III v. Indiana Department of Insurance, Appellee-Respondent. (2025)

MEMORANDUM DECISION

Statement of the Case

[1] Edwin J. Larson, III appeals from the trial court's denial of his petition for judicial review of the decision of the Commissioner of the Indiana Department of Insurance (“the Department”) revoking his insurance license. We affirm.

Issues

[2] Larson presents three issues, which we restate as:

I. Whether Exhibits 1-7 were incorrectly admitted under an exception to the hearsay rule.

II. Whether a statement included in Exhibit 8 was improperly admitted into evidence.

III. Whether the trial court employed an incorrect standard of review to the Commissioner's decision.

Facts and Procedural History

[3] Larson obtained his insurance producer license in 2015 and began employment as an independent contractor agent for State Farm Mutual Insurance Company in 2016. State Farm subsequently conducted an internal audit investigation of Larson, and he resigned in May 2020. State Farm notified the Department of Larson's resignation.

[4] The Department filed a Statement of Charges against Larson seeking permanent revocation of his license due to his alleged intentional misrepresentation of the terms of an actual or proposed insurance contract or application for insurance in violation of Indiana Code section 27-1-15.6-12(b)(5) and use of fraudulent, coercive, or dishonest practices, or demonstration of incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in violation of Indiana Code section 27-1-15.6-12(b)(8). Following a hearing, the Administrative Law Judge (“ALJ”) issued findings, conclusions, and a non-final order recommending the Commissioner deny the Department's request to revoke Larson's license.

[5] The Department filed an objection to the ALJ's recommendation. Determining that Larson violated Subsections 27-1-15.6-12(b)(5) and (b)(8), the Commissioner dissolved the ALJ's recommended order and issued modified findings and conclusions and a final order revoking Larson's insurance license.

[6] Larson petitioned for judicial review, and, after the parties submitted briefs, the trial court denied Larson's petition. Larson now appeals.

Discussion and Decision

[7] An appeal of an administrative agency's decision is governed by the Administrative Orders and Procedures Act (AOPA). Chambers v. Delaware-Muncie Metro. Bd. of Zoning Appeals, 150 N.E.3d 603, 608 (Ind. Ct. App. 2020). In such appeals, “ ‘[w]e do not try the case de novo and do not substitute our judgment for that of the agency.’ ” Miami Cnty. v. Ind. Dep't of Nat. Res., 146 N.E.3d 1027, 1030 (Ind. Ct. App. 2020) (quoting Walker v. State Bd. of Dentistry, 5 N.E.3d 445, 448 (Ind. Ct. App. 2014), trans. denied), trans. denied. In compliance with the version of the AOPA in effect at the time of these proceedings, we will reverse only if the agency action is:

(1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

(2) contrary to constitutional right, power, privilege, or immunity;

(3) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;

(4) without observance of procedure required by law; or

(5) unsupported by substantial evidence.

Ind. Code § 4-21.5-5-14(d) (1987).¹ Substantial evidence, for purposes of judicial review, is something more than a scintilla, but something less than a preponderance. J.R. v. Ind. Dep't of Child Servs., 233 N.E.3d 1069, 1075 (Ind. Ct. App. 2024) (quoting Ind. Dep't of Nat. Res. v. Prosser, 132 N.E.3d 397, 401 (Ind. Ct. App. 2019), trans. denied), trans. denied.

[8] “Courts that review administrative determinations are prohibited from reweighing the evidence or judging the credibility of witnesses and must accept the facts as found by the administrative body.” Walker, 5 N.E.3d at 448. Although the court grants deference to the agency's findings of fact, it accords no such deference to the agency's conclusions of law. Id. The party challenging the agency decision bears the burden of demonstrating its invalidity. I.C. § 4-21.5-5-14(a).

I. Hearsay Evidence

A. Records of a Regularly Conducted Activity Exception

[9] Larson contends that Exhibits 1-7 were incorrectly admitted into evidence under the business records exception to the hearsay rule.

[10] At the evidentiary hearing, the Department sought to admit Exhibits 1-7, and the ALJ ruled that the exhibits were admissible as records of regularly conducted activity under the hearsay exception of Evidence Rule 803(6). Appellant's App. Vol. II, p. 156 (Tr. of Evid. Hrg. Day 1). Larson's counsel responded:

Understandable, Your Honor. May I just for purposes of the record note that I also would like to admit proper [sic] not just 803(6), but 803(8)(b) -- or 803.08, section (b)(2), that I believe this is an investigative report prepared by or for a public office as was discussed in my preliminary and is being offered by that agency case in chief while it's a party to the action.

Id. at 156-57. After the hearing, however, the ALJ stated in his order: “Upon further review, it was an error to admit these documents under the business record exception.” Id. at 90 (Findings of Fact, Conclusions of Law, and Non-Final Order). Nevertheless, in her order, the Commissioner found that Exhibits 1-7 were properly admitted under Rule 803(6). Id. at 24 (Findings of Fact, Conclusions of Law and Final Order). Although the statements of Larson's counsel arguably fail to adequately specify the basis of his objection, we prefer to decide cases on their merits. See Correct Roofing, Inc. v. Vasquez, 246 N.E.3d 328, 337 (Ind. Ct. App. 2024). Accordingly, we will address Larson's argument in this instance.

[11] Our rules of procedure state that hearsay is an out-of-court statement offered in evidence to prove the truth of the matter asserted. Ind. Evidence Rule 801(c). Hearsay is not admissible unless it falls under certain exceptions. Ind. Evidence Rule 802. While administrative agencies are not bound by the strict rules of evidence that courts enforce, they nevertheless have rules concerning hearsay evidence. Indianapolis & S. Motor Exp. v. Pub. Serv. Comm'n, 112 N.E.2d 864, 868 (Ind. 1953). Indiana Code section 4-21.5-3-26 governs hearings conducted by administrative law judges and provides:

The administrative law judge may admit hearsay evidence. If not objected to, the hearsay evidence may form the basis for an order. However, if the evidence is properly objected to and does not fall within a recognized exception to the hearsay rule, the resulting order may not be based solely upon the hearsay evidence.

Ind. Code § 4-21.5-3-26(a) (1986).

[12] Evidence Rule 803(6) provides for the admission of records of a regularly conducted activity as an exception to the rule against hearsay. A record of an act, event, condition, opinion, or diagnosis is admissible if:

(A) the record was made at or near the time by—or from information transmitted by—someone with knowledge;

(B) the record was kept in the course of a regularly conducted activity of a business, organization, occupation, or calling, whether or not for profit;

(C) making the record was a regular practice of that activity;

(D) all these conditions are shown by the testimony of the custodian or another qualified witness, or by a certification that complies with Rule 902(11) or (12) or with a statute permitting certification; and

(E) neither the source of information nor the method or circumstances of preparation indicate a lack of trustworthiness.

Ind. Evidence Rule 803(6). Our Supreme Court has explained that

[t]he business records exception permits records of business activity to be admitted in circumstances when the recorded information will be trustworthy. The reliability of business records stems from the fact that the organization depends on them to operate, from the sense that they are subject to review, audit, or internal checks, from the precision engendered by the repetition, and from the fact that the person furnishing the information has a duty to do it correctly.

Matter of K.R., 154 N.E.3d 818, 821 (Ind. 2020) (quoting Stahl v. State, 686 N.E.2d 89, 92 (Ind. 1997)).

[13] Exhibit 1 is State Farm's internal audit investigation report concerning Larson. See Appellant's App. Vol. II, pp. 37-54. Larson argues the report should not have been admitted under the records exception because it was prepared only in anticipation of litigation and is not part of the systematic conduct of State Farm's business. Appellant's Br. p. 27. We disagree.

[14] Larson is a licensed insurance producer in Indiana. Once licensed, insurance producers have certain rules by which they must abide. See generally Ind. Code ch. 27-1-15.6 (governing qualifications and procedures for licensing of insurance producers). In addition, insurance companies for whom insurance producers work must adhere to certain guidelines. For instance, the license of an insurance company may be suspended or revoked if the Commissioner finds that a violation of an individual licensee acting on behalf of the company was known or should have been known by one or more of the officers or managers of the company, and the violation was neither reported to the Commissioner nor rectified. Ind. Code § 27-1-15.6-12(e). Thus, besides selling insurance, State Farm must also monitor and investigate those selling insurance on its behalf in order to maintain its licensure and therefore its business as a whole. Accordingly, records pertaining to such are part and parcel of State Farm's business. Here, State Farm's audit report is the summary of Larson's violations, which State Farm was statutorily required to investigate and report to the Department as part of its regularly conducted business activity. Exhibit 1 was properly admitted.

[15] In his argument on this issue, Larson lumps the audit report (Exhibit 1) together with Exhibits 2-7 but focuses his argument on the report. Exhibits 2-7 contain a customer complaint, the quote history for a customer on a single day in which numerous auto insurance quotes were generated in the span of just twenty-four minutes, electronic communication between Larson and a team member regarding a customer's policy and corresponding bill, and electronic communication between Larson and another team member regarding several policies. These records memorialize the communication and daily work of Larson and his team in the sale of insurance. Moreover, Timothy Rood, an audit investigator for State Farm and the witness through whom these exhibits were admitted, testified that all electronic communication is captured according to company policy. Appellant's App. Vol. II, p. 147 (Tr. of Evid. Hrg. Day 1). In sum, Larson makes no credible claim that Exhibits 2-7 do not constitute records of regularly conducted activity.

B. Proper Foundation

[16] Larson also argues that Timothy Rood was not a qualified witness to provide the foundation for the admission of the audit report (Exhibit 1) and its attachments (Exhibits 2-7) as a business record because he was not the maker of the report, not the records custodian, and not present when the report was made. Appellant's Br. p. 31; see also Appellant's App. Vol. II, pp. 158, 162 (Tr. of Evid. Hrg. Day 1).

[17] “ ‘[T]he sponsor of an exhibit offered under this exception need not have personally made it, filed it, or had firsthand knowledge of the transaction represented by it.’ ” Payne v. State, 658 N.E.2d 635, 645 (Ind. Ct. App. 1995) (quoting Belcher v. State, 453 N.E.2d 214, 219 (Ind. 1983)), trans. denied. Such sponsoring witness “ ‘need only show that the exhibit was part of certain records kept in the routine course of business and placed in the records by one who was authorized to do so and who had personal knowledge of the transaction represented at the time of the entry.’ ” Id. Further, records kept in the usual course of business are presumed to have been created by someone with personal knowledge and a duty to record, unless there is a showing to the contrary. Payne, 658 N.E.2d at 645.

[18] Here, Rood testified that he was the supervisor who oversaw the investigation into Larson. Appellant's App. Vol. II, p. 131 (Tr. of Evid. Hrg. Day 1). Kiefran Arter was the primary investigator, and, among other responsibilities, Arter conducted the interview of Larson, which was included in the audit report. Id. at 131, 37 (Ex. 1). And Rood was responsible for reviewing the entire report before it was sent to the senior leadership of State Farm. Id. at 153 (Tr. of Evid. Hrg. Day 1). See Embrey v. State, 989 N.E.2d 1260, 1264 (Ind. Ct. App. 2013) (stating that where “ ‘initial informant has personal knowledge of a fact, that fact may be repeated by an infinite number of people as long as each person in the chain is acting in the regular course of business.’ ” (quoting Williams v. Hittle, 629 N.E.2d 944, 948 (Ind. Ct. App. 1994), trans. denied).

[19] Rood also testified that, while he did not retrieve these specific records from State Farm's system, he is familiar with how the information contained in Exhibits 2-7 is retrieved. Appellant's App. Vol. II, p. 155 (Tr. of Evid. Hrg. Day 1). Further, Rood testified that Exhibits 1-7 were made and kept in the regular course of business, that it is a regular practice of State Farm to make these records, the records were made at or near the time of the events they record, and the report and the corresponding exhibits were made by or from information transmitted by a person with knowledge acting in the regular course of business. Id. at 149. There is no foundational deficiency here.

II. Statements in Exhibit 8

[20] Next, Larson alleges that a portion of Exhibit 8 was improperly admitted into evidence. Specifically, contained in Exhibit 8 is a statement by Carrie Lamphear, one of Larson's team members. Like Larson, Lamphear was charged by the Department with intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance and using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business. Ultimately, the Commissioner permanently revoked Lamphear's license. Exhibit 8 is the final determination in the Department's case against Lamphear, and it contains a statement attributed to Lamphear that “she does not deny the allegations, but that she was working under the direction of her supervisor,” who was Larson. Id. at 67 (Ex. 8).

[21] On appeal Larson claims Lamphear's statement is inadmissible because she was not unavailable for the hearing in this case and her statement was not testimony subject to cross-examination. He concludes that the admission of Lamphear's statement violated his constitutional rights to confront witnesses against him. Appellant's Br. p. 32. Although Larson states he challenged the admissibility of Lamphear's statement, in his initial brief he does not provide a cite to the transcript where that occurred, and our review of the transcript reveals no such objection. In his reply brief, Larson points to this statement by his counsel:

Judge, I'll denote irrelevant. I don't know how an agreed entry of a pro se litigant and a document that was wholeheartedly drafted by IDOI -- maybe this is a relevant standard, but I do -- I suspect it will be admitted, and I have proper cross-examination to speak to the process on.

Appellant's App. Vol. II, p. 200 (Tr. of Evid. Hrg. Day 1).

[22] This comment is wholly insufficient to constitute an objection on the concerns Larson now raises on appeal. “ ‘Issues that are not raised before the administrative agency are generally waived for judicial review.’ ” Brookston Res., Inc. v. Dep't of Nat. Res., 243 N.E.3d 1127, 1140 (Ind. Ct. App. 2024) (quoting Ind. Horse Racing Comm'n v. Martin, 990 N.E.2d 498, 506 n.3 (Ind. Ct. App. 2013)), trans. denied. Having determined that Larson failed to raise these issues before the agency, we conclude this argument is waived.

III. Standard of Review

[23] Finally, Larson contends the trial court applied an incorrect standard to its review of the Commissioner's determination. Larson bases his argument on this statement in the trial court's order: “Applying the deferential standard that is greatly favorable to the [Department], the Court DENIED [Larson's] petition for judicial review.” Appellant's App. Vol. II, p. 14 (Trial court's Order of Administrative Review).

[24] Trial courts and the appellate courts review the decision of an administrative agency with the same standard of review. Melton v. Ind. Athletic Trainers Bd., 156 N.E.3d 633, 656 (Ind. Ct. App. 2020), trans. denied. In such a review, we determine whether the agency's decision is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; contrary to constitutional right; in excess of statutory authority; without observance of procedure required by law; or, at the time of this proceeding, unsupported by substantial evidence. Id. at 657; I.C. § 4-21.5-5-14(d). Accordingly, “it is the agency's decision that we review, not the trial court's.” Id. Thus, it is of no consequence to Larson at this stage of the proceedings if the trial court utilized an incorrect standard to review the agency's decision because we review the agency's decision, not the trial court's.

[25] Moreover, as set forth above, on judicial review, courts do accord some deference to the agency's determination. See Miami Cnty., 146 N.E.3d at 1030 (stating that on judicial review courts do not try case de novo and do not substitute our judgment for that of agency); see also Walker, 5 N.E.3d at 448 (stating that on review of administrative determinations courts are prohibited from reweighing evidence or judging credibility of witnesses and must accept facts as found by agency).

Conclusion

[26] Based on the foregoing, we find Larson did not satisfy his burden of demonstrating the invalidity of the agency's decision. We thus affirm the trial court's denial of Larson's petition for judicial review.

[27] Affirmed.

FOOTNOTES

1.   In 2024, our General Assembly amended Subsection (d)(5) to require that the party seeking judicial relief be prejudiced by an agency action that is “unsupported by a preponderance of the evidence,” rather than “substantial evidence.” Pub. L. No. 128-2024 (effective July 1, 2024). “Absent explicit language to the contrary, statutes generally do not apply retroactively[,]” N.G. v. State, 148 N.E.3d 971, 973 (Ind. 2020), and we discern no such language in this amendment. Additionally, neither party argues that this amendment affects our decision. Accordingly, we review this case under the version of the AOPA in effect at the time of the proceedings below and employ the substantial evidence standard.

Robb, Senior Judge.

Chief Judge Altice and Judge Bradford concur. Altice, C.J., and Bradford, J., concur.