The Commissioner of the Indiana Department of Insurance v. Jeffrey A. Schumaker , 118 N.E.3d 11 ( 2018 )

FILED
Dec 31 2018, 7:37 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEY FOR APPELLEE
Curtis T. Hill, Jr. Arend J. Abel
Attorney General of Indiana Cohen & Malad, LLP
Indianapolis, Indiana
Frances Barrow
Deputy Attorney General
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
The Commissioner of the December 31, 2018
Indiana Department of Court of Appeals Case No.
Insurance, 18A-MI-864
Appellant, Appeal from the Marion Superior
Court
v. The Honorable Patrick J. Dietrick,
Judge
Jeffrey A. Schumaker, Trial Court Cause No.
Appellee. 49D12-1703-MI-11747
Brown, Judge.
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 1 of 20
[1] The Commissioner (the “Commissioner”) for the Indiana Department of
Insurance (the “Department”) appeals the trial court’s order vacating its
decision to not renew Jeffrey A. Schumaker’s insurance producer license. We
affirm.
Facts and Procedural History
[2] Schumaker has held an insurance producer license since 1990 and concentrates
his business in life, health, disability, and Medicare supplement insurance. He
also held a license with the Financial Industry Regulatory Authority
(“FINRA”) permitting him to sell securities. In 2011, Mr. Schumaker
experienced financial difficulties1 and took $8,300 from his homeowners
association, for which he volunteered as the treasurer. In March 2014,
Schumaker repaid the money he had taken from the homeowners association
along with two years of dues he owed and one year of future dues. He
disclosed his actions to the homeowners association and resigned as treasurer,
and the association elected not to pursue charges. Schumaker reported his
actions to his broker-dealer, the broker-dealer in turn communicated with
FINRA, and Schumaker elected not to challenge the suspension issued by
FINRA. Schumaker believed FINRA communicated with the Commissioner,
1
Schumaker indicated he had been in an accident and was being sued and that a large medical bill had come
due.
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 2 of 20
and when completing his license renewal application, he disclosed his FINRA
bar.2
[3] On August 12, 2016, the Commissioner issued an Administrative Order Notice
of Nonrenewal of License which stated the enforcement division of the
Department received untimely notification of Schumaker’s securities license
suspension and permanent bar, stated Schumaker had disclosed that he
misappropriated funds for personal use as treasurer of his homeowners
association, cited Ind. Code § 27-1-15.6-17(a)3 and Ind. Code § 27-1-15.6-
12(b)(8),4 and stated that Schumaker’s producer license would not be renewed.
2
The administrative record contains a letter by Lincoln Financial Group dated April 25, 2016, to the
Department stating that it requested an appointment termination for Schumaker as a result of his permanent
bar by FINRA. An employee of the Department testified that the Department received the letter and sent a
communication to Schumaker which was returned because it was addressed incorrectly and that, on the day
the communication came back through the mail, the employee received Schumaker’s renewal application
from the licensing division.
3
Ind. Code § 27-1-15.6-17(a) provides “[a] producer shall report to the commissioner any administrative
action taken against the producer in another jurisdiction or by another governmental agency in Indiana not
more than thirty (30) days after the final disposition of the matter.”
4
Ind. Code § 27-1-15.6-12(b) provides in part:
The commissioner may reprimand, levy a civil penalty, place an insurance producer on
probation, suspend an insurance producer’s license, revoke an insurance producer’s
license for a period of years, permanently revoke an insurance producer’s license, or
refuse to issue or renew an insurance producer license, or take any combination of these
actions, for any of the following causes:
(1) Providing incorrect, misleading, incomplete, or materially untrue
information in a license application.
*****
(8) Using fraudulent, coercive, or dishonest practices, or demonstrating
incompetence, untrustworthiness, or financial irresponsibility in the conduct of
business in Indiana or elsewhere.
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 3 of 20
At Schumaker’s request, a hearing was scheduled before an administrative law
judge (the “ALJ”).
[4] On September 14, 2016, the ALJ held a hearing. In November 2016, the ALJ
issued Findings of Fact, Conclusions of Law and Order. The ALJ found, “[i]n
response to Question 2, of his application for renewal to [the Department]
Schumaker made a full and complete disclosure of the FINRA bar and the
circumstances leading thereto.”5 Appellant’s Appendix Volume II at 35. The
ALJ found that no evidence was presented that Schumaker has ever committed
any conduct that is fraudulent, coercive, dishonest, incompetent,
untrustworthy, or financially irresponsible in the conduct of his insurance
business or any other business venture. The ALJ also found “the evidence in
this case demonstrates that Schumaker took $8300 from the homeowners’
association bank account with the intent to repay it” and “[w]hile dishonest, all
evidence presented at the hearing was that this was a singular issue, out of
character for Schumaker, and not part of a pattern of deceit or a series of
‘practices’ in either his personal or professional life.” Id. at 37. The ALJ
recommended that the order of nonrenewal be reversed on the conditions that
Schumaker’s license be granted on a two-year probationary basis and that he
pay a civil penalty of $1,000.
5
The ALJ indicated that Question 2 stated: “Have you been named or involved as a party in an
administrative proceeding, including a FINRA sanction or arbitration proceeding regarding any professional
or occupational license or registration, which has not been previously reported to this insurance department?”
Appellant’s Appendix Volume II at 31.
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 4 of 20
[5] On February 20, 2017, the Commissioner issued Findings of Fact, Conclusions
of Law, and Final Order. The Commissioner stated that the Department filed
an objection to the ALJ’s recommended order and challenged, in relevant part,
the ALJ’s conclusions relating to Ind. Code § 27-1-15.6-12(b)(8). The
Commissioner found that Schumaker violated subsections (1) and (8) of Ind.
Code § 27-1-15.6-12(b) and ordered that his insurance producer license not be
renewed.
[6] On March 22, 2017, Schumaker filed a petition for judicial review with the trial
court. The parties submitted briefs6 and on February 1, 2018, the court held
argument. On March 19, 2018, it issued its Findings of Fact,7 Conclusions of
Law and Order which vacated the Commissioner’s February 20, 2017 order
and provided:
Findings of Fact
1. Mr. Schumaker concentrates his business in life and health
insurance, disability and Medicare supplement insurance. Ex. 5. In
his insurance business, Mr. Schumaker does not handle any cash for
insureds. Tr. 35. Instead, the insured pays all premiums directly to
the insurance company. Id. The only funds Mr. Schumaker deals
with are his own commission checks from which he pays his salary
and his office expenses. Id.6
Schumaker argued that FINRA is not a governmental agency but an independent, non-for-profit
organization and that the FINRA action was not an administrative action which was required to be disclosed
under Ind. Code § 27-1-15.6-17(a). The Commissioner replied that FINRA actions “are precisely the types of
sanctions the Department needs to know about.” Appellant’s Appendix Volume II at 69.
7
The parties do not challenge the factual findings.
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 5 of 20
2. At the time of the administrative hearing, Mr. Schumaker had
held a license from the Department for 26 years and was serving
about 300 customers. Ex. 5. He has never [had] a complaint
relating to [the] manner in which he conducted his business. Id.
3. Mr. Schumaker also served as treasurer of his homeowners’
association, an unpaid, volunteer position that was neither elected
nor appointed. Mr. Schumaker held the position because the
association needed volunteers for various positions due to its small
size. Tr. 24-25.
4. In 2011, Mr. Schumaker experienced significant personal issues.
At a school sporting event on a rainy evening, two young girls ran
out in front of his car and, because one stopped and the other ran,
Mr. Schumaker could not avoid hitting one of them and injuring
her. Tr. l6. The accident exacted a heavy emotional toll on Mr.
Schumaker and his family. Tr. l6, Tr. 55. It also had a big impact
on his business. Tr. 16. In addition to the emotional turmoil the
event caused, Mr. Schumaker incurred expenses because he was
sued over the accident. Id; Ex. 5.
5. Mr. Schumaker was expecting a substantial commission check
and wrote an equally substantial check to pay a medical bill. Tr. l7.
When the commission check did not arrive, Mr. Schumaker took
$8300 in homeowner’s association funds for his own use, without
authorization. Tr. 41. He always intended to pay the money back,
and no one with the homeowners’ association discovered his
actions. TR. 17; Ex. 5.
6. In 2014, the homeowners’ association had bills coming due and
needed funds. Tr. 18. Mr. Schumaker returned the funds he had
taken, depositing $9000, which included the $8300 and his own
dues. Tr. 19-20. He disclosed to the association what he had done
and how he had corrected it. Tr. 22. He also resigned as treasurer.
Id.
7. After hearing Mr. Schumaker’s disclosures, the other members
of the homeowners’ association deliberated. Id. Tom Mack, a
neighbor who was present when Mr. Schumaker told the
homeowners what he had done, noted that Mr. Schumaker was
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 6 of 20
very remorseful. Ex. 2. Mr. Mack and the other home owners
concluded Mr. Schumaker made a bad decision, but that because he
informed them, repaid the funds, and was being investigated at
work, they would not pursue charges. Tr. 22; Ex. 2. According to
Mr. Mack “Jeff is a very reliable, honest and kind person that had
made a bad choice.” Ex. 2. Mr. Schumaker’s wife testified how
out of character the actions were for her husband, describing them
as “an aberration.” Tr. 56.
8. One association member was a former registered representative
(a person who buys or sells securities for a registered broker-dealer)
and said Mr. Schumaker should report the incident to his broker-
dealer, so he did. Tr. 24-25. The broker-dealer reported the
incident to the Financial Industry Regulatory Authority, also
known as FINRA, a private self-regulatory entity in the securities
business. Tr. 25.
9. FINRA began an investigation, which its attorneys pursued
aggressively. Tr. 27. Mr. Schumaker learned that even if [he]
avoided being barred from association with FINRA, the process
would be expensive. Id. He heard from one individual who spent
approximately $100,000.00 in attorneys’ fees, costs, and fines. Id.Accordingly, Mr. Schumaker did not contest or otherwise
participate in the investigation. Ex. 5. Under FINRA’ rules, non-
participation leads to a bar against further association with FINRA.
Id. FINRA’s attorneys and his own counsel assured him he could
continue in his insurance business, he just could no longer sell
securities. Tr. 27-28.
10. After Mr. Schumaker could no longer serve his broker/dealer
clients, another registered representative, William Novack began
serving them. Tr. 50. Novack testified Mr. Schumaker’s clients
“spoke very highly of him.” Id. Novack further testified to his own
assessment that Mr. Schumaker “did quite well” and “did a very
nice job in putting things together for his clients.” Id. Novack also
testified Mr. Schumaker’s clients could be negatively affected if Mr.
Schumaker could not assist them with their insurance needs. Id. at
51.
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 7 of 20
11. Mr. Schumaker did not know he was supposed to disclose the
FINRA bar to the Department until he was in the process of
renewing his producer’s license. Tr. 31. Question 2 of the
application asked “Have you been named or involved as a party in
an administrative proceeding, including a FINRA sanction or
arbitration proceeding regarding any professional or occupational
license or registration, which has not been previously reported to
this insurance department?” Filing No. 10 (ALJ’s Order) p. 2, ¶ 3.
Mr. Schumaker disclosed the FINRA bar and the circumstances
leading to it. Ex. l.
12. On August 12, 2016, the Department notified Mr. Schumaker
his license would not be renewed in an “Administrative Order —
Notice of Nonrenewal of License.” Record Doc. 16. The reasons
given for the non-renewal were that Mr. Schumaker failed to report
the FINRA suspension within 30 days of its final disposition and
that he allegedly used “fraudulent, coercive, or dishonest practices,
or demonstrate[d] incompetence, untrustworthiness, or financial
irresponsibility in the conduct of business in Indiana or elsewhere,”
which Ind. Code § 27-1-15.6-12(b)(8) lists as a basis for discipline.
Id.
13. Mr. Schumaker timely sought administrative review.
14. Mr. Schumaker acknowledged his personal use of association
funds was wrong, but stated the events were caused by extreme
circumstances not likely to recur and had no relationship to his
blemish-free, 26-year record in providing services under his Indiana
insurance producer’s license. He denied the conduct amounted to
“fraudulent, coercive, or dishonest practices, or demonstrate[d]
incompetence, untrustworthiness, or financial irresponsibility in the
conduct of business in Indiana or elsewhere” within the meaning of
Ind. Code § 27-1-15.6-12(b)(8).
15. Mr. Schumaker further argued it was arbitrary and capricious
to refuse to renew his insurance producer’s [license] based on the
belated disclosure of the FINRA action.
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 8 of 20
16. Mr. Schumaker’s Indiana producer’s license expired on June
30, 2016, while his application was pending. Record Doc. l6
(Administrative Order - Notice of Nonrenewal) ¶ 2.
17. The Honorable Reuben B. Hill, Administrative Law Judge,
held an evidentiary hearing. Mr. Schumaker presented his own
testimony, his wife’s, and that of the homeowner and registered
representative described above. He also presented evidence of his
most recent Field Office Review Worksheet and a post-audit letter
stating, “Congratulations! I would like to commend you on how
well you have been managing the affairs of your branch office. I am
pleased to inform you that there were no material exceptions found
during the audit of your branch office. This is a great
accomplishment and a direct reflection of your commitment to
excellence.” Ex. 3. Mr. Schumaker also testified he has made
changes to his business to avoid the extreme financial pressures that
led to his actions. Tr. 36-37.
18. Mr. Schumaker is the sole financial supporter for his family,
which includes his wife, two sons in college, his mother-in-law who
lives with him, and a young family member placed in their home by
family services. Tr. l l-12; Tr. 53. Losing his producer income
would be devastating to the family, Ex. 5; And, at age 53 with 26
years in the insurance industry, Mr. Schumaker does not know
what he would do to replace that income. Ex. 5; see also Tr. 37.
19. At the hearing, the Department took the position that the
statutory term “fraudulent, coercive, or dishonest practices” was not
modified by the closing phrase “in the conduct of business in
Indiana or elsewhere.” In other words, the department took the
position that Ind. Code § 27-1-15.6-12(b)(8) provided two separate
bases for discipline:
(A) fraudulent, coercive, or dishonest practices; or
(B) incompetence, untrustworthiness, or financial
irresponsibility in the conduct of business in Indiana or
elsewhere.
Filing No. 10 (ALJ’s Order), Conclusion ¶ 7.
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 9 of 20
20. In his conclusions of law, ALJ Hill noted, but did not resolve
the different interpretations urged by the parties. Id., Conclusion ¶
6-7. Instead, he found that “all evidence presented at the hearing
was that [Mr. Schumaker’s conduct] was a singular issue, out of
character for Schumaker, and not part of a pattern of deceit or a
series of ‘practices’ in either his personal or professional life.” Id.Conclusion ¶ 8. For the late reporting of the FINRA proceeding,
ALJ Hill recommended that “the order of nonrenewal be reversed
under the following conditions:
1. Applicant’s independent adjuster’s license shall be granted
on a two year probationary basis, during which time,
Applicant shall adhere to all insurance laws or the
Department will seek immediate revocation of his license.
2. Applicant shall pay the sum of One Thousand Dollars
($1,000.00) civil penalty in accordance with Indiana Code
27-1-28-18 (e).”
Id. at p.9.
21. The Department sought review of ALJ Hill’s Order, arguing its
interpretation of the statute to the Commissioner and asking for a
review of ALJ Hill’s finding concerning the payment of interest.
Filing No. 9. The Commissioner agreed with the Department on
both issues. Concerning the statutory interpretation issue, the
Commissioner concluded:
The term ‘in the conduct of business in Indiana or
elsewhere,’ when used in Ind. Code § 27-1-15.6-12(b)(8),
should not be read in conjunction with the terms ‘fraudulent,
coercive, or dishonest practices.’ Ind. Code § 27-1-l5.6-
12(b)(8) provides the Commissioner the authority to take
administrative action when a producer uses fraudulent,
coercive, or dishonest practices in any event, whether in the
conduct of business in Indiana or not.
Filing No. 4 (Commissioner’s Final Order of Nonrenewal) ¶ 12.
The Commissioner did not address the ALJ’s conclusion that a
single instance of misconduct did not amount to “practices.” Nor
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 10 of 20
did the Commissioner find that any of Mr. Schumaker’s conduct
occurred “in the conduct of business.” The Commissioner
concluded that “The appropriate penalty for such a violation is
refusal to renew the license.” Id.
22. As a factual matter, the administrative record in this case
establishes the following:
1. The ALJ ruled Mr. Schumaker had not engaged in
fraudulent, coercive, or dishonest practices, or even one such
practice, but a single isolated instance of dishonesty.
2. The Commissioner made no contrary finding, nor would
the evidence support a contrary finding.
3. Neither the Commissioner nor the ALJ made any finding
on the appropriateness of the sanction if the Division could
not establish Mr. Schumaker engaged in fraudulent, coercive,
or dishonest practices, but established Mr. Schumaker
violated a technical reporting requirement by voluntarily
disclosing the FINRA action on his next renewal
application, rather than within 30 days.
Conclusions of Law
1. The ALJ ruled Mr. Schumaker did not engage in fraudulent,
coercive or dishonest practices, whether in the conduct of business
or otherwise. Filing No. 10 (ALJ’s Order), Concl. ¶ 8. According
to the ALJ, “all evidence presented at the hearing was that this was
a singular issue, out of character for Mr. Schumaker, and not part of
a pattern of deceit or a series of ‘practices’ in either his personal or
professional life.” Id. The Commissioner did not find otherwise.
2. Thus, as the record stands, neither the ALJ nor the
Commissioner found a violation of Ind. Code § 27-1-15-6-12(b)(8).
The Court owes no deference to the arguments the Commissioner’s
lawyers make that the record is sufficient to show a violation.
Instead, the Court owes deference to the ALJ’s finding that no
violation of that statute occurred and the Commissioner made no
contrary finding.
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 11 of 20
3. Because neither the ALJ nor the Commissioner found that Mr.
Schumaker engaged in “fraudulent, coercive or dishonest
practices,” whether in the conduct of business or otherwise, this
Court need not decide whether a connection to Mr. Schumaker’s
business was required. Rather, the fact that, as the ALJ found, Mr.
Schumaker’s conduct was a single instance of dishonesty, rather
than “practices,” means that the statutory language is not met.
4. In addition, the Court finds the Commissioner’s reading of the
statute implausible. If any dishonest “practice” were a sufficient
basis for the Commissioner to take action against a licensee, then
the statute would also sweep in a wide variety of socially and
personally “dishonest” conduct, such as cheating at golf or in card
games. Nothing in the statutory text suggests such a broad reading.
5. Reading the statute to reach isolated instances of dishonesty
would also render meaningless other subsections of the same
statute. Subsection (b)(4), for example, authorizes the
Commissioner to discipline a licensee for “Improperly withholding,
misappropriating, or converting any monies or properties received
in the course of doing insurance business.” Ind. Code § 27-1-15.6-12
(b)(4). If a single instance of misappropriation, whether inside or
outside the insurance business, violates subsection (b)(8), then
subsection (b)(4) becomes meaningless.
6. A Court must give effect “to all of the provisions and words of a
statute where it is possible.” Read v. Beczkiewicz, 215 Ind. 365, 382,
18 N.E.2d 789, 796, reh’g denied 19 N.E.2d 465 (1939). Our
Supreme Court recently reaffirmed that rule multiple times: “No
word or part of the statute should be rendered meaningless if it can
be reconciled with the rest of the statute. Indiana Alcohol & Tobacco
Commission v. Spirited Sales, LLC, 79 N.E.3d 371, 376 (Ind. 2017)
(citing West v. Indiana Secretary of State, 54 N.E.3d 349, 353 (Ind.
2016), which in turn cited Siwinski v. Town of Ogden Dunes, 949
N.E.2d 825, 828 (Ind. 2011)).
7. Here, reconciling the statutory provisions gives meaning to the
General Assembly’s decision that a single misappropriation in the
insurance business is sufficient basis for action against a license in
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 12 of 20
paragraph (b)(4), and that repeated misappropriations that become
“practices” need not occur in that context, but only in any kind of
business, to provide a ground for discipline under paragraph (b)(8).
But there is not any portion of the statute that makes a single,
isolated act, not occurring in the insurance business, a ground for
discipline.
8. The Commissioner relies heavily on the notion that the Court
must afford deference to the agency’s interpretation of the statute,
but even the case the Commissioner cites, Jay Classroom Teachers
Ass’n v. Jay School Corp., 55 N.E.3d 813 (Ind. 2016), holds that “we
review an agency’s conclusions of law de novo.” Id. at 816 (Ind.
2016); see also Indiana Alcohol & Tobacco Comm’n v. Spirited Sales,
LLC, 79 N.E.3d 371, 375 (Ind. 2017); 813; Moriarity v. Department of
Natural Resources, 2018 WL 828492, at *3 (Ind. Ct. App. Feb. 13,
2018). [8]
9. Deference is only appropriate when an agency’s interpretation of
an ambiguous statute is reasonable. State v. Mills, 76 N.E.3d 861,
870 (Ind. Ct. App. 2017). Here, the Commissioner’s interpretation,
which would apply the statute to isolated, non-business acts of
dishonesty, such as cheating at cards or golf, and which would
render Ind. Code § 27-1-15.6-12(b)(4) completely meaningless, is
not reasonable. Accordingly, the Commissioner’s Order must be
vacated.
10. The appropriate remedy in this case is not, however, simply a
remand. There is no dispute what the facts are or any suggestion
that they could be found differently on remand. Once the
Commissioner’s erroneous reliance on Ind. Code § 27-1-15.6-
12(b)(8) is removed, all that is left of the case is an inadvertent
failure to report the FINRA suspension, which was voluntarily
reported, unprompted, on the next renewal application.
8
The Indiana Supreme Court granted transfer in Moriarity on May 24, 2018, after the trial court issued its
order. See Moriarity v. Ind. Dep't of Nat. Res., 102 N.E.3d 288 (Ind. 2018).
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 13 of 20
11. It would be unreasonable, and an abuse of discretion, to deny
the renewal of Mr. Schumaker’s license based on tardiness alone,
particularly when that tardiness was inadvertent.
12. At the hearing, Mr. Schumaker’s lawyer suggested that the
appropriate remedy would be for the Court to order Mr.
Schumaker’s license renewed, in accordance with the ALJ’s
proposed order. Unfortunately, the Court cannot order such relief
and must remand to the Commissioner under Indiana State Bd. of
Health Facility Adm’rs v. Werner, 841 N.E.2d 1196 (Ind. Ct. App.
[(2006)]), decision clarified on reh’g, 846 N.E.2d 669 (Ind. Ct. App.
2006).
13. While the Court has held that Mr. Schumaker did not engage in
“fraudulent, coercive or dishonest practices” under the statute, and
has further found that non-renewal is too harsh a sanction, the
Commissioner has other remedies he can impose. For example, the
Commissioner can “reprimand, levy a civil penalty, [or] place an
insurance producer on probation. . .” Ind. Code § 27-1-15.6-12(b).
Other statutory sanctions, such as a revocation or suspension are
either inapplicable in the circumstance where a producer does not
have a current license or are, like non-renewal, too harsh for a
minor reporting violation. Nevertheless, the Commissioner must be
afforded an opportunity to determine whether to reprimand Mr.
Schumaker or place him on probation and whether to impose a civil
penalty. That choice belongs to the Commissioner on remand.
Entry of Judgement
For the reasons stated above, the Petition for Judicial Review is
GRANTED and this matter is REMANDED for consideration of
the appropriate penalty short of non-renewal.
Appellant’s Appendix Volume II at 7-17. The Commissioner appeals.
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 14 of 20
Discussion
[7] The issue is whether the trial court erred in vacating the Commissioner’s
February 20, 2017 order and remanding for consideration of the appropriate
penalty. Agency action subject to the Administrative Orders and Procedures
Act will be reversed only if the court determines that a person seeking judicial
relief has been prejudiced by an agency action that is arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law; contrary to
constitutional right, power, privilege, or immunity; in excess of statutory
jurisdiction, authority, or limitations, or short of statutory right; without
observance of procedure required by law; or unsupported by substantial
evidence. Fishburn v. Ind. Pub. Ret. Sys., 2 N.E.3d 814, 821 (Ind. Ct. App. 2014),
trans. denied; see Ind. Code § 4-21.5-5-14(d). A trial court and an appellate court
both review the decision of an administrative agency with the same standard of
review. Fishburn, 2 N.E.3d at 821. The burden of demonstrating the invalidity
of agency action is on the party to the judicial review proceeding asserting
invalidity. Id.; Ind. Code § 4-21.5-5-14(a). We give deference to an
administrative agency’s findings of fact, if supported by substantial evidence,
but review questions of law de novo. Fishburn, 2 N.E.3d at 821. See LTV Steel
Co. v. Griffin, 730 N.E.2d 1251, 1257 (Ind. 2000) (“While an appellate court
grants deference to the administrative agency’s findings of fact, no such
deference is accorded to the agency’s conclusions of law.”).
[8] To the extent we must interpret statutory language, our goal is to determine and
give effect to the intent of the legislature. Fishburn, 2 N.E.3d at 824. We review
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 15 of 20
an issue of statutory interpretation de novo. Id. If the statutory language is clear
and unambiguous, we require only that the words and phrases it contains are
given their plain, ordinary, and usual meanings to determine and implement the
legislature’s intent. Id. If a statute is ambiguous, we seek to ascertain and give
effect to the intent of the legislature. Id. In doing so, we read the act as a whole
and endeavor to give effect to all of the provisions. Id. Deference to an
agency’s interpretation of a statute becomes a consideration when a statute is
ambiguous and susceptible to more than one reasonable interpretation, and an
agency’s incorrect interpretation of a statute is entitled to no weight. Ind. Horse
Racing Comm’n v. Martin, 990 N.E.2d 498, 503 (Ind. Ct. App. 2013) (citations
omitted).
[9] Ind. Code §§ 27-1-15.6 govern the qualifications and procedures for the
licensing of insurance producers. Ind. Code § 27-1-15.6-1. An insurance
producer is a person required to be licensed under the laws of Indiana to sell,
solicit, or negotiate insurance. Ind. Code § 27-1-15.6-2.
[10] Ind. Code § 27-1-15.6-12(b) provides:
The commissioner may reprimand, levy a civil penalty, place an
insurance producer on probation, suspend an insurance producer’s
license, revoke an insurance producer’s license for a period of years,
permanently revoke an insurance producer’s license, or refuse to
issue or renew an insurance producer license, or take any
combination of these actions, for any of the following causes:
(1) Providing incorrect, misleading, incomplete, or
materially untrue information in a license application.
Court of Appeals of Indiana | Opinion 18A-MI-864 | December 31, 2018 Page 16 of 20
(2) Violating:
(A) an insurance law;
(B) a regulation;
(C) a subpoena of an insurance commissioner; or
(D) an order of an insurance commissioner;
of Indiana or of another state.
*****
(4) Improperly withholding, misappropriating, or converting
any monies or properties received in the course of doing
insurance business.
*****
(8) Using fraudulent, coercive, or dishonest practices, or
demonstrating incompetence, untrustworthiness, or financial
irresponsibility in the conduct of business in Indiana or
elsewhere.
[11] Ind. Code § 27-1-15.6-17(a) provides:
A producer shall report to the commissioner any administrative
action taken against the producer in another jurisdiction or by
another governmental agency in Indiana not more than thirty
(30) days after the final disposition of the matter. The report
shall include a copy of the order, consent to order, or other
relevant legal documents.
[12] The Commissioner asserts that the phrase “in the conduct of business” does not
apply to “fraudulent, coercive, or dishonest practices” in Ind. Code § 27-1-15.6-
12(b)(8) and that the statute does not apply solely to the conduct of business.
The Commissioner argues that the statute applies to a single incident of
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dishonesty and that the use of the phrase “fraudulent, coercive, or dishonest
practices” demonstrates that the use of “practices” refers to more than one type
of misconduct. The Commissioner further argues that the decision to not
renew Schumaker’s license was justified given his failure to disclose the FINRA
action. The Commissioner also argues that the sanction of nonrenewal was
reasonable and points to Schumaker’s decision to take $8,300 and the resulting
FINRA bar which he failed to timely disclose to the Department.
[13] Schumaker maintains that the Commissioner’s interpretation of Ind. Code § 27-
1-15.6-12(b)(8) is not reasonable and that the absence of any finding or evidence
that his actions were taken in the conduct of business is fatal to the
Commissioner’s conclusion. He further maintains that a single instance of
dishonesty does not constitute “practices” under subsection (8) and that the
legislature could easily have used language to specify that a single act could
result in discipline but chose instead to use plural terms and terms that require
regularity in the conduct. He also argues that it is unreasonable to deny his
renewal based on an inadvertent failure to report the results of the FINRA
action within thirty days.
[14] Ind. Code § 27-1-15.6-12(b)(8) provides the Commissioner may take action with
respect to a producer’s license for the causes of “[u]sing fraudulent, coercive, or
dishonest practices, or demonstrating incompetence, untrustworthiness, or
financial irresponsibility in the conduct of business in Indiana or elsewhere.”
The ALJ found, and the Commissioner does not dispute, that Schumaker’s
action of taking funds from his homeowners association did not occur “in the
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conduct of business.” Thus, the subsection is inapplicable in this case to the
extent the phrase “in the conduct of business” modifies each of the causes listed
in subsection (8). Even assuming the phrase “in the conduct of business” does
not modify the phrase “[u]sing fraudulent, coercive, or dishonest practices,” we
note that the ALJ found as noted by the trial court that Schumaker “took $8300
from the homeowners’ association bank account with the intent to repay it” and
that, “[w]hile dishonest, all evidence presented at the hearing was that this was
a singular issue, out of character for Schumaker, and not part of a pattern of
deceit or a series of ‘practices’ in either his personal or professional life.”
Appellant’s Appendix Volume II at 37. The evidence supports the conclusion
that Schumaker’s action of taking money from his homeowners association,
under the specific circumstances of this case as set forth in the administrative
record, did not constitute “practices” in Schumaker’s professional or personal
life which warrant the severe sanction of refusal to renew his insurance
producer license.
[15] Also, the ALJ found that Schumaker “made a full and complete disclosure of
the FINRA bar and the circumstances leading thereto” in his application for
renewal, and the Commissioner, in its decision, adopted this finding and noted
that the Department’s objection to the ALJ’s recommended order challenged in
relevant part the ALJ’s conclusions related to subsection (8), not subsection (1),
of Ind. Code § 27-1-15.6-12(b). Id. at 35. To the extent that he did not timely
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report the FINRA action to the Department and was required to do so,9
Schumaker testified that, because he was going through everything with
FINRA, he assumed FINRA shared all of that information with the
Commissioner, that he did not realize that was something he needed to do as
well, and that as soon as he went online to complete his renewal he provided an
explanation for what had happened. We agree that any delay does not merit
the strict sanction of nonrenewal of Schumaker’s license. We do not disturb the
trial court’s ruling.
[16] For the foregoing reasons, we affirm the order of the trial court.
[17] Affirmed.
Altice, J., and Tavitas, J., concur.
9
As previously noted, Ind. Code § 27-1-15.6-17(a) requires a producer to report an administrative action
against the producer “in another jurisdiction” within thirty days.
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