On December 27, 2018, Division of Insurance hearing officer, Kristina A. Gasson, entered orders and fines on Orders to Show Cause filed by the Division of Insurance against Wafeek A. Shalabi of Orland Park, Illinois and Chandra Barr, of Charlotte, North Carolina. The decisions were published on January 2, 2019, on the Division’s website after the three-day appeal period under G.L. c. 26, § 7, for the Respondents to appeal to the commissioner of insurance had expired.
In both these cases, the hearing officer also entered orders on each Order to Show Cause:
- Revoking any licenses, including their nonresident producer licenses issued to the Respondents:
- 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 proprietor, partner, stockholder, officer or employee of any licensed insurance producer.
The hearing officer also fined Mr. Shalabi $1,500,00 and Ms. Barr $500.00 with orders to pay the fines owed to the Division within 30 days of the entries of the orders.
Both Respondents defaulted on the Order to Show Cause filed by the Division against them. The allegations in the Division’s Order to Show Cause that the hearing officer accepted regarding each of the Respondents were the following:
Wafeek A Shalabi and his agency lose licenses in Illinois for “incompetence, untrustworthiness, and financial irresponsibility”
Massachusetts licensed first Mr. Shalabi as a nonresident insurance producer on December 29, 2009.
Mr. Shalabi had been licensed by the state of Illinois to sell casualty, fire, health and life insurance since 1985. He was the President and owner of Midwest Insurance Group of Illinois, Inc. (“Midwest Insurance”), an Illinois corporation licensed as a business entity insurance producer.
After proceedings before the Illinois Division of Insurance, the Division’s acting director entered an order revoking the licenses of both Mr. Shalabi and his company, Midwest Insurance. In the revocation proceedings, the Division had proved to the satisfaction of the acting director that Mr. Shalabi and Midwest Insurance had violated Illinois insurance law by committing acts demonstrating “incompetence, untrustworthiness, and financial irresponsibility in the conduct of business in the state of Illinois” including:
- Shalabi and Midwest Insurance had an agency contract to represent American Equity Investment Life Insurance Company’s (“American Equity”) in the sale of its products. American Equity terminated the agreement and the agreements of all Mr. Shalabi ’s sub producers for cause after an investigation and audit.
- Shalabi and Midwest Insurance’s producers solicited and submitted American Equity annuities that did not bear the name and signature of the insurance producer who solicited and wrote the application.
- A producer employed by Shalabi and Midwest Insurance neither presented to an applicant nor to the replacing insurer a “Notice Regarding Replacement of Insurance of Annuity” as required by law, but instead, incorrectly marked the annuity applications as not replacing any existing insurance or annuities. Also, the producer improperly designated the annuities “unqualified” when, in fact, they were “qualified.” Because of these misrepresentations and the failure to liquidate the existing products, the consumers dealing with the producer incurred financial losses.
- On at least six occasions, Shalabi’s sub producers wrote American Equity annuities without a valid contract to represent the insurer. Mr. Shalabi and Midwest Insurance producers then signed and submitted the applications as though they were the producers.
- Shalabi and Midwest Insurance had failed to repay over $31 thousand to American Equity for return commissions on canceled annuities.
- As the designated licensed producer for Midwest Insurance, Shalabi had a duty to ensure his agents were licensed. Shalabi accepted annuity applications from an individual who had her insurance producer’s license revoked in Illinois and failed to inquire into the licensing status of the subagents working with Midwest Insurance.
- Also, Mr. Shalabi failed to communicate and cooperate with the Illinois Department of Insurance during the investigation of his insurance business practices.
Based on the evidence supporting these conclusions, Mr. Shalabi and Midwest Insurance were found to have violated Illinois insurance laws and demonstrated “incompetence, untrustworthiness, and financial irresponsibility” in the conduct of their insurance businesses in Illinois.
Besides revoking their licenses, the acting director imposed a civil penalty of $5,000.00 and hearing costs of $2,254.00, against Mr. Shalabi and his agency, Midwest Insurance.
Massachusetts moves for revocation
On February 1, 2017, the Division of Insurance (“Division”) filed an Order to Show Cause against Mr. Shalabi who was, at that time, still licensed Massachusetts nonresident individual insurance producer. July 14, 2014.
The Division’s Order to Show Cause alleged Mr. Shalabi, by failing to timely report the revocation of his license by the Illinois Division of Insurance violated M.G.L. c. 175, §162V(a) and that this violation supported revocation of Mr. Shalabi’s Massachusetts producer license under the provisions of M.G.L. c. 175, §162R (a)(2) and (a)(9).
After Mr. Shalabi failed to appear, the hearing officer granted a summary decision on Mr. Shalabi’s default.
Based on the evidence from the Illinois proceeding presented to the hearing officer by the Division, she found that Mr. Shalabi engaged in a pattern of fraudulent and financially irresponsible conduct in the business of insurance and imposed the maximum penalty of $1,000 for the first ground upon which Shalabi’s license was revoked, M.G.L. 175, §162R (a)(8). Also, the hearing officer imposed the maximum penalty of $500 for Mr. Shalabi’s failure to report his Illinois license revocation to the Division.
Chandra Barr—Submitting false policies to earn a bonus
Massachusetts licensed Ms. Barr as a nonresident insurance producer on September 20, 2014. She did not renew her license, and the Division canceled her license for nonrenewal on August 6, 2017.
Ms. Barr worked for Allstate Insurance in North Carolina selling personal lines policies using resident and nonresident producer licenses.
Allstate employees, like Ms. Barr, could earn production bonuses for writing policies over their quota. Ms. Barr received bonuses after she had placed some renter policies. However, problems developed with the policies she had placed. The insureds Ms. Barr had placed with Allstate to get her bonuses did not know that Allstate had insured them.
Allstate’s investigators interviewed Ms. Barr about her activities in placing the questionable policies and recorded the interview. In the interview, Ms. Barr admitted that she had bound at least three policies by falsifying the applications without the persons named on the applications giving their consent or having any knowledge about the applications.
Based on her dishonest conduct, Allstate terminated her employment for cause and notified the commissioners of insurance in every state where she was licensed.
Notices to states of termination of relationship for cause
Massachusetts, along with most states, has adopted as its insurance producer licensing law, the National Association of Insurance Commissioners Producer Licensing Model Act.
Under that act, when an insurance company “terminates the appointment, employment, contract or other insurance business relationship with a producer” for cause, it may be required to notify the commissioner of insurance. Not every termination for cause requires an insurer to notify commissioners of insurance. However, if the termination involves the producer “using…dishonest practices…or demonstrating…untrustworthiness” notice is required.
In Ms. Barr’s case, based upon Allstate’s notices of her termination for signing peoples’ names to applications without their permission or knowledge several states took administrative action against her nonresident producer licenses.
Kansas revocation followed by other states and then Massachusetts
Kansas was the first state to act on Allstate’s notice. After receipt of the notice with the details of Allstate’s reasons for terminating her employment and agent’s license, the Kansas commissioner of insurance requested Ms. Barr to present, if she wished, any defense.
When Ms. Barr failed to respond, Kansas revoked her nonresident producer license on February 15, 2017, effective March 1, 2017.
Following Kansas’ revocation, the states of Arkansas, Indiana, Maine, Vermont, and Washington, revoked or nonrenewed her nonresident producer licenses. Finally, in March of 2018, the state of North Carolina revoked her resident producer license.
Massachusetts proceeds to revoke and impose fine
On May 1, 2017, the Massachusetts Division of Insurance (“Division”) filed an Order to Show Cause against Ms. Barr who, at the time of filing, was a licensed Massachusetts nonresident insurance producer.
The Division’s Order to Show Cause only alleged that Ms. Barr had failed to report the revocation of her insurance producer license in Kansas and, as a result, violated M.G.L. c. 175, §162V (a). The Division’s Order to Show Cause did not address the administrative actions against Ms. Barr in Arkansas, Indiana, Maine, Vermont, Washington or in her home state of North Carolina.
The Division did allege that Ms. Barr was subject to discipline for her submission of false applications to Allstate in North Carolina. The hearing officer, however, denied that claim stating there was “no evidence in the record to show that these actions affected Massachusetts consumers.”
Based on Ms. Barr’s failure to contest the Division’s Order to Show Cause, the hearing officer defaulted her and granted the Division’s request for a summary decision. The hearing officer granted the orders requested by the Division listed above and imposed a $500 fine. The fine was based solely on her failure to report the revocation of her Kansas nonresident producer license as required by M.G.L. c. 175, §162V(a). The fine was the maximum allowed for Ms. Barr’s failure to report an administrative action involving her producer licenses.
Six license revocation decisions issued in a week by one hearing officer
These two decisions were the last of the six license revocation decisions issued by this hearing officer between December 21, and December 27, 2018. For the circumstances of the four other revocations, please see Agency Checklists’ article of January 8, 2018, “Mass. Division of Insurance Hearing Officer Revokes Producer’s License and Fines Him $3,000,” and the January 15, 2018 article, “Mass. DOI Hearing Officer Revokes Three Producers’ Licenses and Imposes $5,500 in Fines.”