vs. ) CASE NO. 78-1075
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on 21 September 1978 at Rockledge, Florida.
For Petitioner: Patrick F. Maroney, Esquire
For Respondent: Andrew A. Graham, Esquire
By Administrative Complaint dated June 2, 1978, the State of Florida, Commissioner of Insurance, Petitioner, seeks to revoke, suspend or otherwise discipline the license of Charles Lee Armstrong, a/k/a Jack Armstrong, Respondent, and Respondent's eligibility for future licenses. As grounds therefor it is alleged that on or about January 20, 1977 Respondent collected a premium from Luigi Sesti for an insurance policy which was never issued, that he made various misrepresentations regarding this policy, that when Sesti subsequently sustained a loss, Respondent made additional false representations to Sesti and attempted personally to settle the claim for less than the loss sustained; that on or about November 5, 1975 Respondent collected a premium from Roseland S. Wood as renewal for mobile home policy which was not renewed when due and Wood was left without insurance for some eight months. That Respondent on or about 28 October 1976 collected an additional premium for extra coverage from Wood which was never forwarded to the underwriter and which premium was incorrect for the coverage requested, and that Respondent failed to advise Wood of the factual situation that existed, leaving Wood to believe she had received all coverage requested; and that Respondent failed to have his place of business open, occupied and accessible to the public during business hours. As a result of the allegations made in the administrative complaint Respondent is charged with violating Sections 626.561, 626.611, 626.621, 626.731(3) and 626.9541 Florida Statutes.
At the hearing Respondent admitted that he had received a check from Mrs.
Wood in the amount of $145 for a mobile home policy which was not issued for some eight months and that Wood was without coverage during that period, that he advised Wood that the cost of additional coverage would be $326, that Wood suffered a loss on July 15, 1977 and was advised by the insurance company of the policy under which she was covered.
Thereafter, 6 witnesses were called by Petitioner, 2 witnesses including Respondent were called by Respondent, one rebuttal witness was called by Petitioner and 18 Exhibits were admitted into evidence.
Charles Lee Armstrong, a/k/a Jack Armstrong, (hereinafter referred to as Petitioner or Armstrong) is licensed by the Florida Insurance Department as a general lines agent to represent Foremost Insurance Company and Fortune Insurance Company (Exhibit 1). Prior to 1976 Armstrong was an Aetna agent.
From February 10, 1968 through February 10, 1977 Luigi Sesti carried homeowners policy with Aetna with Armstrong Agency. Armstrong's designation as an Aetna agent was terminated by Aetna termination notice (Exhibit 8) dated August 21, 1975 for low volume of business. The company practice is to terminate the agency relationship ninety days after notice of termination. Thereafter Respondent continued as a limited company agent for one year, during which he was authorized to renew Aetna policies. (Exhibit 7). After that one year extension, Respondent had no agency relationship with Aetna and, to renew an Aetna policy, he would have to have an Aetna agent process the renewal.
Luigi Sesti had dealt with Armstrong as Sesti's Insurance agent since 1968 and had maintained an Aetna home-owner's policy which had last been renewed through Armstrong for the year ending February 10, 1977.
Upon receipt of notice from Armstrong that his policy would expire February 10, 1977, Sesti sent Armstrong his check in the amount of $165 (Exhibit
3) for renewal of his policy. Although Armstrong was no longer authorized to renew Aetna policies, he deposited Sesti's check but thereafter failed to provide Sesti with insurance coverage on his house or contents.
Armstrong advised Aetna that Sesti's policy had been replaced with an Eastern insurance policy, and Aetna failed to notify Sesti that the Aetna policy was not renewed.
In August 1977 Sesti's home was burglarized. He lost a television set, radio, watch, spotlight and a ring, and Sesti contacted Armstrong to report the loss. Armstrong visited the home and suggested Sesti submit no formal claim because to do so would make it difficult for Sesti to renew his insurance. In his own explanation, Armstrong testified that he intended to pay Sesti for his loss but Sesti could never establish the value of the ring or establish a price for which he would settle. Armstrong offered Sesti $250 to settle the claim.
During the discussions between Armstrong and Mrs. Sesti, Armstrong said he had authority to settle claims for Aetna up to $500 and that he was an attorney. Neither of these statements was true.
When Armstrong was unable to agree on the amount of the claim, Mrs. Sesti contacted Aetna and learned that the policy on her her had expired 10 February 1977 and had not been renewed.
Because no valid policy had been issued to Sesti, Aetna initially denied liability. When advised by Sesti that Aetna would not pay their claim, Armstrong returned the premium he had received from Sesti for the policy not renewed in one check for $155 dated 9/7/77 and in another check for $10 dated 11/23/77 (Exhibit 5) which Sesti received with a letter from the Insurance Commissioner's office dated November 29, 1978 (Exhibit 14).
After further investigation by Aetna revealed the facts as noted above, Aetna issued a policy (Exhibit 15) which effectively renewed Sesti's homeowners policy for one year from February 10, 1977. They deducted the premium and the $100 deductible from the amount they paid Sesti for the loss sustained. Aetna's Regional Manager testified that Aetna paid for the loss because Sesti had been insured by them for several years and they felt a moral obligation for their former agent's failure to provide coverage and for their failure to notify Sesti he was no longer insured by Aetna. Aetna allowed Sesti approximately $450 for the loss of the ring and approximately $350 for the other things stolen.
Roseland S. Wood had insured her mobile home with Foremost Insurance Company since 1953, and with Jack Armstrong as Agent since 1964. Policy No. 101-8498757 covered the period 11/3/74 to 11/3/75 (Exhibit 13). By check dated November 5, 1975 made payable to Armstrong (Exhibit 9) Wood forwarded the premium for renewal of this policy. Unbeknownst to Wood the policy was not renewed until July 28, 1976 by policy No. 8498643 (Exhibit 12). This is the policy that Armstrong forwarded to Foremost.
Armstrong was in Europe on vacation when this policy was issued by the woman he had hired to keep his office open during his vacation and he professed no knowledge of why the policy was issued at this particular time.
In October 1976 Wood wanted additional coverage and Armstrong came out to assist in providing the additional coverage. After discussing increasing personal property coverage, plus garage and contents and boats, Respondent advised Wood that the additional coverage would cost $326. Wood gave Respondent a check that day (Exhibit 10).
Thereafter Armstrong issued policy No. 8498518 (Exhibit 11) for the period 10/28/76 to 10/28/77 but the personal property coverage was less than Wood had asked for and the garage and contents were not included. Neither Exhibit 11 nor the premium for this coverage was ever received by Foremost from Armstrong. They became aware of Exhibit 11 after Wood suffered a burglary in July 1977 and came to the Foremost office to file a claim. The costs of coverage on Exhibit 11 are not correct and had this policy been received by Foremost it would have been rejected by the computer due to inaccurate premium charges, the inclusion of boats on this policy and incorrect comprehensive liability coverage.
By failing to renew Wood's coverage in November 1975, Respondent left Wood without coverage until Exhibit 12 was issued providing coverage from 7/28/76. This renewal was written by Armstrong Agency, who had authority from Foremost to write this renewal. As noted above, this policy was written while Armstrong was on vacation. The $145 premium paid by Wood for the renewal of the policy was not remitted to Foremost until after July 28, 1976. At the time of Wood's loss in July 1977 she was covered by this policy.
When the existence of the above facts regarding the two policies and dates they were issued to Wood were uncovered, Armstrong refunded to Wood $181 of the $326 premium he collected, Foremost refunded the additional $145 of this premium to Wood, and Wood's claim was settled by Foremost to Wood's satisfaction. Foremost has a claim against Armstrong for this $145 Foremost refunded to Wood.
Respondent acknowledged writing Exhibit 11 and assumed that it was mailed to Foremost. He does not remit payment to the company until he is billed. Foremost sends a monthly statement to each agent showing policy numbers received. The agent can readily check this list against the policies he has issued to ascertain if a policy was not received by the company. The company also maintains a policy register where policy numbers are recorded. A copy of this is sent to their agents to check against policies the agents have issued. Failure of the agencies to submit policies in sequential numbers will be picked up on the computer, but only after quite a few numbers have been skipped. There was insufficient volume from Armstrong's agency to trigger this information from the computer.
With respect to Charge III, failure to keep office open and accessible to the public during office hours, an insurance investigator visited the office on some six occasions in December 1977 and February and March 1978. At these visits the office was open but neither Armstrong nor a secretary was present. A lady working in an office down the hall from Respondent's office came to the office when the inspector arrived and offered to contact Armstrong. Several telephone calls made to Armstrong's office during March 1978 resulted in the phone being answered by an answering service. Respondent has operated a one-man office for many years and has an answering service cover all calls while he is out of the office. He wears a radio pager and claims his answering service can always contact him.
The lady who covers office visits for Respondent during his absence from the office has had several years experience working in a general insurance agency. She fills out applications for clients coming into the office, gives receipts for payments, signs Armstrong's name to applications and other documents; and has done so for 4 or 5 years. She is not on any type of regular salary or otherwise employed by Armstrong.
Respondent has been a licensed insurance agent since 1961 and Respondent's testimony was unrebutted. This is the first complaint filed against him in his capacity as a licensed insurance agent.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this hearing.
Grounds for compulsory suspension or revocation of an insurance license are contained in Section 626.611 Florida Statutes which provides for such action upon a finding
that any of the following grounds exists:
Lack of one or more of the qualifications for license or permit as specified in this code.
Willful misrepresentation of any insurance policy or annuity contract or willful
deception with regard to any such policy or contract, done either in person or by any form of dissemination of information or advertising.
If, as an adjuster or claims investigator or agent permitted to adjust claims under this code, he has materially misrepresented to an insured or other interested party the terms and coverage of an insurance contract with intent and for the purpose of effecting the settlement of claim for loss or damage or benefit under the contract on less favorable terms than those provided in and contemplated by the contract.
For demonstrated lack of fitness or trust worthiness to engage in the business of insurance.
(10) Misappropriation, conversion or unlawful withholding of monies belonging to insurers or insureds or beneficiaries or to others and received in conduct of business under the license.
(13) Willful failure to comply with, or willful violation of, any proper order, rule or regulation of the Department, or willful violation of any provision of this Code.
Section 626.621 Florida Statutes provides for discretionary revocation or suspension of license for similar grounds as those above.
Section 626.561 Florida Statutes relates to reporting and accounting for funds and provides in pertinent part:
All premiums . . . received by an agent
. . . in transactions under his license shall be trust funds so received by the licensee in a fiduciary capacity, and the licensee in the applicable regular course of business shall account for and pay the same to the insurer, insured or other persons entitled thereto.
Section 626.731 Florida Statutes establishes qualifications for the issuance of a license to a general lines agent and one of these qualifications is:
(3) That his place of business will be located in this state and he will be actively engaged in the business of insurance, and will maintain a place of business accessible to the public.
Further, Section 626.9541 Florida Statutes provides, inter alia, the following acts constitute unfair or deceptive trade practices which Section 626.9521 Florida Statutes prohibits: knowingly filing or delivering false statements; attempting to settle claims by misrepresenting pertinent facts or policy provisions relation to coverages; making false representations relative to an application for the purpose of obtaining a fee; knowingly collecting a fee for an insurance policy not then provided; or representing any insurer or
collecting or doing business without the authority of the insurer or failing to turn over when required all collections of such insurer.
Respondent's contention that the failure to renew the policy of Sesti was simply an inadvertent mistake or error, even if true, is neither justification nor valid excuse for such failure. People pay for insurance to protect themselves against losses they cannot otherwise afford. Failure to provide coverage to one who has remitted the premium and believes himself protected from the loss he cannot otherwise afford has such severe consequences that inadvertence or inattention cannot be tolerated.
Here Respondent knew he could not renew Sesti's policy with Aetna when he notified Sesti his policy was due for renewal, yet he apparently took no steps to provide coverage for Sesti. His testimony that he contacted another Aetna agent to rewrite the policy is not credible. Such a request should have been in writing and evidence of such writing could have been presented by Respondent if it existed. Even if Respondent had contacted the other agent and had been advised that Sesti's policy could not be renewed, failure to provide other coverage for Sesti or at least notify Sesti he was without coverage was totally inexcusable and constitutes gross negligence in servicing insureds.
Furthermore, Respondent's actions when Sesti reported the loss from the burglary were those of a man who knows he has committed the unpardonable sin but still tries to evade responsibility for his wrongful conduct. Mr. and Mrs. Sesti are elderly people who appeared to be upwards of 70 years old. Whether true or not, it is generally assumed that old people are more easily deceived than are younger people and they have more need to be able safely to rely upon the representation of their insurance agents. Here Respondent had been the agent for Sesti for approximately 10 years and therefore would have greater expectation of them believing the representations he made to them regarding the policy. Nevertheless he failed to tell them he had not renewed their policy, attempted to dissuade them from filing a claim, and made false representations to induce them to settle for less than their full loss.
With respect to Wood, this insured had also been a client of Respondent for many years. No reason for failure to renew this policy was given. Respondent testified he thought he had renewed the policy, but such testimony is hardly credible. The evidence was uncontradicted that Wood did the renewal premium to Respondent but the renewal policy was not issued until some eight months later.
From Respondent's testimony that he did not renew the policy and was in Europe on the date the policy was renewed, it can only be concluded that the woman he employed to run the office during his vacation had discovered the omission to renew Wood's policy, wrote the renewal and sent it in to the company without sending a copy to Wood. But for this renewal, Wood would have been uninsured when the burglary occurred.
Respondent failed to provide any satisfactory reason for his failure to forward to the insurer a copy of the increased coverage policy prepared for Wood in October 1976. Had he done so, the errors in the policy would have been picked up and Respondent would have received a statement from the insurer showing what the correct premium was and the amount owed to the insurer. More importantly, Wood would have received the coverage for which Respondent had been paid. Here, too, the evidence was uncontradicted that Wood paid the premiums to Respondent and Respondent never remitted this payment to the insurer.
Respondent's testimony that he forgot to send the policy to the company or that he thought he had forwarded this policy to the insurer is unworthy of belief. To believe that leads only to the conclusion that Respondent was so negligent in the running of his office that all insureds serviced by him ware in danger of being without coverage. Almost any type of accounting would have disclosed the amended policy had not been fowarded to the insurer. The only rational explanation is that Armstrong deliberately and intentionally failed to send either the policy he had written or the premium he had collected to the insurer.
Wood had a copy of the policy for which he had paid an additional $386 premium and the company had a copy of the policy for which Wood had paid $145. The only one holding both policies was Respondent. But for the burglary at Wood's residence which led to Wood filing a claim under a policy of which the company was unaware, Respondent would have been able to retain the full premium of $386 paid by Wood and no one would have been the wiser.
With respect to Count III, the evidence was uncontradicted that Respondent's office was open every working day. It was also uncontradicted that Respondent was out of the office a large part of each working day and no full- time employee was present at the office while Armstrong was out selling insurance or servicing clients. However, the person working in another office in the building who came to Respondent's office when anyone appeared and who was able to contact Respondent immediately served to make the office available to the public. Telephone calls were answered during Respondent's absence by an answering service who was also able to contact Respondent at all hours through his beeper radio. The statute requires the agent's place of business to be available to the public. That statutory requirement was here met.
From the foregoing it is concluded that Respondent is guilty of Counts I and II as alleged, and that he is not guilty of Count III. It is further concluded that these violations are extremely serious violations of the fiduciary duties owed by an insurance agent and as such that they raise serious doubts that Respondent can continue to act as a licensed insurance agent without serious danger to the public. However, it is further recognized that Respondent has been a licensed insurance agent for some 17 years without apparent problems or charges against him. It is therefore
RECOMMENDED that the license of Charles Lee Armstrong, d/b/a Jack Armstrong, be revoked. It is further
RECOMMENDED that the revocation be stayed for a period of 3 years, at the expiration of which, unless the stay is sooner vacated for good cause shown, the revocation be sat aside and Respondent restored to good standing.
DONE AND ENTERED this 24th day of October, 1978.
K. N. AYERS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301
Patrick F. Maroney, Esquire Division of Insurance
Andrew A. Graham, Esquire 1970 Michigan Avenue, Suite E Cocoa, Florida 32922
