JASON TERRY V OFFICE OF FINANCIAL AND INSURANCE REGULATION
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STATE OF MICHIGAN
COURT OF APPEALS
JASON TERRY,
UNPUBLISHED
April 28, 2011
Petitioner-Appellee,
v
OFFICE OF FINANCIAL & INSURANCE
REGULATION and COMMISSIONER OF
FINANCIAL & INSURANCE REGULATION,
No. 295470
Ingham Circuit Court
LC No. 08-000459-AA
Respondents-Appellants.
Before: SERVITTO, P.J., and GLEICHER and SHAPIRO, JJ.
PER CURIAM.
In this insurance licensing dispute, respondents, the Office of Financial and Insurance
Regulation (OFIR) and the Commissioner of Financial and Insurance Regulation, appeal by
leave granted a circuit court order reversing a commissioner decision to revoke petitioner Jason
Terry’s resident insurance producer license. We affirm.
The parties do not dispute the pertinent facts that led to this appeal. In March 2007,
Terry applied to the OFIR seeking licensure as a resident producer of property and casualty
insurance. Terry revealed on his application that he had a 2005 felony conviction for driving
while impaired or intoxicated, third offense. See current MCL 257.625(9)(c). In June 2007, the
OFIR’s insurance licensing director issued Terry a license subject to a three-year term of
probation, “[p]ursuant to MCL 500.1239.” Shortly thereafter, though, the OFIR commenced
proceedings to revoke Terry’s license. In March 2008, the commissioner issued a decision
revoking Terry’s license, reasoning that Terry did not possess a valid license given that MCL
500.1205 and MCL 500.1239 mandated a denial of the license due to his felony conviction.
Terry sought review in the circuit court, which reversed the commissioner’s license
revocation according to the following logic:
MCL 500.1205 specifically states it does not allow a license to be awarded
to anyone who has committed an act that is grounds for denial, suspension, or
revocation under MCL 500.1239. MCL 500.1239 gave the Commissioner
discretion to determine what type of offense would lead to suspension or
revocation of a license. The specific language used in MCL 500.1239 states the
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Commissioner may revoke a license when an applicant has been convicted of a
felony.
On January 6, 2009, MCL 500.1239 was edited to say the Commissioner
shall refuse to issue a license under MCL 500.1205 if an applicant had been
convicted of a felony. However, the new law did not contain any language
making it retroactive. At the time Plaintiff’s license was granted under the law, it
was a valid license. Once a valid license had been issued, OFI[R] did not have
the legal authority to revoke Plaintiff’s license due to his previous felony
conviction. The Commissioner was not acting lawfully when he stripped Plaintiff
of his license.
When a circuit court reviews an agency decision, it must circumscribe its consideration to
an ascertainment “whether the decision was contrary to law, was supported by competent,
material, and substantial evidence on the whole record, was arbitrary or capricious, was clearly
an abuse of discretion, or was otherwise affected by a substantial and material error of law.”
Dep’t of Labor & Economic Growth, Unemployment Ins Agency v Dykstra, 283 Mich App 212,
223; 771 NW2d 423 (2009) (internal quotation omitted). “This Court reviews a lower court’s
review of an agency decision to determine whether the lower court applied correct legal
principles and whether it misapprehended or grossly misapplied the substantial evidence test to
the agency’s factual findings.” Id. at 222. If appellate review involves statutory interpretation,
we consider this issue de novo. Id. at 223.
The OFIR and the commissioner raise multiple challenges to the circuit court’s
interpretation of the relevant licensing statutes. The legal positions the OFIR and the
commissioner raise in this appeal mirror those made by the Department of Economic Growth
(DEG) and the commissioner in King v Michigan, 488 Mich 208; 793 NW2d 673 (2010), a case
in which our Supreme Court recently decided several issues of statutory construction relating to
resident insurance producer licensing.1 The facts of King closely resemble the circumstances
presented here. “In 2004, [Steven King] applied to the Michigan Office of Financial and
Insurance Services (OFIS) [now the OFIR] for a resident insurance producer license,” fully
disclosing a 2000 felony conviction of operating a vehicle under the influence of liquor. Id. at
211 (opinion by Davis, J.).2 “The commissioner granted [King’s] license.” Id. at 212.
[King] then pursued a career as an insurance agent for a number of years.
In the meantime, he has not been convicted of any other felonies or provided any
new grounds for revocation of his license . . . . In 2008, [the DEG and the
commissioner] began proceedings to revoke [King’s] license, and [King] initiated
1
The Supreme Court more recently denied a motion for reconsideration in King. ___ Mich ___
(Docket No. 140684, entered April 8, 2011).
2
Although only Justice Hathaway joined Justice Davis’s lead opinion, Justice Cavanagh and
Chief Justice Kelly concurred in the lead opinion’s statutory construction. Id. at 217.
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the instant suit. The gravamen of [the DEG’s and the commissioner’s] argument
is that a change to the Insurance Code in 2002 had required the commissioner to
deny [King’s] application, that failing to do so was a mistake, and that the current
provisions of the Insurance Code [MCL 500.100 et seq.] require the
commissioner to correct that mistake. . . . [Id. (emphasis in original).]
Because the Michigan Supreme Court’s subsequent statutory interpretation disposes of
the OFIR’s and the commissioner’s instant contentions regarding the meaning of the Insurance
Code, we republish much of the Supreme Court’s analysis in King, 488 Mich 208. With respect
to the first question presented in King, “whether in 2004 the [c]ommissioner . . . was required by
statute to deny [King’s] application for a resident insurance producer license on the basis of
[King’s] fully disclosed prior felony conviction,” id. at 210-211 (emphasis in original), the
Supreme Court explained as follows:
Before 2002, the Insurance Code’s licensure provisions had required
applicants to have “good moral character.” . . . It remains the law today that no
licensing agency may make a finding as to an applicant’s moral character on the
sole basis of a criminal conviction. MCL 338.42. It also remains the law that
“(o)rders, decisions, findings, rulings, determinations, opinions, actions, and
inactions of the commissioner in (the Insurance Code) shall be made or reached in
the reasonable exercise of discretion.” MCL 500.205.
The “good moral character” requirement in the Insurance Code’s licensure
provisions was replaced by 2001 PA 228. When [King] applied for his license,
MCL 500.1205(1)(b) provided that an application “shall not be approved” if the
applicant had “committed any act that is a ground for denial, suspension, or
revocation under (MCL 500.1239).” While this seems mandatory when read in
isolation, MCL 500.1239(1) provided that “the commissioner may place on
probation, suspend, revoke, or refuse to issue” a license for a list of possible
reasons, including an applicant’s “having been convicted of a felony.” MCL
500.1239(1)(f) [emphasis in original]. Consistent with MCL 500.205, the
licensure requirement mandates that the commissioner make a discretionary
judgment call when reviewing an application and deny the application if he or she
concludes—in the exercise of that discretion—that denial, suspension, or
revocation would be appropriate.
. . . When the applicable versions of MCL 500.1205, MCL 500.1239, and
MCL 500.205 are read together, they set forth a licensure procedure that requires
the commissioner to exercise judgment within a framework . . . . We reject [the
the DEG’s and the commissioner’s] contention that the Insurance Code in effect
in 2004 required the commissioner to deny [King’s] application. The Insurance
Code did not, and the commissioner’s exercise of discretion in granting [King] a
license was therefore permissible. [Id. at 213-214 (emphasis in original).]
The Supreme Court further rejected as “incorrect” a prior commissioner decision that the DEG
and the commissioner offered in support of its preferred statutory construction. Id. at 214-215.
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Concerning the second issue decided in King, “whether the commissioner is now
required by statute to affirmatively revoke [King’s] license on the basis of the same prior
felony,” id. at 211 (emphasis in original), our Supreme Court elaborated:
Subsequently, 2008 PA 422 and 2008 PA 423 amended MCL 500.1205
and MCL 500.1239. MCL 500.1205 now provides in relevant part that “(a)n
application for a resident insurer (sic) producer license shall not be approved
unless the commissioner finds that the individual (h)as not committed any act
listed in (MCL 500.1239(1)).” And MCL 500.1239(1)(f) provides that “the
commissioner shall refuse to issue a license” for “(h)aving been convicted of a
felony.”
These two statutes are now consistent, and were a convicted felon to apply
for an insurance producer license today, the commissioner would be required to
deny it. . . . But no language in these statutes rebuts the general rule of
construction that changes to a statute should only apply prospectively. Even if we
were to engage in a speculation that the amendment was intended to clarify the
Legislature’s prior intent, amendments may not be applied retrospectively if doing
so would impair a vested right. The fact that an applicant like [King] would
necessarily be denied a license today does not automatically invalidate [the
commissioner’s] decision to exercise its discretion to grant him a license in 2004.
Although the current statutes require denial of a license, they do not
require an existing license to be revoked. The first clause of MCL 500.1239(1)
states in full: “In addition to any other powers under this act, the commissioner
may place on probation, suspend, or revoke an insurance producer’s license or
may levy a civil fine under (MCL 500.1244) or any combination of actions, and
the commissioner shall refuse to issue a license under (MCL 500.1205 or
500.1206a), for any 1 or more of the following causes(.)” Denial is mandatory if
any number of enumerated conditions is satisfied; however, revocation is still as
discretionary as it was in 2004.
Therefore, we answer the second question, whether [the commissioner] is
currently required by statute to revoke [King’s] license, in the negative. [Id. at
215-216 (emphasis in original).]
The Supreme Court then proceeded to address the third issue presented in King, “whether
the commissioner is now permitted to revoke [King’s] license on the basis of the same prior
felony,” 488 Mich at 211 (emphasis in original):
We observe initially that the plain language of the present Insurance Code
gives the commissioner the discretion to pursue revocation of [King’s] resident
insurance producer license for a variety of possible reasons, including [King’s]
having been convicted of a felony. However, we emphasize that doing so must be
a “reasonable exercise of discretion.” MCL 500.1205. Here, the gravamen of
[the DEG’s and the commissioner’s] argument is that the commissioner is
required to revoke [King’s] license. This erroneous abdication of discretion is, in
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itself, an abuse of discretion. Therefore, in this case, the commissioner cannot be
said to be engaging in a “reasonable exercise of discretion.”
With regard to this issue, we hold only that the commissioner may not
revoke a license on the basis of the erroneous belief that he must do so when, in
fact, he has discretion. Because this result is mandated by the plain terms of the
Insurance Code, we make no pronouncement about whether equity applies here or
what effect it might have. . . .
***
[King’s] license was properly granted by the commissioner in 2004. The
Insurance Code does not require [King’s] license to be revoked now. The
commissioner could have exercised reasonable discretion and decided to pursue
revocation of [King’s] license; however, in this case, the commissioner
necessarily abused that discretion by proceeding on the basis of an erroneous
belief that he was required to revoke [King’s] license. [Id. at 216-217 (emphasis
in original).]
Keeping in mind the Supreme Court’s statutory interpretation in King, 488 Mich 208, in
this case the commissioner properly exercised discretion in granting on a probationary basis
Terry’s 2007 license application. The OFIR and the commissioner do not now suggest that Terry
has subsequent convictions or has engaged in any conduct that would place his resident producer
license in jeopardy. As in King, id. at 216, the OFIS and the commissioner have pursued
revocation of Terry’s license in a fashion that amounts to an “erroneous abdication of
discretion,” under the mistaken belief “that the commissioner is required to revoke [Terry’s]
license.” We conclude that the circuit court correctly found that the commissioner’s decision to
revoke Terry’s license rested on incorrect readings of the applicable law. Dykstra, 283 Mich at
222-223.
Affirmed.
/s/ Deborah A. Servitto
/s/ Elizabeth L. Gleicher
/s/ Douglas B. Shapiro
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