Court rules state immune from man’s lawsuit

By Judy Harrison, BDN Staff
Posted July 28, 2009, at 8:56 p.m.

PORTLAND, Maine — A Hampden man may ask the U.S. Supreme Court to decide whether he can sue the state for an alleged violation of the consent degree it entered into with him when he was disciplined four years ago for unethical insurance practices.

The Maine Supreme Judicial Court on Tuesday unanimously ruled that the state was immune from the lawsuit filed by Alan Knowlton that sought monetary damages. The justices reversed a decision made last year by Superior Court Justice William Anderson, who found that Knowlton, 55, could sue the state because the consent agreement was a contract.

Under Maine law, the state is immune from nearly all lawsuits. It can be sued for damages for breach of contract under certain circumstances.

Knowlton’s attorney Joseph Baldacci of Bangor called the justices’ ruling a “dangerous precedent.” Baldacci also said that he and co-counsel Eric Mehnhert of Bangor were seriously considering appealing the decision to the nation’s highest court.

“The consent agreement allows Mr. Knowlton to seek enforcement of the consent agreement,” Baldacci said, “The court’s decision goes against the language of the consent agreement.”

Deputy Attorney General Paul Stern said Tuesday that Knowlton could ask the court to enforce the settlement agreement rather than suing the state for damages.

Baldacci said his client still could pursue that legal action but did not know whether he would.

“We’re pleased with the [decision],” Stern said. “It’s direct and correct. It delineates the difference between a normal commercial contract and a consent agreement.”

Contracts and consent agreements are outlined in separate statutes, Justice Jon Levy wrote for the state’s high court.

The justice concluded that there is a distinct difference between “a statute that authorizes the state to enter into contracts in its proprietary role involving the establishment of financial obligations between the state and a private actor, and a statute that authorizes the state to resolve regulation enforcement proceedings by consent agreement in the exercise of its police powers.”

“The sentence in the statute providing that a consent agreement entered into by the Superintendent of Insurance may be enforced in Superior Court is an extension of the superintendent’s general duty to enforce the insurance code,” Levy said. “It does not expressly confer to individuals who enter into a consent agreement with the superintendent a right to sue for damages based on an alleged breach of the agreement. The judicial enforcement of a consent agreement is a remedy that is distinct from compensatory damages awarded for the breach of that agreement.”

The lawsuit stemmed from the consent agreement Knowlton entered into in March 2005 with the Bureau of Insurance over practices by Bankers Life & Casualty Co. Knowlton agreed to pay a $750 civil penalty and to a 270-day period of license probation. The Maine Bureau of Insurance investigated the company after it had received 70 formal complaints about its practices over the previous three years.

In its own consent agreement with the state, the Illinois firm agreed to pay a $400,000 fine for violating state law and to invest $100,000 in organizations and initiatives that benefit Maine’s senior citizens for failing to provide adequate training and supervision of its employees in Bangor, where Knowlton worked, and in its Portland office.

Knowlton sued the state in Penobscot County Superior Court in 2007, arguing that the bureau’s consent agreement with Bankers Life required the firm to fire him. The state has denied that allegation.

In a separate lawsuit filed earlier this month in Penobscot County Superior Court, Knowlton alleged that three state employees violated the law when they made it a condition of Bankers Life’s consent agreement that it fire Knowlton. He also is seeking damages in that case.

The defendants in that lawsuit, which has been moved to U.S. District Court in Bangor, are Judith Shaw, deputy superintendent for the Bureau Of Insurance; Glenn Griswold, director of the Consumer Health Care Division of the Bureau of Insurance; and Assistant Attorney General Andrew Black.

An answer to the complaint has not been filed.

Baldacci said Tuesday that Knowlton has not worked since May 2006.

In a 2007 interview, Knowlton told the Bangor Daily News that he had earned between $70,000 and $80,000 a year as an insurance agent.

“They’ve destroyed my career and my personal and professional reputation,” he said more than 2½ years ago.

http://bangordailynews.com/2009/07/28/politics/court-rules-state-immune-from-manrsquos-lawsuit/ printed on August 22, 2014