Insurance Law Revision Commission

At its creation the ILRC was charged with consolidating and recodifying Utah's insurance laws in accordance with eleven stated objectives. These objectives embodied the Legislature's intention to create a "dynamic and responsive regulatory environment in Utah to attract and promote the growth of insurance companies within the state within the constraints of adequate protection of the public..." (Laws of Utah, 1981, Ch. 141). A two-year extension of the ILRC which passed as H.B. 64, 1983, merely restated the objectives outlined in the previous bill (H.B. 157, 1981) while allowing for an additional two year revision period. Similarly, the creation of the ICTF in 1985 charged that body to continue the public comment and review process for an additional eight months and submit final recommendations to an interim committee for consideration by the 1986 Legislature.

In a "Declaration of policy" statement included as Section 2 of S.B.141 (1981), the Legislature outlined its reasoning for the proposed revisions. First, they recognized "fair and reliable insurance markets" as essential to the "social and personal security of Utah citizens" and the "existence and growth of commerce in the state." To ensure the existence of such markets, the Legislature sought to promote "the essential factors influencing competition and market efficiency within each line of insurance." In accordance with public policy, the Legislature recognized "free competition as the primary self-regulatory force in insurance markets" but reaffirmed the state's role as the "appropriate governmental entity for regulating the insurance industry." "The foundation for such regulation," they concluded, "is a body of unified and integrally complete insurance statutes which outline the public policy objectives and provide adequate guidance for executive implementation of these policies."

To this end, the Legislature sought to recodify the state's insurance law and created an "insurance law revision commission" for that purpose. They drew up eleven objectives to direct the commission through the recodification process. The commission was charged: "a) To ensure the financial and business soundness of all insurers doing business in this state; b) To ensure that policyholders, claimants, and insurers are treated fairly and equitably; c) To ensure that the state has an adequate and healthy insurance industry, characterized by competition and the exercise of private initiative; d) To provide for a department that is competent in the field of insurance, and capable of enforcing the state's insurance law; e) To encourage full cooperation of the department with other regulatory bodies, both of this state, and the federal government; f) To improve the effectiveness and fairness of the state's regulation of insurance; g) To maintain freedom of contracts and freedom of enterprise consistent with the other stated objectives of the commission's tasks; h) To encourage self-regulation of the insurance industry; i) To encourage loss prevention as an important aspect of the operation of the insurance industry; j) To keep the public informed on insurance matters; k) To achieve all other objectives as the commission deems proper" (Laws of Utah, 1981, Ch. 141).

The ILRC first met July 15, 1981 in the Governor's Board Room, Utah State Capitol. Operating under a two-year mandate, the ILRC completed its first full revision of the insurance code on March 25, 1983. This initial revision failed to satisfy the interests of all concerned parties, however. In anticipation of this situation, the Legislature extended the life of the ILRC for two additional years (to May 11, 1985) by passing H.B. 64 on January 24, 1983 (Laws of Utah, 1983, Ch. 143). This additional drafting period culminated in a second full revision completed October 12, 1984, which was adopted by the Legislature as S.B. 232 in March 1985.

Concerned that additional criticism would force further amendments to the revised code the following year, the Legislature delayed the effective date of the newly adopted code and created the ICTF to conduct an additional sweeping review of the proposed revisions. Dane Leavitt, former head staff of the commission, noted verbally to Archive's staff in the Fall of 2002 that SB232 was in trouble late in the process because dentists and allied medical providers did not agree with specific sections. The creation of the task force was, in part, an attempt to involve all of the detractors of SB232 in an additional review process before the bill became law. Operating under an eight month mandate, the ICTF concluded its review January, 1986 and presented its revisions to the 1986 Legislature as S.B. 91. The primary functions of the task force included: "1. - to provide a[n additional - eight month] forum for the public airing of suggestions concerning the new Insurance Code; 2. - study the [sixteen contentious] issues described under subsection 8; 3. - give periodic reports and recommendations to the Business, Labor and Economic Development [BLED] Interim Committee (of Utah Legislature); 4. - submit final recommended amendments to the BLED interim committee for consideration by the 1986 Legislature" (Laws of Utah, 1985, Ch. 242).

In sum, the entire insurance recodification process spanned three distinct drafting periods. Between August 1981 and March 1983, the ILRC (through its executive director) conducted an initial review of the individual code chapters and prepared the first comprehensive recodification draft. In June 1983, the ILRC began a detailed review of this draft, resulting in a considerably revised draft recodification which they presented to the Legislature as S.B. 232, February 1985. The ICTF conducted the third and final review between June 1985 and January 1986, with its amendments passed as S.B. 91 during that session.

The ILRC was composed of not more than twenty members appointed to two year terms. Eight members representing companies from the life, health, title, and property and casualty insurance industries were appointed by the governor, as were five members from the public at large. Two senators were appointed by the president of the Senate and two members of the House of Representatives by the speaker of the House. Additional members included the commissioner of insurance, the attorney general, and an executive director. The ICTF was composed of thirteen members appointed for the full eight-month term. The governor appointed twelve of the members including one member of the Senate and one of the House of Representatives. The insurance commissioner was an ex officio member. The governor was to appoint all replacements.

The commission contracted with a qualified individual to act as executive director who was solely responsible for managing the actual recodification process. The director, Spencer L. Kimball, professor of law at the University of Chicago, enjoyed complete autonomy from the commission, conducting the recodification his own way, with his own staff, but was obligated to accept the commission's council and direction. The commission elected one of its members to serve as chairman, who was responsible for calling and conducting all meetings (John F. Peircey served as chairman for the commission's entire history). The Legislature directed the commission to make periodic reports of its progress and actions to the appropriate legislative interim and standing committees and submit an annual progress report to the legislative management committee (Laws of Utah, 1981, Ch. 141). The task force was chaired by the Senate appointee, Fred W. Finlinson, who was responsible for calling and conducting all meetings (Laws of Utah, 1985, Ch. 242).

By March 1983, the commission's executive director, Spencer L. Kimball, had completed an initial draft of the code; from that point on he was no longer directly involved in the recodification process. The estrangement of the director from the commission's activities was brought about by an inability of the director and several commission members to settle sharp differences of opinion over certain code revisions. Though still legally a member of the commission, after March 1983, Prof. Kimball only occasionally offered comments on the commission's subsequent drafts.

The organizational history of the ILRC and ICTF follows the three distinct review and drafting periods which made up the entire recodification process. During the initial drafting period (7/81-3/83), the 20 member commission directly delegated section-by-section reviews, and regular commission business, to individual subcommittees and employed a private consultant (the executive director) to conduct the actual drafting with his own staff. The commission circulated copies of proposed drafts to a 200-300 member informal "Advisory Committee" for further comment. The commission reorganized in May, 1983 (5/83-12/84), creating a "Steering Committee" to manage the actual recodification process, hired their own staff (in conjunction with the Office of Legislative Research General Counsel, or OLRGC) rather than work through a director, and created numerous small "Topical Advisory Committees" to review and comment on proposed drafts. In 1985, the senate bill creating the ICTF (S.B. 232) called for the OLRGC to act as the task force's staff and authorized it to "contract with qualified persons not employed by that office" for additional assistance. The ICTF created three subcommittees to conduct reviews on controversial issues, and manage administrative affairs.

The ILRC maintained numerous subcommittees over its four year history as a means of delegating responsibility for actions considered pertinent to its mission. Subcommittees were appointed by the chairman from the commission membership and assigned specific research tasks to be reported back to the entire body. The Commission also assigned various code sections to individual subcommittees for revision, which they completed with the help of numerous assistants (both staff and volunteers). The Commission circulated the revised code drafts to an Advisory Committee for comment section-by-section as it was completed. Approximately fourteen days following receipt of these materials by the committee, a public hearing was held at which the committee staff collected Advisory Committee members' comments for review by the Commission.

The Advisory Committee was strictly a public input body which never met formally. Its function was to provide an "outside" evaluation of code drafts (to be submitted to the Commission) in a manner that reflected each member's personal interests, or the interests of an organization, trade association, or commercial industry which they represented. Committee members were selected based on their inherent or expressed interest in the recodification process. On the recommendation of the subcommittee directing the creation of the Advisory Committee, the Commission maintained that "any group testifying or otherwise expressing concern about the recodification should be made a member of the [committee]"; membership totaled 200-300 persons. The Commission chair appointed a chairman and vice-chairman to the Advisory Committee (Michael O. Leavitt and Marilee Latta respectively).

By October 1982, the Commission realized that its initial goal for submitting a final draft to the 1983 Legislature was unrealistic. Numerous complaints that insufficient time had been allocated for public input challenged the legitimacy of the entire review process and significant disagreements over code revisions continued to exist between interested parties. Faced with these obstacles, the Commission decided to defer the submission of a final draft to the legislature until after the 1983 general session and establish a Steering Committee to resolve "troublesome issues" by "working with representatives of the industry and the public." As noted earlier, this reorganization was, in part, the result of an insurmountable conflict between several commission members and the executive director, Spencer Kimball, over specific code revisions which led ultimately to his estrangement by March 1983.

As a subcommittee of the ILRC, the Steering Committee was charged to resolve disagreements over code revisions and complete a "workable draft" of the code to submit to the commission. The committee originally consisted of seven members from the commission; in September 1983 an eighth member was added to accommodate other members' frequent absences. A majority of members constituted a quorum, and a majority vote was required to reject or adopt any proposed change or amendment. The committee meetings were open to all interested parties, but the agenda could be modified only by a majority vote from the committee. A list of thirty "controversial issues" requiring the committee's special attention defined the committee's approach to code revisions during this second review period, and led to the creation of a new advisory committee process.

On June 27, 1983, the commission agreed on the creation of numerous smaller public review committees (called Topical Advisory Committees, or TACs) to replace the former, single Advisory Committee. The committees were to assist the Steering Committee with formulating solutions to persistent disagreements over certain sections of the code. The Commission selected TAC members by individual invitation only; some were chosen from those former Advisory Committee groups which felt marginalized by the previous public input process. The letter of invitation indicated that "the [topical] advisory committee will work under the direction of the Steering Committee of the Insurance Law Revision Commission, and will be asked to provide both commentary and specific language proposals for the Steering Committee's review." The Commission's creation of topical advisory committees reflects two important changes in the recodification process. First, by adopting the smaller, more exclusive TACs, the commission was attempting to streamline the public input process formerly conducted through the larger, more costly (in terms of time and money) Advisory Committee, and thus expedite the completion of an acceptable final draft which they had failed to do by the 1983 general session. Second, adoption of the TACs reflected a topical approach to future code revisions in accordance with certain controversial issues, rather than the section-by-section approach which guided the commission's initial review process.

Due to the Commission's limited budget and time constraints, volunteers played a necessary role in the revision and review process. Ostensibly, those volunteers serving on the various Topical Advisory Committees were invited because they represented a specific interest or view point which would contribute significantly to a debate on Utah's insurance industry and the state's regulation of it. This dependence on industry-sponsored volunteers, however, led many to question the potential for improper influence by special interests. Many perceived the involvement of special interests as a violation of the laws' purported objectivity. In response, the commission adopted procedures to potentially ensure that volunteers given specific drafting or research assignments would not "obtain an unfair influence on the commission's product through their assistance."

The passing of S.B. 232 on 25 February 1985, the initial adoption of the 1985 draft of the insurance code, inaugurated the third and final revision period with the creation of the ICTF. That bill charged the Office of Legislative Research and General Council to provide the necessary staff assistance for the task force, and authorized it to contract with qualified persons not employed with that office to that end. The task force created three subcommittees (Administration, Property and Casualty, and Life and Health) to review and make recommendations on issues of particular difficulty. As chair of the task force, Senate appointee, Fred W. Finlinson, appointed all subcommittee members (Laws of Utah, 1985. Ch. 242).