230-RICR-20-60-3. Rate Hearing Procedures on Property and Casualty and Worker’s Compensation Insurance Filings (version Amendment, 11/02/2005 to 11/02/2005)

State of Rhode Island and Providence Plantations DEPARTMENT OF BUSINESS REGULATION Division of Insurance 233 Richmond Street Providence, RI 02903 INSURANCE REGULATION 39 RATE HEARING PROCEDURES ON FIRE AND MARINE, WORKER’S COMPENSATION AND OTHER PROPERTY AND CASUALTY INSURANCE FILINGS Table of Contents Section 1 Authority Section 2 Purpose Section 3 Definitions Section 4 Scope and Purpose Section 5 Costs of Hearing Section 6 Hearing Officer Section 7 Intervenors Section 8 Filing, Motions and Requests Section 9 Discovery Section 10 Prefiled Testimony and Exhibits Section 11 Pre-Hearing Conference Section 12 Public Hearing Section 13 Final Decision Section 14 Extensions of Time Limits Section 15 Rate Hearings on Existing Rates Section 16 Interpretation and Construction Section 17 Severability Section 18 Effective Date Section 1 Authority This Regulation is promulgated in accordance with R.I. Gen. Laws §§ 42-14-16, 42-35-3, 27-6-1 et seq, 27-7.1-1 et seq., 27-9-1 et seq and 27-44-1 et seq. Section 2 Purpose The purpose of this Regulation is to establish the hearing procedures that pertain to fire and marine, workers’ compensation and other property and casualty insurance rate filings Page 1 of 14 Reg. # 39 Section 3 Definitions As used in this Regulation: (a) “Decision” shall mean the decision of the Director as to the rate filing. (b) "Director" shall mean the Director of the Department of Business Regulation or his or her designee. (c) “Filer” shall mean the carrier or licensed rating or advisory organization making a fire and marine, workers’ compensation or other property and casualty insurance rate filing. (d) “Hearing Officer” shall mean that person or persons designated by the Director to serve as his or her designee with regard to a specific rate hearing. (e) "Intervenor" shall mean a person granted status to intervene in a proceeding as provided by these rules. (f) "Licensed rating organization" shall mean an organization referred to in R.I. Gen. Laws § 27-9-22 et seq. (g) "Party" means the Filer; the Office of the Attorney General (the "Attorney General"); and any person or entity that is granted intervenor status by the Hearing Officer. (h) "Person" means any individual, partnership, corporation, association, governmental subdivision, or public or private organization of any character other than an agency. (i) "Prospective loss costs" shall mean that portion of a "rate" that does not include provisions for expenses (other than loss adjustment expenses) or profit and are based on historical aggregate losses and loss adjustment expenses adjusted through development to their ultimate value and projected through trending to a future point in time. (j) "Rate" shall mean the cost of insurance per exposure unit, whether expressed as a single number or as a "prospective loss cost" and an adjustment to account for the treatment of expenses, profits and variations in loss experience, prior to any application of individual risk variations based on loss or expense considerations. (k) "Rate filing" shall mean those filings providing either "prospective loss costs" or the final "rate" of either an insurance company or "licensed rating or advisory organization.” Page 2 of 14 Reg. # 39 Section 4 Scope and Purpose (a) The provisions of this Regulation shall apply to all insurance Rate Filings subject to the requirements of R.I. Gen. Laws §§ 27-6-1 et seq, 27-7.1-1 et seq., 27-9-1 et seq, and 27-44-1 et seq provided such Rate Filings are the subject of a hearing pursuant to the statute. When the circumstances of a particular proceeding require more detailed procedures than those set forth in this Regulation, additional procedures that assure expeditious review may be ordered by the Director or Hearing Officer applicable to that particular proceeding. (b) This Regulation shall be read in conjunction with any and all other procedural Regulations adopted by the Department. In the event of a conflict, the provision of this Regulation shall control in rate hearings subject to its provisions. (c) The purposes of this Regulation are as follows: 1. To expedite the orderly conduct and disposition of fire and marine, workers’ compensation and other property and casualty insurance Rate hearings. 2. To enable all parties to discover the positions of all other parties with respect to each filing prior to the actual hearing. 3. To guarantee that an impartial Hearing Officer will preside at all hearings. 4. To encourage and promote settlement of all procedural matters relating to each filing without the necessity of formal adversary proceedings. 5. To limit any final decision of the Director to evidence contained in the record, stipulations of fact, and matters officially noticed; and 6. To provide for a final decision on a filing within one hundred twenty (120) days from the filing date referred to in Section 8(b) of this Regulation. (d) In computing any period of time prescribed or allowed by this Regulation or by order of the Director, the day of the act, event, or default after which the designated period of time begins to run is not to be included and Saturdays, Sundays and State holidays shall be counted only when the period described is more than seven (7) days. The last day of the period so computed is to be included unless it is a Saturday, a Sunday, or a legal holiday, in which event the period runs until the end of the next day which Page 3 of 14 Reg. # 39 is not a Saturday, a Sunday, or a holiday. Where the time period within which an action must be taken is specified by statute, the terms of the statute control and the provisions of this paragraph shall not apply. (e) When by this Regulation or by a notice or order issued by the Director or Hearing Officer, an act is required or allowed to be done at, before, or within a specified time, the Director or Hearing Officer, for cause shown, may at any time, in his or her discretion, with or without request, motion or notice, order the period enlarged before the expiration of the period originally prescribed or as extended by a previous order, provided that time limits or periods that apply to other Persons affected by the resulting change or delay are also adjusted appropriately. Requests for enlargement of time that are filed after expiration of the period originally prescribed or as extended by previous order will be granted only in exceptional circumstances. Section 5 Costs of Hearing (a) The Filer is responsible to pay the reasonable and customary fees of any and all experts retained by the Department to assist in the hearing process. Any dispute over the amount of the fees, which will be billed directly by the consultant to the Filer and paid directly by the Filer to the consultant, shall be referred to the Hearing Officer for resolution. (b) The Filer is responsible to have present a stenographer at all proceedings in connection with the hearing, including the prehearing conference, and have a stenographic transcript of all proceeding relating to the Rate hearing made. The Hearing Officer shall be provided with the original of the stenographic record which shall become part of the official transcript of the Rate hearing. The Filer is responsible to pay the costs of the stenographer and the transcripts required under this section. (c) The Hearing Officer may order the Filer to pay such other costs directly related to the Rate hearing as are reasonable. Section 6 Hearing Officer (a) The Director, authorized by law to adjudicate insurance Rate hearings, may delegate his or her authority to hear the case to a Hearing Officer. (b) If the Director intends to appoint a Hearing Officer other than the designated departmental Hearing Officer, said appointment must be made and notice given to all parties not later than the pre-hearing conference and if no pre-hearing conference is held pursuant to Section 11(h) of this Regulation, not later than ten (10) days prior to the hearing. Page 4 of 14 Reg. # 39 (c) If any party, in good faith, shall timely present a sufficient affidavit of personal bias, lack of independence, disqualification by law, or other reason for disqualification, the Director may then disqualify said Hearing Officer and designate another Hearing Officer to preside. Any denial of such a request must be in writing setting forth the reasons for such denial. (d) No Party shall engage in direct communication with a Hearing Officer relating to the matters of law or fact to be heard by the Hearing Officer without the permission or attendance of all other parties to the proceeding. This prohibition does not apply to any matters not related to the hearing currently pending before the Hearing Officer. (e) The Director may appoint a replacement hearing officer if the appointed hearing officer is unable to continue as hearing officer. Section 7 Intervenors (a) An application for Intervenor status shall be made to the Director or Hearing Officer in writing. The application shall contain a statement explaining how the applicant is or may be, a member of a class which is or may be, substantially and directly affected by the proceeding. (b) An application for Intervenor status may be filed at any time after the filing date but shall be filed within the time permitted for Intervenor applications by an order of the Director which is publicly noticed. Any Person who applies for Intervenor status after the deadline set by the Director shall be permitted to intervene only upon a compelling demonstration of good cause, and shall be subject to any established hearing schedule. (c) The Director or Hearing Officer may permit interested individuals to make comments on the record as to the matters before the Director or Hearing Officer. Such comments made by the witnesses may be subject to cross examination, and the Director or Hearing Officer is entitled to give such public testimony the appropriate weight that he or she determines. Such determination shall be dependent upon the expertise and knowledge of the witness. Section 8 Filing, Motions and Requests (a) All Rate Filings shall be submitted to the Insurance Division of the Department in accordance with the provisions of R.I. Gen. Laws §§ 27-6-1 et seq, 27-7.1-1 et seq., 27-9-1 et seq, and 27-44-1 et seq, or as the laws governing such filing shall be amended from time to time. Page 5 of 14 Reg. # 39 (b) Upon the receipt of any filing subject to this Regulation, the document and any material accompanying it will be inspected by the Department. If the document is found by the Department to be defective or insufficient, the Department shall inform the person filing it of the defect or omission within thirty (30) days of receipt of the filing, and shall further specify what additional information the filer must provide to remove the defect or insufficiency. The defective or insufficient documents will not be deemed to be filed. The defective or insufficient documents will be retained by the Department marked to indicate that it is not deemed filed. Within thirty (30) days of submission of additional material by the filing party in response to the notice of defect, the Department shall determine whether the defect or omissions have been corrected and notify the filing party of the determination. The filing date for such a document shall be deemed to be the date on which the last document that removed any defect or made the filing complete was received by the Department. (c) Every motion or request for an order or ruling of any kind by the Director or Hearing Officer shall be in writing, unless made on the record during a hearing to which the request or motion is related. Every request or motion shall include or be accompanied by a clear and detailed statement of the facts that support the order or other action sought. The statement supporting the request or motion should also include any arguments with respect to policy or law that have a bearing on the request. Copies of every request or motion shall be served on every Party to the proceeding by the requesting or moving Party. (d) Requests or motions and their supporting papers should be clearly labeled on the first page with a title that includes "motion" or "request", a short description of the action or order requested, and a caption sufficient to identify the matter to which the request or motion relates. If legal arguments are advanced, the supporting statement accompanying the motion shall include citations to all supporting authorities relied upon by the moving Party. (e) Any Party opposing a motion or request shall file a statement in opposition to the motion or request within ten (10) days after service of the motion or request, unless some other period is established by the Director or Hearing Officer. (f) In order to expedite the prompt exchange of information, clarification of issues, and discovery, and established dates for motions, requests and discovery, the Director or Hearing Officer may call and conduct conference(s) of the parties from time to time. Page 6 of 14 Reg. # 39 Section 9 Discovery (a) The Director and Department staff shall have all authority granted to them by statute to obtain information in any proceeding, and the provisions of this Section shall not be construed to limit that authority in any way. (b) All parties shall have the right to serve informational requests upon any Party, subject to the following terms and procedures. (1) Informational requests shall be in writing, unless made on the record in a pre-hearing or hearing, and specifically directed to a Party or Parties. A copy of each request shall be provided to the Director or Hearing Officer and all parties to the proceeding. (2) The Department, Attorney General and all Intervenors shall serve their discovery requests upon the Filer as directed by the Director or Hearing Officer at the prehearing conference or thereafter. Additional information requests may be served on the Filer if the initial discovery request was made in a timely manner. (3) Informational requests shall be relevant to the issues involved in the pending proceeding, and shall not be unduly burdensome or repetitious. (4) Objections to an information request shall be filed with the Director or Hearing Officer no later than ten (10) days after it is received, unless some other period is prescribed by order. (5) Each informational request shall be answered within thirty (30) days after its receipt or such other period as may be ordered by the Director or Hearing Officer, except as to any part of a request to which specific and timely objection is made. In cases where timely objection has been made and the objection is subsequently overruled, the requested information shall be provided within thirty (30) days of receipt of the Director's or Hearing Officer's ruling on the objection or such other period as may be provided in that ruling. (6) A copy of the responsive material shall be provided to the Director or Hearing Officer and to each Party. Responsive material does not become part of the record of hearing unless offered and admitted. Section 10 Prefiled Testimony and Exhibits The prefiling of each Party's direct case, including testimony and exhibits, shall be required in rate proceeding. If any Party other than the Filer does not desire to present Page 7 of 14 Reg. # 39 a direct case, such Party shall so inform the Director or Hearing Officer not later than the pre-hearing conference. Notwithstanding the foregoing, a Party not desiring to present a direct case may, not later than ten (10) days prior to the commencement of the final hearing, move to request to file direct testimony and exhibits in accordance herewith. Prefiling shall be subject to a schedule established by the Director or Hearing Officer by order issued preceding a prehearing conference or otherwise, and shall be subject to the following further provisions: (a) Parties to the case shall file with the Director or Hearing Officer, in such number of copies as the Director or Hearing Officer may order, all testimony and exhibits of each witness whom they propose to present in support of their direct cases. Two (2) copies of such testimony and exhibits shall be served on each Party at the time that such testimony and exhibits are filed with the Director or Hearing Officer. If the prefiled direct testimony described in this paragraph is filed prior to the decision by the Director or Hearing Officer regarding petitions to intervene, additional copies of such testimony and exhibits shall be served on each proposed Intervenor within two (2) days of the date that the Party filing the testimony and exhibits receives notice of the petition to intervene. (b) Prefiled testimony shall be in writing and shall be presented in double- spaced print or typescript in the form of questions and answers that would render similar oral testimony admissible. Prefiled exhibits may be attached to the testimony, provided that they are referred to, identified, and introduced in the prefiled testimony. Prefiled written testimony shall have numbered pages and include line numbers on each page, in the left hand margin, except as otherwise permitted by the Director or Hearing Officer. Each Party may file an opening statement with its prefiled testimony and exhibits containing a narrative summary of the testimony and exhibits and the fact(s) that they are intended to establish. (c) A witness while under oath, may supplement, correct and explain his or her prefiled testimony and exhibits by filing amendments thereto in writing or by oral testimony. Such supplementation, correction and explanation shall not substantially alter the subject matter of the testimony unless a change of circumstance which is clearly identifiable has developed, except to the extent that information which was not available and which could not have been obtained through the exercise of due diligence at the time of preparation of the testimony may affect the nature of the presentation. Prefiled testimony shall be introduced into the record by the oral testimony of the witness under oath, after which it may be offered as an exhibit, with the same effect as if the testimony had been given orally in its entirety. Each witness presenting prefiled direct testimony shall be subject to oral cross-examination. Re-direct examination will be conducted orally and will be limited to matters raised during cross-examination. Objection to prefiled testimony or exhibits may Page 8 of 14 Reg. # 39 be made at the time that testimony or exhibits are offered at the oral hearing. Section 11 Pre-Hearing Conference (a) The purpose of the pre-hearing conference is to provide an opportunity for the consideration of facts, arguments, and other issues as well as consideration of the means by which the hearing procedure may be facilitated and the disposition of the proceedings expedited. (b) At the prehearing conference the Director or Hearing Officer shall set a date by which the parties (other than the Filer) shall deliver to the Filer, the Hearing Officer and all Intervenors their written comments on the filing, stating areas of disagreement, if any, their proposed alternatives, if any, and their own recommendation as to the extent of Rate level adjustment on which each would be prepared to agree. Unless good cause is shown, this date should be at least ten (10) days prior to the public hearing. (c) Reasonable means to be considered by the parties in order to expedite the orderly conduct and disposition of the hearing include the following: 1. the simplification or clarification of the issues; 2. the exchange and acceptance of service of exhibits proposed to be offered in evidence; 3. the obtaining of stipulations as to undisputed facts and documents; 4. to the extent practicable, the settling of all procedural matters prior to hearing. (d) The public hearing shall be held with the goal of delivering a Decision to the Filer within one hundred twenty days (120) of the filing. Any informational requests shall be answered thirty (30) days prior to the hearing or such other period as may be ordered by the Director or Hearing Officer. (e) All parties shall attend the prehearing conference fully prepared to discuss all issues involved in the proceeding. Any Party may request other parties and the Department to be accompanied by their consultants. (f) At the conclusion of the pre-hearing conference, a pre-hearing order shall be prepared to document the discussion. The pre-hearing order will become part of the Department's record of the filing pursuant to the Page 9 of 14 Reg. # 39 provisions of R.I. Gen. Laws § 42-35-9. The pre-hearing order shall be in writing. (g) Failure of a Party to attend the conference after being served with due notice thereof shall constitute a waiver of all objections to any order, ruling or settlement which results from the conference, unless the Hearing Officer finds good cause for the absence. (h) If the parties and the Department agree, no pre-hearing conference shall be held and the final hearing shall commence within thirty (30) days of receipt of the information called for in Section (b) above. Section 12 Public Hearing (a) After public notice as provided in R.I. Gen. Laws §§ 27-9-10, 27-6-11, 27- 7.1-5.1 and 6.1 or 27-44-7 as the case may be, the Director or Hearing Officer shall hold a public hearing. (b) Hearings will be held before the Director or Hearing Officer in accordance with this Regulation. (c) The parties have the right to be represented by counsel admitted to practice in the State of Rhode Island, to be present, and to participate. The right to participate shall include the right to present evidence and argument on all relevant issues, to call and examine witnesses, to cross- examine the author of any documents prepared by or on behalf of or for the use of the Department and offered in evidence, and to cross-examine any Person present and testifying. Those individuals employed by the Director pursuant to R.I. Gen. Laws § 27-9-52 may appear at any hearing and shall have the right to participate in any proceedings on the same basis as the parties may have, subject to the aforesaid. (d) All witnesses shall swear that their testimony is whole and truthful or shall make a solemn affirmation to the effect in lieu thereof. (e) The Director or Hearing Officer may admit evidence which possesses probative value commonly accepted by reasonable and prudent persons in the conduct of their affairs, giving effect to the rules of privilege recognized by law, and excluding incompetent, immaterial, and unduly repetitious evidence. Documentary evidence may be received in the form of copies or excerpts or by incorporation by a reference. Upon request, parties shall be given an opportunity to compare the copies with the originals. (f) Objections to evidentiary offers may be made and shall be noted in the records. Page 10 of 14 Reg. # 39 (g) At any stage of the hearing, the Director or Hearing Officer may require that further evidence be submitted upon such terms or conditions as the Director or Hearing Officer deems proper. (h) When evidence to be presented consists of technical matters or figures so numerous as to make the presentation difficult to follow, it shall be presented in exhibit form, supplemented and explained by oral testimony. (i) Notice may be taken of judicially cognizable facts. Parties shall be notified either before or during the hearing or by reference in preliminary reports or otherwise of the material noted, including any staff memoranda or data. Parties shall be afforded an opportunity to contest the material so noted. (j) A complete record of the proceedings shall be made and at the close of the hearing, expedited transcripts shall be ordered. Costs of the transcripts for the Department and the Attorney General shall be borne by the Filer. (k) All hearings once commenced shall continue on successive work days until completed, unless the Hearing Officer rules otherwise. (l) At the conclusion of the evidence, the Director or Hearing Officer may permit the parties to argue orally or to submit written briefs within fifteen (15) days of receipt of the transcript of the hearing or such other period as ordered by the Hearing Officer. (m) All hearings shall be open to the public. (n) Any written evaluation of evidence produced by an actuary or other expert engaged by the Department which is available prior to the conclusion of the presentation of the evidence shall be available to the parties at or prior to the close of the hearings. Section 13 Final Decision (a) As soon as is practicable after the hearing is concluded, but in no event later than thirty (30) days after receipt of the transcript of proceedings, the Hearing Officer shall transmit a recommendation to the Director, for the Director’s adoption, rejection or modification. The final Decision shall be served upon the parties forthwith. (b) The Decision shall be effective immediately unless a specific effective date is specified in the Decision. Any Party requesting a stay of the Decision shall do so in accordance with R.I. Gen. Laws § 42-35-15(c). (c) The final decision shall be based exclusively on: Page 11 of 14 Reg. # 39 1. the competent evidence and arguments presented during the course of the hearing and made a part of the record; 2. stipulations of fact; 3. briefs, if any; and 4. matters officially noticed. (d) The decision and order shall contain: 1. an appropriate caption; 2. the appearance of the parties; 3. a short statement of the nature of the proceedings; 4. complete references to the specific statutes or regulations at issue; 5. a list of exhibits admitted in evidence which may be part of the initial decision or attached as an appendix; 6. a review of the facts produced at the hearing in relation to the applicable law and covering all issues of fact and law raised in the proceedings; 7. specific findings of contested fact which shall be designated as such and which shall not be set forth in statutory or conclusionary language; 8. specific conclusions of law based upon the findings of fact and applicable constitutional principles, statutes, and rules or regulations; 9. an appropriate order based upon the findings and conclusions; and In the event the Hearing Officer or Director has relied on any written evaluation of evidence produced by an actuary or other expert engaged by the Department, a copy of said written evaluation shall be appended to the decision and/or order. (e) If the order of the Director shall state that the Director shall accept a modified filing in compliance with said order, the Department shall process said modified filing expeditiously and, in no event later than thirty (30) days from the date of its acceptance of said modified filing, report to the Director its conclusions as to the compliance by the Filer of said Page 12 of 14 Reg. # 39 modified filing, and upon the finding by the Director that such modified filing complies with the order of the Director, the Director shall approve said modified filing and it shall be effective as of the date of its acceptance. Section 14 Extensions of Time Limits (a) Upon a finding by the Hearing Officer or Director that good cause exists, any of the time limits enumerated above may be extended. (b) Requests for extension of any period must be stipulated in writing prior to the expiration of the period. Stipulations of all parties are acceptable in lieu of a written request for extension. (c) Extensions shall not be granted if inattention or procrastination caused the delay, but shall be granted if the delay is attributable to honest mistake, accident, or any cause compatible with proper diligence. Section 15 Rate Hearings on Existing Rates In the event that the Director or a Hearing Officer shall hold any hearing on an existing Rate pursuant to the requirements of R.I. Gen. Laws §§ 27-6-1 et seq, 27-7.1-1 et seq., 27-9-1 et seq, or 27-44-1 et seq, this Regulation shall apply. For purposes of this Section the "Filer" shall be the Party which filed the Rate, the filing date shall be the date on which notice of the hearing is received by the Filer and the effective date shall be the effective date set forth in the Decision. Section 16 Interpretation and Construction (a) This Regulation shall be interpreted as declaratory of the practice and procedures of the Department as it existed before their adoption except to the extent: (1) they are inconsistent with such practice and procedure; (2) express provision appears in these Regulations to the contrary; or (3) as may result from necessary implication. (b) It is hereby declared to be the intention of the Department to provide by this Regulation for the prompt, fair, and orderly administration and enforcement of the statutes within its jurisdiction, and this Regulation shall be liberally construed and applied to effect this intention and the remedial purpose and policies of the Department. Page 13 of 14 Reg. # 39 (c) Words in the singular number include the plural, and vice versa, except where the context otherwise requires or where a contrary result appears from necessary implication. (d) This Regulation shall apply to all complaints, investigations, and other proceedings begun after their effective date, so far as practicable, to all proceedings then pending to the extent permitted by law. Section 17 Severability If any provision of this Regulation or the application thereof to any Person or circumstances is held invalid or unconstitutional, the invalidity or unconstitutionality shall not affect other provisions or applications of this Regulation which can be given effect without the invalid or unconstitutional provision or application, and to this end the provisions of this Regulation are severable. Section 18 Effective Date This Regulation and the amendments thereto shall be effective as indicated below. EFFECTIVE DATE: August 1, 1990 AMENDED: May 6, 1993 REFILED: December 19, 2001 AMENDED: November 2, 2005 Page 14 of 14 Reg. # 39