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Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
SCDOI vs. Stephen D. Lacy

AGENCY:
South Carolina Department of Insurance

PARTIES:
Petitioners:
South Carolina Department of Insurance

Respondents:
Stephen D. Lacy
 
DOCKET NUMBER:
01-ALJ-09-0425-CC

APPEARANCES:
n/a
 

ORDERS:

ORDER OF DISMISSAL

This matter is before the Administrative Law Judge Division ("Division") pursuant to a motion raised by the undersigned judge.

In April 1997, the South Carolina Department of Insurance ("Department") issued Notice of Investigation letters regarding the Fidelity Optima Plan. The Department took depositions of several agents and began extensive investigations into the plan and the agents who sold the plan in South Carolina. On or about June 9, 1999, the Department mailed a Letter of Allegation and Notice of Opportunity to be Heard to many agents, including Respondent. On June 28, 1999, the Department received Respondent's request for a contested case hearing. Sometime in June or July 1999, the Department met with the attorneys of some of the agents involved and, according to the Department, reached an "informal agreement" to hold the Agency Transmittal Forms "to afford the parties to a related class action litigation an opportunity to attempt to resolve the issues raised in this matter." As a result, the Department did not file the Agency Transmittal Form in this matter with the Division until September 26, 2001, more than two years later. According to the Agency Transmittal Form, the Department now seeks to revoke Respondent's license for engaging in the unauthorized transaction of insurance business by selling and/or marketing life, accident, and health insurance related products with organizations unlicensed and unauthorized to transact insurance business in this state.

The undersigned judge, on his own motion, raised the issue of whether the defense of laches applied to the facts of this case. See Wallace v. Timmons, 232 S.C. 311, 101 S.E.2d 844 (1958); Cook v. Knight, 106 S.C. 310, 91 S.E. 312 (1917). A hearing on the issue of laches was held on October 22, 2001. Gwendolyn Fuller appeared on behalf of the Department. Respondent was excused from attending the hearing. During the hearing, Ms. Fuller did not specifically address any conversations she may have had with Respondent or any representative of Respondent. On October 25, 2001, the office of the undersigned judge sent a letter to Respondent allowing Respondent, on or before November 2, 2001, to "submit a sworn affidavit detailing any conversations you or your attorney may have had with representatives of the Department regarding your request for a hearing or the filing of your case with the Administrative Law Judge Division." The office of the undersigned judge, however, never received anything on behalf of Respondent in response to the letter of October 25. Lacking any evidence to support the defense of laches, the undersigned judge found that the defense did not apply to the facts of Respondent's case.

On January 24, 2002, the undersigned judge issued an Order for Pre-Hearing Statements requiring both parties to file a Pre-Hearing Statement within fifteen days of the date of that order. The office of the undersigned judge mailed the Order for Pre-Hearing Statements and a blank Pre-Hearing Statement form with accompanying Certificate of Service to Respondent. The Department timely filed its Pre-Hearing Statement on February 8, 2002, and sent a copy to Respondent. On February 12, 2002, the office of the undersigned judge sent a letter to Respondent indicating it had not received a Pre-Hearing Statement from him. The letter further indicated that Respondent would be allowed to file his Pre-Hearing Statement on or before February 22, 2002, but failure to do so would result in dismissal of the case and revocation of Respondent's license to sell insurance. On February 25, 2002, Respondent called the office of the undersigned judge and indicated he received the letter of February 12 on February 23, 2002, one day after the deadline. He also indicated that he never received the original Order for Pre-Hearing Statements and blank form. In a letter dated February 25, 2002, faxed the same day, the undersigned judge agreed to allow Respondent to file his Pre-Hearing Statement on or before March 7, 2002.

On March 7, 2002, Respondent filed his Pre-Hearing Statement and accompanying documents. In the letter, Respondent indicated he received the letter dated October 16, 2001, which allowed him to be excused from the hearing, and the letter dated February 12, 2002, which he received on February 23. Respondent, however, claims he never received any of the intermediate correspondence from the office of the undersigned judge. According to Respondent, he assumed his case had been dismissed until he received the letter of February 12.

On March 11, 2002, the undersigned judge issued a Notice of Motion Hearing requiring Respondent to appear and testify under oath that he did not receive the letter dated October 25, 2001, or the Order for Pre-Hearing Statements dated January 24, 2002, by mail. At the hearing on March 27, 2002, David Belton, Esquire appeared on behalf of the Department and Respondent appeared pro se. Respondent testified that he had been having trouble with his mail and that the Georgetown County Addressing Department recently informed him that his appropriate mailing address is 160 Shipmaster Avenue rather than #1 Shipmaster Avenue, which is the address he has used during the three years he has lived at that residence. Respondent specifically testified that he did not receive the letter of October 25, 2001, or the Order for Pre-Hearing Statements until it was faxed to him on February 25, 2002. Respondent further testified that he did not have an agreement with the Department about delaying the contested case hearing in this matter.

Laches is an equitable doctrine consisting of the elements of (1) a delay (2) that is unreasonable and (3) that causes prejudice. Terry v. Lee, 314 S.C. 420, 445 S.E.2d 435 (1994).

Clearly there was a delay in this case. According to ALJD Rule 12, the Department should have filed the Agency Transmittal Form with the Division within five working days of receiving the request for a contested case hearing. The Department, however, did not file the form until two years and three months later.

This delay was unreasonable. The Agency Transmittal Form consists of basic information including a list of the statutory provisions giving rise to the controversy, a brief explanation of the nature of the request for hearing, and names, addresses, and telephone numbers for the parties of the case. No reasonable explanation can be given for waiting more than two years to submit this information to the Division. At the hearing, the Department argued that it waited to file the Agency Transmittal Form because a related case was pending in federal court. This argument, however, has no merit. Cases are routinely filed with the Division in compliance with the ALJD Rules and later stayed by the assigned judge pending the hearing and resolution of a related case in another court. Under those circumstances, the assigned judge would have had the opportunity to address a formal motion for stay while also giving the pro se litigant the opportunity to respond to the motion. If the judge then granted the motion, the judge could ensure the pro se litigant was notified of an official delay in the processing of the case.

Furthermore, Respondent was prejudiced by the delay. Based on the evidence submitted and testimony offered, Respondent was not consulted about the Department's decision to hold the Agency Transmittal Form. Respondent testified that he has suffered a financial loss. He stopped selling insurance out of fear he would lose his insurance license and as a result the commissions on any policies sold during that time. Respondent also testified that he believes he would be at an extreme disadvantage to defend himself. Respondent testified that he lost his files during Hurricane Floyd in September 1999 and because the Department waited two years to file the case with the Division, Respondent will have a difficult time recalling names, dates, and events.

At the hearing on October 22, 2001, the Department also argued that because Respondent did not make a motion before the Division for an order directing the Department to file the Agency Transmittal Form, the defense of laches should not preclude the hearing of this case. See ALJD Rule 12 ("If the agency fails to file the requested materials with the Division within five working days, the party requesting the hearing may move before the [Division] for an order directing the agency to respond forthwith."). This argument lacks merit as well. Although ALJD Rule 12 provides an avenue of relief for instances when the Department fails to file the Agency Transmittal Form with the Division, that avenue of relief does not negate the duty of the Department to transmit the case. The Department, therefore, cannot use Respondent's inaction as a defense for failing to comply with the filing requirement of ALJD Rule 12.

Taking into consideration all circumstances surrounding this case, I conclude that the defense of laches precludes the hearing of this case. See Ramantanin v. Poulos, 240 S.C. 13, 124 S.E.2d 611 (1962).

IT IS HEREBY ORDERED that the relief requested by the South Carolina Department of Insurance is denied.

IT IS FURTHER ORDERED that this case is dismissed with prejudice in favor of Respondent.

AND IT IS SO ORDERED.



__________________________________

MARVIN F. KITTRELL

Chief Administrative Law Judge

March 28, 2002

Columbia, South Carolina


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