DFS Licensees Keep Getting in Trouble

According to the Department of Financial Services’ January 2, 2013 release of disciplinary actions, 7 DFS licensees were revoked while 41 others were imposed fines ranging from $500 to $63,000. All since the DFS’ previous release of disciplinary actions in September 2012. As expected, a handful of small fines ($500, $750) were for technical reporting violations, such as failing to report to the DFS within 30 days of the final disposition of another insurance department matter or failing to disclose a prior criminal conviction on a DFS application. Presumably those licensees fully cooperated with the DFS’ investigations and had no prior disciplinary actions. Other fines involved continuing to act as a licensee after a license had expired, or transacting business under an unapproved name, or unlawfully paying commissions to unlicensed employees. Only one fine was issued in connection with an advertisement and that involved specifying an insurance rate without providing the full name of the insurer referred to and the city of the insurer’s principal place of business.

More substantial fines (up to $15,000 to one respondent) were issued in connection with failing to properly file excess line broker affidavits and others ($2,000, $9,100, and $63,000 respectively) involved the solicitation, negotiation and or delivery in New York of annuity contracts issued by an unauthorized insurer. The disparity of the fines suggests they may have been calculated based upon a percentage of the premiums written and/or the number of statutory violations.

The penalty of revocation was imposed to brokers who collected insurance premium payments from insureds but failed to remit the payments to the insurers or who failed to replace an insureds’ funds after premium checks were dishonored by the bank. One agent was revoked for misappropriating money and falsifying bank records in order to conceal the misappropriation (which also resulted in misdemeanor convictions).

The most shocking conduct resulting in revocation involved the submission to the DFS on a renewal application for an agent’s license that named an individual who had previously died as “President and sublicensee.” Now this is one sure way of getting in trouble that I had not seen before!