A Division of Insurance hearing officer entered an Order under General Laws Chapter 175, § 166B against Cassandra L. Ott of Virginia Beach, Virginia to dispose of any interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer and fined Ms. Ott $7,000 pursuant to General Laws Chapter 176D § 7, on December 28, 2015.
Virginia Beach call center licensed employees nationwide for insurance sales
Ms. Ott worked for Sutherland Global Services, Inc. (“Sutherland”). Sutherland advertises itself as “Business Process Outsourcing company” that provides services for customer support and customer acquisition to a number of industries including the insurance industry.
Among the insurance industry offerings the company provides, according to its website, include “customer acquisition and service, underwriting support, policy administration, and claims processing to delight your most valuable asset – your customers.”
In Ms. Ott’s case, in February 2014, while an employee of Sutherland’ Virginia Beach call center, she became licensed as a resident insurance producer in Virginia. As part of her job, Metropolitan Property and Casualty (“Metropolitan”) made an agency appointment for her to work the inbound sales management contract between Sutherland and Metropolitan.
Under this contract, Sutherland’s licensed employees handled inbound calls with potential Metropolitan customers on a nationwide basis. Of note, is that in that same month (February 2014), through both Sutherland and Metropolitan’s assistance, Ms. Ott became licensed as a non-resident Metropolitan agent in almost every state of the union, including Massachusetts.
Misrepresenting customer information to give unwarranted discounts
Ms. Ott’s insurance sales career, however, ended soon after it began. Less than three months later, on May 17, 2014, Sutherland abruptly terminated her employment and Metropolitan immediately notified the various insurance departments that had so recently issued Ms. Ott her producer licenses that Metropolitan had terminated Ms. Ott appointment for cause.
In acting upon the Metropolitan notice of termination of Ms. Ott’s appointment, the state of Kentucky noted in its complaint that her termination, according to the insurer, resulted from “fraudulent, coercive or dishonest practices” where:
Ott failed to properly rate all drivers on vehicle usage, provided discounts to an insured even though the insured told her she did not qualify, provided inaccurate coverage information to an insured, and failed to properly document the policy to the insured as outlined by Metropolitan’s procedures during a monitored telephone conversation…
After failing to respond to three written request regarding the matter, the last being sent by certified mail, Kentucky revoked Ms. Ott’s non-resident producer license on September 22, 2014.
Nine additional states act administratively against Ms. Ott’s licenses
After Kentucky acted, other states followed suit with their own terminations or suspensions. Some acted independently based on Metropolitan’s termination notice. Others initiated proceedings based upon notices from the NAIC’s Regulatory Information Retrieval System that the State of Kentucky had taken administrative action against Mr. Ott.
North Dakota followed Kentucky in revoking Ms. Ott’s non-resident producer license on November 24, 2014 based on Metropolitan’s termination notice for cause and Ms. Ott’s failure to respond. Over the next year, seven more states, not including Massachusetts, acted to revoke or suspend Ms. Ott’s licenses: State of Minnesota (revocation), March 2, 2015; State of South Dakota (revocation), March 3, 2015; State of Virginia (revocation) March 20, 2015, State of Washington (revocation), March 25, 2015; State of ldaho (revocation), April 3, 2015; State of Arkansas (suspension), April 7, 2015; State of Indiana (suspension), July 13, 2015, and State of Maine, September 15, 2015.
Most of these states took action under statutes similar to the Massachusetts law that allows the insurance commissioner to revoke or suspend a license if “…a producer [fails to report] …to the commissioner any administrative action taken against the producer in another jurisdiction …within 30 days of the final disposition of the matter.”
Interestingly, a quick review of a random selection of other states where Ms. Ott held non-resident producer licenses, including, but not limited to, Texas, New York, California, Montana, New Mexico, Nevada, Utah, and Wyoming showed no administrative activity. In those states, Ms. Ott’s license information indicated the license as “expired,” “inactive,” or apparently “in force”.
Minnesota independently reviews recorded evidence of Ms. Ott’s violations and issues a $3000 fine
Ms. Ott’s telephone call with a prospective insured were, in the ordinary course of Sutherland’s business, recorded and monitored for quality. The Kentucky decision mentioned that Metropolitan’s notice of the termination alleged that the actions that caused Ms. Ott’s termination had occurred on a recorded line.
Of all the insurance departments that received the notice of termination alleging that Ms. Ott had committed “fraudulent, coercive or dishonest practices”, only the Minnesota Department elected to review this evidence before acting.
The memorandum contained in the records of Ms. Ott’s revocation proceeding states:
Call records that the Department examined revealed that the Respondent [Ms. Ott] misrepresented customer information so that customers could receive discounts for which they did not qualify. Such a practice harms not only the insurer but also other insureds that ultimately bear the cost of such improper discounting.
Based on this evidence, the memorandum went on to state:
In light of Respondent’s misrepresentations and fraudulent practices during the sale of insurance, it is appropriate to revoke Respondent’s non-resident insurance producer license…In addition, it is appropriate to impose a civil penalty of $3,000 against the Respondent…for her three, separate violations of Minnesota law.
The Minnesota commissioner’s final order imposed the $3,000, in civil penalties against Respondent for her violations of [Minnesota statutes]” in addition to revoking her license.
Massachusetts becomes eleventh state to act against Ms. Ott’s licenses.
The Division of Insurance issued Ms. Ott a a non-resident producer license on February 8, 2014.
On October 21, 2015, the Division of Insurance filed its order to show cause against Ms. Ott arising out of her failure to report to the Division of Insurance the revocation or suspension of her non-resident producer licenses in Kentucky, North Dakota, South Dakota, Minnesota, Washington, and Virginia.
Ms. Ott neither contacted the Division nor appeared at the hearing although the hearing officer found that she had received sufficient notice. The hearing officer entered a default and summary judgment against her ruling:
…Ott, by failing to report to the Division any of seven administrative actions revoking her license, committed seven violations of Chapter 175, §162V(a). Because these actions constitute serious violations of the insurance laws, I impose the maximum fine for each of them.
The maximum fine allowed under Chapter 175, §162R (a) for violations of the insurance laws, such as §162V(a), is $1,000 per violation.
Additionally, the hearing officer entered orders against Ms. Ott requiring her to return any licenses, prohibiting her from transacting directly or indirectly transacting any insurance business or acquiring, in any capacity whatsoever, any insurance business in the Commonwealth of Massachusetts; and to dispose of any and all interests in Massachusetts as proprietor, partner, stockholder, officer or employee of any licensed insurance producer.
Finally, the hearing officer ordered: “Cassandra L. Ott shall pay a fine of Seven Thousand ($7,000) to the Division within 30 days of the entry of this order.”
A warning for call center employees (and others) licensed as non-resident producers in multiple states
This is the second case that Agency Checklists has written about where a call center employee, licensed as non-resident producer, have received substantial fines for violating the law which requires the timely reporting of administrative actions.
While Ms. Ott’s failure to report arose out of actual misfeasance, the Division levied a similar $4,000 fine against a licensee who initially failed to furnish “replacement fingerprints cards” to the State of Washington. When that licensee failed to respond to Washington, the state’s division of insurance revoked her non-resident license, with additional states soon following, after she failed to report that revocation to other issuing authorities within 30 days as required by the licensing laws enacted in most states. See “Agency Checklists”, June 25, 2014, DOI fines agent $4000 for not reporting license revocations.
In Agency Checklists opinion, the punishment in the second case did not appear to fit the crime, still the lesson learned from the fine imposed is that anyone who holds multiple non-resident licenses should be careful and cognizant of the laws.
The laws on notifying either one or more issuing authorities of any administrative actions by any agency are quite clear in Massachusetts as well as other states. The time loss and costs involved in failing to notify issuing authorities about any administrative actions and change of addresses, can be disproportionately severe in some cases.