Request By:
Mr. Donald N. Rhody
Acting Commissioner of Insurance
Post Office Box 517
151 Elkhorn Court
Frankfort, Kentucky 40602
Opinion
Opinion By: Steven L. Beshear, Attorney General; Joseph R. Johnson, Assistant Attorney General
This is in response to your letter in which you inquired whether a conflict of interest exists with respect to the personal service contract Dr. Ronald C. Horn, an Eastern Kentucky University professor, has with the the Department of Insurance. You state that Dr. Horn, a Chartered Life Underwriter (CLU) and Chartered Property and Casualty Underwriter (CPCU) has a personal service contract to revise study manuals for use by applicants for insurance agents' licenses. In addition, Dr. Horn holds a consultant's license issued by the department, is a member of the Kentucky Insurance Regulatory Board and is a chairholder for insurance studies at Eastern Kentucky University.
KRS 45A.340 pertains to conflicts of interest of public officers and employees. As a preliminary muter it should be noted that Dr. Horn is not a state employee as defined in KRS 18.110(10) by reason of his personal service contract. Furthermore, he is not a public officer or employee as defined in KRS 45A.335(2) by his reason of his position as a chairholder for insurance studies at Eastern Kentucky University. The fact that he has obtained his insurance designation of CLU and CPCU also raises no conflict of interest problem. The only potential problem raised in your letter concerns the fact that he is a member of the Kentucky Insurance Regulatory Board and also holds a consultant's license from the Department of Insurance.
KRS 45A.340(3) would prohibit Dr. Horn from being compensated as an expert witness for appearing before the Kentucky Insurance Regulatory Board and KRS 45A.340(6) would prohibit him from receiving any compensation for services rendered regarding matters before the Board. Another relevant statute is found in KRS 304.9-440(1)(g) which sets forth the grounds on which a consultant's license may be suspended or revoked which includes fraudulent or dishonest practices or if the licensee has shown himself to be incompetent, untrustworthy, or a source of injury or loss to the public. Although Dr. Horn is qualified and fully eligible to hold a consultant's license while serving on the Board, he should be aware of the aforesaid statutory provision in the event that a rate filing should come before the Board in a matter in which he previously acted as a consultant to the insurance company involved. In order to avoid the appearance of impropriety, he should abstain from participating or voting in such a case.
Pursuant to KRS 45A.340(6), Dr. Horn may not receive any compensation whatsoever from an insurance company for acting as a consultant to the company on any rate filing before the Board. However, Dr. Horn would not be disqualified from receiving his per diem compensation of one hundred dollars ($100) plus expenses for his service on the Kentucky Insurance Regulatory Board as set forth in KRS 304.2-380(3). With the above-noted exception, we find no conflict between Dr. Horn's service on the Board and holding a consultant's license issued by the Department of Insurance.