The Louisiana Department of Insurance did not have the authority to issue fines and a cease-and-desist order against a Texas law firm accused of massive fraud involving hurricane damage claims, an administrative judge ruled.
Judge Cazeline G. Hebert handed down the decision on Jan. 31, concluding that the department did not have the jurisdiction under Louisiana law to issue a cease-and-desist order and $2 mn in fines against McClenny, Moseley & Associates and several of its attorneys in 2023.
Since then, MMA has admitted to sending letters to Louisiana insurers on behalf of over 800 policyholders who never retained the firm.
MMA attorneys appealed LDI’s actions, arguing that the department only has jurisdiction over entities engaged in the business of insurance, not the practice of law. Hebert agreed, ruling that LDI lacks criminal enforcement powers and must refer suspected fraud to law enforcement agencies, including the Louisiana Department of Justice and state police.
The decision stated that Louisiana law limits LDI’s authority by requiring it to refer any fraudulent act it identifies as a potential criminal violation to the appropriate law enforcement agencies for further investigation and prosecution.
Hebert rejected LDI’s argument that it had subject matter jurisdiction over all acts of insurance fraud, concluding that only law enforcement and prosecutorial agencies could investigate and enforce the alleged violations.
LDI spokesman John Ford confirmed that the department cannot appeal the ruling. “State agencies can’t appeal Division of Administrative Law rulings, so we don’t have the option to,” Ford said in an email.
The cease-and-desist order and fines were issued in 2023 by former Insurance Commissioner Jim Donelon. Current Commissioner Tim Temple expressed disappointment with the ruling, arguing that LDI had the authority to investigate and take administrative action against MMA for fraudulent activity in the insurance claims process.
Temple urged the Louisiana Department of Justice to take action against MMA for its alleged criminal activities.
The 2023 fines targeted MMA, its founding partners James McClenny and John Moseley, and Louisiana managing partner William Huye III.
They were accused of participating in unfair trade practices and insurance fraud, which affected at least 850 Louisiana homeowners and policyholders. MMA worked with Apex Roofing to represent Louisiana residents affected by hurricane damage.
LDI estimates that insurance fraud costs Louisiana residents about $4 billion annually by increasing policy costs. Temple emphasized that under his leadership, LDI’s Office of Insurance Fraud will continue investigating entities that violate the state’s insurance laws and put consumers at risk.
