Diversified Benefit Plans Agency, Inc. v. Harold Duryee, Superintendent, Ohio Dept. of Ins.

• Decision Date: 01 March 1995
• Docket Number: 94CA005897,95-LW-2389
• Parties: DIVERSIFIED BENEFIT PLANS AGENCY, INC., et al., Appellees v. HAROLD DURYEE, SUPERINTENDENT, OHIO DEPT. OF INSURANCE, Appellant C.A.
• Court: Ohio Court of Appeals

DIVERSIFIED BENEFIT PLANS AGENCY, INC., et al Appellees v. HAROLD DURYEE, SUPERINTENDENT, OHIO DEPT. OF INSURANCE, Appellant

No. 94CA005897

95-LW-2389 (9th)

Court of Appeals of Ohio, Ninth District Lorain

March 1, 1995

APPEAL FROM JUDGMENT ENTERED IN THE COMMON PLEAS COURT CASE NO 93CV110843

This cause was heard upon the record in the trial court. Each error assigned has been reviewed and the following disposition is made:

DECISION

BAIRD J.

Harold Duryee, Superintendent, Ohio Department of Insurance ("Superintendent"), appeals the decision of the Lorain County Common Pleas Court vacating an order issued by the Superintendent in the matters of Thomas J. Patton ("Patton") and Diversified Benefit Plans Agency Inc. ("Diversified"). We reverse.

Patton is president of Diversified. Both Patton and Diversified are licensed by the Ohio Department of Insurance to act as insurance agents in the State of Ohio. On October 23, 1992, the Superintendent sent Patton and Diversified two Notices of Opportunity for Hearing related to Patton's and Diversified's business dealings with the County of Lorain ("County"). Patton was alleged to have misrepresented to the County the premium rate for group life insurance, misrepresented himself as "administrator" for the county, and exceeded his authority by preparing and submitting a group life insurance application to an agency for which he was not licensed. Both Patton and Diversified were alleged to have made misrepresentations to the County with respect to conversion coverage.

A.

All charges against Patton and Diversified were consolidated, and a hearing was held before an attorney examiner at the Ohio Department of Insurance on March 9, 1993. On May 19, 1993, the examiner issued her report and recommendation, finding that:

1) From November 25, 1986, through at least April 6, 1988, Patton knowingly misrepresented to the County the premium rate for group life insurance provided by Medical Life Insurance Company ("Med Life"), a subsidiary of Blue Cross and Blue Shield of Ohio, Inc. Patton initially proposed coverage from Canada Life at the rate of thirty-two cents per $1,000 coverage, with such premium to include accidental death and dismemberment ("AD&D") coverage. Patton subsequently negotiated with Med Life to provide the County's coverage at a rate of twenty-four cents per $1,000 coverage, but he continued to charge the County the thirty-two cent rate and retained the difference as his fee.

2) Patton had, on two occasions, signed applications for insurance with Amerisure Life Insurance Company ("Amerisure") as the County's "administrator," thereby exceeding his authority as an insurance agent.

3) On November 17, 1989, Patton signed an application for new coverage for the County with AIG Life Insurance Company ("AIG") and, by doing so, exceeded his authority because he was not licensed by AIG as its agent until November 8, 1991, nearly two years later.

4) Both Patton and Diversified made misrepresentations to the County about conversion coverage in connection with a bid they submitted to the County in response to a request for proposal for group health insurance. The proposal quoted a rate of fifty cents per employee per month for conversion coverage and was based upon rates charged by Celtic Life Insurance ("Celtic"). In return for the monthly fee, Celtic provides employees with the right to convert to an individual policy upon a termination of group coverage. Neither Patton nor Diversified ever provided such coverage. Instead, they provided counseling services to employees for which they charged the fifty-cent rate per month.

The examiner recommended that the Superintendent issue an order revoking all insurance licenses held by Patton in the State of Ohio, ordering both Patton and Diversified to cease and desist from violating R.C. 3901.20, and ordering that they return to the County all payments received for conversion coverage, plus interest. The examiner further recommended that insurance companies and agencies, including Diversified, be prohibited from employing Patton or permitting him to serve as a director, consultant, or in any other capacity.

On July 26, 1993, the Superintendent adopted the recommendations of the hearing examiner, except with respect to the requirement that Patton and Diversified return all payments received from the County for conversion coverage.^[1]

B.

Patton and Diversified appealed the Superintendent's order to the Lorain County Common Pleas Court pursuant to the procedure for administrative appeals set forth in R.C. 119.12. The court, after admitting additional evidence not before the examiner at the hearing, reversed the Superintendent's order, noting that the record demonstrated "no pattern of alleged dishonest practices, untrustworthiness, unfair or deceptive acts or practices regarding any client other than the County of Lorain." The court stated that, because only one client was complaining about Patton and Diversified, it was required to review the Superintendent's findings with particularity to determine if such findings were supported by reliable, probative and "substantive" evidence, and were in accordance with law. The court noted that "[o]rdinarily, a reviewing court may not substitute its judgment for that of the agency unless it finds that there is not a preponderance of reliable, probative and substantial evidence to support the agency's decision." The court concluded that such preponderance of evidence did not exist in the record to support the Superintendent's decision and vacated the Superintendent's order.

The court found that: 1) Patton had not knowingly misrepresented to the County his receipt of eight cents of the thirty-two cents paid by the County for life insurance and AD&D coverage; 2) the County was aware of the arrangement between Patton and the insurance providers; 3) Patton complied with the terms of his competitive bid; 4) no employees were harmed by his arrangement; 5) Patton reasonably believed he had authority to sign as "administrator" of the insurance programs; 6) Patton had implied authority to submit an application to AIG without being licensed; and 7) neither Patton nor Diversified made misrepresentations to the County about conversion coverage.

C.

The Superintendent appeals the common pleas court's order, asserting three assignments of error. Because two of the assignments of error raised on this appeal involve the standard of review used by the trial court and the standard of review to be used by this court, we review such standards as a preliminary matter.

Patton and Diversified's appeal to the Lorain County Court of Common Pleas was taken pursuant to R.C. 119.12 which governs certain appeals of agency orders, including those which revoke or suspend a party's license to engage in certain professional activities. When reviewing an order of an administrative agency, a common pleas court acts in a "limited appellate capacity." Univ. Hosp., Univ. of Cincinnati College of Medicine v. State Emp. Relations Bd. (1992), 63 Ohio St.3d 339, 343. In reviewing an order of an administrative agency pursuant to R.C. 119.12, the common pleas court is bound to affirm the agency's order "if it is supported by reliable, probative, and substantial evidence, and is in accordance with the law." Pons v. Ohio State Med. Bd. (1993), 66 Ohio St.3d 619, 621. See, also, Bottoms Up, Inc. v. Liquor Control Comm., (1991), 72 Ohio App.3d 726, 728. The common pleas court "must give due deference to the administrative resolution of evidentiary conflicts" and therefore must not substitute its judgment for that of the administrative agency. Hawkins v. Marion Corr. Inst., (1990), 62 Ohio App.3d 863, 870, quoting Univ. of Cincinnati v. Conrad, (1980), 63 Ohio St.2d 108, 111.

An appellate court's review of the trial court's decision is even more limited and requires the appellate court "to determine only if the trial court has abused its discretion, i.e., being not merely an error of judgment, but perversity of will, passion, prejudice, partiality or moral delinquency. Pons, 66 Ohio St. 3d at 621. Where the common pleas court applies a standard of review greater than that called for in R.C. 119.12, the trial court has abused its discretion. Bottoms Up., Inc. 72 Ohio App.3d at 729-730.

D.

In his first and third assignments of error, the Superintendent asserts that the lower court abused its discretion and erred as a matter of law by 1) construing R.C. 3901.20 to require a widespread pattern of unfair and deceptive practices involving more than just one client before the Superintendent can take action for violation of the statute; and 2) failing to uphold the order of the Superintendent when such order was supported by reliable, probative, and substantial evidence and was in accordance with law.

1.

R.C. 3901.20 states that "No person shall engage in this state in any trade practice which is defined in sections 3901.19 to 3901.23 of the Revised Code as, or determined pursuant to those sections to be, an unfair or deceptive act or practice in the business of insurance." (Emphasis added.) In its order, the common pleas court stated:

I first note that while the Superintendent would impose a professional "death sentence" upon Patton and de facto divorce him from his company, Diversified, there is no pattern of alleged dishonest practices, untrustworthiness, unfair or deceptive acts or practices regarding any client other than the County of Lorain. Prior to a permanent revocation of a professional license I would expect to see a widespread pattern of wrongdoing involving more than just one client.

The court cites no authority for its position, nor have we found any. The statute clearly prohibits "any" unfair trade practice....