On April 2, 2018, Andrew W Crowther, Jr., who has a business address at 27 Water Street, Wakefield, entered into a consent agreement with Division of Insurance.
Michael D. Powers, Esq., Counsel to the Commissioner signed the consent agreement for the Division. On April 11, 2018, Jean F. Farrington, Esq., Presiding Officer in the adjudicatory proceeding against Mr. Crowther approved the consent agreement. The consent agreement terminated the license revocation hearings against Mr. Crowther in exchange for Mr. Crowther agreeing to:
- The revocation of his Massachusetts insurance producer license thirty days from the effective date of the consent agreement on May 2, 2018.
- The returning of any Massachusetts licenses issued by the Division to Mr. Crowther to the commissioner’s office within thirty days of the effective date of the consent
- The disposing of any interest Mr. Crowther had as proprietor, partner, stockholder, officer or employee in any licensed insurance producer within thirty days of the effective date of the consent agreement.
- Also, disposing of any direct or indirect interest Mr. Crowther had as a proprietor, partner, stockholder, officer, director, employee, consultant, or independent contractor of any business in the Commonwealth requiring an insurance license within thirty days of the consent agreement.
- Being barred from owning, managing, directing or being an employee, consultant or independent contractor, partner, director or officer, paid or unpaid, of any business in the Commonwealth requiring an insurance
- Being prohibited from soliciting, aiding in the placement, continuation, or negotiation of insurance policies or taking any action which may lead any person or entity to believe that he is authorized in the Commonwealth to engage in the business of insurance in any capacity, including without limitation:
- acting as a licensed insurance producer;
- special insurance broker;
- public adjuster;
- insurance advisor;
- viatical loan provider;
- viatical broker;
- viatical settlement broker;
- viatical settlement provider;
- reinsurance intermediary broker;
- reinsurance intermediary manager, or,
- any other licensed insurance professional.
Division of Insurance complaint filed in 2012 after 2009 lawsuit by Attorney General over Agency’s hidden fees
On December 22, 2009, the Attorney General filed a civil action in Suffolk Superior Court naming Mr. Crowther and others at the Kilgore insurance agency as defendants.
The Attorney General brought the suit under §4, of G.L. c. 93A, alleging that Mr. Crowther and the other defendants had for years, knowingly deceived their insurance customers as to the existence and amount of so-called “agency fees” they were charging, by rolling these fees into the policy premium and actively concealing them from their insureds. According to the Attorney General, Mr. Crowther and the other defendants had charged these hidden fees on top of the intended broker compensation included in the policy premium by the insurer, “thus forcing their clients to pay twice.”
While the Attorney General’s suit was pending, the Division of Insurance filed an Order to Show Cause against Mr. Crowther and the other defendants on August 16, 2012, seeking the license revocation and the imposition of fines for alleged conduct in the business of insurance in violation of M.G.L. c. 175, §§ 162R(a)(5), 162R(a)(7), 162R(a)(8), 162R(a)(10) and M.G.L. c. 176D, §§ 2 and 3.
Division proceedings stayed license hearings while Attorney General prosecuted a civil action for violations
The Division stayed its proceedings on the Order to Show Cause against Mr. Crowther because of an ongoing lawsuit brought by the Attorney General alleging civil claims based on some of the same acts and conduct alleged by the Division in its Order to Show Cause.
On April 29, 2015, a Superior court judge entered an amended final judgment in the Attorney General’s civil suit against Mr. Crowther and against three of the remaining four defendants in the amount of $2,183,637.30 plus statutory prejudgment interest at 12% per annum from December 22, 2009. See Agency Checklists’ article of May 4, 2015, “Court Orders $3.5 Million Restitution From Producer And Agency For Fees Exceeding 20% Of Premiums.”
Following the entry of judgment in the Attorney General’s civil suit, the Division lifted its stay on the Order to Show Cause and the remaining respondents including Mr. Crowther filed Answers to the Order to Show Cause in February 2016 “…denying the allegations in the Order to Show Cause”.
In June 2017, the Division executed a consent agreement with the two principals of the Kilgore agency and the Kilgore agency corporation. As part of the consent agreement and order entered into by the parties, the Kilgore Agency and its two principals agreed to pay a $20,000 fine which allowed the agency to settle the matter “…without admitting any wrongdoing or violation of insurance laws.”
This fine was the second largest fine imposed in 2017 by the Division of Insurance.
License hearing on Order to Show Cause against Mr. Crowther was scheduled for April 11, 12, and 13
Mr. Crowther was not part of the 2017 settlement with the Kilgore Agency. He had left the employ of that agency in 2010, following the filing of the Attorney General’s lawsuit.
The Division scheduled three days of hearing on the Order to Show Cause against Mr. Crowther for April 11, 12, and 13. On April 2, 2018, Mr. Crowther agreed to give up his insurance licenses and any interests in any insurance businesses by entering into the consent agreement..
However, the consent agreement did state:
- Nothing contained herein shall preclude Crowther from seeking a license in the future.
- The execution of this consent agreement and Order by Crowther is not an admission of wrongdoing, of liability, or the truth of any of the disputed factual and legal allegations and claims asserted by the Division in the Amended Order to Show Cause or by the Commonwealth in the Civil Action [against Mr. Crowther].
Attorney General and Mr. Crowther have appealed the Superior Court’s judgment to the Massachusetts Appeals Court
How receptive the present Commissioner or any future Commissioner of Insurance would be to issuing Mr. Crowther a new license based upon the findings of the Superior Court in the Attorney General’s suit is an open question.
Following the Superior Court judgment, all parties appealed the judge’s findings to the Massachusetts Appeals Court. In January of 2018, the Appeals Court heard oral arguments on the cross-appeals. The Attorney General’s appeal asks the court to rule that the Superior Court decision needs modification because of the trial court judge:
- Limiting damages to 80% of each deceptively charged agency fee, thus, allowing Defendants to realize a 20% profit from their wrongful conduct;
- Declined to extend liability to a longtime Kilgore Agency insurance broker despite her direct and extensive involvement in the unlawful conduct, saying this would be “unfair” given her status as an assistant, rather than a primary broker; and
- Declined to impose civil penalties or attorney’s fees and costs, despite finding that the Defendants had “purposely” and “deliberately” kept clients “in the dark” about agency fees that, on average, were nearly five times larger than the standard broker compensation for this type of insurance.
Mr. Crowther, in his appeal, seeks the reversal of the multimillion-dollar judgment against him arguing:
- The Appeals Court should reverse the Superior court judgment, and remand the case to that court for further proceedings because the trial judge erroneously considered claims barred by the applicable statute of limitations; and because;
- The trial court incorrectly applied the law by using consumer law rules in business-to-business transactions.
Agency Checklists will report on the Kilgore appeal decision when issued
Ordinarily, under the appellate rules, the Appeals Court seeks to issue its decisions within 120 days of oral argument. Although, it should be noted that the Court often extends this time for complex or difficult cases. If the rule holds, the Court will issue a decision by June 2018.
Agency Checklists expects this decision to have important guidance from the Appeals Court on the charging of fees by producers. As soon as we learn of the decision we will report back to our readers what the Appeals Court has to say.