FILED
02-26-2018
John Barrett
Clerk of Circuit Court
2016PR000704

Before The

State of Wisconsin
DIVISION OF HEARINGS AND APPEALS
In the Matter of Blanche Berenzweig,
Respondent

DHA Case No. OCI-17-0037
OCI Case No. 14-C42002

NOTICE OF FILING PROPOSED DECISION
TO: Blanche Berenzweig, by
Attorney Michael Ganzer
Terschan, Steinle, Hodan & Ganzer, S.C.
309 North Water Street, Suite 215
Milwaukee, WI 53202

Office of the Commissioner of Insurance, by
Attorney Lauren Van Buren
125 South Webster Street
Second Floor
Madison, WI 53703

PLEASE TAKE NOTICE that a Proposed Decision in the above-captioned matter has
been filed with the Commissioner of Insurance. A copy of the Proposed Decision is attached
hereto.
If you have objections to the Proposed Decision, you may file them in writing, briefly
stating the reasons, authorities, and supporting arguments for each objection. Your objections
and argument must be received at the Commissioner of Insurance, State of Wisconsin, P. O. Box
7873, Madison, Wisconsin 53707-7873, within 20 days of the date of the Proposed Decision.
You must provide a copy of your objections and argument to all other parties by the same date.
You may also file a written response to any objections to the Proposed Decision. Your
response must be received at the Commissioner of Insurance no later than ten days after receipt
of objections. You must provide a copy of your response to all other parties by the same date.
The attached Proposed Decision is the Administrative Law Judge’s recommendation in
this case. The Order included in the Proposed Decision is not binding on you. After reviewing
the Proposed Decision and objections, if any, the Commissioner of Insurance will issue a binding
Final Decision and Order.
The process relating to Proposed Decisions is described in Wis. Stat. § 227.46(2).

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 DHACaseNo. OCI-1 7-0037

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Dated at Madison, Wisconsin on February 8, 2018.
STATE OF WISCONSIN
DIVISION OF HEARINGS AND APPEALS
5005 University Avenue, Suite 201
Madison, Wisconsin 53705-5400
Telephone: (608) 266-3865
(608) 264-9885
FAX:

By:
Rachel L. Pings
Administrative Law Judge

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Before The

State of Wisconsin
DIVISION OF HEARINGS AND APPEALS
DHA Case No. OCI-17-0037
OCI Case No. 17-C42002

In the Matter of Blanche Berenzweig,
Respondent
PROPOSED DECISION
The PARTIES to this proceeding are:

Blanche Berenzweig, by
Attorney Michael Ganzer
Terschan, Steinle, Hodan & Ganzer, S.C.
309 North Water Street, Suite 215
Milwaukee, WI 53202

Office of the Commissioner of Insurance, by
Attorney Lauren Van Buren
125 South Webster Street
Second Floor
Madison, WI 53703

PRELIMINARY RECITALS

On September 1 8, 2017, the Office of the Commissioner of Insurance (OCI) issued a
Notice of Hearing alleging that Blanche Berenzweig (Respondent) engaged in violations relating
to her insurance agent license. The matter was referred to the Division of Hearings and Appeals
for hearing and Administrative Law Judge Rachel Pings was appointed to preside over a Class 2
hearing. On October 2, 2017, Respondent timely filed an Answer. On October 23, 2017, Judge
Pings conducted a telephone prehearing conference with the parties, at which time witness and
exhibit list deadlines were established and a hearing was scheduled.
Pursuant to due notice, hearing was held on November 28 and 29, 2017 in Madison,
Wisconsin. OCI appeared by Attorney Lauren Van Buren, who offered OCI Exhibits 1 through
12 and 14 through 16. Respondent appeared by Attorney Michael Ganzer, who offered
Respondent Exhibits 101 through 110. All exhibits were made part of the record at the close of
the hearing. The hearing was audio recorded and transcribed by Gramann Reporting. The parties
provided written closing arguments, the last of which was received on January 12, 2018.

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DHACase No. OCI- 17-0037
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APPLICABLE LAW
Wis. Stat. § 628.34 Unfair marketing practices.
(12) RULES DEFINING UNFAIR TRADE PRACTICES. The commissioner may define specific unfair trade
practices by rule, after a finding that they are misleading, deceptive, unfairly discriminatory, provide
an unfair inducement, or restrain competition unreasonably.

Wis. Admin. Code Ins § 6.60 Prohibited business practices.
(1) In this section:

(a) “Affiliate" means any person who is under the control of or acts at the direction of the
agent.
(b) “Agent" means an intermediary as defined in s, 628.02, Stats.
(c) “Customer" means a natural person with whom the agent or affiliate is doing or has,
within 3 years from the act or transaction regulated by this section, done an insurance
business as that term is defined in s. 618.02 (2) and (3), Stats.
(d) “Personal financial transaction" includes a transaction in which the agent or an affiliate of
the agent borrows money, property or securities from a customer; loans money, property or
securities to a customer; acts as custodian for money, property or securities of a customer;
obtains power of attorney over money, property or securities of a customer; obtains a
guarantee of any loan from a customer; shares directly or indirectly in profits or losses with a
customer; or without furnishing equal consideration obtains title to or ownership of any
property of a customer. In this section “personal financial transaction" does not include
transactions conducted by an agent or affiliate in the normal course of doing an insurance
business such as holding an insurance policy for analysis or servicing, or receiving an
insurance premium from a customer provided the transaction is properly recorded on the
records of the agent or affiliate as required by s. Ins 6.6 1 , including the name of the insurer
for whom the premium was received, and the agent or affiliate immediately issues a written
receipt to the customer for the policy or premium.

(2) The following are deemed to be unfair trade practices by an agent or affiliate pursuant to s. 628.34
(12), Stats., without limiting those terms to the practices specified in this section:
(a) Effecting or attempting to effect a personal financial transaction with a customer unless
any of the following apply:
1 . The customer is a relative of the agent or affiliate as defined in s. 1 3.62 (12g),
Stats.
2. The customer is a person residing in the household of the agent or affiliate at the
time of the transaction.
3. The transaction is a bona fide arm's length business transaction where the customer
is either qualified to understand and assess the transaction or has been advised or
represented in the transaction by a qualified individual who is not the agent or
affiliate.
4. The agent or affiliate is acting lawfully pursuant to authority given under federal
or state law governing the securities or investment advisory business.
(b) Knowingly being listed as a beneficiary of any proceeds of a life insurance policy or
annuity issued to a customer unless the agent or affiliate has an insurable interest in the life of
the customer.

 DHA Case No. OCI-17-0037
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(5) A violation of sub. (2) is a cause for denial of an agent license application under s. 628.04 (1),
Stats., and a cause for agent license suspension, revocation or limitation under s. 628.10 (2) (b), Stats.

Wis. Stat. § 618.02 Definitions. For the purposes of this chapter, unless the context indicates otherwise:
(1) “Directly procured insurance" means insurance procured under s. 618.42.
(2) “Doing an insurance business" includes:
(a) Soliciting, making, or proposing to make an insurance contract;
(b) Taking or receiving an application for insurance;
(c) Collecting or receiving, in full or in part, an insurance premium;
(d) Issuing or delivering an insurance policy except as a messenger not employed by the
insurer or by an insurance agent or broker;
(e) Inspecting risks, setting rates, disseminating information or advising on risk management

in connection with the solicitation, negotiating, procuring or effectuation of insurance
coverage;
(f) Investigating, settling, adjusting or litigating claims;
(g) In any way representing or assisting any person to do an insurance business or to procure
insurance; and
(h) Any other act generally regarded as doing an insurance business.
(3) “Doing an insurance business" does not include:
(a) Acting as an attorney for a client; and
(b) Acting as a full-time salaried employee of an insured in the capacity of an insurance buyer
or manager.
Wis. Stat. § 628.10 Termination of license.
(2) REVOCATION, SUSPENSION, AND LIMITATION OF LICENSES.

(b) For other reasons. ...the commissioner may revoke, suspend, or limit in whole or in part
the license of any intermediary or individual navigator if the commissioner finds that the
licensee is unqualified as an intermediary or navigator, is not of good character, or has
repeatedly or knowingly violated an insurance statute or rule or a valid order of the
commissioner under s. 601 .4 1 (4), or if the intermediary’s or navigator’s methods and
practices in the conduct of business endanger, or financial resources are inadequate to
safeguard, the legitimate interests of customers and the public. Nothing in this paragraph
limits the authority of the commissioner to suspend summarily an intermediary’s or
individual navigator's license unders. 227.51 (3).

Wis. Stat. § 601.64 Enforcement procedure.
(3) FORFEITURES AND CIVIL PENALTIES.
(a) Restitutionaryforfeiture. Whoever violates an effective order issued under s. 60 1 .41 (4),
any insurance statute or rule, or s. 149.13, 2011 stats., shall forfeit to the state twice the
amount of any profit gained from the violation, in addition to any other forfeiture or penalty

imposed.
(c) Forfeiture for violation of statute or rule. Whoever violates an insurance statute or rule or
s. 149. 1 3, 201 1 stats., intentionally aids a person in violating an insurance statute or rule or s.
149. 13, 2011 stats., or knowingly permits a person over whom he or she has authority to
violate an insurance statute or rule or s. 149.13, 201 1 stats., shall forfeit to the state not more
than $ 1 ,000 for each violation. If the statute or rule imposes a duty to make a report to the
commissioner, each week of delay in complying with the duty is a new violation.

 DHA Case No. OCI-17-0037
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(d) Procedure. The commissioner may order any person to pay a forfeiture imposed under
this subsection or s. 601.65, which shall be paid into the common school fund. If the order is
issued without a hearing, the affected person may demand a hearing under s. 601.62 (3) (a). If
the person fails to request a hearing, the order is conclusive as to the person's liability. The
scope of review for forfeitures ordered is that specified under s. 227.57. The commissioner
may cause action to be commenced to recover the forfeiture. Before an action is commenced,
the commissioner may compromise the forfeiture.

Wis. Stat. § 601.41 General duties and powers.
(1) DUTIES. The commissioner shall administer and enforce chs. 600 to 655 and ss. 59.52 (11) (c),
66.0137 (4) and (4m), 100.203, and 120.13 (2) (b) to (g) and shall act as promptly as possible under
the circumstances on all matters placed before the commissioner.
(2) POWERS. The commissioner shall have all powers specifically granted to the commissioner, or
reasonably implied in order to enable the commissioner to perform the duties imposed by sub. (1).

(4) ENFORCEMENT PROCEEDINGS.
(a) The commissioner shall issue such prohibitory, mandatory, and other orders as are

necessary to secure compliance with the law.. .

Wis. Admin. Code § Ins 6.59 Licensing of individuals as agents...
(5) COMPETENCE AND TRUSTWORTHINESS. The following criteria may be used in assessing
trustworthiness and competence:

(d) Other criteria. Other criteria which the commissioner considers evidence of
untrustworthiness or incompetence, including but not limited to:

2. Violating any insurance laws, or violating any regulation, subpoena or order of the
insurance commissioner or of another state's insurance commissioner.

4. Improperly withholding, misappropriating or converting any monies or properties
received in the course of doing insurance business.
7. Having admitted or been found to have committed any insurance unfair trade
practice or fraud.
8. Using fraudulent, coercive, or dishonest practices, or demonstrating incompetence,
untrustworthiness or financial irresponsibility in the conduct of business in this state
or elsewhere.

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DHA Case No. OCI-1 7-0037
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ISSUES

Did Respondent violate Wisconsin insurance law by: (1) obtaining a power of attorney
over LeRoy Em’s property and finances within three years of conducting insurance business as
his agent, and/or (2) knowingly being listed as the beneficiary of Mr. Em’s annuity contracts? If
so, do the violations constitute sufficient grounds to revoke her intermediary license, order
remedial remedies, and impose monetary penalties?
FINDINGS OF FACT
1 . Since 1983 and at all material times, Blanche Berenzweig (“Respondent”) was a resident
and licensed insurance intermediary in Wisconsin. (OCI Ex. 1 p. 1) Her license is
therefore subject to the jurisdiction and control of the Wisconsin Commissioner of

Insurance.
2. From 1 993 to 2009, Respondent provided the following services to LeRoy Em as his
insurance agent with respect to two annuity contracts:

a. Lincoln Benefit annuity contract no. 01F0079636 (“Lincoln Benefit annuity”)
i. In 1993, Respondent and another agent helped Em apply for and purchase
a Lincoln Benefit annuity with $99,637.17 in total initial deposits. Em
named his estate as the beneficiary. (OCI Exs. 2 and 3 at  6 and 7; OCI
Ex. 8 at pp. 2-37) The agents of record were listed as Respondent and
Leah Morley (50% each). (OCI Ex. 8 at pp. 99-103) On March 7, 1996,
the agent of record was changed to Susan Pytynia (100%) because
Respondent left the financial institution where she had been working when
she helped initiate the Lincoln Benefit annuity. (OCI Ex. 8 at pp. 102-103)

ii. On November 6, 2008, Em asked Respondent to help him with the
Lincoln Benefit annuity. Respondent and Ern together called Lincoln
Benefit to request written documentation of the annuity’s current interest
rate and balance, which Lincoln Benefit provided on November 20, 2008.
(OCI Exs. 2 and 3 at  K 10 and 11; OCI Ex. 8 at pp. 154-155; 1 1/28/17 Tr.
at pp. 148-150) The policy value was $213,982.95 at that time.
iii. On November 10, 2009, Respondent faxed documentation to Lincoln
Benefit to make herself the agent of record for the Lincoln Benefit
annuity. (OCI Exs. 2 and 3 at 1 12; OCI Ex. 8 at p. 95) She explained to
Lincoln Benefit that she had “tried repeatedly to become the agent on this
contract” and provided a copy of her insurance license. (OCI Ex. 6 at pp.
9-13)

b.

Integrity annuity

contract no. 2100108593 (“Integrity annuity”)

i. On May 24, 2006, Respondent was the agent who helped Ern apply for
and purchase an Integrity annuity with an initial premium of $166,404.92.

 DHA Case No. OCI-17-0037
Page 6

Em named his sister, Carole Carter, as the beneficiary. (OCI Exs. 2 and 3
at ff 8 and 9; OCI Ex. 7 at pp. 4-7)
3. From 2007 to 2009, Respondent learned from Em that he wanted to make her the
beneficiary of his estate. (1 1/29/17 Tr. at pp. 9, 22). She initially protested but eventually
acquiesced, claiming she did not know there was anything wrong with it. (1 1/29/17 Tr. at
p. 22)

4. On November 20, 2009, Em executed a Last Will and Testament, Durable Power of
Attorney (POA) for Property and Finances, and Durable Power of Attorney for Health
Care, naming Respondent as his personal representative, beneficiary, attomey-in-fact,
and primary health care agent. (OCI Exs. 2 and 3 at 13, 16-18) Susan Drewitz was the
attorney who drafted, witnessed, and notarized Em’s estate planning documents.
Respondent shared office space with Attorney Drewitz, referred Em to her, and
accompanied him to his meeting with her. (OCI Exs. 2 and 3 at 14, 15) Respondent
signed the estate planning documents acknowledging her immediately-effective duties as
his power of attorney. (OCI Exs. 2 and 3 at f 20)

5. On May 14 and 1 7, 2010, respectively, Respondent continued to assist Em as his
insurance agent by changing the beneficiary of his annuities (to herself):
a. For the Integrity annuity, she presented the form to Ern, completed it in her
handwriting, and submitted it to Integrity to be processed. (OCI Ex. 7 at pp. 8081; 1 1/29/17 Tr. at pp. 25-26)
b. For the Lincoln Benefit annuity, she requested the change of beneficiary form,
presented it to Ern, completed the form in her handwriting, and submitted it to
Lincoln Benefit to be processed. (OCI Ex. 8 at pp. 108-109; 11/29/17 Tr. at pp.
24-25)

6. On April 26, 2010, when Em was 86-years-old, he paid an additional $315,041.62 to the
Lincoln Benefit contract, increasing its value to $544,629.96. (OCI Ex. 8 at pp. 41-45)

7. From 1993 until 2013, the only interactions Ern had with Respondent were at her place of
business. (11/29/17 Tr. at p. 29)
8. In October 2013, Ern was in a motor vehicle accident that totaled his vehicle. (1 1/29/1 7
Tr. at pp. 30-3 1) This prompted Respondent to visit his personal residence for the first
time out of concern for how he would meet his daily needs without transportation.
(1 1/29/17 Tr. at p. 33) The poor and potentially unsafe state of his residence caused
further concern, and on November 1, 2013, Respondent as Ern’s POA hired Stowell
Associates to manage his living situation, daily needs, and medical needs. (OCI Ex. 14 at
p. 69; 1 1/28/17 Tr. at pp. 37-38, 65; Tr. 1 1/29/17 at pp. 32-33) In the years that followed,
Respondent continued as his POA to arrange for his care and was apparently the only
person to do so.
9. On April 13, 2016, Em died at the age of 92. (OCI Exs. 2 and 3 at K 28)

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DHA Case No. OCI-17-0037
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10. Soon after Em’s death, Respondent made death claims on the Integrity and Lincoln
Benefit annuities and received the following proceeds as beneficiary:
a. On May 27,2016, Integrity issued her a check in the amount of $276,648.66.
(OCI Ex. 6 at p. 31)

b. On June 1 5, 2016, Lincoln Benefits issued her a check in the amount of
$734,467.65. (OCI Ex. 6 at p. 18)
1 1. A third-party complained to OCI about Respondent’s transactions with Em and OCI
therefore began an investigation to determine if Respondent’s conduct violated insurance
law. On August 17, 201 7, OCI filed a parallel action in circuit court against Respondent
for an order restraining her from spending or disposing of the annuity proceeds and
requiring her to freeze the funds pending resolution of this action. (OCI Ex. 6 at pp. 1-8;
1 1/29/17 Tr. at p. 72) In response, Respondent agreed to those terms and has maintained
the funds in approved accounts. (11/29/17 Tr. at pp. 72-73)

PROPOSED CONCLUSIONS OF LAW

12. OCI bears the burden to prove by a preponderance of the evidence that Respondent
engaged in insurance law violations as alleged. Wis. Admin. Code § Ins 5.39(3)(b).
13. When Respondent became Em’s power of attorney, she engaged in a prohibited unfair
trade practice by effecting a personal financial transaction with a customer in violation of
Wis. Stat. § 628.34(12) and Wis. Admin. Code Ins § 6.60(2)(a).
14. When Respondent was knowingly listed as the beneficiary of Em’s Lincoln Benefit and
Integrity annuities, she engaged in two prohibited unfair trade practices in violation of
Wis. Stat. § 628.34(12) and Wis. Admin. Code Ins § 6.60(2)(b).
15. Pursuant to Wis. Stat. § 601.64(3)(c), whoever violates an insurance law shall forfeit to
the state up to $1,000 for each violation. The seriousness of each of Respondent’s three
violations warrants the maximum possible forfeiture, for a total of $3,000.

16. Pursuant to Wis. Stat. § 601.41(4)(a), it is necessary and appropriate for the
Commissioner to issue the following orders to enforce and secure compliance with the
law:

a. Respondent shall not receive, retain, or benefit in any way from the proceeds of
the Integrity Life or Lincoln Benefit annuities;
b. Respondent shall immediately repay $276,648.66 to insurer Integrity Life;
c. Respondent shall immediately repay $734,467.65 to insurer Lincoln Benefit;
d. Insurer Integrity Life shall immediately void the May 12, 2010 change of
beneficiary form for annuity contract no. 2100108593; and
e. Insurer Lincoln Benefit shall immediately void the May 14, 2010 change of
beneficiary form for annuity contract no. 01F0079636;

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DHA Case No. OCI-17-0037
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17. Pursuant to Wis. Stat. § 628. 1 0(2)(b) and Wis. Admin. Code Ins § 6.60(5), permanent
revocation of Respondent’s intermediary license is warranted because she violated Ins §
6.60(2) and lacks good character, repeatedly and knowingly violated insurance statutes
and rules, and her methods and practices in the conduct of insurance business endanger
the legitimate interests of customers and the public. Furthermore, she lacks sufficient
competency and trustworthiness for licensure as set forth in Wis. Admin. Code §§ Ins
6.59(5)(d)2 (violating insurance laws and regulations), Ins 6.59(5)(d)4 (improperly
withholding, misappropriating or converting any monies or properties received in the
course of doing insurance business), Ins 6.59(5)(d)7 (having been found to have
committed insurance unfair trade practices and fraud), and Ins 6.59(5)(d)8 (using
fraudulent, coercive, and dishonest practices, and demonstrating incompetence,
untrustworthiness and financial irresponsibility in the conduct of business).
18. The Division of Hearings and Appeals has authority to issue this proposed decision and
order pursuant to Wis. Admin. Code § Ins 5.43 and Wis. Stats. § 227.47.

OPINION
The parties offer widely divergent views of the nature of Respondent’s relationship with
Leroy Em, a reclusive man who died at the age of 92 with no connection to family or friends.
Respondent characterizes herself as his trusted confidante and only friend, who magnanimously
took on his care as he aged when no one else could or would, such that she is deserving of any
money he wanted to reward her with. OCI considers her an unethical insurance agent who took
advantage of her position of trust with a lonely old man so she could benefit from his sizeable
estate when he died. Indeed, the stakes were high - she received over $1 million as the
beneficiary of his two annuities.

It is important at the outset to define what this case is and is not. This case is limited to
consideration of whether Respondent violated insurance law and, if so, what actions the
Commissioner should take as a result. OCI contends that Respondent engaged in three instances
of unfair trade practices involving Em. One was becoming his POA, and two were knowingly
being listed as the beneficiary of his annuities. If proven by a preponderance of the evidence,
either of these violations can result in an order revoking her insurance agent license, requiring
forfeitures, and necessitating remedial orders by the Commissioner. This case is not about who
deserves or is entitled to Ern’s estate. His family has apparently initiated an action in probate
court to contest his will (of which she was also named beneficiary). That court will make those
determinations.
The facts are largely undisputed,1 including that Respondent became Em’s POA and was
knowingly named the beneficiary of his annuities. She contends, however, that the applicable
insurance law is nuanced regarding prohibited business practices between agents and their
customers and several exceptions apply here. First, she maintains that Em was not her customer
under the law because she had not done insurance business for him within three years of
becoming his POA and being named as beneficiary of his annuities. Ins § 6.60(1)(c). Second, she
1 OCI offered 34 paragraphs of factual allegations. (OCI Ex. 2) Respondent answered with admissions to nearly all
of them. (OCI Ex. 3)

 DHA Case No. OCI-17-0037
Page 9

claims the POA transaction itself was one of bona fide arm’s length, and therefore permissible.
Ins § 6.60(2)(a)3. Finally, she claims she had an insurable interest in Em’s life such that she was
permitted to be named a beneficiary on his annuities. Ins § 6.60(2)(b). For the reasons that
follow, I find that Respondent’s conduct was not made permissible by any of these stated
exceptions to the law.
I.

Ern was Respondent 's insurance customer when she became his POA and
beneficiary of his annuities.

The offending transactions occurred in November 2009 and in May 2010, respectively,
when Respondent became Em’s POA and the beneficiary of his annuities. If Respondent did
insurance business for Em at the time or in the preceding three years, then he was her customer
and she was prohibited from the transactions.
The record established by a preponderance of the evidence that Em was Respondent’s
customer in the three years preceding her becoming his POA on November 20, 2009. On
November 6, 2008, he came to her financial planning office for help regarding his interest rate on
the Lincoln Benefits contract. He suspected that Lincoln Benefits was inappropriately lowering
the interest rate on the annuity she had helped him purchase back in 1993. She assisted him anew
in 2008 by reviewing the contract, concluding the insurer could not lower the interest rate
beyond 5%, and calling the insurer with Ern present to relay this and request written
documentation of the correct interest rate and his current balance. This incident was documented
in writing by the insurer, Lincoln Benefits, and Respondent herself testified in detail about it.
(OCI Ex. 8 at pp. 154-155; 1 1/28/17 Tr. at pp. 148-150, 153) Respondent was not the insurance
agent of record on the contract at the time because, although she initiated it with Em many years
prior, she had since left the bank where she worked when it was initiated. Nevertheless, Em did
not seek out help from the bank or agent of record. Rather, he went to Respondent’s new
financial planning and insurance agent office and sought her expertise. And indeed, that is what
he got. She inspected the contract and advised him (and Lincoln Benefits) of what it required
regarding the interest rate in connection with the continued effectuation of his coverage. This
constituted doing insurance business under the law. Wis. Stat. §§ 618.02(2)(e) and (h). She also
engaged in insurance business under the law on November 10, 2009, when she filed
documentation with Lincoln Benefits to change the agent of record on the annuity back to
herself. She provided a copy of her insurance agent license as support for the transaction and
made clear that Ern was her insurance customer. There would have been no reason to provide her
insurance agent license had she not been working in her capacity as an agent. That conduct
therefore also constituted insurance business. Wis. Stat. §§ 618.02(2)(e) and (h).
These same insurance business incidences support a finding that Ern was also
Respondent’s customer when she became the beneficiary of his annuities in May 2010.
Furthermore, she was explicitly conducting insurance business for him during the offending
beneficiary transactions themselves. She was the insurance agent who requested the change of
beneficiary forms, presented them to Em, used her own handwriting to complete the forms, and
submitted them to Integrity and Lincoln Benefits to be processed.

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 DHA Case No. OCI- 17-0037
Page 10

Having established that Em was Respondent’s customer at the time of the POA and
annuity beneficiary transactions, the transactions themselves determine whether other exceptions
may have applied to render them legal. Examining the nature of the transactions when they
occurred in 2009 and 2010 is necessary; not with the benefit of hindsight, knowing now how
events unfolded in the years that followed. The offending transactions occurred in 2009 and
2010, years before Em became infirm and Respondent started actively managing his financial
affairs. The record established that in 2009 and 2010, Em, though advanced in age, was lucid and
able to competently make financial decisions. The nature of Respondent and Em’s relationship at
the time was an emerging platonic friendship. Respondent’s 2009 and 2010 calendar records
indicate that their contact consisted exclusively of him visiting her at her office a bit more than
one time per month, on average, (Resp. Ex. 107 at p. 1)

II.

When Respondent become Em 's power of attorney, it was not a bonafide arm ’s
length transaction.

On November 20, 2009, Respondent became Em’s POA2 when he signed numerous
estate planning documents prepared by the attorney Respondent connected him with. Because
Ern was Respondent’s insurance customer, this was prohibited unless it was a bona fide arm’s
length transaction. Ins § 6.60(2)(a)3. “Bona fide” is defined as a transaction made in good faith,
without fraud or deceit, and sincere or genuine. Black’s Law Dictionary, 7th Ed., p. 168 (1999).
“Arm’s length” means dealings between two parties who are not related or not on close terms
and who are presumed to have roughly equal bargaining power; notably, it does not involve
confidential or fiduciary duties. Id. at p. 103. Although the record shows that Respondent and
Ern were not related or on particularly close terms at the time he executed his estate planning
documents, the POA was nevertheless not a bona fide arm’s length transaction.
Respondent provided no reasoning for her contention that the POA transaction was one
of bona fide arm’s length other than to point out that Em knew what he was doing and was
adamant about her being named. But Em was not the agent subject to ethical and legal
obligations as they related to her customers; the Respondent was. She therefore should not have
agreed to become his POA. It gave full discretion to manage her customer’s financial affairs.
This presented a conflict of interest given her role as his insurance agent because it authorized
her to purchase insurance on his behalf, thereby tempting her to exercise her powers to her own
benefit based on commissions or other considerations. Making matters worse, other estate
planning transactions that Ern executed at the exact same time as the POA made Respondent the
sole beneficiary of his entire estate and gave her control of his health care decisions. She would
therefore have been motivated as his POA to spend as little of his money as possible (for his care
or otherwise) because every penny she spent was one less penny she would receive upon his
death. The parties did not have equal bargaining power and the transaction was not truly one of
bona fide arm’s length. Therefore, it does not matter whether Ern was qualified to understand
and assess the transaction or had been independently advised about the transaction by a qualified
person. It was a prohibited transaction in the first place.

2

The POA became effective the day it was signed. Resp. Ex. 1 02 at p. 6.

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 DHA Case No. OCI-1 7-0037
Page 1 1

III.

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When Respondent became the beneficiary of Ern ’s annuities, she did not have an
insurable interest in his life.

I turn next to the propriety of the annuity beneficiary transactions. There were two
separate transactions; they occurred on May 14 and 17, 2010, respectively, when she was
knowingly named as beneficiary of the Integrity and Lincoln Benefit annuities. She contends this
was permissible because she had an insurable interest in his life. An insurable interest is a legal
interest in another person’s life. Black’s Law Dictionary, 7th Ed., p. 816 (1999). If apolicy lacks
an insurable interest as its basis, it will usually be unenforceable as a form of wagering. Id.
Insurable interest exists “only if the beneficiary has a reasonable expectation of advantage from
the continuance of the insured’s life, or would lose by his death.” See OCI Reply Br. at p. 16
citing the treatise Appleman on Insurance Law and Practice, Vol. 2, Ch. 45, Insurable Interest, s.
762. The courts have described insurable interest as follows:
“But in all cases there must be a reasonable ground, founded upon
the relations of the parties to each other, either pecuniary or of
blood or affinity, to expect some benefit or advantage from the
continuance of the life of the assured. Otherwise the contract is a
mere wager, by which the party taking the policy is directly
interested in the early death of the assured. Such policies have a
tendency to create a desire for the event. They are, therefore,
independently of any statute on the subject, condemned, as being
against public policy.” Albrent v. Spencer, 275 Wis. 127, 138, 81
N.W.2d 555, 561 (1957) citing Warnock v. Davis, 104 U.S. 775,
780, 26 L. Ed. 924(1881).

The record does not support Respondent’s claimed insurable interest in Em’s life. She
concedes that she was not related by blood and had no pecuniary interest in the continuation of
his life, but she clings to the term “affinity” in Albrent to claim her relationship with Em should
nevertheless serve as evidence of an insurable interest. In other words, she argues she had a
legally protected interest in Em’s continued life because it provided her with his friendship. I
disagree. Em knew Respondent first and foremost as his insurance agent; that is where his trust
of her stemmed from. Although he may have begun to consider her his friend, it was not
reciprocal, especially in 2010 when the beneficiary transactions occurred. Respondent had her
own personal life, many close friends (several of whom testified at the hearing), children, and a
husband with whom she lived on a part-time basis in another state. At the time Em named
Respondent the beneficiary of his sizable annuities (which is the only time that matters), the
depth of their relationship was thin and entirely one-sided. Em visited her exclusively at her
place of business where they discussed topics that interested him. She had no idea that he was
living in utter squalor despite his impressive bank account. Had he one day simply stopped
coming to her office in 2010 prior to her becoming the beneficiary of his annuities, it would have
caused no meaningful loss to her whatsoever. Nor did she have anything to gain - pecuniary or
otherwise - from the continuation of his life. She only stood to gain from his death. Knowingly
being named as the beneficiary of his annuities therefore violated the law.

h

 DHA Case No. OCI-17-0037
Page 12

IV.

Penalties and remedial action must be ordered to remedy Respondent's violations
of insurance law.

Having concluded that Respondent committed three distinct violations of insurance law, I
now consider what remedy is necessary as a result. Respondent engaged in unfair trade practices,
which OCI regulates because they are inherently misleading, deceptive, and unfairly
discriminatory, and they can provide an unfair inducement or restrain competition unreasonably.
Wis. Stat. § 628.34(12). The insurance industry is highly regulated to protect consumers since
agents have special access to their finances, personal information, and ultimately their trust.
Prohibiting unfair trade practices serves to protect against the inherent conflict of interest when
an agent serves as both insurance salesperson and a customer’s financial decision-maker or
beneficiary. Respondent sidestepped these important ethical cornerstones when she became
Em’s POA for financial decisions and the beneficiary of his annuities. In 2009 and 2010, she
took advantage of an isolated, elderly customer. By becoming Em’s POA, she put herself in a
position to entirely manage his money. Of particular concern, this included the power to buy or
sell annuities and insurance on Em’s behalf. She further exploited Em’s trust and isolation by
knowingly being named as the beneficiary of his annuities when she had no insurable interest in
his life. She profited illegally by more than $1 million.
She knew what she was doing was wrong. As an example of her culpability, the record
contains an audio recording of a telephone call she made to Integrity just two weeks after Em
died. She informed the Integrity representative of his death and made clear that no new
transactions should occur on the contract so it would remain liquid and not be “tied up.” (OCI
Ex. 7 audio CD; 1 1/29/17 Tr. at pp. 60-70) She conspicuously left out that she was the
beneficiary. More than once, she identified herself to the Integrity representative as the agent on
the contract, once she identified herself as Era’s POA, and at no time did she mention that she
was also the beneficiary, despite multiple references to the beneficiaries by Integrity’s
representative. She used her authority as the insurance agent and POA to ensure her rights as a
beneficiary would not be hindered. This shows exactly why it is such a problem for an insurance
agent to mix being an insurance agent with being a customer’s POA or beneficiary.
OCI requests various forms of relief to address the law violations. Wisconsin Statutes
Chapter 6013 charges the Commissioner with administering insurance law and gives him strong
enforcement powers. Courts have recognized the breadth of those powers, especially pursuant to
Wis. Stat. § 601.41(4), noting there is no limitation on the nature of orders the Commissioner is
authorized to issue so long as they are necessary to ensure compliance with the law. Homeward
Bound Servs., Inc. v. Office of Ins. Com’r, 2006 WI App 208, 1j 33, 296 Wis. 2d 481, 724 N.W.2d
380. These powers include ordering money to be returned, because allowing someone to make a
profit on money illegally-received deprives the lawful beneficiaries of it. Id. at f 19. OCI points
out that Respondent must be ordered to expunge and refund the annuity proceeds directly to the
insurers rather than to Era’s estate, since she could still profit for those same funds under the
latter circumstances depending on the outcome of the probate action.
3

1 agree with OCI that Chapter 601 governs the order for remedy in this case, as opposed to Wis. Stat. §§
628.347(5) and (6) as cited by Respondent. The latter provision is not applicable here. It applies to compliance and
remedial measures specific to violations of suitability in annuity transactions, which were not alleged or found here.

r

1
r

F

 r

DHA Case No. OC1- 17-0037
Page 13

OCI requests that the Commissioner exercise his authority to enforce insurance law in the
following ways:
(1) Permanently revoke Respondent’s insurance agent license;
(2) Bar Respondent from retaining funds from the annuities and
require her to return them to the annuity insurers;

(3) Void the May 2010 annuity change of beneficiary forms so that
the funds are issued to the beneficiary who was named prior to the

changes;4

(4) Require Respondent to forfeit $3,000 to the state; and
(5) Require Respondent to forfeit $2,022,232.62 (twice the profit

gains) to the state.
Respondent counters that none of this is necessary and fails to account for mitigating
circumstances. She believes she dutifully fulfilled her role as POA by managing Em’s care in his
final years when no one from his family stepped in to do so. The record generally corroborated
this. She believes as a result that she is more deserving of his estate than the children of his nowdeceased siblings. She urges that OCI cannot substitute its will for that of Mr. Em, who deemed
her worthy of his entire estate (by naming her beneficiary of the annuities and his will) and
intentionally excluded his family. She further points out that she enjoys a reputation for good
character in the community and her previous insurance agent record is unblemished. She requests
dismissal of the action outright but contends that if violations of the law are found, then she
should forfeit at most $3,000. She contends that license revocation is neither warranted nor
necessary, as she is 70-years-old and has surrendered her insurance agent license in anticipation
of retirement.

As explained at the outset, this case is not about what Ern may have wanted. Nor is it
about maligning Em’s extended family. Perhaps the probate court will consider such things, but
they have no bearing on the Commissioner’s authority to enforce insurance law. Respondent’s
post-violation conduct is not mitigating and not even particularly relevant. It should come as a
surprise to no one that she maintained a relationship with Em after he put her in charge of his
finances, named her the beneficiary of his annuities worth more than $1 million, and named her
the beneficiary of his sizable estate. It was in her best financial interest to stay the course and
maintain his trust, lest he cut her out. If she truly enjoyed his intermittent companionship in the
meantime, that was likely an unintended bonus. In any event, the Commissioner cannot allow
insurance agents to benefit or profit from violations of the insurance law and that is exactly what
happened here. It is within his statutory power, and is in fact his statutory obligation, to remedy it
by issuing remedial orders.

4

In the case of the Integrity annuity, that would be the issue of Ern’s now-deceased sister Carole Carter per stirpes.
For the Lincoln Benefit annuity, it would be Em’s estate distributed per stirpes.

’

 DHA Case No. OCI- 1 7-0037
Page 14

It was not lawful for the Respondent to be named as her customer’s POA or beneficiary
of her customer’s annuities. These are very serious violations involving a vulnerable elderly
insurance customer. To not impose stiff sanctions as a result would unduly depreciate the serious
of the violations and fail to effectively send a message to Respondent and others in the insurance
industry that such conduct will not be tolerated. The Commissioner has the obligation and
authority to correct the law violations by ordering Respondent to return all annuity proceeds to
the insurers immediately, and ordering the insurers, in turn, to void the unlawful beneficiary
change forms they received from Respondent in May 2010. This puts the annuities in the place
they would have been but for the insurance law violations. Under these circumstances,
Respondent will expunge any profit she illegally-obtained and therefore she cannot also be
required to forfeit twice any of the profit to the state. She can and should, however, be made to
forfeit $3,000 as a penalty for the violations, and she must lose her insurance agent license.
Although she has apparently decided to retire from the insurance industry, the Commissioner
must revoke her license permanently to preclude her from changing her mind in the future.
Anything less would fail to adequately convey and impress upon her the seriousness of the law
violations.
PROPOSED ORDER
NOW THEREFORE, based on the findings of fact and conclusions of law, it is

recommended that:
(1) Respondent’s insurance agent license should be revoked permanently;
(2) Respondent should forfeit $3,000 to the State of Wisconsin no later than 30 days from
the date of the final order;

(3) Respondent should not receive, retain, or benefit in any way from the proceeds of the
Integrity Life or Lincoln Benefit annuities;

(4) Respondent should immediately repay $276,648.66 to insurer Integrity Life;
(5) Respondent should immediately repay $734,467.65 to insurer Lincoln Benefit;
(6) Insurer Integrity Life should immediately void the May 12, 2010 change of
beneficiary form for annuity contract no. 2100108593; and

(7) Insurer Lincoln Benefit should immediately void the May 14, 2010 change of
beneficiary form for annuity contract no. 01F0079636.

 DHA Case No. OCI-17-0037
Page 1 5

Dated at Madison, Wisconsin on February 8, 2018.
STATE OF WISCONSIN
DIVISION OF HEARINGS AND APPEALS
5005 University Avenue, Suite 201
Madison, Wisconsin 53705-5400
Telephone: (608) 266-3865
(608) 264-9885
FAX:
By:

7ÿ

M

Rachel L. Pings
Administrative Law Judge