WASHINGTON STATE OFFICE OF ADMINISTRATIVE HEARINGS

In the matter of

Regan Bail Bonds, Inc. and David A. Regan,

Unauthorized Entity I Respondents.

Docket No. 08-2019-INS-00063

ORDER GRANTING RESPONDENTS' MOTION FOR PROTECTIVE ORDER

Agency: Office of the Insurance Commissioner

Agency No. 19-0370

1. ISSUE

1.1. Whether to grant the Respondents' Motion for Protective Order.

2. ORDER SUMMARY

2.1. The Respondents' Motion for Protective Order is granted.1

3. MOTION HEARING

II II

3.1. Hearing Date: October 25, 2019

3.2. Administrative Law Judge: Terry A. Schuh

3.3. Respondents: Regan Bail Bonds, Inc. and David A. Regan

3.3.1. Representative: Spencer Freeman, Attorney, Freeman Law Firm

3.4. Agency: Office of the Insurance Commissioner

3.4.1 . Representative: Sofia Pasarow, Insurance Enforcement Specialist

3.4.2. Observer: Toni Hood, Deputy Commissioner of Legal Affairs, Office of the Insurance Commissioner

1 I orally granted the molion at 1he hearing on October 25, 2019, but without explanation. This written order explains 1hc oral order.

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3.5. Documents Considered:

3.5.1. Motion for Protective Order Re: Office of Insurance Commissioner Discovery Requests; October 15, 2019; 22 pages plus attachment

3.5.2. Declaration of David Regan Matthew Hollibaugh [sic] in Support of Respondents' Motion for Protective Order re: Office of Insurance Commissioner Discovery Requests; October 14, 2019; 3 pages

3.5.3. OIC's Response to Respondents' Motion for Protective Order; October 22, 2019; 14 pages plus attachments

3.5.4. The pleadings and other documents filed in this matter

4. ANALYSIS

4.1. Regan Bail Bonds, Inc. and David A Regan (collectively, "the Respondents") sought protection regarding the following discovery requests served by the Office of the Insurance Commissioner ("OIC"):

Interrogatory No. 5: What are Regan's2 processes and procedures in calculating the amount of premium to collect from or on behalf of defendants for the bail bonds posted by Regan in Washington that are guaranteed by an admitted insurer?

Interrogatory No. 6: What are Regan's processes and procedures in calculating the amount of premium to collect from or on behalf of defendants for the bail bonds posted by Regan in Washington that are guaranteed by Regan?

Interrogatory No. 7: What are Regan's processes and procedures in determining whether to collect collateral from or on behalf of defendants for the bail bonds posted by Regan in Washington that are guaranteed by an admitted insurer?

Interrogatory No. 8: What are Regan's processes and procedures in determining whether to collect collateral from or on behalf of defendants

2 As OJC provided in paragraph 3.6 of the instructions to OIC's Interrogatories and Requests for Production of Documents, '"Regan' refers collectively to Regan Bail Bonds, Inc. and David A. Regan, as well as each entity individually."

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for the bail bonds posted by Regan in Washington that are guaranteed by Regan?

Interrogatory No. 11 : Provide all reports, analyses, statements, business plans, financial forecasts, financial projections, and budgets reflecting Regan's financial condition form 2017 to present.

Interrogatory No. 12: List Regan's assets and liabilities as of each of the following dates: December 31 , 2016; March 31, 2017; June 30, 2017; September 30, 2017; December 31, 2017; March 31 , 2018; June 30, 2018; September 30, 2018; December 31, 2018; and March 31, 2019.

Interrogatory No. 13: List all bail bonds posted by Regan in Washington that are guaranteed by Regan wherein any property, real or personal, is or was used as collateral or security for such bonds during the following time period: January 1, 2017, through June 1, 2019. For each bond, list and describe in detail the property, identify the property owner for each property, and provide the accompanying bail bond documentation.

Interrogatory No. 14: Describe in detail the entire transaction for bail bonds posted by Regan in Washington that are guaranteed by Regan during the following time period: January 1, 2017, through June 1, 2019. Identify each of the parties to the transaction, all contractual arrangements, transfers of money or other property, and interactions with the court system. If any transaction follows a different process, describe the difference in detail.

Request for Production of Documents No. 1: Produce all documents and electronic data relating to any commission, salary, or bonuses Janet Capps received for posting bail bonds in Washington courts on behalf of Regan.

Request for Production of Documents No. 2: Produce all documents and electronic data submitted to Washington courts from January 1, 2017, through June 1, 2019, in the process of obtaining an Order of Justification to post bail bonds. Identify the Washington county or counties for which each document or electronic data was submitted.

Request for Production of Documents No. 3: Produce all complaints made by individuals in Washington related to Regan's bail bond

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practices. This includes, but is not limited to, complaints submitted to insurers which Regan has been appointed to and complaints submitted directly to Regan.

4.2. The parties offered a variety of arguments regarding the Respondents' motion. However, the key is relevance.

4.3. "An agency may by rule determine whether or not discovery is to be available in adjudicative proceedings and, if so, which forms of discovery may be used." RCW 34.05.446(2).

4.4. Here, OIC has issued such a rule, making discovery available under CR 26-CR 37, except for CR 26(j) and CR 35. WAC 284-02-070(2)(e)(i) and (ii).

4.5. "Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action". CR 26(b)(1) (in pertinent part).

4.6. '"Relevant evidence' means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." ER 401.

4.7. In other words, evidence is relevant if it will assist the trier of fact in determining a material fact at issue.

4.8. At issue in this case is whether to affirm or set aside OIC's Amended Order to Cease and Desist.

4.9. More specifically, as expressed in the Amended Order to Cease and Desist, OIC seeks to order the Respondents to cease and desist from four interrelated types of conduct:

"Engaging in or transacting any business of insurance as an unauthorized surety insurer in the state of Washington.

Holding itself out as a surety insurer, in the state of Washington, without authorization by the Insurance Commissioner.

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Making any representation or advertisement in the course of insurance business which declares, deceptively infers, or suggests that it is authorized to act as the surety insurer of a bail bond.

Directing, allowing, or assisting any employees, representatives, or agents, who are unlicensed insurance producers, to engage in or transact the business of insurance in the state of Washington."

Preamble to Amended Order to Cease and Desist.

4.10. Moreover, the context of OIC's action is at least 325 bail bonds for which the Respondents allegedly did not secure an authorized surety insurer, about which OIC has already gathered documentation. Amended Order to Cease and Desist, 1) 13, et seq.

4.11. Apparently, it is these transactions, and any similar such transactions, which OIC deems to be functioning as a surety insurer, without OIC authorization. OIC seeks to order the Respondents to cease and desist from that activity. So, ultimately, the parties must persuade me whether issuing bail bonds in the manner described in the Amended Order to Cease and Desist does or does not constitute functioning as a surety insurer.

4 .12. Therefore, ultimately, the information OIC seeks by means of the discovery challenged in the Respondent's motion must lead to evidence that will assist me in resolving that issue.

4.13. Here, in Interrogatories 5, 6, 7, and 8, OIC seeks information regarding the Respondents' decisions to set fees and require collateral, for all bonds. Interrogatories 5 and 7 seek such information as to bonds backed by an authorized surety insurer and Interrogatories 6 and 8 seeks such information as to bonds not backed by an authorized surety insurer. Nothing in the briefs and oral argument persuade me that the Respondents' conduct regarding fees and collateral has any bearing on whether their conduct as to bail bonds not backed by an authorized surety insurer constitutes Respondents functioning as a surety insurer.

4.14. In Interrogatories 11 and 12, OIC seeks information regarding the Respondents' financial condition. Arguably, that could have bearing on whether the Respondents have the financial wherewithal to viably

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function without a surety insurer and that could have bearing on whether the Respondents have the financial wherewithal to serve as a surety insurer. However, I am not convinced by the arguments offered that it is relevant to establishing whether the Respondents' conduct constituted functioning as a surety insurer.

4.15. In Interrogatories 13 and 14, OIC seeks information regarding the details of the bail bonds posted not backed by an authorized surety insurer, e.g. the specific property posted as security and the identity of the property owner. Apparently, OIC also wants to know if there are more transactions of which it is yet not aware. However, OIC does not seek to calculate a sanction based on quantity or quality or any other parameter of these transactions. Rather, it seeks to prevent them. Accordingly, I am not persuaded that this information is designed to produce evidence relevant to helping me decide the only issue before me, and that is whether in offering bail bonds not backed by a surety insurer constituted conduct as a surety insurer.

4.16. Request for Production 1 seeks documentation regarding the remuneration paid to an employee of the Respondents. Request for Production 2 seeks information regarding the Orders of Justification linked to the bail bonds posted but not backed by an authorized surety insurer. Finally, Request for Production 3 seeks complaints filed against the Respondents regarding their bail bond practices. I am not persuaded that any of these is designed to lead to evidence that will assist me in determining whether the specific transactions alleged and at issue here constituted producing surety insurance.

4.17. Thus, for the reasons recited above, the Respondents' Motion for Protective Order should be granted.

5. ORDER

IT IS HEREBY ORDERED THAT:

5.1. The Respondents' Motion for Protective Order re: Office of Insurance Commissioner Discovery Requests is GRANTED.

5.2. The Respondents are not required to answer Interrogatories Nos. 5, 6, 7, 8, 11, 12, 13, and 14, and Requests for Production Nos. 1, 2, and 3.

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OAH: 253-476-6888

Issued from Tacoma, Washington, on the date of mailing.

--C tAS~t..-V TerryA~ Administrative Law Judge Office of Administrative Hearings

CERTIFICATE OF SERVICE IS ATTACHED

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OAH: 253-476-6888

CERTIFICATE OF SERVICE FOR OAH DOCKET NO. 08-2019-INS-00063

I certify that true copies of this document were served from Tacoma, Washington via Consolidated Mail Services upon the following as indicated:

D R 6 V,

avid A Regan egan Bail Bonds, Inc. 12 W Evergreen Blvd ancouver, WA 98660

R espondent

pencer D Freeman s F 11 Ta R

reeman Law Firm, Inc. 07 1/2 Tacoma Ave S coma, WA 98402

espondent Representative

ofia Pasarow s In 0 M p

surance Enforcement Specialist IC, Legal Affairs Division S:40255 0 Box40255

0 A

lympia, WA 98504-0255 gency Representative

ebekah Carter R H 0 M PO 0 A

earing Units Paralegal ffice of the Insurance Commissioner S:40255

Box 40255 lympia, WA 98504-0255 gency Contact

Date: Thursday, October 31, 2019

181 First Class Mail □ Certified Mail, Return Receipt □ Hand Delivery via Messenger □ Campus Mail □ Facsimile DE-mail

181 First Class Mail □ Certified Mail, Return Receipt □ Hand Delivery via Messenger □ Campus Mail □ Facsimile □ E-mail

□ First Class Mail D Certified Mail, Return Receipt □ Hand Delivery via Messenger 181 Campus Mail D Facsimile □ E-mail

□ First Class Mail D Certified Mail, Return Receipt □ Hand Delivery via Messenger 181 Campus Mail □ Facsimile DE-mail

OFFICE OF ADMINISTRATIVE HEARINGS

ob.,~~ Stephanie Kitt Legal Assistant 2

Order Granting Respondents' Motion for Protective Order OAH Docket No. 08-2019-INS-00063 Page B of 8

OAH: 253-476-6888