Case Title: Bankers Life & Cas. Co. v. Superintendent of Ins.

Citation: 

Docket Number: 

State: maine

Court: Maine Supreme Court

Date: 2013-01-10T00:00:00Z

Document:
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 
 
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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. 
 
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[¶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 
 
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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. 
 
 
 
 
 
 
 
 
 
 
 
 
11 
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