OIR Rule Development Workshop Report: Informal Conferences

On Thursday, February 26, 2009, the Florida Office of Insurance Regulation (“OIR”) held a Rule Development Workshop on proposed Rule 69N-121.066 “Informal Conferences.”  To view the meeting notice and complete proposed Rule text, click here.

The proposed Rule, which pertains to insurers and the OIR in regard to market conduct examinations, specifically outlines changes and clarifies procedures involving insurers challenging the findings of these examination reports both before and after their finalization by the OIR.  The proposed Rule, if adopted, will impact the operation of Section 624.319, F.S., pertaining to OIR examination and investigation reports.

Sections 624.316 and 626.3161, F.S., charge the OIR with examining the insurers subject to its regulation, and Section 624.319, F.S., provides the procedures under which the OIR must make a written report of each insurer based on these examinations. 

OIR Assistant General Counsel Bob Prentiss, who presided over the Workshop, explained that the proposed amendment to the Rule was precipitated by misunderstanding of Section 624.319(1), F.S.  Insurers mistakenly believe that the law entitles them to a formal administrative hearing in accordance with Chapter 120 of the Florida Code in order to contest findings of a finalized, filed report prior to the OIR taking any administrative actions against (or making recommendations to) the insurer as a result of the report’s findings.   Mr. Prentiss expressed the OIR’s position that the law does not provide for this type of a formal hearing, but merely provides for an informal hearing (what the Rule terms a “conference”) which, at the discretion of the OIR, may result in changes to the draft reports when they are finalized, filed and published. 

The Workshop was highly contentious and representatives of various insurers and insurance associations were overtly displeased and perplexed by the OIR’s interpretation of Section 624.319, F.S. Arguing that “the OIR’s proposed amended Rule is a solution in search of a problem,”  these representatives continually questioned why the OIR was taking this position now, considering the current Rule relating to this statute has been unchanged for 15 years.

A representative of First American Title Insurance voiced the concerns shared by all industry representatives in attendance that a market conduct exam, which is often performed by an examiner with little knowledge or understanding of exactly how the industry and insurance products work, affords very little opportunity for the insurer to correct errors or further explain the report components.  He explained that much of the information set forth in these reports could be considered a trade secret, anti-competitive and “plain wrong.” 

As the First American representative and others explained, the current version of Rule 69N-121.066, F.A.C., subsection (2)(e) provides an insurer the right to raise the inaccuracies in the report and if and when the OIR  files a report that an insurer believes to be inaccurate, the insurer may (in accordance with Chapter 120 of the Florida Code) seek a formal hearing. 

Section (2)(e) is the only part of the current Rule that the OIR is seeking to amend.  The changes read as follows:

Old Language:

(2)(e) If disputed points are not settled in the conference, and the Office notifies the company that it intends to file the report and make it a public document as presented in the draft form, the insurer may request a formal hearing to resolve the disputed issues, as provided under Chapter 120, F.S., and in accordance with the Notice of Rights which are a part of the Offices’s notification.

New Language:

(2)(e) If based upon the findings set out in the report the Office takes action against the insurer which affects its substantial interest, the insurer shall have the right to request a hearing pursuant to Section 120.569, F.S. to address the action taken by the Office based upon those findings.

The main argument raised by the insurers was that simply finalizing and filing the report, which could serve an evidentiary function in any proceeding against an insurer pursuant to Section 624.319(2), F.S., is highly prejudicial going into a hearing and therefore affects the “substantial interests” of the insurer, especially in light of the fact that the report will be pointed to as a public record and its findings given credence in any subsequent actions initiated by either the OIR or another party.   The insurers’ argument follows that without the right to a formal hearing to contest the report (which will lay the basis for further administrative action), insurers are being deprived of due process. 

In response to the insurers’ argument, Mr. Prentiss said that the OIR cannot deprive an insurer of any right it has under Florida law, and therefore, the Division of Administrative Hearings can decide whether a formal hearing is appropriate if and when an insurer seeks one.  The insurance representatives responded to Mr. Prentiss’s comments by saying that the Rule was designed to implement Chapter 120, F.S., and facilitate due process through the administrative process, which the proposed changes to the Rule failed to do.

Mr. Prentiss asked those in attendance to read the decisions Menorah Manor, Inc., v. Agency for Health Care Administration, 908 So.2d 1100, 30 Fla. L. Weekly D1717; and Florida Dept. of Ins. v. Cypress Ins. Co., 660 So.2d 1177. Fla.App. 1 Dist.,1995, in order to gain an understanding of how the OIR’s interpretation of a statute has no bearing on whether an insurer may receive an administrative hearing.

The Workshop record will be left open for twenty days from today’s date (February 26, 2009).

 

Please note that the material above is a brief summary of the Rule Development Workshop.  It is not intended to be a comprehensive review of any particular issues relating to the policies and/or Rule(s) discussed.  Further, this report should not be relied upon for making any specific decisions.  Should you have any questions about any of the above matters, please contact this office. 

Colodny Fass will continue to follow actions taken by the Florida Office of Insurance Regulation in regards to this and other matters, and provide information on, and analysis of, those issues and events as they arise.

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