Proposed Consent Order No. 20-0269 - Wa

EXHIBIT 10

MIKE KREIDLER STATE INSURANCE COMMISSIONER

April 24, 2020

Cory LeBlanc lA Smart Start, LLC 500 E Dallas Rd Grapevine, TX 76051 [email protected] [email protected]

STATE OF WASHINGTON

OFFICE OF INSURANCE COMMISSIONER

Jacquelyn Beatty Karr Tuttle Campbell 701 Fifth Avenue, Ste 3300 Seattle, WA 98104 [email protected]

Re: IA Smart Start, LLC Proposed Consent Order No. 20-0269

Dear Sir or Madam,

OLYMPIA OFFICE: INSURANCE BUILDING P.O. BOX 40255 OLYMPIA, WA 98504-0255 Phone: (360) 725-7000

The Office of the Insurance Commissioner has found that 1 A Smart Start, LLC ("the Company") has violated a provision of Washington State law. The violation(s) are detailed in the attachment to this letter. When a violation occurs, the Insurance Commissioner is granted the authority to take action, which includes levying a fine.

We are offering the Company an opportunity to settle this matter by signing the attached Consent Order and paying a fine. As part of this settlement, the Company will admit its violation, pay the imposed fine, premium taxes, and penalty, and agree to fully comply with all applicable laws of Washington State going forward.

The deadline to accept the settlement offer, pay the fine, taxes, and penalty is May 26, 2020. Please refer to the instructions on the next page. Payment for the fine, and taxes and penalty, must be paid by separate payments. Additionally, payments will not be accepted without the signed order. When we receive your signed order and separate payments for the fine, and taxes and penalty, the Insurance Commissioner will execute the agreement and provide you with a validated copy of the settlement agreement for your records. If the settlement offer is not accepted by that date, it will be withdrawn.

Upon withdrawal of the settlement offer, the Insurance Commissioner may request a hearing to impose the fine. Alternatively, you may request a hearing yourself. If this matter results in a hearing, the Insurance Commissioner is not bound by this settlement offer and may seek a fine in the full amount warranted for your particular situation.

If you have any questions regarding this matter, I can be reached at (360) 725-7264 or by email at [email protected].

Si~~ 7liii,~ Daniel Jacobs ~ Insurance Enforcement Specialist Legal Affairs Division

Enclosure: Consent Order

lA Smart Start, LLC April 24, 2020 Page2

How do I accept this time-limited settlement offer?,

By May 26, 2020, you must:

1. Sign the attached settlement order. The settlement order is called a Consent Order because you are agreeing or consenting to the terms of the agreement.

2. Pay the fine amount, taxes and penalty indicated in the order by 2 separate checks or money orders. Make the checks or money orders payable to WA Office oflnsurance Commissioner.

3. Mail the signed order with your 2 separate payments to:

Office of the Insurance Commissioner Attn: Fiscal POBox40255 Olympia, WA 98504-0255

or Office of the Insurance Commissioner Atm: Fiscal 5000 Capitol Blvd SE Tumwater, WA 98501

Payment will not be accepted without the signed order. When we receive your signed order and separate payments for the fine, and taxes and penalty, the Insurance Commissioner will execute the agreement and provide you with a validated copy of the settlement agreement for your records. If the settlement offer is not accepted by the date given, it will be withdrawn.

How do I request an administrative hearing?

By July 23, 2020, you must fill out and sign the Demand for Hearing form online at the following location:

https://www.insurance.wa.gov/how-file-demand-hearing

Your Demand for Hearing can be in a separate document, but the completed Demand for Hearing form must also be filed along with your written demand. ·

1. If you would like to also provide a written request for an administrative hearing, your written request should include:

• A brief statement of how you are harmed by the commissioner's proposed action. • A statement of the outcome you seek. • Your contact information: name, mailing address, email address, and phone number. • A copy of the commissioner's proposed order you are challenging.

Although not required, it would be helpful if you also included the following information in your written request for a hearing:

• A statement identifying the facts in the Consent Order you disagree with or believe are inaccurate, and why you think so.

• A statement identifying any additional facts or information you want the Insurance Commissioner to consider.

2. Mail your written request to:

Office of the Insurance Commissioner ATTN: Hearings Unit POBox40255 Olympia, WA 98504-0255

For more information about the hearings process, please visit: http://www.insurance.wa.gov/about-administrativehearings

STATE OF WASHINGTON OFFICE OF THE INSURANCE COMMISSIONER

In the Matter of Order No. 20-0269

lA SMART START, LLC,

Unauthorized Entity/Respondent.

CONSENT ORDER LEVYING A FINE AND ASSESSING PREMIUM TAXES, INTEREST AND PENALTY

This Consent Order Levying a Fine and Assessing Premium Taxes and Penalty ("Order")

is entered into by the Insurance Commissioner of the state of Washington ("Insurance

Commissioner"), acting pursuant to the authority set forth in RCW 48.02.060 and RCW

48.15.023, and lA Smart Start, LLC. This Order is a public record and will be disseminated

pursuant to Title 48 RCW and the Insurance Commissioner's policies and procedures.

BASIS:

l. lA Smart Start, LLC (''Smart Start" or "the Company") is a foreign limited liability

company, domiciled in Texas, and registered with the Washington Secretary of State since

December 20, 2012.

2. Smart Start does not hold any sort of Certificate of Authority, Registration, or

License authorizing it to act as an insurer in the state of Washington.

3.· Smart Start manufactures ignition interlock devices ("IID"), electronic equipment

that tests a person's blood alcohol content prior to their operation of a vehicle. Smart Start devices

are leased to the enrollee, typically as a court-mandated requirement, and the enrollee must pay

Smart Start a monthly rental fee. The contract the enrollee signs is called the Provision of

Monitoring Services ("the contract") which offers "coverage" for theft of the Smart Start device

in exchange for $6.00 per month, in addition to the other rental fees. This provision in the contract

states as follows:

THEFT WARRANTY (THIS IS NOT INSURANCE) - IGNITION INTERLOCK ONLY This warranty is optional. Please read this carefully. This warranty will cover the replacement cost of $1,550.00 for the equipment provided in performance of the monitoring service if the equipment is stolen. This warranty is valid under the following conditions: 1) the entire vehicle for ignition interlock provided is stolen

CONSENT ORDER LEVYING A FINE AND ASSESSING PREMIUM TAXES & PENALTY ORDER NO. 20-0269

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1 State of Washington Office of Insurance Commissioner POBox40255 Olympia, WA 98504-0255

AND 2) you supply a valid hard copy of a police report with your theft claim AND 3) you have paid th_e monthly warranty and CONTRACT fees on time each month and have brought your car in for all scheduled appointments. Term: This warranty shall commence on the Effective Date and shall continue in full force and effect until terminated (1) by court order effective as of the date set forth therein, (2) by the shop effective immediately upon discovery that the equipment has been tampered with or misused by the client or (3) by SMART START for any reason effective Fifteen (15) day after SMART START's written notice to Client issued to Client's last known address as reflected in the records of SMART START. The cost of the warranty program may be changed at any time if deemed necessary by Smart Start. The warranty fee is non-refundable. The warranty cost is prepaid monthly with your CONTRACT payment.

__ (Initial) I ACCEPT the warranty. __ (Initial) I DECLINE the warranty and accept responsibility for the $1,550.00 replacement cost of service equipment.

[ All emphasis in original.]

4. The above text is followed by:

Client further acknowledges and CONTRACTs that in the event the equipment described in the CONTRACT with SMART ST ART is damaged beyond repair, under section 8 RISK OF LOSS of this CONTRACT, the recovery cost of the equipment shall be:

ssr-1000•: 11D C11mern C11ble*: SSl-20/20•: SSl-20/20 o,mcrn~: SSl-20120 OPS module":

$1,550."' $30."' $1,550.00

$1,800."' $1,900.'0

SSl-20/20 C11mer11" & •PS~: SSl-20/30": SSl-20/30 C11mcru*: SSJ-20/30 OPS module": SSl-20/30 Camera" & opsa:

$2,150.''' $1,550."' $1,800.'" $(,'°0,0l $2,150.00

Clm1 f111·the1• osknowledsu these nre Hovldoted dnpngges i!!.Jhi ... ,.nuuit.wu: C!om•t ncfion•

IN-HOM Sinndard~: IN-HOM Mobile": IN-HOM Power Cord": IN-HOM Power Supply•: IN-HOM Pkg M11tl~

$1.~50."' $1,800.00

$20.0l $70 .00

$10."'

5. The Insurance Commissioner began its inquiry upon receipt of a complaint filed by

a Washington consumer who purchased the theft warranty, and whose video camera component

of the IID was stolen from his vehicle. Because the vehicle itself was not stolen, Smart Start denied

coverage under the theft warranty.

6. Between October 1, 2016 and October 1, 2019, 8,881 Washington consumers

purchased the theft warranty from Smart Start. Smart Start collected $908,022 in revenue.

7. Despite language in the contract asserting otherwise, the "theft warranty" is not a

warranty under Washington state law because the consumer is charged extra for the additional

coverage, contrary to the definition of warranty in RCW 48.110.020(22).


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2 State of Washington Office of Insurance Commissioner PO Box40255 Olympia, WA 98504-0255

8. The "theft warranty" is insurance as defined in R CW 48.01.040 because the product

is a contract whereby Smart Start agrees to indemnify the enrollee for the replacement costs for

the IID that the enrollee would be responsible for absent the product, and such agreement is subject

to certain specific conditions precedent, or "determinable contingencies."

9. RCW 48.01.040 defines 'insurance' as a contract whereby one undertakes to

indemnify another or pay a specified amount upon determinable contingencies.

10. RCW 48.110.020(22) defines 'warranty' as a warranty made solely by the

manufacturer, importer, or seller of property or services without consideration; that is not

negotiated or separated from the sale of the product and is incidental to the sale of the product; and

that guarantees indemnity for defective parts, mechanical or electrical breakdown, labor, or other

remedial measures, such as repair or replacement of the property or repetition of services. This

statute is referenced solely to demonstrate that the Smart Start theft protection does not constitute

a "warranty" pursuant to RCW 48.110.020(22).

11. RCW 48.05.030(1) provides that no person shall act as an insurer and no insurer

shall transact insurance in this state other than as authorjzed by a certificate of authority issued to

it by the Insurance Commissioner and then in force; except, as to such transactions as are expressly

otherwise provided for in this code.

12. RCW 48.15.020(1) provides that an insurer that is not authorized by the Insurance

Commissioner may not solicit insurance business in this state or transact insurance business in this

state.

13. RCW 48.14.020(1) provides that an insurer shall on or before the first day of March

of each year pay to the status treasurer through the Insurance Commissioner's office a tax on

premmms. Such tax shall be in the amount of two percent of all premiums.

14. RCW 48.14.060(1) provides that any insurer failing to file its tax statement and to

pay the specified tax on premiums by the last day of the month in which the tax becomes due shall

be assessed a penalty of five percent of the amount of the tax; and if the tax is not paid within forty

five days after the due date, the insurer will be assessed a total penalty often percent of the amount

of the tax; and if the tax is not paid within sixty days of the due date, the insurer will be assessed

a total penalty of twenty percent of the amount of the tax. The tax may be collected by distraint,

and the penalty recovered by any action instituted by the Insurance Commissioner in any court of


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3 State of Washington Office oflnsurance Commissioner PO Box 40255 Olympia, WA 98504-0255

competent jurisdiction. The amount of any penalty collected must be paid to the state treasurer

and credited to the general fund.

15. RCW 48.14.060(2) provides that in addition to the penalties set forth in subsection

(1) of this section, interest will accrue on the amount of the unpaid tax at the maximum legal rate

of interest permitted under RCW 19.52.020 commencing sixty-one days after the tax is due until

paid.

16. RCW 48.14.095(1) provides that this section applies to any insurer or taxpayer, as

defined in RCW 48.14.0201, violating or failing to comply with RCW 48.05.030(1), RCW

-48.17.060, RCW 48.36A.290(1), RCW 48.44.015(1), or RCW 48.46.027(1).

17. RCW 48.14.095(2) provides that except as provided in subsection (7) of this

section, RCW 48.14.020, RCW 48.14.0201, and RCW 48.14.060 apply to insurers or taxpayers

identified in subsection (1) of this section.

18. RCW 48.15.023(5)(a) states that if the Insurance Commissioner has cause to

believe that any person has violated the provisions of RCW 48.15.020(1), the Insurance

Commissioner may:

(i) Issue and enforce a cease and desist order in accordance with the provisions of

RCW 48.02.080; and/or

(ii) Assess a civil penalty of not more than twenty-five thousand dollars for each

violation, after providing notice and an opportunity for a hearing in accordance with

chapters 34.05 and 48.04 RCW.

19. By engaging in the business of insurance in this state without a Certificate of

Authority, and failing to remit premium taxes for 8,881 insurance contracts sold while

unauthorized to do so, lA Smart Start, LLC violated RCW 48.05.030(1), RCW 48.15.020(1),

RCW 48.14.020, and RCW 48.14.095, justifying the imposition of a fine under RCW

48.15.023(5)(a)(ii), and the assessment of a premium tax, tax interest and tax penalties underRCW

48.14.020, RCW 48.14.060, and RCW 48.14.095.

CONSENT TO ORDER:

The Insurance Commissioner of the state of Washington and the Company agree that the

best interest of the public will be served by entering into this Order. NOW, THEREFORE, the

Company consents to the following in consideration of its desire to resolve this matter without


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4 State of Washington Office of Insurance Commissioner POBox40255 Olympia, WA 98504-0255

further administrative or judicial proceedings. The Insurance Commissioner consents to settle this

matter in consideration of the Company's payment of a fine, and upon such terms and conditions

as are set forth below:

1. The Company acknowledges its duty to comply fully with the applicable laws of

the state of Washington.

2. The Company consents to the entry of this Order, waives any and all hearing or

other procedural rights, and further administrative or judicial challenges to this Order.

3. By agreement of the parties, the Insurance Commissioner will impose a fine of

$25,000.00 (Twenty-Five Thousand Dollars) to be paid by May 26, 2020.

4. By agreement of the parties, the Company will pay premium tax owed in the

amount of$18,161, tax penalties of$2,599, and tax interest of$2,662, to be paid by May 26, 2020.

5. The Company understands and agrees that any further failure to comply with the

statutes and/or regulations that are the subject of this Order constitutes grounds for further

penalties, which may be imposed in direct response to further violations.

6. This Order and the violations set forth herein constitute admissible evidence that

may be considered in any future action by the Insurance Commissioner involving the Company.

However, the facts of this Order, and any provision, finding or conclusion contained herein does

not, and is not intended to, determine any factual or legal issue or have any preclusive or collateral

estoppel effects in any lawsuit by any party other than the Insurance Commissioner.

EXECUTED this ___ day of _______________ ~ 2020.

SMART START LLC

By: _______________ _

Printed Name: ----------------

Printed Corporate Title: _______________ _


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5 State of Washington Office of Insurance Commissioner PO Box 40255 Olympia, WA 98504-0255

AGREED ORDER:

Pursuant to the foregoing factual Basis and Consent to Order, the Insurance Commissioner

of the state of Washington hereby Orders as follows:

1. The Company shall pay a fine in the amount of $25,000.00 (Twenty-Five Thousand

Dollars), receipt of which is hereby acknowledged by the Insurance Commissioner.

2. The Company shall pay premium tax owed in the amount of $18,161, tax penalties

of $2,599, and tax interest of $2,663, receipt of which is hereby acknowledged by the Insurance

Commissioner.

3. This Order and the violations set forth herein constitute admissible evidence that

may be considered in any future action by the Insurance Commissioner involving the Company.

However, the facts of this Order, and any provision, finding or conclusion contained herein does

not, and is not intended to, determine any factual or legal issue or have any preclusive or collateral

estoppel effects in any lawsuit by any party other than the Insurance Commissioner.

ENTERED at Tumwater, Washington, this ___ dayof __________ ~ 2020.

MIKE KREIDLER Insurance Commissioner

By and through his designee

DANIEL JACOBS Insurance Enforcement Specialist Legal Affairs Division


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Documents

Proposed Consent Order No. 20-0269 - Wa