On June 4, 2014 the Division of Insurance Hearing Officer Jean F. Farrington entered an Order under General Laws Chapter 175, § 166D against Richard Hayward to dispose of any interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer and fined Mr. Hayward $2,000.00 pursuant to General Laws Chapter 176D § 7.
A series of license revocations and fines in different states from a criminal conviction
Mister Hayward’s case is interesting because it exemplifies what can happen to a producer who runs afoul of criminal laws independent of any insurance laws and then fails to report to the commissioner the pendency of that criminal action.
The above Order entered by Hearing Officer Farrington was possibly the last of a series of revocations entered against Mr. Hayward by various states including Kentucky, Virginia, Pennsylvania, New York, and Indiana, spanning a period from 2009 to the present 2014.
All of the revocations flowed from the failure of Mr. Hayward to report a criminal proceeding in Florida in 2008 resulting from his obtaining a credit card through fraudulent means.
Many other states have in force statutes or rules similar to the Massachusetts statutes involved in Mr. Hayward’s case that require
“a producer [to report]…to the commissioner any administrative action taken against the producer in another jurisdiction or by another governmental agency in the commonwealth within 30 days of the final disposition of the matter.” G.L. c. 175, §162V(a).
As well as the explicit provision that with regard to any criminal cases that requires:
…Within 30 days of the initial pretrial hearing date, a producer shall report to the commissioner any criminal prosecution of the producer taken in any jurisdiction.… G.L. c. 175, §162V(b).
Employment in Florida placing insurance in other states
Although Mr. Hayward lived and worked in Florida for a number of years in various businesses, there is no apparent record of him having a Florida producer license. However, in 2008 he obtained employment with Liberty Mutual in Florida. As part of that employment, Mister Hayward obtained nonresident producer licenses in Kentucky, Indiana, Pennsylvania, New York, Virginia and Massachusetts.
On July 1, 2008 Mr. Hayward was charged by the Winter Garden Florida Police with using the information of a third person to obtain credit cards for him and his wife from a bank. After investigating the complaint, the police filed charges against him for obtaining credit cards through fraudulent means by using a third person’s personal identification information without consent.
After various pretrial proceedings, on July 1, 2009 he pleaded nolo contendere to the charge of fraud through identity theft and was found guilty in the Circuit Court for Orange County. He was sentenced to one day in jail and one year of probation with an order of restitution.
Employer takes action to notify all departments of a criminal conviction in Florida
Apparently, soon after Mr. Hayward was sentenced, his employer became aware of the criminal proceeding and determined that it had a duty to notify all of the appropriate licensing agencies since Mr. Hayward had failed to do so.
On July 21, 2009, Liberty Mutual reported to all the states where Mr. Hayward was licensed as a producer that he had been arrested on September 11, 2008 for criminal use of personal identification information. They also reported that the initial charges against Mr. Hayward were two counts of criminal misconduct in the Circuit Court of Orange County in the State of Florida. The first count was for fraudulent use of personal identification information, a felony. The second was for obtaining a credit card through fraudulent means, a misdemeanor.
The company also sent copies of a July 11, 2009 statement given by Mr. Hayward following his conviction.
In that statement Mr. Hayward claimed that the charges had been brought against him because of his relationship with a “Gary Oakley” who cosigned on a credit card with the respondent [Mr. Hayward]. However, the arrest affidavit furnished apparently by Liberty Mutual to all of the agencies signed by Detective Robert Chamberlain alleged that Mr. Hayward had actually opened a new credit card account in Mr. Oakley’s name for which Mr. Oakley had not consented. That credit card had a past due balance at the time of Mr. Hayward’s arrest in excess of $7,000.00.
Administrative license revocations and fines from failing to report criminal proceeding
As soon as the various states where Mr. Hayward was licensed became aware of his criminal case they began to take action.
Kentucky had a specific legal provision providing for the revocation of any insurance license where anyone was “convicted of a misdemeanor for which restitution is ordered in excess of three hundred ($300), or of any misdemeanor involving dishonesty, breach of trust, or moral turpitude.” That state summarily revoked Mr. Hayward’s nonresident producer license on August 11, 2009.
On August 31, 2009, Liberty Mutual notified all of the remaining departments that Mr. Hayward’s license had been revoked in Kentucky for “using fraudulent, coercive or dishonest practices; or demonstrating an incompetence or untrustworthiness or financial irresponsibility.”
The state of Indiana then began a proceeding on September 19, 2009, based on Mr. Hayward’s “failure to timely notify the department of a criminal prosecution and for using fraudulent or dishonest practices or demonstrating incompetence, untrustworthiness or financial irresponsibility in the conduct of business in Indiana or elsewhere.”
On September 30 Liberty Mutual advised the Indiana Department and presumably all the other departments of insurance where Mr. Hayward had licenses, including Massachusetts, that they had terminated his employment status for his failure to “timely notify the company of the arrest and misdemeanor charge which resulted in the revocation of [Mr. Hayward’s] Kentucky producer license which was required for his employment with Liberty Mutual.”
Since Mr. Hayward chose to ignore these proceedings in Indiana, even though the Indiana Division of Insurance assured him that he could participate by telephone, the Indiana hearing officer entered an order on March 24, 2010, revoking his license and fining Mr. Hayward $3500.00.
Mr. Hayward seems to have learned a lesson from ignoring the Indiana proceeding, since when the Pennsylvania Insurance Department also charged him, he advised, “that he is out of the insurance business and he is willing to sign a consent order revoking his non-resident producer license.” On May 5, 2011, Mr. Hayward signed with the Pennsylvania Department a consent decree revoking his license. Although the Department had the authority to impose a $5000 penalty, the signed consent decree had no civil fine as part of its orders.
When Mr. Hayward failed to respond to the State of Virginia’s notice, it simply entered an order on December 16, 2009, revoking his nonresident producer license for failure to notify the State Corporation Commission of the Kentucky administrative action.
The New York department revoked his license as a non-resident producer simply stating that he had failed within 30 days of the initial pretrial hearing to notify it of his Florida criminal prosecution and the Kentucky, Virginia, and Indiana administrative actions against him. This order issued on April 21, 2011, with no civil fine imposed.
Massachusetts waits until 2014 to take action
For some unspecified reason, Massachusetts did not commence any revocation proceeding until some three years after Mr. Hayward’s nonresident producer license had expired. He was originally licensed in Massachusetts on June 6, 2008 and had not renewed his license when it terminated on January 8, 2011.
On March 4, 2014, the Division of Insurance filed its order to show cause against Mr. Hayward arising out of his failure to report his 2009 Florida conviction or the Kentucky Department of Insurance having revoked his license in August of 2009 because of the Florida conviction.
The Division of Insurance show cause order apparently did not mention or charge Mr. Hayward with having failed to advise the Division of the additional revocations by the states of Virginia, Pennsylvania, New York and the fine and revocation from the state of Indiana.
In this case, Mr. Hayward did not appear although the hearing officer found that he had received sufficient notice. She entered a default and summary judgment against him stating:
“I find that the evidence supports a finding that Hayward, by failing to report his criminal prosecution and Kentucky license revocation, committed two statutory violations. … I am persuaded that failure to comply with the reporting of the crime in Chapter 175, § 162V on a timely basis is a serious violation of the insurance laws and therefore impose the maximum fine for each of those violations.”
An insurance licensee has a statutory responsibility to report administrative or criminal actions to the commissioner. Mr. Hayward is an extreme case, but the lesson is the same for more minor infractions and proceedings. The failure to report, independent of the underlying proceedings, can result in fines and license revocation or suspension.
The Massachusetts Division of Insurance decision can be found here: Division of Insurance v. Richard Hayward.