58-1004-17112-2

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE COMMISSIONER OF COMMERCE

In the Matter of the Insurance FINDINGS OF FACT,

Producer’s License of Joseph F. Ruiz CONCLUSIONS AND

RECOMMENDATION

The above-entitled matter came on for hearing before Administrative Law Judge Linda F. Close on March 8, 2006, at the Office of Administrative Hearings. The record closed at the end of the hearing day.

Michael J. Tostengard, Assistant Attorney General, 1200 NCL Tower, 445 Minnesota St., St. Paul, MN 55102-2130, appeared on behalf of the Department of Commerce (Department).

Joseph F. Ruiz, 1185 N. Concord St. St. Paul, MN 55075, appeared on his own behalf without counsel.

NOTICE

This Report is a recommendation, not a final decision. The Commissioner of Commerce will make the final decision after reviewing the record and may adopt, reject or modify these Findings of Fact, Conclusions, and Recommendations. Under Minn. Stat. § 14.61, the Commissioner’s decision shall not be made until this Report has been available to the parties to the proceeding for at least ten (10) days. An opportunity must be afforded to each party adversely affected by this Report to file exceptions and present argument to the Commissioner. Parties should contact Kevin Murphy, Deputy Commissioner, Minnesota Department of Commerce, 85 Seventh Place E., Suite 500, St. Paul, MN 55101, to ascertain the procedure for filing exceptions or presenting argument to the Commissioner.

If the Commissioner fails to issue a final decision within 90 days of the close of the record, this report will constitute the final agency decision under Minn. Stat. § 14.62, subd. 2a. In order to comply with this statute, the Commissioner must then return the record to the Administrative Law Judge within 10 working days to allow the Judge to determine the discipline to be imposed. The record closes upon the filing of exceptions to the report and the presentation of argument to the Commissioner, or upon the expiration of the deadline for doing so. The Commissioner must notify the parties and the Administrative Law Judge of the date on which the record closes.

Under Minn. Stat. § 14.62, subd. 1, the agency is required to serve its final decision upon each party and the Administrative Law Judge by first class mail or as otherwise provided by law.

STATEMENT OF ISSUES

1. Did Respondent’s actions demonstrate he is untrustworthy or financially irresponsible or is otherwise incompetent or unqualified for licensure in violation of Minn. Stat. §§ 45.027, subd. 7 (4), and 60K.43, subd. 1 (2) and (8)?[1]

2. Did Respondent misappropriate and convert Minnesota Automobile Insurance Plan (MN Plan) premiums and other funds that he had collected in violation of Minn. Stat. § 60K.43, subd. 1 (4)?

3. Did Respondent misrepresent the terms of actual or proposed insurance contracts in violation of Minn. Stat. § 60K.43, subd. 1 (5)?

4. Did Respondent provide false answers to the Department’s investigator in violation of Minn. Stat. §§ 45.027, subd. 7 (3) and 60K.43, subd. 1 (8)?

5. Is an order of discipline in the public interest?

Based on all of the files, records and proceedings, herein, the Administrative Law Judge makes the following:

FINDINGS OF FACT

1. Respondent is a licensed insurance producer who has been in the insurance business for thirty-five years. He is now retired, and his principal source of income is social security.[2]

2. In December 2005, the Department investigated a complaint, received from the South St. Paul Police Department (SSPPD), that Respondent was issuing fraudulent MN Plan binders to persons whose vehicles had been impounded. These persons used the binders to recover their vehicles from the impound lot, but no coverage was actually placed with MN Plan.[3]

3. During the course of investigation, an undercover SSPPD officer went to Respondent’s office and requested a binder so he could recover his vehicle from the impound lot. Respondent agreed to and did sell a binder to the undercover officer with the understanding that coverage would not actually be placed with MN Plan.[4]

4. Thereafter, a Department investigator met with Respondent and questioned him about selling fraudulent MN Plan binders. Respondent denied selling fraudulent binders.[5]

5. At a subsequent meeting, a Department investigator informed Respondent about the undercover officer and Respondent’s sale of a binder to him. Respondent then admitted that he had sold such binders. Over a period of time, he had sold at least thirty such binders.[6]

6. Respondent is Hispanic, and he maintains close ties with the Hispanic community, as did his parents. He knows the hardships many Hispanic community members face, and he sympathizes with their difficulties.[7]

7. The persons to whom Respondent sold the binders at issue were Hispanic, most of whom were unable to purchase insurance because of their illegal immigration status. He wanted to help these people, because they needed their cars to go to work.[8]

8. At the time of issuing a binder of the type at issue, Respondent had the client make a payment of $225.00. This represented $150.00 for the premium and $75.00 for Respondent. Respondent required the client to sign a policy cancellation immediately upon receipt of a copy of the binder. The client then took the copy to the impound lot to retrieve his or her vehicle. The client subsequently came back to Respondent, who returned the premium portion of the payment. Respondent kept the $75.00 for his work in issuing the binder.[9]

9. If one of Respondent’s clients had experienced an accident before returning to Respondent’s place of business, a claim could have been made against the insurance company if the cancellation were ignored. Thus, insurance companies were at risk by virtue of Respondent issuing these binders.[10]

10. On February 8, 2006, the Commissioner of Commerce issued a Notice of and Order for Hearing, Order to Show Cause, Order for Summary Suspension, and Statement of Charges setting a hearing date of March 6, 2006. At the Department’s request, the hearing was continued to March 8, 2006.

Based on the foregoing Findings of Fact, the Administrative Law Judge reaches the following:

CONCLUSIONS

1. The Administrative Law Judge and the Commissioner of Commerce are authorized to consider the charges against Respondent under Minn. Stat. §§ 47.027, subd. 6 and 60K.43, subd. 2.

2. Respondent received due, proper and timely notice of the charges, and of the time and place of the hearing.

3. The Department has fulfilled all procedural requirements of law and rule so that this matter is properly before the Administrative Law Judge.

4. Minn. Stat. § 47.027, subd. 7 authorizes the Commissioner to take disciplinary action against the license of a person who violates any law, rule or order related to the duties and responsibilities entrusted to the Commissioner.

5. Pursuant to Minn. R. 1400.7300, subp. 5, the burden is on the Department to prove by a preponderance of the evidence that Respondent has violated a law, rule, or order related to the Commissioner’s duties and responsibilities.

6. The Department proved by a preponderance of the evidence that Respondent’s issuance of fake insurance binders in order to deceive the authorities at the impound lot demonstrated he is untrustworthy or financially irresponsible or is otherwise incompetent or unqualified for licensure in violation of Minn. Stat. §§ 45.027, subd. 7 (4), and 60K.43, subd. 1 (2) and (8).

7. The Department proved by a preponderance of the evidence that, by issuing refunds of premiums rather than forwarding them to the insurance company, Respondent misappropriated and converted Minnesota Automobile Insurance Plan (MN Plan) premiums that he had collected in violation of Minn. Stat. § 60K.43, subd. 1 (4). However, the Department failed to prove by a preponderance of the evidence that Respondent converted “other funds” in violation of Minn. Stat. § 60K.43, subd. 1 (4), as alleged by the Department.

8. The Department proved by a preponderance of the evidence that, by causing copies of insurance binders to be shown to authorities at the impound lot, Respondent misrepresented the terms of actual or proposed insurance contracts in violation of Minn. Stat. § 60K.43, subd. 1 (5).

9. The Department proved by a preponderance of the evidence that, by denying to the Department having made sales of these binders, Respondent provided false answers to the Department’s investigator in violation of Minn. Stat. §§ 45.027, subd. 7 (3) and 60K.43, subd. 1 (8).

10. Disciplinary action against Respondent is in the public interest.

11. The Memorandum that follows explains the reasons for these Conclusions and the Administrative Law Judge therefore incorporates that Memorandum into these Conclusions.

Based on the foregoing Conclusions, the Administrative Law Judge makes the following:

RECOMMENDATION

IT IS HEREBY RECOMMENDED: that the Commissioner of the Minnesota Department of Commerce take disciplinary action against the Respondent’s license.

Dated this 31st day of March 2006.

/s/ Linda F. Close

LINDA F. CLOSE

Administrative Law Judge

Reported: Tape Recorded (one tape)

MEMORANDUM

The essential facts of this case are not contested. Respondent, in a misguided attempt to assist members of the Hispanic community, engaged in acts that were fundamentally dishonest. He sold insurance binders, not for the purpose of insuring vehicles, but for the purpose of hoodwinking authorities into releasing the vehicles to uninsured owners.[11]

In his defense, Respondent argues the lack of harm to any insurance companies and the goodness of his motives. As to the former, the Department’s witness testified that insurance companies were harmed because they were potentially at risk once the binder was issued. Thus, if one of Respondent’s clients had had an accident before reclaiming the premium amount, the cancellation could be ignored and the insurance company would then have to pay.

Respondent’s argument also overlooks his wrongdoing in treating the premium as his own property. Under Minnesota law, a conversion is any “act of willful interference with the personal property of another which is without justification or which is inconsistent with the rights of the person entitled to use, possession or ownership of the property.” Dain Bosworth Inc. v. Goetze, 374 N.W.2d 467, 471 (Minn. Ct. App. 1985). Here, once the premium payment was made, the money belonged to the insurance company, not Respondent.[12] Insurance companies were harmed because their property was misappropriated and they were placed at risk.

Respondent’s wish to help members of his community is genuine and understandable. He himself was raised by immigrant parents and he is keenly aware of the hardships faced by documented and undocumented workers. The method he chose to help, however, was in clear violation of the statutes governing the conduct of insurance producers. Unfortunately, this has meant the suspension of his satisfying thirty-five year career in the insurance field.

The Department contended in the Notice of and Order for Hearing that Respondent misrepresented the terms of the insurance contract.[13] Arguably, this provision of the statute is meant to protect only purchasers of insurance contracts. This narrow reading is not justified, however. In the context of this case, the very existence of an insurance contract was misrepresented. This allowed an end run around Minn. Stat. § 169A.42, which governs impoundment of vehicles used by drivers who are arrested for driving while impaired. The statute requires an impoundment lot to release such a vehicle only to an “owner…who provides proof of ownership of vehicle, proof of valid Minnesota driving privileges, and proof of insurance required by law…” The statute is thus a public safety measure, and avoiding the statute is a harm to the public at large.

The Department also contended that Respondent had misappropriated “other funds,” in addition to premiums. The Department presented no argument or evidence in this regard, however. Consequently, the record does not support that portion of Count II about misappropriating “other funds” in violation of Minn. Stat. § 60K.43, subd. 1 (4).

L.F.C.