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CMFG Stipulation and Consent Order

Docket No. 19-014-I
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CMFG Life Insurance Company 


This Stipulation and Consent Order is entered thisday of April, 2019 by and between CMFG Life Insurance Company (the “Company”) and the Vermont Department of Financial Regulation (the “Department”). 

WHEREAS, the Commissioner of the Department (the “Commissioner”) is responsible for administering and enforcing the insurance laws of the State of Vermont, including 8 V.S.A. 

§§ 11, 12, 15, 3665, 4723, and 4724; and 

WHEREAS, after an investigation, the Department asserts that the Company has violated the insurance laws, as set forth below; and 

WHEREAS, the Company cooperated with the Department in its investigation by responding to inquiries and providing documentary evidence and other materials; and 

WHEREAS, the Company and the Department wish to resolve this matter without further administrative proceedings or litigation; and 

WHEREAS, the Company has agreed to make certain payments to the Department subject to the terms and conditions of this Order, and take certain other actions; and 

WHEREAS, the Company elects to permanently waive any right to a hearing and appeal under the Vermont Administrative Procedure Act, Title 3, Chapter 25 of the Vermont Statutes Annotated, the rules, regulations, and orders of the Commissioner, and any right to judicial review by any court with respect to this Consent Order (the “Order”). 

NOW THEREFORE, the Commissioner makes findings and conclusions as follows: 



The Company is a foreign insurer with its principal place of business located at 5910 Mineral Point Road, Madison, Wisconsin 53705, NAIC #62626. 

The Company is subject to the jurisdiction of the Commissioner pursuant to Title 8, Chapter 101, Subchapter 2. 

The Company consents to the entry of this Order. 

At all times relevant to this matter, the Company operated as a licensed life insurer in the State of Vermont. 

In 2006, the Department and the Company (f/k/a CUNA Mutual Insurance Society) entered into a Stipulation & Consent Order (“2006 Stipulation”) relating to the Company’s failure to the pay the statutorily required interest rate on credit life claims, among other violations. 

Pursuant to the 2006 Stipulation, the Company was required to 

audit its credit life insurance claims from January 1, 2001 through the date of the 2006 Stipulation and provide the Department a copy for approval; 

pay the interest owed to the underpaid beneficiaries; 

implement procedures to comply with 8 V.S.A. § 3665(c)(2) and (d); and 

pay a $1,000.00 penalty with regard to the credit-life violation (the total penalty ordered pursuant to the 2006 Stipulation was $15,500.00). 

The Company has complied with the 2006 Stipulation regarding its credit life business, and has also paid the six percent (6%) statutory interest rate on life insurance claims relating to Vermont insureds since 2006. 

Beginning in August 2017, the Department conducted a review of the Company’s life insurance claims pertaining to policies issued in Vermont, as well as claims paid to Vermont residents for the period January 1, 2014 through December 31, 2016 for individual and group policies. 

As a result of this review, the Department discovered that 18% of the Company’s claim payments included insufficient interest payments to Vermont-resident beneficiaries. 

The Department subsequently required an additional review and restitution period beginning August 8, 2006 and ending December 31, 2016. 

The data ultimately produced by the Company evidences 213 instances of underpayment pursuant to Vermont’s statutory interest payment requirements, 154 of which occurred after publication of Bulletin 159 (Nov. 30, 2010), which clarifies the Department’s application of 8 V.S.A. § 3665 to life insurance claims when the policy was delivered or issued for delivery in Vermont, the beneficiary is a Vermont resident at the time of death, or the group policy is issued outside of Vermont but the certificate was delivered or issued for delivery to a Vermont resident who is a Vermont resident at the time of his/her death. 

Those 213 incidents involved a total of $16,294.13 in underpayments to beneficiaries.  The 154 claim payments following the Department’s publication of Bulletin 159 involved a total of $12, 054.86 in underpayments to beneficiaries. 

The Company admits that it did not apply the 8 V.S.A. § 3665 interest rate to life claims other than those relating to Vermont insureds until after another state performed a market conduct examination in 2014 and found that the Company used only the insured’s state of residence in its interest rate calculation. 

The Department’s investigation also revealed that the Company had failed to verify that the interest amounts it paid as part of the life insurance death claims process were consistent with Vermont regulation and that the Company did not have adequate systems in place to prevent such errors. 

The Company did not consistently identify and remedy claims interest-payment failures across all life insurance product lines after the 2006 Stipulation relating to its credit life business. 

Company staff have been cooperative and responsive to the Department’s requests, acknowledged the statutory violations, initiated a self-audit without Department order, and paid restitution in the amount of $16,294.13, representing underpayments to 213 beneficiaries on claims dating back to 2006, which restitution was completed in 2017. 

Since the audit period, the Company has implemented controls to prevent such errors and has engaged in ongoing self-audit and remediation throughout the implementation process, which has been completed and reported to the Department prior to the entry of this Order. 

The Department finds that these violations caused financial harm to consumers. 



Pursuant to 8 V.S.A. §§ 11, 12, 15, 3665, 4723, and 4724, the Commissioner is charged with enforcing the insurance laws of the State of Vermont. 

Pursuant to 8 V.S.A. § 3661, the Commission may impose a civil administrative penalty for each violation of Title 8, an administrative rule of the Department, or an order of the Commissioner relating to insurance.  Violations are subject to an administrative penalty of up to $1,000 per violation.  

Pursuant to 8 V.S.A. § 3665(a), an insurance company is responsible for payment of any consequential damages caused by improper delay in payment or settlement of claims to beneficiaries. 

It is a violation of 8 V.S.A. § 3665(c)(2) to fail to provide, as part of the payment of a life insurance policy claim, the interest that by law accrues from the date of death at a rate of 6%. 

The Department published Insurance Division Bulletin 159 on November 30, 2010, addressing jurisdictional issues for life insurance with a nexus to multiple states:  “[I]t is the Department’s position” that the statutory interest rate is required to be paid in all of the following situations: 

When the individual or group policy was delivered or issued for delivery in Vermont, regardless of whether the beneficiary resides in Vermont at the time of death of the owner or certificate holder; 

When the beneficiary resides in Vermont at the time of the death of the owner or certificate holder, regardless of where the group or individual policy was issued; and 

When the group policy was issued outside of Vermont, but the certificate was delivered or issued for delivery to a Vermont resident who is also a resident of this state at the time of his or her death. 

It is a violation of 8 V.S.A. §§ 4723, 4724(19) to fail to comply with any rates, rules, regulations, or forms filed with the Commissioner. 

Pursuant to 8 V.S.A. § 4726, the Commission may impose a civil administrative penalty for each violation of Title 8, Chapter 129.  Violations are subject to an administrative penalty of up to $1,000 per violation. 

By failing to pay required statutory interest on 154 death benefit claims from November 30, 2010 through December 31, 2016, the Company committed 154 violations of 8 V.S.A. § 3665(c) and 154 violations of 8 V.S.A. §§ 4723, 4724(19).  The post-Bulletin 159 violations were similar in substance to the violations for which the Company had already paid an administrative penalty in 2006, and the Company learned of these violations years before the Department’s review and did not report or remedy the deficiencies.  For these reasons, the violations are committed with notice and knowledge of the Company’s obligations under § 3665(c).   

Altogether, the Company has committed 154 violations of 8 V.S.A. § 3665(c) and 154 violations of 8 V.S.A. §§ 4723, 4724(19), which together carry a potential administrative penalty of $308,000. 


CMFG Life Insurance Company 

By:  _________________________________________  

Lisa Wagner, Vice President 



Michael S. Pieciak, Commissioner 

Vermont Department of Financial Regulation 




NOW, THEREFORE, based on the Company’s stipulation and on the Findings of Fact and Conclusions of Law, the Commissioner issues the following Order: 

If the Company fails or neglects to comply with any of the terms, conditions or undertakings set forth in this Stipulation and Consent Order, the Department may, upon written notice to the Company, institute any legal or administrative proceedings it deems appropriate to enforce same and to seek such other appropriate sanctions, and the Company shall consent to the entry of judgment for any unpaid balance. 

The Company’s future failure to pay the statutorily prescribed amount of interest on a death benefit claim—whether the claim pre- or post-dates this Order—shall constitute a “willful” violation pursuant to 8 V.S.A. § 3661(a)(3) and § 4726(b) and will be subject to a heightened penalty amount. 

The Company shall pay an administrative penalty in the amount of $231,000.00 to the Department within thirty (30) days of the execution of this Stipulation and Consent Order. 

The Company has implemented or shall implement the following corrective actions (“Corrective Action Plan” or “CAP”): 

Update the rate parameters in the Company’s claims system for Vermont to ensure compliance with all Vermont laws, Regulations, Orders, and Bulletins, including Bulletin 159. 

Create documented procedures for the review of interest rate laws and regulations and for integration of changes to the claims system.  Procedures that have been implemented voluntarily are described in Exhibit A, “Claims Interest Job Aid” document; and Exhibit B, “Claims and Claims Interest Requirements Job Aid,” which includes sample screen shots of the new laws and regulations review process described therein. 

Capture within the claims system the details of any changes or updates to rate parameters, including date and name of the individual performing the change or update, as reflected in Exhibit C, “Vermont State Interest Table.” 

Perform regular (no less than quarterly) Company audits of death claim procedures and interest rate calculations involving Vermont claims and provide the full results of those audits to the Administrative Insurance Examiner at the Department without demand for a period of two years.  The Department shall have sixty days from the date of receipt of each audit results to notify the Company of any issues or concerns.  If the Company timely reports and has no incidents, or resolves all incidents to the Department’s satisfaction, during the two-year period beginning with the date this Order is executed, this reporting requirement terminates. 

Comply with all Vermont laws, Regulations, Orders, and Bulletins. 

The Company shall conduct a self-audit no later than July 31, 2019 to ensure compliance with the CAP and Vermont law.  The full results of the self-audit, including detailed information regarding all Vermont life-insurance claims and payments made, must be reported to the Department by August 31, 2019. 

The Company must obtain the Department’s prior written approval to make any changes to the CAP. 

All expenses incurred by the Department in reviewing CAP compliance will be billed back to the Company. 

Nothing in this Order shall be construed as limiting the Commissioner’s authority to investigate the Company for matters not resolved by this Order or for matters unrelated to this Order. 

Nothing herein shall be construed as limiting any private action a person may have. 

The Company consents to the entry of this Order and acknowledges its consent is given freely and voluntarily and that no promise has been made to induce it to consent except as otherwise stated herein. 

The Company acknowledges it has been represented by counsel in this matter and voluntarily waives its right to an administrative hearing on this matter and to judicial review of this matter. 

The Company further acknowledges the Commissioner retains jurisdiction over this matter for purposes of enforcing this Order. 

This Order shall be governed by and construed under the laws of the State of Vermont. 

This Order is entered into solely for the purpose of resolving this matter and is not intended to be used for any other purpose. 



The Company hereby admits the jurisdiction of the Commissioner over the subject matter of this proceeding and knowingly and voluntarily waives its right to a hearing before the Commissioner or his designee and all other procedures otherwise available under Vermont law, the rules of the Department, the provisions of Title 3, Chapter 25, or any right it may have to judicial review of this matter. 

The Company certifies that the Findings of Fact are accurate and complete, that it has reported to DFR all failures to pay the proper interest amount on a life insurance policy, and that full restitution has been paid to all impacted beneficiaries. 

The Company admits to the existence of the violations set forth in this agreement as identified in the Department’s findings and conclusions. 

The Company acknowledges this Order constitutes a valid order duly rendered by the Commissioner and agrees to be bound by it. 

The Company acknowledges and agrees this Order is entered into freely and voluntarily. 

The Company acknowledges its understanding of all terms, conditions, and obligations contained in the Order and further acknowledges that should it fail to comply with any provision of the Order, the Commissioner may impose additional sanctions and seek appropriate relief subject to the Company’s right to a hearing pursuant to Vermont insurance laws. 

Entered at Montpelier, Vermont this ____ day of April, 2019. 

Michael S. Pieciak, Commissioner 

Vermont Department of Financial Regulation