ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This matter is before the Administrative Law Judge Division pursuant to S.C. Code Ann. §
38-43-130 (Supp. 1997) and S.C. Code Ann. § 1-23-600(B) (Supp. 1997) upon Respondent's request
for a contested case hearing on Petitioner's decision to revoke Respondent's resident insurance
agent's license. Petitioner South Carolina Department of Insurance ("DOI") seeks revocation of
Respondent's license for wilfully deceiving or dealing unjustly with the citizens of the State in
failing to transmit promptly or pay all or a portion of collected premiums.
After notice to the parties, a hearing before the Administrative Law Judge Division was
conducted on September 22, 1998. Upon review of the relevant and probative evidence and the
applicable law, I find and conclude that Respondent committed the violation charged. I further find
and conclude that the appropriate penalty under the surrounding circumstances is a $500 fine.
DISCUSSION
The preponderance of the evidence shows that Respondent failed to transmit all or a portion
of a customer's premium payment on ten of the eleven cases presented at the hearing. Although
Respondent questioned the accuracy of his former employer's (Liberty Life) records, a permissible
inference that the records are accurate may be drawn in the absence of evidence to the contrary. See
Gastineau v. Murphy, 323 S.C. 168, 473 S.E.2d 819 (Ct. App. 1996) (the existence of a fact cannot
rest in speculation, surmise or conjecture). Such contrary evidence existed in only one case, in which
the customer's canceled check showed that the funds were deposited into Liberty Life's bank
account.
The evidence also shows that Respondent's actions were wilful in light of his refusal to meet
with his former supervisor, R.A. Kuppens, to review the audit of his account. Respondent could
have asked for a second meeting with company officials if a meeting with Kuppens proved to be
unproductive or intolerable. Further, Respondent could have paid the alleged amount of shortage
under protest and pursued alternative means to recover the disputed amount if he could not reach an
agreement with Liberty Life.
The facts of this case do not warrant revocation of Respondent's license. During
Respondent's employment with Liberty Life, Kuppens was abusive and unresponsive to questions
that could not be answered by Respondent's direct supervisor. Further, while Respondent admitted
that he practiced poor record keeping, he believed that Kuppens was responsible for alteration of
company records to reflect several of the disputed shortages. Additionally, the presentation of three
different amounts alleged to be owed by Respondent justifiably gave him doubts about the credibility
of Liberty Life's representations to him. While these facts do not excuse Respondent's failure to
attend the proposed meeting to review the audit, they are mitigating factors which make license
revocation inappropriate and the imposition of a monetary penalty a more reasonable sanction.
FINDINGS OF FACT
By a preponderance of the evidence, I find the following facts:
1. Notice of the date, time, place and nature of the hearing was timely given to all
parties.
2. During all times relevant to this case, Respondent was licensed by DOI as a resident
insurance agent for Liberty Life Insurance Company ("Liberty Life"), which sells life insurance,
health insurance and accident insurance.(1) Respondent was an employee of Liberty Life until May
17, 1996, when he resigned from the company.
3. John Russell Fulmer ("Fulmer") was Respondent's sales manager at Liberty Life and
he directly supervised Respondent.
4. Respondent's duties in his employment with Liberty Life included the sale of debit
policies, the collection of insurance premiums from customers, and remitting the premiums to the
company.
5. Respondent collected premiums on debit policies at the homes of customers on a
monthly basis.
6. Liberty Life's standard procedure for collecting premiums involved the completion
of two receipts; one for the customer and one for the company.
7. Respondent commonly collected partial payments from policyholders with account
overages, which combined with the overage amount, would equal a full payment. In such situations,
Respondent would write a reciept paid in full for the policyholder but report the payment to Liberty
Life as a partial payment for the actual amount of cash recieved.
8. Respondent used unorthodox and sloppy recordkeeping practices, but Respondent
did not employ such practices in an attempt to apprpriate premium payments for his own personal
use.
9. Prior to Respondent's resignation from Liberty Life, a debit inspection was ordered
by Liberty Life's home office. The inspection involved checking on delinquent customer accounts
and verifying with each customer the status of their premium payments. If a customer did not agree
that he or she was behind on premium payments, it was necessary to examine the customer's receipt
or canceled check.
10. Fulmer accompanied Respondent on his debit routes to verify the status of each
customer's account, and he determined the premium payment dates from past receipts given to each
customer. In several cases, there were discrepancies between the receipt given to the customer and
the corresponding receipt supplied to the company, with the customer's receipt showing full payment
of the monthly premium but the corresponding company receipt showing only a partial payment. 11. Respondent's termination of employment occurred before the debit inspection was
completed.
12. Only eleven customer accounts could be verified by receipts or canceled checks.
13. Upon completion of the debit inspection, Fulmer determined that there was a
premium shortage of $367.69 in the accounts assigned to Respondent. Fulmer calculated the
shortage using only those accounts verified by customer receipts or canceled checks. Fulmer notified
Liberty Life's District Manager and its home office of the shortage.
14. On August 7, 1996, Liberty Life's District Manager, R.A. Kuppens ("Kuppens"), sent
a letter to Respondent requesting that he reimburse the company for a $367.69 shortage.
15. Upon receiving Kuppens' August 7, 1996 letter, Respondent requested copies of
documentation supporting the amount of the shortage.
16. Upon receiving Respondent's request for documentation, Kuppens responded by
inviting Respondent to visit his office to review all materials related to the debit inspection and audit
of his account. Respondent declined the invitation, insisting that Liberty Life mail copies of the
documentation to him.
17. Liberty Life's audit department audited Fulmer's inspection results. Upon completion
of the audit, the audit department calculated the total verifiable shortage to be $365.12. Later, DOI
informed Respondent that the amount of the shortage was $326.32.
18. One of the customer account cases presented by DOI did not have sufficient
documentation or explanatory testimony showing that Respondent failed to transmit a customer
payment. In case number 9, the insured presented a canceled check showing that the disputed
payment had been deposited into Liberty Life's bank account. Fulmer failed to explain how these
funds could have been deposited into Liberty Life's account without being reflected in its records.
Fulmer also failed to explain how Respondent could have retained these funds under his control after
they were deposited into the Liberty Life bank account.
19. In case number 10, Fulmer testified that the company receipt was voided, and
therefore, Liberty Life recorded a shortage for the full $70.13 indicated on the customer's receipt.
The supporting documentation, however, shows that Liberty Life actually received $9.70 of the
$70.13 paid by the customer.
20. The actual amount Respondent failed to transmit to Liberty Life from premiums
collected from customers is $229.73.
21. Respondent has not reimbursed Liberty Life for any amount of shortage.
CONCLUSIONS OF LAW
Based upon the foregoing Findings of Fact, I conclude, as a matter of law:
1. The Administrative Law Judge Division has subject matter jurisdiction of this case
pursuant to S.C. Code Ann. § 38-43-130 (Supp. 1997) and S.C. Code Ann. § 1-23-600(B) (Supp.
1997).
2. The standard of proof in administrative proceedings is a preponderance of the
evidence. Anonymous v. State Board of Medical Examiners, 329 S.C. 371, 496 S.E.2d 17 (1998).
3. The Director of the Department of Insurance has the authority to suspend or revoke
an agent's license if the agent has "wilfully deceived or dealt unjustly with the citizens of this State."
S.C. Code Ann. § 38-43-130 (Supp. 1997). The words "deceived or dealt unjustly with the citizens
of this State" include failing to transmit promptly or pay all or a portion of the amount of an
insurance premium when the agent has received payment from a customer or insured. S.C. Code
Ann. § 38-43-130(3) (Supp. 1997).
4. The term "wilful" is often defined as "proceeding from a conscious motion of the
will; voluntary; knowingly; deliberate. Intending the result which actually comes to pass; designed;
intentional; purposeful; not accidental or involuntary." Black's Law Dictionary 1103 (6th ed. 1990).
An act or omission is "willfully" done, if done voluntarily and intentionally and with the specific
intent to do something the law forbids. Id.
5. The burden of proof is on DOI to demonstrate that Respondent wilfully deceived or
dealt unjustly with the citizens of this State by failing to transmit promptly or pay premiums
collected from a customer. See 2 Am.Jur.2d Administrative Law § 360 (1994) (generally, the burden
of proof is on the party asserting the affirmative in an adjudicatory administrative proceeding);
Converse Power Corp. v. South Carolina Dep't of Health and Envt'l Control, 98-ALJ-07-0032-CC
(June 15, 1998).
6. The trier of fact must weigh and pass upon the credibility of evidence presented. See
S.C. Cable Television Ass'n v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586
(1992). The trial judge who observes a witness is in the best position to judge the witness's
demeanor and veracity and evaluate his testimony. See, e.g., McAlister v. Patterson, 278 S.C. 481,
299 S.E.2d 322 (1982).
7. Acting as the fact-finder, it is the prerogative of the administrative law judge "to
impose the appropriate penalty based on the facts presented." Walker v. South Carolina ABC
Comm'n, 305 S.C. 209, 211 S.E.2d 633, 634 (1991).
8. In lieu of a revocation or suspension of a license, an administrative penalty as
provided in S.C. Code Ann. § 38-2-10 may be may imposed upon an insurance agent. S.C. Code
Ann. § 38-43-130 (Supp. 1997).
9. South Carolina Code Ann. § 38-2-10 (Supp. 1997) provides that DOI shall fine a
licensed agent in an amount not to exceed two thousand five hundred dollars, or suspend or revoke
his license, or both for each violation of the insurance laws of this State. If the violation is wilful,
then DOI shall fine the agent in an amount not to exceed five thousand dollars, or revoke or suspend
his license, or both.
10. Although Respondent questioned the accuracy of Liberty Life's records, a
permissible inference that the records are accurate may be drawn in the absence of evidence to the
contrary. See Gastineau v. Murphy, 323 S.C. 168, 473 S.E.2d 819 (Ct. App. 1996) (the existence
of a fact cannot rest in speculation, surmise or conjecture).
11. Respondent's actions were wilful in light of his refusal to meet with Kuppens to
review the audit of his account.
12. Respondent's wilful failure to attend the proposed meeting to review the audit
notwithstanding, the facts of this case do not warrant revocation of Respondent's license. Given the
totality of the circumstances, repayment of the shortage to Liberty Life and imposition of a monetary
fine is the appropriate sanction.
13. The appropriate fine under the facts of this case is $500.
14. Any motions or issues raised in these proceedings, but not addressed in this Order are
deemed denied pursuant to ALJD Rule 29(C).
ORDER
IT IS THEREFORE ORDERED that Respondent reimburse Liberty Life Insurance
Company in the amount of $229.73 within thirty (30) days of the date of this Order.
IT IS FURTHER ORDERED that Respondent pay to the South Carolina Department of
Insurance a fine of Five Hundred Dollars ($500) within thirty (30) days of the date of this Order. If
Respondent fails to pay the entire fine within this time period, his resident insurance agent's license
shall be automatically revoked pursuant to S.C. Code Ann. § 38-43-130 (Supp. 1997).
AND IT IS SO ORDERED.
____________________________________
STEPHEN P. BATES
ADMINISTRATIVE LAW JUDGE
January 14, 1999
Columbia, South Carolina
1. After Respondent resigned from Liberty Life, he failed to take steps to renew his license.
The lapse of Respondent's license, however, does not prevent disciplinary action against him.
See Alpern v. License Appeal Commission of City of Chicago, 38 Ill.App.3d 565, 348 N.E.2d
271 (1976); People v. Standard Accident Insurance Company, 17 A.D.2d 1, 230 N.Y.S.2d 145
(1962); Wallman v. New York State Athletic Commission, 20 Misc.2d 398, 194 N.Y.S.2d 213
(1959); Valley Lodge v. Pennsylvania Liquor Control Board, 163 Pa.Super. 395, 62 A.2d 68
(1948); Vitali v. Smith, 105 R.I. 760, 254 A.2d 766 (1969); see also 51 Am.Jur.2d License and
Permits § 83 (1970). |
