California’s insurance brokers are licensed and disciplined by the Insurance Commissioner through the Department of Insurance (DOI).  It has been my experience that the Department of Insurance takes a firm stance in disciplining its licensees.  In my view there are three reasons that account for this: 1) the Insurance Commissioner is an elected public official who has political concerns should his Department be perceived as being weak in disciplining licensees, 2) the legacy of  the Insurance Commissioner Chuck Quackenbush scandal in 2000, and 3) the subsequent enactment of Insurance Code section 12921 which makes the Insurance Commissioner solely responsible for the administrative settlements.  There are particular public protection issues relative to insurance brokers, because theft of premium monies and the failure to bind insurance, which leaves consumers unprotected and vulnerable, are constant problems.

The DOI also has some powerful tools in its tool chest, including Insurance Code section 1669, which allows for summary revocation of a license (that is, revocation without a hearing), as well as summary denial of a license application, where a licensee or license applicant has been convicted of a felony, has lost another occupational license, or has been convicted of a criminal violation of the Insurance Code.  The Insurance Code also permits the DOI to revoke a license when a licensee is "not of good business reputation" or it is simply "against the public interest" for them to have a license.   No profession, not even physicians, is subject to such vague and broad standards of discipline.

Despite these considerable legal hurdles, we have found that licensees and license applicants can be successfully represented before the DOI.  In the case of the Order of Summary Revocation, the DOI will consider a timely filed Petition for Reconsideration under Government Code section 11521.  In cases where a licensee or applicant is entitled to a hearing, the DOI tends to respect the outcome of administrative hearings, and is very receptive to a strong showing of character fitness or rehabilitation by its licensees or license applicants.  In most of the cases we have handled, those cases that were not dismissed resulted in license restriction.  License restriction by the DOI is less onerous that license probation typically used by other licensing agencies and usually requires little of the licensee or license applicant beyond compliance with all laws until the license restriction is lifted.  Restriction can later be lifted by a petition to the DOI, clearing the insurance broker’s license of discipline.

The pitfalls of a license denial or license discipline case usually arise at the beginning of the case.  License applicants, seeking to avoid disclosure of past indiscretions, sometimes file false or incomplete applications that do not list prior convictions.  Current licensees either fail to notify the DOI of changes to their background information, fail to respond to a demand for information, or make statements that are later used against them.  It is absolutely critical that a license applicant or licensee handle all communications with DOI properly, employing honesty and sincere cooperation in most cases, but exercising one’s right to remain silent in cases that can lead to criminal charges, and of course carefully choosing one’s words in all communications.  The words of the Miranda warning are true here – everything you say can be used against you in a court of law.