TO BE PUBLISHED 

93-ORD-67

June 3, 1993

IN RE: James L. Thomerson/Department of Insurance

OPEN RECORDS DECISION

This matter comes to the Attorney General on appeal from the Department of Insurance's denial of Mr. Kit Wagar's February 22, 1993, request to inspect certain records pertaining to Kentucky Central Life Insurance Company which are in the Department's custody. Mr. Wagar requested access to:

Mr. Wagar is a staff writer for the Lexington Herald-Leader, and his request was made under the Open Records Law.

Mr. Patrick Watts, General Counsel for the Department of Insurance, denied Mr. Wagar's request on February 25, 1993, advising him that "none of the documents requested are available for public inspection." Since this appeal centers on the records identified in items 1, 2, and 5 above, we examine his responses to these requests only.

In denying Mr. Wagar's request for correspondence with the National Association of Insurance Commissioners, other states' departments of insurance, and Kentucky Central, Mr. Watts relied on KRS 61.878(1)(k), restricting release of public records or information the disclosure of which is prohibited by enactment of the General Assembly, and KRS 304.2-150(3)(b)1, relating to the confidentiality of information received from the National Association of Insurance Commissioners. In addition, he relied on KRS 61.878(1)(h) which permits a public agency to withhold correspondence with private individuals if the correspondence is not intended to give notice of final action of a public agency.

In response to Mr. Wagar's request for memoranda, reports, or analyses of Kentucky Central's financial condition, Mr. Watts indicated that such records are exempt from public inspection pursuant to KRS 61.878(1)(h), which permits an agency to withhold preliminary drafts and notes. Mr. Watts also relied on KRS 61.878(1)(i), authorizing nondisclosure of preliminary recommendations and preliminary memoranda in which opinions are expressed or policies formulated or recommended. Finally, he relied on KRS 61.878(1)(c), arguing that the requested records were confidentially disclosed to the Department of Insurance in conjunction with the regulation of commercial enterprise or the grant or review of a license to do business, are generally recognized as confidential or proprietary, and that their disclosure would permit an unfair commercial advantage to competitors of Kentucky Central.

Mr. Watts denied Mr. Wagar's request for minutes, notes, or other reports of meetings with Kentucky Central officials. Relying on KRS 61.878(1)(h), he explained that no minutes or reports of these meetings were generated, and that any notes that were kept are properly excludable under the cited exception.

On behalf of his client, the Lexington Herald-Leader, Mr. James L. Thomerson appealed to the Attorney General, pursuant to KRS 61.880(2), the Department's denial of Mr. Wagar's request. Mr. Thomerson argues that Mr. Watts' reliance on KRS 61.878(1)(h) to authorize nondisclosure of correspondence with Kentucky Central is misplaced. Kentucky Central, he notes, is a regulated business monitored by the Department of Insurance. The individual to or from whom the correspondence comes is not acting in his or her private capacity, but as an agent for Kentucky Central. It is his position that "[i]n corresponding with Kentucky Central, the Department is conducting the public's business and, therefore, such correspondence should be disclosed." Mr. Thomerson does not challenge Mr. Watts' reliance on KRS 61.878(1)(k) and KRS 304.2-150(3)(b)1.

Responding to the Department's denial of Mr. Wagar's request for memos, reports or analyses of the insurance company's financial condition under KRS 61.878(1)(h) and (i), Mr. Thomerson maintains that "[a] report or analysis of Kentucky Central's financial condition would not be an opinion, but rather wold [sic] contain facts concerning Kentucky Central." He argues that such factual information cannot be characterized as preliminary or be deemed an opinion. He also rejects Mr. Watts' argument that memos, reports, or analyses are exempt pursuant to KRS 61.878(1)(c), relating to "records confidentially disclosed to an agency . . . ," noting that the records sought are those generated by the Department, and not those generated by Kentucky Central and "confidentially disclosed" to the Department.

With respect to the Department's denial of Mr. Wagar's request to inspect any notes made during meetings with Kentucky Central, Mr. Thomerson argues that because these notes provide the only factual record of what occurred in the meetings, they should be released. Any expression of opinion contained in the notes can be segregated from factual information, and the latter released pursuant to KRS 61.878(4).

We are asked to determine if the Department of Insurance properly denied Mr. Wagar access to the records identified in items 1, 2, and 5 of his February 22 request. We find that the Department failed to meet its statutory burden of proof in responding to his request for correspondence with the National Association of Insurance Commissioners, other states' insurance departments, and Kentucky Central, and for memos, reports and analyses of Kentucky Central's financial condition. However, the Department properly denied his request for minutes, notes, or other reports of meetings with Kentucky Central officials inasmuch as no minutes were recorded, and any notes taken during the meetings are properly excludable under KRS 61.878(1)(h).

The records of the Department of Insurance are governed generally by KRS 304.2-150. Subsection (3) of that statute provides:

Aside from the exceptions enumerated in the statute, the Department's records are subject to the Open Records Act.

KRS 61.880(1) sets forth procedural guidelines for agency response to an open records request. It provides that "[a]n agency response denying, in whole or in part, inspection of any record shall include a statement of the specific exception authorizing the withholding of the record and a brief explanation of how the exception applies to the record withheld." (Emphasis added.) The language of the statute is mandatory. It has long been the position of this Office that mere invocation of an exception, without an adequate explanation of how the exception applies, does not satisfy the burden of proof imposed on the agency by KRS 61.880(2) and KRS 61.882(3). Although he is empowered to "request additional documentation from the agency for substantiation" pursuant to KRS 61.880(2), it is not for the Attorney General to "make the agency's case" or otherwise speculate what the agency might have intended. Our review is limited to the written request and denial.

With respect to Mr. Wagar's request for correspondence with the National Association of Insurance Commissioners, other states' departments of insurance, and Kentucky Central, Mr. Watts stated:

Mr. Watts did not offer any further explanation of how the exceptions he had invoked applied to the specific records withheld.

Mr. Watts does not deny the existence of correspondence with the National Association of Insurance Commissioners or with other state's departments of insurance. However, he summarily dismisses Mr. Wagar's request for such correspondence with a vague reference to KRS 304.2-150(3)(b)(1). As noted, that provision authorizes the nondisclosure of "information received in confidence from the National Association of Insurance Commissioners . . . ." Mr. Watts does not indicate the nature of the correspondence withheld or suggest that it was "received in confidence." His response is therefore deficient.

Mr. Watts next asserts that the correspondence with Kentucky Central is properly exempt pursuant to KRS 61.878(1)(h), relating to correspondence with a private individual. This appeal arises in the context of the widely publicized takeover of the Insurance Company by the Department of Insurance. At the company's request, the Department obtained an order from the Franklin Circuit Court on February 12, 1993, which placed Kentucky Central under the Department's rehabilitation program. Pursuant to KRS 304.33-150, this order to rehabilitate authorizes the state to "take possession of the assets of the insurer and to administer them under the orders of the court." The Insurance Commissioner is directed to appoint a special deputy commissioner who is empowered "to take such action as he deems necessary or expedient to reform and revitalize the insurer," and who is vested with "all the powers of the officers and managers . . . ." KRS 304.33-160.

After its February 12 takeover, Kentucky Central forfeited certain attributes of a private individual which it formerly enjoyed. We fail to see how the cited exception applies to correspondence exchanged by Kentucky Central and the Department of Insurance after this date. Like a contractor to a governmental entity, an insurance company which has been taken over by the state "must accept certain necessary consequences of involvement in public affairs." OAG 90-7, at p. 4. Among these is "the risk of closer public scrutiny than might otherwise be the case." Id. The company "loses any character of a 'private individual,' as such phrase is used in KRS 61.878(1)[(h)], that [it] might be said to have, in connection with correspondence . . ." regarding its takeover and the Department of Insurance's plans for rehabilitation.

Id. We do not believe that such correspondence can be properly characterized as "correspondence with a private individual" within the meaning of KRS 61.878(1)(h).

Whether correspondence exchanged by Kentucky Central and the Department prior to the February 12 takeover is exempt under KRS 61.878(1)(h) is a closer question. Although there appear to be no prior opinions of this Office which are directly on point, we concur with Mr. Thomerson in his view that a regulated business monitored by the Department of Insurance also forfeits certain attributes of a private individual, at least in relation to its regulated activities.

We do not mean to suggest that all of the correspondence exchanged by Kentucky Central and the Department after January 1, 1992, and before February 12, 1993, is subject to disclosure, or that the Department's invocation of KRS 61.878(1)(h) to support nondisclosure was entirely unwarranted. It is the opinion of this Office, however, that the Department failed to sustain its statutory burden of proof by describing in general terms the records withheld and explaining how the cited exemption applies to those records. The Department, having failed to meet its burden of proof, should promptly arrange for Mr. Wagar to inspect the correspondence.

We reach a similar conclusion with respect to Mr. Watts' denial of Mr. Wagar's request for memos, reports, or analyses of Kentucky Central's financial condition. In responding to Mr. Wagar's request, Mr. Watts stated:

Again, Mr. Watts did not provide any further explanation. We therefore conclude that the Department failed to meet its burden of proof in sustaining its denial of the records identified in the second part of Mr. Wagar's request.

Moreover, we are not persuaded that the Department could justify its denial of that portion of the request, in its entirety, on the basis of KRS 61.878(1)(h) and (i). In our view, the Department has taken final action in this matter by petitioning the Franklin Circuit Court for an order to rehabilitate Kentucky Central. The submission of a petition to the court constitutes final action of the Department relative to its investigation into Kentucky Central's financial condition. See e.g., University of Kentucky v. Courier-Journal and Louisville Times Co., Ky., 830 S.W.2d 373 (1992) (holding that a response signed by the University of Kentucky's president and submitted to the NCAA constituted the final result of an investigation).

Based on its review of the company's troubled financial situation, the Department concluded that Kentucky Central's assets had deteriorated to a point that continued operation would be hazardous to policyholders, creditors, and the public. To the extent that the Department has taken final action in this matter, any memos, reports, or analyses which form the basis of its action, or which were incorporated into its action, lose their exempt status.

With respect to Mr. Watts' invocation of KRS 61.878(1)(c), we concur with Mr. Thomerson in his view that the exception is inapplicable. As he correctly notes, the memos, reports, and analyses sought are those generated by the

Department. Moreover, KRS 61.878(1)(c) relates to "records confidentially disclosed to an agency" by a regulated commercial enterprise or an entity applying for a license to do business, or for the review of its existing license, if the records are generally recognized as confidential or proprietary and their disclosure would permit an unfair commercial advantage to competitors. Mr. Watts did not attempt to establish that the records withheld satisfy this test, nor do we believe that he could make such a showing.

Because Mr. Watts does not indicate the nature of the records withheld, or explain how these exceptions apply to the records, we are unable to determine whether the Department properly relied on KRS 61.878(1)(c), (h), and (i) in issuing a blanket denial of Mr. Wagar's request for memos, reports, and analyses. The Department did not meet its burden of proof, and must arrange for inspection of these documents.

Turning to the final category of records requested by Mr. Wagar, we find that the Department properly withheld any minutes, notes, or other reports generated in the course of its meetings with Kentucky Central officials. Mr. Watts indicated that no minutes or reports of these meetings were generated, and that any notes which were taken were properly excludable under KRS 61.878(1)(h). This Office has previously recognized that a public agency cannot furnish access to documents which it does not have or which do not exist. OAG 83-11; OAG 87-54; OAG 88-5; OAG 91-112. A request for such documents is therefore moot. OAG 88-44. The Department properly advised Mr. Wagar that that portion of his request could not be satisfied inasmuch as no such records exist.

Mr. Watts seems to acknowledge that notes were taken at these meetings, but argues that they are exempt under KRS 61.878(1)(h). That provision expressly authorizes the nondisclosure of, among other things, preliminary drafts and notes, and was intended to protect random notations made by individuals present at a meeting. This is in contrast to the official minutes of a meeting of a public agency which set forth an accurate record of votes and actions taken at a meeting, and are formally approved by the members of the agency. KRS 61.835. As we observed in OAG 78-626, p. 2:

It is the opinion of this Office that Mr. Watts properly denied Mr. Wagar's request for any notes taken during the Department's meetings within Kentucky Central officials.

In summary, we find that the Department of Insurance failed to meet its burden of proof in sustaining its denial of Mr. Wagar's request for correspondence with the National Association of Insurance Commissioners, other states' departments of insurance, and Kentucky Central, and memos, reports, or analyses of Kentucky Central's financial condition. While the Department's reliance on the cited exceptions may not have been entirely unwarranted, it failed to describe the nature of the documents withheld, and to state how the exception relied upon applied to the documents withheld from inspection. The Department having failed to meet its burden of proof, this Office is left with no alternative but to order disclosure of these records. We further conclude, however, that the Department properly advised Mr. Wagar that no minutes or reports were generated during its meetings with Kentucky Central officials, and that therefore that portion of his request could not be satisfied. The Department met its burden of proof relative to its invocation of KRS 61.878(1)(h) to support nondisclosure of any notes taken at these meetings, and may continue to withhold these records.

The Department of Insurance and Mr. Wagar may challenge this decision by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882.

CHRIS GORMAN

ATTORNEY GENERAL

AMYE B. MAJORS

ASSISTANT ATTORNEY GENERAL

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Distributed to:

Hon. Patrick Watts

General Counsel

Department of Insurance

P. O. Box 517

Frankfort, KY 40602-0517

Mr. Kit Wagar

Staff Writer

Lexington Herald-Leader

100 Midland Avenue

Lexington, KY 40508-1999