Chapter 14. Law on Examinations.

§ 31–1401. Definitions.

For the purposes of this chapter, the term:

(1) Repealed.

(2) “Company” means any person engaging in or proposing or attempting to engage in any transaction or kind of insurance or surety business and any person or group of persons who may otherwise be subject to the insurance laws of the District of Columbia, including fraternal benefit associations and excluding the District of Columbia Life and Health Guaranty Association and the District of Columbia Property and Liability Insurance Guaranty Association.

(2A) “Department” means the Department of Insurance, Securities, and Banking.

(3) “District” means the District of Columbia.

(4) “Examiner” means any individual or firm having been authorized by the Mayor to conduct an examination under this chapter.

(5) “Person” means any individual, aggregation of individuals, trust, association, partnership, or corporation, or any affiliate thereof.

(Oct. 21, 1993, D.C. Law 10-49, § 2, 40 DCR 6110; May 21, 1997, D.C. Law 11-268, § 10(ff)(1), 44 DCR 1730; Mar. 24, 1998, D.C. Law 12-81, § 39, 45 DCR 745; June 11, 2004, D.C. Law 15-166, § 4(j), 51 DCR 2817.)

Prior Codifications

1981 Ed., § 35-3601.

Effect of Amendments

D.C. Law 15-166, in par. (2A), substituted “Department of Insurance, Securities, and Banking” for “Department of Insurance and Securities Regulation”.

Emergency Legislation

For temporary (90 day) amendment of section, see § 4(j) of Consolidation of Financial Services Emergency Amendment Act of 2004 (D.C. Act 15-381, February 27, 2004, 51 DCR 2653).

Editor's Notes

Mayor authorized to issue rules: Section 10 of D.C. Law 10-49 provided that the Mayor shall, pursuant to subchapter I of Chapter 15 of Title 1 subchapter I of Chapter 5 of Title 2, 2001 Ed., issue rules to implement the provisions of this chapter.

Delegation of Authority

Delegation of authority pursuant to D.C. Law 10-49, the Law on Examinations Act of 1993, see Mayor’s Order 94-54, March 7, 1994 ( 41 DCR 1433).

§ 31–1402. Authority, scope, and scheduling of examinations.

(a) The Mayor, or any of his or her examiners, may conduct an examination under this chapter of any company as often as the Mayor in his or her sole discretion deems appropriate, but shall at a minimum conduct an examination of every insurer licensed in the District at least once every 5 years. In scheduling and determining the nature, scope, and frequency of the examinations, the Mayor shall consider such factors as the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants, and other criteria set forth in the Examiners’ Handbook adopted by the National Association of Insurance Commissioners and in effect when the Mayor exercises discretion under this section.

(b) For purposes of completing an examination of any company under this chapter, the Mayor may examine or investigate any person, or the business of any person, insofar as the examination or investigation is, in the sole discretion of the Mayor, necessary or material to the examination of the company.

(c) In lieu of an examination under this chapter of any foreign or alien insurer licensed in the District, the Mayor may accept, until January 1, 1994, an examination report on the company prepared by the insurance department for the company’s state of domicile or port-of-entry state. Thereafter, these reports may be accepted only if the insurance department was at the time of the examination accredited under the National Association of Insurance Commissioners’ Financial Regulation Standards and Accreditation Program, or the examination is performed under the supervision of an accredited state 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.

§ 31–1403. Conduct of examinations.

(a) Upon determining that an examination should be conducted, the Mayor 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 Mayor may also employ any other guidelines or procedures the Mayor deems appropriate.

(b) Every company or person from whom information is sought, or its officers, directors, and agents, must provide to the examiners appointed under subsection (a) of this section, at all reasonable hours at its offices, convenient and free access 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 officers, directors, employees, and agents of the company or person must 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, revocation, or nonrenewal of any license or authority held by the company to engage in an insurance or other business subject to the insurance laws of the District. Any proceedings for suspension, revocation, or nonrenewal of any license or authority shall be conducted pursuant to §§ 31-4305 and 31-2502.03.

(c) The Mayor, or any of his or her examiners, may issue subpoenas, administer oaths, and 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 Mayor 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.

(d) When making an examination under this chapter, the Mayor may retain attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists as examiners, the cost of which shall be borne by the company which is the subject of the examination.

(e) Nothing contained in this chapter shall be construed to limit the Mayor’s authority to terminate, suspend, or complete any examination in order to pursue other legal or regulatory action pursuant to the insurance laws of the District. Findings of fact and conclusions of law made pursuant to any examination shall be prima facie evidence in any legal or regulatory action.

(f) Nothing contained in this chapter shall be construed to limit the Mayor’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 Mayor may, in his or her sole discretion, deem appropriate.

(g)(1) Any insurer, agent, or broker may cause its accounts, records, documents, and files described in subsection (b) of this section to be created, recorded, copied, or reproduced by any photographic, photostatic, microfilm, microcard, miniature photographic, optical disk, electronic imaging, electronic data processing, electronically transmitted facsimile, printout, or reproduction of electronically stored data or other process which accurately reproduces or forms a durable medium for the reproduction of an account, record, document, or file.

(2) If the items so stored are not the original but accurately represent the original, the original may be destroyed unless held in a custodial or fiduciary capacity, but only if the data is easily accessible to the department in readable form and readable reproduced copies are obtainable.

(3) A record so stored and accurately reproduced is admissible in evidence as the original in any judicial or administrative proceeding whether the original is in existence or not. The introduction of a reproduced record does not preclude admission of the original. This shall not be construed to exclude from evidence any document or copy thereof which is otherwise admissible under the rules of evidence.

§ 31–1404. Examination reports.

(a) General description. — 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 those conclusions and recommendations as the examiners find reasonably warranted from the facts.

(b) Filing of examination report. — No later than 60 days following completion of the examination, the examiner in charge shall file with the Mayor a verified written report of examination under oath. Upon receipt of the verified report, the Mayor 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 30 days to make a written submission or rebuttal with respect to any matters contained in the examination report.

(c) Adoption of report on examination. — Within 30 days of the end of the period allowed for the receipt of written submissions or rebuttals, the Mayor 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:

(1) 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 Mayor, the Mayor may order the company to take any action the Mayor considers necessary and appropriate to cure the violation;

(2) 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 subsections (a) and (b) of this section; or

(3) Calling for an investigatory hearing with no less than 20 days notice to the company for purposes of obtaining additional documentation, data, information, and testimony.

(d) Orders and procedures. —

(1) All orders entered pursuant to subsection (c)(1) of this section shall be accompanied by findings of fact and conclusions of law resulting from the Mayor’s consideration and review of the examination report, relevant examiner workpapers, and any written submissions or rebuttals. These orders shall be considered final administrative decisions and may be appealed to the Mayor pursuant to §§ 31-4332 and 31-2502.43 [repealed], and shall be served upon the company by certified mail, together with a copy of the adopted examination report. Within 30 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.

(2) Any hearing conducted under subsection (c)(3) of this section by the Mayor shall be conducted as a nonadversarial confidential investigatory proceeding 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 Mayor’s review of relevant workpapers or by the written submission or rebuttal of the company. Within 20 days of the conclusion of such a hearing, the Mayor shall enter an order pursuant to subsection (c)(1) of this section.

(A) 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 Mayor 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 Mayor shall be under oath and preserved for the record. Nothing contained in this section shall require the Department to disclose any information or records which would indicate or show the existence or content of any investigation or activity of a criminal justice agency.

(B) The hearing shall proceed with the Mayor 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 Mayor. The company and the Department shall be permitted to make closing statements and may be represented by counsel of their choice.

(e) Publication and use. —

(1) Upon the adoption of the examination report under subsection (c)(1) of this section, the Mayor shall continue to hold the content of the examination report as private and confidential information for a period of 10 days, except to the extent provided in subsection (b) of this section. Thereafter, the Mayor may open the report for public inspection so long as no court of competent jurisdiction has stayed its publication.

(2) No District law shall prevent or be construed as prohibiting the Mayor from disclosing the content of an examination report, preliminary examination report, or results, or any related matter, to the Department or the department of insurance of any other state or country, or to law enforcement officials of the District or any other state or any agency of the federal government at any time, so long as the agency or office receiving the report or related matters agrees in writing to hold it confidential in a manner consistent with this chapter.

(3) In the event the Mayor determines that regulatory action is appropriate as a result of any examination, the Mayor may initiate any proceedings or actions as provided by the laws of the District.

(f) Confidentiality of ancillary information. — All working papers, recorded information, documents, and copies produced by, created by, obtained by, or disclosed to the Mayor or any other person in the course of an examination made under this chapter or in the course of analysis by the Commissioner of the financial condition or market conduct of a company shall be confidential and privileged; shall not be subject to subchapter II of Chapter 5 of Title 2; shall not be subject to subpoena; and shall not be subject to discovery or admissible in evidence in a private civil action. The Commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as part of the Commissioner’s official duties. Documents, materials, or other information, including all working papers, and copies, in the possession or control of the National Association of Insurance Commissioners, including its affiliates and subsidiaries, shall be confidential and privileged; shall not be subject to subpoena; and shall not be subject to discovery or admissible in evidence in a private civil action, if they are:

(1) Created, produced, or obtained by, or disclosed to, the National Association of Insurance Commissioners, including its affiliates and subsidiaries, while the National Association of Insurance Commissioners, including its affiliates and subsidiaries, are (A) assisting in an examination made under this chapter or an examination made by another jurisdiction with a law that is substantially similar to this chapter, or (B) assisting the Commissioner or the chief insurance regulatory official of another jurisdiction in the analysis of the financial condition or market conduct of a company; or

(2) Disclosed to the National Association of Insurance Commissioners, including its affiliates and subsidiaries, under subsection (f-2) of this section by the chief insurance regulatory official of another jurisdiction.

(f-1) The Commissioner or any person who received documents, material, or other information while acting under the authority of the Commissioner, including the National Association of Insurance Commissioners, including its affiliates and subsidiaries, shall not be permitted to testify in a private civil action concerning confidential documents, materials, or other information subject to subsection (f) of this section.

(f-2) To assist in the performance of the Commissioner’s duties, the Commissioner:

(1) May share documents, materials, or other information, including confidential and privileged documents, materials, or other information subject to subsection (f) of this section, with other state, federal, and international regulatory agencies; with the National Association of Insurance Commissioners, including its affiliates and subsidiaries; and with state, federal and international law enforcement authorities; provided, that the recipient agrees, and has the legal authority, to maintain the confidentiality and privileged status of the documents, materials, communication, or other information;

(2) May receive documents, materials, communications, or other information, including otherwise confidential and privileged documents, materials, or other information, from the National Association of Insurance Commissioners, including its affiliates and subsidiaries, and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or other information; or

(3) May enter into agreements governing the sharing and use of information consistent with this subsection.

(f-3) No waiver of an applicable privilege or claim of confidentiality in the documents, materials, or other information shall occur as a result of disclosure to the Commissioner under this section or of sharing as authorized in subsection (f-2) of this section. Nothing in this section shall require an insurer to disclose documents, materials, or other information that is not otherwise required by law to be disclosed.

(f-4) A privilege established under the law of a state or jurisdiction that is substantially similar to the privilege established under this section shall be available and enforced in any proceeding in, and in any court of, the District.

(f-5) In this section, the terms “Department,” “insurance department,” “law enforcement agency,” “regulatory agency,” and “National Association of Insurance Commissioners” shall include their employees, agents, consultants, and contractors.

(Oct. 21, 1993, D.C. Law 10-49, § 5, 40 DCR 6110; Feb. 27, 1996, D.C. Law 11-90, § 7, 42 DCR 7155; May 21, 1997, D.C. Law 11-268, § 10(ff)(2), 44 DCR 1730; Oct. 21, 2000, D.C. Law 13-191, § 5, 47 DCR 7311.)

Prior Codifications

1981 Ed., § 35-3604.

Effect of Amendments

D.C. Law 13-191 rewrote subsec. (f) and added subsecs. (f-1) to (f-5). Prior to amendment, subsec. (f) provided: “(f) Confidentiality of ancillary information.—All working papers, recorded information, documents, and copies produced by, obtained by, or disclosed to the Mayor or any other person in the course of an examination made under this chapter must be given confidential treatment, are not subject to subpoena, and may not be made public by the Mayor or any other person, except to the extent provided in subsection (e) of this section. Access may also be granted to the National Association of Insurance Commissioners. Parties must agree in writing prior to receiving the information to provide it the same confidential treatment required by this section, unless the prior written consent of the company to which it pertains has been obtained.”

Emergency Legislation

For temporary amendment of section, see § 8 of the Insurance Omnibus Emergency Amendment Act of 1995 (D.C. Act 11-48, May 15, 1995, 42 DCR 2544) and § 7 of the Insurance Omnibus Congressional Recess Emergency Amendment Act of 1995 (D.C. Act 11-97, July 19, 1995, 42 DCR 3844).

Temporary Legislation

For temporary (225 day) amendment of section, see § 7 of Insurance Omnibus Temporary Amendment Act of 1995 (D.C. Law 11-36, September 8, 1995, law notification 42 DCR 5305).

§ 31–1405. Conflict of interest.

(a) No examiner may be appointed by the Mayor if the examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this chapter. This section shall not be construed to automatically preclude an examiner from being:

(1) A policyholder or claimant under an insurance policy;

(2) A grantor of a mortgage or similar instrument on the examiner’s residence to a regulated entity if done under customary terms and in the ordinary course of business;

(3) An investment owner in shares of regulated diversified investment companies; or

(4) A settlor or beneficiary of a blind trust into which any otherwise impermissible holdings have been placed.

(b) Notwithstanding the requirements of this section, the Mayor may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions, even though these persons may from time to time be similarly employed or retained by persons subject to examination under this chapter.

§ 31–1406. Cost of examinations.

All expenses of the examinations shall be paid by the company examined, and the company shall timely pay the Mayor the actual expense of such an examination upon receipt of itemized bills provided by the Mayor. For purposes of expenses assessed and paid under this section, the provisions of Unit A of Chapter 3 of Title 2 shall not apply.

(Oct. 21, 1993, D.C. Law 10-49, § 7, 40 DCR 6110; Mar. 25, 2003, D.C. Law 14-236, § 4, 49 DCR 10483.)

Prior Codifications

1981 Ed., § 35-3606.

Effect of Amendments

D.C. Law 14-236 added the last sentence.

Emergency Legislation

For temporary (90 day) amendment of section, see § 4 of Department of Insurance and Securities Regulation Procurement Emergency Act of 2002 (D.C. Act 14-314, March 26, 2002, 49 DCR 3451).

For temporary (90 day) amendment of section, see § 4 of Department of Insurance and Securities Regulation Procurement Congressional Review Emergency Act of 2003 (D.C. Act 15-9, January 27, 2003, 50 DCR 1478).

Temporary Legislation

For temporary (225 day) amendment of section, see § 4 of Department of Insurance and Securities Regulation Procurement Temporary Act of 2002 (D.C. Law 14-159, June 25, 2002, law notification 49 DCR 6495).

§ 31–1407. Immunity from liability.

(a) No cause of action shall arise nor shall any liability be imposed against the Mayor, the Mayor’s authorized representatives, or an examiner appointed by the Mayor for any statements made or conduct performed in good faith while carrying out the provisions of this chapter.

(b) 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 Mayor or the Mayor’s authorized representative or examiner pursuant to an examination made under this chapter, if the act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.

(c) This section does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subsection (a) of this section.

(d) A person identified in subsection (a) of this section shall be entitled to an award of attorney’s fees and costs if the person is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this chapter and the party bringing the action was not substantially justified in doing so. For purposes of this section, the term “substantially justified” means a proceeding that had a reasonable basis in law or fact at the time that it was initiated.