ALJDEC decisions subject to certification as final

10A-121-INS · Department of Insurance · 2011-05-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 21, 2011 APPEARANCES: No one appeared for Respondent; Assistant Attorney General Alyce C. Meislik appeared on behalf of the Arizona Department of Insurance ADMINISTRATIVE LAW JUDGE: Thomas Shedden _____________________________________________________________________ FINDINGS OF FACT On February 23, 2011, the Arizona Department of Insurance issued a Notice of Hearing setting this matter for hearing at 8:00 a.m. April 21, 2011. Respondent Shelli Lynn Houseknecht did not appear and the matter was convened in her absence at about 8:20 a.m. The Department presented the testimony of Teresa Clementz, who works for American Family Insurance, and Arnold Sniegowski, an investigator with the Department. Ms. Houseknecht holds license No. 78285 (the “license”) issued by the Department. The license is due to expire on August 31, 2012. Ms. Houseknecht’s residential address of record with the Department is 1511 West Kent Drive in Chandler, Arizona. Ms. Houseknecht was a contracted sales agent for American Family from November 23, 1999 until she resigned on March 5, 2010. American Family’s agents are authorized to take payments from customers and deposit these payments into the agent’s bank account. The agent then notifies American Family of the deposit and four days later, American Family initiates an electronic transfer moving the money from the agent’s account to American Family’s account. On March 8, 2010, Ms. Clementz learned that Ms. Houseknecht’s account did not have sufficient funds to cover payments due to American Family. At that time, Ms. Houseknecht agreed that American Family could deduct $3,229.13 from her last paycheck, which covered the amount of the shortfall. Later in March 2010, Ms. Clementz learned that Ms. Houseknecht had reported transactions to American Family in which she took checks or cash from customers, but for which there were insufficient funds in her account to cover those transactions. American Family was not able to recover these payments from Ms. Houseknecht. Subsequently, 7 customers reported that they had received past-due or cancellation notices, even though they had provided Ms. Houseknecht with premium payments by check. In all 7 cases, the customers provided American Family copies of the checks showing that Ms. Houseknecht had deposited these checks into her account. American Family was not able to recover these payments from Ms. Houseknecht. American Family made good on all 36 transactions, such that the customers did not suffer any adverse consequences, but American Family has not recovered from Ms. Houseknecht a total of $8,279.21. In a letter dated March 23, 2010, Ms. Clementz informed the Department that Ms. Houseknecht had misappropriated premium funds. The Department assigned Mr. Sniegowski to investigate the matter. Mr. Sniegowski discussed the matter with Ms. Houseknecht, but she was vague in her responses to his questions. Because Ms. Houseknecht was not responsive to Mr. Sniegowski’s inquiries he had a Departmental subpoena prepared. Mr. Sniegowski went to Ms. Houseknecht’s residence on Kent Drive, but no one answered the door and to Mr. Sniegowski it appeared as though Ms. Houseknecht was moving. Mr. Sniegowski mailed the subpoena to Ms. Houseknecht by certified mail, but that subpoena was returned as undeliverable on June 30, 2010. Mr. Sniegowski tried to serve a second subpoena at the Kent Drive address, but the house appeared to be vacant and there was a lock box on the door. On July 20, 2010, Mr. Sniegowski had a telephone conversation with Ms. Houseknecht in which she informed him that she had received a Consent Order that was mailed to her Kent Drive address. The Department requests that Ms. Houseknecht’s license be revoked because Ms. Houseknecht failed to meet her duties as a fiduciary and because she failed to cooperate with the Department’s investigation. The Department also requests that Ms. Houseknecht be ordered to pay restitution to American Family in the amount of $8,279.221 CONCLUSIONS OF LAW The Department bears the burden of persuasion. See A.R.S. § 41-1092.07(G). The burden of proof at an administrative hearing falls to the party asserting a claim, right or entitlement. The standard of proof is that of the preponderance of the evidence. See A.A.C. R2-19-119. A preponderance of the evidence is “[e]vidence 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). The preponderance of the evidence shows that Ms. Houseknecht improperly withheld money received in the course of doing insurance business, in violation of A.R.S. § 20-295(A)(4). The preponderance of the evidence shows that Ms. Houseknecht used dishonest business practices and demonstrated untrustworthiness or financial irresponsibility in the conduct of business, in violation of A.R.S. § 20- 295(A)(8). The Department alleged that Ms. Houseknecht violated A.R.S. § 20-295(A)(2) because she did not respond to a subpoena issued by the Department. But, because the evidence does not show that the subpoena was properly served on Ms. Houseknecht, the Department has not met its burden of proof with respect to this allegation. Based on the proven violations of A.R.S. § 20-295(A)(4) & (A)(8), the Department has the authority to revoke Ms. Houseknecht’s license, and the authority to order Ms. Houseknecht to provide restitution to American Family. See A.R.S. § 20-295(B) and (F). Ms. Houseknecht’s failure to appear at the hearing is considered a factor in aggravation that demonstrates that she is not amenable to the Department’s oversight and regulation. Considering the nature of Ms. Houseknecht’s violations, the Department’s decision to revoke her license should be affirmed. Considering the nature of Ms. Houseknecht’s violations, she should be required to pay $8,279.21 in restitution to American Family. RECOMMENDED ORDER IT IS ORDERED that Shelli Lynn Houseknecht’s license No. 78285 is revoked; IT IS FURTHER ORDERED that within 20 days of the final Order in this matter, Shelli Lynn Houseknecht must pay $8,279.21 in restitution to American Family Insurance. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 10 days from the date of that certification.

Done this day, May 9, 2011.

/s/ Thomas Shedden Thomas Shedden Administrative Law Judge

Transmitted electronically to:

Christina Urias, Director Department of Insurance -----------------------

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