MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2013 ME 7
Docket: BCD-12-110
Argued: November 7, 2012
Decided: January 10, 2013
Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, GORMAN, and JABAR, JJ.
BANKERS LIFE AND CASUALTY COMPANY
v.
SUPERINTENDENT OF INSURANCE
SAUFLEY, C.J.
[¶1] Bankers Life and Casualty Company appeals from a judgment entered
in the Business and Consumer Docket (Horton, J.) that affirmed a decision of the
Superintendent of Insurance ordering Bankers Life to pay restitution and a civil
penalty of $100,000 after a Bankers Life agent engaged in deceptive insurance
sales practices in multiple transactions with an elderly woman. See 24-A M.R.S.
§§ 12-A(1), 1420-K, 1445, 2155 (2012); see also 6 C.M.R. 02 031 917-1 § 6(A)
(2007). We are not persuaded by Bankers Life’s challenges to the
Superintendent’s application of the law, findings of fact, and exercise of discretion,
and we affirm the judgment affirming the Superintendent’s decision.
I. BACKGROUND
[¶2] The Superintendent of Insurance has licensing and oversight authority
over insurance companies and agents who sell insurance and annuity products to
2
the public. See generally 24-A M.R.S. §§ 209 to 211, 1401 to 1420-P, 1441 to
1450 (2012). The Superintendent alleges that Bankers Life, through its agent, sold
unsuitable annuities to an elderly client.
A. Applicable Statutes and Regulations
[¶3] Bankers Life and its agents functioned as “insurance producers” at the
relevant time because they were “required to be licensed under subchapter II-A
[24-A M.R.S. §§ 1420 to 1420-P] to sell, solicit or negotiate insurance.” 24-A
M.R.S. § 1402(5); see also 24-A M.R.S. §§ 2, 1413(1), 1420-A(12) (2012).
Producers may be subject to discipline, including civil penalties, for “[u]sing
fraudulent, coercive or dishonest practices, or demonstrating incompetence,
untrustworthiness or financial irresponsibility in the conduct of business in this
State or elsewhere.” 24-A M.R.S. § 1420-K(1)(H). An insurer such as Bankers
Life “[i]s responsible for injuries to consumers resulting from the actions of its
appointed producers to the extent of restitution, reimbursement of money or
payment of interest to the consumer” and also “[i]s accountable and may be
penalized by the superintendent, as provided for in this Title, for the actions of its
producers.” 24-A M.R.S. § 1445(1)(C), (D); see also 24-A M.R.S. § 4 (2012).
[¶4] The regulations of the Bureau of Insurance require producers and
insurers to take steps to ensure the “suitability” of recommendations made to
individuals about offered annuities “so that the insurance needs and financial
3
objectives of consumers at the time of the transaction are appropriately addressed.”
6 C.M.R. 02 031 917-1 §§ 1(A), 6(A) (2007). In particular, the regulations require
that a producer “have reasonable grounds” for the belief that an annuity is suitable
based on the financial information that the consumer discloses. Id. § 6(A). An
insurer or a producer business entity such as Bankers Life must have in place “a
system to supervise recommendations,” including the recommendations of its
insurance producers, “that is reasonably designed to achieve compliance with this
regulation.” 6 C.M.R. 02 031 917-2 § 6(D)(1), (2) (2007). This system must
include “[m]aintaining written procedures” and “[c]onducting periodic reviews of
its records that are reasonably designed to assist in detecting and preventing
violations of this regulation.” Id. § 6(D)(1)(a), (b), (2)(a), (b).
B. Factual Background
[¶5] In the fall of 2007, Matthew F. Juliano, an insurance agent for Bankers
Life, met with a seventy-five-year-old woman who had recently been treated for
cancer to discuss issues related to Medicare, health, and prescription insurance;
long-term care insurance; and IRA and CD options. As a result of that meeting
and additional meetings with Juliano and his colleague Timothy E. Farren, a unit
sales manager for Bankers Life, the woman purchased three Bankers Life annuities
4
by liquidating three certificates of deposit, selling her General Electric stock, and
rolling over an individual retirement account annuity.1
[¶6] These sales involved several irregularities. First, Juliano’s “fact
finder,” which summarized the woman’s financial situation and was required to be
submitted for his supervisor Eugene Gagnon’s suitability review, failed to quantify
many items, including the amount of the woman’s credit card debt. Although the
fact finder stated that the woman believed she needed $20,000 in funds to be
“totally liquid and accessible,” the entire CD proceeds and all but $15,000 of the
stock proceeds were invested in annuities, leaving $6,000 after taxes for her use.
Bankers Life did not require that the fact finder be updated as new products were
purchased through Bankers Life and did not require the woman’s signature on the
form before transactions could be effectuated. All of this occurred despite a
Consent Agreement entered into with the Bureau in 2005 that required Bankers
Life’s regional director and an independent monitor to conduct ongoing review of
suitability training and compliance procedures with periodic reporting.2
1
The Superintendent also found that Juliano had allowed or induced this woman to finance a
snowmobile and insure it in her name for use by Juliano, with Juliano to purchase the snowmobile from
her through a series of payments. Bankers Life was not held responsible for this conduct, and we do not
discuss it further.
2
In July 2006, the independent monitor had determined that the level of detail in the fact finders
“failed” in thirty percent of the files reviewed.
5
[¶7] Second, the suitability of the IRA annuity rollover was questionable
because the Bankers Life annuity had lower guaranteed long-term minimum
interest rates than the IRA annuity that the woman had previously held, had more
stringent limits on the funds available for withdrawal, and would not mature for ten
years—longer than the likely life expectancy for this seventy-five-year-old cancer
survivor.3
[¶8] Third, Juliano was not required to supply, as part of Gagnon’s review,
the mathematical comparisons he used to justify his recommendations. When he
spoke with the woman, Juliano improperly compared the short-term, more
favorable introductory guaranteed minimum interest rate for the Bankers Life IRA
annuity with the standard guaranteed minimum interest rate of the IRA annuity that
it was proposed to replace.
[¶9] Fourth, the timing of the General Electric stock sale at the end of the
calendar year was questionable. The sale generated $39,000 in capital gains and
increased the woman’s tax liability by two tax brackets for that year, which
affected the calculation of certain Medicare premiums. Bankers Life’s standard
sales presentation states that taxes are a consideration that agents take into account,
but none of Bankers Life’s agents followed up to ensure that the woman obtained
professional advice, and none believed that follow-up was required.
3
In fact, the woman died in November 2010.
6
[¶10] Finally, when all of the sales and purchases were complete, the
woman’s access to funds was diminished and delayed. She became distressed
because she did not have immediate access to the cash necessary to cover expenses
related to her house. Nor was she able to make the charitable donations that she
had described to Juliano or to pay off her credit card debt.
[¶11] Underlying these irregularities was the reality that Juliano did not
have a clear understanding of the office’s organizational structure. For instance,
Juliano did not know for sure whether Farren or another unit sales manager was his
direct manager. Gagnon tried to have Juliano come to the Bangor office at least
once per month, but Juliano did not come if there were snowstorms and would
instead receive a telephone briefing and get materials by mail.
[¶12] The staff of the Bureau of Insurance petitioned the Superintendent to
consider disciplinary action against Bankers Life, Juliano, Farren, and Gagnon.
The woman who had purchased the Bankers Life annuities died in November
2010, before the January 2011 hearing. The Superintendent issued her decision on
May 12, 2011. Relevant to this appeal, she found that Juliano had failed to make
reasonable efforts to obtain information necessary to evaluate the suitability of his
recommendations in violation of 6 C.M.R. 02 031 917-1 § 6(A); had been
incompetent, untrustworthy, and financially irresponsible in his annuity sales in
violation of 24-A M.R.S. § 1420-K(1)(H); and had made misleading comparisons
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between the woman’s existing investments and those offered by Bankers Life in
violation of 24-A M.R.S. § 2155.4
[¶13] The Superintendent held Bankers Life accountable for Juliano’s
actions because he was acting as its agent and Bankers Life “failed to make any
meaningful effort to prevent the improper sales or take timely corrective action.”
The Superintendent revoked Juliano’s license, imposed on him a civil penalty of
$10,000, required Bankers Life to pay a civil penalty of $100,000, and required
Bankers Life to pay restitution of $2,801.60 plus interest at the statutory pre-
judgment interest rate.
[¶14] Bankers Life and Juliano each timely petitioned for review of the
Superintendent’s final decision. See 24-A M.R.S. § 236 (2012); M.R. Civ. P. 80C.
The matters were consolidated in June 2011, and the matter was accepted for
transfer to the Business and Consumer Docket in July. The court affirmed the
decision of the Superintendent. Bankers Life has appealed.5
II. DISCUSSION
[¶15] When the Superior Court has acted in its appellate capacity in an
action brought pursuant to M.R. Civ. P. 80C, we “review a decision of the
4
Findings related to the woman’s purchase of a snowmobile for Juliano’s use are not relevant in
reviewing the Superintendent’s ruling on Bankers Life’s responsibility for penalties. We do not address
those findings in this opinion.
5
Although Juliano filed a notice of appeal, he and the other parties stipulated to the dismissal of that
appeal. See M.R. App. P. 4(a)(3).
8
Superintendent directly for an abuse of discretion, error of law, or findings not
supported by the evidence.” Anthem Health Plans of Me., Inc. v. Superintendent of
Ins., 2012 ME 21, ¶ 13, 40 A.3d 380; see Me. Health Care Ass’n Workers’ Comp.
Fund v. Superintendent of Ins., 2009 ME 5, ¶ 8, 962 A.2d 968. In reviewing the
interpretation of a statute, we will first look to the plain language and then, if the
language is ambiguous, will “accord due consideration to the Superintendent’s
interpretation and application of technical statutes and regulations and will
overturn the Superintendent’s action only if the statute or regulation plainly
compels a contrary result.” Anthem Health Plans of Me., Inc., 2012 ME 21, ¶ 13,
40 A.3d 380 (quotation marks omitted); see, e.g., Me. Ass’n of Health Plans v.
Superintendent of Ins., 2007 ME 69, ¶¶ 34-60, 923 A.2d 918.
[¶16] We review the factual findings of the Superintendent to determine
whether she “made findings not supported by substantial evidence in the record.”
Consumers for Affordable Health Care, Inc. v. Superintendent of Ins., 2002 ME
158, ¶ 22, 809 A.2d 1233. In reviewing the findings, we will “examine the entire
record to determine whether the agency could fairly and reasonably find the facts
as it did,” Rangeley Crossroads Coalition v. Land Use Regulation Comm’n, 2008
ME 115, ¶ 10, 955 A.2d 223, even if the record contains other inconsistent or
contrary evidence, see Concerned Citizens to Save Roxbury v. Bd. of Envtl. Prot.,
2011 ME 39, ¶ 24, 15 A.3d 1263. Thus, we will “affirm the findings of fact if
9
there is any competent evidence in the record to support them.” Martha A. Powers
Trust v. Bd. of Envtl. Prot., 2011 ME 40, ¶ 11, 15 A.3d 1273 (quotation marks
omitted); see also Gulick v. Bd. of Envtl. Prot., 452 A.2d 1202, 1207-08 (Me.
1982).
[¶17] As the Superior Court observed, the findings of fact regarding
Juliano’s misconduct were supported by the record, and those findings, even
without the additional findings regarding Bankers Life’s inadequate supervision,
provided support for Bankers Life’s liability based on the plain meaning of 24-A
M.R.S. § 1445(1)(C) and (D). The statute provides that an insurer “[i]s responsible
for injuries to consumers resulting from the actions of its appointed producers to
the extent of restitution, reimbursement of money or payment of interest to the
consumer” and “[i]s accountable and may be penalized by the superintendent, as
provided for in this Title, for the actions of its producers.” Id. The statute includes
no requirement that the insurer be found to have independently taken improper
actions, and Juliano’s actions bring Bankers Life under these provisions.
[¶18] Even to the extent that the Superintendent imposed liability on
Bankers Life for “failing to conduct adequate supervision and failing to follow its
own suitability review processes in an effective manner,” the findings of the
Superintendent were supported by substantial, competent evidence demonstrating
that Bankers Life lacked necessary supervisory practices that would ensure
10
adequate financial liquidity for the client, prevent misleading comparisons, ensure
the accuracy of the fact finders that were completed, require reasonable inquiry to
gather suitability information, and ensure the competence and trustworthiness of its
producers. See 24-A M.R.S. § 1445(1)(A), (B) (requiring an insurer to “ensure
adequate training for its appointed producers” and “provide supervision of its
appointed producers who sell insurance on its behalf”). Because the irregularities
particular to these sales arose when Bankers Life was already on notice that its
suitability review process had been failing, there was no error or abuse of
discretion in the Superintendent’s decisions regarding sanctions.
[¶19] In short, the Superintendent did not err in her statutory interpretation
or factual findings and did not abuse her discretion by imposing restitution and a
penalty on Bankers Life based on the evidence presented in the administrative
record.
[¶20] All other arguments raised by Bankers Life are unpersuasive, and we
do not discuss them here.
The entry is:
Judgment affirmed.
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On the briefs:
Christopher T. Roach, Esq., Catherine R. Connors, Esq., Joshua D. Dunlap,
Esq., and Benjamin W. Jenkins, Esq., Pierce Atwood LLP, Portland, for
appellant Bankers Life & Casualty Co.
William J. Schneider, Attorney General, and Andrew L. Black, Asst. Atty.
Gen., Augusta, for appellee Superintendent of Insurance
At oral argument:
Christopher T. Roach, Esq., appellant Bankers Life & Casualty Co.
Andrew L. Black, Asst. Atty. Gen., for appellee Superintendent of Insurance
Business and Consumer Docket docket number AP-11-09
FOR CLERK REFERENCE ONLY