OFFICE OF THE INSURANCE COMMISSIONER
MARYLAND INSURANCE ADMINISTRATION
MARYLAND INSURANCE *
ADMINISTRATION, ex rel R.C.T.’ *
v. Case No. MIA-2011-01-025
AMERICAN GENERAL LIFE
INSURANCE COMPANY *
* * * * * * * * * * * *
MEMORANDUM AND FINAL ORDER
Pursuant to §~i2-201and 12-202 of the Insurance Article ofthe Annotated Code of
Maryland, the Maryland Insurance Commissioner (“Commissioner”) finds that American
General Life Insurance Company (“American General”) did not violate Maryland’s insurance
law when would not agree to cancel the life insurance policy on Complainant, Ms. T. ‘5, life,
which was purchased while Ms. T. was still legally married to her ex-husband.
STATEMENT OF THE CASE
Ms. T. filed a complaint with the Maryland Insurance Administration (“MIA”) on June
30, 2010 complaining about American General’s maintaining a life insurance policy on her life,
which is owned by her ex-husband, D.T., because he does not now have an insurable interest in
her life. (MIA Ex. 1.) By letter dated July 2, 2011, the MIA informed American General of its
investigation. (MIA Ex. 2.) In a decision dated December 15, 2010, the MIA found that
American General had not violated Maryland’s insurance laws. (MIA Ex. 14.) Ms. T. noted a
timely appeal on January 4, 2011. (MIA Ex. 15.)
1 Complainants are identified by their initials in an effort to protect their privacy.
This case is governed by the contested case provision ofthe Administrative Procedure
Act, the hearing provisions of Maryland’s Insurance Article, and the procedural rules for MIA
hearings. MD. CoDE ANN., STATE Gov’TART., §~
10-201 — 10-226; MD. CoDE ANN., INs. ART.,
2-21-, 2-213; COMAR 31.02.01.2
The issue in this case is whether American General violated Maryland’s insurance laws
in refusing to cancel policy insuring the life ofMs. T.
SUMMARY OF THE EVIDENCE
The hearing was held at the MIA on July 20, 2011. Complainant represented herself and
provided sworn testimony. American General was represented by Brian D. Bolton, Esq. of Funk
and Bolton and was accompanie4 by Timothy Bolden, Chief Litigation Counsel for American
ML4 Exhibits (Contained in the Record)
1 Complaint dated 06/30/10
2 Letter from MIA to American General dated 07/02/10
3 Letter from MIA to Complainant dated 07/02/10
4 Facsimile from American General to MIA dated 7/8/10
5 Facsimile from American General to MIA dated 07/26/10
6 Received original copy ofExhibit #5 on 07/27/10
7 Facsimile from American General to MIA dated 08/06/10
8 Letter from MIA to American General dated 09/23/10
9 Facsimile from American General to MIA dated 09.28/10
10 Letter from American General to MIA via facsimile dated 10/18/10
11 Follow-up letter from American General to MIA via facsimile dated 10/29/10
12 Letter from American General to MIA via facsimile dated 11/01/10
13 Response from American General to MIA via facsimile dated 11/02/10
14 MIA determination dated 12/15/10
15 Facsimile Request forHearing received from Complainant on 01/04/11
16 Original of Exhibit #15 received from Complainant on 0 1/05/1’l
17 Letter from MIA to American General dated 01/05/11
2 Unless otherwisenoted, all statutory citations are to the InsuranceArticle of the Annotated Code of Maryland.
18 Facsimile from American General to MIA dated 01/05/il
19 Response from American General to MIA via facsimile dated 01/07/11.
20 Original of Exhibit #19 received on 01/12/11.
21 Letter from MIA to Complainant approving Hearing Request dated 01/19/11.
1 State ofRhode Island Family Court Hearing Before Magistrate dated
1 Amendment of Application Policy Acceptance Acknowledgment dated
2 Health Statement Policy Acceptance Acknowledgment dated 04/27/10
Hearing Officer Exhibits
1 Letter from MIA to Parties dated 2/07/11
FINDING OF FACT
These findings of fact are based upon a complete and thorough review of the entire
record including the hearing transcript and all exhibits and documentation provided by the
parties. The credibility of the witnesses has been assessed based upon the substance oftheir
testimony, their demeanor, and other relevant factors. To the extent that there are any facts in
dispute, the following facts are found, by a preponderance of the evidence, to be true. Citations
to particular parts ofthe record are for ease ofreference and are not intended to exclude and do
not exclude reliance on the entire record.
Mr. and Ms. T. were married on March 1, 1991 in the state of Rhode Island. (MIA Ex.
1.) On May 16, 2006, Mr. and Ms. T. entered into a marital property and separation agreement,
known in Rhode Island as a “bed and board divorce.” (MIA Ex. 1; T. 13.)~This agreement
divided assets, but did not address any existing or future life insurance policies. Id. Under the
~Page references to the hearingtranscript are cited as (T. .)
heading “Future Divorce,” the agreement allowed either party to move for a divorce in the future
citing “irreconcilable differences.” Id.
On June 9, 2006, a Rhode Island Family Court granted a bed and board divorce based on
irreconcilable differences and approved the property settlement agreement. (MIA Ex. 1.) The
order contained a disclaimer at the top stating: “THIS IS NOT A FINAL JUDGMENT OR
DECREE OF DIVORCE. THE PARTIES REMAIN MARRIED UNTIL ENTRY BY THIS
COURT OF A FINAL JUDGMENT OR DECREE OF DIVORCE.” Id.
On September 27, 2006, Ms. T. completed an online application for a policy with
American General insuring her life. (MIA Ex. 6.) On December 23, 2006, Ms. T. accepted the
policy issued by American General and became owner and insured of the policy. Id. On January
9, 2007, Mr. T. completed an online application for $250,000.00 of life insurance on the life of
Ms. T. (MIA Ex. 6.) The application listed Mr. T. as the owner ofthe policy. Id. This policy
was requestedthrough Richard Ramos4 of Life Quotes, Inc. Id. Pertinent information from Ms.
T.’s September 27, 2006 application was used for issuance of this policy.
On March 27, 2007, Mr. T. and Ms. T acknowledged acceptance ofpolicy
and acknowledged Mr. T. as the policy owner and beneficiary. (MIA Ex. 1.) Ms. T. signed an
amendment of application form acknowledging this information. Id. Ms. T. also signed a health
statement acknowledging receipt and acceptance of the policy. Id.
Mr. T. and Ms. T. were granted an absolute divorce by a Rhode Island court on June 6,
2008. (MIA Ex. 1.) On November 3, 2009, Ms. T. requested a cancellation of the policy after
learning that it was still active. Id. There was correspondence between Ms. T. and American
General after which, American General refused to cancel the policy. Id.
~The policy (YM00424248) was initially issued identifying Ms. T. as the owner. On 3/7/10, Mr. Ramos requested
that the policy be reissued with Mr. T. as the owner and beneficiary.
The notice of hearing in this case states, “that specific attention at the hearing will be
directed to Maryland Code Annotated, Insurance Article, Sections 12-201 and 12-202.” Section
i2-201(a)(2)(iii) provides that “a personmay not procure or cause to be procured an insurance
contract on the life or body of another individual unless the benefits under the insurance contract
are payable to: a person with an insurable interest in the individual at the time the contract was
made.” (Emphasis added.) Section i2-202(a)(ii) requires that a life insurance contract be
consented to in writing by the individual to be insured.
Here, Ms. T. argues that the insurance policy lacks sufficient consent and, therefore,
should be terminated. (MIA Ex. 16.) She argues further that the policy should never have been
issued because her ex-husband did not have an insurable interest in her life as a result of the “bed
and board divorce” that was finalized six (6) months before issuance of the policy. (T. 11.)
Section 1 2-202(a)(2) requires that for an insurance contract to be valid, the person to be
insured must be legally competent and consent in writing at the time of formulation ofthe
contract. There is no allegation of a lack of competence. Therefore, the only material question is
whether Ms. T. consented in writing and the record is clear that she did.
On March 7, 2007, Ms. T. signed an application amendment acknowledging “receipt and
acceptance” ofthe policy. (MIA Ex. 1.) She also signed a Health Statement acknowledging
receipt and acknowledgment ofthe policy and attesting that she had no significant medical
changes since her previous policy. Id. Ms. T. testified that she was the person who signed these
documents. (T. 26-27.) The forms were clear and unambiguous. They clearly list Ms. T. as the
insured and her ex-husband as the owner and 100% share beneficiary. Id.
Ms. T. argues that there was no insurable interest as a result of the “bed and board
divorce.” (T. 11.) This argument is not supported by the law or by the evidence. Rhode Island
courts have held that a “bed and board divorce” “does not put an end to the marriage relation or
destroy the relation of husband and wife but merely suspends certain ofthe marital rights and
obligations.” Tierney v. Tierney, 50 R.I. 105, 106 (1929). Furthermore, the legal document
granting the “bed and board divorce” is clear evidence that it does not end the marital
relationship. The first page ofthe document contains a disclaimerthat says that the “parties
remain legally married.” (MIA Ex. 1.)
Ms. T. did not receive an absolute divorce until June 6, 2008. (MIA Ex. 1.) Therefore, at
the time that the insurance contract was formed, she was still legally married to her ex-husband.
Maryland law is clear that marriage creates insurable interest. Section 12-201 (b)(2)(i) notes that
“for individuals related by blood or law, a substantial interest engendered by love and affection is
an insurable interest.” The Court of Appeals of Maryland has acknowledged that the relationship
between husband and wife falls within the scope of Section 12-20i(b)(2)(i). Hopkins v. Hopkins,
328 Md. 263, 269, 614 A.2d 96, 99 (1992).
The scope of the Insurance Commissioner’s authority is limited to determining whether
an insurance company has failed to abide by the provisions of the Insurance Article. The
Commissioner has no authority to alter or void the terms ofa legally enforceable contract.
The record clearly supports a finding that American General has not violatedthe provisions of
the Insurance Article in refusing to void the life insurance policy at issue. An individual
(including an ex-spouse) can own a life insurance policy on the life of an individual who had
applied for or consented to that policy. Section 12-202; Hopkins v. Hopkins, 328 Md. 263, 269
(1992). Only the owner of a policy can alter or change the policy.
The insurance contract was consented to on March 7, 2007. (MIA Ex. 1.) This is a full
year before the absolute divorce on June 6, 2008. Id. Therefore, as a matter of law, at the time
that the insurance contract was consented to, Ms. T. was still legally married to her ex-husband.
This case seems to be one of buyer’s remorse rather than lack of consent and insurable interest.
Ms. T. clearly no longer wants her ex-husband to hold an insurance policy on her life and her
feelings are understandable. Ms. T. blanches at the thought that, upon her death, her ex-husband
will “laugh all the way to the bank.” (MIA Ex. 1.) While Ms. T. clearly regrets her decision to
consent to this policy, there is insufficient evidence to support the allegation~ lack of consent
or lack ofinsurable interest.
CONCLUSION OF LAW
Based upon the foregoing Findings of Fact and Discussion, it is found, as a matter of law,
that American General did not violate the Insurance Article ofthe Annotated Code of Maryland.
Based upon the foregoing reasons, it is ORDERED this 10
th day of August, 2011, that the
decision ofthe Maryland Insurance Administration is hereby AFFIRMED and that the records
and publication of the Maryland Insurance Administration reflect this decision.
THERESE M. GOLDSMITH
Signature on file with Orignal