Insurance Com'r for the State v. Engelman

• Decision Date: 01 September 1995
• Docket Number: No. 144,144
• Citation: 692 A.2d 474,345 Md. 402
• Parties: INSURANCE COMMISSIONER FOR THE STATE of Maryland v. Steven E. ENGELMAN, t/a Professional Bail Bonds, Inc., et al. ,
• Court: Maryland Court of Appeals

Page 402

345 Md. 402

692 A.2d 474

INSURANCE COMMISSIONER FOR THE STATE of Maryland v. Steven E. ENGELMAN, t/a Professional Bail Bonds, Inc., et al.

No. 144, Sept. Term, 1995.

Court of Appeals of Maryland.

April 17, 1997

Evelyn O. Cannon, Assistant Attorney General (J. Jospeh Curran, Jr., Attorney General; Joy Y. Hatchette, Assistant Attorney General, on brief), Baltimore, for Petitioner.

Andrew Jay Graham (Geoffrey H. Genth, Kramon & Graham, P.A., on brief), Baltimore, for Respondent.

Argued before MURPHY, ^* C.J., and ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI, BELL and RAKER, JJ.

KARWACKI, Judge.

We are principally called upon in this case to review the propriety of an administrative enforcement proceeding brought under the Maryland Insurance Code ("the Code"), Maryland Code (1957, 1991 Repl.Vol., 1992 Cum.Supp.), Article 48A, §§ 1-697. ¹ We are asked whether the Maryland Insurance Administration ("the MIA") may prohibit, by adjudication, bail bondsmen from accepting installment payments on bond premiums ² when their surety's approved rate filings ³ neither permit nor prohibit such activity. For the reasons explained below, we shall answer that question in the negative and affirm the judgment of the circuit court. Because this case results from the consolidation on judicial review of two separate administrative actions, we shall recount the facts relevant to each Respondent seriatim.

I.

a. Engelman

Steven E. Engelman ⁴ began operating a bail bonding company known as Professional Bail bonds on October 22, 1992. Engelman subsequently incorporated the entity as Professional Bail Bonds, Inc. ("Professional"), which began issuing bonds in its own name in January of 1993.

In March of that same year, Sandra Castagna, Senior Market Conduct Examiner for the MIA, and William McGarvey, a Market Conduct Examiner for that same organization, performed an examination of Professional's business activities as well as those of Engelman, for the period November 1, 1992 through February 28, 1993. By a letter dated April 19, 1993, ⁵ Castagna informed Engelman of the March examination results, questioning a $12,766.25 discrepancy between insurance premiums charged and premiums actually collected. Castagna also informed Engelman that "Professional" was not a registered trade name and that the corporation was not on record as having a Certificate of Qualification as required by § 168(e)(2) of the Code.

On April 22, 1993, Engelman responded to Castagna's letter, averring that he had registered Professional as a trade name and completed the corporation's Certificate of Qualification and was filing it that same day. Unsure of the alleged discrepancy period, however, Engelman requested further information so that he could adequately respond. Within six days, Engelman's father, who also was his accountant, informed Castagna by letter that, with respect to the discrepancy between premiums charged and premiums collected,

"there are numerous situations where premiums are not paid in full because of broken promises, bad checks and the bad credit of essentially indigent persons who make up the bulk of his clientelle. [sic] At the time of these shortfalls, Steven [Engelman] provides his client with a written receipt and obtains a promissory note for the balance due. Steve keeps a record of these balances due but in time, many of these receivables go on to becoming write offs ..."

Following its investigation, the MIA alleged, inter alia, that by failing to collect bond premiums in full at the time the bonds were written, Engelman violated §§ 226(a), 230(b), and 242(e) of the Code, discussed further beginning in Part III, infra. The MIA also charged Engelman with violations of § 168(e)-(f), ⁶ for failing to timely acquire a Certificate of Qualification and for failing to timely register Professional's trade name with the agency.

At a hearing held before an Administrative Law Judge ("ALJ") of the Office of Administrative Hearings, ⁷ Engelman stipulated that from November 1, 1992 to February 28, 1993, he and his employees had accepted less than the full premium for thirty-five issued bonds, although the balance of the premiums due had been secured by promissory notes. The sureties underwriting the bonds did not have a rate filing permitting installment payments. Engelman also conceded that he did not register Professional's trade name until April 20, 1993--almost five months beyond the date it began issuing bonds and collecting premiums in its own name. The ALJ recommended granting Engelman's Motion for Summary Decision on the installment payment issue, concluding that none of the cited statutes prohibited the practice. The ALJ did, however, conclude that Engelman's failure to comply with § 168(e)-(f) warranted a three-day suspension under § 175(12). ⁸

On March 8, 1995, the Insurance Commissioner ("Commissioner") rejected the ALJ's conclusions of law with respect to installment payments, concluding that "[they] ... plainly constitute[ ] a 'special favor ... benefit ... or valuable consideration' as those terms are used in § 226(a) of Article 48A," and that § 230(b) prohibited the collection of partial premiums. The Commissioner imposed a thirty-day suspension for the totality of Engelman's alleged violations. Engelman then sought judicial review in the Circuit Court for Baltimore City.

b. Wynder

After an initial hearing before the Associate Deputy Insurance Commissioner ("ADC"), Respondent Wynder was found to have violated various provisions of Art. 48A for concededly collecting bond premiums in installments. Wynder sought judicial review of the ADC's Order in the Circuit Court for Baltimore City, which remanded the case for a de novo hearing. The ALJ assigned to hear Wynder's case delayed his ruling pending the Engelman decision. On April 17, 1995, Wynder received a recommended suspension of sixty days under § 175(1), (6), and (12), see n. 6 supra, which the Commissioner adopted in a Final Order, dated April 21, 1995. Wynder once again sought judicial review in the Circuit Court for Baltimore City.

II.

Engelman and Wynder's cases were consolidated on judicial review. The circuit court reversed Respondents' suspensions for accepting "short money." In its Memorandum Opinion and Order, the court ruled that "installment plans, with or without interest, are permitted under the [Insurance] Code, and do not constitute a 'valuable consideration' given in exchange for the purchase of the bond [within the meaning of § 226(a) ]." The court further concluded that even assuming that the Commissioner himself prohibited the practice of accepting "short money," that policy was unknown and unknowable to Engelman and Wynder and fairness dictated that the Commissioner adopt a specific rule prohibiting the practice.

The court, however, affirmed Engelman's suspension for failing to register and qualify Professional in a timely manner, but remanded the case so that the Commissioner could consider what portion of Engelman's suspension was attributable to his registration and qualification failures. The Commissioner appealed that judgment to the Court of Special Appeals. Engelman filed a cross-appeal. We granted a writ of certiorari in both cases before argument in the intermediate appellate court to consider the issues raised.

III.

Ordinarily, a final order of the Commissioner must be upheld on judicial review if it is legally correct and reasonably supported by the evidentiary record. Montgomery County v. Buckman, 333 Md. 516, 519, 636 A.2d 448, 450 (1994); Younkers v. Prince George's County, 333 Md. 14, 18-19, 633 A.2d 861, 862-63 (1993). This standard of review is both narrow and expansive. It is narrow to the extent that reviewing courts, out of deference to agency expertise, are required to affirm an agency's findings of fact, as well as its application of law to those facts, if reasonably supported by the administrative record, viewed as a whole. United Parcel Service v. People's Counsel, 336 Md. 569, 577, 650 A.2d 226, 230 (1994); Supervisor v. Asbury Methodist Home, 313 Md. 614, 625-27, 547 A.2d 190, 195-96 (1988); Bulluck v. Pelham Wood Apts., 283 Md. 505, 513, 390 A.2d 1119, 1124 (1978). The standard is equally broad to the extent that reviewing courts are under no constraint to affirm an agency decision premised solely upon an erroneous conclusion of law. United Parcel Service, 336 Md. at 577, 650 A.2d at 230; Baltimore Lutheran High Sch. Ass'n v. Employment Security Admin., 302 Md. 649, 662, 490 A.2d 701, 708 (1985).

The fact that both Engelman and Wynder secured bond premiums with promissory notes or otherwise extended credit to their customers is undisputed. Therefore, the only remaining question is whether that practice is proscribed by the Insurance Code when not part of an approved rate filing.

IV.

Leaning on the oft quoted principles of statutory construction, see generally Kaczorowski v. Mayor, 309 Md. 505, 515, 525 A.2d 628, 632-33 (1987), the Commissioner maintains that when read together, the package of Code provisions addressing the regulation of rate filings compels the conclusion that installment payments are prohibited if not part of an approved rate filing. Specifically, the Commissioner points to §§ 226(a), 230(b) and 242(e) of the Code. They provide in pertinent part:

" § 226. Unfair discrimination and rebates--Property, casualty and surety insurance.

(a) Giving of rebates inducement by insurer, agent or broker prohibited.--No insurer or any employee or representative thereof, and no agent or broker shall pay, allow, or give or offer to pay, allow, or give, directly or indirectly, as an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit, or reduction of the premium named in the policy of insurance, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement whatever, not specified in the...