### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE Se pte m be r 9, 200 8 S es sio n
JOYC E TR

AIL v. STA TE OF TEN NES SEE, DE PA RTM ENT OF COM MER CE AN D IN SU RA NC E, (Insuranc e D ivisio n)

Direc t Appeal from the Chancer y Court for Davidson Cou nty No. 06-1146-IVHon. Richard H. Din kin s, Chancellor

No. M2008- 00062-COA-R 3-CV - F iled Novem ber 5, 2008

The Commissioner revoke d appellant’ s license to sell insurance and fine d her $7,000.00. A ppellant petitioned for r eview by

the Trial Court, who a ffirme d the determination made by the Commiss ioner. On a pp e a l, w e a ff

ir m th e Judg me nt o f t

he Tr ia l Co ur

t.

T e n n . R
. A p p . P
. 3 A p p e a l a s o f Ri g h t ; J u d g m e n to f t h e C h a n c e r y C o u r tA ff i r m e d a nd Re m ande d.

H ER SCH EL P I CKE N S F RAN KS , P.J ., delivere d the opinion of the Court, in which D. M I CH A EL S WI NEY , J ., and S HAR ON G. L EE , S P .J ., joined.

Rob e rt L . H us ke y , M anc he ste r, Te nn e sse e , f or a pp e lla nt, Joy c e Tr a il. Robert E. Cooper, Jr., Attorney Gene ral a

nd Reporter , Michae l E

. Moore, Solicitor Gene ral, L aura T. Kidwell, Assistant At t o rn ey Gene ral, a

nd Sarah A . Hiestand, Senior Counsel, Na shville, Tenne ssee, f

or appe llee, State of Te nnessee , Depa rtment of Commerce and Insuranc e.

OP IN ION Appellant broug ht this action to revie w t he Final Dec ision of a St ate Administrative Ag ency , revokingher insura nce lice nse, and f

ining he r $7,000.00.

Th e a dmi nis tr ativ e re c or d w a s f ile d w iththe Tri al Co ur

t, a nd a he ari ngwa s h e ld wher ein the attorne y s argued their positions.-2- The a dminist rati v e record sets for th the Administrative L aw Judge ’s dec ision and finding s. J ames Dunlap had testified befor e the AL J that he and his mother went to appellant’ s office to obta in insurance , and he wrote a chec k for the down pay

ment in the amount of $316.75, on No ve mbe r 1 5, 20 01 . H e te sti fi e d th a t he did no t re c e ive an in sura nc e po lic y , a

nd that th e c he c k d id not clear his bank ac count until Febr uary 8, 2002. He did not re member r ece iving a ny bills from the ins ur anc e c omp any , b ut h e wr ote a c he c k to the ins ur anc e a g e nc y on Ap ri l 5 fo r $ 23 3. 99 , a nd wr ote chec ks for the same amount in May and June of that y ear

. Dunlap identified a

n insurance car d that he was g iven by appellant, a nd testified that it stated the eff

ective date was 12/15/01, a nd expired 12/15/02, a

nd listed the insurance company as Tenne ssee Insuranc e Company . He testified that he was involved in an accident in Fe bruar y 2002,
and re po rt e d it

to a pp e lla nt.
The re cord r evea ls that after the accident S tate Farm Insuranc e Company was see king to rec over $5,000.00 f

rom Dunlap a s a result of the ac cident, and that Dunlap hired a n attorney and fi le d a laws uit a g a ins t app e lla nt a nd PGAIns ur anc e Com

pa ny , a nd a s a re su lt, a pp e lla nt s e ttl e d w ith him for $7,000.00 which c overe d the claim by State Fa rm an d at t o rn ey ’s fe es. Also appe llant eventua lly

sent two che cks to Dunlap to ref und his pr emiums, but he did not cash the m on the advice of c ouns e l.

The AL J found that, pursua nt to Tenn. Code Ann. §56-6- 1 1 2 , t h e Commissi oner could suspend, re voke, or r efuse to reissue a n ag ent’s license for imprope rly taking or misappropriatingan insured’ s money , for usingfra udulent, coer cive, o r d i s h onest prac tices in the conduct o f b u s iness, or for demonstratingincompetenc e, untrustworthiness, or f inancial ir re sp on sib ili ty

in t he c on du c t of bu sin e ss. Th e AL J f ound the State ha d me t it s b ur de n o f p ro of in sh ow ingthat a

pp e lla nt i mpr op e rl y

wi thh e ld o r m isa

pp ro pr iate d D un la

p’ s f un ds on e ig ht s e pa

rate
o c c a s i o n s , w h i c hw a s t o h i s d e t r i m e n tb e c a u s e t h e m o n e y w a s n o tp a s s e d t o t h e i n s ur an c e c o mp an y, PGA, which resulted in Dunlap not having insura nce. F urther, that while acc epting pay ments from Dunlap for insurance cover ag e she never procur ed, she issued a fra udulent insurance car d to Dunlap. The AL J found appe llant’s dishonesty was a lso shown by

the fa ct s he neve r disclosed the la ck of policy even a fter D unlap had e x perie nced a n acc ident. The AL J revoke d appellant’ s li ce nse, and assessed the fine of $7,000.00.

Followingarguments befor e the Tr ial Cour t , t h e Trial Court filed a Memora ndum Opinion and Orde r, and note d that pursuant to Tenn. Code A nn. §4-5-322, his r eview was c onfined to the administrative re cord, a nd that the Court could onl y reve rse or

modify the ag ency ’s dec ision if the dec ision was in violation of constituti onal/stat utory provisions, in ex cess of the ag ency ’s authority , made upon unlaw ful proce dure, a rbitrar y or capricious, or unsupported by substantial and materia l evidence

.

The Court found t h er e wa s substantial and materia l evidence to support the AL J ’s finding that appellant i m p ro p erly withheld or misappropriated money to the detriment of Dunla p from November 2001 throug h October 2002, which re sulted in Dunlap havingno cover ag e whe n he-3-

rea sonably

expected to have cover ag e. The Court also found there was subs t antial and mate rial
e vid e nc e to s up po rt

the AL J’s fin din g that app e lla nt wa s f ra ud ule nt, dis ho ne st a

nd un tr us tw or thy in he r c on du c t by a c c e pti ng pa y me nts fr om Dunla

p fo r an in sura

nc e po lic y

sh e ne ve r p ro c ur e d f

or him and by issuing him a fr audulent proof of insuranc e ca

rd. The Court a ffirme d the findi n g that appellant violated T enn. Code Ann. §56- 6-112 (a )(4) & ( 8).

The Tr ial Court noted that it could only examine the sanction to de termine if it was
unwa rr ante d in law o r w ith out ju sti fi c a tio n in fa c t, a nd he de te rm ine d th a t th e sanc tio ns imp os e d in thi s c a se we re wa

rr ante d a nd jus tif ie d. Ap pe lla

nt o n a pp e a l, r a ise s th e se iss ue s:
1. Was the Commi ssion’s decision cha rac terized by

abuse of disc re t ion or clea rly unwar rante d exercise of discretion, and further was the de cision and deg ree of punishment rende red c ommensurate w ith the evidence ?

2. Did the Trial Court er r in upholding the Commi ssioner’s de cision?

As we ha ve pre viously

explained: Tenn.Code Ann. § 4- 5-322(h) addre sses the nar row scope of judicial re view of a n a dmi nis tr a tiv e a g e nc y

de c isi on a s f oll ow s:
The c o u rt ma

y a f f ir m th e d e c is io n o f th e a g e n c y o r r e ma n d th e case for further proce eding s. The cour

t may revers e or modify

the dec ision if the rig hts of the petit ioner have bee n prejudice d beca use the a dminist rative finding s, infere nces, c onclusions or dec isions are: (1 ) I n v iol a tio n o f c on sti tut ion a l or statut or y pr ov isi on s; ( 2 ) In e x c e s s o f

th e s t a tu t o r

y a u th o r i ty o f

th e a g e n c y; (3) Ma de upon unlawf

ul proce dure; (4 ) A rb itr ary

or c a pr ic iou s o r c ha

ra c te ri zed by a bu se of dis c re tio n or c le arl y unwar rante d exercise of

discretion; or (5) Unsuppor

ted by evide n ce wh i ch is both substantial and materia l in the light of the entire r ecor d.

I n deter mining the substantialit y of evide nce, the court shall take into account whateve r in the re co rd fairly detra cts from its weig ht, but the court shall not substitut e its judgme nt for that of the ag ency as to th e weight of

the evidenc e on qu e sti on s o f f

a c t.-4- T h e te r m “ s u b s ta n ti a l a n d mate r ia l e v id e n c e ” h a s b e e nd e f in e d a s “ ‘ s u c hr e le v ant evidenc e as a

rea sonable mind might acce pt to support a rational conclusion and suc h
a s t o f u r n i s ha r e a s o n a b l y s o un d b a s i s f o r t h e a c t i o nun d e r

c o n s i d e r a t i o n

. ’ ” T h is Court has also desc ribed it as requiring “ ‘something less than a preponde ranc e of the evidenc e . .

. b u t more than a scintilla or g limmer.’” Judicial review of an administrative ag ency ' s decision under the “substantial and material evidenc e”
s t an d ar d , h o w e v e r , s u

b j e c t s th e a g e n c y' s d e c i s i o nt o c l o s e s c r u t i n y.
Whe n r e vie wi nga

tr ia l c ou rt 's reviewof

an a dmi nis tr a tiv e a g e nc y ' s d e c isi on , th is Court essentially

is to determine “whether or not the trial court prope rly applied the ... standard of

revie w” f ound at Tenn. Code Ann. § 4-5-322( h). This Court addre ssed its jud ic ia l r e vie w o f e vid e nc e c on ta ine d in the a dmi nis tr a tiv e re c or d a s f oll ow s:
Whil e thi s Co ur

t ma y c on sid e r e vid e nc e in t

he re c or d that detr a c ts f

ro m it s weig ht, [ this] [C ]ourt is not allowed to substitut e it s judgme nt for that of the ag ency conce rningthe weig ht of the evide nce....
J udicial re view of a

n ag ency ' s construction of a statute and its ap p l i cation of the statute to the fac t s of the c ase is a de termination involving a question of law. Acc ording ly , this Court's review of such m atters is de novo without any presumption of cor rec tness. Wit h respe ct to an ag ency ' s interpre tation of its ow n rules and regulations, courts aff

ord d ef er en ce a nd controlling weig ht to such determinations unless plainly

err oneous or inconsistent with the re g ulation.

J on es v . B ur e au of T

e nn Car e , 94 S.W .3d 495 (Tenn. Ct. App. 2002)( citations omitt ed).

I n this case, the Court f

ound there was substantial a nd materia l evidence to support the AL J ’s finding that appellant imprope rly withheld or misappropriated money to the detriment of Du n l ap fr o mNo v em b er

2 0 0 1 t h ro u ghOc t o b er

2 0 0 2 , wh i ch re s u l t ed i nDu n l ap h av i n g n o co v er age when he rea sonably

expected to have cover ag e. The Court also found t h ere was substantial and materia l evi d en ce t o support the AL J ’s finding that appellant wa s fra udulent, dishonest and untrustworthy

in her c onduct by

acc epting pay

ments from Dunlap for an insurance policy she neve r procur ed for him and by

issuing him a fr audulent proof of insuranc e ca

rd. The T rial Court aff

irmed the finding that appellant violated T enn. Code Ann. §56- 6-112 (a )(4) & ( 8).

The e vidence in the rec ord supports these f indings. The re w as substantial proof that appellant ha d numerous opportunit ies to discover and di sclose the lack of cover ag e to Dunlap, but failed to do so, but i nstead, kept repr esenting that he had cover ag e and acc epting pay ments for the same, whe n she had r eason to know that no cover ag e ex isted. She supplied him with an insuranc e car d with a fictit ious policy number on it, and failed to follow up on numerous inquiries about the lack of a policy being issued. Appellant was unable to suppor t a ny of her excuses for her be havior with valid documentation, and the AL J found her testimony to be lacking in credibility . For all of the fore g oing r easons, the A L J ’s finding s ar e supported by substantial and mater ial evidenc e, and-5-

in affir ming the A L J ’s J udg ment, the Trial Court applied the proper standard of

revie w in this case.

We affir m the J udg ment of the Tr ial Court and re mand, with the cost of the a ppeal assessed to Joy ce T rail.

_________________________ H ER SCH EL P I CKE N S F RAN KS , P

. J.