ALJDEC

97A-216-INS · Department of Insurance · 1998-04-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 14,1998.

APPEARANCES: Christy A. Chisolm, Esq. for the Petitioner; Assistant Attorney General Shelby L. Cuevas for the Arizona Department of Insurance

ADMINISTRATIVE LAW JUDGE: Lewis D. Kowal _____________________________________________________________________

FINDINGS OF FACT 1. On July 30, 1997, Donald Mayer (“Mr. Mayer”) filed an application for a non-resident property and casualty insurance agent’s license (the ”Application”) with the Arizona Department of Insurance (the “Department”) on behalf of Universal Business Insurance, Inc. (“Applicant”) 2. Applicant is a Utah corporation authorized to transact business in Arizona. Mr. Mayer is Applicant’s president and Jeffrey Shields (“Mr. Shields”) is Applicant’s vice-president who, as officers of Applicant, are persons authorized to exercise any agent powers conferred upon Applicant, should an insurance license be granted by the Department. 3. Applicant answered “No” to question (F)(11) of the Application, which asks “Has agency applicant or any individual designated in the license EVER been a defendant or respondent in any civil, criminal or administrative case involving allegations of fraud, misappropriation, conversion, misrepresentation, dishonesty or breach of fiduciary duty?” 4. In a September 2, 1997, supplement to the Application, Mr. Mayer disclosed that he and the Applicant had their insurance agent’s license revoked by the Department, that he and Mr. Shields had disciplinary action taken against them by the Utah Department of Insurance resulting in fines and imposition of probation, and that the Department of Insurance in the state of California denied Applicant’s insurance license application. 5. On October 24, 1989, the Utah Insurance Commissioner entered a Stipulation and Order in Utah State Insurance Department v. Donald R. Mayer, Docket No. 89-263, wherein Mr. Mayer admitted to making false and misleading communications to clients and receiving non- commission compensation. Mr. Mayer’s insurance license was placed on probation for one year and an Administrative Forfeiture of $1,000.00 was assessed against him. 6. On March 21, 1989, the Utah Insurance Commissioner entered into a Stipulation and Order in Utah State Insurance Department v. Jeffrey G. Shields, Docket No. 90-079, wherein Mr. Shields admitted to signing and delivering bonds for an unauthorized insurer and making a communication containing false and misleading information. Mr. Shield’s insurance license was placed on probation for one year and an Administrative Forfeiture of $1,000.00 was assessed against him. 7. On February 25, 1991, the California Insurance Commissioner entered a Decision denying Applicant’s application for an Organizational License. One of the reasons provided for the denial was Applicant’s knowing and wilful misstatement in Applicant’s application to the California Insurance Commissioner. 8. On March 16, 1993, following a hearing In the Matter of Universal business Insurance, Inc. and Donald R. Mayer, Docket No. 7791, the Director of the Department determined that Applicant’s and Mr. Mayer’s conduct constituted the existence of a misrepresentation or fraud in obtaining or attempting to obtain an insurance license in the State of Arizona. In the Order, the Director found that the conduct of affairs of the Applicant and Mr. Mayer under their licenses showed them to be incompetent or a source of injury and loss to or repeated complaint by the public or any insurer. Applicant’s and Mr. Mayer’s Arizona insurance licenses were revoked and a civil penalty of $2,500 was assessed against each of them. 9. On October 1, 1997, the Department issued a letter to Applicant denying the Application. 10. On October 25, 1997, Applicant timely filed with the Department a request for a hearing regarding the Department’s denial of the Application. 11. During the hearing, the Department asserted that the denial was based on Applicant’s failure to disclose the Utah disciplinary action taken against Mr. Mayer and Mr. Shields within the California application, the failure to disclose the actions taken by the Utah and California Departments of Insurance against Mr. Mayer and the Applicant in the Application, which constitute a material misrepresentation or fraud in the application for, or attempt to obtain an insurance license. Further, the Department maintained that Mr. Mayer and Mr. Shields each have a record of dishonesty in business or financial matters and that the Applicant , Mr. Mayer, and Mr. Shields each have a record of conduct under an insurance license showing each of them to be incompetent or a source of injury and loss to, or repeated complaints by the public or any insurer. The Department also maintained that Mr. Mayer and Applicant each have a record of suspension or revocation of an insurance license in any jurisdiction. 12. Mr. Mayer and Mr. Shields recognized their prior conduct as being violations of the insurance laws and expressed remorse that it occurred. 13. Although Applicant admits it did not answer Question (F)(11) correctly, it claims that was a mistake and that the information relayed to the Department in furtherance of answering question (F)(9) shows that the Department did receive the necessary information so there was no intent to deceive or conceal or withhold information from the Department. 14. The Department contended that there are situations where there could be different answers and disclosures to questions (F(9) and (F)(11) on the Application. However, under the facts and circumstances of this case, the essential information was disclosed in supplemental documents submitted to the Department on behalf of the Applicant and the evidence established that, as Applicant contends, the negative response to question (F)(11) was a mistake. Consequently, there was no credible evidence presented to establish fraud or an attempt to make a material misrepresentation to the Department in the Application by Applicant. 15. It is undisputed that the Utah insurance licenses of Applicant, Mr. Mayer and Mr. Shields are in good standing. The record also reflects that Mr. Mayer has a restrictive California insurance license. 16. Applicant admitted that it did not handle administrative matters as well as it should have and has taken appropriate measures to prevent this situation from reoccurring. Applicant has hired a person of good reputation in the insurance industry to handle administrative matters including the filing of insurance agent applications and renewals. 17. The testimony of Mr. Mayer and Mr. Shields as set forth above is determined to be credible. 18. Applicant presented witnesses concerning the integrity, business practices and good reputation in the insurance and business community of Applicant, Mr. Mayer and Mr. Shields. Those witnesses were determined to be sincere and credible and the Department did not present credible evidence to refute their testimony.

CONCLUSIONS OF LAW 1. The Director of the Department (“Director”) has jurisdiction over this matter pursuant to A.R.S. §20-1161. 2. Mr. Mayer’s and Applicant’s insurance agent license revocations, as set forth above in the Findings of Fact, constitute records of revocations of insurance licenses in any jurisdiction within the meaning of A.R.S. §20-290(B)(5). 3. Mr. Mayer and Mr. Shields each have a record of dishonesty in business and financial matters within the meaning of A.R.S. §20- 290(B)(2). 4. Applicant and Mr. Mayer have a record of conduct under insurance licenses issued in Arizona showing them to be incompetent or a source of injury and loss to, or repeated complaints by the public, or any insurer, within the meaning of A.R.S. §20-290(B)(4). 5. Pursuant to A.R.S. §§20-290(B) (1), (2) 20-290(B)(4) and 20- 290(B)(5), the Director has discretionary authority to grant or deny the Application. 6. Notwithstanding the prior revocations and license history of the Applicant, Mr. Mayer, and Mr. Shields, Applicant sustained its burden of proving that it possesses the requisite qualifications to be licensed by the Department as a life insurance agency. RECOMMENDED ORDER Under the particular facts and circumstances of this case and the evidence presented, including but not limited to the duration of time that has elapsed since the prior insurance agent license revocations, Applicant’s officers’ remorse as to having committed the violations, the establishment that the Utah insurance licenses of Applicant, Mr. Mayer, and Mr. Shields are in good standing, Applicant’s business history in the State of Utah and the establishment of good character and trustworthiness of Donald Mayer and Jeffrey Shields since the prior administrative disciplinary actions were taken against their insurance licenses, the Administrative Law Judge recommends that the application for a property and casualty insurance agent license Universal Business Insurance, Inc. submitted to the Department on July 30, 1997, be granted.

Done this day, April 28,1998.

______________________________________ Lewis D. Kowal Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 1998, to:

Mr. John A. Greene, Director Department of Insurance 2910 North 44th Street, Ste. 210 Phoenix, AZ 85018

By ___________________________ -----------------------

Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826