Insurance Service Management, Inc. v. Muhl

WILNER, Judge. The question before us is whether the Circuit Court for Montgomery County erred when it modified, and then affirmed as modified, an order of the Insurance Commissioner revoking the insurance licenses of appellants Insurance Service Management, Inc. and John G. Nocerino. We shall affirm the judgment of the Circuit Court. The appellants are essentially one and the same.

Nocerino operated an insurance agency in Silver Spring through the corporation. Appellants’ difficulties arose from their relationships with six different entities: two insurance companies (Monarch Insurance Co. and Rockwood Insurance Co.), three clients (Bootlegger, Inc., A & A Himes Decorating and Painting Co., and T.I.A.B. Corporation), and one premium finance company (TIFCO). In August, 1983, they were charged with eight violations of the Insurance Code, stemming essentially from their failure to pay amounts due to the two insurance companies and TIFCO and from their issuance of ²¹⁹ several checks drawn on insufficient funds. Specifically, they were charged with: (1) In June, 1983, fraudulently completing a premium finance agreement in the name of Bootlegger and retaining the proceeds of $6,531 in their account in violation of Md.Code Ann. art. 48A, § 175(1), (4), (6), (11), (12), and (13); 1 (2) In June, 1983, failing to maintain a sufficient balance in their checking account and proffering a check for $3,834 to TIFCO drawn on insufficient funds, in violation of § 175(4), (12), and (13); (3) In May, 1983, failing to maintain a sufficient balance in their checking account and proffering a check for $1,978 to TIFCO drawn on insufficient funds, in violation of § 175(4), (12), and (13); (4) In February, 1983, failing to maintain a sufficient balance in their checking account and proffering a check for $7,105 to Rockwood drawn on insufficient funds, in violation of § 175(4), (12), and (13); ²²⁰ (5) From March to July, 1983, failing to pay their account current to Rockwood in the amount of $11,500, in violation of § 175(11); (6) From November, 1982, to March, 1983, failing to keep their account current with Monarch in the amount of $15,-342, in violation of § 175(11); (7) From June, 1983, to December, 1983, instituting fictitious premium finance agreements in the names of Bootlegger, A & A Himes, and T.I.A.B., in violation of § 175(1), (6), (12), and (13); and (8) Failing to pay a certain civil statutory penalty of $350 within 30 days, in violation of § 175(10).

On February 7, 1984, following a hearing before a hearing officer, the Commissioner found that appellants had indeed failed to maintain sufficient balances and had issued checks drawn on insufficient funds, as alleged in charges 2 through 6, which amounted to violations of § 175(4), (11), (12), and (13). With respect to charges 1 and 7, the Commissioner found: “It is undisputed that the premium finance proceeds were, in fact, deposited in the Respondent’s account and never paid to Monarch Insurance Company. However, the evidence is less conclusive regarding the fictitious nature of the three aforementioned insureds. Although the insureds listed the same post office box mailing address and the only payments received apparently were sent from the Respondent’s agency, the Respondent stated that these were second-year renewals, and there was some indication that the carriers had had some previous contact with these insureds.” From this he concluded that appellants had violated § 175(1), (4), (6), (11), (12), and (13).

The eighth charge, dealing with the civil penalty, was dismissed when evidence was presented that appellants had paid the penalty. ²²¹ Upon these findings “together with the seriousness of the violations,” the Commissioner revoked appellants’ licenses and ordered appellants to make full restitution to Rock-wood, Monarch, and TIFCO within 60 days or in accordance with any existing agreement between the parties. Appellants filed an appeal to the Circuit Court for Montgomery County, contending that the Commissioner’s order was not supported by the evidence presented at the hearing. Most of the underlying facts found by the Commissioner, according to the court, were “undisputed on appeal.” The two factual findings that were contested were (1) that appellants received a $1,335 down payment from Bootlegger on a policy financed by TIFCO, and (2) that appellants had actually collected the premiums due by it to Monarch. The court found the first of those findings to be supported by evidence, but found no evidence to support the second.

In pertinent part, the finding made by the Commissioner on the Monarch account was that the account was past due in the amount of $17,251 “representing various premiums collected by [appellants]____” (Emphasis added.) The court modified that finding to read “representing various premiums due to be collected by [appellants]____” (Emphasis added.) The court pointed out that “[t]he bulk of Appellants’ appeal” concerned not the Commissioner’s findings of fact, but rather his conclusions of law; i.e., that appellants’ actions constituted the statutory violations found by the Commissioner. The court examined those contentions and concluded that the Commissioner was correct in finding violations of § 175(1) (wilful violation of art. 48A), (4) (misappropriation, conversion, or unlawful conversion of money belonging to an insurer), and (12) (lack of trustworthiness or competence), but that he erred in finding violations of § 175(6) (fraudulent or dishonest practices), (11) (failed or refused, on demand, to pay over money in their hands belonging to a person entitled to receive it), and (13) (does not intend to carry on business in good faith). These latter ²²² conclusions, in effect, served to vacate the Commissioner’s findings with respect to charge 7 and limit the effect of his findings as to charges 1 through 6 to § 175(1), (4), and (12). 2 With these modifications — adding the words “due to be” to the one factual finding and reversing the Commissioner’s conclusions that § 175(6), (11), and (13) had been violated— the court affirmed the Commissioner’s order. Appellants now turn to us, complaining that the court “erred in modifying and then affirming the decision of the Insurance Commissioner.” They make two arguments: first, as a matter of statutory construction, the court had no authority to modify and affirm, and second, that, having found insufficient evidence to sustain violations under § 175(6), (11), and ²²³ (13), the court was obliged to remand the case to the Commissioner so that he could determine whether revocation of the license was still an appropriate penalty.

(1) Statutory Construction Can The Court Modify And Affirm? The court’s authority, in reviewing orders of the Insurance Commissioner, other than those approving or disapproving rate filings, is governed by Md.Code Ann. art. 48A, § 40(4) and (5). They provide: “(4) Hearing de novo. — Upon receipt of such transcripts and evidence the court shall hear the matter d[e] novo as soon as reasonably possible thereafter. Upon the hearing of the appeal the court shall consider the evidence contained in the transcript, exhibits, and documents therein filed by the Commissioner, together with such additional evidence as may be offered by any party to the appeal.

(5) Judgment. — The court may affirm the decision of the Commissioner or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the administrative findings, inferences, conclusions, or decisions are: (i) In violation of constitutional provisions; or (ii) In excess of the statutory authority or jurisdiction of the Commissioner; or (iii) Made upon unlawful procedure; or (iv) Affected by other error of law; or (v) Unsupported by competent, material, and substantial evidence in view of the entire record as submitted; or (vi) Against the weight of competent, material and substantial evidence in view of the entire record, as submitted by the Commissioner and including d[e] novo evidence taken in open court; or (vii) Unsupported by the entire record, as submitted by the Commissioner and including de novo evidence taken in open court; or ²²⁴ (viii) Arbitrary or capricious.” Reading the first part of § 40(5) literally, with the semicolon in place, appellants urge that the court had no authority to modify and affirm the Commissioner’s decision — that it could affirm or remand, as one set of options, or it could reverse or modify, as another, independent set of options. We do not share that reading of the statute. It is evident that the Legislature intended to give the court all four options, equally. Those are the normal options given to a court on judicial review of an administrative agency’s order, whether the appeal is strictly on the record made before the agency or additional evidence is allowed at the judicial level.

See Md.Code Ann. State Gov’t art., § 10-215; Md.Rule B13. See also Government