DOI Fines Producer $1,250 For Prior Failures To Report After License Lapses

After an eight-month hiatus, the Division of Insurance issued a decision on February 24, 2022, revoking the license of a nonresident producer for failing to report administrative actions in other states. The unusual feature of the Division’s decision is the length of time between the original complaint and the decision. Although the respondent, Alan C. Redmond (“Mr. Redmond”) of Warren, Ohio, defaulted on the Division’s Order to Show Cause on November 14, 2019, the Division’s decision did not issue for more than two years and three months.

The story behind Mr. Redmond’s failure to report administrative actions against him was the underlying business Mr. Redmond started that followed a six-year trajectory from initial success to ultimate failure.

The Division’s Order to Show Cause

On September 13, 2019, the Division filed an Order to Show Cause against Mr. Redmond seeking revocation of his Massachusetts nonresident producer license, alleging he was subject to discipline under the provisions of M.G.L. c.175, §162R (a)(9) (“failing to report within thirty days administrative proceedings in other states”). The Division’s show-cause order alleged that Mr. Redmond failed to report to the Division administrative actions concerning his insurance licenses issued to him by Nebraska, Oregon, Minnesota, South Dakota, Virginia, and Arkansas.

After Mr. Redmond did not respond to the show-cause order, the Division moved, on November 1, 2019, for the entry of a default and the allowance of a motion for a summary decision revoking Mr. Redmond’s nonresident producer license and entering the Division’s requested Orders. The hearing officer scheduled a hearing on the summary decision motion for November 14, 2019.

After Mr. Redmond did not appear at the hearing or otherwise communicate with the Division about the hearing, the hearing officer found him in default and proceeded to eventually issue a decision on the undisputed evidence concerning the unreported administrative actions against Mr. Redmond concerning administrative actions against him in Nebraska, Oregon, Minnesota, South Dakota, Virginia, and Arkansas,

What the hearing officer’s decision did not present was the background on Mr. Redmond’s nationwide insurance agency, United Brokers of America (“United Brokers”), which did not hold any Massachusetts licenses and over which Massachusetts had no jurisdiction.

United Brokers of America: Mr. Redmond founded National Brokers of America in 2013, based on his vision for “bridging the gap…left by the healthcare reform bill that was passed in 2010 leav[ing] many Americans still in the dark about what is happening in the health care industry.” Mr. Redmond’s vision encompassed selling by telemarketing short-term health insurance, major medical health insurance, supplemental health insurance, and guaranteed issue health insurance to uninsured individuals.

By March of 2014, National Brokers had 132 employees working out of a 44,000 sq. ft. office in Reading, Pennsylvania selling health insurance around the country.

For the calendar year 2017, National Brokers had gross commission revenue of $6,948,580. However, starting in 2017, compliance issues began to affect National Broker’s business, and by the end of the calendar year 2018, its gross revenue had collapsed to $64,800. When it filed for bankruptcy for the second time, on September 30, 2019, its court filing showed the company had assets of $23,078.87 against $14,946,349.50 in liabilities. The largest unsecured claim of $8,967,000 belonged to personal loans made by Mr. Redmond to National Brokers.

To further compound its troubles, in August 2020, the United States Secretary of Labor filed a lawsuit against National Brokers and Mr. Redmond, personally, for violations of the Fair Labor Standards Act. The Secretary’s complaint alleged that after repeated warnings and agreements to comply, National Brokers continued to require its employees to work up to 50 hours per week without paying them time-and-a-half after forty hours. The lawsuit sought statutory damages for 318 National Brokers former employees the Labor Department claimed had been denied overtime pay.

Compliance problems with National Brokers and Mr. Redmond’s nonresident licenses

Mr. Redmond’s compliance problems with National Brokers began in Louisiana. On June 6, 2016, the designated person responsible for National Brokers’ operations in Louisiana had his license revoked. The Louisiana Department of Insurance granted National Brokers thirty days to comply with providing another licensed person to take responsibility for National Brokers’ operations in Louisiana. When National Brokers did not comply, the Commissioner revoked National Brokers of America’s license to operate, effective January 6, 2017. The Louisiana Department did not sanction Mr. Redmond as President of National Brokers, and no reporting by National Brokers to Massachusetts was required since it never held a Massachusetts nonresident producer license.

Nebraska: National Brokers notified the Nebraska Department of Insurance of the Louisiana revocation on April 19, 2017, but not within the 30 days allowed under Nebraska law for reporting an administrative action in another state. As a result, National Brokers and its President, Mr. Redmond, as the responsible party for National Brokers, entered into a consent decree on July 5, 2017, by which they jointly paid the Nebraska department a $500 fine. The fine was a reportable event for Mr. Redmond.

Minnesota: On January 26, 2017, the Minnesota insurance regulator filed a more serious claim against National Brokers and Mr. Redmond. The Minnesota Department of Commerce, which regulates insurance, alleged that National Brokers had violated Minnesota law by misrepresenting insurance policies to insureds writing insurance policies under the name of a Minnesota licensed producer who had previously left the company and falsely claiming to insureds that they were part of MNSure, the Affordable Care insurance marketplace for Minnesota.

When National Brokers did not respond to requests for information, the Minnesota Department issued an administrative order advising National Brokers that its nonresident insurance producer license and nonresident insurance agency licenses were revoked and imposed a $50,000 civil penalty. The Minnesota order became final on July 13, 2017.

Oregon: National Brokers was permitted to sell Health Plans’ insurance products under the terms of Master Commission Advance Agreement and Managing General Agent Agreement with Health Plan Intermediaries Holdings, L.L.C. to market its health plans in states where National Brokers was licensed. Health Plans terminated this agreement on July 1, 2016, and notified the Oregon Insurance Department on August 18, 2016, that National Brokers and Mr. Redmond had sold solicited and negotiated insurance business in Oregon on 1,014 different occasions between January 1, 2014, and May 31, 2016, under the agreement while they did not hold any Oregon nonresident producer licenses.

Mr. Redmond and National Brokers did obtain Oregon nonresident insurance producer licenses after the fact: In June and July 2016, respectively. However, in April 2017, the Oregon Department of Insurance requested information on the policies sold by National Brokers while unlicensed. When the Oregon Department received no response to its request, the Department scheduled a hearing which neither National Brokers nor Mr. Redmond attended.

On June 29, 2017, the Department ordered National Brokers and Mr. Redmond to cease-and-desist their violations of the Oregon insurance code, revoked National Brokers and Mr. Redmond’s nonresident producer licenses, and assessed a civil penalty of $101,400 against National Brokers, calculated at the rate of $100 for each of the 1014 policies illegally sold in Oregon.

South Dakota: On October 2, 2017, Mr. Redmond submitted a renewal application to the South Dakota Insurance Department. His application did not disclose, as required, that he had been named in administrative actions in Nebraska and Oregon. Instead, he answered “No” to the question, denying his involvement in any administrative actions. Based on this misstatement and Mr. Redmond’s refusal to reply to the Department’s request for information, his renewal application was denied on October 2, 2017. The denial letter informed Mr. Redmond that the denial was a reportable event requiring notice to any jurisdictions where he held insurance licenses.

Virginia: On March 9, 2018. The Virginia State Corporation Commission, the regulator of insurance in Virginia, issued a final order revoking Mr. Redmond’s license for failing to report administrative actions taken against him in another jurisdiction within 30 days.

Arkansas: On July 16, 2019. The Arkansas Insurance Commission issued an emergency order suspending Mr. Redmond’s Arkansas nonresident producer license based on findings that Virginia, Minnesota, and Oregon had revoked his producer licenses, that he had failed to disclose National Brokers’ February 2019 bankruptcy filing, which he signed as president and had failed in his 2016 application for an Arkansas nonresident producer license to disclose an unspecified criminal history.

The hearing officer’s rulings on the Division’s allegations against Mr. Redmond

After reviewing the above facts concerning the Division’s evidence about the actions taken by the six states against Mr. Redmond, the hearing officer treated each one in considering Mr. Redmond’s failure to report each to Massachusetts.

In the first instance, The Division sought to revoke Mr. Redmond’s Massachusetts license pursuant to M.G.L. c. 175 §162R (a)(9) based on revocations of his producer licenses by Oregon, Minnesota, and Virginia, denial by South Dakota of his application to renew his producer license, and suspension by Arkansas of his nonresident producer license. Section 162R,(a)(9) allows the Commissioner to revoke a Massachusetts license based on that licensee “having an insurance producer license, or its equivalent, denied, suspended or revoked in any other state, province, district or territory.”

On this violation, the hearing officer ruled that the orders issued by Oregon, South Dakota, and Virginia satisfied the statutory criteria. She found, however, that the Minnesota and the Arkansas orders did not establish a violation. The Minnesota order, while referencing Mr. Redmond, only applied to National Brokers, an entity over which Massachusetts had no jurisdiction. The Arkansas order did not apply because it entered after Mr. Redmond’s license had expired. Although the hearing officer did not address the Nebraska order directly, presumably, she did not mention it because that consent order involved only a fine and no license denials, suspensions, or revocations.

The Division also sought rulings that under M.G.L. c. 175 §162V (a), Mr. Redmond had been obligated to report administrative actions by Oregon, Nebraska, Minnesota, South Dakota, Virginia, and Arkansas within thirty days of any final order to the Division, but had failed to do so.

Again, the hearing officer ruled that neither the Minnesota nor the Arkansas order could satisfy the statute because the first did not apply to Mr. Redmond and the second occurred after Mr. Redmond’s Massachusetts license had expired. However, the hearing officer did find that all the four remaining state orders applied. Accordingly, she found that Mr. Redmond had failed to report the final administrative orders entered against him by Nebraska, Oregon, South Dakota, and Virginia.

The hearing officer declines to impose maximum fines

The Division sought for the hearing officer to impose, consistent with its standard requests in these types of revocation cases, civil penalties of $1,000 per each failure to report. The Division’s argument rested on the terms of M.G.L. c. 175, § 162R(a)(2) that prohibits “violating any insurance laws.” That statute, § 162R, also lists other violations but generally provides that the Commissioner of Insurance may allow fines for any of the violations equal to those allowed under M.G.L. c. 176D, §7 (which allows for fines of up to $1,000 for “unfair and deceptive acts committed in the business of insurance”).

The hearing officer denied, as she had done before, the Division’s request. She reasoned that decisions in license revocation proceedings distinguish between affirmative acts of a licensee in Massachusetts, resulting in license revocation, and acts by third parties, e.g., out-of-state insurance commissioners, to revoke or suspend a Massachusetts licensee’s nonresident producer license in that state.

While the hearing officer declined to impose fines under M.G.L. c. 176D, she did impose four fines for the failure to report violations M.G.L. c. 175, § 162V. Since this statute has no specific penalty, it falls under the general penalty statute M.G.L. c. 175, § 194 which allows up to a $500 fine per violation.

The hearing officer elected to impose a $1250 fine based on $500 for the failure to report the Oregon administrative action and $250 each for the failure to report the Nebraska, South Dakota, and Virginia actions.

Mr. Redmond loses his resident producer license in his home state of Ohio

Although not mentioned in the Division’s decision, on December 3, 2018, the Ohio Division of Insurance scheduled a hearing to revoke Mr. Redmond’s resident insurance license. The allegations against him involved the revocation of his insurance licenses by Oregon on June 29, 2017, Minnesota on July 13, 2017, and Virginia on March 9, 2018.

In this case, Mr. Redmond did retain counsel and opposed the revocation of his resident license.

On January 8, 2020, the Ohio superintendent of insurance accepted a hearing officer’s written report and recommendation to revoke Mr. Redmond’s resident license based upon the Oregon, Minnesota, and Virginia revocations.

Mr. Redmond appealed the superintendent’s decision to the Ohio Court of Appeals, which on July 27, 2021, rendered a decision affirming the revocation of his license based upon the substantial evidence contained in the department submissions regarding cease-and-desist order related to unlicensed activity, the mishandling of funds and breach of fiduciary responsibilities.

Final orders by the hearing officer

Besides the fines the Massachusetts Hearing Officer imposed on Mr. Redmond, she also entered the additional orders set forth below:

ORDERED: That any and all insurance producer licenses issued to Alan C. Redmond by the Division are hereby revoked; and it is

FURTHER ORDERED: that Alan C. Redmond shall return to the Division any licenses in his possession, custody, or control; and it is

FURTHER ORDERED: that Alan C. Redmond shall cease and desist from the conduct that gave rise to this Order to Show Cause; and it is

FURTHER ORDERED: that Alan C. Redmond, from the date of this order, is prohibited from directly or indirectly transacting any insurance business or acquiring, in any capacity whatsoever, any insurance business in the Commonwealth of Massachusetts; and it is

FURTHER ORDERED: that Alan C. Redmond shall comply with the provisions of M.G. L. c. 175, §166B and dispose of any and all interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer; and it is

FURTHER ORDERED: that Alan C. Redmond shall pay a fine of One Thousand Two Hundred Fifty Dollars ($1,250) to the Division within 30 days of the entry of this order.