The DOI assessed fines totaling $29,015 in the First Quarter of 2016
On a quarterly basis, 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 second quarter of 2016, which includes special investigations and enforcement hearings during the months of April, May and June. During this period, the Division was involved in a total of 11 different Administrative Actions resulting in fines total $29,015.
In comparison, during the First Quarter of 2016, a total of $15,900 were levied, a little more than half of the fines imposed in the second quarter. This also represents an increase in fines as compared to the second quarter of 2015, in which the Division levied a total of $8,600 in fines.
The DOI Special Investigations Unit was involved with 11 investigations during the Second Quarter of 2016
The largest fine imposed this quarter was an $8000 fine against a Non-Resident Producer
As in the First Quarter of 2016, the largest single fine assessed in the Second Quarter was for $8000 against Non-Resident Producer. This case involving one De’Borah S. Dunbar, of Henderson, Nevada resulted in the Division of Insurance issuing an order revoking and ordering the return of any and all producer licenses. It also ordered Ms. Dunbar 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.
Ms. Dunbar’s violations were in conjunction with her short-lived career as an insurance sales agent with Amica. As an employee of Amica Insurance’s National Sales Center, she was required to obtain nonresident licenses in multiples states.
According to Division of Insurance records from South Dakota, Ms. Dunbar was terminated shortly after joining Amica’s customer service department for “misconduct.”
A Compliance Agent for the Division of Insurance in South Dakota followed up with Amica and received information that:
[Ms.] Dunbar’s appointment to Amica was involuntarily terminated for misconduct. Dunbar was not honest with the manager during the investigation regarding her misconduct and the company also found that she was entering false and/or inaccurate information during the application process with respect to at least one California consumer.
A full review of Ms. Dunbar’s case in Massachusetts is contained in Agency Checklists May 24, 2016 article entitled, “Mass. DOI Fines Producer $8000 For Failing To Report Administrative Proceedings.”
The second largest fine for this quarter was for $6,500
In another action this quarter involving a Non-Resident Producer, the Division of Insurance levied a $6,500 fine for that producer’s actions in another state. In 2014, John Paul Gutschlag of Frisco, Texas pleaded guilty to fraudulently overcharging the Virginia Polytechnic Institute (“Virginia Tech”) a $1 million for health insurance premiums. Virginia Tech alleged that the fraud involved substantially more money on the order of $20 million. This case seemed to echo another later case also involving an insurance agent defrauding a university. See Agency Checklists’ June 9, 2015 article, “Former Owner of Academic Risk Agency, Bonney Hebert, Pleads Guilty To Defrauding Insurer of $10 Million in Premiums.”
On May 27, Stephen M. Summers, a Division of Insurance hearing officer entered an order under General Laws Chapter 175, § 166B against Mr. Gutschlag revoking and ordering 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. The Division also fined Mr. Gutschlag $6,500 pursuant to General Laws Chapter 176D § 7, and G.L. c. 175, § 194, on April 27, 2016. Agency Checklists also reported on this case in its June 7, 2016 article entitled, “License Lost After Racketeering Conviction For University Premium Fraud.”
The Division was involved in a total of 11 special investigations and enforcement hearing in this quarter
The following is a summary of the 11 Administrative Actions the Division of Insurance took against both Resident and Non-Resident Producers in the second quarter of 2016. Of those eleven actions only three involved Resident Producers, while the remaining eight cases involved Non-Resident Producers. The following is a review of the types of allegations made in each of the cases. Since each case may include more than one allegation, the total number of allegations made surpasses 11. This list is just to make both Resident and Non-Resident Producers aware of the types of allegations that are included in a DOI Administrative Enforcement Action.
A look at the individual cases…
The following a list of the Administrative Actions taken this quarter:
- The first case allegations against a Producer for Untrustworthiness and Failure to Report an Administrative Action. The disposition of the case involved a Settlement Agreement; Permanent License Revocation and a Cease and Desist Order.
- The second case involved allegations again a Resident Producer for Untrustworthiness. The disposition of this case resulted in a Hearing Officer Decision along with a $1,600 fine; $765 dollars in Restitution and a Cease & Desist from Violations.
- The third case involved an action involving a Non-Resident Producer. The primary allegation involved Failure to Report an Administrative Action. The final disposition of the case involved a Settlement Agreement, a $500 fines and a Cease & Desist from Violations.
- The fourth case involved the Division’s decision involving De’Borah Dunbar. As outlined in our article on this decision, the primary allegations involved Failure to Report Administrative Action, Violation of Insurance Laws and Untrustworthiness resulting in a Hearing Office Decision, a Revocation, a Cease & Desist from Violations and an $8000 fine.
- The fifth Administrative Action this quarter involved allegations against a Non-Resident Producer for Placing or Renewing Policies while Unlicensed. This final disposition of this action resulted in a Settlement Agreement along with a $3,000 fine and a Cease and Desist from Violations.
- The sixth case this quarter was against a Non-Resident Insurance Producer for allegations of Incorrect Application Information; Misrepresentation; Unfair Insurance Practices; Failure to Report Administrative Actions, Violating Insurance Laws; and Other States Revocation Hearing Officer Decision. The case’s disposition included a $5,500 Fine, Cease & Desist from Violation along with a Revocation.
- The seventh administrative action this quarter involved a Non-Resident Producer Agency for Placing or Renewing Policies While Unlicensed. This case resulted in a Settlement Agreement and a $2,250 fine along with a Cease and Desist from Violations.
- The eighth case focused on the allegations against John Gutschlag as outlined in Agency Checklists’ article June 7, 2016 article entitled, “License Lost After Racketeering Conviction For University Premium Fraud.” This case resulted with a $6,500 Fine, the second highest this quarter, along with a Cease and Desist and a Revocation in response to allegations involving Failure to Report Administrative Actions; Conversion; Misrepresentation of Insurance Contract; Felony Conviction; Unfair Insurance Practice; Untrustworthiness; and Other States Revocation Hearing Officer Decision.
- The ninth case of this quarter involves a Non-Resident Insurance Producer and allegations of a Failure to Report Administrative Actions. The disposition of this action resulted in a Hearing Officer Decision and a $500 Fine.
- The tenth case of this quarter involved a Non-Resident Producer Insurer for Payment of Commissioner to Unlicensed Individual. The case was disposed of via a Settlement Agreement and a $250 Fine.
- The last case this quarter was against a Resident Producer Insurer for Unlicensed Activity. The case was disposed of with a Settlement Agreement along with a $150 Fine.
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.”