South Carolina              
Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
SCDOI vs. Donald W. Richards

AGENCY:
South Carolina Department of Insurance

PARTIES:
Petitioners:
South Carolina Department of Insurance

Respondents:
Donald W. Richards
 
DOCKET NUMBER:
98-ALJ-09-0277-CC

APPEARANCES:
T. Douglas Concannon, for Petitioner

Donald W. Richards, pro se
 

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).


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