On July 31, 2018, the Louisiana Department of Insurance (“Department”) issued Advisory Letter 2018-02 giving its thoughts on both state law and federal law dealing with felons involved in the business of insurance. Louisiana law currently prohibits producers from employing in the business or allowing to associate with the business any person convicted of a felony. This statute was amended in the 2018 regular session of the Louisiana legislature to allow an insurance producer to employ in his business or to associate with his business an individual previously convicted of a felony if the producer first obtains the written consent of or a waiver from the Commissioner (Act 299). The Department notes that it is incumbent upon producers to make written request to obtain the consent of or a waiver from the Commissioner under such circumstances. The consent or a waiver is specific to and exclusively in favor the hiring producer to avoid regulatory action by the Commissioner as provided for in the statute.
The Advisory Letter notes that the cited Louisiana statutes operate independently from federal law contained in 18 U.S.C. 1033, as the federal law places the responsibility of obtaining a waiver on individuals who have been convicted of a felony involving dishonesty or a breach of trust. Such individuals are “prohibited persons” and cannot engage in the business of insurance unless they are given written consent to work in the business of insurance by an appropriate insurance regulator in this case, the Commissioner of Insurance. The Department states that such a written consent merely releases the holder of the consent from his or her status as a prohibited person under federal law. Thereafter, whether the holder of the consent is qualified to engage in the business of insurance becomes a matter of state law as it would have been in absence of 18 U.S.C. 1033. The Department closes this analysis by advising that state law requires a hiring producer to obtain the consent of or waiver from the Commissioner for any and all felony convictions of a potential or current employee.
While the definitions of felony under federal law and state law differ somewhat, and the approach differs, the Department’s concluding admonition is that in some situations, both the producer and the convicted felon will be required to obtain the consent of or waiver from the Commissioner. Even though a waiver has been granted under 18 U.S.C. 1033 by the Commissioner, the failure of a producer to obtain the consent or waiver in compliance with Louisiana state law (Act 299) may result in regulatory action against the producer.
Affected producers, those with current employees who have felony convictions, will have until December 31, 2018 to come into compliance with current state law, as amended by Act 299, but any employee hired after August 1, 2018, is immediately subject to that law as described herein.