On July 6, 2018 and July 10, 2018, Division of Insurance (“Division”) hearing officers, Jean Farrington and Kristina A. Gasson, entered orders revoking the nonresident producer licenses against Paul E. Smyth of Stamford, Connecticut and Dawn Marie Crowder of Tampa, Florida (“Respondents”).
The two revocation decisions were published on the division’s website on July 11, 2017, after the three-day appeal period under G.L. c. 26, § 7, for the Respondents to appeal to the commissioner of insurance expired.
On each of the Respondents’ complaints by the division of insurance, the hearing officers, besides revoking any nonresident producer licenses issued to the Respondents also entered orders:
- Ordering the return to the division any license in their possession, custody or control;
- Prohibiting the Respondents from directly or indirectly transacting any insurance business or acquiring, in any capacity whatsoever, any insurance business in Massachusetts; and
- Ordering the Respondents to comply with the provisions of M.G.L. c. 175, §166B and dispose of any interests in Massachusetts as a proprietor, partner, stockholder, officer or employee of any licensed insurance producer.
The hearing officers also fined each of the Respondents. Mr. Smyth was fined $500, and Ms. Crowder was fined $2,000. Both fines were ordered paid to the division within 30 days.
Both the Respondents defaulted on the complaints filed by the division against them. The underlying facts relating to the complaints the division filed against the Respondents arose out of the following:
Paul E. Smyth—False application for $2 million universal life policy
Mr. Smyth was licensed as a Massachusetts nonresident insurance producer on February 11, 2015. The division’ s complaint alleged Mr. Smyth failed to report the revocation of his resident producer license, on May 19, 2017, by the Connecticut Insurance Department.
The Connecticut license revocation occurred after the Connecticut Department received a complaint from a 77-year old woman who had purchased from Mr. Smyth several years before a $50,000 Mass Mutual Life Insurance Company policy. The woman had received a notice a policy from a life insurance company she had never heard of and from whom she had never bought a policy. She contacted the insurer and disputed everything about the policy.
An investigation found the policy had been issued on June 2, 2015, by the Life Insurance Company of the Southwest on the life of a 77–year old woman upon an application submitted by Mr. Smyth.
The policy was an index universal life product with a $2 million face value and a $10,000 monthly premium payment. The application, of which the putative applicant had no knowledge, contained materially false information that represented the applicant was a novelist with an annual income of $415,000; and a net worth of $2.6 million.
The first monthly premium payment of $10,000 was paid via electronic funds transfer from a Peoples United Bank savings account controlled by Mr. Smyth. The beneficiary on the policy was a former employer of the woman with whom she had not spoken in some years.
Mr. Smyth defaulted on the complaint against him in Connecticut. Besides losing his insurance license, on September 27, 2016, FINRA barred Mr. Smyth from a broker or otherwise associating with a broker-dealer firm after a complaint that he had received $27,565.00 in cash to pay the premiums on a client’s whole life policies and that the money was missing.
After Mr. Smyth failed to answer the division’ s complaint, the hearing officer entered a default. In imposing a fine for Mr. Smyth’ s failure to report the Connecticut administrative action as required by Massachusetts law, the hearing officer declined to impose a fine under M.G.L c. 176D, § 7, for unfair insurance practices: A fine which could reach $1 thousand per violation “for each and every act…” However, the hearing officer did impose a fine under the general penalties provided in M.G.L. c. 175, §194, where the maximum fine allowed under that section is $500 per violation.
The hearing officer found the failure to report the Connecticut revocation constituted one violation of G.L. c. 175, § 162R, and imposed a $500 fine.
Dawn Marie Crowder—Failure to report pending criminal charges and other states’ administrative actions
Massachusetts first licensed Ms. Crowder on February 15, 2015, as a nonresident producer. Her insurance employer was New York Life. The division’s March 21, 2017 complaint against alleged she had failed to report criminal charges filed against her in Florida and administrative actions against her by the states of Washington, Indiana, and Georgia.
Ms. Crowder’s problems began on the evening of July 19, 2015, at a restaurant in St. Petersburg, Florida. The deputy sheriff called to the scene wrote on the complaints he swore out against Ms. Crowder:
While at the restaurant the defendant got upset with management and began yelling and causing a scene in the restaurant. This caused security to escort the defendant out of the restaurant where she continued to yell and disturb the peace of other customers. Upon my arrival, I observed the defendant in the parking lot yelling obscenities at the manager and security staff while other customers were walking by her in the parking lot.
The deputy arrested Ms. Crowder for disturbing the peace, and when he searched her handbag, he found cocaine and methamphetamine. At the time of her arrest, Ms. Crowder was 55. The charges filed against her were two counts of felony possession of controlled substances: cocaine and methamphetamine; and, disorderly conduct.
In February 2016, the court where her charges were pending allowed Ms. Crowder to enter into an eighteen-month pretrial intervention program. On January 24, 2017, the state’s attorney satisfied with Ms. Crowder’s involvement with the diversion program moved the court to dismiss all charges against her.
Unfortunately, Ms. Crowder was not as successful in keeping her insurance licenses.
On December 15, 2015, the Washington state insurance commissioner received correspondence from New York Life saying the company was terminating Ms. Crowder’s producer appointments because she violated company policy by failing to disclose the criminal charges filed against her in Florida. Since Ms. Crowder had not notified the Washington insurance commissioner of the charges, that state revoked her nonresident producer license. The states of Indiana and Georgia soon followed in suspending or revoking her nonresident producer licenses.
When Ms. Crowder did not file an answer to the division’ s complaint, the hearing officer entered a default. On Ms. Crowder failure to report the criminal charges and the administrative actions of the states of Washington, Indiana, and Georgia in a timely manner as required by Massachusetts law, the hearing officer imposed, as provided in M.G.L. c. 175, §194, the maximum fine allowed under that section of $500 per violation.
The hearing officer found the failure to report the criminal charges and the administrative actions in Washington, Indiana, and Georgia constituted four violations of G.L. c. 175, § 162R. Consequently, the hearing officer imposed a $2,000 fine.
