Hearing Officer Denies DOI’s request for license revocation and additional orders
In an unusual order, the Hearing Officer Jean F. Farrington has denied much of the substantive relief sought by the Division of Insurance (“DOI” or “Division”) against a nonresident licensed producer, Emma M. Moreau (“Ms. Moreau”), who failed to report administrative actions against her license as required by Massachusetts law.
Failure to report administrative actions as required by statute
Ms. Moreau had been licensed by the Division as a nonresident producer since December 17, 2013.
In Ms. Moreau’s case, the Division filed an Order To Show Cause against Ms. Moreau on October 27, 2015, alleging that she had failed to report to the Division, as required by M.G.L. c. 175, §162V(a), administrative actions taken by the states of California, Virginia and Delaware against her producer licenses.
The Order To Show Cause sought a number of orders against Ms. Moreau including:
- The revocation of her Massachusetts insurance license
- An order requiring Ms. Moreau to dispose of any insurance-related interests in Massachusetts,
- An order prohibiting her from conducting an insurance business in Massachusetts, and
- An order imposing a fine or fines for the alleged violations.
Division strictly enforces producers reporting out-of-state administrative actions
The reporting statute requiring producers to report administrative actions to the Division. M.G.L. c. 175, § 162V(a) provides:
A producer shall 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. This report shall include a copy of the order, consent to order or other relevant legal documents.
Readers of Agency Checklist may recall based on prior articles that the Division has been quite diligent in pursuing fines and license revocations against resident and nonresident producers who fail to report administrative actions in other states as required by the above statute.
In some cases, these fines have reached substantial amounts for license revocations that have not involved serious misfeasance, but often simply a failure to respond to an insurance department’s inquiries. For example, see Agency Checklists’ June 23, 2014 article, “DOI Fines Agent $4000 For Not Reporting License Revocations.” Although, in fairness to the Division, there also have been a number of cases in which the actions of the person fined have been quite serious. See Agency Checklists June 14, 2014 article, “Fined for Failure To Report Criminal Proceeding To Commissioner.”
Ms. Moreau fails to answer or appear and is defaulted by Hearing Officer
Before commencing proceedings, the Division made Ms. Moreau a settlement offer to avoid further proceedings. When the Division received no response, it filed its Order To Show Cause.
As is not uncommon in such cases, Ms. Moreau neither responded nor appeared to the Order To Show Cause. In other cases, this has resulted in the entry of a default and the granting of the orders asked for by the Division including license revocations and orders prohibiting conducting an insurance business in Massachusetts.
However, in Ms. Moreau’s case, notwithstanding her default, the Hearing Officer conducted an analysis of the Division’s Order To Show Cause and the proceedings in California, Virginia, and Delaware upon which the Division based its case.
Hearing Officer finds no violation in not reporting original California order
In Ms. Moreau’s case, even though Ms. Moreau did not appear, the Hearing Officer Jean Farrington made findings in Ms. Moreau’s favor based upon her review of the record.
The Division based it Show Cause Order on a California Insurance Department order of March 28, 2014, “In the Matter of the Application of Emma Margaret Moreau.” This order issued Moreau a restricted producer license.
Additionally, the Division introduced an October 27, 2014 Order from the State of Virginia revoking Ms. Moreau’s Virginia producer’s license based upon Ms. Moreau having failed to report “within 30 calendar days an administrative action that was taken against her by the State of California.” Also, the Division alleged that the State of Delaware had revoked Ms. Moreau’s license.
Hearing Officer Farrington stated with regard to the California evidence, “I am not persuaded that §162V (a) required Moreau to report this action to the Division.”
Hearing Officer Farrington reasoned that the Massachusetts statute defines a reportable administrative action as one “taken against the producer.” The caption in the California Order suggests that the dispute arose in connection with a license application, not from an administrative action initiated by the California Department of Insurance.
Additionally, she noted that §162V (a) does not define “administrative action,” and quoted from the Background Question 2 on the NAIC standard application for individual producer licenses that characterizes an “administrative action” as, among other things, having a license application denied. Similarly, the Hearing Officer pointed out M.G.L. c. 175, §162R (a)(9) identifies, as a basis for disciplinary action against a Massachusetts licensee, having a license “denied, suspended or revoked” in any other jurisdiction.
Since the outcome of the California proceeding actually resulted in Ms. Moreau’s retention of a California producer license, not a denial, the Hearing Officer found that the Division’s evidence did not support that Ms. Moreau had violated §162V (a) by not reporting the California proceeding.
On the Delaware proceeding, the Hearing Officer found that the Division’s allegation did not satisfy the statute because there was no allegation that Ms. Moreau had failed to report this revocation to the Division.
$500 Fine for failing to report Virginia proceeding but no revocation of Massachusetts licenses or prohibition against transacting insurance business in Massachusetts
Ms. Moreau did not get off scot-free, however. Hearing Officer Farrington found that Ms. Moreau did have a legal duty to report to the Division the administrative action of Virginia, which occurred on October 27, 2014.
The reporting statute, M.G.L. c. 175, § 162V(a), does not have a specific penalty. M.G.L. c. 175, §194, provides for up to a $500 fine when a person violates a provision of the insurance laws that does not specifically include a penalty. The Hearing Officer granted the Division’s request for a $500 fine because Ms. Moreau should have satisfied her statutory obligation almost a year before the Division filed its Order To Show Cause.
Yet, the Hearing Officer denied the Division’s other requests for orders revoking Ms. Moreau’s producer license, prohibiting her from directly or indirectly transacting any insurance businesses in Massachusetts or having any interests in a Massachusetts insurance business.
The Hearing Officer stated her reasons for denying the Division’s additional requests stating in substance:
- The grounds for revoking an insurance license are set out in M.G.L. c. 175, §162R (a)(1) through (14). The Order To Show Cause does not link Ms. Moreau’s failure to report the Virginia license revocation to any of those grounds…The Division’s requests for revocation and for an order to return any Massachusetts license are therefore denied.
- With respect to cancellation of any appointments Moreau may have, the Order To Show Cause alleges no facts that would support such a request and it is denied.
- The Order To Show Cause also seeks relief permitted by M.G.L. c. 175, §166B that, in brief, prohibits a person whose license has been revoked from owning or engaging in the insurance business in Massachusetts. That relief, however, is available only when a person’s license is revoked and therefore must be denied in this proceeding.