Understanding Adverse Administrative Action Disclosure Obligations For Licensed Maryland Insurance Producers

The Maryland Insurance Administration (“MIA”) is the Maryland state agency responsible for issuing and regulating the licenses of residential and non-residential Maryland insurance producers. The Maryland Insurance Article (“Ins.”) of the Maryland Code creates continuing disclosure obligations for Maryland insurance producers, including but not limited to instances of “adverse administrative action” taken against the insurance producer.

Understanding these disclosure obligations are critical for all insurance producers, but especially for those producers who are licensed in multiple states. The failure to timely disclose adverse administrative action can lead to additional disciplinary actions, potentially resulting in the imposition of fines, license suspensions or revocations, and other disciplinary actions.

What are the disclosure obligations for Maryland insurance producers against whom adverse administrative action has been taken?

Ins. § 10-126(f)(1) requires a Maryland insurance producer to report to the MIA Commissioner “any adverse administrative action taken against the insurance producer” in either: 1) another jurisdiction; or 2) by another governmental unit in the State of Maryland.

The disclosure report must be made no more than “30 days after the final disposition” of the adverse administrative action being disclosed. The disclosure report must also include “a copy of the order, consent order, and any other relevant legal documents.” Ins. § 10-126(f)(2).

What qualifies as an “adverse administrative action”?

Ins. § 10-126(f) does not define the term “adverse administrative action”. Instead, Maryland courts have generally interpreted the term “adverse administrative action” to mean an action taken against the insurance producer that is adverse to the insurance producer’s “interests” or impacts a “key requirement” of the insurance producer’s continued employment as an insurance producer. Coomes v. Maryland Insurance Administration, 232 Md. App. 285, 300 (2017).

Critically, an “adverse administration action” is not always accompanied by a traditional “hearing” before a state agency. For example, in Coomes, a Virginia insurance producer with a non-resident Maryland insurance producer license was under investigation by the Virginia insurance commissioner for actions that had occurred while transacting insurance business in Virginia. Id. at 292. The insurance producer ultimately agreed to voluntarily surrender her Virginia producer license and to not to reapply for a Virginia license for one year in exchange for an end to the license revocation proceedings. Id. at 293.

The insurance producer did not disclose the surrender agreement to the MIA. When the MIA discovered the existence of the Virginia surrender agreement, the MIA revoked the producer’s license, citing Ins. § 10-126(f)’s disclosure obligations related to adverse administrative action.

On appeal, the Appellate Court of Maryland affirmed the MIA’s decision, noting that the “reasonable interpretation of the terms of the [surrender] agreement as a whole is that it was adverse in nature.” Coomes, 232 Md. at 300-01. Additionally, and because the surrender of the resident Virginia license “had a detrimental impact” on the insurance producer’s “license authority[,]” the surrender constituted an adverse administrative action that was required to be disclosed to the MIA within 30 days. Id. at 304.

Because of the short, 30-day window in which insurance producers are obligated to disclose, insurance producers who are involved in administrative action should promptly engage counsel to evaluate disclosure obligations and prepare a disclosure report if required.

If you are an insurance producer facing administrative action or have received a potentially “adverse” decision from an administrative agency, early legal guidance can help safeguard your producer license.

We have extensive experience assisting licensed Maryland insurance producers navigate these complicated and time-sensitive licensing issues. For more information or assistance, contact the attorneys at Brown & Bullock, LLC today.