AZ HB2560

Establishes an insurance compliance self-evaluative privilege in Arizona law that protects voluntary internal audits, reviews, and assessments conducted by licensed insurance companies and regulated entities from discovery and use as evidence in civil and administrative proceedings.

Protects "insurance compliance self-evaluative audit documents" including audit reports, memoranda, implementation plans, and supporting materials from being disclosed or admitted in court, with specified exceptions for regulatory agencies and certain circumstances.

Allows insurance companies to submit audit documents to the Department of Insurance director as confidential documents without waiving privilege, and prohibits the director from disclosing these documents to other persons or entities, except the director may use them to ensure compliance with corrections.

Permits courts to compel disclosure of audit documents only after in camera review if the company waived privilege, the material is not privileged, or the privilege is being asserted fraudulently, and only for portions relevant to disputes in the proceeding.

Exempts from privilege protection documents required by law to be collected or reported, information obtained through independent observation or monitoring by regulatory agencies, and information from sources not involved in audit preparation; applies retroactively to all pending litigation and administrative proceedings.