Utah Lt. Gov.

It’s important to note that this was just a very initial step in the investigation and decisions process.

Following our initial story on Wednesday, we reached out to Utah Gov. Gary Herbert’s office yesterday to try to get some clarification on why the Utah Insurance Department has banned Zenefits from operating in this state. As a result of our efforts, Lt. Gov. Spencer Cox conducted a conference call with reporters this afternoon to clarify the state’s position.

“I’m anxious on this topic,” said Cox.

That’s understandable, especially considering the outrage expressed by Utah’s tech community this week after they first learned of the insurance commission’s decision.

As we reported on Wednesday, as a result of the Utah Insurance Department’s letter to the company, dated Nov. 20, Zenefits has stopped taking new Utah customers. Yet, Gov. Herbert’s spokesman, Marty Carpenter, told KUER that “there is no reason for the company to stop operating in the state as no official action has been taken against them.”

In an attempt to clear up some confusion, I asked Cox why Zenefits believes one thing and the Governor’s office believes another.

“This is really a procedural issue,” said Cox. “As we met with the commissioner and talked about the process, it’s important to note that this was just a very initial step in the investigation and decisions process. And I think there was a little bit of a miscommunication there. There’s an opportunity for due process to play out, an opportunity for Zenefits to respond, an opportunity for the company to file an appeal, and there has been no cease and desist action taken against Zenefits. I think that’s very important.”

Cox continued, “This is not a final decision, this is really an initial step in the process. I think there was some misunderstanding by Zenefits and their counsel. We have been assured, and I actually asked the commissioner to reach out to Zenefits yesterday to assure them that no cease and desist letter has been issued and there’s nothing preventing them from — at this stage — from continuing until the process plays out.”

Zenefits is claiming that the letter Insurance Commissioner Todd Kiser sent to the company, however, contradicts Cox’s statement that the HR software startup is free to operate in Utah until this process plays out. Kiser’s letter explicitly states that, “Zenefits will immediately discontinue advertising that its electronic platform is free.”

Yet, when I asked Cox if Zenefits is free to conduct business in the same manner in which they do in every other state, Cox said, “That is correct. This is not a final decision.”

The confusion may also lie in the fact that Zenefits believes it can legally operate in Utah under the current law, whereas the Utah Insurance Commission believes the company is currently in violation of the law.

In a statement published on Beehive Startups yesterday, Zenefits CEO Parker Conrad said, “The fact remains that Zenefits is legal under existing Utah law. Utah’s Insurance Commissioner is stretching the law to ban Zenefits in Utah in order to protect incumbent insurance brokers from online competition.”

When asked whether he believes Zenefits is not in violation of Utah’s insurance regulations and whether the Governor’s office disagrees with its own Insurance Commissioner, Cox said, “That’s not what I’m saying. What I’m saying is there is a process, and that that process matters. Think of a legal court process. There’s now an opportunity for [Zenefits] to respond — and I’d also like to add that this process is a lengthy process. There is an opportunity for the insurance commission to change their decision once they receive additional information from Zenefits. Nothing has been decided.”

So, here’s where we stand right now: Zenefits believes its not allowed to operate in Utah because they received a letter from the Utah Insurance Department explicitly telling them to immediately stop conducting business the way they normally do, and Gov. Herbert’s office is telling us that Zenefits can absolutely continue to operate in Utah as this process continues to play out.

We’ll have more details as this story develops.

Published 12/5/2014

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