Opinion
No. CV02 0523382 S
April 5, 2004
MEMORANDUM OF DECISION
This action is an administrative appeal which the plaintiffs, Golf Marketing Worldwide, LLC ("Golf Marketing") and Kevin Kolenda ("Kolenda"), brought pursuant to the provisions of the Uniform Administrative Procedures Act, General Statutes § 4-166 et seq. ("UAPA"). The petition, dated July 1, 2002, appeals from the May 22, 2002 order of defendant, Susan Cogswell, Insurance Commissioner of the State of Connecticut, determining that the plaintiffs had violated General Statutes § 38a-272 and § 38a-271 by engaging in unauthorized insurance activities. That order adopted the recommendations of a hearing officer's report finding the plaintiffs in violation of the foregoing statutes and imposed fines of $5,000 on Golf Marketing and $2,000 on Kolenda pursuant to General Statutes § 38a-278(a) and an additional fine of $2,000 on Golf Marketing pursuant to General Statutes § 38a-278(b).
"No person or insurer shall directly or indirectly do any of the acts of an insurance business set forth in subsection (a) of section 38a-271 except as authorized by the general statutes . . ."
That statute provides, in relevant part:
(a) Unless otherwise indicated, as used in sections 38a-27, and 38a-271 to 38a-278, inclusive, "insurer' includes all corporations, . . . and individuals engaged as principals in the business of insurance . . . Any of the following acts effected in this state by mail or otherwise is defined to be doing an insurance business in this state: (1) The making of or proposing to make, as an insurer, an insurance contract; . . . (3) the taking or receiving of any application for insurance; (4) the receiving or collection of any premium . . .; (5) the issuance or delivery of contracts of insurance to residents of this state or to persons authorized to do business in this state; . . .
"In addition to the penalty provided in subsection (a) of this section or otherwise provided by law, any person or insurer violating section 38a-27 or 38a-271 to 38a-278, inclusive, shall be fined five hundred dollars for the first offense and an additional five hundred dollars for each month during which any such person or insurer continues such violation."
Under the Uniform Administrative Procedures Act ("UAPA"), General Statutes § 4-166 et seq., judicial review of an agency decision is very restricted. Section 4-183(j) of the General Statutes provides as follows.
The court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court shall affirm the decision of the agency unless the court finds that substantial rights of the person appealing 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) affected by other error of law; (5) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or (6) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.
In their complaint, the plaintiffs claim only that the findings of the defendants were clearly erroneous in view of the record. Significantly, they do not claim that the Commissioners decision was in excess of the statutory authority of the agency, or arbitrary, capricious or characterized by abuse of discretion or a clearly unwarranted exercise of her discretion. Nor have the plaintiffs pleaded that the administrative decision is in violation of constitutional or statutory provisions or "affected by other error of law." Accordingly, the scope of judicial review in this appeal is limited to the issue of whether the decision of the commissioner was clearly erroneous in view of the evidence in the record.
Judicial review of an administrative agency decision requires the court to determine whether there is substantial evidence in the administrative record to support the agency's findings of fact and whether the conclusions drawn from those facts are reasonable. Schallenkamp v. DelPonte, 229 Conn. 31, 40, 639 A.2d 1018 (1994). The court may not retry the case or substitute its own judgment for that of the administrative agency on the weight of the evidence or questions of fact. Murphy v. Commissioner of Motor Vehicles, 254 Conn. 333, 343, 757 A.2d 561 (2000).
The record consists of the transcript of hearings held on November 29, 2001 and December 18, 2001, the exhibits introduced into evidence at those hearings, the briefs of the parties submitted to the hearing officer, the hearing officer's decision and the order of the defendant, Commissioner, adopting the recommendations of the hearing officer.
The record establishes the following undisputed facts. Golf Marketing is a limited liability corporation with a principal place of business in Connecticut. Kolena is its president and principal marketing representative. Golf Marketing is engaged in the business of providing marketing and promotional services to the golf industry. Among these services are the promotion of hole-in-one and long putt contests held in conjunction with golf events, many of which benefit charities. Golf Marketing's services include providing sponsor signs and other promotional materials for use at golf events, and prizes for successful contestants.
In many cases the prizes consist of vacation packages to golf resorts or airline travel. Such prizes are provided to Golf Marketing without cost by the respective golf resorts and airlines in order to achieve publicity and market exposure. The hearing officer found that the activities of the plaintiffs in connection with such contests and prizes did not constitute the transaction of the business of insurance. The commissioner agreed with these findings. Accordingly, these activities are not at issue in this appeal.
In other cases, a hole-in-one is rewarded with a cash prize, an automobile or an automobile lease. In such cases, Golf Marketing will pay the cash prize to the successful contestant or make payments to the participating automobile dealer for the automobile or the automobile lease as the case may be. In return for its services, Golf Marketing collects a fee from the event sponsor based upon the length of the golf hole, the number of contestants and the value of the prize. The plaintiffs' activities in connection with contests in which cash prizes were awarded or in which the plaintiff paid for the prizes awarded were found by the defendants to constitute the offering of insurance products.
While the plaintiffs urge otherwise, evidence in the record supports the Commissioner's finding that the plaintiffs entered into hole-in-one contracts in 2000 and 2001. On each of these occasions Golf Marketing accepted contract fees in return for its undertaking to pay the price of automobiles or automobile leases given as prizes to successful contestants. The record includes copies of Golf Marketing's standard contract with event sponsors which states: "Golf Marketing, Inc. (sic) hereby agrees to reimburse the client named in this contract up to the maximum specified prize value if a Hole-in-One (as defined by the USGA Rules of Golf) occurs on the date(s) and target hole(s) as specified . . ."
The record also establishes that Golf Marketing maintained an Internet web site with the web address of "www.hole-in-one.com." The web site touted Golf Marketing as "the original creators of Hole-in-One Putting Insurance ©1991" and offered to sell "Hole-in-One Insurance" in return for the payment of a "premium." The web site stated "In everyday terms, Hole-In-One Insurance is prize coverage without the prize risk. 1. You choose a prize or prize value to offer. 2. Tell us the yardage of the hole and the number of players. 3. We compute a premium and then . . . If anyone makes the Hole-in-One, Golf Marketing pays for the Grand Prize." (Emphasis in original.)
It is undisputed that the plaintiffs do not have and have not applied for an insurance license from the state pursuant to General Statutes § 38a-41(a). It follows that they are in violation of the statutes if they have engaged in the business of insurance. In Connecticut the operative definition of insurance is set forth in General Statutes § 38a-1(10) which provides:
"Insurance" means any agreement to pay a sum of money, provide services or any other thing of value on the happening of a particular event or contingency or to provide indemnity for loss in respect to a specified subject by specified perils in return for a consideration. In any contract of insurance, an insured shall have an interest which is subject to a risk of loss through destruction or impairment of that interest, which risk is assumed by the insurer and such assumption shall be part of a general scheme to distribute losses among a large group of persons bearing similar risks in return for a ratable contribution or other consideration.
This definition is an apparent codification of the Supreme Court's definition of "insurance" in Day v. Walsh, 132 Conn. 5, n. 1, 42 A.2d 366 (1945), an action on a life insurance policy, which listed the five essential elements of insurance as set forth in W.R. Vance, Handbook on the Law of Insurance at 2 (2d ed. 1930).
The contract of insurance, made between parties called the insured and the insurer, is distinguishable by the presence of five elements:
(a) The insured possesses an interest of some kind susceptible of pecuniary estimation, known as an insurable interest.
(b) The insured is subject to a risk of loss through the destruction or impairment of that interest by the happening of designated perils. CT Page 6187
(c) The insurer assumes that risk of loss.
(d) Such assumption is part of a general scheme to distribute actual losses among a large group of persons bearing similar risks.
(e) As consideration for the insurer's promise, the insured makes a ratable contribution to a general insurance fund, called a premium.
A contract possessing only the three elements first named is a risk-shifting device, but not a contract of insurance, which is a risk-distributing device; but, if it possesses the other two as well, it is a contract of insurance, whatever be its name or its form.
The Supreme Court recently commented that the statutory definition of "insurance" in Conn. Gen. Stat. § 38a-1(10) is simply "the assumption of another's risk for profit." Doucette v. Pomes, 247 Conn. 442, 456, 724 A.2d 481 (1999) (holding that a company acting as a self-insurer to satisfy its workers' compensation liability is not an insurer within the meaning of the statute).
The plaintiffs do not seriously dispute that Golf Marketing assumed the financial risk associated with numerous hole-in-one contests and that they collected premiums for assuming those risks. They claim, however, that there was no insurable interest and no insurable risk. In support of this claim they quote Clarence A. Kulp John W. Hall, Casualty Insurance, p. 12 (Fourth Ed.) (1968).
Insurable risk must result from perils that produce loss that is accidental in the basic sense of the expression: the loss to the insured must be fortuitous, unexpected and unpredictable in time and place. It is obvious that the insured member of a group should not deliberately create loss or exaggerate an actual loss. To him, loss should be a chance event and preferably one he would rather avoid.
(Emphasis added)
The plaintiffs argue that the tournament sponsor and Golf Marketing intentionally create a situation where participating golfers can win a prize. Golfers are encouraged to enter the contest and the sponsor allegedly wants one of them to succeed in scoring a hole-in-one. This scenario is contrasted against traditional insurance where the purpose is to protect against fortuitous and unpredictable events, which no one wants to occur.
The record reflects that a hole-in-one is an infrequent achievement. While all participating golfers may try to achieve the feat, it does not appear that any are so skilled that they reasonably expect the result on any given shot. By offering a prize to successful golfers, the sponsor creates a risk that it may be required to award the prize when the unexpected event occurs. It is this risk that Golf Marketing is assuming in return for the sponsor's payment of the required premium.
The record includes the testimony of Paul Siegel, CPCU, called by the plaintiffs as an expert witness on the issue of insurance. On the basis of over thirty years in the insurance industry, Siegel testified that an agreement to provide a prize to a hole-in-one winner is not a proper subject for insurance. Siegel opined that Golf Marketing's business is to indemnify tournament sponsors for risks that the tournament sponsor themselves create. These risks are created by offering golfers an opportunity to win a prize by achieving a hole-in-one on a designated hole. Siegel claimed that he is aware of no insurance product where an insurance company will offer to pay an insured for losses incurred when the insured intentionally creates a situation where the insured is exposed to the loss.
The Plaintiffs allege that in the absence of contrary expert testimony, the hearing officer and the Commissioner were not free to ignore Siegel's opinion. The court disagrees. The defendants were not bound by any particular testimony in the record whether contradicted or not. The defendants were free to either accept Siegel's opinion or reject it. The court may not substitute its judgment for that of the agency with respect to the weight of the evidence on issues of fact. General Statutes § 4-183(j).
Plaintiffs also argue that in the case of their hole-in-one policies, there is no risk to insure because insurable risks must be "accidental" in nature. It is claimed that hole-in-one contests are contests of skill. The achievement of a hole-in-one is allegedly desired by both the participants and the contest sponsor. The court is not persuaded by this argument. The issue is not the nature of the risk being assumed, but the fact that it is the plaintiff who is assuming the risk of another party in return for compensation. That undertaking is the essence of an insurance transaction.
The plaintiffs urge that the creation of the risks by tournament sponsors should be contrasted with traditional insurance allegedly offered only to protect against existing risks. The court does not find this distinction persuasive. Many risks which are the subject of insurance coverage are in large part created by the activities of the insured. For example, operating an automobile on a public highway creates the risk of damages to the vehicle and creates an exposure of liability to others. These risks could be entirely avoided if the traveler chose to walk, ride a bicycle or take public transportation. Similarly, when an individual or a corporation decides to embark upon a business venture, or to enter a profession, risks (including premises liability, products liability, malpractice claims, etc.) are necessarily created by that decision. The assumption of such risks in return for the payment of premiums constitutes and is properly recognized as the business of insurance.
There is substantial evidence in the record to support each of the findings of fact made by the Commissioner. The conclusions drawn by the Commissioner from those facts are reasonable. The construction and interpretation of the statutes of this state made by the Commissioner are sound and consistent with applicable precedents. The plaintiffs have failed to sustain their burden of showing that the findings of the defendants were clearly erroneous in view of the record. Accordingly, the plaintiffs' appeal is dismissed.
David R. Tobin, Judge