H. B. 4503
(By Delegates Beane, Hutchins, Mahan and Cann)
[Introduced February 11, 2000; referred to the
Committee on Banking and Insurance then Finance.]
A BILL to amend and reenact section nine, article two, chapter
thirty-three of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, relating to providing for the
payment from the "commissioner's examination revolving fund"
of attorneys, appraisers, independent actuaries, independent
certified public accountants or other professionals and
specialists retained by the insurance commissioner as
examiners.
Be it enacted by the Legislature of West Virginia:
That section nine, article two, chapter thirty-three of the
code of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted to read as follows:
ARTICLE 2. INSURANCE COMMISSIONER.
§33-2-9. Examination of insurers, agents, brokers and solicitors;
access to books, records, etc.
(a) The purpose of this section is to provide an effective and
efficient system for examining the activities, operations,
financial condition and affairs of all persons transacting the
business of insurance in this state and all persons otherwise
subject to the jurisdiction of the commissioner. The provisions of
this section are intended to enable the commissioner to adopt a
flexible system of examinations which directs resources as may be
deemed appropriate and necessary for the administration of the
insurance and insurance related laws of this state.
(b) For purposes of this section, the following definitions
shall apply:
(1) "Commissioner" means the commissioner of insurance of this
state.
(2) "Company" or "insurance company" means any person engaging
in or proposing or attempting to engage in any transaction or kind
of insurance or surety business and any person or group of persons
who may otherwise be subject to the administrative, regulatory or
taxing authority of the commissioner, including, but not limited to, any domestic or foreign stock company, mutual company, mutual
protective association, farmers mutual fire companies, fraternal
benefit society, reciprocal or inter-insurance exchange, nonprofit
medical care corporation, nonprofit health care corporation,
nonprofit hospital service association, nonprofit dental care
corporation, health maintenance organization, captive insurance
company, risk retention group or other insurer, regardless of the
type of coverage written, benefits provided or guarantees made by
each.
(3) "Department" means the department of insurance of this
state.
(4) "Examiners" means the commissioner of insurance, or any
individual or firm having been authorized by the commissioner to
conduct an examination pursuant to this section, including, but not
limited to, the commissioner's deputies, other employees, appointed
examiners or other appointed individuals or firms who are not
employees of the department of insurance.
(c) The commissioner or his examiners may conduct an
examination under this section of any company as often as the
commissioner in his or her discretion deems appropriate. The
commissioner or his examiners shall at least once every three years visit each domestic insurer and thoroughly examine its financial
condition and methods of doing business and ascertain whether it
has complied with all the laws and regulations of this state. The
commissioner may also examine the affairs of any insurer applying
for a license to transact any insurance business in this state.
(d) The commissioner or his examiners shall, at a minimum,
conduct an examination of every foreign or alien insurer licensed
in this state not less frequently than once every five years. The
examination of an alien insurer may be limited to its United States
business: Provided,
That in lieu of an examination under this
section of any foreign or 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 the first day of January, one
thousand nine hundred ninety-four. Thereafter, such reports may
only be accepted if:
(1) The insurance department was at the time of the
examination accredited under the national association of insurance
commissioners' financial regulation standards and accreditation
program; 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 such an accredited state
insurance department and who, after a review of the examination
work papers and report, state under oath that the examination was
performed in a manner consistent with the standards and procedures
required by their insurance department.
(e) In scheduling and determining the nature, scope and
frequency of examinations conducted pursuant to this section, the
commissioner may consider such matters as the results of financial
statement analyses and ratios, changes in management or ownership,
actuarial opinions, reports of independent certified public
accountants and other criteria as set forth in the examiners'
handbook adopted by the national association of insurance
commissioners and in effect when the commissioner exercises
discretion under this section.
(f) For purposes of completing an examination of any company
under this section, the commissioner may examine or investigate any
person, or the business of any person, insofar as the examination
or investigation is, in the sole discretion of the commissioner,
necessary or material to the examination of the company.
(g) The commissioner may also cause to be examined at such times as he or she deems necessary the books, records, papers,
documents, correspondence and methods of doing business of any
agent, broker, excess lines broker or solicitor licensed by this
state. For these purposes the commissioner or his examiners shall
have free access to all books, records, papers, documents and
correspondence of all the agents, brokers, excess lines brokers and
solicitors wherever the books, records, papers, documents and
records are situate. The commissioner may revoke the license of
any agent, broker, excess lines broker or solicitor who refuses to
submit to such examination.
(h) In addition to conducting an examination, the commissioner
or his examiners may, as the commissioner deems necessary, analyze
or review any phase of the operations or methods of doing business
of an insurer, agent, broker, excess lines broker, solicitor or
other individual or corporation transacting or attempting to
transact an insurance business in the state of West Virginia. The
commissioner may use the full resources provided by this section in
carrying out these responsibilities, including any personnel and
equipment provided by this section as the commissioner deems
necessary.
(i) Examinations made pursuant to this section shall be conducted in the following manner:
(1) Upon determining that an examination should be conducted,
the commissioner or his designee shall issue an examination warrant
appointing one or more examiners to perform the examination and
instructing them as to the scope of the examination. In conducting
the examination, the examiner shall observe those guidelines and
procedures set forth in the examiners' handbook adopted by the
national association of insurance commissioners. The commissioner
may also employ any other guidelines or procedures as the
commissioner may deem appropriate.
(2) Every company or person from whom information is sought,
its officers, directors and agents shall provide to the examiners
appointed under subdivision (1) timely, convenient and free access
at all reasonable hours at its offices to all books, records,
accounts, papers, documents and any or all computer or other
recordings relating to the property, assets, business and affairs
of the company being examined. The officers, directors, employees
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.
(3) The refusal of any company, by its officers, directors, employees or agents, to submit to examination or to comply with any
reasonable written request of the examiners shall be grounds for
suspension, revocation, refusal or nonrenewal of any license or
authority held by the company to engage in an insurance or other
business subject to the commissioner's jurisdiction. Any
proceedings for suspension, revocation, refusal, or nonrenewal of
any license or authority shall be conducted pursuant to section
eleven, article two of this chapter.
(4) The commissioner or his examiners shall have the power to
issue subpoenas, to administer oaths and to examine under oath any
person as to any matter pertinent to the examination, analysis or
review. The subpoenas shall be enforced pursuant to the provisions
of section six, article two of this chapter.
(5) When making an examination, analysis or review 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
shall be borne by the company which is the subject of the
examination, analysis or review or, in the commissioner's
discretion, paid from the commissioner's examination revolving
fund.
(6) Nothing contained in this section may be construed to
limit the commissioner's authority to terminate or suspend any
examination, analysis or review in order to pursue other legal or
regulatory action pursuant to the insurance laws of this state.
The commissioner or his examiners may at any time testify and offer
other proper evidence as to information secured during the course
of an examination, analysis or review, whether or not a written
report of the examination has at that time either been made, served
or filed in the commissioner's office.
(7) Nothing contained in this section may be construed to
limit the commissioner's authority to use and, if appropriate, to
make public any final or preliminary examination report, any
examiner or company workpapers or other documents or any other
information discovered or developed during the course of any
examination, analysis or review in the furtherance of any legal or
regulatory action which the commissioner may, in his or her sole
discretion, deem appropriate. An examination report, when filed,
shall be admissible in evidence in any action or proceeding brought
by the commissioner against an insurance company, its officers or
agents and shall be prima facie evidence of the facts stated
therein.
(j) Examination reports prepared pursuant to the provisions of
this section shall comply with the following requirements:
(1) All examination reports shall be comprised of only facts
appearing upon the books, records or other documents of the
company, its agents or other persons examined or as ascertained
from the testimony of its officers or agents or other persons
examined concerning its affairs and any conclusions and
recommendations the examiners find reasonably warranted from the
facts.
(2) No later than sixty days following completion of the
examination, the examiner in charge shall file with the
commissioner a verified written report of examination under oath.
Upon receipt of the verified report, the commissioner shall
transmit the report to the company examined, together with a notice
which shall afford the company examined a reasonable opportunity of
not more than ten days to make a written submission or rebuttal
with respect to any matters contained in the examination report.
(3) Within thirty 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 any
written submissions or rebuttals and any relevant portions of the examiner's workpapers and enter an order:
(A) 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 such violation; or
(B) Rejecting the examination report with directions to the
examiners to reopen the examination for purposes of obtaining
additional data, documentation or information and refiling pursuant
to subdivision (2) above; or
(C) Calling for an investigatory hearing with no less than
twenty days notice to the company for purposes of obtaining
additional documentation, data, information and testimony.
(4) All orders entered pursuant to this subsection shall 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. Any order issued pursuant to paragraph (A), subdivision
three of this subsection shall be considered a final administrative
decision and may be appealed pursuant to section fourteen, article two of this chapter and shall be served upon the company by
certified mail, together with a copy of the adopted examination
report. Within thirty 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.
(k) Hearings conducted pursuant to this section shall be
subject to the following requirements:
(1) Any hearing conducted pursuant to this section by the
commissioner or the commissioner's authorized representative shall
be conducted as a nonadversarial confidential investigatory
proceeding as necessary for the resolution of any 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 twenty days of the
conclusion of any such hearing, the commissioner shall enter an
order pursuant to paragraph (A), subdivision (3), subsection (j) of
this section.
(2) The commissioner may not appoint an examiner as an
authorized representative to conduct the hearing. The hearing shall proceed expeditiously with discovery by the company limited
to the examiner's workpapers which tend to substantiate any
assertions set forth in any written submission or rebuttal. The
commissioner or the commissioner's representative may issue
subpoenas for the attendance of any witnesses or the production of
any documents deemed relevant to the investigation whether under
the control of the commissioner, the company or other persons. The
documents produced shall be included in the record and testimony
taken by the commissioner or the commissioner's representative
shall be under oath and preserved for the record. Nothing
contained in this section shall require the commissioner to
disclose any information or records which would indicate or show
the existence or content of any investigation or activity of a
criminal justice agency.
(3) The hearing shall 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 commissioner shall be
permitted to make closing statements and may be represented by counsel of their choice.
(l) Adoption of the examination report shall be subject to the
following requirements:
(1) Upon the adoption of the examination report under
paragraph (A), subdivision (3), subsection (j) of this section, the
commissioner may continue to hold the content of the examination
report as private and confidential information for a period of
ninety days except to the extent provided in subdivision (6),
subsection (i) of this section. Thereafter, the commissioner may
open the report for public inspection so long as no court of
competent jurisdiction has stayed its publication.
(2) Nothing contained in this section may prevent or be
construed as prohibiting the commissioner from disclosing the
content of an examination report, preliminary examination report or
results or any matter relating thereto or the results of any
analysis or review to the insurance department of this or any other
state or country or to law-enforcement officials of this or any
other state or agency of the federal government at any time, so
long as the agency or office receiving the report or matters
relating thereto agrees in writing to hold it confidential and in
a manner consistent with this section.
(3) In the event the commissioner determines that regulatory
action is appropriate as a result of any examination, analysis or
review, he or she may initiate any proceedings or actions as
provided by law.
(4) 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,
analysis or review made under this section 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 subdivision (5), subsection (i) of this
section. Access may also be granted to the national association of
insurance commissioners. 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.
(m) No examiner may be appointed by the commissioner if the
examiner, either directly or indirectly, has a conflict of interest
or is affiliated with the management of or owns a pecuniary
interest in any person subject to examination under this section.
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.
(5) Notwithstanding the requirements of this subsection, 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 these persons may from time to time be similarly
employed or retained by persons subject to examination under this
section.
(n) Personnel conducting examinations, analyses or reviews of
either a domestic, foreign or alien insurer shall be compensated
for each day worked at a rate set by the commissioner. The
personnel shall also be reimbursed for their travel and living
expenses at the rate set by the commissioner. Other individuals who are not employees of the department of insurance shall all be
compensated for their work, travel and living expenses at rates
approved by the commissioner, or as otherwise provided by law. As
used in this section the costs of an examination, analysis or
review means:
(1) The entire compensation for each day worked by all
personnel, including those who are not employees of the department
of insurance, the conduct of such examination, analysis or review
calculated as hereinbefore provided;
(2) Travel and living expenses of all personnel, including
those who are not employees of the department of insurance,
directly engaged in the conduct of the examination, analysis or
review calculated at the rates as hereinbefore provided for;
(3) All other incidental expenses incurred by or on behalf of
the personnel in the conduct of any authorized examination,
analysis or review.
(o) All insurers subject to the provisions of this section of
the code shall annually pay to the commissioner on or before the
first day of July, one thousand nine hundred ninety-one and every
first day of July thereafter an examination assessment fee of eight
hundred dollars. Four hundred fifty dollars of this fee shall be paid to the treasurer of the state to the credit of a special
revolving fund to be known as the "Commissioner's Examination
Revolving Fund" which is hereby established and three hundred fifty
dollars shall be paid to the treasurer of the state. The
commissioner may at his discretion, upon notice to the insurers
subject to this section, increase this examination assessment fee
or levy an additional examination assessment fee of two hundred
fifty dollars. In no event may the total examination assessment
fee including any additional examination assessment fee levied
exceed one thousand five hundred dollars per insurer in any
calendar year.
(p) The moneys collected by the commissioner from an increase
or additional examination assessment fee shall be paid to the
treasurer of the state to be credited to the "Commissioner's
Examination Revolving Fund." Any funds expended or obligated by
the commissioner from the "Commissioner's Examination Revolving
Fund" may be expended or obligated solely for defrayment of the
costs of examinations, analyses or reviews of the financial affairs
and business practices of insurance companies, agents, brokers,
excess lines brokers, solicitors or other individuals or
corporations transacting or attempting to transact an insurance business in this state made by the commissioner pursuant to this
section or for the purchase of equipment and supplies, travel,
education and training for the commissioner's deputies, other
employees and appointed examiners necessary for the commissioner to
fulfill the statutory obligations created by this section.
(q) The commissioner may require other individuals who are not
employees of the department of insurance who have been appointed by
the commissioner to conduct or participate in the examination,
analysis or review of insurers, agents, brokers, excess lines
brokers, solicitors or other individuals or corporations
transacting or attempting to transact an insurance business in this
state to:
(1) Bill and receive payments directly from the insurance
company being examined, analyzed or reviewed for their work, travel
and living expenses as previously provided for in this section; or
(2) If an individual agent, broker or solicitor is being
examined, analyzed or reviewed, bill and receive payments directly
from the "Commissioner's Examination Revolving Fund" for their
work, travel and living expenses as previously provided for in this
section.
(r) The commissioner and his examiners shall be entitled to immunity to the following extent:
(1) No cause of action shall arise nor shall any liability be
imposed against the commissioner or his examiners for any
statements made or conduct performed in good faith while carrying
out the provisions of this section.
(2) No cause of action shall arise, nor shall any liability be
imposed against any person for the act of communicating or
delivering information or data to the commissioner or his examiners
pursuant to an examination, analysis or review made under this
section, if the act of communication or delivery was performed in
good faith and without fraudulent intent or the intent to deceive.
(3) The commissioner or any examiner shall be entitled to an
award of attorney's fees and costs if he or she is the prevailing
party in a civil cause of action for libel, slander or any 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.
(4) This subsection does not abrogate or modify in any way any
constitutional immunity or common law or statutory privilege or immunity heretofore enjoyed by any person identified in subdivision
(1) of this subsection.
NOTE: The purpose of this bill is to provide for the payment
from the commissioner's examination revolving fund of attorneys,
appraisers, independent actuaries, independent certified public
accountants or other professionals and specialists retained by the
insurance commissioner as examiners.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.