Because of the Massachusetts Administrative Procedure Act, the Division of Insurance (“DOI”) had to hold two proceedings to revoke Jay Seitz (70) of Gloucester’s 2018 resident producer license and to affirm the denial of his 2021 renewal application based on Mr. Seitz’s unsuitability to hold a Massachusetts resident producer license.
The DOI revoked Mr. Seitz’s producer license in June 2022. However, under Massachusetts law, it had to conduct a second proceeding on the appeal of Mr. Seitz from the Director of Producer Licensing (“Director) denying Mr. Seitz’s January 3, 2021 application to renew his Massachusetts insurance producer license.
Mr. Seitz’s insurance fraud conviction in New York
Mr. Seitz first obtained a Massachusetts resident producer license in 2018. Before he applied for a resident producer license in Massachusetts, Mr. Seitz had been a licensed psychologist in New York. In his practice, he associated with two professional corporations that had billed no-fault insurers almost $3 million for psychological services. These no-fault insurance claims fraudulently sought payment for Mr. Seitz’s professional services that persons not licensed as psychologists or social workers provided in his stead.
After a 2014 jury trial finding Mr. Seitz guilty of mail fraud and health care fraud, he received a 24-month sentence in federal prison and was ordered to pay the defrauded no-fault insurers $2,703,000.00 in restitution and forfeit $584,089.92 to the United States. Also, he lost his New York psychologist license.
Mr. Seitz’s convictions barred his employment in the insurance industry without a waiver by the commissioner
Under the “Violent Crime Control and Law Enforcement Act of 1994.” (18 USC § 1033), it is a federal crime for a person to be in the business of insurance if they have ever been convicted of a state or federal felony involving insurance fraud or mail fraud. See Agency Checklists’ article of September 26, 2017, “Insurers And Agents Cannot Be Good Samaritans In Hiring Under Federal Law.”
Convicted felons, subject to § 1033, can apply to the insurance commissioner for a waiver. Absent a waiver, a person convicted of both mail fraud and insurance fraud, like Mr. Seitz, cannot legally work in the insurance industry in any capacity without committing a crime.
Division revokes Mr. Seitz’s original license for misstatements and non-disclosure
After issuing a producer license to Mr. Seitz in 2018, the Division learned about his criminal convictions.
On February 6, 2020, the Division filed an administrative complaint based upon Mr. Seitz’s failure to disclose in his 2018 license application his criminal convictions or the administrative actions involving his psychologist’s license. Besides seeking the revocation of his license, the complaint also sought fines and orders against Mr. Seitz to cease any insurance business and divest himself of any ownership interest in a Massachusetts insurance entity.
On June 21, 2021, the hearing officer assigned to the DOI’s complaint against Mr. Seitz revoked his producer license, entered orders against his participation in a Massachusetts insurance business, and fined him $4,000.00. See Agency Checklists’ article of June 29, 2021, “Division Hearing Officer Revokes Resident Producer’s License For Failure To Disclose Prior Insurance Fraud Conviction.
Mr. Seitz files for an adjudicatory proceeding on the denial of his renewal application
While the DOI’s show cause proceeding to revoke his producer license was still pending, Mr. Seitz filed a renewal application on January 3, 2022.
On March 10, 2021, the Director sent Mr. Seitz a letter denying the renewal of his producer license, listing eight legal grounds that warranted the commissioner denying Mr. Seitz a license renewal. Mr. Seitz responded on March 15, 2021, with a “Notice of Claim for an Adjudicatory Proceeding” (“Notice”) requesting a hearing under the state administrative procedure act regarding the denial of his renewal application.
Massachusetts law required a separate proceeding on Mr. Seitz’s renewal application
Under the Massachusetts Administrative Procedure Act, M.G.L. c. 30A, § 13, any licensee has the right to an administrative hearing before an agency can refuse to renew a license. Indeed, if the licensee has made “a timely and sufficient application for a renewal,” the license does not expire until the agency has held a full adjudicatory hearing denying the renewal.
As a result, the DOI proceeded with the revocation of Mr. Seitz’s 2018 license based on his earlier misstatements and non-disclosure. While simultaneously, it had to move on a parallel track defending the denial of his renewal application which had inadequately disclosed his criminal history and status under Title 18 U.S.C. 1033.
Mr. Seitz’s license denial appeal seeks renewal of his producer license and a §1033 waiver
Mr. Seitz’s Notice demanded the renewal of his 2018 license and the commissioner to waive § 1033 to allow Mr. Seitz to work in the insurance industry legally.
He supported his Notice with his February 19, 2020 letter to the commissioner in response to an enforcement action filed against him by the Division on February 6, 2020, a letter dated April 1, 2020, that he sent to William P. Barr, former Attorney General of the United States, about his 2014 federal convictions; and 3) the Director’s Denial Letter advising him of the reasons for denying his 2021 renewal application.
The Division responds as ordered to Mr. Seitz’s Notice
On April 6, 2021, pursuant to a procedural order from the assigned hearing officer, the Division filed an answer consisting of:
A) Mr. Seitz’s application to renew his resident producer license, dated January 3, 2021.
B) Mr. Seitz’s initial application for an individual producer license, dated November 6, 2018.
C) the docket in United States v. Jay Seitz, case number 1:12-cr-00921-2, United States District Court, Southern District of New York, filed August 12, 2014.
D) Denials by Indiana and South Dakota, respectively, dated December 20, 2019, and June 10, 2020, of producer license applications from Mr. Seitz; and
E) Denials of producer license applications from Mr. Seitz issued by North Dakota and North Carolina in 2019.
On May 19, 2022, the Division, based on the documents submitted, filed a motion for a summary decision. The hearing officer ordered Mr. Seitz to file any response to the Division’s motion by May 27, 2022.
The waiver of § 1033 ruled beyond the scope of the license denial hearing
As a preliminary matter, the hearing officer ruled that Mr. Seitz’s request for a §1033 waiver had no place in the appeal of his license denial.
Waiver requests under §1033 follow the procedure in DOI Bulletin “1998-11 The Federal Violent Crime Control and Law Enforcement Act of 1994.” Under this protocol, the felon seeking a waiver applies to an advisory committee that reviews applications and allows applicants to meet with them to explain why they believe the commissioner should grant them written consent. By federal statute, granting a waiver is entirely discretionary with the commissioner and not a matter for an adjudicatory proceeding.
The hearing officer finds valid four of the Director’s eight reasons for refusing to renew Mr. Seitz’s producer license
The Director’s Denial Letter had eight reasons for denying Mr. Seitz’s 2021 renewal application. These reasons were:
- Mr. Seitz’s insurance fraud convictions.
- Mr. Seitz’s failure to disclose his insurance fraud convictions in his 2018 resident producer application.
- Mr. Seitz “provid[ed] incorrect, misleading, incomplete, or materially untrue information” on his 2018 license application.
- Mr. Seitz’s 2014 insurance fraud convictions established that he had engaged in “insurance unfair trade practice or fraud” and “us[ed] fraudulent, coercive, or dishonest practices, or demonstrate[ed] incompetence, untrustworthiness, or financial irresponsibility in the conduct of business, in the commonwealth or elsewhere.”
- Mr. Seitz having had four states deny his applications for insurance producer licenses.
- Mr. Seitz failed to report these license denials to the commissioner as required by M.G.L. c. 175, §162V (a).
- Mr. Seitz failed to disclose those other state license denials on his 2021 renewal application: and,
- Mr. Seitz, because of the above actions, had been found to violate the insurance laws of the Commonwealth.
The hearing officer found four of the eight denial reasons established adequate grounds for the Director’s refusal to issue a renewal license to Mr. Seitz.
The legal grounds the hearing officer found supported the Director’s denial
The first ground in the Denial Letter the hearing officer identified as a valid basis for denying Mr. Seitz’s renewal application was M.G.L. c. 175, §162R (a)(6).
On his 2021 renewal application, Mr. Seitz answered “Yes” to the question asking if he had been convicted of a felony. Section 162R(a) (6) states the conviction of a felony is sufficient ground for the commissioner to “refuse to issue or renew an insurance producer’s license.”
Based on the admission by Mr. Seitz of his felony conviction, the hearing officer found that the Director had proper grounds to deny Mr. Seitz his 2021 license renewal.
The next two grounds in the Denial Letter the hearing officer identified as a valid basis for denying Mr. Seitz’s renewal application were M.G.L. c. 175, §162R (a)(7) and (8). These subsections of §162(a) allow the commissioner to deny license renewal to anyone, (7) “having admitted or been found to have committed any insurance unfair trade practice or fraud,” and (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 support of these two grounds, the hearing officer relied upon the federal district court judgment stating that Mr. Seitz had been convicted and sentenced for: “Mail Fraud, Health Care Fraud, and Conspiracy to commit Health Care Fraud,” and Mr. Seitz’s admission he had applied for a waiver under 18 U.S.C. §1033 to the commissioner because of his conviction of a felony involving dishonesty or breach of trust.
The hearing officer found that this documented conviction and the admission Mr. Seitz made in his Notice that he needed a waiver under Title 18 U.S.C. §1033 validated the denial of his 2021 producer license renewal application
Finally, under §162R (a)(9), the commissioner may refuse to renew a producer’s license for the applicant “having an insurance producer license, or its equivalent, denied, suspended or revoked in any other state, province, district or territory.” Mr. Seitz did not contest that the documents submitted by the Division evidencing the states of North Dakota, North Carolina, Indiana, and South Dakota had denied him licenses. Accordingly, the hearing officer found the Director had a proper basis for denying Mr. Seitz’s license renewal based on the reason set out in §162R (a)(9).
Other grounds of the Denial Letter did not support non-renewal under Massachusetts law
On the remaining reasons contained in the Denial Letter, the hearing officer found that the Division had not established that the Denial Letter adequately defined grounds for refusing the renewal of Mr. Seitz’s license.
The hearing officer found either that the grounds given by the Director did not identify an applicable statutory provision that allowed a non-renewal, adequately explain the factual basis of the reason, or comply with the Standard Adjudicatory Rules of Administrative Procedure, in identifying both the specific facts relied upon as the basis for the agency’s action and the statutory or regulatory authority for the action taken by the agency.
Final conclusion of hearing officer: adequate basis existed for denying renewal
Notwithstanding that the hearing officer did not accept all the grounds listed in the Denial Letter as valid, she noted that the Denial Letter stated that although Mr. Seitz’s renewal application “was denied for more than one reason, it would have been independently denied for each listed reason.”
Accordingly, the hearing officer ruled:
“I find that undisputed facts and the statute setting out the grounds for denying an insurance producer license fully support the denial of the renewal application dated January 3, 2021, that Jay Seitz submitted to the Division of Insurance.
The Division’s motion for summary decision is hereby allowed.”