The Supreme Judicial Court of Maine has affirmed a lower court’s decision upholding the Maine Superintendent of Insurance’s conclusion that Guarantee Trust Life Insurance Company (“GTL”) was accountable for violations of a number of Maine statutes by a company acting as GTL’s producer – even before the company’s formal appointment as GTL’s producer. As a result, the court upheld the Superintendent’s order that GTL pay a civil penalty of $150,000.

1. The following article is from National Underwriter’s latest online resource,
FC&S Legal: The Insurance Coverage Law Information Center.
The Insurance Coverage Law Information Center
LIFE INSURER’S LIABILITY FOR ACTIONS OF ITS PRODUCER –
EVEN BEFORE PRODUCER’S FORMAL APPOINTMENT –
IS UPHELD BY MAINE’S TOP COURT
December 2, 2013 Steven A. Meyerowitz, Esq., Director, FC&S Legal
The Supreme Judicial Court of Maine has affirmed a lower court’s decision upholding the Maine Superintendent of
Insurance’s conclusion that Guarantee Trust Life Insurance Company (“GTL”) was accountable for violations of a number
of Maine statutes by a company acting as GTL’s producer – even before the company’s formal appointment as GTL’s
producer. As a result, the court upheld the Superintendent’s order that GTL pay a civil penalty of $150,000.
The Case
American Medical and Life Insurance Company (“AMLI”), a New York insurance company, entered into an agreement
with GTL under which GTL would act as a “fronting carrier” for AMLI in Maine because GTL was fully licensed to issue
insurance in Maine. Under this arrangement, GTL would issue a policy, and AMLI and its entities would perform the
administration of that policy, and, through a reinsurance agreement, a majority of the risk would be shifted to AMLI.
Pursuant to the agreement, GTL retained 10 percent of the risk (profits or losses) and received five percent of the gross
net collected premiums.
As part of the fronting arrangement, GTL and AMLI contracted in the agreement that any insurance premiums paid to
AMLI were deemed to have been received by GTL.
GTL issued a group limited benefits health insurance policy to the National Congress of Employers (“NCE”) that enabled
GTL to provide coverage under NCE-issued policies to individuals in Maine. GTL, however, never obtained approval from
the Maine Bureau of Insurance to issue a group policy to NCE in Maine.
Under its agreement with GTL, AMLI subcontracted marketing duties in Maine to Florida-based Cinergy Health, Inc. The
Maine Bureau of Insurance alleged that Cinergy violated Maine insurance laws in the course of marketing the limited
medical benefit insurance plan and it filed petitions against GTL and Cinergy.
As to GTL, the Bureau alleged that it violated 24–A M.R.S. §§ 1420–M(1), 2186(2), and 2412(1–A) (2012), and that it was
accountable pursuant to 24–A M.R.S. § 1445(1)(D) for Cinergy’s insurance law violations.
After a hearing, the Superintendent of Insurance issued a written decision finding that Cinergy had committed multiple
violations of the Maine Insurance Code. The Superintendent concluded that GTL was accountable for Cinergy’s violations
occurring after GTL had appointed Cinergy its producer. The Superintendent also concluded that GTL was accountable
for Cinergy’s actions from before GTL had appointed Cinergy as its producer, pursuant to 24–A M.R.S. § 1445(1)(D).
Finally, the Superintendent concluded that GTL had violated 24–A M.R.S. §§ 1420–M(1), 1902, and 2412(1–A)(B). The
Superintendent imposed a civil penalty of $150,000 on GTL.
A trial court ruled in favor of the Superintendent, and the dispute reached Maine’s highest court.
The Maine Insurance Code
Title 24–A M.R.S. §1420–M(1) (2012) states:
An insurance producer may not act as an agent of an insurer unless the insurance producer becomes an appointed agent
of that insurer. An insurance producer who is not acting as an agent of an insurer is not required to become appointed.
Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com
©2013. All Rights Reserved.

2. Title 24–A M.R.S. §1902 (2012) states, in part:
A person may not act as or profess to be an administrator after August 1, 1990, unless licensed under this chapter.
Title 24–A M.R.S. §2412(1–A)(B) (2012) provides, in relevant part:
An insurer may not provide coverage to a resident of this State under a group or blanket policy or contract issued and
delivered outside this State unless ... [f]or trustee group policies ... and association group policies ..., certificates of
coverage to be delivered or issued for delivery in this State [are] filed with the superintendent at least 60 days before any
solicitation in this State, with sufficient information concerning the nature of the group, including any trust agreements or
association bylaws, to enable the superintendent to determine whether the group satisfies the statutory requirements for
a trustee or association group.
Title 24–A M.R.S. §1445(1)(D) (2012) states, in part:
In addition to any other applicable provisions of law, the insurer ... [i]s accountable and may be penalized by the
superintendent, as provided for in this Title, for the actions of its producers.
The Decision by the Maine Supreme Judicial Court
The court upheld the lower court’s decision in favor of the Superintendent.
Significantly, the court found that GTL could be held liable for misconduct of Cinergy occurring before the date on which
GTL had appointed Cinergy as its producer, declaring that “an insurer is strictly liable for the actions of those who sell,
solicit, or negotiate insurance of the insurer, whether or not the producer was formally appointed.”
According to the court, Section 1445(1)(D)’s use of the phrase “its producers” suggested only that the insurer must know,
or should know, that an entity or person was selling, soliciting, or negotiating its insurance product to impose liability on
the insurer, “but no more.”
The court found that it was “undisputed” that Cinergy was selling, soliciting, or negotiating coverage under the master
policy issued by GTL prior to its appointment and, as such, that Cinergy was GTL’s producer. The court rejected GTL’s
contention that AMLI had subcontracted with Cinergy without GTL’s approval and that GTL thus had not known that
Cinergy was the entity marketing its insurance coverage, finding that GTL knew that insurance was being sold under its
policy, knew when it signed the agreement with AMLI that AMLI had intended to subcontract marketing to other entities
and that those entities were not or might not be licensed in Maine, and, therefore, had:
accepted business and the accompanying premiums while turning a blind eye to whether a producer working on its behalf
was even licensed, much less marketing its coverage in compliance with the law.
According to the court, the Superintendent “properly held GTL accountable for Cinergy’s misconduct before GTL formally
appointed Cinergy as its producer agency.”
Next, the court rejected GTL’s argument that the Superintendent had erred in finding it liable pursuant to 24–A M.R.S.
§ 1420–M(1) because that section placed a duty only on producers (e.g., Cinergy) and not on insurers (e.g., GTL). In the
court’s view, the Superintendent had not erred in concluding that insurers may be liable pursuant to 24–A M.R.S. §
1420–M(1) and in holding GTL accountable for its failure to appoint Cinergy before it had begun acting as its producer
and before it had accepted business that Cinergy sold.
Moreover, the court rejected GTL’s argument that the Superintendent had erred in finding that GTL had violated 24–A
M.R.S. § 2412(1–A)(B) because there was no evidence that GTL had issued any certificate of coverage and, therefore, no
evidence that it had provided coverage to any Maine consumer but that Cinergy instead had issued AMLI certificates and
coverage. Simply put, the court found, “GTL ‘provide[d] coverage’ to Maine consumers before filing sufficient information
to show that NCE satisfied statutory requirements.”
The court also ruled that Section 2412(1–A) did “not require that GTL have issued certificates of coverage to be liable
under that section.”
Rejecting GTL’s final arguments (due process and timeliness), the court affirmed the decision below.
Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com
©2013. All Rights Reserved.

3. The case is Guarantee Trust Life Ins. Co. v. Superintendent of Ins., No. BCD–13–56 (Maine Nov. 21, 2013). Attorneys
involved include: Sidney St. F. Thaxter, Esq., David P. Silk, Esq., and Benjamin M. Leoni, Esq., Curtis Thaxter LLC, Portland,
on the briefs, for appellant Guarantee Trust Life Insurance Company; Janet T. Mills, Attorney General, and Andrew L.
Black, Asst. Atty. Gen., Office of Attorney General, Augusta, on the briefs, for appellee Superintendent of Insurance;
Benjamin M. Leoni, Esq., argued, for appellant Guarantee Trust Life Insurance Company; Andrew L. Black, Asst. Atty. Gen.,
argued, for appellee Superintendent of Insurance.
For more information, or to begin your free trial:
• Call: 1-800-543-0874
• Email: customerservice@SummitProNets.com
• Online: www.fcandslegal.com
FC&S Legal guarantees you instant access to the most authoritative and comprehensive
insurance coverage law information available today.
This powerful, up-to-the-minute online resource enables you to stay apprised
of the latest developments through your desktop, laptop, tablet, or smart phone
—whenever and wherever you need it.
Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com
©2013. All Rights Reserved.