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STATE OF MAINE
Superintendent of Insurance Mila Kofman issues this Decision and Order in the above-captioned proceeding. I. PROCEDURAL HISTORY On May 2, 2008, Bureau of Insurance staff (the “BOI Staff Petitioner”), through its counsel, Bureau staff attorney Arthur Hosford, filed a Petition for Enforcement alleging violations of the Maine Insurance Code by Paul Allen Dyer. The BOI Staff Petitioner alleged generally that:
On the basis of these allegations, the BOI Staff Petitioner requested that the Superintendent:
On May 16, 2008, I issued a Notice of Pending Proceeding and Hearing, among other matters establishing an intervention deadline and setting a public hearing date of July 2, 2008. No applications for intervention were filed. On Mr. Dyer’s motion, which was opposed by the BOI Staff Petitioner, I continued the public hearing to July 28, 2008. See Order on Motions for Continuance, Enlargement, and Amendment, dated June 25, 2008. On June 20, 2008, I issued a Procedural Order; and on June 25, 2008 issued an Amended Procedural Order. The parties completed discovery under the terms of such orders by July 2, 2008. Discovery was conducted by the BOI Staff Petitioner pursuant to a subpoena for the production of documents. A discovery dispute between the parties was resolved by Order on Production of Documents issued by me on July 9, 2008. Pursuant to that Order, Mr. Dyer provided the required response on July 11, 2008. The public hearing was held on July 2, 2008. I presided over the hearing, assisted by Deputy Superintendent Judith Shaw and Assistant Attorney General Thomas Sturtevant. The BOI Staff Petitioner was represented by Assistant Attorney General James Bowie, assisted by Bureau staff attorney Arthur Hosford and Deputy Superintendent Eric Cioppa. Paul Dyer was represented by attorneys Peter Bickerman and Alexia Pappas. Offered and admitted into evidence were BOI Staff Petitioner Exhibits 1, 3, 4, 8, 9, 11, 15, 16, 17; Dyer Exhibits 1, 2, 3, 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19; and the electronic Bureau of Insurance licensing information available via the Agency License Management System (ALMS) Online Services for Paul A. Dyer, Legacy Insurance & Financial Advisors, Inc., and Master Mentors (I provided a hard copy of this information to the parties post hearing, and hereby designate it as Hearing Officer Exhibit 1). Testimony under oath was provided by BOI Staff Petitioner witnesses Paul A. Dyer and Benjamin Russell, and Dyer witnesses Betty Green and Pamela Hart. The hearing was conducted entirely in public session. The record was held open after the conclusion of the hearing for the filing of additional evidence by Paul A. Dyer in response to my oral information request made at hearing. On July 31, 2008, the additional evidence was filed with me, consisting of recent publications by Mr. Dyer, and hereby designated as Hearing Officer Exhibit 2. II. PURPOSE OF THE PROCEEDING As stated in the Notice of Pending Proceeding and Hearing:
See Notice at Section III, p. 2. The proceeding was conducted in accordance with the provisions of the Maine Administrative Procedure Act, 5 M.R.S.A. chapter 375, subchapter IV; 24-A M.R.S.A. §§ 229 to 236; Bureau of Insurance Rule Chapter 350; and the Amended Procedural Order. All parties had the right to present evidence, to examine or cross-examine witnesses, and to be represented by counsel and, in fact, exercised those rights. III. ALLEGED STATUTORY VIOLATIONS; RELIEF REQUESTED / STATUTORY REMEDIES Based on the allegations contained in its Petition for Enforcement, as generally described in Section I above, the BOI Staff Petitioner alleges that Paul A. Dyer violated the Maine Insurance Code, 24-A M.R.S.A. §§ 2186(2), 2205, 1420-K(1)(B), 1420-K(1)(H). See, e.g., Petition at ¶¶ 19, 21, 23, 25. Accordingly, the BOI Staff Petitioner requests me to impose statutory remedies against Mr. Dyer pursuant to authority under 24-A M.R.S.A. §§ 1420-K(1)(B), 1420-K(1)(H), and 10 M.R.S.A. §§ 8003(5)(A-1)(2-A), (3). Other statutory remedies are available to me under 24-A M.R.S.A. § 12-A. A. Alleged Statutory Violations 24-A M.R.S.A. § 2186(2). This statute establishes that “[a] person may not commit a fraudulent insurance act.” The term “fraudulent insurance act” is defined at section 2186(1) to mean any of the following acts or omissions when committed knowingly and with intent to defraud:
24-A M.R.S.A. § 2205. This statute establishes:
24-A M.R.S.A. §§ 1420-K(1)(B), 1420-K(1)(H); 10 M.R.S.A. § 8003(5)(A-1)(2-A). Under 24-A M.R.S.A. §§ 1420-K(1)(B) and 1420-K(1)(H) I may impose certain remedies if an insurance producer uses “fraudulent, coercive or dishonest practices” or demonstrates “incompetence, untrustworthiness or financial irresponsibility in the conduct of business in this State or elsewhere” or for “(v)iolating any insurance laws, or violating any rule, regulation, subpoena or order of the superintendent or of another state’s insurance commissioner.” Similarly, 10 M.R.S.A. § 8003(5)(A-1)(2-A) provides remedies to the Bureau of Insurance for “each violation of applicable laws, rules or conditions of licensure or registration.” B. Relief Requested / Statutory Remedies 24-A M.R.S.A. § 12-A(1); 10 M.R.S.A. § 8003(5)(A-1)(3). Pursuant to 24-A M.R.S.A. § 12-A(1), I am authorized, following an adjudicatory hearing, to asses a civil penalty of up to $500 for each violation in the case of an individual and a civil penalty of up to $10,000 for each violation in the case of a corporation or other entity other than an individual, unless the applicable law specifies a different civil penalty. Pursuant to 10 M.R.S.A. § 8003(5)(A-1)(3), “(i)n addition to authority otherwise conferred, unless expressly precluded by language of denial in its own governing law” the Bureau of Insurance may “(i)mpose civil penalties of up to $1,500 for each violation of applicable laws, rules and conditions of licensure or registration or for instances of actionable conduct or activity.” 24-A M.R.S.A. §§ 1420-K(1)(B), 1420-K(1)(H); 10 M.R.S.A. § 8003(5)(A-1)(2-A). Under 24-A M.R.S.A. §§ 1420-K(1)(B) and 1420-K(1)(H), I may place on probation, suspend, revoke, or refuse to issue or renew an insurance producer’s license, or may levy a civil penalty in accordance with section 12-A, or take any combination of such actions if the producer uses “fraudulent, coercive or dishonest practices” or demonstrates “incompetence, untrustworthiness or financial irresponsibility in the conduct of business in this State or elsewhere” or for “(v)iolating any insurance laws, or violating any rule, regulation, subpoena or order of the superintendent or of another state's insurance commissioner.” Similarly, 10 M.R.S.A. § 8003(5)(A-1)(2-A) provides that “(i)n addition to authority otherwise conferred, unless expressly precluded by language of denial in its own governing law” the Bureau of Insurance,“(f)or each violation of applicable laws, rules or conditions of licensure or registration may” . . . “(r)evoke a license or registration.” IV. FINDINGS OF FACT Based on the filings on record at the Bureau of Insurance in this proceeding and the testimony and exhibits presented at the hearing, and after considering the parties’ respective arguments, I find that:
V. ANALYSIS AND CONCLUSIONS OF LAW The BOI Staff Petitioner has the burden of proving the various allegations it has asserted against Paul A. Dyer. As stated above, those allegations include the illegal impersonation of Benjamin Russell; an illegal course of conduct that was dishonest, fraudulent, deceptive, and unethical; an illegal course of conduct in making misrepresentations of fact to the Maine Bureau of Insurance; violations of insurance laws. Based on those allegations, the demonstration that must be made by the BOI Staff Petitioner for proving statutory violations under the Maine Insurance Code are fraudulent insurance acts under 24-A M.R.S.A. § 2186(2); or fraudulent, coercive, or dishonest practices, or untrustworthiness in the conduct of business in this State under 24-A M.R.S.A. § 1420-K(1)(H). The BOI Staff Petitioner also cites to illegal pretext interviews under 24-A M.R.S.A. § 2205. A. Fraudulent Insurance Acts; Fraudulent Practices As noted above, the BOI Staff Petitioner alleges that Paul A. Dyer committed fraud in violation of 24-A M.R.S.A. §§ 2186(2) and 1420-K(1)(H) because he illegally impersonated Benjamin Russell in a January 2, 2007 telephone call to The Hartford, in order to induce The Hartford to provide Mr. Dyer confidential information to which Mr. Dyer was not entitled. Under Maine law fraud consists of (1) the making of a false representation, (2) of a material fact, (3) with knowledge of its falsity or in reckless disregard of whether it is true or false; (4) for the purpose of inducing another to act upon it; and (5) justifiable and detrimental reliance by the other. Me. Eye Care Assocs., P.A. v. Gorman, 2008 ME 36, ¶ 12, 942 A.2d 707, 711; Grover v. Minette-Mills, Inc., 638 A.2d 712, 716 (Me. 1994). I find that the BOI Staff Petitioner has proven elements (1) through (4) of the fraudulent practice claim [24-A M.R.S.A. § 1420-K(1)(H)] against Paul A. Dyer, but that the BOI Staff Petitioner has not met its burden of proof on element (5) necessary for a finding of fraud under Maine law. Thus, I find that in the January 2, 2007 telephone call by Mr. Dyer to The Harford, and subsequent actions by The Hartford:
Regarding element (5), I find that the reliance by The Hartford on Paul A. Dyer’s false representation was justifiable, but that the BOI Staff Petitioner has not met its burden of proving detrimental reliance by The Hartford. Thus, in order to prove fraud, the BOI Staff Petitioner must prove that The Hartford acted upon Paul A. Dyer’s false representation to their damage. Me. Eye Care Assocs., 2008 ME 36, ¶ 12, 942 A.2d 707, 711. The record shows that The Hartford relied on Paul A. Dyer’s false representation by faxing to Mr. Dyer the “Fixed Payout Quote” document for Benjamin Russell’s Hartford annuity. However, there is no evidence in the record on the element of damages, whether to The Hartford or to Benjamin Russell. The BOI Staff Petitioner has not met its burden on this essential element necessary to prove a claim for fraud. On this record, I cannot conclude that Paul A. Dyer committed fraud. By reason of the foregoing, the BOI Staff Petitioner’s allegations against Paul A. Dyer of fraudulent insurance acts under 24-A M.R.S.A. § 2186(2) and fraudulent practices under 24-A M.R.S.A. § 1420-K(1)(H) are denied as unsupported by the record. B. Coercive or Dishonest Practices; Incompetence or Untrustworthiness in the Conduct of Business As noted above, the BOI Staff Petitioner alleges that Paul A. Dyer engaged in an illegal course of conduct that was dishonest, deceptive, and unethical when he impersonated Benjamin Russell in the telephone call to The Hartford on January 2, 2007 in order to obtain the “Fixed Payout Quote” on the Russells’ Hartford annuity. Each of these allegations implicate statutory violations under 24-A M.R.S.A. § 1420-K(1)(H). Under section 1417, I may impose remedies if an insurance producer or consultant uses coercive or dishonest practices, or demonstrates incompetence or untrustworthiness in the conduct of business in this State or elsewhere. As set forth in Section IV, paragraphs 6-8 above, I found that Paul A. Dyer impersonated Benjamin Russell in the telephone call to The Hartford on January 2, 2007 in order to obtain the “Fixed Payout Quote” on the Russells’ Hartford annuity. On the basis of these factual findings I conclude that Paul A. Dyer committed both a coercive and a dishonest practice, and that Paul A. Dyer’s actions demonstrate both incompetence and untrustworthiness in the conduct of business in this State in violation of 24-A M.R.S.A. § 1420-K(1)(H). It was coercive for Paul A. Dyer to misrepresent his identity by pretending to be Benjamin Russell in order to obtain a faxed document providing a “Fixed Payout Quote” from The Hartford. These actions by Paul A. Dyer are dishonest and constitute untrustworthiness. Moreover, it constitutes incompetence for Paul A. Dyer to fail to recognize the impropriety of his misrepresentations to The Hartford prior to engaging in such conduct. By reason of the foregoing, the BOI Staff Petitioner’s allegations against Paul A. Dyer of coercive and dishonest practices, and incompetence and untrustworthiness in the conduct of business in this State under 24-A M.R.S.A. § 1420-K(1)(H) are granted. C. Pretext Interview; Misrepresentations to Bureau of Insurance In its Petition to Enforce, the BOI Staff Petitioner cites to 24-A M.R.S.A. § 2205 and the prohibition on pretext interviews. The BOI Staff Petitioner further alleges misrepresentations by Paul A. Dyer to the Bureau of Insurance. Insufficient evidence in the record exists to support a conclusion under section 2205 or of misrepresentations by Paul A. Dyer to the Bureau of Insurance. These allegations are denied as unsupported by sufficient evidence in the record. VI. SANCTIONS As stated previously, 24-A M.R.S.A. § 12-A(1) authorizes me to assess a civil penalty of up to $500 for each violation of the Insurance Code in the case of an individual. I am granted additional authority by 10 M.R.S.A. § 8003(5)(A-1)(3) to impose civil penalties of up to $1,500 for each violation of laws, rules, or conditions of licensure. In addition to civil penalties, insurance producer and consultant licensees are subject to license action if the producer or consultant engages in “fraudulent, coercive or dishonest practices” or demonstrates “incompetence, untrustworthiness or financial irresponsibility in the conduct of business in this State or elsewhere” or for “(v)iolating any insurance laws, or violating any rule, regulation, subpoena or order of the superintendent or of another state’s commissioner.” See 24-A M.R.S.A. §§ 1417(1), 1420-K(1)(B), 1420-K(1)(H). The remedies available to me for any violation listed in section 1420-K may include probation, suspension, revocation, limitation of activities, or refusal to issue or renew an insurance producer or consultant license. 24-A M.R.S.A. § 1417(1). Similarly, 10 M.R.S.A. § 8003(5)(A-1)(2-A) grants authority to me, “[i]n addition to authority otherwise conferred,” to revoke a license. In determining an appropriate penalty I consider the violation and extent of wrongdoing to assure the penalty and remedy is reasonable in relation to the violation that was committed. That consideration includes elements such as harm to others, any acceptance of responsibility by the actor, the nature of the violation, and the existence of past violations. The matter before me in this proceeding includes allegations of three categories of violations by Paul A. Dyer: fraud; coercive and dishonest practices, and incompetence and untrustworthiness in the conduct of business in Maine; and prohibitory pretext interviews. While I do not find that the record supports the allegations of fraud and prohibitory pretext interviews, I do find that it supports my conclusion that Paul A. Dyer, by his actions, engaged in conduct that was incompetent, untrustworthy, coercive, and dishonest. As a licensed insurance producer and consultant as well as the responsible person for two licensed business entities, Paul A. Dyer is held to a high standard of conduct. 24-A M.R.S.A. §§ 1417, 1420-K. I consider these statutory standards to be akin to a fiduciary duty. Through his own testimony, Mr. Dyer professed a high level of skill and expertise such that he mentors other insurance producers, often those who specialize in sales to senior citizens. Mr. Dyer readily admitted to impersonating Mr. Russell but did not believe it was wrong since he was simply attempting to gather information for Mr. Russell’s benefit. During his testimony Mr. Dyer acknowledged that his actions in this matter violated standards of professional conduct, and that his impersonation of Mr. Russell in the telephone call to The Hartford was not consistent with his fiduciary duties. Transcript, p. 88 at lines 17-25. As explained in Section V above, I found Mr. Dyer’s actions to constitute coercive and dishonest practices, and incompetence and untrustworthiness in the conduct of business in this State pursuant to 24-A M.R.S.A. § 1420-K(1)(H). A producer’s fiduciary duty goes not only to the insured but also to the insurer. Mr. Dyer, although not acting on behalf of The Hartford at the time of the impersonation, has been an appointed producer for The Hartford since 2002. The Hartford and every other company that places its trust in Mr. Dyer have the right to believe that their standards and the ethical standards for the profession will be upheld by any producer appointed to act on their behalf. By impersonating Mr. Russell, Mr. Dyer not only violated his fiduciary duty to his client but also to the company he represents. Even more troubling is the fact Mr. Dyer believed as long as he had Mr. Russell’s permission, his act of impersonation was acceptable. Even if, arguendo, Mr. Russell had agreed to the impersonation or consented to it, such impersonation nonetheless would have been, at a minimum, coercive and dishonest. Mr. Dyer should not have impersonated Mr. Russell under any circumstances, and to do so is a clear expression of incompetence. The authority given and the trust placed in licensed insurance producers and consultants enables some to easily take advantage of their clients. To protect consumers, regulators must hold licensed insurance producers and consultants to the highest of standards requiring licensees to act in a way that is entirely honest and trustworthy. This essential quality holds even greater significance when a licensee holds himself out as a mentor to others. Not only is Paul A. Dyer acting as a fiduciary but he is held in the public’s trust since it is the public that relies upon his status as a licensee of the Bureau of Insurance to assume that he will act ethically and honestly and in the best interests of his clients. It is troubling to think that other licensees who have been mentored by Mr. Dyer may share his sense that at times the ends justify the means. Paul A. Dyer is not an extremely inexperienced producer or consultant under the direction of a more senior colleague; quite the opposite. Mr. Dyer holds himself out to be an expert and uses his skills to guide those starting out in the insurance field. There should be no question in the mind of an experienced producer and consultant that impersonating a client is out of the question no matter what the circumstances. The actions of dishonesty, incompetence, untrustworthiness, and coercion perpetrated by Mr. Dyer represent a serious violation of the public’s trust and the fiduciary responsibilities Mr. Dyer owes his clients and the companies he represents. Paul A. Dyer notes that he has not been subject to enforcement by the Superintendent prior to the matter now before her. It is true that there is no indication in the record that Mr. Dyer has past violations. This may serve as a mitigating factor in determining the ultimate sanctions to be imposed. An additional possible mitigating factor asserted by Paul A. Dyer is that he did not gain financially from his actions. In other words, there was no harm done. While there is nothing in the record to support a finding of direct measurable harm to the company or to the Russells, other forms of harm exist. In this case, there is, indeed, harm by way of damage to the credibility of and faith in the integrity of the profession of insurance sales and brokerage. The damage has an affect on not only the public but also Mr. Dyer’s colleagues in the profession as their good reputations suffer from the actions of one. After weighing all of these considerations, the request by the BOI Staff Petitioner for permanent revocation of Paul A. Dyer’s resident producer license and resident consultant license coupled with imposition of a civil penalty of $1,500.00 for each violation is denied. Rather, each of Mr. Dyer’s licenses will be suspended for a period of 3 years, with an additional 2 year period of license probation subject to conditions, as set forth more fully below. Additionally, Mr. Dyer will be assessed a civil penalty in the total amount of $500.00 to be paid as set forth below. VII. ORDER For the reasons set forth in this Decision, the Superintendent ORDERS that the Petition to Enforce is GRANTED IN PART AND DENIED IN PART as filed against Paul A. Dyer. As set forth in Section V above, the allegations of coercive or dishonest practices, and incompetence or untrustworthiness in the conduct of business filed against Paul A. Dyer are GRANTED; and the allegations of fraud, prohibitory pretext interviews, and misrepresentations to the Bureau of Insurance filed against Paul A. Dyer are DENIED. Accordingly, it is further ORDERED that:
VIII. NOTICE OF APPEAL RIGHTS This Decision and Order is final agency action of the Superintendent of Insurance within the meaning of the Maine Administrative Procedure Act. Any party may appeal this Decision and Order to the Superior Court as provided by 24-A M.R.S.A. § 236, 5 M.R.S.A. § 11001, et seq. and M.R. Civ. P. 80C. Any such party must initiate an appeal within thirty days after receiving this notice. Any aggrieved non-party whose interests are substantially and directly affected by this Decision and Order may initiate an appeal within forty days of the issuance of this decision. There is no automatic stay pending appeal; application for stay may be made as provided in 5 M.R.S.A. § 11004. The effective date of this Decision and Order shall be the date of the Superintendent’s signature below.
PER ORDER OF THE SUPERINTENDENT OF INSURANCE
Last Updated: August 22, 2012 |
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