2007 Minnesota Statutes

60A.031 EXAMINATIONS.
    Subdivision 1. Power to examine. (1) Insurers and other licensees. At any time and for
any reason related to the enforcement of the insurance laws, or to ensure that companies are being
operated in a safe and sound manner and to protect the public interest, the commissioner may
examine the affairs and conditions of any foreign or domestic insurance or reinsurance company,
including reciprocals and fraternals, licensee or applicant for a license under the insurance laws,
or any other person or organization of persons doing or in the process of organizing to do any
insurance business in this state, and of any licensed advisory organization serving any of the
foregoing in this state.
The commissioner shall examine the affairs and conditions of every insurer licensed in this
state not less frequently than once every five years.
(2) Who may be examined. The commissioner in making any examination of an insurance
company as authorized by this section may, if in the commissioner's discretion, there is cause to
believe the commissioner is unable to obtain relevant information from such insurance company
or that the examination or investigation is, in the discretion of the commissioner, necessary or
material to the examination of the company, examine any person, association, or corporation:
(a) transacting, having transacted, or being organized to transact the business of insurance in
this state;
(b) engaged in or proposing to be engaged in the organization, promotion, or solicitation of
shares or capital contributions to or aiding in the formation of a domestic insurance company;
(c) holding shares of capital stock of an insurance company for the purpose of controlling the
management thereof as voting trustee or otherwise;
(d) having a contract, written or oral, pertaining to the management or control of an insurance
company as general agent, managing agent, attorney-in-fact, or otherwise;
(e) which has substantial control directly or indirectly over an insurance company whether
by ownership of its stock or otherwise, or owning stock in any domestic insurance company,
which stock constitutes a substantial proportion of either the stock of the domestic insurance
company or of the assets of the owner thereof;
(f) which is a subsidiary or affiliate of an insurance company;
(g) which is a licensed agent or solicitor or has made application for the licenses;
(h) engaged in the business of adjusting losses or financing premiums.
Nothing contained in this clause (2) shall authorize the commissioner to examine any person,
association, or corporation which is subject to regular examination by another division of the
Commerce Department of this state. The commissioner shall notify the other division when an
examination is deemed advisable.
    Subd. 2.[Repealed, 1981 c 211 s 42]
    Subd. 2a. Purpose, scope, and notice of examination. An examination may, but need
not, cover comprehensively all aspects of the examinee's affairs, practices, and conditions. The
commissioner shall determine the nature and scope of each examination and in doing so shall take
into account all available relevant factors concerning the financial and business affairs, practices
and conditions of the examinee. For examinations undertaken pursuant to this section, the
commissioner shall issue an order stating the scope of the examination and designating the person
responsible for conducting the examination. A copy of the order shall be provided to the examinee.
In conducting the examination, the examiner shall observe the guidelines and procedures
in the examiner's handbook adopted by the National Association of Insurance Commissioners.
The commissioner may also employ other guidelines or procedures that the commissioner may
consider appropriate.
    Subd. 3. Access to examinee. (a) The commissioner, or the designated person, shall have
timely, convenient, and free access at all reasonable hours to all books, records, securities,
accounts, documents, and any or all computer or other records and papers relating to the property,
assets, business, and affairs of any company, applicant, association, or person which may be
examined pursuant to this section for the purpose of ascertaining, appraising, and evaluating
the assets, conditions, affairs, operations, ability to fulfill obligations, and compliance with
all the provisions of law of the company or person insofar as any of the above pertain to the
business of insurance of a person, organization, or corporation transacting, having transacted,
or being organized to transact business in this state. Every company or person being examined,
its officers, directors, and agents, shall provide to the commissioner or the designated person
timely, convenient, and free access at all reasonable hours at its office to all its books, records,
accounts, papers, securities, documents, any or all computer or other records relating to the
property, assets, business, and affairs of the company or person. The officers, directors, and
agents of the company or person shall facilitate the examination and aid in the examination so
far as it is in their power to do so.
The refusal of a company, by its officers, directors, employees, or agents, to submit to
examination or to comply with a reasonable request of the examiners is grounds for suspension or
refusal of, or nonrenewal of, a license or authority held by the company to engage in an insurance
or other business subject to the commissioner's jurisdiction. The proceedings for suspension,
revocation, or refusal of a license or authority must be conducted as provided in section 45.027.
(b) The commissioner or any examiners may issue subpoenas, administer oaths, and examine
under oath any person as to any matter pertinent to the examination. If a person fails or refuses
to obey a subpoena, the commissioner may petition a court of competent jurisdiction, and upon
proper showing, the court may enter an order compelling the witness to appear and testify or
produce documentary evidence. Failure to obey the court order is punishable as contempt of court.
(c) When making an examination or audit under this section, the commissioner may retain
attorneys, appraisers, independent actuaries, independent certified public accountants, or other
professionals and specialists as examiners, the cost of which must be paid by the company that is
the subject of the examination or audit.
(d) This section does not limit the commissioner's authority to terminate or suspend any
examination in order to pursue other legal or regulatory action pursuant to the insurance laws
of this state. Findings of fact and conclusions made pursuant to an examination are prima facie
evidence in a legal or regulatory action.
(e) Nothing contained in this section shall be construed to limit the commissioner's authority
to use as evidence a final or preliminary examination report, examiner or company workpapers
or other documents, or other information discovered or developed during the course of an
examination in the furtherance of a legal or administrative action which the commissioner may, in
the commissioner's sole discretion, consider appropriate.
    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 workpapers 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 workpapers, 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 workpapers 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 workpapers 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 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, the National Association of Securities Dealers, 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.
    Subd. 5. Order; foreign and domestic companies. Within a reasonable time of receipt of an
examination report the commissioner may issue an order to the examinee directing compliance
within a time specified in the order or by law with one or more of the following:
(a) to restore within the time and extent prescribed by law or the commissioner's order any
deficiency, whenever its capital, reserves or surplus have become impaired,
(b) to cease and desist from transaction of any business or from any business practice which
if transacted or continued might result in the examinee's condition or further transaction of
business being hazardous to its policyholders, its creditors, or the public,
(c) to cease and desist from any other violation of its charter or any law of the state.
    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 in an action commenced in
Ramsey County by the attorney general on behalf of the state of Minnesota and the money so
recovered shall be paid into the general fund.
    Subd. 7. Alternatives to examinations. In lieu of an examination under this section of a
foreign or an alien insurer licensed in this state, the commissioner may accept an examination
report on the company as prepared by the insurance department for the company's state of
domicile or port of entry state until January 1, 1994. After January 1, 1994, the reports may
only be accepted if:
(1) the insurance department is accredited under the National Association of Insurance
Commissioners Financial Regulation Standards and Accreditation Program at the time of the
examination; or
(2) the examination is performed under the supervision of an accredited insurance department
or with the participation of one or more examiners who are employed by an accredited state
insurance department and who, after a review of the examination workpapers and report, state
under oath that the examination was performed in a manner consistent with the standards and
procedures required by their insurance department.
    Subd. 7a. Conflict of interest. The department shall establish reasonable procedures so
that no examiner, either directly or indirectly, has a conflict of interest or is affiliated with the
management of or owns a pecuniary interest in a person subject to examination under this chapter.
This section shall not be construed to automatically preclude an examiner from being:
(1) a policyholder or claimant under an insurance policy;
(2) a grantor of a mortgage or similar instrument on the examiner's residence to a regulated
entity if done under customary terms and in the ordinary course of business;
(3) an investment owner in shares of regulated diversified investment companies; or
(4) a settlor or beneficiary of a "blind trust" into which any otherwise impermissible holdings
have been placed.
Notwithstanding the requirements of this section, the commissioner may retain from time
to time, on an individual basis, qualified actuaries, certified public accountants, or other similar
individuals who are independently practicing their professions, even though the persons may
from time to time be similarly employed or retained by persons subject to examination under
this chapter.
    Subd. 8. Power to make rules. The commissioner may promulgate any rules which may be
necessary to the administration of subdivisions 1 to 9.
    Subd. 9. Immunity from liability. (a) No cause of action shall arise nor shall liability be
imposed against the commissioner, the commissioner's authorized representatives, or an examiner
appointed by the commissioner for statements made or conduct performed in good faith while
carrying out the provisions of this section.
(b) No cause of action shall arise, nor shall liability be imposed against a person for the act
of communicating or delivering information or data to the commissioner or the commissioner's
authorized representative or examiner pursuant to an examination made under this section, if the
act of communication or delivery is performed in good faith and without fraudulent intent or
the intent to deceive.
(c) This section does not abrogate or modify a common law or statutory privilege or
immunity enjoyed by a person identified in paragraph (a).
(d) A person identified in paragraph (a) may be awarded attorney fees and costs if the person
is the prevailing party in a civil cause of action for libel, slander, or other relevant tort arising out
of activities in carrying out the provisions of this section, and the party bringing the action was
not substantially justified in doing so. For purposes of this section, a proceeding is "substantially
justified" if it had a reasonable basis in law or fact at the time that it was initiated.
History: 1967 c 591 s 1; 1969 c 234 s 1,2; 1969 c 399 s 1; 1981 c 211 s 1-7; 1984 c 628 art 3
s 11; 1986 c 444; 1991 c 325 art 10 s 3; 1992 c 540 art 2 s 2; 2004 c 285 art 4 s 3; 2004 c 290 s 22