Sec. 38a-14. (Formerly Sec. 38-7). Examination of affairs of insurance companies, corporations, associations or health care centers collecting underwriting data. Costs.
Sec. 38a-14. (Formerly Sec. 38-7). Examination of affairs of insurance companies, corporations, associations or health care centers collecting underwriting data.
Costs. (a) The commissioner shall, as often as he deems it expedient, examine into the
affairs of any insurance company or health care center doing business in this state, any
corporation or association collecting data utilized by any such insurance company in
the underwriting of insurance policies and any corporation organized under any law of
this state or having an office in this state, which corporation is engaged in, or claiming
or advertising that it is engaged in, organizing or receiving subscriptions for or disposing
of stock of, or in any manner aiding or taking part in the formation or business of, an
insurance company or companies, or which is holding the capital stock of one or more
insurance corporations for the purpose of controlling the management thereof, as voting
trustees or otherwise.
(b) In scheduling and determining the nature, scope and frequency of the examinations, the commissioner shall 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 such other criteria as set forth in the
examiners' handbook adopted by the National Association of Insurance Commissioners
and in effect at the time the commissioner exercises discretion under this section.
(c) (1) To carry out examinations under this section, the commissioner may appoint, as examiners, one or more competent persons, not officers of or connected with
or interested in any insurance company, other than as a policyholder. The commissioner
may engage the services of attorneys, appraisers, independent actuaries, independent
certified public accountants or other professionals and specialists to assist him in conducting the examinations under this section as examiners, the cost of which shall be
borne by the company which is the subject of the examination. (2) In conducting the
examination, the commissioner, his actuary or any examiner authorized by the commissioner may examine, under oath, the officers and agents of such a company, health care
center, corporation or association and all persons deemed to have material information
regarding the company's, health care center's, corporation's or association's property
or business. Each such company, health care center, corporation or association, its officers and agents, shall produce the books and papers, in its or their possession, relating
to its business or affairs, and any other person may be required to produce any book or
paper, in his custody, deemed to be relevant to such examination, for the inspection of
the commissioner, his actuary or examiners, when required. The officers and agents of
the company, health care center, corporation or association shall facilitate the examination and aid the examiners in making the same so far as it is in their power to do so. 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 of, or refusal of 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 such proceedings for suspension, revocation or refusal of any license
or authority shall be conducted pursuant to subsection (c) of section 38a-41. (3) 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 adopt such other guidelines or procedures
as the commissioner may deem appropriate.
(d) In lieu of an examination under this section of any foreign or alien insurer licensed in this state, the commissioner may accept until January 1, 1994, an examination
report on the company prepared by the insurance department for the company's state
of domicile or port-of-entry state. Thereafter, such reports may only be accepted if (1)
such state's 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 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.
(e) (1) Nothing contained in this section shall be construed to limit the commissioner's authority to terminate or suspend any examination in order to pursue legal or regulatory action pursuant to the insurance laws of this state. Findings of fact and conclusions
made pursuant to any examination shall be prima facie evidence in any legal or regulatory
action.
(2) Nothing contained in this section shall be construed to limit the commissioner's
authority in such legal or regulatory action 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.
(3) No later than sixty days following completion of the examination, the examiner
in charge shall file, under oath, with the Insurance Department a verified written report
of examination. Upon receipt of the verified report, the Insurance Department shall
transmit the report to the company examined, together with a notice which shall afford
the company examined a reasonable opportunity, not to exceed thirty days to make a
written submission or rebuttal with respect to any matters contained in the examination
report. 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, regulation 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 subparagraph
(A) of this subdivision; 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.
(f) (1) All orders entered pursuant to subdivision (3) of subsection (e) of this section
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. The findings and conclusions, which form the
basis of any such order of the commissioner, shall be subject to review as provided in
section 38a-19. (2) Any investigatory hearing conducted under subparagraph (C) of
subdivision (3) of subsection (e) of this section by the commissioner or authorized
representative, shall be conducted as a nonadversarial confidential investigatory proceeding as necessary for the resolution of any inconsistencies, discrepancies or disputed
issues apparent (A) upon the filed examination report, (B) raised by or as a result of the
commissioner's review of relevant workpapers or (C) by the written submission or
rebuttal of the company. Within twenty days of the conclusions of any such hearing,
the commissioner shall enter an order pursuant to subparagraph (A) of subdivision (3)
of subsection (e) of this section. The commissioner shall 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 his authorized 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 department, the company or other persons. The documents produced shall be included in the record and testimony taken by the commissioner
or his authorized representative shall be under oath and preserved for the record. Nothing
contained in this section shall require the department 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. The hearing shall proceed with the commissioner
or his authorized representative posing questions to the persons subpoenaed. Thereafter
the company and the Insurance Department may present testimony relevant to the investigation. Cross-examination shall be conducted only by the commissioner or his authorized representative. The company and the Insurance Department shall be permitted to
make closing statements and may be represented by counsel of their choice.
(g) The commissioner may, if he deems it in the public interest, publish any such
report, or the result of any such examination contained therein, in one or more newspapers of the state.
(h) The commissioner shall, at least once in every five years, visit and examine
the affairs of each domestic insurance company, health care center, domestic fraternal
benefit society, and foreign and alien insurance company doing business in this state.
Notwithstanding subdivision (1) of subsection (c) of this section, no domestic insurance
company or other domestic entity subject to examination under this section shall pay
as costs associated with the examination the salaries, fringe benefits, traveling and maintenance expenses of examining personnel of the Insurance Department engaged in such
examination if such domestic company or entity is otherwise liable to assessment levied
under section 38a-47, except that a domestic insurance company or other domestic entity
shall pay the traveling and maintenance expenses of examining personnel of the Insurance Department when such company or entity is examined outside the state.
(i) Nothing contained in this section shall 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, to the Insurance Department
of this or any other state or country, or to law enforcement officials of this or any other
state or to any agency of the federal government at any time, so long as such agency
or office receiving the report or matters relating thereto agrees in writing to hold it
confidential.
(j) 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 section shall be given confidential treatment, shall
not be subject to subpoena and shall not be made public by the commissioner or any
other person, except to the extent provided in subsection (i) of this section. Access to
such information may be granted by the commissioner to the National Association of
Insurance Commissioners so long as it agrees, in writing, to hold it confidential.
(k) (1) The commissioner may engage the services of, 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 said persons
may from time to time be similarly employed or retained by persons subject to examination under this section. (2) No cause of action shall arise nor shall any liability be imposed
against the commissioner, the commissioner's authorized representatives or any examiner appointed by the commissioner for any statements made or conduct performed in
good faith while carrying out the provisions of this section. (3) 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 the commissioner's authorized
representative examiner pursuant to an examination made under this section, if such act
of communication or delivery was performed in good faith and without fraudulent intent
or the intent to deceive. (4) This section does not abrogate or modify in any way any
common law or statutory privilege or immunity heretofore enjoyed by any person identified in subdivision (2) of this subsection. (5) A person identified in subdivision (2) of
this subsection shall be entitled to an award of attorney's fees and costs if he 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.
(1949 Rev., S. 6032; 1953, S. 2784d; P.A. 77-215; P.A. 81-101, S. 6; P.A. 90-243, S. 3; P.A. 92-112, S. 2; P.A. 93-239, S. 16; P.A. 96-227, S. 2.)
History: P.A. 77-215 authorized examination of affairs of corporations and associations "collecting data utilized by
any such insurance company in the underwriting of insurance policies" and amended provisions accordingly; P.A. 81-101
deleted exception to five-year examinations for domestic fraternal benefit societies which formerly were examined once
every three years; P.A. 90-243 applied provisions to health care centers, divided sections into Subsecs. and added Subsec.
(e) re commissioner's power to hire independent actuaries and repayment of examination expenses; Sec. 38-7 transferred
to Sec. 38a-14 in 1991; P.A. 92-112 deleted former Subsecs. (c) and (e) re examiner's report and re use of independent
contractors and payment of costs by entity being examined, added new Subsec. (b) re the scheduling, nature, scope and
frequency of examinations, relettered old Subsec. (b) as (c) and divided it into Subdiv. (1) allowing the commissioner to
engage the services of various professionals to assist him in conducting the examinations and requiring insurers to bear
the expense of such services and Subdiv. (2) re sanctions of nonrenewal or suspension of license for refusal to submit to
examination or to comply with reasonable requests of the examiners within the commissioner's discretion, added new
Subsec. (d) re acceptable substitutes for an examination report for any foreign or alien insurers, added new Subsec. (e) re
the commissioner's authority to review, accept or reject any examination or to terminate or suspend the examination of
an insurer to pursue legal or regulatory action and to use any facts or conclusions made from the examination as prima
facie evidence in a legal or regulatory action, added new Subsec. (f) re hearings and orders of the commissioner concerning
his evaluations, conclusions and findings in assessing the examination report, created new Subsec. (g), with language taken
from the former Subsec. (c) re publication of report of examination of an insurer, relettered former Subsec. (d) as (h),
added new Subsec. (i), allowing the commissioner to disclose to any local, state, or federal government or to any law
enforcement officials the contents of any examination report or preliminary examination report provided the agency agrees
in writing to hold it confidential, added new Subsec. (j) making all workpapers and recorded information confidential, not
subject to subpoena and not accessible to the public and added Subsec. (k) allowing the employment of various professionals
who may independently practice their profession by being employed by an organization subject to examination, providing
that no liability or cause of action may arise against the commissioner or his representatives if conduct or statements made
were in good faith and without fraudulent intent and allowing any party found to be harmed by the disclosure of the
commissioner or his representatives an award of attorney's fees and cost, if he is the prevailing party in a civil cause of
action for libel, slander or relevant tort; P.A. 93-239 added Subsec. (c)(3) re procedures followed when conducting an
examination, added new Subsec. (e)(2) re commissioner's authority to make the results of an examination public, renumbering the existing Subdiv. (2) accordingly, made technical corrections to internal references in Subsec. (f) and amended
Subsec. (h) to delete the commissioner's option to accept the official report of an alien or foreign insurer in lieu of an
examination of his own; P.A. 96-227 amended Subsec. (h) to revise provisions re domestic insurers' examination costs.
See Sec. 38a-49 re reimbursement of state for costs incurred in examining fraternal benefit societies and foreign companies.
See Sec. 38a-50 re reimbursement for costs of valuation.
See Sec. 38a-51 re assessments of costs of examination and valuation.
Annotation to former section 38-7:
In determining whether the law has been complied with, the commissioner acts as a quasi-judicial officer. 60 C. 461.
See note to Sec. 38-9 (now 38a-18).
Annotation to present section:
Subsec. (k):
Subdiv. (5) cited. 240 C. 141.