Around the Western Alliance States – March 13, 2023

California — Agents & Fraud CE: The California Department of Insurance is now requiring agents to take one hour of anti-fraud continuing education every two years.

Here’s what the law says. The California Department of Insurance hereby notifies you that sections 1749, 1749.3, 1749.31, 1749.32, and 1749.33 of the California Insurance Code were amended to require licensed California resident agents and brokers and applicants for a California resident agent-broker license to complete “one hour of study on insurance fraud” as a part of, and not in addition to, their ethics training requirement. (Senate Bill 1242 [Senate Committee on Insurance, Chapter 424, Statutes of 2022])

1. What does the statute require?

California Insurance Code (CIC) Section 1749.3 requires Property Broker-Agents and/or Casualty Broker-Agents and Life agents and/or Accident and Health or Sickness agents to complete three hours of ethics training during their two-year license term. Personal Lines broker-agents and Limited Lines Automobile insurance agents will also be required to complete three hours of ethics training during their two-year license term.

2. Does a California non-resident have to complete California’s ethics training?

Per Section 1749.2 of the CIC, California non-residents are exempt from having to complete the ethics continuing education requirement. Although non-resident licensees are except from the ethics continuing education requirement, non-resident licensee must complete the required annuity and long-term care training. The annuity training is provided in Section 1749.8 of the CIC which states that non-resident life-only agent licensees who sell annuity products must complete an initial eight-hour annuity training course and then complete a four-hour annuity training course each license renewal. Similarly, Section 10234.93 of the CIC states that non-resident life-only agents who sell long-term care are required to complete eight hours of long-term care training each license term.

3. Is the ethics requirement in addition to a resident agents’ continuing education (CE) requirement?

No, this approved ethics training course will be part of, not in addition to, the agents’ CE requirement.

4. Does a licensed agent need to take a single two-hour or four-hour ethics course, in order to meet their specific CE requirement?

No, these approved ethics courses are available in various hour increments. There are one, two, three, four, and more CE credit hours given to approved ethics courses. The agent must complete courses that have credit hours that either meet or exceed the agent’s required number of ethics CE hours.

5. Will an agent who is 70 years old and has been licensed in good standing for 30 continuous years in the State of California need to complete the ethics continuing education requirement?

No, Section 1749.3 (c) of the CIC states, in part, that a licensee shall not be required to comply with the continuing education requirements stated in Section 1749 et seq. of the CIC if the licensee submits proof satisfactory to the commissioner that he or she has been a licensee in good standing for 30 continuous years in this state and is 70 years of age or older. However, the licensees that are except from continuing education training stated in Section 1749(c) of the CIC that sell annuity or long-term care products must complete the required annuity training stated in Section 1749.8 of the CIC and the long-term care training that is stated in Section 10234.93 of the CIC.

6. Is a licensee holding the Life-Limited To The Payment Of Funeral And Burial Expenses insurance, be required to complete the ethics continuing education requirement?

No, since this agent is not required to complete any continuing education the agent is also exempt from the ethics CE requirement. However, the Life-Limited To The Payment Of Funeral And Burial Expenses is required to complete the annuity training requirement stated in Section 1749.8 of the California Insurance Code, if transacting an annuity product at any time.

7. When a Life Agent, Accident and Health or Sickness Agent, Property Broker-Agent, Casualty Broker-Agent or Personal Lines Broker-Agent is placed on inactive status due to a disability, military duty, maternity leave, etc. but is now ready to return to an active status and is making up the continuing education (CE) hours missed throughout each renewal period, how many ethics continuing education courses must the agent take?

When a licensee goes from an inactive status to an active status, the licensee must complete the required continuing education (CE) hours for the renewal terms he or she was inactive (i.e. the licensee is inactive for two license terms, the licensee would need to complete 48 hours of continuing education credit). The inactive licensee would need to complete the number of required continuing education hours and a portion of the continuing education hours would need to meet the ethics CE requirement. For example, if a Property Broker-Agent licensee is inactive for two license terms, the licensee would need to complete a total of six hours of ethics continuing education in order to have a license with an active status.

8. If an applicant was recently licensed and took 12 hours of code and ethics, as part of their pre-licensing requirement, will this agent still need to take the ethics approved class?

Yes, ethics continuing education courses are developed to meet established ethics curriculum standards. The prelicensing code and ethics course do not meet those standards. The newly licensed Life Agent and/or Accident and Health Agent or Sickness and/or Property Broker-Agent and/or Casualty Broker-Agent will be required to complete three hours of an approved ethics continuing education course during his or her two-year license term.

9. Can surplus ethics continuing education hours be carried over for use in the next licensing renewal period?

No, the licensee must complete three hours of ethics continuing education as part of the 24 hours of the continuing education required every two year license renewal period


Source link:

Source link: California Department of Insurance —

California — LA business owner and conspirator sentenced in $54 million workers’ compensation insurance scheme: Wesley Owens, 54, of Atlanta, Georgia, and Beau Wilson, 38, also of Atlanta, pleaded no contest to multiple felony counts of insurance fraud and conspiracy in Department 50 of the Los Angeles Superior Court before Judge Kerry White. The charges were filed after a California Department of Insurance investigation found the two defendants perpetrated a $54 million workers’ compensation insurance fraud scheme.

They both will be sentenced to 10 years formal probation, 60 days of community labor and are ordered to pay $350,000 cash prior to their final sentencing in restitution. Wilson additionally agreed to sell five pieces of real property and remit the proceeds of the sale towards further restitution. Both also stipulated to an agreed additional $14.15 million owed in restitution during their 10 years of formal probation. If either defendant fails to fulfill the terms of their formal probation, or otherwise violates probation, they will be remanded to California State Prison for five years.

Owens owned and was the CEO of Bison Workforce Solutions, a Professional Employer Organization (PEO) based outside Atlanta, Georgia, that provided outsourced workers’ compensation insurance human resources, payroll, tax and other services to other businesses. After receiving a referral from the State Compensation Insurance Fund, the Department launched an investigation which uncovered a massive workers’ compensation insurance fraud scheme perpetrated by Owens, Wilson, and other Bison employees. The investigation found the company failed to pay approximately $29 million in premium as a result of its fraud and bilked its PEO customers out of approximately $25.5 million in fees they thought were paying for workers’ compensation insurance coverage.

The investigation found Owens would obtain workers’ compensation insurance for his company, Bison, and then use the documents provided to it by the insurance company to generate fraudulent Certificates of Insurance, which they would issue to PEO customers. The insurance carrier was told the policy was to cover a small, white-collar firm, not the PEO customers’ businesses which included agricultural workers, roofers, limo drivers, and a wide variety of other employees. The investigation also found Wilson, who was aware of the fraud, recruited customers for Bison and received commissions for each client that used the fraudulent services.

Bison became unable to obtain workers ‘compensation because of its persistent fraud so the company entered into a business relationship with another firm that already had a workers’ compensation insurance policy. Owens and his coconspirators began using that firm’s documents to continue generating fake insurance certificates. In order to conceal the fact that its policy was being misused to insure PEO customers, Bison began paying out claims itself. When the expense of this was too much for the company to sustain, it eventually stopped paying out claims and left workers uncovered by workers’ compensation insurance and with no recourse after being injured on the job.

The Department executed a search warrant in Georgia in conjunction with the Georgia Department of Insurance and conducted numerous interviews. On March 2, 2023, Owens and Wilson pleaded no contest. . Probation and sentencing is initially set for September 13, 2023. The Los Angeles County District Attorney’s Office prosecuted the case.

Idaho — Meridian agent convicted of forging life insurance policies: Kyle Blaine Swallow of Meridian pled guilty and has been convicted of one count of insurance fraud, a felony, for completing and submitting forged life insurance applications to gain a commission while he was an insurance producer.

Mr. Swallow had been charged with eight total counts of fraud; seven of which were dismissed pursuant to plea negotiations. He was sentenced to three years of probation and 120 community service hours to be completed by December 31, 2023.

Following an investigation by the Idaho Department of Insurance, Mr. Swallow’s insurance producer license was revoked on March 31, 2022, for violations of the Idaho Insurance Code. In a recorded statement, Mr. Swallow admitted to the forged applications – including one instance of doing so with a deceased individual’s identity. Swallow received approximately $5,962.68 in commissions on the false applications. This is in violation of Idaho Code § 41-293(1)(a).

Swallow’s case was referred to the Idaho Attorney General’s Office for prosecution in November 2021.

“Misconduct by licensed agents is unacceptable and will not be tolerated by the Department,” said Director Dean Cameron. “Insurance agents are expected to conduct themselves with integrity and to abide by Idaho Insurance Code. We are grateful to the Idaho Attorney General’s Office for their assistance in bringing this individual to justice.”

Since receiving his Idaho resident producer’s license in 2019, Mr. Swallow sold insurance policies with Fidelity & Guaranty Life Insurance Company, Gerber Life Insurance Company, the Independent Order of Foresters, Kansas City Life Insurance Company, and United of Omaha Life Insurance Company.

“I’m proud of our prosecutors who have brought this man to justice. Insurance fraud is not a victimless crime. It has ripple effects that create higher premium costs for hard working people in our state. We appreciate the thorough investigation and teamwork of the Department of Insurance,” said Attorney General Raúl Labrador.

In addition to Mr. Swallow’s sentencing, he was ordered to pay court costs and fees, as well as victim restitution to Mutual of Omaha for $5,962.68, and $1,003.23 to the Idaho Department of Insurance.

Oregon — Oregon to receive more than $420,000 from Nexo securities settlement: The North American Securities Administrators Association (NASAA) and the U.S. Securities and Exchange Commission (SEC) recently announced that a settlement has been reached with Nexo Capital, Inc. (Nexo) as related to the sale of certain crypto asset lending products.

Nexo was found to offer and sell unregistered securities throughout the U.S. and failed to disclose material information relating to the investments. In Oregon, more than 1,400 people invested more than $11 million. Nexo is in process of settling with all 50 states and additional North American securities regulators for total of $25 million. The Oregon Division of Financial Regulation (DFR) will receive $424,528.30 via a payment plan with the final payment due Nov. 20, 2023. Out of that total, $42,452.83 will go to the DFR financial education account.

In the past year, a working group of state regulators conducted a comprehensive investigation into Nexo’s alleged offer and sale of unregistered securities in the form of its Earned Interest Product (EIP), wherein investors would deposit their crypto assets with Nexo in exchange for promised rates of return. Many state regulators have agreed to the terms of a settlement with Nexo to resolve its past unregistered activities. More jurisdictions are expected to follow.

Nexo is a Cayman Islands corporation established in 2018 that provides virtual currency-related financial services to retail and institutional borrowers in the U.S., including trading, borrowing, and lending services. The investigation discovered that EIP investors could passively earn interest on digital assets by loaning those assets to Nexo. Nexo maintained total discretion over the revenue-generating activities used to earn returns for investors. The company offered and promoted the EIP and other products to investors in the U.S. via its website and social media channels, suggesting in some instances that investors could obtain returns as high as 36 percent.

Nexo failed to comply with state registration requirements and, as a result, investors were sold unregistered securities in violation of state law and also were deprived of critical information and disclosures necessary to understand the potential risks of the EIP.

“All financial services companies, including new companies offering services for crypto assets, must comply with Oregon’s investor protection laws,” said TK Keen, administrator for DFR. “In partnership with NASAA and other state agencies, the division continues its efforts to protect Oregonians’ retirement savings investments and ensure that companies operating in Oregon do so in accordance with the law. Cryptocurrencies and related investments are typically a volatile investment product with higher risks. Investors need to read through all of an entity’s disclosures – including what may be quite a bit of fine print – to fully understand the risks, which underscores the importance of consumers having the opportunity to read through these materials.”

The division’s consent order against Nexo can be found on our website.

Washington — Kreidler issues $25,500 in fines for violations in February: Insurance Commissioner Mike Kreidler issued fines in February totaling $25,500 against insurance companies, producers, brokers and individuals who violated state insurance laws and regulations.

Unlicensed brokers and unauthorized insurers

Empire West Insurance Services, Inc.; fined $10,000 (order 23-0030).

    Empire West obtained surplus lines insurance for consumers in Washington without being licensed to do so.

Insurance companies

Esurance Insurance Company, Northbrook, Ill.; fined $5,000 (order 23-0016).

    Esurance, part of the Allstate Insurance Group, was fined for not listing its full name and the location of its home or principal office on Allstate’s “Underwriting Companies” webpage.

Euler Hermes North America Insurance Company, Owings Mills, Md.; fined $4,000 (order 22-0718).

    Euler Hermes issued two surety bonds when it did not hold a certificate of authority for that kind of insurance. The Company also failed to keep full and adequate accounts and records.

Producers, agents & brokers

    Kelly Stutts, Mobile, Ala.; fined $250 (order 23-0027).

    Bryan Insurance Agency, Ltd. Graham, Texas; fined $250 (order 23-0039).

    Cascade West Title Company, Bellevue, Wash.; fined $1,000 (order 22-0727).

    Golden State Claims Adjusters, Carlsbad, Calif.; fined $5,000 (order 23-0029).

About PIA Western Alliance

The Professional Insurance Agents Western Alliance is a membership organization promoting and enhancing the success of independent agencies seeking to grow, learn and be heard within the industry.


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