On December 15, 2015, the Division of Insurance Hearing Officer Jean F. Farrington entered an Order affirming the denial of the application of the Tarantino Insurance Agency, LLC, (“Tarantino Agency”), of 1090 Massachusetts Avenue, Arlington, Massachusetts, for the renewal of its producer license.
Division denied agency’s renewal license alleging three statutory grounds
The Hearing Officer’s decision resulted from the Tarantino Agency’s appeal of the Director of Producer Licensing’s September 15, 2015 letter notifying Tarantino Insurance that she would not issue the agency a renewal license.
On appeal from the Director’s decision, the Division relied upon three of the fourteen grounds contained in G.L. c. 175, §162R(a) that permit the Commissioner to refuse to issue or renew a producer’s license. These provisions were §§162(a)(1), 162(a)(7), and 162(a)(8) that state as grounds for license denial that:
- The applicant has provided “incorrect, misleading incomplete or materially untrue information on the application.” (§162(a)(1));
- The applicant has been “found to have committed any insurance unfair trade practice or fraud” (§162R(a)(7)); and
- The applicant has been “found to be using fraudulent, coercive or dishonest practices or demonstrating incompetence, untrustworthiness or financial irresponsibility in the conduct of business in the Commonwealth.” (§162R(a)(8).
Agency failed to disclose lawsuit by premium finance company alleging conversion of funds
In the course of reviewing the application of the Tarantino Agency, the Division obtained records relating to an action initiated by a premium finance company, Magna Finance of Worcester, against the Tarantino Agency and its manager, Michael F. Tarantino. The agency and Mr. Tarantino had been sued in December 2013 in the Waltham District Court in a civil action where the complaint had alleged among other matters, a “conversion of funds.”
Based on the allegation of this suit, that resulted in a final default judgment of some $27,000 in July 2014, the Division argued that the Tarantino Agency’s failure to disclose this suit in its license application gave the Director a sufficient ground for her refusal to issue a license.
The Tarantino Agency had answered “no” to the application’s Background Question 5, that asked if the business entity or any owner of that entity or the member or manager of a Limited Liability Company (LLC):
…is a party to or ever been found liable in any lawsuit involving allegations of fraud, misappropriation or conversion of funds or misrepresentations. (Emphasis added).
Agency claims advice from Division in omitting lawsuit from license application answer
The agency’s manager, Michael Tarantino, did not dispute that he had not disclosed the Magna Finance suit on the Tarantino Agency’s application. However, he contended that the omission resulted from information provided by the Division.
Mr. Tarantino claimed that at the start of the license renewal process he had spoken with Division’s Special Investigation Unit. This conversation related to a 2004 settlement agreement between him and the Division and what information needed to be included on the agency’s application. The 2004 enforcement action against Mr. Tarantino had involved a “Failure to timely remit return premium to finance company” that had been resolved by a settlement agreement imposing a $500 civil penalty and a cease and desist order.
Mr. Tarantino argued that he received conflicting information because one person told him that he needed to respond about Magna Finance and another stated that the only disclosure issue was the 2004 enforcement action.
He further argued that in a subsequent communication with the Division, he was informed that the Tarantino Agency, LLC had been dissolved. But that after he had brought the agency back into good legal standing with the Secretary of State, the Division, in asking for a paper application, made no mention of his having to disclose the Magna Finance litigation.
As a result of these interactions with the Division, Mr. Tarantino claimed that he was led to believe that the only issue was the dissolution of the LLC and not the disclosure of the Magna Finance litigation in answering Question 5 on the application.
Mr. Tarantino also advised the Hearing Office that he would pay the court judgment obtained by Magna Finance against the agency and himself personally, “…under protest if I must to get my license reinstated”.
Hearing officer finds the Division’s evidence does not support denial under §§162R(a)7 and (a)(8)
The Hearing Officer started her decision by pointing out that the grounds for refusing to issue or to renew an insurance producer license are specified by statute in Massachusetts.
With regard to two of the three statutory subsections relied upon by the Division, the Hearing Officer found the Division’s evidence did not support a finding that Tarantino Agency had either been “found to have committed any insurance unfair trade practice or fraud” or “found to be using fraudulent, coercive or dishonest practices or demonstrating incompetence, untrustworthiness or financial irresponsibility in the conduct of business in the commonwealth…”
The Division’s evidence in support of its position on those two statutory provisions primarily consisted of the records relating to the Magna Finance litigation against the agency.
The Hearing Officer found that these records did not support a conclusion that the the Tarantino Agency had committed an unfair insurance trade practice or fraud sufficient to satisfy the Division’s burden of proof.
In particular, the Hearing Officer found that in the District Court no answer was filed to the Magna Finance complaint and that Mr. Tarantino’s and the Tarantino Agency’s liability resulted from a default judgment. Thus, the District Court never made any findings or rulings on the complaint’s allegations that could constitute evidence that either Mr. Tarantino or the Tarantino Agency had engaged in practices that would support a denial under §162R(a)(7) or §162R(a)(8) of the agency’s license application.
As a result, the Hearing Officer ruled that there was
…insufficient evidence to support denial of the Tarantino Agency’s license application for the reasons set out in §162R(a)(7) or §162R(a)(8).”
Hearing officer finds agency’s failure to disclose suit alleging “conversion of funds” sufficient to deny issuance of license
However, in the Hearing Officer’s opinion, the Director had the right to deny the agency’s application.
The agency’s incorrect answer to the application’s question that specifically asked if Mr. Tarantino, as the agency’s manager, or the Tarantino Agency were parties to litigation alleging “conversion of funds” supported a decision denying the license on the grounds that he provided incorrect or materially untrue information on that application.
Hearing Officer rejects claim that Division relieved agency of duty to disclose lawsuit
Mr. Tarantino’s argument that his incorrect answer to Question 5 resulted from conversations with Division staff that led him to believe that he did not need to report the Magna Finance litigation, the Hearing Officer found had no merit. In her opinion, Mr. Tarantino, as the LLC manager, had sole responsibility for the content of the Tarantino Agency’s business entity application. As part of that application, the Hearing Officer found, he certified that he understood and complied with the insurance laws and regulation of the commonwealth, and that he was responsible for the Tarantino Agency’s compliance with those laws, rules and regulations.
Further, the Hearing Officer found that Mr. Tarantino’s chronology of his contacts with Division staff about the Tarantino Agency’s application did not support his contention that his answer to Question 5 was based on advice from the Division. The evidence showed that Mr. Tarantino acknowledged that he was told, at the beginning of the renewal process, that he needed to respond about the issue with Magna Finance. Since he elected to omit it from the application, the Director had the right to deny the application.
Also, the Hearing Officer commented that Mr. Tarantino’s offer to pay Magna Finance’s court judgment if that would allow his license to be reinstated “demonstrates a profound misunderstanding of the reason for denial of the Tarantino Agency application.”
Final order denying appeal of license denial
The Hearing Officer’s final order was:
After careful review of the record in this matter, I find that it fully supports the Director’s determination that the omission from the Tarantino Agency’s application for a business entity producer license of information on a civil action by Magna Finance against the Tarantino Agency and Michael Tarantino is grounds for denying that application.
Under G.L. c. 26, §7, the agency had three days to appeal to the Commissioner of Insurance. Absent that appeal, the agency would have thirty days from the December 15 decision date to to file an administrative law appeal with the Superior Court.