SECTION 7.83. Appeal of Examination Reports

(a) Purpose and scope. This section implements Insurance Code Chapter 401 which directs the Commissioner to adopt procedures for filing and adoption of examination reports and for hearings to be held under Insurance Code Chapter 401 and guidelines governing orders issued under Insurance Code Chapter 401. The section provides an appeals process to preserve both the right of a company to a fair and impartial examination and promote respect for the independence and the importance of the on-site examiner who actually observes the conditions being reported. The purpose of an appeal process is not to replace the examination in the field, nor is it to substitute the judgment of the supervisory or management personnel for that of the examiner. It is to properly weigh the examination report, and to determine whether there is any error or bias which should be corrected. This section applies to all examinations conducted of any entity examined under Insurance Code Chapter 401, except for entities that are subject to another examination appeals process under the Insurance Code.

(b) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise.

(1) Adopted examination report--An examination report that has been adopted by the department under this section.

(2) Appeal--The process by which a company requests that the department review a final examination report for error or bias before adoption of the final examination report.

(3) Company--Any entity examined by the department under Insurance Code Chapter 401.

(4) Examination report--A report prepared by or on behalf of the department as a result of an examination under Insurance Code Chapter 401. An examination report does not include work papers related to the examination.

(5) Final examination report--An examination report that has been reviewed by the chief examiner or designee, and transmitted to the examined company.

(6) Department--Texas Department of Insurance.

(c) Computation of time. A day is a calendar day. In computing any period of time prescribed or allowed by these sections, by order of the agency, or by any applicable statute, the day of the act, event, or default after which the designated period of time begins to run is not included, but the last day of the period so computed is included, unless it is a Saturday, Sunday, or legal holiday, in which event the period runs until the end of the next day which is neither a Saturday, Sunday, nor a legal holiday.

(d) Exit conference. At the conclusion of an examination, the examiner-in-charge will provide company management the opportunity to participate in an exit conference on the findings and conclusions of the examination. Following the exit conference, the examiner-in-charge will complete the examination report and file it with the chief examiner or designee.

(e) Transmittal of final examination report. After the chief examiner or designee has reviewed an examination report, the final examination report will be transmitted to the examined company with a cover letter identifying the report as a final examination report and notifying the company that it has the right to appeal the report under subsection (f) of this section.

(f) Appeal of examination report.

(1) First level appeal. The first level of appeal is to the chief examiner or designee. Within 14 days of the receipt by the company of a final examination report, the company may file with the chief examiner or designee:

(A) a written rebuttal to the final examination report specifying the error or bias in the examination report,

(B) documentation demonstrating the error or bias, and

(C) a written request for a hearing before the chief examiner or designee.

(2) Consideration of first level appeal. The chief examiner or designee will consider the written rebuttal and documentation submitted by the company and any information received at a first level appeal hearing, if the examined company requests one. No later than 14 days following receipt of a written rebuttal under paragraph (1) of this subsection or the conclusion of a first level appeal hearing, the chief examiner or designee may make changes to the report to correct error or bias. After any changes are made, the chief examiner or designee will transmit a copy of the amended examination report to the company or notify the company that no changes have been made.

(3) Second level appeal. Second level appeals may be made to the deputy commissioner, Financial Regulation Division, or designee only after a company has completed an appeal under paragraph (2) of this subsection. Within 14 days of the receipt by the company of the amended examination report or notice described in paragraph (2) of this subsection, the company may file with the appropriate deputy commissioner or designee:

(A) a written rebuttal to the final examination report specifying the error or bias in the examination report,

(B) documentation demonstrating the error or bias, and

(C) a written request for a hearing before the deputy commissioner or designee.

(4) Consideration of second level appeal. The deputy commissioner or designee will consider the written rebuttal and the documentation submitted by the company and any information received at a second level hearing, if the examined company requests one. No later than 14 days following receipt of a written rebuttal to the examination report under paragraph (3) of this subsection or the conclusion of a second level hearing, the deputy commissioner or designee may make changes to the examination report to correct error or bias. After any changes are made, the deputy commissioner or designee will transmit a copy of the amended examination report to the company or notify the company that no changes have been made.

(g) Adoption of examination reports. An examination report is deemed adopted if no appeal is pursued under subsection (f)(1) or (3) of this section. An examination report appealed to the deputy commissioner or designee will be adopted by the deputy commissioner or designee under the provisions of subsection (f)(4) of this section.

(h) Review of report by board of directors. The board of directors of the company must review the adopted examination report. The minutes of the meeting of the board of directors at which the adopted examination report is considered must reflect that each member of the board of directors has reviewed the adopted examination report.

(i) Examination reports of foreign and alien companies.

(1) Examination reports of foreign and alien insurance companies authorized to transact business in this state which are prepared by other jurisdictions and filed with the department may be accepted by the department in lieu of examining such foreign or alien company.

(2) Examination reports of foreign or alien insurance companies authorized to transact business in this state which are filed with the department under paragraph (1) of this subsection are deemed adopted when received.

(j) Extensions of time. Any of the deadlines in this section may be extended by mutual agreement of the company and the department's employee assigned to conduct that portion of the appeal.

(k) Other matters.

(1) Commissioner's authority. Notwithstanding this section, the Commissioner may take regulatory action at any time against a company, using any information obtained during the course of any examination. Nothing contained in this section will be construed to limit the Commissioner's authority to use any final or preliminary examination report, any examiner or company work papers 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 Commissioner may, in his or her sole discretion, deem appropriate.

(2) Disclosure by Commissioner. Nothing contained in this section will be construed to prohibit the Commissioner from disclosing the content of an examination report, preliminary examination report or results, or any related matter, to the insurance department of any other state or country in which the examined company does business, or to law enforcement officials of this or any other state, or to an agency of the federal government at any time. The Commissioner may request any recipient of such reports or related matters to agree in writing to hold it confidential in a manner consistent with Insurance Code Chapter 401.

Source Note: The provisions of this §7.83 adopted to be effective June 10, 1999, 24 TexReg 4238; amended to be effective February 7, 2019, 44 TexReg 480