NU Online News Service, Feb. 7, 10:29 a.m. – The Minnesota Department of Commerce has charged American Bankers Insurance Company of Florida and American Bankers Life Assurance Company with “willfully violating” Minnesota insurance law and said it will seek to stop the companies from selling insurance in the state.

Minnesota Insurance Commissioner James Bernstein will also seek at least $10 million in fines, the department said in a strongly worded statement.

American Bankers, Miami, responded Feb. 5 by filing a lawsuit in a Minnesota district court in Ramsey County. The suit asks the court to determine whether the department can impose additional penalties related to a multi-state market conduct examination that dates back to 1998.

American Bankers, according to Jim Sykes, a company spokesman, has already settled the issue through a 43-state agreement with a group of regulators that included the Minnesota department. The 1998 agreement called for a $15 million settlement payment, incluing $750,000 for Minnesota, Sykes says.

A reexamination was agreed to and concluded in the middle of 2001, Sykes adds.

The department, however, contends that the results of a market conduct examination show that the companies have exhibited a “pattern of non-compliance” by illegally issuing more than 200,000 insurance policies to Minnesota residents.

The policies sold, according to the department, were either not approved or had been disapproved and sales continued after the multi-state settlement.

“This is not a onetime mistake,” Bernstein says. “There is a clear pattern of illegal behavior. Because these policies have not been reviewed and approved by the Department of Commerce, there is no guarantee that consumers will get what they thought they were paying for.”

The Minnesota department also alleges the management of ABIC and ABLAC has given the impression of being “incompetent or untrustworthy by having been the subject of at least 66 other disciplinary actions imposed by Minnesota and other states.”

The department lists violations incurred by the companies since 1993 as follows:

  • In 1993, marketing and sales violations resulted in a $100,000 fine and the use of unlicensed agents resulted in $100,000 in investigative costs.
  • The 1998 multi-state exam resulted in a $12 million total fine of which Minnesota received $688,776 for violations including market and sales violations, use of unlicensed agents and improper claims handling.
  • A reexamination of ABIG in 2000 resulted in a multi-state fine of $3 million of which Minnesota received $66,924. The department says that ABIG was non-compliant in all areas of operation.
  • A $2,000 fine in 2001 for ABLAC’s “misrepresenting facts regarding coverages in the handling of a claim.”

Types of insurance sold include accidental death, health and disability policies, the department says. A mix of individual and group policies was sold by the companies, according to Bruce Gordon, a department spokesman.

A hearing is scheduled for March 8. The judge will make a recommendation but the commissioner will ultimately decide on any action, Gordon says.

If the companies are not satisfied with the outcome, the matter can be appealed to the Minnesota Court of Appeals, he adds.