                   IN THE COURT OF APPEALS OF TENNESSEE
                                AT NASHVILLE
                            September 9, 2008 Session

       JOYCE TRAIL v. STATE OF TENNESSEE, DEPARTMENT OF
          COMMERCE AND INSURANCE, (Insurance Division)

               Direct Appeal from the Chancery Court for Davidson County
                  No. 06-1146-IV Hon. Richard H. Dinkins, Chancellor



                  No. M2008-00062-COA-R3-CV - Filed November 5, 2008



The Commissioner revoked appellant’s license to sell insurance and fined her $7,000.00. Appellant
petitioned for review by the Trial Court, who affirmed the determination made by the Commissioner.
On appeal, we affirm the Judgment of the Trial Court.


Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Affirmed and
Remanded.


HERSCHEL PICKENS FRANKS, P.J., delivered the opinion of the Court, in which D. MICHAEL SWINEY ,
J., and SHARON G. LEE, SP.J., joined.


Robert L. Huskey, Manchester, Tennessee, for appellant, Joyce Trail.

Robert E. Cooper, Jr., Attorney General and Reporter, Michael E. Moore, Solicitor General, Laura
T. Kidwell, Assistant Attorney General, and Sarah A. Hiestand, Senior Counsel, Nashville,
Tennessee, for appellee, State of Tennessee, Department of Commerce and Insurance.



                                          OPINION

              Appellant brought this action to review the Final Decision of a State Administrative
Agency, revoking her insurance license, and fining her $7,000.00.

               The administrative record was filed with the Trial Court, and a hearing was held
wherein the attorneys argued their positions.
                The administrative record sets forth the Administrative Law Judge’s decision and
findings. James Dunlap had testified before the ALJ that he and his mother went to appellant’s
office to obtain insurance, and he wrote a check for the down payment in the amount of $316.75, on
November 15, 2001. He testified that he did not receive an insurance policy, and that the check did
not clear his bank account until February 8, 2002. He did not remember receiving any bills from the
insurance company, but he wrote a check to the insurance agency on April 5 for $233.99, and wrote
checks for the same amount in May and June of that year.

                 Dunlap identified an insurance card that he was given by appellant, and testified that
it stated the effective date was 12/15/01, and expired 12/15/02, and listed the insurance company as
Tennessee Insurance Company. He testified that he was involved in an accident in February 2002,
and reported it to appellant.

                 The record reveals that after the accident State Farm Insurance Company was seeking
to recover $5,000.00 from Dunlap as a result of the accident, and that Dunlap hired an attorney and
filed a lawsuit against appellant and PGA Insurance Company, and as a result, appellant settled with
him for $7,000.00 which covered the claim by State Farm and attorney’s fees. Also appellant
eventually sent two checks to Dunlap to refund his premiums, but he did not cash them on the advice
of counsel.

                The ALJ found that, pursuant to Tenn. Code Ann. §56-6-112, the Commissioner
could suspend, revoke, or refuse to reissue an agent’s license for improperly taking or
misappropriating an insured’s money, for using fraudulent, coercive, or dishonest practices in the
conduct of business, or for demonstrating incompetence, untrustworthiness, or financial
irresponsibility in the conduct of business. The ALJ found the State had met its burden of proof in
showing that appellant improperly withheld or misappropriated Dunlap’s funds on eight separate
occasions, which was to his detriment because the money was not passed to the insurance company,
PGA, which resulted in Dunlap not having insurance. Further, that while accepting payments from
Dunlap for insurance coverage she never procured, she issued a fraudulent insurance card to Dunlap.
The ALJ found appellant’s dishonesty was also shown by the fact she never disclosed the lack of
policy even after Dunlap had experienced an accident. The ALJ revoked appellant’s license, and
assessed the fine of $7,000.00.

               Following arguments before the Trial Court, the Trial Court filed a Memorandum
Opinion and Order, and noted that pursuant to Tenn. Code Ann. §4-5-322, his review was confined
to the administrative record, and that the Court could only reverse or modify the agency’s decision
if the decision was in violation of constitutional/statutory provisions, in excess of the agency’s
authority, made upon unlawful procedure, arbitrary or capricious, or unsupported by substantial and
material evidence.

               The Court found there was substantial and material evidence to support the ALJ’s
finding that appellant improperly withheld or misappropriated money to the detriment of Dunlap
from November 2001 through October 2002, which resulted in Dunlap having no coverage when he


                                                 -2-
reasonably expected to have coverage. The Court also found there was substantial and material
evidence to support the ALJ’s finding that appellant was fraudulent, dishonest and untrustworthy in
her conduct by accepting payments from Dunlap for an insurance policy she never procured for him
and by issuing him a fraudulent proof of insurance card. The Court affirmed the finding that
appellant violated Tenn. Code Ann. §56-6-112 (a)(4) & (8).

               The Trial Court noted that it could only examine the sanction to determine if it was
unwarranted in law or without justification in fact, and he determined that the sanctions imposed in
this case were warranted and justified. Appellant on appeal, raises these issues:

               1.      Was the Commission’s decision characterized by abuse of discretion or
                       clearly unwarranted exercise of discretion, and further was the decision and
                       degree of punishment rendered commensurate with the evidence?

               2.      Did the Trial Court err in upholding the Commissioner’s decision?

               As we have previously explained:

               Tenn.Code Ann. § 4-5-322(h) addresses the narrow scope of judicial review of an
               administrative agency decision as follows:

                       The court may affirm the decision of the agency or remand the case for
                       further proceedings. The court may reverse or modify the decision if the
                       rights of the petitioner have been prejudiced because the administrative
                       findings, inferences, conclusions or decisions are:

                       (1) In violation of constitutional or statutory provisions;

                       (2) In excess of the statutory authority of the agency;

                       (3) Made upon unlawful procedure;

                       (4) Arbitrary or capricious or characterized by abuse of discretion or clearly
                       unwarranted exercise of discretion; or

                       (5) Unsupported by evidence which is both substantial and material in the
                       light of the entire record.

               In determining the substantiality of evidence, the court shall take into account
               whatever in the record fairly detracts from its weight, but the court shall not
               substitute its judgment for that of the agency as to the weight of the evidence on
               questions of fact.



                                                 -3-
               The term “substantial and material evidence” has been defined as “ ‘such relevant
               evidence as a reasonable mind might accept to support a rational conclusion and such
               as to furnish a reasonably sound basis for the action under consideration.’” This
               Court has also described it as requiring “ ‘something less than a preponderance of the
               evidence . . . but more than a scintilla or glimmer.’” Judicial review of an
               administrative agency's decision under the “substantial and material evidence”
               standard, however, subjects the agency's decision to close scrutiny.

               When reviewing a trial court's review of an administrative agency's decision, this
               Court essentially is to determine “whether or not the trial court properly applied the
               ... standard of review” found at Tenn. Code Ann. § 4-5-322(h). This Court addressed
               its judicial review of evidence contained in the administrative record as follows:

                       While this Court may consider evidence in the record that detracts from its
                       weight, [this] [C]ourt is not allowed to substitute its judgment for that of the
                       agency concerning the weight of the evidence....

               Judicial review of an agency's construction of a statute and its application of the
               statute to the facts of the case is a determination involving a question of law.
               Accordingly, this Court's review of such matters is de novo without any presumption
               of correctness. With respect to an agency's interpretation of its own rules and
               regulations, courts afford deference and controlling weight to such determinations
               unless plainly erroneous or inconsistent with the regulation.

Jones v. Bureau of TennCare, 94 S.W.3d 495 (Tenn. Ct. App. 2002)(citations omitted).

                In this case, the Court found there was substantial and material evidence to support
the ALJ’s finding that appellant improperly withheld or misappropriated money to the detriment of
Dunlap from November 2001 through October 2002, which resulted in Dunlap having no coverage
when he reasonably expected to have coverage. The Court also found there was substantial and
material evidence to support the ALJ’s finding that appellant was fraudulent, dishonest and
untrustworthy in her conduct by accepting payments from Dunlap for an insurance policy she never
procured for him and by issuing him a fraudulent proof of insurance card. The Trial Court affirmed
the finding that appellant violated Tenn. Code Ann. §56-6-112 (a)(4) & (8).

                The evidence in the record supports these findings. There was substantial proof that
appellant had numerous opportunities to discover and disclose the lack of coverage to Dunlap, but
failed to do so, but instead, kept representing that he had coverage and accepting payments for the
same, when she had reason to know that no coverage existed. She supplied him with an insurance
card with a fictitious policy number on it, and failed to follow up on numerous inquiries about the
lack of a policy being issued. Appellant was unable to support any of her excuses for her behavior
with valid documentation, and the ALJ found her testimony to be lacking in credibility. For all of
the foregoing reasons, the ALJ’s findings are supported by substantial and material evidence, and


                                                 -4-
in affirming the ALJ’s Judgment, the Trial Court applied the proper standard of review in this case.

               We affirm the Judgment of the Trial Court and remand, with the cost of the appeal
assessed to Joyce Trail.




                                                      _________________________
                                                      HERSCHEL PICKENS FRANKS, P.J.




                                                -5-
