Minnesota, American Bankers At Odds

The policies sold, according to the department, were either not approved or had been disapproved and sales continued after the multi-state settlement.

"This is not a onetime mistake," Bernstein says. "There is a clear pattern of illegal behavior. Because these policies have not been reviewed and approved by the Department of Commerce, there is no guarantee that consumers will get what they thought they were paying for."

The Minnesota department also alleges the management of ABIC and ABLAC has given the impression of being "incompetent or untrustworthy by having been the subject of at least 66 other disciplinary actions imposed by Minnesota and other states."

The department lists violations incurred by the companies since 1993 as follows:

• In 1993, marketing and sales violations resulted in a $100,000 fine and the use of unlicensed agents resulted in $100,000 in investigative costs.
• The 1998 multi-state exam resulted in a $12 million total fine of which Minnesota received $688,776 for violations including market and sales violations, use of unlicensed agents and improper claims handling.
• A reexamination of ABIG in 2000 resulted in a multi-state fine of $3 million of which Minnesota received $66,924. The department says that ABIG was non-compliant in all areas of operation.
• A $2,000 fine in 2001 for ABLAC's "misrepresenting facts regarding coverages in the handling of a claim."

Types of insurance sold include accidental death, health and disability policies, the department says. A mix of individual and group policies was sold by the companies, according to Bruce Gordon, a department spokesman.

A hearing is scheduled for March 8. The judge will make a recommendation but the commissioner will ultimately decide on any action, Gordon says.

If the companies are not satisfied with the outcome, the matter can be appealed to the Minnesota Court of Appeals, he adds.