Insurance agencies generally think of legal disputes as involving customers, carriers, employees, or competitors. But an agency can also find itself directly at odds with the regulator responsible for its license.
That is what happened in Grant C. Bennett, Sr. and Grant C. Bennett Insurance Agency, Inc. v. Louisiana Department of Insurance, a dispute that eventually reached the Louisiana Court of Appeal in 2021. The case demonstrates not only the considerable enforcement authority possessed by state insurance departments, but also the importance of understanding the administrative appeal process when an agency challenges a regulator.
The Department Suspends the Licenses
Grant C. Bennett, Sr. and Grant C. Bennett Insurance Agency, Inc. both held Louisiana insurance producer licenses. On July 1, 2015, the Louisiana Department of Insurance summarily suspended those licenses. Bennett and the agency challenged the suspension and requested that it be stayed while they contested the Department’s action.
Before the hearing on that request occurred, however, the Department went further. It revoked both insurance licenses and imposed a $5,000 fine on Bennett and another $5,000 fine on the agency. The Department subsequently issued an additional notice identifying further alleged violations of Louisiana insurance law.
According to the subsequent appellate decision, the Department’s disciplinary action included alleged violations of Louisiana Revised Statutes §22:1554(A)(3), (4), and (5). Those provisions give Louisiana’s Insurance Commissioner authority to discipline producers for conduct including failure to properly account for or remit insurance premiums or other money, fraudulent or dishonest practices or financial irresponsibility, and misrepresentation concerning an insurance contract, binder, rider, plan, or application.
Importantly, the 2021 appellate opinion concentrates primarily on the procedural history and does not provide a detailed factual account of every transaction underlying the Department’s allegations.
The Agency Fights Back
Bennett and his agency did not simply accept the Department’s decision. An administrative hearing was eventually held before an administrative law judge on November 3, 2016. The administrative judge ruled in favor of the Louisiana Department of Insurance and affirmed the license revocations and fines.
Bennett and the agency then filed a petition for judicial review in Louisiana’s Nineteenth Judicial District Court. That effort was also unsuccessful. Following a December 2019 hearing, the district court issued a January 21, 2020 judgment denying Bennett’s petition for review.
The agency then took its dispute to the Louisiana Court of Appeal, First Circuit.
An Unusual Ending
Interestingly, the Court of Appeal did not ultimately decide whether the Department of Insurance was substantively correct in revoking the licenses.
Instead, the majority found a problem with the wording of the lower court’s judgment.
Louisiana appellate procedure requires a final judgment to contain sufficiently clear language identifying the disposition of the case. Although the district court had denied Bennett’s petition and had orally affirmed the administrative decision, the written judgment did not expressly state that the Department’s decision was affirmed, reversed, modified, or remanded. The appellate majority therefore concluded that it lacked jurisdiction because there was not a sufficiently final appealable judgment before it.
The appeal was dismissed.
One judge dissented, arguing that denying the petition for judicial review, together with the district court’s oral ruling affirming the administrative decision, was sufficient and that the appellate court should have considered the case.
Lessons for Insurance Agencies
The Bennett case provides three important lessons for agency owners. First, an insurance license is an extremely valuable business asset, and state insurance departments possess substantial authority to suspend or revoke that license when they believe insurance laws have been violated. Second, fighting a regulator is different from ordinary commercial litigation. Agencies may have to navigate a sequence involving the Insurance Department, an administrative law judge, district-court judicial review, and ultimately an appellate court. Third, never mishandle policyholder funds. It needs to be deposited straight into the agency’s trust account and the law state law needs to be closely followed once in the trust account.
And as Bennett demonstrates, procedural issues can become just as important as the underlying dispute. For an agency facing serious regulatory action, obtaining experienced insurance regulatory counsel early in the process can be critical. Once an agency’s license itself is at stake, the dispute is no longer simply about a fine or disagreement with a regulator—it can become a fight over whether the agency remains in business at all.
