Request By:
Richard Breen
Suite 3
2950 Breckenridge Lane
Louisville, KY 40220Elizabeth Johnson
Department of Insurance
P.O. Box 517
Frankfort, KY 40602-0517Maragret Shreve
Department of Insurance
P.O. Box 517
Frankfort, KY 40602-0517
Opinion
Opinion By: Albert B. Chandler III, Attorney General; James M. Ringo, Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether the Department of Insurance violated the Open Records Act in denying Richard M. Breen's request for copies of Department in-house memoranda and documents produced by Humana during its investigation of a complaint, filed on behalf of his client, that private and confidential information was disclosed by her insurer to a third-party, without her consent, in violation of KRS 304.17A-555. For the reasons that follow, we conclude that, with the exception of a procedural deficiency, the Department's partial denial of Mr. Breen's request did not violate the Act.
After the investigation was completed, Mr. Breen, by letter dated December 1, 2000, renewed a prior request for copies of the documents submitted by Humana which had been denied while the investigation was ongoing.
By letter dated January 11, 2001, Margaret L. Shreve, Paralegal (under authority of the official custodian), responded to Mr. Breen's request, stating:
Please find enclosed the documents requested in your December 1, 2000 open records request regarding the above matter. Also, please note that we have redacted, pursuant to KRS 61.878(1)(a), information of a personal nature relating to the insured. The personal information redacted may consist of the home address, home telephone number, date of birth, social security numbers, vehicle identification numbers, checking account numbers, insurance policy and account numbers of the insured. I am also enclosing a privilege log that lists the documents not subject to the Open Records Act.
The Department's privilege log listed the following documents which were withheld "due to work product or of a proprietary nature:"
- Documents Requested from Humana (Agreements w/Outside Vendors, etc.)
- In-House Memoranda (contents listed in privilege log)
- Humana/Magellan: Class-Action Suit, Court Pleadings (Jane Doe v. Humana; Richard Breen Attorney)
- Humana/Magellan: Organization Chart
- Humana/Magellan: Anthem's Contract with Magellan
- Humana/Magellan: In-House e-mails
- Humana/Magellan: Provider Agreements
- Research file
In his letter of appeal, Mr. Breen argues that the Department erroneously denied his request for documents produced by Humana during the investigation. Specifically he challenges the documents "withheld per the privilege log; notably, Humana's agreements with outside vendors, organizational chart, contracts with Magellan, Magellan procedures, information provided by Magellan concerning the survey conducted by a telemarketer and in-house Humana/Magellan e-mails. " Mr. Breen also argues that the Department improperly withheld its own in-house memoranda. He did not challenge the withholding of the "Humana/Magellan: Class-Action Suit, Court Pleadings (Jane Doe v. Humana; Richard Breen Attorney)" documents or the "research file."
In a supplemental response directed to this office, Elizabeth A. Johnson, counsel for the Department, provided this office with a response to the issues raised in Mr. Breen's appeal. Elaborating on the agency's original response, Ms. Johnson, citing KRS 61.878(1)(j), asserted that the Department's in-house memoranda and e-mails were exempt from disclosure as preliminary documents not intended to give notice of final agency action. She explained:
At the direction of the Commissioner of Insurance, the undersigned and other employees of the Department analyzed KRS 304.17A-555 and its applicability to Mr. Breen's client's complaint. This was done in order for Department Staff to make a recommendation to the Commissioner as to the resolution of the complaint. In the file, but not disclosed to Mr. Breen as listed in item number one of the privilege log, are e-mails and inter-office memorandum that contain preliminary recommendations. These documents were not intended to give notice of the Department's final decision regarding the complaint. See University of Kentucky v. Courier-Journal & Louisville Times Co., 830 S.W.2d 373 (1992). The Department's final action in this matter was released to Mr. Breen's client in a letter dated November 2, 2000.
In addition to KRS 61.878(1)(j), Ms. Johnson stated that the in-house memoranda also included correspondence between the Department's legal counsel and the Commissioner of Insurance, a client, which would be protected from disclosure under the attorney-client privilege pursuant to KRE 503(a).
Addressing next the documents produced by Humana during the investigation listed on the privilege log, Ms. Johnson stated that these records were exempt from disclosure under authority of KRS 61.878(1)(c). She argued in part:
First, as part of the investigation, the Department required Humana to disclose items three through six listed on the privilege log, to help facilitate their investigation. Second, it is generally recognized that internal documents of private corporations are confidential or proprietary. KRS 61.878(1)(h) and KRE 503(a). These include Humana's organization chart, Humana's in-house e-mails, Magellan's procedure addendum, and information furnished by Magellan regarding Issues & Answers Survey Parameters. Third, it is also generally recognized that contracts between private corporations contain confidential and proprietary information. 00-ORD-112.
Finally, the Department strongly maintains that disclosure of this information into the public arena would permit an unfair commercial advantage to other health insurers in the Commonwealth. These documents represent some of the basic business dealings of Humana, including but not limited to, business decisions made by Humana regarding contracting, internal policies and procedures, and payment to third parties. This information is proprietary. For these reasons, the Department of insurance respectfully requests that Mr. Breen's request to compel production of these documents be denied.
Pursuant to KRS 61.880(2) and 40 KAR 1:030, Section 3, to facilitate this office's review, we requested that the Department provide us with a copy of the in-house memoranda which had been withheld for an in camera review and a copy of the record reflecting the Department's final agency action in the matter. In addition, we asked that the Department elaborate on its position that certain withheld items on the privilege log were properly excluded from inspection under KRS 61.878(1)(c).
We are asked to determine whether the Department's partial denial of Mr. Breen's request violated the Open Records Act. For the reasons that follow, we conclude that, with the exception of certain procedural deficiencies, the Department's denial did not constitute a violation of the Act.
KRS 61.878(1)(l) authorizes public agencies to withhold "public records or information the disclosure of which is prohibited or restricted or otherwise made confidential by enactment of the General Assembly." This provision operates in tandem with KRE 503 to exclude from public inspection otherwise public records protected by the attorney-client privilege. KRE 503(b) establishes the general rule of privilege:
A client has a privilege to refuse to disclose and to prevent any other person from disclosing a confidential communication made for the purpose of facilitating the rendition of professional legal services to the client [.]
Thus, the privilege consists of three elements: The relationship of attorney and client, communication by or to the client relating to the subject matter upon which professional advice is sought, and the confidentiality of the expression for which the protection is claimed. Robert G. Lawson, The Kentucky Evidence Law Handbook § 5.10 (Michie, 3d ed. 1993), citing United States v. Schwimmer, 892 F.2d 237, 243 (2d Cir. 1989). Its purpose is to insure that confidences exchanged by an attorney and client are protected, thereby encouraging them to freely communicate. The term "client" is defined to include "a person, including a public officer, corporation, association, or other organization or entity, either public or private , who is rendered professional legal services by a lawyer. . . ." KRE 503(a)(1). The privilege extends to communications from attorney to client "if they constitute legal advice, or tend directly or indirectly to reveal the substance of a client confidence." Kentucky Evidence Law Handbook at § 5.10 citing United States v. Defazio, 899 F.2d 626, 635 (7th Cir. 1990). Of course, the privilege "must be strictly construed and given no greater application than is necessary to further its objective." Kentucky Evidence Law Handbook § 5.10.
In 97-ORD-127, we held that the privilege extends to documents reflecting communications between attorney and public agency client if they constitute legal advice or reveal the substance of a client confidence, or constitutes interdepartmental memoranda in which legal opinions are expressed and policies formulated.
We have examined the in-house memoranda and, although we cannot disclose the contents, they can be summarized generally as an August 22, 2000 memorandum from Ms. Johnson, as legal counsel, to the Deputy Commissioner for Heath insurance, through Legal Counsel, rendering a legal interpretation of a statute and a September 30, 2000 memorandum from Ms. Johnson, as legal counsel, to the Commission and Deputy Commissioner discussing the complaint, including legal arguments, interpretation of statutes, and legal opinions.
The in-house memoranda was prepared by the Department's attorney, Ms. Johnson, in order to provide her client, the Department, with advice on the legal matters related to the complaint and relevant statutes, thus, satisfying the first and second part of the three part test. It is also clear that the Department has attempted to insure the legal analysis contained in the legal opinion was shielded from disclosure. The Department, in its original and supplemental responses relied upon the attorney client privilege in denying Mr. Breen's request for these memoranda.
Moreover, this office has previously recognized that although a number of the exceptions to the Open Records Act are forfeited "upon the occurrence of a specific event, this has never been the rule with respect to attorney work product [and documents shielded by the attorney-client privilege]." 97-ORD-127; OAG 91-214. Simply stated, reliance on legal advice does not negate the attorney-client privilege. We believe that KRS 61.878(1)(l), operating in tandem with KRE 503, justifies the nondisclosure of the disputed memoranda. It is the opinion of this office that the Department properly denied access to these in-house documents.
We address next the Department's denial of access to certain documents provided to the agency by Humana during the investigation of the complaint listed on the privilege log under KRS 61.878(1)(c)1.
This office has consistently recognized that in order to qualify for exclusion under KRS 61.878(1)(c)1, public records must be:
1) confidentially disclosed to an agency or required by an agency to be disclosed to it;
2) generally recognized as confidential or proprietary; and
3) of such a character that disclosure would permit an unfair commercial advantage to competitors of the entity that disclosed them.
See, e.g., 96-ORD-135; 97-ORD-66; 97-ORD-132. On at least two occasions, the Kentucky Supreme Court has analyzed this provision, concluding that the public agencies, which had invoked it, met their statutory burden of proof. In Marina Management Services, Inc. v. Cabinet for Tourism, Ky., 906 S.W.2d 318 (1995), the Court held that records containing financial information of privately owned marina operators were exempt from disclosure. The Court reasoned that disclosure would provide an unfair advantage to competitors by allowing them to ascertain the economic status of the marina operators. At page 319 of that opinion, the Court observed:
The records submitted to the Parks Department include information on asset values, notes payable, rental amounts on houseboats, related party transactions, profit margins, net earnings, and capital income. These are records of privately owned marina operators, disclosure of which would unfairly advantage competing operators. The most obvious disadvantage may be the ability to ascertain the economic status of the entities without the hurdles systematically associated with acquisition of such information about privately owned organizations. Further, the facts on the record indicate that the audit statements were disclosed confidentially to Tourism and the Auditors Office. On these facts alone, the exemption clearly applies.
Thus, the Parks Department adduced sufficient proof to support invocation of the exemption.
Similarly, in Hoy v. Kentucky Industrial Revitalization Authority, Ky., 906 S.W.2d 766 (1995), the Court found:
The financial information required to be submitted by GE in its application to KIRA detailed the company's business and revitalization project. Under administrative regulations adopted by KIRA, such information included a financial history of the corporation, projected cost of the project, the specific amount and timing of capital investment, copies of financial statements and a detailed description of the company's productivity, efficiency and financial stability. . . . It does not take a degree in finance to recognize that such information concerning the inner workings of a corporation is "generally recognized as confidential or proprietary" and falls within the wording of KRS 61.878(1)(c)(2).
Here again, the public agency from which access to confidentially disclosed records of a private corporation was sought established that those records were generally recognized as confidential or proprietary. These cases, along with the cited open records decisions, confirm that the burden of proving that the records withheld for exclusion, under KRS 61.878(1)(c)1, rests with the agency.
In this regard, the Department, pursuant to our request that it elaborate on its position that records submitted by Humana qualified for exclusion from disclosure under KRS 61.878(1)(c)1, submitted the following additional documentation and information:
Item 1: Documents Requested from Humana (Agreements w/ Outside Vendors, etc.)
. Includes two documents.
. The first document is a private agreement "between Horizon Research Internal ("HRI") and those markets who participate in Humana's Hospital Internal Medicine Specialist program" (effective April 13, 2000). This agreement is between Humana and HRI for the conducting of customer satisfaction surveys for the Hospital Inpatient Management System Program (HIMS). The agreement is not signed by a Humana representative.
. The second document is an agreement between Burke, Inc., an Ohio corporation, and thirty-six different entities, including Humana Louisville/Lexington HMO (effective March 8, 2000). It is an agreement for the conducting of customer satisfaction surveys for National Committee for Quality Assurance "NCQA." It is signed by Burke, Inc. and Humana representatives.
. Mental Health Services are not included in these survey agreements. A mental health service survey was the issue of the complaint filed with the Department.
?
Item 4: Humana/Magellan: Organization Chart
. At the request of the Department, Magellan Health Services, Inc. created an organization chart showing its (ownership) relationship to other entities licensed by the Department.
. The complainant filed her complaint against Humana and not Magellan.
. Magellan was acting as an agent for Humana in conducting mental health services surveys and, thus, this information was helpful to the Department.
. This chart did not exist before the Department requested that Magellan create it to assist the Department.
Item 5: Humana/Magellan: Anthem's Contract with Magellan
. Includes a private Agreement between Anthem Blue Cross and Blue Shield, Inc. and Magellan (formerly known as Green Spring).
. Anthem Blue Cross and Blue Shield, Inc. is not the subject of the complaint filed by the complainant.
. The Department had this agreement on file and, therefore, used it in the early stages of its investigation to determine the services rendered by Magellan to licensed insurers in Kentucky. Anthem's contract was used until the Department obtained Humana's contract with Magellan.
. Specifically, the Department was interested in provisions in the contract addressing issues of confidentiality.
. In the cover sheet from Anthem to the Department, it states that "Anthem considers these documents proprietary, confidential, and not appropriate for production to Open Records requests."
. Again, it must be reiterated that Anthem is not a party to this complaint.
. The Contract is approximately thirty-three pages long.
. The contract is for the administration of mental health benefits by Magellan for Anthem's insureds.
Item 6: Humana/Magellan: In-House emails
. Includes Department of Insurance e-mails from March 2000 to October 2000 regarding this complaint.
. The e-mails are from various individuals within different divisions of the Department, including the Legal Division, Consumer Protection and Education Division, Health Insurance Policy and Managed Care Division, the Commissioner's office, Market Conduct, and Financial Standards.
. These e-mails contain preliminary discussions regarding the complaint.
. These e-mails do not reflect final agency determination concerning the complaint. These e-mails contain discussion between legal counsel and various clients within the Department.
Item 7: Humana/Magellan: Provider Agreements Magellan Procedure Addendum Original Agreement 4/1/94Information Furnished by CMG (Magellan) re: Issues & Answers Survey Parameters
. Includes a 4/1/94 original private contract between Humana Health Plan, Inc.; HMPK Inc., and Humana Insurance Company (referred to collectively as Humana) and CMG Health, Inc. (Magellan). It also includes approximately twelve amendments or addendum to the 4/1/94 original agreement.
. The original contract is for the administration of mental health benefits by CMG, Inc. for Humana insureds, including fee agreements, terms and conditions, confidentiality agreements, etc.
. Upon request, Humana confidentially disclosed these agreements to the Department.
. Includes a Magellan Behavioral Health Procedure Addendum for the Louisville Site. It has an effective date of 8/29/96 and was revised 4/16/98.
. The Procedure Addendum explains the population selection criteria, sample size criteria, data collection, survey instrument, response scoring method, implications of results for patient satisfaction surveys.
. The client member population targeted for the survey was adult members who used outpatient services from either a mental health provided or substance abuse rehabilitation agency during January through June 1998. The results of the survey, for this period was included.
. This includes the script used by the surveyors for the mental health services survey.
. Includes Human/CMG Inquiry Management Workflow -- explains procedures for when a Humana insured contacts CMG/Magellan regarding (1) information, (2) dissatisfaction with plan or service, (3) denial of claims, (4) Medicare, and (5) grievance.
We conclude the Department's responses adequately demonstrate that the documents that it required Humana to produce represent basic business dealings of Humana with private third parties and business decisions made by Humana regarding contracting, internal policies and procedures, how it is organized, and payment to third parties. They are records of a private corporation generally recognized as confidential or proprietary and constitute the inner workings of the company, the release of which would unfairly advantage competitors. "The most obvious disadvantage may be the ability to ascertain the economic status of the entities without the hurdles systematically associated with acquisition of such information about privately owned organizations." Marina Management Services, supra at 319. Thus, we find the Department properly withheld disclosure of documents produced by Humana during its investigation of the complaint under authority of KRS 61.878(1)(c)1.
Mr. Breen states in his letter of appeal that his client is not a business competitor of Humana and would not have any unfair business advantage in obtaining this information. However, this is not the test. The records made confidential under KRS 61.878(1)(c)1, are exempt from disclosure regardless of the identity of the requester. The Attorney General has consistently recognized that under the Open Records Act, all persons have the same standing to inspect public records and that the purpose for which an individual requests those records is irrelevant. 92-ORD-1136; OAG 89-86; OAG 91-129. "If one person [in the absence of a court order] is allowed to inspect a record, all should be allowed to inspect. " OAG 89-86, at p. 5. Thus, the reason why Mr. Breen requested the records is not relevant to our decision. If Mr. Breen was entitled to inspect the records, any other requester would also be entitled to inspect the records, including a business competitor. OAG 89-86. Accordingly, we conclude the response of the Department did not violate the Open Records Act.
We next address the Department's nondisclosure of interoffice e-mails. KRS 61.878(1)(j) authorizes the nondisclosure of:
Preliminary recommendations and preliminary memoranda in which opinions are expressed or policies formulated or recommended.
The Department states that the interoffice e-mails contain preliminary discussions among different divisions of the Department, including the Legal Divisions regarding the complaint, which do not reflect final agency action. These records would be exempt under KRS 61.878(1)(j), unless any were adopted as part of the Department's final action on the investigation. 1 A review of the record reflecting the Department's final action of the matter does not adopt any e-mails or other in-house documents as part of its final action. In that record, the Department states, in relevant part:
However, upon closer review of the information you submitted and after meeting with representatives from Humana and representatives from the company that administers Humana's Mental health benefits, the Department has concluded that Humana is not in violation of KRS 304.17A-555.
KRS 304.17A-555 does not apply to the present case because the information disclosed was not information protected under the statute. Specifically, Humana did not redisclose any information contained in your patient record. Rather, Humana provided the telephone surveying company information that Humana had independent of your patient record. Thus, KRS 304.17A-555 is not applicable.
Accordingly, since none of these documents were adopted as the basis of the Department's final action, they retain their preliminary character and could properly be withheld from disclosure under KRS 61.878(1)(j).
Finally, we note that the Department's original response dated, January 11, 2001 was not timely in that it was not made within three business days after receipt of Mr. Breen's request, dated December 1, 2000, as required by KRS 61.880(1). Moreover, the response that records on the privilege log were being withheld "due to work product or of a proprietary nature," also was procedurally deficient in that it failed to cite the specific statutory exemption authorizing nondisclosure of the records and a brief explanation of how the exception applied to the records withheld. KRS 61.880(1).
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3) , the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceeding.
Footnotes
Footnotes
1 In 01-ORD-83, this office clarified the issue of when a preliminary record loses its preliminary character. In that decision, we explained:
Moreover, we believe this appeal provides the occasion for clarification of the issue of when a preliminary report forfeits its preliminary characterization. It is the City of Bowling Green's position that an internal affairs report must only be disclosed if it is "incorporated by reference" into the final action taken by the chief of police or ultimate decision-maker. We do not believe that the case law supports this position. In City of Louisville, Board of Medical Licensure , and University of Kentucky , above, the courts employed the term "adopt" rather than "incorporate" when referencing preliminary records that forfeit their preliminary characterization. The term "incorporate" appears in City of Louisville only with reference to the complaints that spawn an investigation, and that are "deemed incorporated as a part of . . . final determinations" inasmuch as "whatever final actions are taken necessarily stem from them . . . ." City of Louisville at 660 (emphasis added).
These terms are not synonymous or interchangeable. The concept of incorporation by reference has a narrow legal meaning, and is defined in Black's Law Dictionary as "[t]he method of making one document of any kind become a part of another separate document by referring to the former in the latter, and declaring that the former shall be taken and considered as a part of the latter the same as if it were fully set out therein." Black's Law Dictionary , 690 (5th ed. 1979). To adopt, on the other hand, means "to accept, appropriate, choose, or select . . .," Id . at 45, or "[t]o take and follow (a course of action) by choice or assent . . . [t]o take up and make one's own." American Heritage Dictionary 12 (3rd ed. 1994). In our view, the courts purposefully employed the broader concept of "adoption" rather than "incorporation," relative to preliminary investigative reports and records, to avoid a narrow, legalistic interpretation. To the extent that prior open records decisions of this office are inconsistent with this view, they are hereby modified. Where the preliminary investigative report or records are adopted as the basis of the final action taken, regardless of whether the report or records are incorporated by reference, the purpose for which KRS 61.878(1)(i) and (j) exists is no longer served, and the reports and records forfeit their preliminary characterization and must be disclosed. This did not occur in the instant appeal, and the City of Bowling Green properly withheld Capt. Wells' report.