The Division of Insurance Hearing Officer, Jean F. Farrington issued a second opinion on April 14, 2016 in which she has held the Division of Insurance to a strict pleading standard in its order to show cause against a resident licensed individual. The first of these two cases, was reviewed in the Agency Checklists’ article “Mass. DOI’s Request For License Revocation Denied.”
In this second case, Division of Insurance v. Wade M. Callander, Docket No. E2015-07, the Division sought discipline based upon the failure of Mr. Callander to place insurance for which he had received premiums from an insured. While the Hearing Officer imposed fines for the violations and ordered restitution, she denied orders barring the respondent from working in the Massachusetts insurance industry or from owning any Massachusetts insurance businesses.
Failure to place insurance after the receipt of payment from insured.
The docket noted that Mr. Callander had been licensed by the Division since February 7, 1991.
In its filed Order To Show Cause against Mr. Callander on October 5, 2015, the Division alleged that on two occasions Mr. Callander had received premium payments from a customer for workers’ compensation insurance, but ultimately failed to place the coverage.
The Order To Show Cause sought a number of orders against Mr. Callander for these violations, including:
- To cease and desist from the conduct alleged in the Order To Show Cause;
- To dispose of any insurance-related interests in Massachusetts;
- To return any licenses in his possession to the Division;
- To prohibit Mr. Callander from conducting any insurance business in the Commonwealth;
- To make restitution to the business that had paid premiums for coverage that it had not received; and
- That he be fined for his alleged violations.
The basis for Mr. Callander’s violations in the statute were the provisions of M.G.L. c. §176D (Prohibiting unfair and deceptive practices in the business of insurance) M.G.L. c. 175, §162R(a)(4) (Converting monies received in the course of insurance business) and (a)(8) (Dishonest practices….or financial irresponsibility in the conduct of business).
The Division apparently did not request that Mr. Callander’s producer’s license be revoked since the license had expired or terminated on December 23, 2014. As pointed out however, by the Hearing Officer, the expiration of the license does not terminate the jurisdiction of the commissioner. M.G.L. c. 175, § 162R(e) (“The commissioner shall retain the authority to …impose any penalty or remedy…even if the person’s license…has been surrendered or has lapsed by operation of law”).
Mr. Callander appears and agrees with the Division on disposition of charges
At a pre-hearing conference, Mr. Callander reconfirmed what he had stated in a December 8, 2015 email to counsel for the Division. In that email, he had admitted that he had received the premium payments from the customer identified in the Order To Show Cause, South Shore Cabinet, and had agreed to reimburse the customer for the remaining premium that he had not previously returned. He also stated in the email that he would agree to pay to the Division a $3,000.00 fine.
Based on this agreement, the Hearing Officer ordered the parties to submit a consent agreement along the agreed-to terms presented at the hearing.
No agreement on terms of consent order leads to settlement falling apart
Following the hearing, Mr. Callander and the Division could not agree on the terms of the consent order. Mr. Callander objected to signing a cease and desist order and also sought terms in the proposed order that would guarantee that he could be licensed as a producer.
His refusal apparently related to a concern that the cease and desist order would prevent him from maintaining his position as an insurance claims adjuster. Additionally, Mr. Callander sought, as part of the consent order, that the Division would agree that he could obtain a producer license at some unspecified time in the future.
The Hearing Officer’s decision noted that the Cease and Desist order had no effect on his employment as an insurance adjuster. Although not stated in the Decision, this observation probably related to the fact that, as opposed to some states, Massachusetts does not license or regulate insurance adjusters. Also, the Hearing Officer noted that a Consent Order limiting what the Division could do in the future was outside the scope of the proceeding before her.
After Mr. Callander did not enter into a consent agreement, the Division again moved for a summary decision based upon the undisputed facts. Mr. Callander did not contest the Division’s motion.
Documentary evidence establishes failure to place insurance after receiving premiums
The Hearing Officer received the following documentary exhibits presented by the Division:
- Emails from Mr. Callander to the Division’s counsel admitting the conversion of the premiums and the failure to repay them in full to the insured;
- Copies of the checks dated April 8, 2013 and October 10, 2013 from the customer with a notation of payment for workers’ compensation insurance;
- The subsequent demand from the customer for the reimbursement for the premiums paid for the workers’ compensation that was not placed;
- The complaint by the customer to the Division’s Consumer Services Department; and finally,
- Callander’s partial reimbursement acknowledging the partial payment, but noting that the unpaid balance due was $765.00.
Hearing Officer fines for two violations but does not revoke licenses.
The Hearing Officer found that the evidence presented by the Division entitled it to a summary decision, however, the Hearing Officer made specific findings that reduced the relief requested by the Division.
There was no dispute that Mr. Callander had failed to transfer the premium payments he received from his customer to a workmen’s compensation insurer, thereby causing the customer to be uninsured for a statutorily mandated coverage. The Hearing Officer found that this was sufficient under M.G.L. c. 175, 172R(a)(4) for improperly withholding or misappropriating premiums. The Hearing Officer also found that these actions constituted “dishonest practices and demonstrated incompetence, untrustworthiness or financial irresponsibility in the conduct of the business of insurance in the Commonwealth” as specified in M.G.L. c. 175 §162R(a)(8).
The Hearing Officer, however, noted that the Division’s request for relief under M.G.L. c. 176D, only permitted orders requiring the licensee to cease and desist from such practices.
The Hearing Officer found that since the Order To Show Cause did not ask for the revocation of Mr. Callander’s license (or right to a license) the statutory remedies that the Division sought under M.G.L. c. 175 §§ 166B (Divestiture of insurance businesses and prohibition on employment) and 174B (Surrender of licenses) were remedies available only after the revocation of a license.
In this case the Hearing Officer found that as a matter of law – since the Division only sought a Cease and Desist order – the remedies relating to prohibiting the ownership of any insurance businesses or working in the insurance industry in Massachusetts were not available as a remedy to the Division. Accordingly, the Hearing Officer denied the Division’s request for these orders.
On a final note, the Hearing Officer did find that the violation of M.G.L. c. 175, § 162R allows for civil penalties, even if no action is taken against the license itself of the respondent, in this case Mr. Callander. The Hearing Officer found that the failure to transmit premium payments to insurers was a serious violation and that, absent any mitigating factors, she would impose the maximum fine. The Hearing Officer did note, however, that Mr. Callander returned nearly half the consumer’s premium payments in January 2014, well before the Order To Show Cause had been filed. He also had acknowledged his debt to the insured. As a result, the Hearing Officer imposed a fine of $800.00 for each of the two violations in lieu of the maximum fine of $1,000.00.
Additionally, although Mr. Callander had acknowledged to the Division that he would pay a $3,000.00 fine, the Hearing Officer found that since they were only two violations there could only be two fines imposed.
As a result, the final order also ordered Mr. Callander to reimburse his customer the $765.00 that he owes to the insured within 15 days.
Order imposing fine likely moot as Mr. Callander had passed away before entry of decision.
The decision entered in this case on April 14, 2016. However, it appears that Mr. Callander passed away on March 18, 2016 at the age of 50, leaving a wife and two children. His obituaries did not further explain his demise at such a relatively young age.
Hopefully, the Division will follow the standard practice of vacating a fine imposed after a person has already died. Naturally, the right of the insured to seek restitution against Mr. Callander’s estate would not be impaired since that is a pre-existing debt.
