HOUSE BILL REPORT
HB 1035
As Reported by House Committee On:
State Government Operations & Accountability
Title: An act relating to providing confidentiality to certain insurance commissioner examinations.
Brief Description: Providing confidentiality to certain insurance commissioner examinations.
Sponsors: Representatives Kirby, Roach, Simpson and Schual-Berke; by request of Insurance Commissioner.
Brief History:
State Government Operations & Accountability: 1/21/05, 1/28/05 [DPS].
Brief Summary of Substitute Bill |
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HOUSE COMMITTEE ON STATE GOVERNMENT OPERATIONS & ACCOUNTABILITY
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 7 members: Representatives Haigh, Chair; Green, Vice Chair; Nixon, Ranking Minority Member; Clements, Miloscia, Schindler and Sump.
Minority Report: Without recommendation. Signed by 1 member: Representative McDermott.
Staff: James Allen (786-7114).
Background:
The Public Disclosure Act (Act) requires state agencies to make public records available to
the public unless the records are specifically exempted from the disclosure requirements or
are made confidential by another statute.
Under one such statute, certain documents provided to the Insurance Commissioner
(Commissioner) may be confidential and exempt from public disclosure. Protected
information includes information received from the National Association of Insurance
Commissioners and information received from federal, state, and international governmental
agencies. Information obtained from these sources is protected from disclosure only to the
extent that it is confidential and/or privileged under the laws of the jurisdiction from which it
originated. The Commissioner may share confidential information among these sources,
provided the recipient agrees to maintain the confidentiality of the information.
Summary of Substitute Bill:
In general, information the Insurance Commissioner obtains from an insurer in the course of
a financial or market conduct examination is exempt from the disclosure requirements of the
Public Disclosure Act. If, however, the Commissioner cites such records in connection with
an official agency action, the records are subject to disclosure. In this case, the
Commissioner must notify the entity that produced the records five business days before
disclosure in connection with the agency action, and that entity may seek an injunction in any
superior court in Washington to prevent disclosure.
If the Commissioner has obtained information in the course of a financial or market conduct
examination that is exempt from disclosure, and that information is connected to allegations
of negligence or malfeasance by the Commissioner related to a financial or market conduct
examination, then any person may petition any superior court in Washington for access to the
information. In that case, the court must conduct an in-camera review after providing notice
to the Commissioner and parties who provided information. The court may order the
Commissioner to allow the petitioner access to the information; the petitioner must maintain
its confidentiality. After conducting a hearing, the court may order disclosure of the
information if the court finds that there is a public interest in disclosure and that exemption
from disclosure is not necessary to protect any individual's right of privacy or any vital
government function.
Information related to a financial or market conduct examination undertaken as a result of a
proposed change in control or ownership of an insurer or health carrier shall be disclosed,
unless: (1) the information is otherwise privileged or exempted from public disclosure; and
(2) the Commissioner finds that the public interest in nondisclosure outweighs the public
interest in disclosure.
Substitute Bill Compared to Original Bill:
Under the substitute bill, a party objecting to disclosure of materials may seek injunctive
relief in any superior court in Washington. When information otherwise exempt from public
disclosure is connected to allegations of negligence or malfeasance by the Insurance
Commissioner related to a financial or market conduct examination, any person may petition
any superior court of Washington to allow for the inspection of the information.
Appropriation: None.
Fiscal Note: Not requested.
Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of session in which bill is passed.
Testimony For: For background, examinations are done for consumer protection. There are
two types of exams: financial and market conduct. Financial exams are a review of accuracy
and completeness, with the results published. Among other results, market conduct exams
make sure that marketing techniques are legal and that administrative procedures are in
compliance with Washington law. The Office of the Insurance Commissioner has a couple of
options: it can do the exams itself; or it can share the responsibility with other states. This
bill will make it easier for Washington to join other states' efforts to conduct some
examinations. The section that allows people to go to court if there are allegations of
malfeasance or negligence by the Commissioner provides a remedy if people don't trust a
future Insurance Commissioner. Insurers want to be forthcoming and helpful to the
Commissioner in these examinations, but sometimes they have to be guarded with some of
their information because it would become public under current law and would be available
to the competition once transferred to the Office of the Insurance Commissioner; this
currently is bad for the regulators and the regulated. Also, information provided to regulators
under current law could invite litigation, so we need to prevent data mining as a way to
generate litigation. Banking examination papers that are similar to these insurance
documents are currently exempted under state law.
Testimony With Suggestions: There are great sums of money at stake and millions of
people affected; the information covered under the bill is important to insurers and the
insured. Line 15's mention of a "court of competent jurisdiction" could mean all courts in the
United States and abroad, so this should be changed to Thurston County. On lines 27 and 28,
the discussion of documents being "otherwise privileged or exempted from public disclosure"
could also mean any state; some states don't allow the information out for any purpose. We
don't have a problem if you also want to change the current reference to Thurston County to
any superior court in Washington; we just want Washington state law to be what is
applicable.
Testimony Against: None.
Persons Testifying: (In support of original bill) Mary Clogston and Jim Odiorne; Office of
the Insurance Commissioner; Melvin Sorensen, American Council of Life Insurers, Americas
Health Insurance Plans and Property and Casualty Insurers Association of America; and Jean
Leonard, State Farm Insurance Companies and Washington Insurers.
(With concerns to original bill) Rowland Thompson, Allied Daily Newspapers of
Washington.