In a rare rebuke to the Division of Insurance’s (“division”) enforcement efforts, on July 9, 2018, a division hearing officer, Jean Farrington, Esq., dismissed an Order to Show Cause (“complaint”), filed against a resident producer, Michael Tarantino. The division’s complaint sought the revocation of Mr. Tarantino’s producer license for failure to pay Plymouth Rock a collected insurance premium in a timely manner.
The division’s complaint sought license revocation, cease and desist orders, and fines
The division filed a complaint against Mr. Tarantino alleged he had failed to remit premium on an auto insurance policy to an insurer and had therefore violated subsections (4) and (8), of M. G. L. c. 175, §162R(a), by
(4) improperly withholding, misappropriating or converting any monies or properties received in the course of doing insurance business;
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(8) using fraudulent, coercive or dishonest practices, or demonstrating incompetence, untrustworthiness or financial irresponsibility in the conduct of business in the commonwealth or elsewhere;…”
In its complaint, the division sought the revocation of Mr. Tarantino’s license, an order that he no longer transact any insurance business in Massachusetts, that he cease and desist from the alleged conduct, and pay fines. During the course of the complaint proceedings, the division limited its requested relief to the hearing officer revoking Mr. Tarantino’s producer license.[pullquote]I find that the record, in this case, does not support the sole sanction sought by the division, revocation of Mr. Tarantino’s producer license. Jean Farrington, Esq. Hearing Officer [/pullquote]
Dishonored check ultimately made good by Mr. Tarantino sparked complaint
On November 1, 2016, Plymouth Rock reported to the division it had terminated Mr. Tarantino’s appointment as a Plymouth Rock agent based upon his failure to remit a collected premium.
On March 8, 2017, the division filed its complaint against Mr. Tarantino The division’s complaint alleged Mr. Tarantino had written a check to Plymouth Rock in September 2016, remitting premium paid on an automobile insurance policy. After his bank returned Mr. Tarantino’s check for insufficient funds, Plymouth Rock terminated his agency contract. Although Mr. Tarantino some months later paid Plymouth Rock the amount due in full the division contended the failure to remit premium immediately and then on later occasions established Mr. Tarantino “improperly withheld, misappropriated or converted any monies or properties received in the course of doing insurance business.” For that reason, the division moved the hearing officer to revoke Mr. Tarantino’s producer license under §162R.
Mr. Tarantino claims the facts alleged do not warrant revocation of his producer’s license
Mr. Tarantino, represented by counsel, filed an answer to the division’s complaint that did not dispute that the check he wrote to Plymouth Rock was returned for insufficient funds. However, his claimed, and a subsequent document submission to the hearing officer, showed he had paid Plymouth Rock’s collection agency, Credit Collection Service, in full on February 22, 2017, for the premium due.
During the course of the proceeding, Mr. Tarantino further claimed:
- the payment had been made in an account he seldom used:
- Plymouth Rock did not cash the check for over a month;
- the account was drawn down because of an oversight;
- the payment delay was a bookkeeping error;
- he had no intent to deprive Plymouth Rock of premium payments;
- the returned check did not prejudice the insured;
- Plymouth Rock issued the policy; and
- Plymouth Rock maintained the policy in effect for its full term.
Therefore, Mr. Tarantino argued that revocation is inappropriate because the transaction underlying the complaint was not in the same category as actions that have merited revocation for converting premiums. This was a single incident of delay in remitting a premium payment, He had paid the insurer in full (eventually), and the customer had insurance at all times.
Hearing officer finds against the Division of Insurance and refuses to revoke license
Based on the documentation Mr. Tarantino submitted showing he fully reimbursed Plymouth Rock on February 22, 2017, for the premium owed, the hearing officer found the record did not support the division’s claim Mr. Tarantino failed to remit premium to Plymouth Rock.
Notwithstanding the undisputed payment to Plymouth Rock, the hearing officer noted the division still argued that she should revoke Mr. Tarantino’s producer license because he had not remitted the premium in a timely fashion. The hearing officer, however, ruled the division’s claim that a delay in transmitting payment was the equivalent of withholding premium was “not persuasive.” The hearing officer noted the division had not presented the hearing officer with any law that prescribed a timetable for transactions between an insurer and its appointed agent.
As to the division’s argument, the dishonored check and the late payment demonstrated “incompetence, untrustworthiness or financial irresponsibility” under § 162R(a)(8), the hearing officer simply stated: “I am not persuaded that a single problem transaction is sufficient to support such a finding.”
In the proceeding, the division attempted to bolster its position by citing two prior cease and desist settlements involving the division and Mr. Tarantino. The hearing officer noted that in both cases the division cited as past misconduct, Mr. Tarantino did not admit to the division’s allegations but agreed to cease and desist from the alleged conduct and to pay a fine. The hearing officer refused to accept the division’s characterization that these two prior settlement agreements evidence that Mr. Tarantino had previously violated “[ G.L. c. 175, § 162R].”
While the hearing officer agreed that decisions in administrative actions based on the conversion of consumers’ premiums have consistently found that revocation is an appropriate outcome, the hearing officer distinguished Mr. Tarantino’s case from those revocation decisions stating:
- The division did not allege that Mr. Tarantino converted any consumer payments.
- The complaint is not based on any consumer complaint or concerns.
- The documents indicate that Mr. Tarantino’s customer received a policy.
- The insured’s policy was not canceled for any failure to pay a premium.
- The complaint arises from Plymouth Rock’s complaint about a single incident associated with its relationship with its appointed agent.
The hearing officer found those facts did not support the division’s argument that Mr. Tarantino violated the public trust.
A final order dismissing the division’s complaint
The hearing officer ended her decision, stating: “I find that the record, in this case, does not support the sole sanction sought by the division, revocation of Mr. Tarantino’s producer license.” Accordingly, the hearing officer entered an order stating:
The [division’s] Motion to Revoke License is denied. [Mr. Tarantino’s] request to dismiss the complaint is allowed.”