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HomeMy WebLinkAbout544 PayesMr. Michael. Payes c/o David C. Eaton P.O. Box 840 Harrisburg, PA 17108 Re: 85 -131 -C A. Findings: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 ORDER OF THE COMMISSION Order No. 544 DECIDEDDEC 19 1986 MAILED,IAN 519A7 Dear Mr. Payes: The State Ethics Commission has received a complaint regarding you and a possible violation of Act 170 of 1978. The Commission has now completed its investigation. The individual allegations, conclusions, and findings on which those conclusions are based are as follows: I. Allegation: That you, an Insurance Investigator II in the Pennsylvania Insurance Department, violated Section 3(a) of the Ethics Act which prohibits a public employee's or public official's use of office or confidential information gained through that office to obtain financial gain by using your position with the Insurance Department to intimidate an eye witness of an accident in which your son was involved and to influence the Kemper Insurance Company, your insurance carrier. 1. You are employed as an Insurance Investigator II by the State Insurance Department. As a public employee, you are subject to the provisions of the Ethics Act. 2. You were previously employed by the Lumberman's Mutual Casualty Company, the parent company of Federal Kemper. a. You were employed in the Claims Department until late 1983. b. Statement of Financial Interests dated October 17, 1984 and on file at the Insurance Department discloses the Kemper Group as the sole source of income for that year. Mr. Michael Payes Page 2 3. Your duties include handling consumer complaints which entail reviewing and resolving claims made against various insurance companies licensed to conduct business in Pennsylvania. This would include an insurance company's refusal to pay a claim and the review of whether or not a company is handling claims properly. 4. Information obtained from the Commercial Union Insurance Company, the Federal Kemper Insurance Company, and verified by you disclosed the following: a. On April 17, 1985, Lower Allen Township police investigated an automobile accident involving your son, Philip Payes, and Karen Dooley. Your son was operating a vehicle owned by you. b. You are insured by the Federal Kemper Insurance Company. c. Karen Dooley is insured by the Commercial Union Insurance Company. 5. Karen Dooley and Commercial Union Insurance Company initiated the following actions regarding the accident: a, Dooley submitted a claim to Insurance Agent, Larry Ray, who notified the Claims Department of Commercial Union. b. The claim was handled by Claims Supervisor, Barbara Keiser, and and Claims Representative, Beth DiSante. c. The claim was submitted to Federal Kemper Insurance Company for payment after Commercial_Union determined that your son was at fault. d. Federal Kemper Claims Representative refused to honor the claim. 6. Records of the Commercial Union Insurance Company disclosed the following: a. A copy of Lower Allen Township Police report dated April 17, 1985, which identifies your son and Karen Dooley as the parties involved in the accident and an analysis. b. Handwritten note of Barbara Keiser dated May 16, 1985 which reports a discussion with an unidentified Federal Kemper adjuster who advised that his supervisor told him not to pay since Michael Payes is their insured. The note also reports a discussion with the claims Mr. Michael Payes Page 3 supervisor who would not admit or deny that Payes had anything to do with the denial of the claim. Keiser reported requesting denial and reasons in writing per Fair Claims Practices Act. c. Correspondence dated May 23, 1985, from Kelby Leonard, Claims Representative, Federal Kemper Insurance Company, to Beth DiSante, Commercial Union, stating reasons for denial of claim. Reasons cited were; Commercial Union's insured panicked, their insured not cited and no contact between the vehicles. d. Transcript of an interview of eye witness, Jeff Henry, conducted on June 20, 1985, disclosed on pages 7 and 8 that you contacted Henry at his home and disputed what Henry reported. e. Copies of cancelled checks representing payments made to Dooley by Commercial Union. Recovery notice indicating that on October 15, 1985, Commercial Union received $1,171.86 from Federal Kemper. f. Inter - Company Arbitration form, Docket N092- 00835 -85 which shows applicant as Commerical Union Insurance Company insured, Karen Dooley, Respondent; Federal Kemper Insurance Company insured, Michael Payes. Rulings of findings on October 2, 1985, 85% in favor of applicant. 7. Commerical Union Claims Representative, Beth DiSante reported as follows: a. She was assigned the Dooley claim on April 23, 1985. She interviewed witness, Jeff Henry, who reported that he was contacted by Michael Payes. She did not speak with anyone from Federal Kemper until after the arbitration hearing. She then spoke to Kelby Leonard who said that he could not pay the claim as he had pressure from other parties and that the pressure was due to Payes conducting his own investigation and determining his son was not at fault. b. She had no direct contact with Payes but has had encounters with him in the past in that he has tried to tell her how to settle claims. 8. Commercial Union Claims Supervisor, Barb Keiser, reported as follows: a. She had telephone contact with the claims supervisor and investigator of Federal Kemper in an attempt to negotiate a subrogation claim for Karen Dooley. She was informed first by the investigator that he would not honor the claim as Mike Payes was involved in this matter. Mr. Michael Payes Page 4 He implied that his supervisor gave him instructions not to honor the claim. The supervisor would not confirm or deny the reasons for not honoring the claim. She did not ask, nor was it volunteered, if Payes advised them not to pay the claim. 9. Federal Kemper Claims Representative, Kelby Leonard, reported as follows: a. He was assigned the Michael Payes' claim and interviewed Philip Payes and a passenger. He talked to Mike Payes who stated that his son was not at fault and that he (Payes) would be conducting his own investigation. Payes never told him to deny payment or how to handle the claim. He interviewed other witnesses and had contact with the other claims agents. The claim was denied for three reasons: no contact accident, insured was not cited by police, and conflicting statements. Payes never used his position with the Insurance Department to influence this case. He felt that a thorough investigeticn was required because Payes was their insured and worked for the Insurance Department. b. He was more thorough in this case than most handled while at Kemper. He felt that the Dooley claim should be denied and recommended to agents from Commercial Union to go to inter - company arbitration. He did not make any statements to either Barb Keiser or Beth DiSante that the claim was being denied because of Mike Payes. The only unusual occurences in this case were the number of people interviewed and that Payes* reported the claim directly to the claims office rather than notifying his agent. He said Payes never tried to use his position with the Insurance Department to influence his handling of this case. 10. Federal Kemper Claims Supervisor, Gregory Krutson, reported as follows: a. He assigned the claim to Kelby Leonard and instructed him to do a thorough job because Payes- was a former employee and because of Payes' position with the Insurance Department. He had a conversation with Barb Keiser but only informed that the case would be denied on the merits. He had no conversations with Payes regarding this case. 11. Federal Kemper District Claims Manager Stella Cummings, reported as follows: a. She did not personally become involved in the claim and did not instruct any of her personnel to pay or not pay the claim. The claim was handled strictly on the bases of the facts. She never discussed this claim with Michael Payes. Mr. Michael Payes Page 5 b. Her only involvement with the Payes claim occurred after adjuster Kelby Leonard expressed concern due to Mike Payes' position with the Insurance Department. She advised both Leonard and Supervisor, Gregory Knutson, to "leave no base untouched and do a thorough job." 12. Larry Ray, Insurance Agent for Karen Dooley, reported as follows: a. He sold the Commercial Union policy to Karen Dooley. He received her claim report in April, 1985 and sometime later learned that Federal Kemper was denying the claim. He spoke with a Federal Kemper Claims Supervisor in Lancaster who advised that due to Mike Payes' position with the Insurance Department, Federal Kemper would not pay the claim. The Federal Kemper agent told him he would deny making the statement. 13. Witness, Jeff Henry, reported that you contacted him on two occasions following the accident. a. The first call occurred a day following the accident. The caller identified himself as a representative of the insurance company for the youth involved in the accident. During the conversation, the caller stated his son was not at fault and could not have caused the accident. Henry believed that you made that call. b. The second call occurred approximately one week later. You identified yourself and challenged Henry's account of the accident. Henry reported that you badgered him into changing his version of the accident. c. Henry reported this call to the Commercial Union Insurance Company. 14. You admitted to contacting Jeff Henry only on one occasion. a. You deny that you badgered Henry or attempted to coerce Henry into changing his statement. b. You stated that you only wanted to obtain information as to what exactly occurred. You claim your questions were based on information contained in the police report. 15. You stated you conducted your own investigation of this accident which included diagrams and photographs of the scene. Mr. Michael Payes Page 6 a. You advised the Federal Kemper adjuster that you would be conducting such an investigation. b. You forwarded your results to the Federal Kemper Insurance Company. c. You stated that you conducted this investigation because it has been your-experience that new investigators never leave the office and often times omit key information. You were not sure what type of investigation would be conducted and you wanted to be sure that all the facts were available to anyone who would review the file. d. You felt this case would go to inter - company arbitrations but deny trying to influence Federal Kemper to handle the claim in that manner. 16. The Federal Kemper Insurance Company did not authorize you to conduct an investigation. Company representatives stated that it is unusual for an insured to conduct a separate investigation. However, based on your years of experience in claims work, the company did not find your actions irregular. a. The company did not authorize you to contact the eyewitness in this case. The company was unaware of this action. Company representatives stated that insureds are always admonished for contacting witnesses. B. Discussion: As an Insurance Investigator II employed by the Pennsylvania State Insurance Department, you are a public employee as that term is defined in the State Ethics Act. 65 P.S. §402. As such, your conduct must conform to the requirements of that law. We must review the instant situation under the provisions of the Ethics Act as set forth in Section 403(a) which provides as follows: Section 3. Restricted activities. (a) No public official or public employee shall use his public office or any confidential information-received through his holding public office to obtain financial gain other than compensation provided by law for himself, a member of his immediate family, or a business with which he is associated. 65 P.S. §403(a). Within the above provision of law, no public employee may use his position of public employment in order to obtain a financial gain for himself Mr. Michael Payes Page 7 or for a member of his immediate family. Such an employee may not use confidential information obtained through public service for similar purposes. In the instant situation, we have been called upon to determine whether you, as an Insurance Investigator serving the Pennsylvania Insurance Department, used or attempted to use your position with that public agency in order to benefit or obtain a financial gain for yourself or for a member of your immediate family. In the instant situation, it is clear that your son was involved in an automobile accident. Your son is a member of your immediate family as that term is defined in the State Ethics Act. In this respect, the State Ethics Act provides as follows: Section 2. Definitions. "Immediate family." A spouse residing in the person's household and minor dependent children. 65 P.S. 402. The provisions of the State Ethics Act would clearly be implicated if you attempted to use your position as an insurance investigator to coerce a licensed insurance company that is regulated by the agency for which you work into handling an insurance claim in a certain manner. In the instant situation, however, we have found insufficient evidence to indicate that you, in fact, conducted yourself in this manner. There is no information or evidence indicating that you threatened or otherwise attempted to coerce the Federal Kemper Insurance Company into not paying the claim regarding the accident in which your son was involved. The only information that relates to this type of conduct was the statement from a Federal Kemper Claims Supervisor who advised that due to your position with the Insurance Department, Federal Kemper would not pay the claim. This Federal Kemper employee, however, indicated that he would deny making that statement. Additionally, it is not clear from that statement whether this individual was reaching that conclusion and taking that position based upon his own assumptions regarding your position or based upon some affirmative statement made by you. We do not believe that this type of second hand statement is the type upon which Ethics Act considerations can be based. The facts of the instant matter clearly indicate that you conducted your own investigation into the auto accident in which your son was involved. There is no indication, however, that you conducted your investigation on Commonwealth time or that you otherwise used your position during the course of this investigation to obtain information. While you did, in fact, contact the eye witness to the accident, that contact as a private individual does not raise Ethics Act considerations. While the eye witness indicated that you attempted to have him change his version of the accident, there was no indication that you did this through the use of your position as an Insurance Investigator and we may not consider this situation under any other provision of law. Mr. Michael Payes. Page 8 Based upon all the foregoing, we conclude that you did not violate the State Ethics Act and that the evidence was insufficient to indicate that you used your position as an Insurance Investigator in an attempt to coerce or threaten an insurance company into refusing to pay a claim in an accident in which your son was involved. Our review of this matter is based solely upon the Ethics Act and we have not considered any other provisions of the law in relation to tills matter. C. Conclusion: You did not violate the State Ethics Act. There was no evidence to indicate that you used your position as an Insurance Investigator with the Pennsylvania State Insurance Department to influence the decisions by a Pennsylvania licensed insurance company in relation to an accident claim in which your son was involved. Our files in this case will remain confidential in accordance with Section 8(a) of the Ethics Act, 65 P.S. 408(a). However, this Order is final and will be made available as a public document 15 days after service (defined as mailing) unless you file documentation with the Commission which justifies reconsideration and /or challenges pertinent factual findings. See 51 Pa. Code 2.38. During this 15 -day period, no one, including the Respondent unless he waives his right to challenge this Order, may violate this confidentiality by releasing, discussing or circulating this Order. Any person who violates the confidentiality of a Commission proceeding is guilty of a misdemeanor and shall be fined not more than $1,000 or imprisoned for not more than one year or both, see 65 P.S. 409(e). By the Commission, G. Sieber Pancoast Chairman