Proposed Insurance Document Shielding
Nashville, TN — Here in the heart of country music land, the nation’s insurance and hospital lobby is testing out a new tune of privilege in the form of Senate Bill 2283. Under the pretense of encouraging these companies to obey the law, this proposed legislation would shield a mass of internal documents from the reach of the law — whether civil, regulatory or criminal enforcement actions.
In recent years, large corporate polluters — envious of the protections from disclosure that the law historically has given to the doctor-patient, lawyer-client, spouse-spouse relationships -pushed through the legislatures of over 20 states what they called an “environmental audit privilege.” This law shields internal material relating to self-audits of pollution activity and legal compliance from the very state pollution law enforcement that needs to get at them to enforce the law better.
Now comes the insurance companies, insurance agents, HMOs and hospitals to shield their “insurance compliance audits” from all state legal actions, whether by an attorney general, district attorney, insurance regulatory agency or private civil lawsuits by defrauded or injured consumers.
Here is the ‘kitchen sink’ definition of an insurance compliance audit. It can be voluntarily conducted by the company or by independent contractors. It is designed to identify and prevent noncompliance. It can include field notes, records of observations, findings, opinions, suggestions, conclusions, drafts, memoranda, drawings, photographs, computer-generated information, phone records, maps, charts, graphs and surveys.
None of these materials would be “admissible as evidence in any civil, criminal, or administrative proceeding,” unless this privilege is “asserted for a fraudulent purpose” or state authorities can make a nearly impossible case for an exception before the court.
Now how would a wronged plaintiff or state law enforcement authorities know enough to force a waiver of the privilege if they cannot get at the material in the first place? Well people in the company, from top management down to the entry-level employee or any consultant hired to work on the insurance compliance audit, might tell them. But wait, Senate Bill 2283 places the privilege of inadmissibility in evidence over these individuals as well. They too can say “mum’s the word!”
The insurance and hospital lobby chose Tennessee because it believes that the Republican dominated legislature and Governor’s office would be receptive to this latest escape from corporate responsibility under the law. But Tennessee is also a major base for the giant Columbia/HCA hospital chain that is in deep trouble with federal and state prosecutors on a variety of charges of fraud.
Opponents of S. 2283 in the Tennessee legislature will likely have an opportunity to ask their abstract “law and order” colleagues how state officials could learn about internal workings of Columbia/HCA if that company had time to work the scope of this legislated privilege, were it enacted earlier, over masses of its files to obstruct investigations designed to protect consumers, taxpayers and company shareholders.
Corporate bosses who talk about personal responsibility of regular Americans do not like to discuss the shredding of corporate responsibility for harm done that they have been achieving in scuttling venerable laws of tort, contract and regulatory actions during the past twenty years. Maybe this time, they’ve overgrabbed.