurring unreasonable cost and delay.
48 (4) (a) Within thirty (30) days after the director, prosecuting attorney,
49 or attorney general makes a written request by certified mail for disclo-
50 sure of an insurance compliance self-evaluative audit document under this
51 subsection, the insurer that prepared or caused the document to be pre-
52 pared may file with the appropriate court a petition requesting an in cam-
53 era hearing on whether the insurance compliance self-evaluative audit doc-
54 ument or portions of the document are privileged under this section or
55 subject to disclosure. The court has jurisdiction over a petition filed by
3
1 an insurer under this subsection requesting an in camera hearing on
2 whether the insurance compliance self-evaluative audit document or por-
3 tions of the document are privileged or subject to disclosure. Failure by
4 the insurer to file a petition waives the privilege.
5 (b) An insurer asserting the insurance compliance self-evaluative privi-
6 lege in response to a request for disclosure under this subsection shall
7 include in its request for an in camera hearing all of the information set
8 forth in subsection (4)(e) of this section.
9 (c) Upon the filing of a petition under this subsection, the court shall
10 issue an order scheduling, within forty-five (45) days after the filing of
11 the petition, an in camera hearing to determine whether the insurance com-
12 pliance self-evaluative audit document or portions of the document are
13 privileged under this section or subject to disclosure.
14 (d) The court, after an in camera review, may require disclosure of mate-
15 rial for which the privilege in subsection (2) of this section is asserted
16 if the court determines, based upon its in camera review, that any one (1)
17 of the conditions set forth in subsection (3)(b)(i) through (iii) of this
18 section is applicable to a civil or administrative proceeding or that any
19 one (1) of the conditions set forth in subsection (3)(c)(i) through (iv)
20 of this section is applicable as to a criminal proceeding. Upon making
21 such a determination, the court may only compel the disclosure of those
22 portions of an insurance compliance self-evaluative audit document rele-
23 vant to issues in dispute in the underlying proceeding. Any compelled dis-
24 closure will not be considered to be a public document or be deemed to be
25 a waiver of the privilege for any other civil, criminal or administrative
26 proceeding. A party unsuccessfully opposing disclosure may apply to the
27 court for an appropriate order protecting the document from further dis-
28 closure.
29 (e) An insurer asserting the insurance compliance self-evaluative privi-
30 lege in response to a request for disclosure under this subsection (4)
31 shall provide to the director of the department of insurance, a prosecut-
32 ing attorney or the attorney general, as the case may be, at the time of
33 filing any objection to the disclosure, all of the following information:
34 (i) The date of the insurance compliance self-evaluative audit doc-
35 ument;
36 (ii) The identity of the entity conducting the audit;
37 (iii) The general nature of the activities covered by the insurance
38 compliance audit; and
39 (iv) An identification of the portions of the insurance compliance
40 self-evaluative audit document for which the privilege is being
41 asserted.
42 (5) (a) An insurer asserting the insurance compliance self-evaluative
43 privilege set forth in subsection (2) of this section has the burden of
44 demonstrating the applicability of the privilege. Once an insurer has
45 established the applicability of the privilege, a party seeking disclosure
46 under subsections (3)(b)(i) through (iii) of this section has the burden
47 of proving that the privilege is asserted for a fraudulent purpose or that
48 the insurer failed to undertake reasonable corrective action or eliminate
49 the noncompliance within a reasonable time. The director, prosecuting
50 attorney or attorney general seeking disclosure under subsection (3)(c) of
51 this section has the burden of proving the elements set forth in subsec-
52 tion (3)(c) of this section.
53 (b) The parties may at any time stipulate in proceedings under subsection
54 (3) or (4) of this section to entry of an order directing that specific
55 information contained in an insurance compliance self-evaluative audit
4
1 document is or is not subject to the privilege provided under subsection
2 (2) of this section.
3 (6) The privilege set forth in subsection (2) of this section shall not
4 extend to any of the following:
5 (a) Documents, communications, data, reports or other information
6 required to be collected, developed, maintained, reported or otherwise
7 made available to a regulatory agency pursuant to the Idaho Code, or other
8 federal or state law, rule or order;
9 (b) Information obtained by observation or monitoring by any regulatory
10 agency; or
11 (c) Information obtained from a source independent of the insurance com-
12 pliance audit.
13 (7) As used in this section:
14 (a) "Insurance compliance audit" means a voluntary, internal evaluation,
15 review, assessment or audit which is not otherwise expressly required by
16 law of an insurer of an activity regulated under title 41, Idaho Code, or
17 other state or federal law, rule or order applicable to an insurer, or of
18 management systems related to the insurer or such activity, that is
19 designed to identify and prevent noncompliance and to improve compliance
20 with those statutes, rules or orders. An insurance compliance audit may be
21 conducted by the insurer, its employees or by independent contractors.
22 (b) "Insurance compliance self-evaluative audit document" means documents
23 prepared as a result of or in connection with, but not prior to, an insur-
24 ance compliance audit. An insurance compliance self-evaluative audit docu-
25 ment may include a written response to the findings of an insurance com-
26 pliance audit. An insurance compliance self-evaluative audit document may
27 include, but is not limited to, as applicable, field notes and records of
28 observations, findings, opinions, suggestions, conclusions, drafts, memo-
29 randa, drawings, photographs, computer-generated or electronically
30 recorded information, phone records, maps, charts, graphs and surveys,
31 provided this supporting information is collected or developed for the
32 primary purpose and in the course of an insurance compliance audit. An
33 insurance compliance self-evaluative audit document may also include any
34 of the following:
35 (i) An insurance compliance audit report prepared by an auditor,
36 who may be an employee of the insurer or an independent contractor,
37 which may include the scope of the audit, the information gained in
38 the audit, and conclusions and recommendations, with exhibits and
39 appendices;
40 (ii) Memoranda and documents analyzing portions or all of the insur-
41 ance compliance audit report and discussing potential implementation
42 issues;
43 (iii) An implementation plan that addresses correcting past noncom-
44 pliance, improving current compliance, and preventing future noncom-
45 pliance; or
46 (iv) Analytic data generated in the course of conducting the insur-
47 ance compliance audit.
48 (c) "Insurer" and "person" shall have the same meaning as provided in
49 sections 41-103 and 41-104, Idaho Code.
50 (8) Nothing in this section shall limit, waive or abrogate the scope or
51 nature of any statutory or common law privilege including, but not limited to,
52 the work product doctrine, the attorney client privilege or the subsequent
53 remedial measures exclusion.
54 SECTION 2. That Section 9-340D, Idaho Code, be, and the same is hereby
5
1 amended to read as follows:
2 9-340D. RECORDS EXEMPT FROM DISCLOSURE -- TRADE SECRETS, PRODUCTION
3 RECORDS, APPRAISALS, BIDS, PROPRIETARY INFORMATION. The following records are
4 exempt from disclosure:
5 (1) Trade secrets including those contained in response to public agency
6 requests for proposal, requests for clarification, requests for information
7 and similar requests. "Trade secrets" as used in this section means informa-
8 tion, including a formula, pattern, compilation, program, computer program,
9 device, method, technique, process, or unpublished or in progress research
10 that:
11 (a) Derives independent economic value, actual or potential, from not
12 being generally known to, and not being readily ascertainable by proper
13 means by other persons who can obtain economic value from its disclosure
14 or use; and
15 (b) Is the subject of efforts that are reasonable under the circumstances
16 to maintain its secrecy.
17 (2) Production records, sale or purchase records, catch records, mortgage
18 portfolio loan documents, or similar business records of a private concern or
19 enterprise required by law to be submitted to or inspected by a public agency.
20 Nothing in this subsection shall limit the use which can be made of such
21 information for regulatory purposes or its admissibility in any enforcement
22 proceeding.
23 (3) Records relating to the appraisal of real property, timber or mineral
24 rights prior to its acquisition, sale or lease by a public agency.
25 (4) Any estimate prepared by a public agency that details the cost of a
26 public project until such time as disclosed or bids are opened, or upon award
27 of the contract for construction of the public project.
28 (5) Examination, operating or condition reports and all documents relat-
29 ing thereto, prepared by or supplied to any public agency responsible for the
30 regulation or supervision of financial institutions including, but not limited
31 to, banks, savings and loan associations, regulated lenders, business and
32 industrial development corporations, credit unions, and insurance companies,
33 or for the regulation or supervision of the issuance of securities.
34 (6) Records gathered by a local agency or the Idaho department of com-
35 merce, as described in chapter 47, title 67, Idaho Code, for the specific
36 purpose of assisting a person to locate, maintain, invest in, or expand busi-
37 ness operations in the state of Idaho.
38 (7) Shipping and marketing records of commodity commissions used to eval-
39 uate marketing and advertising strategies and the names and addresses of grow-
40 ers and shippers maintained by commodity commissions.
41 (8) Financial statements and business information and reports submitted
42 by a legal entity to a port district organized under title 70, Idaho Code, in
43 connection with a business agreement, or with a development proposal or with a
44 financing application for any industrial, manufacturing, or other business
45 activity within a port district.
46 (9) Names and addresses of seed companies, seed crop growers, seed crop
47 consignees, locations of seed crop fields, variety name and acreage by vari-
48 ety. Upon the request of the owner of the proprietary variety, this informa-
49 tion shall be released to the owner. Provided however, that if a seed crop has
50 been identified as diseased or has been otherwise identified by the Idaho
51 department of agriculture, other state departments of agriculture, or the
52 United States department of agriculture to represent a threat to that particu-
53 lar seed or commercial crop industry or to individual growers, information as
54 to test results, location, acreage involved and disease symptoms of that par-
6
1 ticular seed crop, for that growing season, shall be available for public
2 inspection and copying. This exemption shall not supersede the provisions of
3 section 22-436, Idaho Code.
4 (10) Information obtained from books, records and accounts required in
5 chapter 47, title 22, Idaho Code, to be maintained by the Idaho canola and
6 rapeseed commission and pertaining to the individual production records of ca-
7 nola or rapeseed growers.
8 (11) Records of any risk retention or self-insurance program prepared in
9 anticipation of litigation or for analysis of or settlement of potential or
10 actual money damage claims against a public entity and its employees or
11 against the industrial special indemnity fund except as otherwise discoverable
12 under the Idaho or federal rules of civil procedure. These records shall
13 include, but are not limited to, claims evaluations, investigatory records,
14 computerized reports of losses, case reserves, internal documents and corre-
15 spondence relating thereto. At the time any claim is concluded, only statisti-
16 cal data and actual amounts paid in settlement shall be deemed a public record
17 unless otherwise ordered to be sealed by a court of competent jurisdiction.
18 Provided however, nothing in this subsection is intended to limit the attorney
19 client privilege or attorney work product privilege otherwise available to any
20 public agency.
21 (12) Records of laboratory test results provided by or retained by the
22 Idaho food quality assurance laboratory. Nothing in this subsection shall
23 limit the use which can be made, or availability of such information if used,
24 for regulatory purposes or its admissibility in any enforcement proceeding.
25 (13) Reports required to be filed under chapter 13, title 62, Idaho Code,
26 identifying electrical or natural or manufactured gas consumption data for
27 an individual customer or account.
28 (14) Voluntarily prepared environmental audits, and voluntary disclosures
29 of information submitted on or before December 31, 1997, to an environmental
30 agency as defined in section 9-803, Idaho Code, which are claimed to be confi-
31 dential business information.
32 (15) Computer programs developed or purchased by or for any public agency
33 for its own use. As used in this subsection, "computer program" means a series
34 of instructions or statements which permit the functioning of a computer sys-
35 tem in a manner designed to provide storage, retrieval and manipulation of
36 data from the computer system, and any associated documentation and source
37 material that explain how to operate the computer program. Computer program
38 does not include:
39 (a) The original data including, but not limited to, numbers, text,
40 voice, graphics and images;
41 (b) Analysis, compilation and other manipulated forms of the original
42 data produced by use of the program; or
43 (c) The mathematical or statistical formulas that would be used if the
44 manipulated forms of the original data were to be produced manually.
45 (16) Active investigative records and trademark usage audits of the Idaho
46 potato commission specifically relating to the enforcement of chapter 12,
47 title 22, Idaho Code, until the commencement of formal proceedings as provided
48 by rules of the commission; purchase and sales information submitted to the
49 Idaho potato commission during a trademark usage audit, and investigation or
50 enforcement proceedings. Inactive investigatory records shall be disclosed
51 unless the disclosure would violate the standards set forth in subsections
52 (1)(a) through (f) of section 9-335, Idaho Code. Nothing in this subsection
53 shall limit the use which can be made, or availability of such information if
54 used, for regulatory purposes or its admissibility in any enforcement proceed-
55 ing.
7
1 (17) Insurance compliance self-evaluative privilege as exempted pursuant
2 to section 41-349, Idaho Code.
STATEMENT OF PURPOSE
RS 10098C1
This legislation modifies Chapter 3 of Title 41, Idaho Code, by creating a new
code section, Section 41-349, Idaho Code. It provides a limited privilege from
disclosure for documents and information developed in the course of an internal
compliance or procedure audit by an insurer. The purpose is to encourage
insurers to regularly examine and improve their compliance procedures
voluntarily.
FISCAL IMPACT
There is no fiscal impact on the general fund of this state.
Contact: Rep. Bill Deal 332-1000
Allyn Dingel 343-5454
Phil Barber 371-8484
STATEMENT OF PURPOSE/FISCAL NOTE H 659