Effective 28 Aug 2016

374.205. Examination, director may conduct when, required when — duties — nonresident insurer, options, procedures — reports, contents, use of — hearings, procedures — working papers, records, confidential. — 1. (1) The director or any of the director's examiners may conduct an examination pursuant to sections 374.202 to 374.207 of any company as often as the director in his or her sole discretion deems appropriate, but shall, at a minimum, conduct a financial examination of every insurer licensed in this state at least once every five years. In scheduling and determining the nature, scope and frequency of examinations, the director 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, consumer complaints, and other criteria as set forth in the Examiners' Handbook adopted by the National Association of Insurance Commissioners and in effect when the director exercises discretion pursuant to this section.

(2) For purposes of completing an examination of any company pursuant to sections 374.202 to 374.207, the director may examine or investigate any person, or the business of any person, insofar as such examination or investigation is, in the sole discretion of the director, necessary or material to the examination of the company.

(3) In lieu of a financial examination pursuant to section 374.207 of any foreign or alien insurer licensed in this state, the director may accept a financial examination report on the company as prepared by the insurance department or other appropriate agency for the company's state of domicile or port-of-entry state until January 1, 1994. After January 1, 1994, such reports may only be accepted if such insurance department or other appropriate agency was at the time of the examination accredited pursuant to the National Association of Insurance Commissioners' Financial Regulation Standards and Accreditation Program or the examination is performed under the supervision of an accredited insurance department or other appropriate agency or with the participation of one or more examiners who are employed by such an accredited state insurance department or other appropriate agency 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 or other appropriate agency.

2. (1) Upon determining that an examination should be conducted, the director or the director's 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 director may also employ such other guidelines or procedures as the director may deem appropriate.

(2) Every company or person from whom information is sought, its officers, directors and agents shall provide to the examiners appointed pursuant to subdivision (1) of this subsection 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 company or person being examined shall provide within ten calendar days any record requested by an examiner during a market conduct examination, unless such company or person demonstrates to the satisfaction of the director that the requested record cannot be provided within ten calendar days of the request. All policy records for each policy issued shall be maintained for the duration of the current policy term plus two calendar years and all claim files shall be maintained for the calendar year in which the claim is closed plus three calendar years. 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. 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 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 director's jurisdiction. Any such proceeding for suspension, revocation or refusal of any license or authority shall be conducted pursuant to section 374.046.

(3) The director or any of the director's examiners may issue subpoenas to administer oaths and to examine under oath any person as to any matter pertinent to the examination. Upon the failure or refusal of any person to obey a subpoena, the director 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 shall be punishable as contempt of court. Such subpoenas may also be enforced pursuant to the provisions of sections 375.881 and 375.1162.

(4) When making an examination pursuant to sections 374.202 to 374.207, the director may retain attorneys, appraisers, independent actuaries, independent certified public accountants or other professionals and specialists as examiners, the cost of which shall be borne directly by the company which is the subject of the examination.

(5) The provisions of sections 374.202 to 374.207 shall not be construed to limit the director'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 any examination shall be prima facie evidence in any legal or regulatory action.

(6) Nothing contained in sections 374.202 to 374.207 shall be construed to limit the director'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 in the furtherance of any legal or regulatory action which the director may, in his or her sole discretion, deem appropriate.

3. (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 such conclusions and recommendations as 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 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 shall afford the company examined a reasonable opportunity of not more than thirty 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 director shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner's workpapers and either initiate legal action or 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 director, the director may order the company to take any action the director 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 subsection 1 of this section;

(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; or

(d) Calling for such regulatory action as the director deems appropriate, provided that this order shall be a confidential internal order directing the department to take certain action.

(4) All orders entered pursuant to paragraph (a) of subdivision (3) of this subsection shall be accompanied by findings and conclusions resulting from the director's consideration and review of the examination report, relevant examiner workpapers and any written submissions or rebuttals. Any such order shall be considered a final administrative decision and may be appealed pursuant to section 536.150 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. In lieu of the preceding affidavit requirement, in the case of an adopted market conduct report, rather than an adopted financial examination report, the company may file an affidavit executed by its general counsel or chief legal officer stating under oath that the general counsel or chief legal officer has received a copy of the adopted market conduct report and related orders. Any hearing conducted pursuant to paragraph (c) of subdivision (3) of this subsection by the director 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 upon the face of the filed examination report or raised by or as a result of the director'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 director shall enter an order pursuant to paragraph (a) of subdivision (3) of this subsection. In conducting a hearing pursuant to paragraph (c) of subdivision (3) of this subsection:

(a) The director 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 director or his or her 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 director or his or her representative shall be under oath and preserved for the record. The provisions of this section shall not require the department to disclose any information or records which would indicate or show the existence of any investigation or activity of a criminal justice agency; and

(b) The hearing shall proceed with the director or his or her representative posing questions to the persons subpoenaed. Thereafter, the company and the department may present testimony relevant to the investigation. Cross-examination shall be conducted only by the director or the director's representative. The company and the department shall be permitted to make closing statements and may be represented by counsel of their choice.

(5) Upon the adoption of the examination report pursuant to paragraph (a) of subdivision (3) of this subsection, the director shall continue to hold the content of the examination report as private and confidential information for a period of ten days except to the extent provided in this subdivision. Thereafter, the director may open the report for public inspection so long as no court of competent jurisdiction has stayed its publication. Nothing contained in the insurance laws of this state shall prevent or be construed as prohibiting the director 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 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 and in a manner consistent with this section. In the event the director determines that legal or regulatory action is appropriate as a result of any examination, 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 director or any person in the course of an examination made pursuant to this section shall be given confidential treatment and are not subject to subpoena and may not be made public by the director or any other person, except to the extent provided in subdivision (5) of subsection 3 of this section. Access may also be granted to the National Association of Insurance Commissioners. Such parties shall 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.

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(L. 1992 H.B. 1574, A.L. 1997 H.B. 626 merged with H.B. 793, A.L. 1999 S.B. 19 merged with S.B. 386, A.L. 2016 H.B. 2194)