Chandler v. State, Office of Ins. Com'R
| Decision Date | 30 July 2007 |
| Docket Number | No. 57853-7-I.,57853-7-I. |
| Citation | 141 Wn. App. 639,173 P.3d 275 |
| Parties | Jack CHANDLER, Appellant, v. STATE of Washington, OFFICE OF the INSURANCE COMMISSIONER, Respondent. |
| Court | Washington Court of Appeals |
William F. Tri, Jelsing Tri West & Andrus PLLC, Everett, WA, for Appellant.
Elizabeth Christina Beusch, Atty. Gen. Office, Olympia, WA, for Respondent.
¶ 1 Jack Chandler challenges the order revoking his Washington insurance agent's license. He asserts the Review Judge applied the wrong duty of care and burden of proof and her Final Order was not supported by substantial evidence. Under the recent Supreme Court holding in Ongom v. Department of Health, professional disciplinary hearings require clear and convincing proof.1 The Review Judge based her ruling here on both the former preponderance of the evidence and the anticipated clear and convincing evidence standards and correctly rejected the Administrative Law Judge's use of caveat emptor as the standard of care. Chandler challenges the Review Judge's application of a heightened fiduciary standard of care, but we need not decide this issue because substantial evidence supports the Review Judge's decision under the statutory duty of care found in RCW 48.01.030. We affirm.
¶ 2 The facts in this case are well-known to the parties and will be discussed only as they relate to the issues below.
¶ 3 Jack Chandler was a licensed insurance agent in California until he surrendered his license in 2001. He moved to Washington and obtained a resident insurance agent's license. His Washington license was revoked on June 18, 2004. While in Washington, Chandler targeted senior citizens as his clientele and represented himself as an elder planner. Chandler has created several limited liability corporations targeting seniors, including the Senior Loan Center, L.L.C., and a not-for-profit organization, Elder Planners of Washington.
¶ 4 On September 26, 2002, the Office of the Insurance Commissioner (OIC) issued an order revoking Chandler's license on the ground that he was untrustworthy, a source of injury and loss to the public, and not qualified to be an insurance agent. It listed the following reasons for this revocation order: (1) illegally issuing securities for public telephone and/or telephone service (Alpha Telecom) as indicated by the Consent Order Jones signed with the Department of Financial Institutions (DFI), Securities Division; (2) failure to notify the Commissioner of his address change as required by RCW 48.17.450; (3) violating RCW 48.17.475 by failing to promptly respond to two inquiries by OIC investigator Tom Talarico; and (4) violating RCW 48.17.070 and .090(3) by failing to disclose, when he applied for his Washington license, the eight investigations to which he was subject while licensed in California. On December 30, 2002, the OIC amended the Revocation Order, adding the following charges: (1) Chandler continued to contact Bill and Evelyn Kristjanson, a married couple who are each over 80 years old, and attempted to sell them a living will, trust, long-term care coverage, and a reverse mortgage after their daughter informed him that her parents suffered from memory loss and confusion about financial matters; (2) Chandler used high-pressure sales tactics and misrepresented himself to Betty Husby by promising to help her pay lower property taxes in order to sell insurance products, including a reverse mortgage; (3) Chandler sold a living trust and attempted to sell a reverse mortgage to Ray Bruner, despite his son's request that Chandler stop contacting his father, and accepted $965 from Ray Bruner for trust documents that were not delivered; and (4) Chandler accepted $965 from Harold and Juanita Boeckel to create a living trust that was incorrect and became angry and intimidating during the course of the transaction. In these orders, the OIC found that his conduct showed Chandler was untrustworthy and a source of injury and loss to the public, in violation of RCW 48.17.530(h). The matter was referred to an administrative law judge (ALJ) at the Office of Administrative Hearings.
¶ 5 On September 26, 2003, the ALJ issued an Initial Decision and Order which rejected the Revocation Order on the ground that there was insufficient evidence of untrustworthiness and that the "law of caveat emptor remains the general rule in the consumer marketplace." The Initial Decision was referred to a Review Judge to issue a final order on behalf of the Insurance Commissioner, as required by RCW 34.05.464(4) and WAC 284-02-070(2)(b)(i). On June 18, 2004, the Review Judge rejected the ALJ's Initial Decision and issued a Final Order revoking Chandler's license.
¶ 6 In her Final Order, the Review Judge did not adopt all of the ALJ's findings or conclusions. She ruled that the ALJ applied an incorrect standard to determine Chandler's trustworthiness as an insurance agent because "[i]nsurance agents have a `duty of preserving inviolate the integrity of insurance.'" The Review Judge found the ALJ incorrectly applied the rule of the market-place, or caveat emptor, rather than the statutory requirement of integrity, honesty, and equity found in RCW 48.01.030. He therefore improperly placed the entire burden on the elderly consumers to protect themselves against being misled and injured by Chandler's actions. Quoting Tank v. State Farm Fire & Casualty Company,2 she stated "[t]here is a fiduciary relationship between an insured and the insurance agent that requires not only `honest and lawfulness of purpose' but also a `broad obligation of fair dealing'" and reasoned that a heightened standard applied because "the responsibility of an agent to act fairly and honestly is heightened where, as in this case, the agent represents himself as a specialist interested in providing his clients `their options ... to better handle life's certainties and uncertainties.'"3 The Review Judge based her Findings of Fact and the following Conclusions of Law on violations of RCW 48.17.070, 48.17.520(1)(h), and 48.17.530(1)(b).4
¶ 7 Chandler appealed his license revocation to the Snohomish County Superior Court. That court affirmed the Review Judge's Final Order, ruling that there was substantial evidence of Chandler's untrustworthiness and that he was not qualified to be an insurance agent under RCW 48.17.530(1)(h). Chandler appeals.
¶ 8 Judicial review of a final administrative decision is governed by the Washington Administrative Procedure Act (WAPA), chapter 34.05 RCW. "In reviewing administrative action, this court sits in the same position as the superior court, applying the standards of the WAPA directly to the record before the agency."5 To the extent they modify or replace the ALJ's findings of fact and conclusions of law, a review judge's findings and conclusions are relevant on appeal.6 We apply a substantial evidence standard to an agency's findings of fact but review de novo its conclusions of law.7 RCW 34.05.570 governs judicial review of an agency order. Reviewing courts may grant relief only if the party challenging the agency order shows that the order is invalid for one of the reasons set forth in RCW 34.05.570(3).8 An agency's conclusion of law can be reversed or modified if "[t]he agency has erroneously interpreted or applied the law."9 When reviewing factual issues, the substantial evidence standard is highly deferential to the agency fact finder.10 When an agency determination is based heavily on factual matters that are complex, technical, and close to the heart of the agency's expertise, we give substantial deference to agency views.11 Under this standard, evidence must be of a sufficient quantum to persuade a fair-minded person of the truth of a declared premise.12 But courts will not weigh the evidence or substitute our judgment regarding witness credibility for that of the agency.13 Findings of fact to which no error has been assigned are verities on appeal.14
¶ 9 Chandler challenges the Review Judge's Final Order on the grounds that it is unconstitutionally vague on its face and as applied, based on an erroneous interpretation and application of the law, not supported by substantial evidence, and arbitrary and capricious.15
¶ 10 Chandler correctly argues that the OIC must prove its case with clear, cogent, and convincing evidence. In Ongom v. Department of Health, the Supreme Court held that due process requires clear and convincing proof in professional licensing discipline cases.16 Here, the Review Judge applied the correct standard and based her decision on both the preponderance and clear and convincing evidence standards.
¶ 11 Chandler asserts that the Review Judge erred because she failed to give "due regard" to the credibility determinations of the ALJ. OIC contends that the courts should give substantial deference to the findings of the Review Judge and that the relevant inquiry is whether the record supports the findings in the final order. In RCW 34.05.464, WAPA sets forth procedures by which agencies may conduct internal reviews of initial orders.17 RCW 34.05.464(4) provides that the reviewing officer shall exercise all decision-making powers that would have been necessary to decide and enter a final order had the Review Judge presided over the hearing, requiring only that the Review Judge give "due regard" to the fact finder's opportunity to observe witnesses. Because the Review Judge may substitute her findings for those made by the ALJ, it is the Review Judge's findings to which we apply the substantial evidence test on appeal.18
¶ 12 In order to generate clients, Chandler mailed lead cards to 128,000 seniors in King and Snohomish counties. The cards advertised the availability of possible property tax exemptions and living trusts. When seniors responded to these cards, Chandler used the opportunity to sell other...
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