Archive for the ‘FOIL’ Category:

On Being Transparent

When government talks about transparency it can be a double entendre: transparent as in nothing to hide versus we can see right through you!  One of the best tests to determine the true openness of an administration is how it responds to Freedom of Information Law (FOIL) requests.  My Insight column in the June 3, 2013 issue of Insurance Advocate, titled “FOIL Redux,” continues my examination of the mixed-bag responses of New York’s Department of Financial Services to my FOIL requests, particularly where the DFS responses come up short in providing information it has accumulated on the business of insurance it regulates.  Here is a link to the column.

The Liquidation Process in New York – Part IV-B: Information Highway or By-way?

As discussed in the first part of this installment (Part IV-A posted on November 13, 2008), the statutory reporting requirements on the receiver and his agents, including the Liquidation Bureau, are limited and not necessarily helpful to policyholders, claimants and other interested parties. Despite all the noise about transparency, the information available is generally what the Liquidation Bureau decides to disclose rather than what interested parties want to know. Is it any different for New York’s several insurance security/guaranty funds?

As discussed in part III of this series (posted October 9, 2008), New York has five (5) insurance security/guaranty funds. There are three non-life security funds administered by the superintendent of insurance: the property/casualty fund, the workers comp fund and the public motor vehicle liability fund. The Life Insurance Company Guaranty Corporation, a separate entity with its own Board of life industry representatives, administers the guaranty fund protecting current life and annuity policies. There is also a life guaranty fund covering pre-1983 policies that still remains extant.

The P/C Security Funds

The p/c insurance security funds are accounts funded through industry assessments, with the commissioner of taxation and finance as custodian, and with the control of the funds vested with the superintendent as receiver. Because the p/c funds are essentially bank accounts and not separate entities, there are no specific reporting requirements for these funds. The superintendent is required to include as part of his annual report to the legislature under Insurance Law Section 206 “[a] statement of the expenses of administering” the funds, and to include “[t]ables relative to liquidation, conservation or rehabilitation proceedings by the department . . .” In response to these requirements, the superintendent includes a one-page schedule summarizing receipts, disbursements and balances for each of the three p/c funds. That is the sum total of the regularly provided public information about these funds!

However, because the fund accounts are within the custody of the commissioner of taxation and finance, some additional records regarding the funds can be obtained under the Freedom of Information Law. Hence, as a result of FOIL requests over a number of years to the department of taxation and finance, I have obtained detailed information on the disbursements from the three p/c funds on an estate-by-estate basis.

Curiously, however, the taxation and finance department advises that it does not keep records on recoveries from estates. For that information I was referred to the Liquidation Bureau, which, of course, takes the position that it is not a state agency and therefore not subject to FOIL. Notwithstanding this limitation, the Bureau includes some information on recoveries from estates in its annual report filed with the superintendent and which is obtainable under FOIL.

As a result, by using the information obtained from the taxation and finance department about disbursements and the limited information from the Liquidation Bureau on recoveries, I have been able to construct schedules of the net disbursements from the funds on an estate basis for the past 10 years for the p/c fund and the past 6 years for the motor vehicle and w/c funds. The schedules are too extensive to include in this article, but to give an indication of the information that has been developed, here are the five estates with the greatest net drain on each fund over these periods:

P/C Fund Net Distributions (in millions) 1998 through 2007:

Reliance Ins. Co. — $298.2
Group Council Mutual — $184.4
First Central Ins. Co. — $113
Transtate Ins. Co. — $75.5
Legion Ins. Co. — $73
Total All Estates — $1,066

W/C Fund Net Distributions (in millions) 2002 through 2007:

Reliance Ins. Co. — $172.3
Legion Ins. Co. — $76.5
Home Ins. Co. — $34
Fremont Indemnity — $14.6
Amer. Mutual Boston — $12.1
Total All Estates — $354.1

PMV Fund Net Distributions (in millions) 2002 through 2007:

NY Merchant Bakers — $46.4
Capital Mutual — $26.7
Reliance Ins. Co. — $8.5
Legion Ins. Co. — $3.3
Acceleration Nat’l — $3.3
Total All Estates — $89.3

The information that I have been able to glean through FOIL, although not nearly providing a complete picture of the funds, still is enough to raise questions about the management of estates and the security funds provided by the industry. Unfortunately, however, this detailed information is simply not required to be disclosed on any regular basis nor made available for public analysis.

The Life Funds

Unlike the p/c funds, there is a specific statutory authority for “examination and regulation by the superintendent” of the Life Insurance Company Guaranty Corporation, the entity that administers the principal life guaranty fund, and a requirement that the Corporation file an annual financial report and “a report of its activities during the preceding calendar year.” (§7714). Because the superintendent is required to make annual reports and examination reports on licensed companies publicly available (see §§307 and 311), access to this information about the Life Insurance Company Guaranty Corporation and the life guaranty funds it administers must be readily available as well, right? Wrong.

The superintendent does not include any information on the life funds in the annual report to the legislature, and there is no financial information included on the Life Insurance Company Guaranty Corporation web site (, which contains more disclaimers than useful information.

Because the annual financial report and examination reports are filed with the superintendent, they should be available under FOIL. However, in response to my FOIL requests, I was informed that no examinations have been conducted and the annual reports contain “confidential” information and are therefore exempt from disclosure. After an appeal, I eventually received copies of the last couple of “annual reports”, but they were so heavily redacted as to make them useless (the redacted documents reminded me of a 1950’s HUAC era spy movie!).

Ironically, there is more information available on the p/c funds – controlled by the superintendent and his agents at the Liquidation Bureau — than is available on the industry administered life funds. The cost to the industry for funding these funds is substantial, yet there is no hue and cry demanding greater disclosure or accountability. Perhaps, therefore, there should be little surprise that the receivership process in New York is translucent at best, and that the Liquidation Bureau can claim transparency with so little disclosure.

Wrapped in FOIL!

The New York Freedom of Information Law (Article 6 of the New York Public Officers Law) is a wonderful tool, and the New York Court of Appeals recently made the tool even more useful!

Government Agencies are required to make their records available to any citizen upon request, with a few exceptions. One exception is a privacy exemption allowing an agency to deny access to records that “if disclosed would constitute an unwarranted invasion of personal privacy.” Earlier in December the Court of Appeals issued a decision that held that the burden of demonstrating that the privacy exemption applies is on the agency, not the requesting party (In the Matter of Data Tree, LLC v. Edward P. Romaine, & Co., December 18, 2007, Court of Appeals No. 2007/173, ). The Court of Appeals also found that generally “FOIL does not require the party requesting the information to show any particular need or purpose”, although the Court noted that “motive or purpose is not always irrelevant”, such as where it involves an “unwarranted invasion of personal privacy” or to obtain lists of names and addresses to be used for “commercial or fund-raising purposes” (p.7).

These findings are not the most interesting aspect of the case, however. The most interesting finding – at least to those of us who have been denied access to information for this very reason — is that reformatting electronic data to meet a specific request is not necessarily the creation of a new record. Acknowledging that “an agency is not required to create records in order to comply with a FOIL request”, the Court of Appeals nevertheless concludes:

“As stated earlier, the term ‘records’ means, among other things, ‘computer tapes or discs.’ Disclosure of records is not always necessarily made by the printing out of information on paper, but may require duplicating data to another storage medium, such as a compact disc. [Footnote omitted] Thus, if the records are maintained electronically by an agency and are retrievable with reasonable effort, that agency is required to disclose the information. “(p.9) . . . “A simple manipulation of the computer necessary to transfer existing records should not, if it does not involve significant time or expense, be treated as creation of a new document. “(p.10) (Emphasis Added).

Although the decision leaves room for an agency to argue time and expense, the New York Court of Appeals has clearly issued the message that the burden will be on the agency to justify a denial of access to government records.

Halleluiah and Happy New Year!