ALJDEC decisions subject to certification as final

17A-026-INS · Department of Insurance · 2017-10-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of:

WILLIAMS, RONALD JAY

(National Producer Number 2898674)

(Legacy AZ License Number 623187)

Respondent.

No. 17A-026-INS

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: September 21, 2017, at 1:00 p.m.

APPEARANCES: The Arizona Department of Insurance (“the Department”) was represented by Liane Kido, Esq., Assistant Attorney General; Ronald Jay Williams (“Respondent”) appeared on his own behalf.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

The Department referred this matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing on Respondent’s appeal of the Department’s intent to revoke his insurance producer’s license. The Department issued a Notice of Hearing that charged cause to discipline Respondent’s license under A.R.S. §§ 20-295(A)(2), 20-295(A)(5), 20-295(A)(8), and 20-463(A)(1)(a).

The Department submitted six exhibits and presented the testimony of its investigator Wendy Greenwood. Respondent testified on his own behalf.

At all material times, Respondent was licensed as an Arizona resident insurance producer with lines of authority in life, casualty, property, and accident/health or sickness, National Producer Number 2898674, which expires on September 30, 2020.

On or about November 10, 2016, the Department received a notice of willful misrepresentation from Farmers Insurance Company (“Farmers”) based on Respondent’s submission of falsified documents to obtain discounts for clients that the clients were not entitled to receive. Investigator Marletta Wilmarth of Farmers told the Department that Respondent had falsified at least 30 teaching certificate credentials to provide unwarranted policy premium discounts totaling $6,332.25. Ms. Wilmarth explained that Farmers offered an educator affinity discount of 15% of the premium to persons who possess teaching credentials. Ms. Wilmarth stated that the full financial impact of Respondent’s fraud on Farmers was probably significantly higher because some of the policies had been misrated for years.

Ms. Wilmarth informed the Department that Respondent had “recycled” the same certificate number from the Arizona Department of Education that one insured, Rita Treat, had provided to secure the educator affinity discount for the other insureds. Farmers had audited a random sample of 35 teaching certificate credentials that Respondent had submitted to obtain the 15% discount and learned that 30 of the certificates had Ms. Treat’s certificate number with the name changed. Ms. Wilmarth stated that Farmers checked the Arizona Department of Education’s records and found that none of the 30 insureds actually possessed teaching certificates.

Ms. Wilmarth provided to the Department Respondent’s August 30, 2017 signed written response to Farmer’s investigation, in which he did not dispute that he had misrepresented the insureds’ credentials to obtain educator affinity discounts and stated in relevant part as follows:

The educator affinity discount is about 1%. At some point I created teaching certificates for insureds in order to be more competitive. I received a teaching certificate from Rita Treat and started using that certificate as a template to create other educator certificates and believe I may have falsified at least 40 teaching certificates. . . . The certificate number, [XXXX3648], and Educator ID number 2520821, appear on each of the certificates. Some of these individuals are teachers, but the teaching certificate is not for them . . . .

About a month ago, I came to my senses and destroyed the teaching certificate that I had in my office and haven’t created any [since]. I have not altered or falsified any other documents. I did not learn this practice from anyone. I didn’t have a specific system to determine who got the teaching affinity discount and who didn’t. I did it at random. I agree that it’s a misrepresentation to submit a falsified document to the company.

Ms. Wilmarth also submitted to the Department a table of the 30 insureds for whom Respondent had submitted a falsified teaching certificate to obtain an educator affinity discount to which the insureds were not entitled. The table showed the impact of the 15% educator affinity discount on the annual premium. All of the insureds had the same certificate number, except Cheryl Cunningham. Farmers also provided the results of its search for the insureds on the Arizona Department of Education’s website, which showed that most of the insureds did not have any record of having been issued a teaching certificate. Although insured Susan Loe had a certificate, it had a different number from the fraudulent teaching certificate that Respondent had submitted for her to obtain an educator affinity discount.

As part of the Department’s investigation, it issued a subpoena duces tecum to Respondent ordering him to appear on January 30, 2017, before the Department. Ms. Greenwood testified that Respondent admitted that he falsified teaching certificates to obtain unwarranted educator affinity discounts for his customers, but disputed the amount of the discount and that amount of restitution that would be owed to Farmers based on the unwarranted discounts.

The Department obtained records from the Arizona Department of Education showing the insured Cheryl Cunningham possessed a valid teaching certificate with the numbers shown on the certificate that Respondent had submitted to Farmers to establish her eligibility for the educator affinity discount. Ms. Greenwood testified that she had confirmed the certificate’s authenticity and that Ms. Cunningham was employed by the Supai School District. The Department deducted the $158.04 premium impact for Ms. Cunningham from the requested restitution from Farmer’s calculation of the financial impact of Respondent’s fraud, for a total of $6,174.21.

Respondent did not dispute that he had falsified teaching certificates to obtain unwarranted discounts for his customers. However, he testified that he believed that Farmer’s educator affinity discount was 5%. Respondent testified that he talked to someone at Farmer’s and that they confirmed the 5% discount, but that they refused to provide anything in writing.

Ms. Greenwood testified that she clarified with Farmers that its educator affinity discount was actually 15% of the premium, not 1% as Respondent stated in his response or 5% that he testified at the hearing. The Department submitted emails from Ms. Wilmarth that confirmed the 15% discount.

Respondent argued that he should be allowed to keep his insurance producer’s license because he has been licensed for more than 30 years and this is the first complaint that has ever been made against his license.

CONCLUSIONS OF LAW

The Department has jurisdiction to determine the merits of complaints against Respondent’s insurance producer’s license and, if appropriate, to revoke, suspend, or impose other discipline on Respondent’s insurance producer’s license.

The Department bears the burden of proof to establish that cause to discipline Respondent’s insurance license by a preponderance of the evidence. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Respondent bears the burden to establish affirmative defenses and factors in mitigation of the penalty by the same evidentiary standard.

A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”

The Department established that Respondent created at least 29 fraudulent education certificates to obtain educator affinity discounts for customers who were not entitled to use the certificates that Respondent created to obtain the discount. The Department has thereby established cause to discipline Respondent’s insurance producer’s license under A.R.S. §§ 20-295(A)(5), 20-295(A)(8), 20-295(A)(2), and 20-463(A)(1)(a).

With respect to the appropriate penalty, Respondent’s fraud was egregious and repeated. Respondent did not establish that he “came to his senses” or that anything other than Farmer’s discovery of his fraud caused him to discontinue his practice of fraudulently obtaining discounts for customers who were not entitled to the discounts. Under the circumstances, revocation is appropriate.

A.R.S. § 20-295(F) authorizes the Department to require a licensee to pay restitution to compensate their victims for losses caused by the licensee’s violation of applicable statutes. The Department established that the educator affinity is 15% of the premium and that Respondent’s use of fraudulent teaching certificates to obtain educator affinity discounts for at least 29 insureds caused Farmers to lose at least $6,174.21 in premium payments that otherwise would have been due.

RECOMMENDED DECISION

Based on the foregoing, on the effective date of the final order in this matter, it is ordered that Respondent Ronald Jay Williams’ license National Producer Number 2898674 (Legacy AZ License Number 623187) shall be revoked.

It is further ordered that thirty (30) days after the effective date of the final order, Respondent shall submit satisfactory written proof to the Department that he has paid Farmer’s $6,174.21 in restitution by certified or cashier’s check.

It is further ordered that if Respondent fails to submit satisfactory written proof that he has paid $6,174.21 to Farmers, the Department shall not issue any future license to Respondent unless Respondent establishes that he has paid Farmers $6,174.21 in restitution.

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 five days from the date of that certification.

Done this day, October 2, 2017.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Leslie R. Hess, Interim Director

Arizona Department of Insurance