S.D. Observers Concerned About DOI Practices

Insurance representatives and legislators in South Dakota are concerned about how the state Division of Insurance is conducting its investigations in light of an ongoing conflict between the DOI and two life/health insurance agents and a flood of complaints from insurance agents and companies.

Members of the South Dakota Government Operations and Audit Committee have asked officials from the DOI and others to attend a meeting on Oct. 13-14 in Pierre, S.D. after hearings held on Sept. 12 were inconclusive when key DOI representatives did not attend.

The committee, which reviews the operations and fiscal affairs of state departments and agencies, is examining DOI investigative procedures to determine what changes need to be made, said Sen. Jason Gant (R-Sioux Falls), vice chair of the committee.

“We don’t want to micromanage the division, but when we have the kind of interest this has generated, something bigger had to be done,”Gant said.

At the September hearing the committee heard testimony from agents Steve Tinklenberg of Sioux Falls and Pat Bohall of South Sioux City, Neb., both of whom maintain the DOI brought charges against them that were mishandled by the division.

Bohall testified he had lost hundreds of thousands of dollars in business and legal fees after the DOI brought charges against him in 2001. The charges were dropped entirely in May of this year.

The agent testified that the DOI sent letters to all of the insurers he represented, advising them that he was being investigated on 10 charges ranging from altering applications to impeding a DOI investigation. No follow-up letters were sent to the insurers notifying them that charges against Bohall had been dropped.

According to the Argus Leader, Bohall and Tinklenberg notified the state last summer that they were going to sue, claiming investigators from the DOI and the Insurance Fraud Protection Unit had violated their civil rights in the way they conducted their investigations.

The cases never went to trial, and the state paid Tinklenberg $57,500 and Bohall $90,000 to resolve the claims. Tinklenberg is appealing to the South Dakota Supreme Court a ruling to revoke his insurance license.

Under particular scrutiny is Randy Moses, the division’s assistant director for regulation, who oversaw both cases, according to testimony given at the September hearing. Bohall testified that although the original investigators no longer work for the DOI, Moses knew they were using questionable tactics, including edited taped telephone conversations, and should be held accountable.

Tinklenberg, who the DOI originally charged with defrauding a farmer out of a life insurance policy, testified he spent $145,000 fighting criminal and administrative charges. He went to trial and was found not guilty of criminal charges, and a hearing examiner ruled twice against the DOI’s attempt to take away his insurance license. The DOI reversed those decisions, sent them before a second examiner and ultimately received a ruling in its favor. Tinklenberg has appealed the decision, and although he was rejected in circuit court, he is taking the issue to the South Dakota Supreme Court.

Gant wants Moses and the DOI to address several issues at the October hearing, including whether the agency should send letters to insurers about agents under investigation until the cases are resolved, how the division settles on appropriate fines, and the establishment of a timeline for investigations to take place. H.B. 1131, currently pending in the legislature, would limit investigations to two years from the current unlimited status, Gant said.

The committee had planned on concluding its investigations at the last meeting but was unable to do so because the DOI did not show, Gant said. It plans on ending at the October meeting, drawing up recommendations, and giving the Division 30 days to consider changes, coming back in November or December with an update. If the DOI does not agree, legislation will be drafted to correct the practices, Gant said.

“This isn’t some witch hunt due to complaints from these two agents,” he said. “What we’re looking for is the practices and procedures the agency has and how to improve them to benefit the citizens of South Dakota.”