The Third Quarter includes actions in the months of July, August and September
Each quarter, the Division of Insurance publishes a list of the enforcement actions it has taken against licensed Resident and Non-Resident Producers. The total fines assessed often vary depending upon the circumstances and actions alleged.
The following is a review of the Third Quarter of 2016, which includes special investigations and enforcement hearings during the months of July, August and September.
How does the total fines in the 3rd quarter compare to the 1st & 2nd quarters?
Similar to the Second Quarter of 2016, during the Third Quarter, the Division and its Special Investigations Unit was involved in a total of 11 different Administrative Actions. The total fines in the Second Quarter, however, were $29, 015 almost double the amount of the fines imposed during the Third Quarter which totaled $16,500. The First Quarter of 2016 more closely mirrored the First Quarter with $15,900 dollars in fines levied.
The DOI Special Investigations Unit was involved with 11 investigations during the Third Quarter of 2016
The largest fine imposed this quarter was an $8,500 fine against a Non-Resident Producer
Similar to fines imposed during the First and Second Quarters of 2016, the largest single fine assessed in the Third Quarter this year was an $8500 fines against a Non-Resident Producer. While no formal decision was issued, a letter was forwarded to the Non-Resident Producer outlining the allegations as well as the terms of the Settlement Agreement.
According to that formal letter sent via email on July 6, 2016, the Division of Insurance argued that the Durkin & Durkin Insurance Agency, LLC, known also as Innovative Risk Solutions Insurance Agency, LLC had unintentionally violated Massachusetts insurance laws when it continued to conduct business on behalf of Zurich North America after its appointment with the carrier had been terminated.
In particular, the DOI that the agency had been formally terminated by the company in May of 2014. The Division said that the termination letter from Zurich clearly detailed that D&D’s right to submit or bind business had been suspended effectively immediately. In addition, the carrier revoke “…all discretionary authority plus the ability to bind or to issue bonds on Zurich’s behalf on any account.”
Instead of ceasing all activity, however, the Division noted that the agency had continued to”…to conduct business on behalf of Zurich well after the May 2, 2014 termination.” As a result, the DOI concluded that based upon the agency’s actions it had violated M.G.L. c.175 §162R(a) triggering $1000 fines for each violation of M.G.L. c.176D, § 7, M.G.L. c. 176D, § 2, in addition to violating the additional statutes M.G.L. c. 176D, §§ 3, and 5.
As a result, the Division had offered the agency the opportunity to resolve this issue by agreeing to waive its right to a public hearing, in addition to agreeing to cease and desist from the alleged conduct and finally by agreeing to pay an $8,500 fine by October 7th, 2016.
The second largest fine for this quarter was for $5,500
The second largest fine issued this quarter was for $5,500 fine also imposed against a Non-Resident Producer. Unlike the first case which was resolved with a Settlement Agreement, this case was resolved by a public hearing and formal decision issued by the Division of Insurance on July 15, 2016.
In that decision, the DOI Hearing Officer Jean F. Farrington entered an Order under General Laws Chapter 175, § 166D against Sean Green to dispose of any interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer and fined Mr. Green $5,000.00 pursuant to General Laws Chapter 176D § 7.
Mister Green’s case is interesting because it exemplifies what can happen when an applicant makes an application for a nonresident producer license and does not disclose, in response to the standard application, correct answers to the question that ask if the applicant has ever been convicted of a misdemeanor. To read more about the case and the Division’s decision, please read Agency Checklists’ July 25, 2016 decision entitled, “Producer’s Undisclosed Misdemeanor Convictions Leads To $5,000 Fine And License Revocation.”
One of the Division’s decisions involved a Non-Resident Producer whose license was revoked after receiving a 37-year jail sentence for insurance fraud
On July 15, 2016, Jean Farrington, a Division of Insurance hearing officer acting on a show cause proceeding initiated by the Division entered an order revoking the nonresident producer license of Jeffrey Brian Cohen, 40, formerly of Reisterstown, Maryland. The Hearing Officer’s decision also required the return of any and all producer licenses, to cease transacting any insurance business in Massachusetts, and to dispose of any interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer.
One of the grounds for revoking Mr. Cohen’s nonresident producer licenses in Massachusetts was that on Dec 10, 2015, a federal judge in Maryland sentenced Mr. Cohen to 37 years in prison followed by three years of supervised release for wire fraud, aggravated identity theft, making false statements to an insurance regulator and obstruction of justice. The judge also entered an order requiring Mr. Cohen to pay restitution of $137 million.
While the Division did not impose a fine in this case, it did issue a July 15, 2016 decision. For a more in-depth analysis of both that decision and the case in general, please refer to Agency Checklists August 1, 2016 article entitled, “License Revoked After Producer Receives 37-Year Jail Sentence For Insurance Fraud.”
Another decision reported on by Agency Checklists included a $2,000 fine and a license revocation
On August 22, 2016, the Division of Insurance Hearing Officer Jean F. Farrington entered an order under General Laws Chapter 175, § 166D against Robert G. Draper. A Non-Resident Producer, Mr. Draper was an independent agent in Virginia, with Non-Resident licenses in a several states including Massachusetts. According to the DOI decision, Mr. Draper was required to dispose of any interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer and fined Mr. Draper $2,000.
The order entered by Hearing Officer Farrington resulted from Mr. Draper’s failure to report the surrender with prejudice of his nonresident producer licenses in North Carolina in 2013, and Ohio, in 2014, along with the revocation of his producer license in Delaware and Virginia in 2014 and his nonresident producer license in West Virginia in 2016.
For a detailed analysis of both the decision and the case, please refer to Agency Checklists’ August 29, 2016 article entitled, “Nolo Contendere Plea Leads To License Revocation And $2,000 Fine.”
The Division also was involved in another seven special investigations and enforcement hearing during this quarter.
The following is a summary of the remaining eight Administrative Actions the Division of Insurance took against both Resident and Non-Resident Producers in the second quarter of 2016.
Of the remaining nine cases, only four of those actions involved Resident Producers, while the remaining five cases involved Non-Resident Producers.
A look at the individual cases…
The following a list of the Administrative Actions taken this quarter:
- A Non-Resident Producer case involving allegations of Untrustworthiness; Other State(s) Revocation. A Settlement Agreement was entered into by the parties which included a Permanent Revocation; Cease and Desist. As a result of that agreement, no fine was imposed.
- A Non-Resident Producer case involving Other State(s) Revocation of the Non-Resident Producer’s License and the subsequent failure to report an Administrative Action to the Mass. DOI. The case was resolved via a Settlement Agreement which included a Permanent License Revocation as well as a Cease and Desist from All Massachusetts Insurance Activity. As a result of that agreement, no fine was imposed.
- A Masachusetts Producer case involving allegations of Violation of Insurance Laws, Unfair Insurance practice, Untrustworthiness and Failure to Report an Administrative Action. The case which was resolved with a Settlement Agreement and no fine did require the Permanent Revocation of the producer’s license in addition to a Cease and Desist from All Insurance activity. No other monetary fine was imposed.
- A Massachusetts Producer case involving allegations Untrustworthiness as well as forging a name on an insurance contract. In particular, the DOI alleged the producer was terminated for “… submitting false applications and making misrepresentations on client applications.” In total, it was alleged that there were five separate instances in which clients complained that the producer had collected premiums from false applications or applications with incorrect information. This case also was resolved via a Settlement Agreement required the permanent revocation of the producer’s license in addition to a Cease and Desist From All Massachusetts Insurance Activity. No other monetary fine was imposed.
- A Massachusetts Producer case involving allegations of the Producer’s misrepresentation on a license application in addition to a failure to report that Administrative Action to the Division. The case was resolved with the payment of a $1000 fine in conjunction with a Settlement Agreement as well as a Ceast and Desist.
- A Non-Resident Producer case involving allegations of misappropriation and untrustworthiness stemming from a license revocation in another jurisdiction. The case was resolved with a Settlement Agreement requiring the permanent license revocation of the Non-Resident Producer in addition to a Cease and Desist From All Massachusetts Insurance Activity and a Cease and Desist from violations.
- A Non-Resident Producer case involving a Felony conviction and the repurcussions of that conviction leading to other state(s) license revocations as well as allegations of unfair trade practices. The Division resolved this case with a Settlement Agreement and the permanent revocation of the Non-Resident Producer’s license as well as a Cease and Desist.
The Division’s Special Investigation Unit is in charge of investigating producers
While the primary mission of the Division of Insurance is “…to monitor the solvency of its licensees in order to promote a healthy, responsive and willing marketplace for consumers who purchase insurance products” a major part of that mission involves insurance enforcement. The DOI engages in a variety of administrative actions throughout the year in order to ensure that the insurance industry and its representatives maintain a just and healthy marketplace.
That said, during the course of regulating the Massachusetts insurance industry, the Division’s Special Investigation Unit will pursue allegations of misconduct against any persons licensed by the DOI including insurance producers, insurance advisers, public adjusters, reinsurance intermediaries, viatical loan brokers and providers, viatical settlement brokers and providers, insurance companies, health maintenance organizations and self-insurance groups.
As part of its investigation into a case, the Enforcement Division may interview witness, question licensees, demand and review documentary evidence supporting allegations of unfair methods of competition or unfair trade practices or any other violation of the insurance law.
If a specific investigation warrants further action, an investigation may result in a referral to the Attorney General’s office in egregious cases or in less serious cases the Division independently may negotiate settlements or request the Commissioner or his deputies to initiate an administrative proceeding before a hearing officer, agree to assist in cease and desist order and a written compliance programs. In more egregious cases, a licensee’s conduct may warrant the sanctioning of that producer’s license including revocation or suspension along with restitution.
To learn more about avoiding enforcement issues, you may be interested in Agency Checklists’ article “One Way to Avoid Large Fines for You & Your Agency.”