It is eight months since the Division of Insurance has rendered a producer license decision. See Agency Checklists’ article of September 22, 2020, “A $600 Per Day Drug Habit Gets Producer License Revocations and A Conviction For Embezzlement.” That decision related to an Order to Show Cause filed by the Division on October 30, 2019.
Last week, the Division issued a decision to revoke the nonresident producer license of one Kimberly Spears (“Ms. Spears”). However, indicative of the disruption the COVID-19 virus has caused to the insurance division’s regulatory process, the Spears decision arose out an Order to Show Cause first filed on April 19, 2019.
In Ms. Spears’ case, Hearing Officer Jean F. Farrington found that she had failed to report administrative proceedings against her in four other states to the Division of Insurance as required by General Laws Chapter 175, § 162V(a). Based on that violation, the hearing officer fined Ms. Spears $1,100, revoked her producer license, and barred her from conducting any insurance business in Massachusetts.
A series of license revocations and fines in different states from undisclosed misdemeanor convictions
The standard insurance producer application has a question that asks: “Have you ever been convicted of a crime, had a judgment withheld or deferred, or are you currently charged with committing a crime?”
Applicants with prior criminal records sometimes fail to disclose their convictions for fear of having their license applications in one or more states rejected. However, Ms. Spears disclosed her criminal record and received licenses in four states. It was what she did when two states acted unfavorably on her applications that caused Massachusetts to revoke her license and fine her.
Ms. Spears’ criminal record for issuing bad checks ended in 2001
Ms. Spears’ criminal record was from her home state of Kentucky for issuing what that state calls “cold checks.” “Cold checks,” “rubber checks,” or “bounced checks” are similar terms for the crime of knowingly obtaining goods or services by paying with a check drawn on an account the maker knows has insufficient funds to cover the check. Usually, there is no crime committed if the maker makes good on the bounced check within a specified period after a payment demand. (Forty-eight hours in Massachusetts).
In the period between 1997 and 2001, Ms. Spears had five convictions for bounced checks.
- September 5, 1997—Misdemeanor Theft By Deception – Including Cold Checks Under $300.
- September 16, 1997— Misdemeanor Theft By Deception – Including Cold Checks Under $300
- November 13, 2000—Misdemeanor Theft By Deception – Including Cold Checks Under $300
- September 14, 2001—Misdemeanor Theft By Deception – Including Cold Checks Under $300; and
- October 16, 2001.—Felony Theft By Deception – Including Cold Checks Under $300
Initial disclosure of criminal record leads to some, but not all states, issuing a license
Ms. Spears did not become employed in insurance until 2016, fifteen years after her last conviction.
As part of her employment at an insurance call center, she made a license application to her home state, Kentucky, for a resident producer license and applications to Indiana, Massachusetts, Louisiana, Oregon, and Washington for nonresident producer licenses. All her applications disclosed her criminal record in response to the standard application’s criminal history question.
Her home state, Kentucky, Massachusetts, Louisiana, and Washington, issued her licenses after reviewing her disclosures. However, Indiana and Oregon did not issue her licenses based on her criminal record.
Most states have in force statutes or rules like the Massachusetts statutes that require:
“a producer [to report] …to the commissioner any administrative action taken against the producer in another jurisdiction or by another governmental agency in the commonwealth within 30 days of the final disposition of the matter.” G.L. c. 175, §162V(a).”
When a producer fails to notify their resident license state and all the other states where they hold nonresident producer license about an adverse administrative action in a different state, they risk that this failure will violate a reporting statute and cause actions against their licenses.
Ms. Spears did not report the Indiana or Oregon rejections to the states where she had obtained licenses as required. Instead, she reapplied to Indiana and Oregon. Her second application to these two states did not disclose that she had a criminal record or her previous unsuccessful applications.
These second fraudulent applications to Indiana and Oregon ultimately led to her losing her validly issued licenses in Kentucky, Louisiana, Massachusetts, and Washington.
Indiana administrative actions
In 2016, Ms. Spears applied to Indiana for a nonresident producer license disclosing her criminal record. When Indiana rejected her first application based on her criminal record, she reapplied. Her second application did not disclose her conviction or the denial of her first application. Indiana rejected her second application because of her prior criminal record and her failure to disclose her application’s prior rejection.
Oregon administrative actions
Also, in 2016, Ms. Spears applied to Oregon for a nonresident producer license. She disclosed on the application her five convictions. The Oregon Insurance Department contacted her for more information concerning her convictions. When she failed to respond, the Department closed her application file and returned her application fee in November 2016.
Six months later, she reapplied to Oregon for a nonresident producer license disclosing neither her prior application nor criminal convictions. Oregon issued her a license.
On April 16, 2018, after learning of Indiana’s action and that it had issued Ms. Spears her license based on false information, Oregon revoked Ms. Spear’s nonresident producer license.
Washington revokes license based on Oregon action
On July 25, 2018, the Insurance Commissioner of the State of Washington revoked Ms. Spears’s license because she failed to respond to an inquiry from the Commissioner about the Oregon license revocation or timely report the Oregon action to the State of Washington.
Louisiana suspends license when fine unpaid
On July 31, 2018, the Louisiana Department of Insurance suspended Ms. Spears’s Louisiana license for failure to pay a fine imposed on her on April 2, 2018, because she had not disclosed her criminal history on a producer application dated June 19, 2017, and had not reported the Oregon and Indiana administrative actions.
Loss of resident producer license in Kentucky
On June 5, 2018, the Kentucky Department of Insurance revoked Ms. Spears’s insurance license for her failure to report to the Department the Oregon revocation, Indiana’s denial of two license applications, and engaging in dishonest practices violations of Kentucky law.
Massachusetts acts against Ms. Spears’ license
On April 10, 2019, the Division of Insurance filed an Order to Show Cause against Ms. Spears seeking revocation of any Massachusetts producer licenses because she failed to report the administrative actions taken by Indiana, Kentucky, Louisiana, Oregon, and Washington, and orders requiring Ms. Spears to cease any insurance business activities in Massachusetts, divest herself of any interests in Massachusetts insurance businesses and for fines.
Ms. Spears did not appear. The hearing officer found that she had received sufficient notice. She entered a default and summary judgment against her revoking her non-resident producer license and entering the requested prohibitions against Ms. Spears having anything to do with Massachusetts insurance.
The Division charged that Ms. Spears violated M.G.L. c. 175, §162V (a) by failing to report the administrative actions taken by Indiana, Oregon, Kentucky, Washington, and Louisiana within 30 days after the final disposition of those matters.
The hearing officer found the evidence supported the conclusion that Ms. Spears did not report to the Division, the Indiana, Oregon, Kentucky, and Washington administrative actions and thereby violated M.G.L. c. 175, §162V(a).
Based on that finding, the hearing officer ordered the Division to revoke Ms. Spears’s nonresident Massachusetts producer license and imposed fines for her failure to report the Indiana, Oregon, Kentucky, and Washington administrative actions to the Division. The hearing officer found that Ms. Spears did not have a duty to report Louisiana’s suspension because it was not a “final” action.
Fines for failure to report administrative actions
When Ms. Spears’s home state, Kentucky, revoked her license, she became ineligible by law to hold a Massachusetts nonresident producer license. The hearing officer treated the failure to report this revocation more seriously. The other revocations by Indiana, Oregon, and Washington that Ms. Spears did not report did not automatically make her ineligible to hold a Massachusetts nonresident producer license. The hearing officer found these violations less serious.
The hearing officer tiered the fines accordingly: $500 for Ms. Spears’s failure to report the Kentucky administrative action and $200 each for her failure to report the actions taken by Indiana, Oregon, and Washington.
Final orders by hearing officer
The hearing officer’s final orders were:
ORDERED: That any and all insurance producer licenses issued to Kimberly Spears by the Division are hereby revoked; and it is
FURTHER ORDERED: that Kimberly Spears shall return to the Division any licenses in her possession, custody, or control; and it is
FURTHER ORDERED: that Kimberly Spears shall cease and desist from the conduct that gave rise to this Order to Show Cause; and it is
FURTHER ORDERED: that Kimberly Spears, from the date of this order, is prohibited from directly or indirectly transacting any insurance business or acquiring, in any capacity whatsoever, any insurance business in the Commonwealth of Massachusetts; and it is
FURTHER ORDERED: that Kimberly Spears shall comply with the provisions of G. L. c. 175, §166B and dispose of any and all interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer; and it is
FURTHER ORDERED: that Kimberly Spears shall pay a fine of One Thousand One Hundred Dollars ($1,100) to the Division within 30 days of the entry of this order.