Anderson Obtains Reversal of OIC Order in Superior Court

On June 6, 2008, Jason W. Anderson of Carney Badley Spellman, P.S., obtained reversal of an administrative order entered by the Hearings Unit of the Office of the Insurance Commissioner (OIC) against a long-term care and life insurance company.

In the course of an OIC financial examination of the insurer pursuant to chapter 48.03 RCW, an OIC actuary concluded that the insurer’s reserves were inadequate. The OIC required the insurer to increase its reserves, which reduced the insurer’s capital and surplus below the statutory minimum. The OIC required the insurer to cure this deficiency, as well as to file a risk-based capital (RBC) plan pursuant to chapter 48.05 RCW.

The insurer requested a hearing to contest the reserve adjustments and sought discovery of the OIC actuary’s work papers. The OIC refused to produce them, citing a privilege in RCW 48.02.065(6) that protects work papers and other materials “produced by, obtained by, or disclosed to the commissioner” from disclosure “unless cited by the commissioner in connection with an agency action.” The insurer unsuccessfully argued that this privilege was not meant to shield materials from an insurer in a contested hearing, that the OIC “cited” its actuary’s work papers in connection with an agency action, and that due process required disclosure. The OIC hearing officer ruled against the insurer and affirmed the reserve adjustments after a hearing on the merits.

The insurer appealed to King County Superior Court, and Judge Richard D. Eadie reversed the hearing officer’s order. The court held that the hearing officer’s ruling that the OIC was not required to produce its actuary’s work papers was an erroneous application of RCW 48.02.065(6), that OIC actuary work papers are “cited by the commissioner in connection with an agency action” when the OIC relies on them in a contested hearing, and that the insurer was denied due process. The court further held that the hearing officer’s order was not supported by substantial evidence because the OIC actuary’s conclusions were inadmissible. The court held that the actuary’s conclusions lacked adequate foundation because they could not be understood without reference to his work papers.