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New Enactments of Self-Audit Privilege Provide Encouragement for Other States; NAMIC Says

INDIANAPOLIS (Aug. 22, 2005)—An analysis by the National Association of Mutual Insurance Companies (NAMIC) has praised a new legal standard adopted in both Kansas and Texas this year as an effective tool to balance consumer protection with the business needs of insurance companies.

A NAMIC Issue Brief, “Kansas and Texas Enact Self-Audit Privilege,” concludes that while there has not been strong support among state insurance regulators or legislators to embrace a self-evaluative audit privilege for insurance companies, nearly all states have already adopted a similar privilege for medical peer reviews and more than half have enacted protections for environmental self-audits.

“NAMIC is hopeful enactment in 2005 of the self-evaluative privilege in Kansas and Texas, as well as a strong attempt to enact the privilege in Missouri, will encourage additional states to adopt the privilege and move the country as a whole closer to common-sense market conduct surveillance,” stated the report’s author, Joe Thesing, NAMIC State Affairs Manager-Central Region.

Insurers are seeking assurances that if they conduct voluntary self audits to analyze their internal compliance procedures to detect and correct any deficiencies, those internal reports will be treated as legally privileged information. Without this protection, internal reports could be used as adverse evidence in administrative procedures or be made public under open records laws for use in a class action legal proceeding.

With enactment of the Kansas and Texas laws, eight jurisdictions now provide the self-audit privilege. The other six are: District of Columbia, Illinois, Michigan, New Jersey, North Dakota and Oregon. While not identical, each of the laws includes a provision stating that an insurance compliance self-evaluative audit document is privileged information and will not be discoverable or admissible as evidence in a legal action.

This Issue Brief is the latest in a series that NAMIC has published on topics of timely interest to the property/casualty industry. All NAMIC Issue Briefs can be downloaded from NAMIC’s website, NAMIC Online.

“Kansas and Texas Enact Self-Audit Privilege” can be read at NAMIC Online.

Posted: Monday, August 22, 2005 12:00:00 AM. Modified: Monday, August 22, 2005 4:09:12 PM.

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