Responding to or Defending Allegations before the North Carolina Department of Insurance
No licensee ever wants to get a letter from the Agent Services Division of the Department of Insurance [“ASD”]. If you received a letter from the ASD regarding allegations of misconduct affecting your license or denial of licensure, this generally means the ASD has received a complaint or is making an inquiry due to some other information received at the ASD. You may be uncertain about what to do next, what the procedures are and what the results may be.
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You may also be trying to decide whether you need to hire an attorney in responding to the ASD. Our firm represents licensees like you in responding to the ASD and defending against allegations of misconduct and denial of licensure. Representation at the initial informal stage is significantly less expensive than in a formal evidentiary public hearing; therefore, the investment in protecting your license and livelihood generally is more cost-effective in the earlier stages. Although a licensee has a right at any time in the process to be represented by legal counsel, our firm’s best opportunity to assist you in obtaining a favorable or acceptable outcome is in these early stages. We have a good working relationship with counsel for the Department and frequently can work out an acceptable resolution without the need for a formal hearing, including, in some cases, dismissal without any action. Our general explanation of board procedures has a more detailed discussion of how we may be able to assist you in informal proceedings.
In the sections below, we attempt to address some of the questions you may have and explain the general process, procedures and possible results.
The Agent Services Division of the North Carolina Department of Insurance
The Agent Services Division of the N.C. Department of Insurance is the division that oversees the licensing and continuing education for insurance licensees, including insurance agents, title agents and bail bondsman, among others. The Insurance Commissioner, through the ASD, has the authority to place any licensee on probation, or suspend, revoke, or refuse to renew any license issued for any one or more of the causes listed:
- Providing materially incorrect, misleading, incomplete, or materially untrue information in the license application;
- Violating any insurance law of this or any other state, violating any administrative rule, subpoena, or order of the Commissioner or of another state’s insurance regulator, or violating any rule of FINRA;
- Obtaining or attempting to obtain a license through misrepresentation or fraud;
- Improperly withholding, misappropriating, or converting any monies or properties received in the course of doing insurance business;
- Intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance;
- Having been convicted of a felony or a misdemeanor involving dishonesty, a breach of trust, or moral turpitude;
- Having admitted or been found to have committed any insurance unfair trade practice or fraud;
- Using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this State or elsewhere;
- Having an insurance producer license, or its equivalent, denied, suspended, or revoked in any other jurisdiction for reasons substantially similar to those listed;
- Forging another’s name to an application for insurance or to any document related to an insurance transaction;
- Willfully failing to provide the proper notification required by statute;
- Knowingly accepting brokered insurance business from an individual who is not licensed to broker that kind of insurance;
- Soliciting, negotiating, or selling insurance in this State for an unauthorized insurer, regardless of whether the licensee or applicant knew that the insurer was unauthorized;
- Failing to comply with an administrative or court order imposing a child support obligation, after entry of a final judgment or order finding the violation to have been willful;
- Failing to pay State income tax or comply with any administrative or court order directing payment of State income tax, after entry of a final judgment or order finding the violation to have been willful;
- Cheating on an examination for an insurance license or for a prelicensing or continuing education course, including improperly using notes or any other reference material to complete an examination for an insurance license or for a prelicensing or continuing education course;
- Willfully over-insuring property;
- Any cause for which issuance of the license could have been refused had it then existed and been known to the Commissioner at the time of issuance.
Possible Outcomes for Regulatory Action by the ASD
If ASD finds probable cause that a licensee has committed a violation, regulatory action may be taken against a licensee in the following forms:
Voluntary Settlement Agreements: At the informal stage, a licensee and ASD agree to settle by entering into an agreement. The licensee waives a right to a hearing. A monetary penalty often is imposed with voluntary settlement agreements.
Surrender of License(s): In lieu of a regulatory hearing, the licensee can surrender the license(s) by signing a notarized surrender document. The licensee must also agree in writing (s)he is forfeiting his/her rights to a regulatory hearing.
Consent Orders: If the matter is referred by ASD for a formal hearing and ASD files a Notice of Hearing, the licensee and ASD can voluntarily agree to the regulatory action, subject to approval by a Hearing Officer appointed by the Commissioner to preside over the matter.
Revocation of License(s), Suspension of License(s) and/or Imposition of Monetary Penalty: If a settlement cannot be reached or a licensee does not want to surrender his/her license, the case will be scheduled for a formal public hearing, which is an evidentiary hearing with many similarities to a trial in court. The licensee or his or her legal counsel have the right to present evidence in defense, including calling witnesses and introducing exhibits, to make objections, to cross-examine any witness called by ASD, and to make a closing argument. If they have not done so already, most professionals decide that they need to retain an attorney at the formal stage, with which our firm has experience. The Hearing Officer, after a full regulatory hearing, may dismiss the case, or enter a decision to suspend or revoke a license or impose a monetary penalty. Appeal of the Hearing Officer’s decision is to the court system. Generally, it is much more difficult for a licensee to prevail once the matter reaches the court system on an appeal, even if he or she retains legal counsel at that point.
Actions on Applications for Licensure
ASD may deny licensure upon initial application or a reinstatement request. If ASD finds that the applicant has not fully met the requirements for licensing, it will refuse to issue the license and will notify in writing the applicant and the appointing insurer, if any, of the denial, stating the grounds for the denial. Generally, an applicant must make a written demand upon the Commissioner for a review no later than thirty (30) days after service of the notification of denial upon the applicant.
If an applicant requests a review, he or she should receive notice by letter of the time and place of the informal review. The purpose of the review is to determine the reasonableness of the decision to deny an applicant a license. At that time, an applicant may present evidence and arguments to challenge the decision. A licensee may engage counsel to represent him or her at the review conference, which our firm does.
Once the review is complete, an applicant is notified in writing of the outcome of the review. Generally, an applicant must make a written demand upon the Commissioner for a hearing no later than thirty (30) days after service upon the applicant of the notification of the outcome. This is a very important deadline.
After Regulatory Action by ASD
If regulatory action is taken, it can have significant effects on a licensee. Generally, the North Carolina Department of Insurance:
- Provides the insurer with a copy of the documentation of the regulatory action when requested;
- Notifies the National Association of Insurance Commissioners (NAIC) of the action. The NAIC maintains a shared database for all states and the regulatory actions are posted on the NAIC website;
- Codes the licensee record with “Regulatory Action Taken” which means regulatory action has been taken against the licensee;
- Includes the name of the licensee and the action taken in the Department’s newsletter;
- Shows the regulatory action on the license record on the Department’s website through the information portal. The online license record displays “Agent has Regulatory Action” for individual licensees and “Regulatory Action Taken” for agencies and companies.
NOTE: The regulatory coding remains part of the licensee’s public record.
Impact of Decision of Whether to Retain an Experienced Law Firm
If you have received a letter from ASD or have a pending review conference or formal hearing, you should consider retaining a firm like ours that has experience representing licensees before the Department. Regulatory action could have a significant and permanent impact on your license(s) in NC and other states, which also can substantially affect you financially and personally. Hiring an experienced law firm can be an investment in your professional future.