Belth v. Bennett

No. 8 6 - 4 2 9
IN THE SUPREME COURT OF THE STATE OF MONTANA

1987

JOSEPH M. BELTH, as an individual
and as Editor of the Insurance Forum,
Plaintiff/Petitioner and Respondent,
-vs-
ANDREA BENNETT, State Auditor and
Commissioner of Insurance of the
State of Montana,
Defendant/Respondent and Appellant.

APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis & Clark,
The Honorable Gordon Bennett, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Robert Throssell argued, State Auditor's Office, Helena,
Montana
For Respondent:
Jonathan Mot1 argued, Helena, Montana

For Amicus Curiae:
Paul Van Tricht, Legal Affairs, Dept. of Revenue,
Helena, Montana
Charles E. Erdmann, National Association of Insurance
Commissioners, Helena, Montana and Sandra L. Gilfillan,
Kansas City, Missouri

Submitted : February 1 9 , 1 9 8 7

Decided: J u l y 2, 1987

Filed:
JUL 2-

Clerk
Mr. Justice L. C. Gulbrandson delivered the Opinion of the
Court.

Andrea Bennett, the State Auditor and Commissioner of
Insurance for the State of Montana, appeals a Lewis and Clark
County District Court order directing her to provide
respondent Joseph Belth with access to data and analyses in
appellant's possession which relate to insurance companies.
The issues on appeal are:
(1) whether a corporation, as well as a natural
person, can assert the right to privacy exception in Section
9, Article I1 of the Montana Constitution (the "Right to
Know") ;
(2) whether a governmental agency can assert another's
Section 9, Article I1 privacy interest;
(3) whether public disclosure of the information would
deny due process to insurance companies;
(4) whether the District Court erred in declaring
S 33-1-412(5), MCA, unconstitutional. Reversed and remanded.
Appellant is a member of the National Association of
Insurance Commissioners (NAIC). The NAIC developed the
Insurance Regulatory Information System (IRIS) to assist in
the regulation of insurance companies throughout the nation.
The NAIC issues IRIS reports to its members to assist them in
reviewing the financial affairs of insurance companies. The
reports cover two "phases"; (1) a statistical phase of
calculations derived from data supplied by the insurance
companies' annual financial statements, and (2) an analytical
phase which analyzes the information in the statistical
phase. Appellant receives these reports on a regular basis.
Appellant and amicus NAIC argue that Montana will not be
allowed to participate in the IRIS system if appellant has to
divulge the IRIS reports. The record shows that the NAIC
publishes explanatory material stating that IRIS reports
produced under the two phases are confidential and are
furnished to the state insurance departments for regulatory
use only.
Respondent Belth is an Indiana resident and the editor
of a monthly publication entitled Insurance Forum. In March
1985, he sought access to the IRIS reports in appellant's
possession. Appellant initially indicated that respondent
would be allowed access to the information. Subsequently,
appellant refused to allow access to respondent.
In August 1985, respondent filed a complaint in the
Lewis and Clark County District Court seeking a declaratory
judgment that would direct appellant to provide him with
access to the IRIS information. Respondent relied
principally upon Article 11, Section 9 of the Montana
Constitution (vulgarly called the "Right to Know") as the
basis for his complaint. That section provides:
No person shall be deprived of the right
to examine documents or to observe the
deliberations of all public bodies or
agencies of state government and its
subdivisions, except in cases in which
the demand of individual privacy clearly
exceeds the merits of public disclosure.
In August 1985, the appellant filed her answer
asserting, (1) that § 33-1-412(5), MCA, gave her the right to
withhold the information; (2) that release of the
information could cause unwarranted injury to the insurance
companies which were the subjects of the IRIS reports; (3)
that the IRIS reports contain matters of individual privacy
and are protected from access; and (4) that the IRIS reports
contain investigative information which is not a matter of
public record. Section 33-1-412(5), MCA, provides:
The commissioner may withhold from public
inspection any examination or
 investigation report for so long as he
deems such withholding to be necessary
for the protection of the person examined
against unwarranted injury or to be in
the public interest.
In February 1986, the respondent Belth moved for
summary judgment. In August 1986, the District Court entered
judgment for respondent and ordered appellant to provide
respondent with access to all IRIS documents in the
possession of appellant. The court issued a memorandum
explaining its decision and finding that, (1) a corporation
(such as the insurance companies analyzed in the IRIS
reports) could not assert the right to privacy exception to
Article 11, Section 9; (2) that no public official, by reason
of his or her office or employment, could claim a right of
privacy on behalf of an individual; (3) that " [t]here is a
constitutional presumption that all documents of every kind
in the hands of public officials are amenable to inspection,
regardless of legislation, special exceptions being made to
accommodate the exercise of constitutional police power and
other competing constitutional interests, such as due
process;" (4) $ 33-1-412 (5), MCA, (the statute which
appellant relied upon in denying access to respondent) is
clearly in conflict with the constitutional "Right to Know"
(Section 9 of Article 11) because it establishes an area of
secrecy without any showing that there is a privacy interest
involved, much less a privacy interest clearly exceeding the
merits of public disclosure; (5) $ 33-1-412(5), MCA, is
therefore unconstitutional on its face and unquestionably
unconstitutional as applied. This appeal followed.
The first issue is whether a corporation, as well as a
natural person, can assert the right to privacy exception to
the constitutional "Right to Know." This Court has already
ruled on that question. In Mt. States, Etc. v. Dept. of Pub.
Serv. Reg. (Mont. 1981), 634 P.2d 181, 38 St.Rep. 1479, we
held that a corporation could assert the right to privacy
exception.
[TIhe demands of individual privacy of a
corporation as well as of a person might
clearly exceed the merits of public
disclosure, and thus come within the
exception of the right to know provision.
Mt. States, Etc., 634 P.2d at 188. Therefore, the District
Court incorrectly held that a corporation could not assert
the privacy exception to the "Right to Know."
The next issue is whether a governmental agency can
assert the privacy interest of another. In Montana Human
Rights Div. v. City of Billings (Mont. 1982), 649 P.2d 1283,
30 St.Rep. 1504, we allowed the City of Billings to assert
the privacy interests of its employees. The City had argued
that if it disclosed personal information about employees
without their consent or a court order directing it to do so,
it could be sued for revealing the information. We agreed
that "potential economic injury is sufficient to establish
standing." Montana Human Rights Division, 649 P.2d at 1288.
We hold that that same rule allows the appellant to assert
the privacy rights of the insurance companies which are the
subject of the IRIS information. There is a possibility that
the insurance companies could sue the State for appellant's
release of injurious information.
The next issue we address is whether the District Court
erred in declaring $ 33-1-412(5), MCA, unconstitutional on
its face and as applied in this case. We disagree that the
statute is unconstitutional on its face. Section
33-1-412 (5), MCA, allows appellant to withhold certain
reports from public inspection where such withholding is
"necessary for the protection of the person examined against
unwarranted injury or [is] in the public interest. " We note
that,
[i]t is the duty of the courts to uphold
the constitutionality of legislative
enactments if such can be accomplished by
reasonable construction.
North Central Services, Inc. v. Hafdahl (Mont. 1981), 625
P.2d 56, 58, 38 St.Rep. 372, 374. Moreover, "[tlhe general
rule is that whenever there are differing possible
interpretations of statute, a constitutional interpretation
is favored over one that is not." Department of State Lands
v. Pettibone (Mont. 1985), 702 P.2d 948, 956, 42 St.Rep. 869,
878.
To effect a constitutional interpretation, we hold that
the S 33-1-412(5), MCA, exception to public inspection is
identical to, and coextensive with, the right to privacy
exception to the "Right to Know." In other words, appellant
can only invoke the statutory exception when, in the words of
Article 11, Section 9, "the demand of individual privacy
clearly exceeds the merits of public disclosure." We find
that the statutory language is simply an alternative
expression of the constitutional privacy exception. We
believe that this is a reasonable construction of the statute
and it fulfills our duty to uphold the constitutionality of
legislative enactments. The District Court stated that
S 33-1-412 (5), MCA, was unconstitutional "as establishing an
area of secrecy without any showing, legislatively or
otherwise, that there is a privacy interest involved at all,
much less a privacy interest that clearly exceeds the merits
of public disclosure." We disagree. The statute does not
establish an area of secrecy. The statute does authorize
appellant to make the initial decision, in line with the
constitutional language, whether the privacy rights outweigh
the need for public disclosure.
We also disagree with the lower court's ruling that the
statute was unconstitutional as applied in this case. The
court gave no reasoning behind this assertion nor did the
court perform the balancing test between the merits of
privacy and disclosure. Apparently, the court found the
statute unconstitutional as applied because the application
allowed corporations a privacy exception to the "Right to
Know" and the court had ruled that corporations could have no
such exception. As we ruled above, corporations can assert
the privacy exception. Therefore, the court's ruling is in
error, as we will develop further in this opinion.
Given the state of the record in this case, we find
that this Court is in a proper position to balance the
demands of the insurance companies1 privacy rights against
the merits of public disclosure under the "Right to Know"
provision. We believe that this is an instance when this
Court "should exercise its undoubted authority to take the
initiative in disposing of litigation as expeditiously as
possible . . . " Sun River Cattle Co. v. Miner's Bank of
Montana (1974), 164 Mont. 479, 481, 525 P.2d 19, 20; quoting
State ex rel. La France Copper Co. v. District Court (1909),
40 Mont. 206, 211, 105 P. 721, 723. As a preliminary step,
we apply the two-part test this Court has established for
determining whether there exists a constitutionally protected
privacy interest. That test is "whether the person involved
had a subjective or actual expectation of privacy and whether
society is willing to recognize that expectation as
reasonable." Missoulian v. Board of Regents of Higher Educ.
(Mont. 1984), 675 P.2d 962, 967, 41 St.Rep. 110, 116. We
find that the insurance companies did have a subjective or
actual expectation of privacy in the IRIS reports. As noted
previously, NAIC explanatory material states that IRIS
reports are confidential and are furnished to the states for
regulatory use only. We also find that those expectations of
privacy are reasonable. This Court has agreed that,
[tlime, place and status are factors in
the reasonableness determination. But
the determination should include
consideration of -
all relevant
circumstances, including the nature of
the information sought. (Emphasis in
original.)
Missoulian, 675 P.2d at 968. Here, the NAIC warns of the
possibility of inaccuracy in the IRIS reports. In this
regard, NAIC explanatory material provides the following
caveats:
Two limitations of IRIS are the
nonparticipation of some companies, and
the keying of the analytical phase to a
mechanical process that has some
uncontrollable elements. The mechanical
process is dependent on the accuracy and
standardization of the annual statements
filed by the insurers. The ratios cannot
identify a misstatement of financial
condition or, in certain situations, a
statement not prepared in the proper
format. Also, there exists the
possibility of data processing errors.
IRIS has been reasonably effective
in distinguishing between troubled and
sound companies. As previously stated,
however, the statistical ratios are not
in themselves determinative. They are
subject to individual company
circumstances. From previous sections of
this chapter, the following caveats
emerge :
1. No state can rely on IRIS as its only
form of surveillance.
2. Important decisions--such as
licensing--are not based on IRIS without
 further analysis or examination of the
company concerned.
3. Valid interpretation of ratio data
depends to a considerable extent on the
judgement of financial examiners. A
company may be outside the usual range
because of unusual accounting methods, or
matters that have been corrected, or
other circumstances.

5. The criteria for determining usual
range values, and the usefulness of such
ratios, ... may not be valid for future
experience in different economic periods.
For this reason, the components of the
ratios are reviewed annually and updated
as necessary.
The nature of this information increases the insurance
companies' expectations of privacy. Given the NAIC assurance
of confidentiality and the admitted possibility of inaccurate
information, we hold that the insurance companies'
expectations of privacy are reasonable. Therefore, there is
a constitutionally protected privacy interest in the IRIS
reports.
Finally, we reach the dispositive issue, the balancing
test between privacy and disclosure. The demands of
individual privacy are established by the affidavit of James
Borchardt, the chief examiner of the State Insurance
Department. His affidavit statestin part,
3. That the information contained in the
IRIS reports constitute a preliminary
evaluation of the financial condition of
the insurance company being reported on .
4. That prior to taking any type of
regulatory action against an insurance
company a full and complete financial
examination is necessary. That the IRIS
 documents in and of themselves do not
adequately provide an accurate picture of
the company's financial condition. That
to afford a company an opportunity to
fully explain its financial condition it
is necessary for a qualified examiner or
examiners to review the books and records
of the company in total.
5. That the IRIS tests while initially
pointing out potential problem companies
are not dispositive of the issue of
financial condition. That there exists a
real possibility that a company
identified by the IRIS tests as being
outside the statistical limits is
financially sound. To release - - the IRIS
information withour an adeauate
examination potentially jeopardizesa the
company's business reputation. (Emphasis
added. )
We find that the privacy interest at stake is a substantial
one. Parenthetically, we note that Borchardt's affidavit
supports our conclusion that the insurance companies'
expectations of privacy are reasonable.
Respondent argues that there is a substantial benefit
in disclosing the IRIS reports. Respondent's affidavit
indicates the reports are useful in identifying companies
experiencing financial difficulties or with imminent
problems. We agree that there would be some public benefit
to disclosure. We do not find that that benefit would
outweigh the demands of individual privacy. The benefits of
disclosure are diminished by the availability of similar
final, relatively non-subjective examinations made by the
State. Montana's regulatory scheme for insurance companies
includes the following provisions. Section 33-1-401, MCA,
provides that the insurance commissioner "shall examine the
affairs, transactions, accounts, records, and assets of each
authorized" domestic insurer at least once every three years
and of other authorized insurers as he deems advisable. The
commissioner may accept another state's examination in lieu
of making her own. Section 33-1-412, MCA, provides that the
commissioner shall make a report of each examination and that
such reports "shall comprise only facts appearing from the
books, papers, records, or documents" or ascertained from
sworn testimony. That section also states (1) that the
entity examined shall receive a copy of the report, (2) for
the possibility of a hearing on the report, and (3) for
modifying the report as the commissioner deems proper.
Section 33-1-412(5), MCA, also provides that the commissioner
can withhold such reports, as we held above, in accordance
with the constitutional "Right to Know" provision. Under S
33-2-701, MCA, every authorized insurer must file an annual
financial statement with the commissioner. Section 33-1-312,
MCA, provides in part:
(1) The commissioner shall enter in
permanent form records of his official
transactions, examinations,
investigations, and proceedings and keep
such records in his office. Such records
and insurance filings in his office shall
be open to the public inspection except
as otherwise provided in this code with
respect to particular records or filings.
Finally, S 33-2-721, MCA, requires each product liability
insurer to file an annual, detailed busines report, including
information on premiums collected, earned premiums, incurred
losses, loss reserves, etc. Those reports are available to
the public for a reasonable fee. Section 33-2-722, MCA. The
IRIS reports differ from the above described State
examinations in their preliminary, subjective nature. It is
this preliminary, subjective quality which particularly
intrudes upon the privacy interest at stake.
 Given the availability of other comparable information
and the preliminary, subjective nature of the IRIS reports,
we hold that the demands of individual privacy outweigh the
merits of public disclosure. Thus, the appellant may
properly deny respondent Belth access to the IRIS reports. A
further result is that, contrary to the District Court order,
§ 33-1-412(5), MCA, is constitutional as applied in this case
to deny access to respondent.
Reversed and remanded for entry of judgment in
accordance with this opinion.

We Concur: ,--+
PC 6
ustice \

/ Chief Justice /Y

Justices
Mr. Justice William E. Hunt, Sr., dissenting:

I agree with the dissent of Justice Sheehy.
Judge Bennett should be affirmed and the citizen's right to
know should be upheld.
The majority finds many devils lurking in the future
that will take advantage of our foolishness if our balancing
act comes down on the side of the insurance buyer and our
right to know. For example the majority is concerned that
the state might be sued if the commissioner releases
injurious information about an insurance company. There is
another side to that coin. As long as we are going to
speculate, then in my view, to allow a company flying
distress signals observable only to the commissioner but
hidden from potential customers presents far more interesting
possibilities for future litigation than the release of
information furnished by the industry.
As Justice Sheehy says in his dissent, "It approaches
inanity to hold that Montana insureds shall not be allowed to
know which troubled companies are doing business in Montana
or that they are troubled companies."
A company in trouble or showing signs of trouble would
certainly want privacy, but the realistic expectation is
something else. In balancing the right to privacy of a
relatively sophisticated insurance company doing business in
Montana with the rights of generally less informed
consumer-citizens who seek to purchase insurance, I would
hold that the expectation of the citizen to know about the
company clearly outweighs the need of a state agency to
warehouse information in secrecy and deny citizens the right
to be informed. /
The District Court should be
Mr. Justice John C. Sheehy, dissenting:

I dissent. The majority opinion goes far beyond the
right of Joseph M. Belth from Indiana to gain access to IRIS
reports. The majority in effect have told Montana citizens
that they have no right to examine certain information in
IRIS reports on hand in the office of the State Auditor and
Insurance Commissioner about insurance companies with which
Montanans do business. For that reason alone the majority
opinion is inexcuseable and indefensible.
The majority opinion defies Article 11, Section 9,
Montana State Constitution (1972) which states:
Ri ht to know. No person shall be deprived of the
L--
right to examine documents or to observe the
deliberations of all public bodies or agencies of
state government and its subdivisions, except in
cases in which the demand of individual privacy
clearly exceeds the merits of public disclosure.
The question which we should be deciding in this case,
and which is decided adversely by the foregoing majority
opinion, is whether Montanans have a right to know that an
insurance company doing business in this state has been
identified as a "troubled company" by IRIS, and that such
"troubled company" is being licensed or continues to be
licensed by the state auditor. If the "right to know"
provision of the state Constitution means anything, it means
that this specific information should be available to Montana
insureds and to any organization or entities that would
funnel such information to Montana insureds.
In discussing this issue, I take as given that a
corporation as well as a natural person can assert the right
to privacy under the exception to the constitutional right to
know because we said so in Mountain States Telephone and
Telegraph Co. v. Department of Public Service ~egulation
(Mont. 1981), 634 P.2d 181, 38 St.Rep. 1479. I also accept
as given what the District Court found, that S 33-1-412(5),
MCA, if otherwise valid, applies as well to investigation
reports as to examination reports which are specifically
covered under that section.
Unexplained and undiscussed by the majority is how
public domain information, open to anyone, becomes private
when it is run through a computer. Also unexplained and
undiscussed by the majority is why or how Montanans should be
precluded from information which would tell them how
insurance companies licensed in this state stack up when
compared with other insurance companies in the same business.
We are informed how the IRIS system works by the brief
of amicus NAIC [National Association of Insurance
Commissioners]. Its brief states:
Once a year the NAIC disseminates statistical
reports to each state insurance department. The
reports set forth a usual range of ratio results
based on previous studies. IRIS ratios are run on
certain items taken from the annual statements such
as surplus or premium and are compared to the usual
range. - - results - - testing produce
If the of the
values outside - - normal range, this indicates
of the
- - - for further examination.
a need T~~NAIC then
prepares a list which highlights those companies
reflecting values outside the normal range. At
this point, insurance regulators take this
information and combine it with their own internal
methods of analyzing solvency. Internally, a
department's examiner will conduct a detailed
analysis of all of the information which has been
submitted.

- ratios discussed above are published - -
The and are
available - - Respondent. The ratio -- are
to the results
actually compiled from annual statements, which
statements - - available - - Respondent.
are also to the
The results are not produced from any secret source
of material which state open records acts are
designed to reveal. The ratio results, however,
 are confidential work product of the NAIC and are
shared with its member regulators solely on the
basis that the results are not to be divulged to
the public.
The analytical phase of the IRIS employs a team of
examiners and financial analysts to review the
ratio results. Companies selected for review are
those which were designated with four or more
ratios outside of the normal range, in addition to
the companies targeted as requiring attention in
the ~reviousvear. The overall

The majority opinion has erected a wall between
Montanans and the information that regulators have determined
some companies "appear to require immediate regulatory
attention." Such companies have been given an unwarranted
right to privacy by the majority.
No types of corporations are so affected with the public
interest as are financial institutions, which include
insurance companies. It is because of this public interest
that such corporations are so highly regulated by both state
and federal authorities. Insurance companies, however, are
not subject to federal regulation. Even though insurance
companies are part of interstate commerce, United States v.
South-Eastern Underwriters Association (1944), 322 U. S. 533,
64 S.Ct. 1162, 88 L.Ed. 1440, the Congress delegated to the
states the duty of regulating insurance companies under the
McCarran-Ferguson Act. 15 U.S.C. 5s 1011 through 1015. The
principal regulators in each state have formed the National
Association of Insurance Commissioners, with two ends in
mind, one, to provide effective regulation of insurance
companies, and at the same time to make the regulation as
little onerous as possible. We are told that IRIS was
established in 1971 for the property and casualty industry as
an aid to state regulators of companies engaged in such
industry.
Because insurance companies are affected with the public
interest, and because their activities are broadly regulated,
the expectation of privacy of an insurance company does not
begin to rise to the level of a mining company or retail
store chain.
From the viewpoint of regulation, three kinds of
insurance companies may be authorized to do business in this
state: (1) domestic insurers, that is those domiciled or
having their home office in this state; (2) foreign
insurers, that is companies domiciled or having their home
office outside of Montana but in one of the United States or
its territories; and (3) alien insurers, that is insurance
companies domiciled in a foreign country and represented in
the United States by a manager (or in the case of Canada, an
officer of the Canadian corporation). See S S 33-2-111 and
33-2-215, MCA.
An insurance company, whether domestic, foreign, or
alien, desiring to do insurance business in this state must
obtain a certificate of authority from the commissioner who
in this state is the state auditor. Section 33-2-101, MCA.
Each authorized insurer may be examined as to its affairs,
transactions, accounts, records and assets as often as the
state auditor deems advisable but domestic insurers must be
examined not less frequently than every three years. Section
33-1-401, MCA. All the other states have like provisions
requiring examinations. Obviously if the separate examiners
from the 50 states descended willy-nilly on insurance
companies authorized to transact business in the respective
states, the company business would be disrupted and the cost
would be burdensome. To avoid this problem, the NAIC
supervises examinations in an orderly manner in which the
states participate on a regional basis and the examination
results are made available to all the states in which the
insurer is authorized. The examinations, as far as Montana
is concerned, are at the expense of the insurer. Section
33-1-413, MCA.
The IRIS system conducted by the NAIC applies, as we
have said, to the property and casualty business. The ratios
which are used in IRIS are published, and are open to the
public.
Each authorized insurer is required to file with the
state auditor annually a statement of its financial
condition, transactions and affairs as of the December 31
preceding. Section 33-2-701, MCA. Those statutory
provisions which make the investigation and examination
reports confidential do not apply to annual statements.
Section 33-1-412 ( 5 ) , MCA. The material contained in the
annual statement is open to the public.
Thus the basic information used by IRIS is public
information. IRIS utilizes published ratios and applies
those ratios to filed annual statements, to achieve results
which IRIS now considers confidential. It is nonsense to
hold that there is an expectation of privacy in the results
so derived from public information. It approaches inanity to
hold that Montana insureds shall not be allowed to know which
troubled companies are doing business in Montana or that they
are troubled companies. Such companies should have the least
possible expectation of privacy.
The problem presented in this case has two phases which
should be closely examined, 1), whether NAIC, by itself, can
impose confidentiality so as to overrule our constitutional
right to know and 2 ) , whether the state auditor, under S
33-1-412(5), MCA, may- withhold from public inspection an
investigation report obtained with tax monies, which report
she uses in the regulation of insurers.
It should be clear that our constitutional provision for
right-to-know does not depend on a classification of
confidentiality by the NAIC. In San Gabriel Tribune v.
Superior Court (Cal. App. 1983), 192 ~ a l .Rptr. 415, it was
held that assurances of confidentiality by the city to a
disposal company that the data would remain private was not
sufficient to convert what was a public record into a private
record. If we countenance such assertion of confidentiality,
the right to know provision will soon become worthless.
As to the second phase, District Judge Gordon Bennett
concentrated on whether 33-1-412(5), MCA, was
constitutional so as to empower the state auditor to withhold
the information. The District Judge found that S
33-1-412(5), was unconstitutional facially and as applied.
His determination ought to be sustained by us.
The opening paragraph of District Judge Bennett's
discussion on right-to-know is worth repeating:
An extraordinary theme ran through the proposal and
consideration of three entirely novel sections of
the 1972 Constitution. They were the "right of
participation" Section (8), sometimes called the
"open meeting" section; the "right to know" Section
(9), and the "right to privacy" Section (10) all
found in the "declaration of rights" Article 11.
The theme was that except as it may be limited by
the right of the individual to personal privacy,
there is to be in Montana a broad-based, pervasive
and absolute right of citizens to know what is
going on in their government and a right to
participate in government untrammeled by the
government itself.
As District Judge Bennett indicated, in determining
right to know, the three sections of Article 11, Sections 8,
9, and 10 must be read together. Section 10 provides for a
right of individual privacy (which we have determined applies
to corporations) which shall not be infringed without the
showing of a compelling state interest. Section 9 gives all
persons a right to examine documents and to observe the
deliberations of all public bodies or agencies of state
government except where the demands of individual privacy
clearly exceed the merits of public disclosure. Section 8
requires governmental agencies to afford a reasonable
opportunity for citizens' participation in the operation of
agencies prior - - final decision "as may be provided by
to the
law. " It should be clear because the insurers are so
affected with a public interest, because the affairs of their
insureds are so dependent on insurers, and because property
and casualty losses may affect third parties that there is a
compelling state interest which overrides any right of
individual privacy of an insurer to open up information that
an insurance company doing business in this state is
"troubled." The state auditor and the NAIC contend that
divulging such information may result in "a run on the
company" but it may be more important to the insured to make
that run before the company is found insolvent or its
certificate of authority is jerked. Section 8 obviously
intends that governmental agencies open up such information
prior to the final decision of the regulators.
In the light of the three sections of Article 11,
District Judge Bennett determined that B 33-1-412(5) was
facially unconstitutional and invalid as applied. That
particular statute was adopted in 1959, before the adoption
of the state constitutional provisions in the convention of
1972. This is the first case in which the provisions of S
33-1-412(5) have been examined in the light of those
constitutional provisions. District Judge Bennett made an
extensive review of the proceedings of the constitutional
convention, and from it determined that an act of the
legislature which in effect performs the balancing function
between the right to know and the right of individual privacy
was not within the grant of the convention. He found it to
be the prerogative of the courts, and not the legislature to
define "parameters and incidents of the rights guaranteed by
Sections 9 and 10. l1 He therefore held that while government
agencies may be authorized by appropriate legislation to
perform initially the balancing act between the right to know
and the right to privacy "it is the exclusive function of the
state's courts to make final determination as to which right
is dominant in any given case."
With a proper regard therefore to what the
constitutional convention intended in adopting Sections 8, 9,
and 10 of Article 11, we should examine the reasons
postulated by the NAIC and the state auditor for
confidentiality in this case. What are those reasons?
First it is contended that insolvency of the insurer
could result in a "run on the company" instigated by
misinterpretation of IRIS data by those not trained to
interpret the test results. That claim is pretty
far-fetched. If insureds cancel their property and casualty
policies, their premium refunds would be calculated on the
short rate basis which would be adequately covered by the
companies unearned premium reserves. Section 33-2-512, MCA.
Secondly we are told that those responsible for IRIS
data collection fear they may be potentially liable for
errors in reporting. If the IRIS data is that unreliable,
perhaps the state auditor ought not to use the information in
any event.
Third, we are told that if the Montana Insurance
Department is required to disclose IRIS results, it will not
be able thereafter to participate in the IRIS system which,
it is contended, would have a devastating effect on the
Department's ability to monitor the solvency of its domestic
as well as foreign companies. Montana has few if any
domestic property and casualty insurers, and we doubt if the
state auditor would be long in finding out, if it should
occur, that a domestic insurer was in fact a "troubled
company" under I R I S determinations. Other states would be
monitoring foreign companies.
Finally, we are told that I R I S information is important
to the state auditor in determining whether to authorize a
foreign insurance company to do business in Montana. Again,
astute questioning by the state auditor of an applicant for a
certificate of authority would quickly determine its I R I S
standing.
None of these contended reasons for withholding
information contained in I R I S by the state auditor overweigh
the right of our citizens to participate in the debate before
their governmental bodies before the final decision, and to
have access to information which is in the hands of public
officials. Therefore I would sustain the District Court.