The plaintiffs appeal from a decision of a judge of the Superior Court affirming a decision of the Commissioner of Insurance (commissioner), which in turn affirmed a decision and order of a hearing officer of the Division of Insurance (division). The decision held that the plaintiffs, Anawan Insurance Agency, Inc. (Anawan) and Stephen Michaels, one of its officers and directors, violated § 2 of G. L. c. 176D and § 177 of G. L. c. 175 by having paid compensation to one Kuntthy Prum at a time that Prum was not duly licensed as an insurance agent. The hearing officer ordered the plaintiffs to pay fines of $27,800 for 278 violations of G. L. c. 176D, § 2, that took place between November 1, 2000 and December 31, 2001, and $2,200 for twenty-two violations that occurred between August 1, 2000 and October 31, 2000.
The plaintiffs argue that the division’s claims are barred by the statute of limitations, that the plaintiffs were not in violation of G. L. c. 175, § 177, because the statute requires scienter and, that in any event, the fines should have been assessed under G. L. c. 175, § 177, rather than under G. L. c. 176D, § 7. We vacate the judgment, and order that a new judgment enter remanding the case to the commissioner for further proceedings consistent with this opinion.
1. Background. The following facts found by the hearing officer and set forth in the exhibits are undisputed. On September 24, 1999, and again on October 1, 1999, the division received an anonymous letter stating that Anawan, as well as two other insurance agencies, had opened second locations contrary to a moratorium imposed by the Commonwealth. Anawan’s second office was stated to be at 76 Shirley Avenue, Revere. An investigation by the division ensued, primarily by one Loney F. Bond. At some point Bond learned that Prum was doing business at 76
On June 1, 2004, Bond wrote a letter to the plaintiffs stating that the division had received a complaint against Anawan “regarding placement of insurance policies through various carriers” and seeking, among other things, various documents relating to the appointment of past and present producers
“Have you ever employed Kuntthy Prum, if so state the dates of employment and provide the . . . information for this producer/broker? Determine the carrier(s) that he/ she placed business with type and number of policies written.”
On June 23, 2004, Michaels responded and notified the division of Anawan’s prior insurance transactions with Prum, including a listing of all the commissions paid to him. Prior to the receipt of Michaels’s June letter, the division did not know that Anawan had engaged in insurance business transactions with Prum.
On October 25, 2004, after receiving Michaels’s response, the division issued an order to show cause alleging that the plaintiffs had violated § 177 of G. L. c. 175 and § 2 of G. L. c. 176D. A hearing pursuant to c. 176D, § 6, was held at which numerous exhibits were filed, but only one witness, Bond, testified. Thereafter, the hearing officer issued compendious findings accompanied by orders which were affirmed by the commissioner and by a Superior Court judge after the plaintiffs filed a complaint seeking review pursuant to G. L. c. 30A, § 14.
2. Discussion, a. Statute of limitations. The plaintiffs argue that this case is governed by the two-year statute of limitations, G. L. 260, § 5, set forth in the margin.
While arguing that § 5A does not apply, the plaintiffs claim that even if it is the appropriate statute of limitations, the cause of action accrued when the division received the anonymous letters in 1999; the claim for fines is, therefore, barred as too late. The hearing officer found, however, that the division proved that it did not know of the transactions between Anawan and Prum until June 23, 2004 and that:
“the earliest date upon which any argument possibly can be made that the Division ‘should have known’ of the improper insurance business transactions between Anawan and Prum was not until sometime long after October 25, 2000. Under either set of facts, the Division has proved that fines for the pre-November 2000 proved violations are not barred by the statute of limitations set out in § 5A.”
In 3M Corp. v. Browner,
“Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued . . . .”
3M Corp. v. Browner, supra at 1455.
The court noted that the “discovery rule” is based on the idea that plaintiffs cannot have a tenable claim for damages unless and until they have been harmed. For this reason damage claims involving hidden injuries or illnesses are not considered as accruing until the harm becomes apparent. The rule promoted by EPA, however, was different; it was a “discovery of violation” rule having nothing to do with latent injuries and to which the rationale of the discovery of injury mle had no application. Id. at 1460.
We agree with the following reasoning of the court in 3M Corp. v. Browner, supra:
“The statute of limitations on which EPA would engraft its rule is aimed exclusively at restricting the time within which actions may be brought to recover fines, penalties and forfeitures. Fines, penalties and forfeitures, whether civil or criminal, may be considered a form of punishment. ... In an action for a civil penalty, the government’s burden is to prove the violation; injuries or damages resulting from the violation are not part of the cause of action; the suit may be maintained regardless of damage.*452 Immediately upon the violation, EPA may institute the proceeding to have the penalty imposed.”
Here, G. L. c. 175, § 177, as then in effect, see note 6, supra, provided that “[wjhoever violates any provision of this section shall be punished by a fine of not less than twenty nor more than two hundred dollars.” As in the statute imposing penalties in the 3M case, liability under § 177 attached at the time of the violation, and hence “one would expect this to be the time when the claim for the penalty . . . ‘accrued.’ ” 3M Corp. v. Browner, supra at 1461. Also like the statute of limitations in the 3M case, G. L. c. 260, § 5A, is a general statute applicable in all civil penalty cases, and nothing in the language suggests that “the running of the limitations period tum[s] on the degree of difficulty an agency experiences in detecting violations.” 3M Corp. v. Browner, supra. We follow the rationale of that case
b. Claim that violation must be made “knowingly.” In 2002, G. L. c. 175, § 177, was amended by St. 2002, c. 184, § 109, so that the last sentence thereof reads: “Whoever knowingly violates any provision of this section shall be punished by a fine of not less than $50 nor more than $500.” Thus, in addition to increasing the fine, the word “knowingly” was inserted by the Legislature. The plaintiffs claim the amendment was a clarification of the previous version of the statute. We disagree.
Generally, and especially where the language of the applicable statute is clear and unambiguous, see Nationwide Mut. Ins. Co. v. Commissioner of Ins.,
The addition of the word “knowingly” is not a clarification or a mere fine tuning of the earlier provision, but is a significant change that affects substantive rights. Compare Globe Newspaper Co. v. Beacon Hill Architectural Commn.,
“all legislation commonly looks to the future, not to the past, and has no retroactive effect unless such effect manifestly is required by unequivocal terms. It is only statutes regulating practice, procedure and evidence, in short, those relating to remedies and not affecting substantive rights, that commonly are treated as operating retroactively, and as applying to pending actions or causes of action.”
Murphy v. Planning Bd. of Norwell,
c. Damages. The hearing officer found the plaintiffs to be in violation both of G. L. c. 175, § 177, see note 6, supra, and G. L. c. 176D, § 2, inserted by St. 1972, c. 543, § 1, which provides:
“No person shall engage in this commonwealth in any trade practice which is defined in this chapter as, or determined pursuant to section six of this chapter to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance” (emphasis supplied).
Both statutes provide penalties. As indicated earlier, G. L. c. 175, § 177, as in force at the time of the plaintiffs’ violations, provided that “[wjhoever violates any provision of this section shall be punished by a fine of not less than twenty nor
“The two statutes may overlap in their coverage, but in the case of a conflict, the provisions of the specific statute must govern. See Pereira v. New England LNG Co.,364 Mass. 109 , 118-119 (1973), and cases cited. To hold otherwise would be to overlook [the limitations in § 177.]”
Ibid.
So ordered.
Notes
The hearing officer also ordered that the plaintiffs cease and desist from the conduct that gave rise to the sanctions. Since it was agreed that the plaintiffs had ceased doing business with Prum as of December 31, 2001, that order appears to have been pro forma.
In 2002 the term “producer” replaced the former term “agent” or “broker” in G. L. c. 175, § 177. See St. 2002, c. 106, §§ 35-36.
General Laws c. 260, § 5, as amended by St. 1975, c. 432, § 1, provides: “Actions for penalties or forfeitures under penal statutes, if brought by a person to whom the penalty or forfeiture is given in whole or in part, shall be commenced only within one year next after the offence is committed. But if
General Laws c. 260, § 5A, as amended through St. 1983, c. 636, § 29, provides: “Actions arising on account of violations of any law intended for the protection of consumers, including but not limited to the following . . . chapter one hundred and seventy-six D; . . . whether for damages, penalties or other relief and brought by any person, including the attorney general shall be commenced only within four years next after the cause of action accrues.”
General Laws c. 175, § 177, as in effect at the time of the plaintiffs’ transactions with Prum provided in relevant part: “No company and no officer, agent or employee thereof, and no duly licensed insurance broker, shall, directly or indirectly, pay or allow or offer or agree to pay or allow compensation or anything of value to any person, excepting an officer of a domestic company acting under section one hundred and sixty-five, for acting in this commonwealth as an insurance agent or as an insurance broker, both as defined in section one hundred and sixty-two, who is not then duly licensed as an insurance agent of the company for which he assumes to act or as an insurance broker. . . . Whoever violates any provision of this section shall be punished by a fine of not less than twenty nor more than two hundred dollars.”
The 3M court also referred to the legislative history of the statute buttressing its conclusion. See
We note that the hearing officer imposed penalties with respect to each policy and not for each commission payment to Prum. In assessing the fines, the hearing officer noted that the plaintiffs did not act with a complete disregard for their responsibilities: they required Prum to send them by facsimile transmis
We need not consider the portion of the decision ordering the plaintiffs to cease and desist violation of the statute, as all parties agree they are no longer in violation. See note 2, supra.