Mais v. Allianz Life Ins. Co. of N. Am.
| Decision Date | 22 July 2014 |
| Docket Number | Case No. 1:12–CV–565. |
| Citation | 34 F.Supp.3d 754 |
| Parties | Jerry A. MAIS, et al., Plaintiffs, v. ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant. |
| Court | U.S. District Court — Western District of Michigan |
Sharon L. McWhorter, McWhorter Law Firm, Portage, MI, Michael A. Roth, Law Offices of Michael A. Roth PLC, Kalamazoo, MI, for Plaintiffs.
Howard William Burdett, Jr., Boyle Burdett, Grosse Pointe Park, MI, for Defendant.
Jerry Mais has been an Allianz customer since 2005. Joseph Fabian was his Allianz agent. Allianz terminated Fabian's agency in 2007 because Fabian failed to renew his insurance license. The termination was “without cause,” meaning that Fabian could no longer open or accept checks for new accounts but could continue to collect commissions and new customer money on existing Allianz accounts. But Mais did not know about the change in agency authority—and Allianz never told him. After Fabian's initial termination, Mais gave Fabian two large checks made out to Allianz, and Fabian converted them to his own use rather than apply them to new Allianz products. Mais found out about this years later when the FBI investigated Fabian for wire fraud. Mais filed this lawsuit to hold Allianz accountable for its agent's conduct. This Court held a bench trial in this case on June 10–11, 2014. This opinion constitutes the Court's findings of fact and conclusions of law on all triable issues under Federal Rule of Civil Procedure 52.
Jerry Mais purchased his first Allianz product in 2005. That year, he actually purchased four Allianz products—two for himself and two for his wife. Mais was introduced to Allianz products by Allianz agent Joseph Fabian. Fabian was a third-party insurance agent and broker who operated his own independent office. He had been an Allianz agent since 1998. As its agent, Fabian had authority to sell Allianz products, accept checks on behalf of Allianz, and service existing Allianz accounts, which included authority to access confidential account information. Operating out of his own office, Fabian independently recruited and cultivated Allianz clients to earn commissions.
Each time Mais purchased an Allianz product, he filled out an application with Fabian, and gave Fabian a check payable to Allianz. Fabian would submit the application forms on Mais's behalf and Mais would receive confirmation of his new account from Allianz by mail. Fabian also faithfully submitted Mais's checks to Allianz for the first four Allianz purchases. Mais was pleased with the rate of return of his Allianz products and he developed greater trust in Fabian and Allianz.
On or about July 26, 2007, Allianz learned that Fabian had not renewed his license to sell insurance in Michigan. As a result, it terminated Fabian “without cause.” Under Allianz policy, an agent terminated without cause is authorized to continue servicing existing accounts, which includes collecting any residual commissions on the business, and accepting checks on behalf of Allianz to deposit into those accounts. Termination “for cause,” by contrast, terminates such authorization and completely severs the agency relationship. Accordingly, even after termination without cause in 2007, Fabian remained an agent of Allianz authorized to accept checks for existing accounts on Allianz's behalf.
Allianz did not inform Mais—or any other clients—that it had terminated Fabian in 2007. Nor did it inform Mais that Fabian was no longer licensed to sell insurance in Michigan or no longer authorized to open or accept checks for new accounts. In fact, as a policy matter, Allianz does not inform its clients when their agent is terminated “without cause.” It is no surprise then, that Mais thought nothing had changed. The last official word Mais had received from Allianz was that Fabian, an agent in good standing, was fully authorized to open accounts and accept checks for new and existing accounts.
After his 2007 termination, Fabian encouraged Mais to buy a new Allianz product.
Mais agreed. On February 7, 2008, he wrote a check to Allianz for $261,500 for a new Allianz annuity. Everything about the process seemed normal to Mais. He and Fabian completed the Allianz application in the same manner as before, and, as usual, Mais made his check payable to Allianz. Allianz cashed the check and accepted the business even though Fabian was not supposed to be selling new Allianz annuities. Fabian sent the new business to Allianz in the name of another Allianz agent, Barbara Kelsey, operating from Fabian's office. Mais was not aware of this. From his perspective, the transaction was exactly like the original four purchases he made from Allianz through Fabian.
In March 2008, Mais wanted to create a funding mechanism for an educational trust to benefit his children and grandchildren.1 Mais and Fabian filled out an application together, and Mais gave Fabian a check for $121,000 payable to “Allianz Trust Account.” Everything about the process seemed normal. This time, however, Fabian stole Mais's check. Instead of delivering it to Allianz, Fabian deposited it into an account for his personal use. On August 14, 2008, the process repeated itself. Mais gave Fabian another check intended to fund the educational trust. This check was made payable to “Allianz” in the amount of $82,671.92. Fabian stole this check, too.
At the time Fabian stole these checks, Fabian continued to have actual authority to accept checks from existing customers, like Mais, for Allianz. Allianz never communicated to Mais any limit on Fabian's authority before Fabian stole the checks. Nor did Allianz monitor Fabian's day-to-day activity to ensure he was not exceeding the bounds of his limited authority in 2008 or 2009. To the contrary, Allianz actually accepted new business from Mais in February of 2008, just a month before Fabian stole Mais's check. Moreover, between the March and August 2008 thefts, Allianz sent Mais a new customer “welcome” letter, further reinforcing Mais's sense that the relationship between Fabian and Allianz was unchanged.
In early 2009, Allianz received two complaints about Fabian. The first complaint was that a client had given Fabian funds to open an Allianz policy but the policy had not been opened. The second complaint was that Fabian had been making sales presentations and meeting with clients to process Allianz applications even though Barbara Kelsey, one of Fabian's associates and another Allianz agent, was nominally listed as the agent opening the new accounts. A common theme of both complaints was that Fabian was opening accounts or accepting checks for new accounts, contrary to his limited authority with Allianz. Moreover, the first complaint suggested the very real risk of theft of client funds.
Barbara Krueger, an Allianz special investigator, investigated the complaints. She generated a broker-specific Financial Industry Regulatory Authority (“FINRA”) report about Fabian. It documented a pending investigation of Fabian involving a potentially fraudulent real estate dispute. No disciplinary action had been recommended or taken at the time. There were no other investigations. The record evidence suggests that Krueger did not continue to monitor the pending investigation for its resolution.
Krueger also investigated Barbara Kelsey. In mid-February 2009, Krueger sent letters to clients disguised as a “routine” survey from Allianz to Kelsey's clients. (Def.Ex. DD.) The survey inquired into the name of the client's Allianz agent, how the client met the agent, and whether the client had any questions or concerns about the policy. Mais received one of these letters because Kelsey was listed as the agent for his February 2008 annuity, even though Mais had applied with Fabian. The letter appeared routine, and Mais did not respond. Nor did he have any reason to do so. Everything seemed completely normal, and Allianz had told him nothing to suggest otherwise. In mid-March 2009, Krueger sent a follow-up letter with her original letter enclosed. It indicated that if Allianz did not hear from Mais, it would “assume your policy records are accurate, and you remain satisfied with your policy.” (Def.Ex. DD.) Again, Mais did not respond to what appeared to be a routine survey. Ultimately, even though Allianz had reason to believe Fabian was opening accounts and accepting checks for new accounts beyond the scope of his authority and reason to suspect Fabian was misapplying customer funds, it declined to take action.
In early 2010, Krueger investigated a third complaint about Fabian. She discovered that Fabian had modified or created documents on Allianz letterhead without authorization. Detecting fraud, Allianz terminated Fabian for cause. It sent Fabian's clients a brief letter stating that Fabian was “no longer contracted with Allianz life,” and was “no longer authorized to provide ongoing service” of Allianz products. (Pl. Ex. 17.) The letter did not give a reason for Fabian's termination or provide any warning that the clients' accounts may have been compromised.
Mais asked Fabian about the letter. Fabian explained that he was no longer working with Allianz because its commissions were too low. Absent any word from Allianz, all Mais knew was that his longtime Allianz agent was no longer an agent. He didn't know Fabian had been fired for fraud, and he had no reason to believe Fabian was unlicensed to sell insurance in Michigan.
The FBI investigated Fabian. The government filed a felony information on May 16, 2011, charging Fabian with wire fraud. On ...
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Mais v. Allianz Life Ins. Co. of N. Am.
...34 F.Supp.3d 754Jerry A. MAIS, et al., Plaintiffs,v.ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant.Case No. 1:12–CV–565.United States District Court, W.D. Michigan, Southern Division.Signed July 22, Ordered accordingly. [34 F.Supp.3d 758] Sharon L. McWhorter, McWhorter Law Firm,......