ALJDEC

01A-191-INS · Department of Insurance · 2001-10-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 26, 2001. APPEARANCES: The Department of Insurance was represented by Shelby Cuevas, Assistant Attorney General. Thomas Cady failed to appear. ADMINISTRATIVE LAW JUDGE: Gregory L. Hanchett _____________________________________________________________________ In this matter, the Department of Insurance (hereinafter Department) seeks to revoke License Number 85938 belonging to Respondent Thomas Cady, alleging that Respondent has a record of dishonesty in business or financial matters, a violation of A.R.S. §20-290 (C)(2); a record of misappropriation, conversion or irregular withholding of money belonging to policyholders received in the course of business in violation of A.R.S. §20- 290 (C)(3); a record of dishonesty in business matters within the meaning of A.R.S. §20-316(A)(8); conduct which constitutes cause for which the original issuance of any license would have been refused under A.R.S. §20- 316(A)(2); conduct which constitutes a willful violation or noncompliance of any provision of Title 20 or any rule or lawful order of the Director, conduct which constitutes the existence of misrepresentation or fraud in violation of A.R.S. §20-316(A)(3); and conduct which constitutes the transaction of business under an assumed name without having filed a certificate of assumed business name with the Director. Based on the evidence adduced at the hearing, the following findings of fact, conclusions of law, and recommended decision are made. In addition, the undersigned notes that Respondent failed to appear at the hearing having been duly notified of the date, time and place of said hearing. Respondent’s failure to appear came after his motion to continue, which was denied based upon a failure to present cause for such a continuance, was denied. Respondent notified the tribunal that he would not be attending the hearing in a document wherein he objected to the denial of the continuance and asserted that the continuance should be granted. Respondent did not articulate sufficient specific cause to reconsider the earlier denial of the motion to continue in Respondent’s objection to the denial of continuance. Furthermore, Respondent, despite the passage of nearly two weeks after the original denial of the motion to continue, did not file the objection until two days before the hearing. Accordingly, the hearing proceeded in Respondent’s absence. FINDINGS OF FACT 1. Respondent has been at all times material to this appeal licensed to transact property and casualty insurance as an agent and broker pursuant to License Number 85938. 2. From and after December 1, 1999, Respondent transacted insurance business under the assumed business name of Express America Insurance Company. According to the testimony of the Department’s investigator, Mr. Bob Hill, a review of the Department’s records reveals that Respondent never filed a certificate of assumed business name for Express America Insurance Company. Mr. Hill’s testimony was substantiated by a copy of a “License File Inquiry” generated by a computer search of the Department’s data base which was admitted into evidence at the hearing. the document fails to reveal that Respondent ever filed a certificate of assumed business name for the entity “Express America Insurance Company.” 3. On October 7, 1999, Respondent filed an application with the Department to obtain a property and casualty license. 4. One of the questions asked by the license application was whether Respondent had ever had any judgment, order, or other determination. . .issued or made against you. . .in an administrative proceeding. . .of any kind in any jurisdiction based on any of the following: 1. Misappropriation, conversion, of the withholding of monies? 2. Incompetence or a source of injury and/or loss to anyone? 3. Dishonesty in business or financial matters?” Respondent responded “No” to all three questions. In addition, the application asked Respondent whether he had ever had a professional license or business license suspended, revoked, or refused or a fine imposed by any public authority. To this, Respondent also stated “No.” 5. On February 7, 2000, Respondent filed an application for a life and disability insurance agent’s license. Like the October, 1999 application, this application asked Respondent whether he had ever had “any judgment, order, or other determination. . . issued or made against you. . .in an administrative proceeding. . .of any kind in any jurisdiction based on any of the following: 1. Misappropriation, conversion, of the withholding of monies? 2. Incompetence or a source of injury and/or loss to anyone? 3. Dishonesty in business or financial matters?” Respondent again responded “No” to all three questions. In addition, the application asked Respondent whether he had ever had a professional license or business license suspended, revoked, or refused or a fine imposed by any public authority. To this, Respondent again stated “No.” 6. In fact, at the time he answered these questions, Respondent had already had a fine imposed against a license which had been issued to him by the Department of Building and Fire Safety (hereinafter “BFS”). Respondent was the president and qualifying party of Cady and Associates, dba Crossroads Mobile Homes. Respondent held a broker/dealer license issued by BFS from 1996 through June 22, 2000. In Office of Administration v. Cady and Associates dba Crossroads Mobile Homes, Case No. 99-00137, Respondent was accused of failing to provide receipts for earnest money deposits, failing to deposit earnest money in a trust account, failing to retain evidence to show that the earnest money was not used for anything other than the transaction for which it was deposited, and failing to provide all goods and services to a purchaser. On November 18, 1999, Respondent entered into a stipulation and order with BFS wherein Respondent admitted the allegations stated in Paragraph 5, above, and agreed to pay a fine of $500.00. In addition, his the license was placed on probation for a period of two years. 7. BFS issued a second citation and complaint against Respondent in Office of Administration v. Cady and Associates dba Crossroads Mobile Homes, Case No. 99-0/373, alleging that Respondent failed to retain true copies of purchase agreements, failed to write license numbers on purchase agreements, failed to provide receipts for purchase money agreements, failed to deposit earnest money into a trust account, failed to maintain a complete set of all earnest money, failed to provide all goods and services to purchasers, failed to utilize deposits for the purposes for which they were provided, failed to retain records, failed to report sales to BFS, failed to provide consumers with certain required notices, and failed to work within the scope of his license. 8. On June 22, 2000, Respondent entered into a consent agreement and order with BFS in Case 99-0/373 wherein Respondent admitted the allegations contained in Paragraph 7, above. In addition, Respondent surrendered his BFS license and agreed not to apply for a new BFS license for a period of five years. 9. On October 31, 2000, BFS adopted the recommended decision of an administrative law judge in the case of Bennett v. Cady and Associates, Inc., dba Crossroads Mobile Homes, case number 01F-R001004-BFS. In that matter, the administrative law judge found that Bennett had agreed to purchase a new mobile home from Respondent and Respondent had agreed to take Bennett’s trade-in, pay off the existing mortgage on the trade-in, deliver the new home, trim it out and complete other items on the home. Respondent failed to complete certain items on the home and the administrative law judge recommended that the BFS recovery fund pay out $5,910.00 to Bennett. In addition, Respondent’s BFS license was suspended contingent on Respondent’s repayment of the recovery fund. 10. On November 3, 2000, BFS adopted the findings of the administrative law judge issued in the case of Green v. Cady and Associates, Inc., dba Crossroads Mobile Homes, case number 01F-R001004-BFS. In that matter, Green entered into an agreement with Respondent to purchase a mobile home. Green paid Respondent the full price of the home through an initial deposit of $500 followed by a final payment of $19,525.00. The contract between the parties was subsequently rescinded. Respondent represented to Green that he had never cashed the check for $19,525.00 and that he would keep the $500.00 deposit. Respondent then went ahead and cashed the $19,525.00 check and never returned any portion to Green. The administrative law judge found that Green had been damaged by Respondent’s conduct and recommended a payout to Green from the recovery fund in the amount of $20.525. Again, as required by statute, Respondent’s BFS license was suspended pending full repayment to the recovery fund of the $20,525.00 amount that had been paid out to Green. 11. On November 3, 2000, BFS adopted the findings of the administrative law judge in Copeland v. Cady and Associates, Inc., dba Crossroads Mobile Homes, case number 01F-R001003-BFS. In that case, Copeland entered into a sales agreement to purchase a mobile home from Respondent. Copeland made a $3,500.00 down payment. Respondent failed to perform under the sales agreement and further refused to refund the down payment. The administrative law judge recommended payment from the recovery fund in the amount of $3,500.00 and Respondent’s license was again suspended pending repayment of that amount to the fund. 12. On November 7, 2000, BFS adopted the findings of the administrative law judge in McConnell v. Cady and Associates , Inc., dba Crossroads Mobile Homes, case number 01F-R001005-BFS. In that case, McConnell entered into an agreement with Respondent to purchase a mobile home. Under the contract, Respondent was to deliver the new home, trim it out and complete other items on the home. The administrative law judge found that Respondent failed to complete certain items on the home and recommended that the recovery fund pay out $27,551 to McConnell. Respondent’s license was again suspended pending repayment of that amount to the fund. 13. On November 21, 2000, BFS adopted the findings of the administrative law judge in Mericle v. Cady and Associates , Inc., dba Crossroads Mobile Homes, case number 01F-R001008-BFS. The administrative law judge found that Mericle had entered into an agreement with Respondent to purchase a mobile home from Respondent. Respondent failed to perform under the terms of the contract and the administrative law judge ordered payment out of the recovery fund in the amount of $8,210.00 to Mericle. Respondent’s license was again suspended pending repayment of that amount to the fund. CONCLUSIONS OF LAW 1. The Department has the burden of proof in this matter, and the standard of proof on all issues is by a preponderance of the evidence. Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996). A "preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not." Morris K. Udall, Arizona Law of Evidence, §5 (1960). It "is evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not." Black's Law Dictionary, 1182 (6th ed. 1990). 2. Arizona Revised Statutes § 20-290 (C) states in pertinent part that the director may refuse to accept an application for or issue any license if the director finds “that any one or more of the following apply to the applicant . . . : * * * (2). A record of dishonesty on the part of the applicant in business or financial matters. (3). A record of misappropriation, conversion or irregular withholding of monies belonging to policyholders, insurers, beneficiaries or others and received in the conduct of business. . . . 3. Arizona Revised Statute §20-316(A) provides in pertinent part: A. The director may suspend for not more than twelve months or may revoke or refuse to renew any license issued under this article if . . . the director finds that any one or more of the following applies to the licensee: (1). The existence of any cause for which original issuance or any renewal could have been refused. * * * (2). Willful violation of, or willful noncompliance with, any provision of this title or any lawful rule or order of the director. * * * (3). The existence of misrepresentation or fraud in obtaining or attempting to obtain an insurance license. * * * (8). A record of dishonesty in business or financial matters. 4. Arizona Revised Statute §20-318 provides that “[a] licensee shall not transact insurance in this state under an assumed name . . . unless such person shall file in the office of the director a certificate setting forth the name under which the insurance is or is to be transacted and the true real full name or names of the person or persons owning, conducting or transacting the same . . .” 5. The Department has shown that grounds existed for which the Director could have, at the time of the issuance of the various licenses to Respondent, denied the licenses due to a record of dishonesty and misappropriation or irregular withholding of funds, namely, earnest money amounts as shown by the findings of fact above. 6. The Department has carried its burden with respect to proving a violation of A.R.S. §20-316(A)(1), (2), (3), and(8) as shown above in Findings of Fact Paragraphs Two through Thirteen. 7. The Department has carried its burden with respect to the allegation that Respondent violated A.R.S. §20-318. Here, Respondent transacted insurance business under the name “Express America Insurance.” The evidence demonstrates that no certificate of assumed business name was ever filed with the Department for “Express America Insurance.” 8. The extensive pattern of dishonesty and misappropriation as shown through the evidence adduced by the Department at the hearing merits revocation of the license in this matter. RECOMMENDED DECISION Based on the foregoing the undersigned recommends to the Director of the Department of Insurance that Respondent’s license number 85938 should be revoked on the effective date of the Director’s final order in this matter. Done this day, October 16, 2001.

______________________________________ Gregory L. Hanchett Administrative Law Judge Original transmitted by mail this ____ day of ____________, 2001, to:

Department of Insurance Charles R. Cohen ATTN: Curvey Burton 2910 North 44th Street, Ste. 210 Phoenix, AZ 85018

By ___________________________

-----------------------

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826