CLAIRE-IFICATION
CLAIRE-IFICATION IA&B Vice President - Advocacy Claire Pantaloni, CIC, CISR Are you a member with a question? Contact Claire to find the answer at 800-998-9644, ext. 604 or ClaireP@IABforME.com.
QUESTION: Can a producer filing for bankruptcy jeopardize his license?
ANSWER: In the case of bankruptcies, our three states are fairly consistent in their interpretation of the statute. Here is how our Delaware, Maryland, and Pennsylvania insurance regulators currently handle producers’ bankruptcies.
DELAWARE
MARYLAND
PENNSYLVANIA
Business bankruptcies or personal bankruptcies involving funds held on behalf of others must be reported to the Delaware Department of Insurance (DOI). If it is a personal bankruptcy that does not involve funds held on behalf of others, the DOI does not need to be notified.
If it is a personal bankruptcy only, the Maryland Insurance Administration (MIA) would not require to be notified. The requirement to notify the MIA only applies to business bankruptcies.
According to the Insurance Department, if it is a personal bankruptcy only, there shouldn’t be any problem with the license renewal. However, as in Delaware and Maryland, if the individual has failed to pay state income tax or is behind in child-support payments, there could be some ramifications: the producer licensing statute contains similar provisions as the other two states. If the Pennsylvania Department of Revenue indicates that the producer is non-compliant with state taxes, then the Insurance Department likely will take action unless the producer has entered into an agreement with the Department of Revenue to come into and maintain compliance.
On the other hand, failing to comply with an administrative or court order imposing a child-support obligation, or failing to pay state income tax or comply with any administrative or court order directing payment of state income tax can cause serious problems as they are, by statute, acceptable reasons for denying a license. Such issues should be addressed with the bankruptcy attorney and the DOI upfront. Losing a producer’s license after filing for bankruptcy would be both devastating and counterproductive for all parties involved by depriving the producer of his ability to earn a living.
The failure to pay state income tax or a child-support obligation, however, also would trigger the Maryland producer licensing statute and could jeopardize a license renewal. If there are taxes owed to the State of Maryland that are not the subject of a repayment agreement, the Comptroller’s Office will notify the MIA, and the licensee will not be allowed to renew his/her license. For child-support obligations, notification from the child support agency results in the suspension of the producer’s license until the obligation is resolved. Any producer contemplating an individual bankruptcy should voice these issues with the bankruptcy attorney and/or discuss it upfront with the MIA in order to prevent any fallout. IABforME.com |
As a result, it is best to err on the side of caution and pay close attention to any state income tax debt as well as any child-support obligation with the bankruptcy attorney before proceeding. As in Continued on page 5 3
