2019 Connecticut General Statutes
Title 38a - Insurance
Chapter 697 - General Provisions
Section 38a-14 - (Formerly Sec. 38-7). Examination of affairs of insurance companies, health care centers and corporations or associations collecting underwriting data. Costs. Transmission and provision of report.
(a) For the purposes of this section, “company” means 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 that 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) The commissioner shall, as often as the commissioner deems it expedient, examine into the affairs of any company. 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 one or more competent persons as examiners, who shall not be officers of, connected with or interested in any company, other than as policyholders. The commissioner may engage the services of attorneys, appraisers, independent actuaries, independent certified public accountants or other professionals and specialists as examiners to assist the commissioner in conducting the examinations under this section, the cost of which shall be borne by the company that is the subject of the examination.
(2) In conducting the examination, the commissioner, the commissioner’s actuary or any examiner authorized by the commissioner may examine, under oath, the officers and agents of such a company, and all persons deemed to have material information regarding the company’s property or business. Each such company or 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 such person’s custody that is deemed to be relevant to such examination, for inspection by the commissioner, the commissioner’s actuary or examiners. The officers and agents of the company 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, 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 an examination report on such insurer prepared by the insurance department for the insurer’s state of domicile or port-of-entry state 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) Not 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 that 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. Not later than thirty days after 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; (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 this subdivision; or (C) calling for an investigatory hearing with not less than twenty days’ notice to the company for purposes of obtaining additional documentation, data, information and testimony.
(4) (A) The commissioner shall transmit the examination report adopted pursuant to subparagraph (A) of subdivision (3) of this subsection or a summary thereof to the company examined, together with any recommendations or written statements from the commissioner or the examiner. The secretary of the board of directors or similar governing body of the company shall provide a copy of the report or summary to each director and shall certify to the commissioner, in writing, that a copy of the report or summary has been provided to each director.
(B) Not later than one hundred twenty days after receiving the report or summary, the chief executive officer or the chief financial officer of the company examined shall present the report or summary to the company’s board of directors or similar governing body at a regular or special meeting.
(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 that 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 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 (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. Not later than twenty days after the conclusion 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 that tend to substantiate any assertions set forth in any written submission or rebuttal. The commissioner or the commissioner’s 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 the commissioner’s 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 that 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 the commissioner’s 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 the commissioner’s 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 the commissioner 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 insurer, domestic health care center, domestic fraternal benefit society, and foreign and alien insurer doing business in this state. Notwithstanding subdivision (1) of subsection (c) of this section, no domestic insurer or such other domestic entity subject to examination under this section shall pay as costs associated with the examination the salaries, fringe benefits or travel and maintenance expenses of examining personnel of the Insurance Department engaged in such examination if such domestic insurer or domestic entity is otherwise liable to assessment levied under section 38a-47, except that a domestic insurer or such other domestic entity shall pay the travel and maintenance expenses of examining personnel of the Insurance Department when such insurer 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 such report and matters relating thereto confidential.
(j) All workpapers, 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 confidential, 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. The commissioner may grant access to such workpapers, recorded information, documents and copies thereof to the National Association of Insurance Commissioners, provided said association agrees, in writing, to hold such workpapers, recorded information, documents and copies thereof confidential.
(k) (1) The commissioner may from time to time engage, on an individual basis, the services of 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 shall 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 such person is the prevailing party in a civil 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; P.A. 09-74, S. 4–6; P.A. 13-134, S. 3; P.A. 14-235, S. 40; P.A. 15-144, S. 1; P.A. 16-213, S. 10; P.A. 17-15, S. 4.)
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; P.A. 09-74 made technical changes in Subsecs. (e)(3), (f)(2) and (k)(5), effective May 27, 2009; P.A. 13-134 made technical changes; P.A. 14-235 made a technical change in Subsec. (k)(5); P.A. 15-144 added Subsec. (e)(4) re transmission of report by commissioner and provision and presentation of report by entity examined, effective July 1, 2015; P.A. 16-213 amended Subsec. (h) by adding “domestic” re health care center and making a technical change, effective July 1, 2016; P.A. 17-15 amended Subsec. (a) to add “For the purposes of this section, “company” means”, and made technical and conforming changes.
