UNITY FINANCIAL LIFE INSURANCE COMPANY v. DONELON (2021)

This is an appeal from a summary judgment ordering that Unity Financial Life Insurance Company may appoint producers with limited life, health, and accident authority as provided in La. R.S. 22:1547(A)(10) and that such appointed producers were permitted to sell life insurance in an amount not to exceed $30,000. After review, we reverse and remand.

FACTS AND PROCEDURAL HISTORY

Unity Financial Life Insurance Company is domiciled in Ohio and does business in Louisiana. Unity Financial Life Insurance Company underwrites insurance policies for pre-paid funerals. The insurance producers who sell policies for Unity Financial Life Insurance Company are based in funeral homes.

In 2019, the Louisiana Department of Insurance (the Department) became aware that producers holding only limited life, health, and accident line of authority were being appointed by foreign carriers to market products that exceeded their designated license authority pursuant to La. R.S. 22:1547(A)(10).¹ The Department received a termination for cause from a different writing insurer writing major medical coverage for a producer on the basis that the producer was improperly licensed to sell their product. Upon review by the Department, it appeared that the carrier had not verified the producer's license prior to the appointment.

The Department then began a review of its records to assess all appointments for producers holding only limited life, health, and accident licenses. That review revealed that there were nearly 706 appointments with 110 different companies that exceeded the scope of a limited life, health, and accident license. All insurance carriers were thereafter advised, in their appointment renewal invoice notifications issued on February 22, 2019, regarding the need to review their producer lists with the following notice:

IMPORTANT

Insurers are urged to review their appointed producers to ensure that the producer holds an active license and holds the proper lines of authority to sell their products. Appointments for producers holding lines that are not qualified to sell products offered by a specific insurer are subject to non-renewal. Of particular concern are producers holding only a Limited [L]ife, Health and Accident line appointed with carriers marketing products requiring a producer license with major line Life and/or Accident & Health or Sickness authority to sell. Carriers should review the definition of Limited Life, Health and Accident found [in] La[.] R.S. 22:1547(A)(10) for guidance on what products can be sold with this limited authority.

Out of the 110 carriers identified as improperly appointing life, health, and accident producers, 14 were foreign carriers, writing coverage primarily for the pre-need funeral purposes. They were identified as improperly appointing 363 individual producers. Eleven of those 14 foreign carriers, including Unity Financial Life Insurance Company, had 315 total appointments. Those carriers were advised that the statutory limit for producers holding limited life, health, and accident licenses was $2,500.

The carriers were then supposed to determine if their limited life, health, and accident licenses producers were writing within this limit and then have their producers upgrade their status to full authority life license if they exceeded the applicable limit. On April 12, 2019, the Department's Division of Producer Licensing implemented a new process for submitting life, health, and accident appointments. The Department created a separate limited life, health, and accident appointment group specifically overseeing the appointment of limited life, health, and accident producers. Only companies given authorization codes were able to use the electronic appointment submission process to appoint limited life, health, and accident producers after April 12, 2019.

Thereafter, Unity Financial Life Insurance Company filed a petition for injunction and declaratory judgment, naming as defendants James J. Donelon, in his official capacity as the Louisiana Commissioner of Insurance, and the State of Louisiana, through the Department (hereafter collectively the Department), in the Nineteenth Judicial District Court. The suit sought a judgment directing the Department to permit Unity Financial Life Insurance Company to appoint limited lines life, health, and accident insurance producers to sell insurance in the same amount as if they were appointed by a domestic insurer that met the financial requirements of La. R.S. 22:82. The Department filed an answer denying that Unity Financial Life Insurance Company was allowed any of the relief sought. Unity Financial Life Insurance Company thereafter filed a motion for summary judgment seeking a declaratory judgment that its limited lines insurance producers may sell policies up to the amount of $30,000.

After a hearing, the trial court granted the motion for summary judgment, ordering that Unity Financial Life Insurance Company may appoint producers with limited life, health, and accident authority as provided by La. R.S. 22:1547(A)(10), and that such appointed producers were permitted to sell life insurance in an amount not to exceed $30,000. The judgment was signed on July 29, 2020. The Department appealed that judgment.

On appeal, the Department maintains that the trial court erred as a matter of law in granting the motion for summary judgment as the issue was not whether the Department was discriminating against Unity Financial Life Insurance Company as a foreign insurer under La. R.S. 22:331; but rather, whether La. R.S. 22:1547(A)(10) specifies that limited life, health, and accident producers can sell $30,000 policies for domestic stock insurers under La. R.S. 22:82 and domestic insurers under La. R.S. 22:112, but not for foreign insurers such as Unity Financial Life Insurance Company. Thus, the Department maintains, the issue was not one of regulation of foreign insurers but rather one of regulation of domestic insurers.

DISCUSSION

This summary declaratory judgment is subject to the usual de novo review as to whether summary judgment was appropriate. Burgess v. City of Baton Rouge, 2005-2565 (La. App. 1 Cir. 12/28/06), 951 So.2d 1128, 1131. When a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written and no further interpretation may be made in search of the intent of the legislature. La. C.C. art. 9.

Louisiana Revised Statutes 22:1547 provides limitations on the products that can be sold under the limited life, health, and accident line of authority on a producer license. Louisiana Revised Statutes 22:1547 provides in part:

A. Unless denied licensure pursuant to R.S. 22:1554, persons who have met the requirements of this Subpart shall be issued an insurance producer license. An insurance producer may receive qualification for a license in one or more of the following lines of authority:

* * * * *

(10) Limited life, health and accident, which provides insurance coverage pursuant to R.S. 22:142. A license for limited life may allow the producer to sell life insurance in an amount not to exceed thirty thousand dollars when appointed by an insurer which meets the minimum financial requirements of, and is licensed pursuant to, R.S. 22:82(A)(1) or 112(A)(1), and when such policies are issued by such insurer.

Louisiana Revised Statutes 22:142 provides in part that:

A. No domestic industrial insurer whose capital, surplus, and deposit or whose minimum initial surplus and deposit is less than that required by R.S. 22:81 or 111 shall issue any policy or contract, or combination of policies or contracts, on a single life, in excess of the following limitations:

(1) A life insurance policy, including funeral benefits, in the aggregate value of two thousand five hundred dollars in death benefits, exclusive of multiple indemnity benefits.

(2) A disability policy in the aggregate benefits of forty dollars per week.

(3) A policy providing benefits for dismembered and broken limbs, and/or loss of eyesight in the aggregate of one thousand dollars per policy year.

(4) A policy which provides benefits for the payment for or furnishing of hospitalization, drugs, attending physicians and surgical costs in the aggregate of one thousand dollars per policy year.

(5) A policy providing accidental death benefits of one thousand dollars.

Louisiana Revised Statutes 22:82(A)(1) provides that “[d]omestic stock insurers which apply for a certificate of authority on or after September 1, 1989, may transact the following kinds of insurance in this state upon qualifying therefor and by having paid-in capital, minimum surplus, and operating surplus represented by assets as follows:” and provides that Life Insurance, and Health and Accident Insurance, require Paid-in Capital of $100,000, a Minimum Surplus of $1,900,000 and an Operating Surplus of $1,000,000. (Emphasis added.)

Louisiana Revised Statutes 22:112(A)(1) provides that “[d]omestic mutual insurers who apply for a certificate of authority on or after September 1, 1989, may transact the following kinds of insurance in this state upon qualifying therefor and by having an initial minimum surplus and operating surplus represented by assets as follows:” and provides that life insurance, and health and accident insurance, require an Initial Minimum Surplus of $2,000,000 and an Operating Surplus of $1,000,000. (Emphasis added.)

We find that La. R.S. 22:1547(A)(10) is unambiguous. It provides that an insurer may sell life insurance, and health and accident insurance, in an amount not to exceed $30,000 when he or she is appointed by an insurer meeting the minimum financial requirements of and is licensed pursuant to La. R.S. 22:82(A)(1) or La. R.S. 22:112(A)(1). The insurer in both statutes, La. R.S. 22:82(A)(1) and La. R.S. 22:112(A)(1), must be a domestic insurer.

Unity Financial Life Insurance Company cites La. R.S. 22:331 for its argument that that foreign insurers must be treated the same as domestic insurers.

Louisiana Revised Statutes 22:331 provides that:

A. Any foreign or alien insurer, including reciprocals, Lloyds, and fratemals, may be admitted to transact business in this state, upon complying with the provisions of this Subpart, and all other applicable provisions of this Code, to transact the kind or kinds of business which a similar domestic insurer may legally transact under this Code, except nonprofit funeral insurance, and life, health and accident insurers on the cooperative or assessment plan, provided insurers admitted to transact the kinds of business provided in Subparts D and E of this Part, R.S. 22:131 et seq. and R.S. 22:141 et seq., shall meet the requirements for life insurers under R.S. 22:81 through 95 and Subpart C of this Part, R.S. 22:111 et seq.

B. Any foreign insurance company which has been licensed to do the business of life insurance in this state continuously during a period of ten years next preceding October 1, 1948, may continue to be licensed to do the kind or kinds of insurance business which it was authorized to do immediately prior to October 1, 1948.

C. (1) The commissioner of insurance may issue a certificate of authority, as provided in R.S. 22:336, admitting a foreign insurer to transact the business of health and accident insurance as defined in R.S. 22:47.

(2) The commissioner may waive those provisions of this Title necessary to admit a foreign insurer to transact the business of health and accident insurance as defined in R.S. 22:47 within the state.

(3) The commissioner shall not waive any provision of this Title unrelated to the disparate treatment of domestic and foreign insurers with respect to licensure and solvency requirements. (Emphasis added.)

Louisiana Revised Statutes 22:331 provides that the Insurance Commissioner may waive controlling provisions of the Insurance Code. Further, we note that Unity Financial Life Insurance Company is not precluded from selling insurance policies up to $30,000; rather, as a foreign insurer, it can only appoint regularly licensed producers authorized to issue major line life and/or accident and health insurance.² Unity admits that it has appointed some insurance producers to sell policies on its behalf that have a license to write life insurance without limit to amount.

Louisiana Revised Statutes 22:1547(A)(10) clearly provides that a producer may sell life insurance in an amount not to exceed $30,000 when he or she is appointed by an insurer meeting the minimum financial requirements of and is licensed pursuant to La. R.S. 22:82(A)(1) or La. R.S. 22:112(A)(1). As Unity Financial Life Insurance Company does not meet these requirements, we find the trial court erred in ordering that, as a matter of law, Unity Financial Life Insurance Company may appoint producers with limited life, health, and accident authority as provided by La. R.S. 22:1547(A)(10), and that such appointed producers were permitted to sell life insurance in an amount not to exceed $30,000. Therefore, after de novo review, the trial court judgment is reversed, and the matter is remanded to the trial court for further proceedings.

DECREE

For the foregoing reasons, the trial court judgment's July 29, 2020, judgment in favor of Unity Financial Life Insurance Company, and against James J. Donelon, in his official capacity as Commissioner of Insurance for the State of Louisiana, and the State of Louisiana, through the Department of Insurance, is reversed, and the matter is remanded to the trial court for further proceedings. Costs of this appeal are assessed against Unity Financial Life Insurance Company.

REVERSED AND REMANDED.

I respectfully concur in the result. In order for a summary judgment to be granted, the mover must prove through supporting documents both that there is no genuine issue of material fact and that the mover is entitled to judgment as a matter of law. La. C.C.P. art. 966(A)(3). In this case, the law is not clear as to whether La. R.S. 22:331 allows the Commissioner of Insurance to waive the controlling provisions of the Insurance Code in some circumstances and to randomly deny waiver to foreign insurers, like Unity Financial Life Insurance Company, in similar circumstances. Since it is not settled that Unity is entitled to judgment as a matter of law, I agree that summary judgment rendered herein should be reversed and this matter should be remanded to the trial court for a trial.

FOOTNOTES

1.   The information regarding the actions of the Department are from an affidavit of Barry Ward, Deputy Commissioner for the Department.

2.   The Department noted that policies up to $30,000 can be sold by producers who have passed the Life exam or the Life, Accident, Health, or Sickness exam, while a producer holding a limited life, health and accident license has no exam requirement and merely files an application and provides fingerprints.

McDonald, J.

Holdridge, J. concurs with reasons.