Anawan Insurance Agency, Inc. v. Division of Insurance

Citations: 76 Mass. App. Ct. 447; 923 N.E.2d 95Docket: No. 09-P-744

Court: Massachusetts Appeals Court; March 12, 2010; Massachusetts; State Appellate Court

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Plaintiffs Anawan Insurance Agency, Inc. and Stephen Michaels appeal a Superior Court decision that upheld a Commissioner of Insurance ruling. This ruling found that they violated G. L. c. 176D, § 2, and G. L. c. 175, § 177 by compensating Kuntthy Prum while he was unlicensed as an insurance agent. The hearing officer imposed fines totaling $30,000 for 300 violations occurring between 2000 and 2004. Plaintiffs contend that the claims are barred by the statute of limitations, argue that G. L. c. 175, § 177 requires scienter for a violation, and assert that fines should have been assessed under G. L. c. 175, § 177 instead of G. L. c. 176D, § 7. The court vacated the judgment and remanded the case for further proceedings.

The investigation began after anonymous complaints about Anawan's second office, leading to inquiries about Prum's unlicensed status. After uncovering Anawan's prior transactions with Prum, the division initiated a show-cause order alleging violations. The hearing included testimony from one witness and resulted in findings that were affirmed through subsequent appeals.

Regarding the statute of limitations, the plaintiffs argue for a two-year limit per G. L. c. 260, § 5, but the court agreed with the hearing officer that the applicable statute is G. L. c. 260, § 5A, which pertains to actions aimed at consumer protection, thereby allowing the claims to proceed.

Plaintiffs argue that even if § 5A is the correct statute of limitations, their claim is barred as untimely since it allegedly accrued when anonymous letters were received in 1999. However, the hearing officer found that the division was unaware of transactions between Anawan and Prum until June 23, 2004, and that any argument for when the division "should have known" of the violations could only arise after October 25, 2000. Consequently, the division established that fines for violations before November 2000 are not barred by the statute of limitations under § 5A. 

The hearing officer's conclusion that the statute of limitations was tolled is disputed, as the discovery rule does not apply to these fines. Citing Unexcelled Chem. Corp. v. United States, the text emphasizes that a breach of duty, rather than its discovery, is what typically governs. The ruling in 3M Corp. v. Browner further supports this view, rejecting the EPA's claim that penalties only accrue upon discovery of violations, instead stating that the statute of limitations for civil penalties begins when the violation occurs, irrespective of whether it has been discovered.

Here, G. L. c. 175, § 177 held that violations result in fines immediately upon occurrence, with the claim for penalties accruing at that time. The argument that the difficulty in detecting violations affects the statute of limitations is rejected. Additionally, amendments made in 2002 to G. L. c. 175, § 177, which included the term "knowingly" and increased fines, are not viewed as mere clarifications of the previous statute.

A presumption exists that a legislative amendment reflects an intention to change the meaning of a statute, particularly when the statute's language is clear. There is no evidence, such as legislative history or appellate decisions, to counter this presumption regarding the plaintiffs' claims. The requirement for a license serves to protect public welfare, and in public welfare statutes, knowledge (scienter) is not necessary. The addition of "knowingly" to the statute represents a substantial change affecting substantive rights, justifying the application of the statute in effect during the plaintiffs' actions, adhering to the principle that legislation generally operates prospectively unless explicitly stated otherwise. 

The hearing officer determined the plaintiffs violated G. L. c. 175, § 177, and G. L. c. 176D, § 2, both addressing unfair practices in the insurance business and imposing penalties. Under G. L. c. 175, § 177, penalties range from $20 to $200, while G. L. c. 176D, § 7, allows fines up to $1,000 for each violation, making it a more severe penalty. The commissioner was expected to apply penalties under G. L. c. 175, § 177, as the hearing officer only identified violations of that specific statute. Despite overlap between the two statutes, the more specific provisions of § 177 should prevail in case of conflict. 

The judgment is vacated, and the case is remanded to the commissioner for imposing fines under G. L. c. 175, § 177, excluding violations that occurred before October 25, 2000. The plaintiffs must cease the conduct in question, a measure rendered somewhat moot as they had already stopped doing business with Prum by December 31, 2001. The term "producer" has replaced "agent" or "broker" in the statute as of 2002.