3901-1-40 Misconduct by insurance license applicants and licensees.

(A) Purpose

Section 3901.041 of the Revised Code provides that the superintendent of insurance shall adopt, amend, and rescind rules and make adjudications necessary to discharge his or her duties and exercise his or her powers under Chapter 3901 of the Revised Code. Sections 3905.01, et seq., including 3905.14 of the Revised Code authorize the superintendent of insurance to suspend, revoke or refuse to issue or renew the license of any person whom he or she determines to be unsuitable to act as an insurance agent or solicitor. Section 3901.21 of the Revised Code empowers the superintendent of insurance to adopt rules which implement unfair and deceptive practice statutes, and take action under other sections of the Revised Code. The purpose of this rule is to implement statutes setting forth standards of conduct and responsibility applicable to insurance license applicants, licensees, and/or companies licensed or authorized to transact the business of insurance by the superintendent of insurance.

(B) Conduct by individuals warranting suspension, revocation, or refusal to issue or renew an insurance license, assessment of a civil penalty, or imposition of any other sanctions authorized under Title 39 of the Revised Code.

Whenever it is shown, in accordance with the Revised Code, that an individual:

(1) Has knowingly or negligently failed to make a refund to an insured or potential insured, after receipt of a written demand for such refund and upon the insured’s or potential insured’s compliance with the policy, or

(2) Has committed an unfair or deceptive act as defined by any section of the Revised Code or any rule or regulation of the Ohio department of insurance; or

(3) Has been convicted of a crime involving moral turpitude. For purposes of this rule, moral turpitude means having been convicted of a misdemeanor and as a result of that conviction has been required to register as a sex offender.

(4) Has solicited, procured, or placed additional or replacement health or sickness and accident insurance coverage where he or she knew or should have known that the insured or potential insured:

(a) Was and would continue to be covered by substantially duplicative insurance coverage, where the additional coverage will either not pay additional benefits to those offered by the existing coverage or will provide minimal benefits in relation to the cost to that individual of maintaining such coverage;

(b) Would not be entitled to the benefits of that coverage, because of existing health conditions, where the agent or solicitor had caused that individual to believe that he or she would be entitled to such benefits;

(c) Intended to replace existing insurance coverage but would not be entitled to receive benefits from the replacing insurance coverage until he or she had completed some waiting period, which the agent or solicitor had not disclosed to the insured or potential insured.

An insurance company and/or agent may be found to have engaged in an unfair or deceptive practice, whenever it is shown that:

(1) The insurance company or the managing or principal agent of an insurance agency knew or should have known of the misconduct of its licensed agent, sub-agent, solicitor, or solicitor of its licensed agent, as set forth in paragraph (B) of this rule, and has adopted a practice whereby it has:

(a) Expressly ratified, encouraged, or tolerated such misconduct;

(b) Failed to notify the Ohio department of insurance on those occasions where it has reasonable cause to believe that there has been a violation or is a continuing violation of this rule, and the details thereof which are known by the company or agent. Such information shall be treated as confidential by the department of insurance;

(c) Failed, upon the request of the department of insurance, to make a reasonable investigation to determine if such misconduct has occurred.

(2) An insurance company has adopted a practice of refusing to refund an insured’s or potential insured’s premium payment or to issue insurance coverage to that person, at that person’s election, where the company’s agent, or its agent’s licensed solicitor has violated paragraph (B)(2) of this rule.

An agent shall be deemed to be the agent of the company and the solicitor a representative of the agent for purposes of paragraph (C)(2) of this rule whenever it is shown that:

(a) The agent is appointed by the company, or the solicitor is appointed by a licensed agent of the company, and has solicited and sold insurance coverage to the insured or potential insured on behalf of the company;

(b) The agent, or agent’s appointed solicitor, is not licensed by the company, or has been terminated as an agent of the company, but has been given or permitted to retain copies of the company’s applications, receipts, rate books, or other supplies and has solicited and sold insurance coverage to the insured or potential insured who has justifiably relied on the agent’s or solicitor’s apparent authority to act on behalf of the company

The company shall not be deemed to be responsible for such agent’s or solicitor’s conduct, for the purposes of this rule, if it has made a good faith effort to recover its applications, receipts, rate books or other supplies. If the company is unable to recover such supplies, it will not be deemed to be responsible for such an agent’s or solicitor’s conduct if it notifies insureds or potential insureds by publication in a newspaper of general circulation in the county of the agent’s or solicitor’s principal place of business, that the agent or solicitor is not authorized to represent the company.

(D) Severability

Each paragraph of this rule and every part of each paragraph is an independent paragraph and part of a paragraph, and the holding of any paragraph or a part thereof to be unconstitutional, void, or ineffective for any cause does not affect the validity or constitutionality of any other paragraph or part thereof.

Effective: 04/05/2007

R.C. 119.032 review dates: 12/29/2006 and 12/30/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.041, 3905.14, 3905.85 (D)

Prior Effective Dates: 11/30/81