CHARLES E. CUNNINGHAM
TENNESSEE DEPARTMENT OF COMMERCE AND INSURANCE, INSURANCE DIVISION
Assigned on Briefs July 3, 2017
from the Chancery Court for Davidson County No. 15-1072-IV
Russell T. Perkins, Chancellor.
appeal involves the decision of the Commissioner of the
Tennessee Department of Commerce and Insurance (the
"Commissioner") to impose a civil fine and revoke
the license of insurance agent Charles E. Cunningham
("Cunningham"), after concluding that Cunningham
committed six (6) violations of applicable statutes in
connection with his insurance practice. Cunningham filed a
petition for review in the Chancery Court for Davidson County
challenging the sufficiency of the evidence relied on by the
Commissioner. The trial court found that the record supported
the Commissioner's decision and choice of penalty.
Cunningham appealed to this Court. We affirm the judgment of
the trial court.
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
Court Affirmed and Remanded
William E. Griffith, Nashville, Tennessee, for the appellant,
Charles Edward Cunningham.
Herbert H. Slatery, III, Attorney General and Reporter,
Andrée Sophia Blumstein, Solicitor General, and
Timothy R. Simonds, Assistant Attorney General, Nashville,
Tennessee, for the appellee, Tennessee Department of Commerce
B. Goldin, J., delivered the opinion of the court, in which
Frank G. Clement, Jr., P.J., M.S., and John W. McClarty, J.,
B. GOLDIN, JUDGE.
Background and Procedural History
was a licensed insurance agent in Tennessee from 1982 until
his license was revoked as a result of these proceedings.
Cunningham operated his business under the name Cunningham
Insurance, LLC. At all times relevant to these proceedings,
Charles Michael Outland ("Outland") and Rodney
Moore ("Moore") were co-owners of ABC Services
("ABC"), a janitorial business.
December 22, 2009, Moore gave Cunningham a check for $4, 717,
payable to Travelers Indemnity Company
("Travelers") ("Transaction 1"). Moore
tendered the check as partial payment for ABC's
workers' compensation and general liability insurance
policies. Instead of remitting ABC's check to Travelers
for purchase of the requested policies, Cunningham deposited
the check directly into his business operating account.
Cunningham never submitted an application for an insurance
policy to Travelers, and Travelers never issued a policy in
connection with Transaction 1.
December 29, 2009, Moore issued a second check for $10, 744.
The check was tendered as payment-in-full for ABC's
workers' compensation and general liability policies with
effective dates from December 7, 2009 through December 7,
2010 ("Transaction 2"). Although the check was made
payable to Travelers, Cunningham once again deposited the
check directly into his business operating account.
Transaction 2, Cunningham submitted an application for
ABC's policies to Travelers. Travelers issued the
requested policies to ABC with effective coverage dates of
December 7, 2009 through December 7, 2010. Cunningham,
however, did not pay Travelers the policy premiums. After
repeated notifications for payment were mailed to Cunningham,
Travelers canceled ABC's policies in February 2010 due to
non-payment of the premiums. Travelers eventually referred
the case to RMS Collection Service ("RMS").
April 12, 2010, ABC contacted Cunningham to request its
certificates of insurance. Cunningham did not inform ABC that
the policies had been canceled in February due to non-payment
of premiums. Instead, Cunningham provided ABC a fraudulent
declarations page for the canceled insurance policies, and he
led ABC to believe its coverage was still effective.
2010, RMS contacted Outland and notified him that ABC's
policies with Travelers had been canceled on February 7, 2010
for non-payment of premiums. Outland immediately contacted
Travelers about the status of the policies, and Travelers
informed Outland that it had issued the policies but never
received the payments. Travelers also informed Outland that
Travelers had not notified ABC directly concerning the
cancellations because Cunningham had directed Travelers to
send correspondence concerning the policies directly to his
mailing address. Additionally, Travelers advised Outland that
the total amount due for the annual premiums was $6, 619-not
speaking with Travelers, Outland went directly to
Cunningham's office to confront him. Cunningham insisted
the policies were effective and provided Outland with a
declarations page effective March 5, 2011 to March 5, 2012.
When Outland questioned Cunningham about the incorrect dates,
Cunningham explained that the dates reflected a clerical
error, ABC's policies were still effective, and Travelers
must be mistaken because it swept the payment from his
account. Outland then confronted Cunningham with the fact
that Travelers had promised to refund him for the
misappropriated funds and to reinstate ABC's policies.
Even then, Cunningham continued to blame Travelers for the
30, 2010, Outland filed a complaint with the Tennessee
Department of Commerce and Insurance, Insurance Division
("Division"), alleging that Cunningham collected
premiums from ABC, failed to purchase the promised policies,
and continued to misrepresent their existence for several
months. Also, in July 2010, Marguerite Fredette, a senior
investigator with Travelers' internal investigations
division, opened an investigation of Cunningham's
practices after being contacted by Outland.
reimbursed Outland and reinstated ABC's polices. It then
notified Cunningham to immediately reimburse Travelers'
for the premiums Cunningham misappropriated from ABC.
Travelers informed Cunningham repeatedly that nonpayment and
a failure to cooperate with Travelers' audit personnel
would result in an immediate termination of Cunningham's
appointment as an agent for Travelers. On August 9, 2010,
Cunningham sent Travelers a check for $9, 581; however, the
check was returned for insufficient funds. After receiving
notification, Cunningham emailed Travelers representing that
he had mailed a cashier's check on August 30, 2010.
However, Travelers never received the payment, and Cunningham
further failed to provide documents that Travelers requested
in connection with its audit of Cunningham. On September 29,
2010, Travelers terminated its relationship with Cunningham
and filed a complaint with the Division.
Division initiated a formal investigation of Cunningham on
November 8, 2010. On June 28, 2013, the Division filed a
petition against Cunningham with the Secretary of State,
alleging that he violated Tennessee Code Annotated Sections
56-6-112(a)(4), (5), (7), (8), 56-8-104(1)(A), and 56-6-116.
The Division requested that Cunningham's license be
revoked and the maximum civil penalty of two hundred and
fifty thousand dollars ($250, 000) be imposed as authorized
by Tennessee Code Annotated Section 56-2-305.
12, 2014, a hearing was held on the Division's petition
before an administrative law judge (the "ALJ"). On
December 18, 2014, the ALJ issued an order in which she
concluded that the Division had established, by a
preponderance of the evidence, that Cunningham: (1)
misappropriated insurance premium payments (Count I [Tenn.
Code Ann. § 56-6-112(a)(4)]); (2) intentionally
misrepresented the terms of an actual or proposed insurance
contract (Count II [Tenn. Code Ann. § 56-6-112(a)(5)]);
(3) engaged in an unfair trade practice (Count III [Tenn.
Code Ann. § 56-6-112(a)(7)]); (4) engaged in dishonest
and fraudulent practices (Count IV [Tenn. Code Ann. §
56-6-112(a)(8)]); and (5) violated his fiduciary duty to ABC
(Count V [Tenn. Code Ann. § 56-6-116]). The ALJ found
Cunningham guilty of Counts I-V. In total, the ALJ concluded
Cunningham committed six (6) statutory violations.
order of July 9, 2015, the Commissioner adopted the ALJ's
factual findings and legal conclusions. The Commissioner also
affirmed the ALJ's revocation of Cunningham's license
and imposition of an $18, 000 civil penalty. On September 4,
2015, Cunningham filed a petition for judicial review in the
Chancery Court of Davidson County. Tenn. Code Ann. §
4-5-322. On September 26, 2016, the trial court issued a
final order affirming the Commissioner in all respects.
Cunningham appeals. We affirm.
presents the following two (2) issues for our review, which
we restate as follows:
A. Whether the Commissioner erred in her determination that
Appellant committed six (6) statutory violations?
B. Whether the punishment imposed by the Commissioner was