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HF 1732

3rd Engrossment - 90th Legislature (2017 - 2018) Posted on 02/20/2018 01:15pm

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - 3rd Engrossment

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A bill for an act
relating to insurance; examinations by the commissioner of commerce; amending
Minnesota Statutes 2016, section 60A.031, subdivisions 4, 6; proposing coding
for new law in Minnesota Statutes, chapter 60A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2016, section 60A.031, subdivision 4, is amended to read:


Subd. 4.

Examination report; foreign and domestic companies.

(a) The commissioner
shall make a full and true report of every examination conducted pursuant to this chapter,
which shall include (1) a statement of findings of fact relating to the financial status and
other matters ascertained from the books, papers, records, documents, and other evidence
obtained by investigation and examination or ascertained from the testimony of officers,
agents, or other persons examined under oath concerning the business, affairs, assets,
obligations, ability to fulfill obligations, and compliance with all the provisions of the law
of the company, applicant, organization, or person subject to this chapter and (2) a summary
of important points noted in the report, conclusions, recommendations and suggestions as
may reasonably be warranted from the facts so ascertained in the examinations. The report
of examination shall be verified by the oath of the examiner in charge thereof, and shall be
prima facie evidence in any action or proceedings in the name of the state against the
company, applicant, organization, or person upon the facts stated therein.

(b) No later than 60 days following completion of the examination, the examiner in
charge shall file with the department a verified written report of examination under oath.
Upon receipt of the verified report, the department shall transmit the report to the company
examined, together with a notice which provides the company examined with a reasonable
opportunity of not more than 30 days to make a written submission or rebuttal with respect
to matters contained in the examination report.

(c) Within 30 days of the end of the period allowed for the receipt of written submissions
or rebuttals, the commissioner shall fully consider and review the report, together with the
written submissions or rebuttals and the relevant portions of the examiner's work papers
and enter an order:

(1) adopting the examination report as filed or with modification or corrections. If the
examination report reveals that the company is operating in violation of any law, rule, or
prior order of the commissioner, the commissioner may order the company to take any
action the commissioner considers necessary and appropriate to cure the violation;

(2) rejecting the examination report with directions to the examiners to reopen the
examination for purposes of obtaining additional data, documentation, or information, and
refiling the report as required under paragraph (b); or

(3) calling for an investigatory hearing with no less than 20 days' notice to the company
for purposes of obtaining additional documentation, data, information, and testimony.

(d)(1) All orders entered under paragraph (c), clause (1), must be accompanied by
findings and conclusions resulting from the commissioner's consideration and review of
the examination report, relevant examiner work papers, and any written submissions or
rebuttals. The order is a final administrative decision and may be appealed as provided
under chapter 14. The order must be served upon the company by certified mail, together
with a copy of the adopted examination report. Within 30 days of the issuance of the adopted
report, the company shall file affidavits executed by each of its directors stating under oath
that they have received a copy of the adopted report and related orders.

(2) A hearing conducted under paragraph (c), clause (3), by the commissioner or
authorized representative, must be conducted as a nonadversarial confidential investigatory
proceeding as necessary for the resolution of inconsistencies, discrepancies, or disputed
issues apparent upon the face of the filed examination report or raised by or as a result of
the commissioner's review of relevant work papers or by the written submission or rebuttal
of the company. Within 20 days of the conclusion of the hearing, the commissioner shall
enter an order as required under paragraph (c), clause (1).

(3) The commissioner shall not appoint an examiner as an authorized representative to
conduct the hearing. The hearing must proceed expeditiously. Discovery by the company
is limited to the examiner's work papers which tend to substantiate assertions in a written
submission or rebuttal. The commissioner or the commissioner's representative may issue
subpoenas for the attendance of witnesses or the production of documents considered relevant
to the investigation whether under the control of the department, the company, or other
persons. The documents produced must be included in the record. Testimony taken by the
commissioner or the commissioner's representative must be under oath and preserved for
the record.

This section does not require the department to disclose information or records which
would indicate or show the existence or content of an investigation or activity of a criminal
justice agency.

(4) The hearing must proceed with the commissioner or the commissioner's representative
posing questions to the persons subpoenaed. Thereafter, the company and the department
may present testimony relevant to the investigation. Cross-examination may be conducted
only by the commissioner or the commissioner's representative. The company and the
department shall be permitted to make closing statements and may be represented by counsel
of their choice.

(e)(1) Upon the adoption of the examination report under paragraph (c), clause (1), the
commissioner shall continue to hold the content of the examination report as private and
confidential information for a period of 30 days except as otherwise provided in paragraph
(b). Thereafter, the commissioner may open the report for public inspection if a court of
competent jurisdiction has not stayed its publication.

(2) Nothing contained in this subdivision prevents or shall be construed as prohibiting
the commissioner from disclosing the content of an examination report, preliminary
examination report or results, or any matter relating to the reports, to the Commerce
Department or the insurance department of another state or country, or to law enforcement
officials of this or another state or agency of the federal government at any time, if the
agency or office receiving the report or matters relating to the report agrees in writing to
hold it confidential and in a manner consistent with this subdivision.

(3) If the commissioner determines that regulatory action is appropriate as a result of an
examination, the commissioner may initiate proceedings or actions as provided by law.

(f) All working papers, recorded information, documents and copies thereof produced
by, obtained by, or disclosed to the commissioner or any other person in the course of an
examination made under this subdivision, or in the course of market analysis, must be given
confidential treatment and are not subject to subpoena and may not be made public by the
commissioner or any other person, except to the extent provided in paragraph (e). Access
may also be granted to the National Association of Insurance Commissioners (NAIC), the
Financial Industry Regulatory Authority, and any national securities association registered
under the Securities Exchange Act of 1934. The parties must agree in writing prior to
receiving the information to provide to it the same confidential treatment as required by
this section, unless the prior written consent of the company to which it pertains has been
obtained. For purposes of this section, "market analysis" means a process whereby market
conduct surveillance personnel collect and analyze information from filed schedules, surveys,
required reports, such as the NAIC Market Conduct Annual Statement, or other sources in
order to develop a baseline profile of an insurer, to review the operation or activity of an
insurer, or to identify patterns or practices of insurers licensed to do business in this state
that deviate significantly from the norm or that may pose a potential risk to the insurance
consumer.

new text begin (g) Information in the possession or control of, or obtained or disclosed to, the
commissioner in the course of, or derived from, market analysis, as defined in paragraph
(f), by an insurance company is:
new text end

new text begin (1) subject to confidential treatment as provided under paragraph (f); and
new text end

new text begin (2) not subject to subpoena or other discovery nor admissible in evidence in a private
civil action. Neither the commissioner nor any person who received information while acting
under the authority of the commissioner is permitted or required to testify in a private civil
action concerning the information. Nothing in this paragraph limits the ability of the
commissioner to use the information in furtherance of an action brought by the commissioner.
new text end

new text begin (h) Requests for information issued by the commissioner to an insurance company in
the course of a market analysis, as defined in paragraph (f), must be issued under the
commissioner's authority as provided in this section.
new text end

new text begin (i) Notwithstanding paragraph (h), the commissioner may request information from an
insurance company pursuant to the commissioner's authority under section 45.027,
subdivision 1a or 2, if:
new text end

new text begin (1) the request for information is in connection with an unresolved consumer complaint;
or
new text end

new text begin (2) there is an imminent risk of significant harm to a consumer.
new text end

new text begin (j) Requests for information from the commissioner to an insurance company under
paragraph (i) are not subject to section 60A.033.
new text end

Sec. 2.

Minnesota Statutes 2016, section 60A.031, subdivision 6, is amended to read:


Subd. 6.

Penalty.

Notwithstanding section 72A.05, any person who violates or aids and
abets any violation of a written order issued pursuant to this section may be fined not more
than $10,000 for each day the violation continues for each violation of the order deleted text beginin an action
commenced in Ramsey County by the attorney general on behalf of the state of Minnesota
deleted text end
and the money so recovered shall be paid into the general fund.

Sec. 3.

new text begin [60A.033] SCHEDULING CONFERENCE AND ORDER.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin This section applies to examinations limited to market analysis,
as defined in section 60A.031, subdivision 4, paragraph (f).
new text end

new text begin Subd. 2. new text end

new text begin Scheduling conference required. new text end

new text begin Within 30 days of issuing an examination
order under section 60A.031, the commissioner must hold a scheduling conference with
the insurance company.
new text end

new text begin Subd. 3. new text end

new text begin Exception. new text end

new text begin A scheduling conference and order is not required under this section
if the insurance company waives its right to a scheduling conference and order.
new text end

new text begin Subd. 4. new text end

new text begin Scheduling conference. new text end

new text begin At the scheduling conference, the commissioner must
provide the insurance company with the following:
new text end

new text begin (1) the justification for the examination and the regulatory issues the examination will
address;
new text end

new text begin (2) the information that must be produced by the insurance company and the timing for
its production in accordance with the requirements of subdivision 6;
new text end

new text begin (3) the estimated length of the examination, subject to the requirements of subdivision
9;
new text end

new text begin (4) whether contract examiners will be used;
new text end

new text begin (5) a budget for the exam including:
new text end

new text begin (i) the daily or hourly rates for the examiners that will be involved in the examination;
new text end

new text begin (ii) the estimated travel, lodging, meal, and other expenses of the examiners; and
new text end

new text begin (iii) the estimated administrative and supply costs directly associated with the
examination; and
new text end

new text begin (6) an explanation of the invoicing process and the process for resolving billing disputes.
new text end

new text begin Subd. 5. new text end

new text begin Scheduling order. new text end

new text begin Within 15 days following the scheduling conference or as
otherwise agreed to by the commissioner and the insurance company, the commissioner
must issue a scheduling order that includes the information required by subdivision 4, based
on the discussion at the scheduling conference. The commissioner and insurance company
must follow the terms of the scheduling order. To amend a scheduling order there must be
a supplemental scheduling conference that complies with subdivision 4 and a supplemental
scheduling order that complies with this subdivision, unless otherwise agreed upon by the
commissioner and the insurance company.
new text end

new text begin Subd. 6. new text end

new text begin Production of information. new text end

new text begin (a) Any information requested from an insurance
company by the commissioner must:
new text end

new text begin (1) be limited to matters relevant to the issues the examination will address;
new text end

new text begin (2) provide the insurance company with a reasonable period of time to respond to the
request, but not less than 30 days from the receipt of the request; and
new text end

new text begin (3) be reasonable in relation to the burden or expense of gathering the requested
information and the needs of the examination.
new text end

new text begin (b) In making an information request, the commissioner must consider whether the
information being requested is obtainable from some other source that is more convenient,
less burdensome, or less expensive for the insurance company.
new text end

new text begin (c) An insurance company can extend the time period by which a response to an
information request from the commissioner is due by up to 30 days upon giving notice of
the extension to the commissioner. The commissioner may extend any time period by which
information is due relating to an examination.
new text end

new text begin Subd. 7. new text end

new text begin Conduct of an examination. new text end

new text begin (a) Unless required to preserve evidence, the
commissioner, department, and examiners:
new text end

new text begin (1) may not appear at an insurance company's place of business unannounced to conduct
the examination; or
new text end

new text begin (2) may not be present at an insurance company's place of business outside of normal
hours without the insurance company's written consent.
new text end

new text begin (b) If a statement is taken by the commissioner from a person under oath, the person
must first be informed of the following:
new text end

new text begin (1) the scope of the proposed statement;
new text end

new text begin (2) whether the person is the subject of an examination; and
new text end

new text begin (3) that the person may be represented by legal counsel during the taking of the statement.
new text end

new text begin (c) If a statement is taken by the commissioner from a person under oath and the statement
is recorded, the person must be provided with a transcript or recording of the statement
within 30 days of requesting it from the commissioner.
new text end

new text begin Subd. 8. new text end

new text begin Costs. new text end

new text begin All bills for examination costs being charged to an insurance company
pursuant to subdivision 5 or section 60A.031, subdivision 3, paragraph (c), must:
new text end

new text begin (1) be itemized and, with respect to examiner billings, contain activity detail on a quarterly
hourly basis by an individual examiner and disclose the applicable hourly billing rates,
together with per-charge detail for related travel or other expenses; and
new text end

new text begin (2) provide a due date no less than 30 days from receipt of the bill.
new text end

new text begin Subd. 9. new text end

new text begin Completion of examination. new text end

new text begin An examination under section 60A.031 must not
exceed 18 months from the date the commissioner receives the insurance company's first
submission pursuant to a scheduling order, unless:
new text end

new text begin (1) the commissioner determines that there has been a material lack of cooperation by
the insurance company;
new text end

new text begin (2) the examination is a multistate examination; or
new text end

new text begin (3) the commissioner determines that additional time is necessary to complete the
examination and the commissioner notifies the insurance company in writing of the reasons
why the examination requires additional time.
new text end

new text begin Subd. 10. new text end

new text begin Hearing; procedure; judicial review. new text end

new text begin (a) An insurance company aggrieved
by any decision or action of the commissioner under this section as it relates to market
analysis may, within 21 days after that decision or action, make a written request to the
commissioner for a hearing to determine whether the decision or action complies with the
requirements of this section. The commissioner shall hear the party or parties within 21
days after receipt of the request and shall give not less than ten days' written notice of the
time and place of the hearing. Within 15 days after the hearing, the commissioner shall
affirm, reverse, or modify the previous action and specify the reasons for that decision or
action in writing. The effective date of the commissioner's action or decision may be
suspended or postponed pending the completion of the hearing before the commissioner.
new text end

new text begin (b) Nothing contained in this section requires the observance at any hearing of formal
rules of pleading or evidence.
new text end

new text begin (c) An order or decision of the commissioner is a final decision subject to appeal in
accordance with chapter 14.
new text end

new text begin (d) Time used to complete a hearing and appeal under this section must not be counted
toward the time frame for completion of an examination under subdivision 9.
new text end

Sec. 4. new text beginEFFECTIVE DATE.
new text end

new text begin Sections 1 to 3 are effective August 1, 2017, and apply to examinations and investigations
initiated on or after that date.
new text end