In response to substantial industry frustration with the examinations and investigations conducted by the Minnesota Department of Commerce, the 2017 session of the Minnesota Legislature just enacted several significant reforms intended to create a more balanced examination process.
The key change requires Commerce to hold a scheduling conference with the target prior to commencing an exam. At the scheduling conference, Commerce must disclose the following information about the examination:
- Its justification and the specific regulatory issues to be addressed
- The information that must be produced and the timing for its production in accordance with several new requirements
- The estimated length of the examination, which may not exceed 18 months, subject to certain exceptions
- Whether contract examiners will be used
- A budget for the exam including the examiner's daily or hourly rates, the estimated number of hours required, the estimated travel, lodging, meal, and other expenses of the examiners.
Following the conference, Commerce is obligated to issue a scheduling order setting forth the information disclosed at the conference. The insurer that is the subject of the examination and Commerce are bound to follow the terms of the scheduling order.
The legislation also provides significant constraints on Commerce's request for information in conjunction with an examination. Any information requested must:
- Be limited to the issues the examination will address
- Provide the target with a reasonable period of time to respond to the request, but not less than 30 business days from the receipt of the request (which can be extended by an additional 30 days upon request)
- Be reasonable in relation to the burden or expense of gathering the requested information and the needs of the examination
- Be subject to the current examination data privacy requirements and is not subject to subpoena or other discovery nor admissible in evidence in a private civil action
Commerce must also consider whether the requested information can be obtained from some other source that is more convenient, less burdensome or less expensive for the insurer.
Significantly, the subject of an examination aggrieved by the conduct of the examination, may, during the course of the examination, request a hearing before the Commissioner to address any alleged violations of the current examination statute and the new scheduling conference legislation. The decision of the Commissioner is appealable under Chapter 14, Minnesota's Administrative Procedures Act.
This legislation was a joint initiative of the Minnesota Insurance and Financial Services Council and the Insurance Federation of Minnesota. Lawyers from Stinson Leonard Street were actively involved in designing, drafting and consulting on the legislation.
The legislation will be effective on August 1, 2017. See, 2017 Minnesota Session Laws.