By Cyril Tuohy
The Connecticut Supreme Court has reversed a lower court which ruled in favor of the Connecticut insurance regulator against a group of agents who were terminated due to alleged misconduct while selling life insurance policies to military personnel.
In Financial Consulting LLC v. Commissioner of Insurance, the state Supreme Court found that the trial court had improperly dismissed the agents’ claims in 2011 against Connecticut Insurance Commissioner Thomas Leonardi.
Justice Richard A. Robinson found that the state’s “exhaustion doctrine” does not preclude a legal party from asking the court to clarify a matter in dispute by issuing a “declaratory judgment,” even when such matters are the subject of an administrative agency’s pending investigation.
Since the issuance of “second chance notices” by the Connecticut Insurance Department did not start administrative proceedings that would have given the agents access to administrative remedies, and since a formal hearing had not yet been instituted, the agents had “nothing further to exhaust,” Robinson wrote.
The Supreme Court also sent the case back to the trial court for further proceedings.
Life insurance producers Carl Reidemeister, Thomas M. Bonelli, Thomas Moore Jr., Sean Wallace and Financial Consulting asked for the court to intercede after Leonardi’s office launched a probe into their conduct in connection with the agents’ firing by Illinois Mutual.
During the course of the investigation, conducted in the first six months of 2011, the Connecticut insurance regulator offered the agents and opportunity to prove they followed the law by asking the agents a series of questions.
The agents, however, claimed the commissioner’s questions threatened their legal rights and privileges and on July 5, 2011, asked for a “declaratory ruling” on the questions from Leonardi’s office, according to court documents.
Two months later, with no answer from the regulator, the agents sought a declaratory judgment from the court.
In response, the commissioner asked the court to dismiss the agents’ claims on the grounds that the trial court “lacked subject matter jurisdiction,” court documents show.
The commissioner argued that that agents had failed to exhaust their administrative remedies before going to court. The commissioner also said the agents had not done enough to establish their standing in asking for a declaratory judgment, court documents also show.
When the trial court sided with the commissioner, the agents appealed.
The Connecticut Insurance Department’s investigation into the conduct of the agents remains active as the regulator decides whether it will bring administrative charges against the agents, court documents indicate.
Cyril Tuohy is senior writer for InsuranceNewsNet. He has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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