STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 79-1573

)

DONALD WILLIAM MACKLAND, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in the above matter before the undersigned Hearing Officer of the Division of Administrative Hearings on June 19, 1980, in West Palm Beach, Florida.

APPEARANCES

For Petitioner: Patrick F. Maroney

Tallahassee, Florida

For Respondent: Frank G. Cibula, Jr.

West Palm Beach, Florida

On or about July 5, 1979, the Florida Department of Insurance issued an Administrative Complaint against the Respondent, Donald William Mackland. It is therein alleged that the Respondent was licensed with the Department of Insurance as an insurance agent, and that he contracted with a client to provide insurance coverage through the Insurance Company of the State of Pennsylvania.

It is alleged that the Respondent received the premium payment from his client to obtain insurance, but that he did not do so, and instead misappropriated the funds to his own use. The Respondent requested a formal hearing, and the matter was forwarded to the office of the Division of Administrative Hearings on July 23, 1979. The final hearing was originally scheduled to be conducted on October 2, 1979, but was continued on that and one other occasion upon motion of the Department of Insurance. The final hearing was ultimately scheduled as set out above by Notice dated April 22, 1980.

At the final hearing, the Department of Insurance called the following witnesses: Donald Roberts, the Assistant General Manager of The Fronton in West Palm Beach, Florida; and Frank Robinson, the Commercial Property Manager for Managers of North America, Inc., which had managed the Insurance Company of the State of Pennsylvania. The Respondent testified as a witness on his own behalf. Hearing Officer's Exhibit 1, Petitioner's Exhibits 1 through 4, and Respondent's Exhibit 1 were received into evidence. The parties have submitted post-hearing legal memoranda.

FINDINGS OF FACT

1. At all times pertinent to this matter, the Respondent has been licensed by the Florida Department of Insurance as an ordinary life, including disability, agent and a general lines agent.

   
   

2. During the years 1977 and 1978, the Respondent operated an insurance agency known as Florida Commercial Underwriters.

   
   

3. During May, 1977, the Respondent was a general lines agent providing insurance coverages for The Fronton, Inc., West Palm Beach, Florida.

   
   

4. During June, 1977, The Fronton, Inc., delivered a check to the Respondent in the amount of $41,229.00 as a premium payment for various insurance coverages to be provided by the Respondent. Approximately $23,795.00 of that amount represented the premium payment for Policy No. 7485844, issued by the Insurance Company of the State of Pennsylvania. The Insurance Company of the State of Pennsylvania issued the policy to The Fronton, Inc., for the policy period from May 1, 1977, through May 1, 1978. The Insurance Company of the State of Pennsylvania had a firm policy during this period that premiums would be due within forty-five days from inception of the policy, or within fifteen days from the date of billing, whichever was later. Due to errors on its part, the Insurance Company of the State of Pennsylvania did not submit its bill to the Respondent until November 30, 1977. The notice on the face of the bill itself indicated that the premium was due within fifteen days of the date of the bill. The Respondent did not pay the premium in accordance with the bill. By notice dated January 31, 1978, the Insurance Company of the State of Pennsylvania advised The Fronton, Inc., that its policy would be cancelled effective February 17, 1978, because the premium had not been paid. Donald Roberts, the Assistant General Manager of The Fronton, Inc., immediately contacted the Respondent. The Respondent advised Roberts that the problem was apparently of a bookkeeping sort, and that the premium had been paid. Within four or five days of the time that he received the Notice of Cancellation, Roberts again contacted the Respondent and requested that the Respondent produce the cancelled check verifying that the premium had been paid. Roberts followed that telephone contact with a visit to the Respondent's office approximately forty-five minutes later. The Respondent searched for a cancelled check, but told Roberts that he would need to get it from the bank. Roberts told him to produce the cancelled check later that day. When the Respondent failed to do that, Roberts took the matter to the office of the State Attorney.

   
   

5. Despite the fact that he told Roberts that the policy had been paid, the Respondent had not paid the premium. In fact, he did not pay the premium until May 8, 1978, after he had raised some money from another source. He paid the premium by delivering the check personally to the insurance company's office in Atlanta. Apparently mindful of the fact that the Respondent was acting as its agent, and that the Respondent's receipt of the premium was thus binding upon it, the Insurance Company of the State of Pennsylvania reinstated the policy, and has acknowledged that despite its Notice of Cancellation, the policy was in full force and effect during its entire term.

   
   

6. The Respondent had suffered financial reverses during this period of time. He had apparently forgotten that the premium had not been paid between the time that he received the check from The Fronton, Inc., and the bill from the Insurance Company of the State of Pennsylvania. When he received the bill, he did not have sufficient funds available to pay it. He had in effect used the money paid by The Fronton, Inc., to cover other debts that he had.

7. Since May, 1978, the Respondent has been working as an employee with another insurance agency. His employer assisted him in paying off the obligations that the Respondent incurred in connection with his former business. It does not appear that the Respondent has had problems of this sort in his new position, and he currently teaches an insurance agent's course at a local school.

   
   

   CONCLUSIONS OF LAW

   
   

8. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. Sections 120.57(1), 120.60, Florida Statutes.

   
   

9. Florida Statutes Section 626.561 provides that insurance agents who receive premiums which belong to insurers receive such funds in a fiduciary capacity. The statute provides that an agent who diverts or appropriates such funds shall be guilty upon conviction of larceny by embezzlement. Florida Statutes Section 626.611 provides grounds for compulsory suspension or revocation of an insurance agent's license. Among these grounds are the following:

   
   

   1. For demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

   2. For demonstrated lack of reasonably adequate knowledge and technical compe tence to engage in the transactions authorized by the license or permit.

   3. Fraudulent or dishonest practices in the conduct of business under the license or permit.

   4. Misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insureds or beneficiaries or to others and received in conduct of business under the license.

      
      

      Florida Statutes Section 626.621 provides various grounds for discretionary suspension or revocation of licenses. These include:

      
      

      (2) Violation of any provision of this code or of any other law applicable to the business of insurance in the course of dealing under the license or permit.

      (6) If in the conduct of business under the license or permit he has engaged in unfair methods of competition or in unfair or deceptive acts or practices, as prohib ited under part VII of this chapter, or has otherwise shown himself to be a source of injury or loss to the public or detri mental to the public interest.

      
      

      The Respondent's conduct in failing to pay the premium submitted to him by The Fronton, Inc., to the Insurance Company of the State of Pennsylvania; his appropriation of the premium paid to him by The Fronton, Inc., for uses other

      than that to which it was intended; and his misrepresentation to the representative of The Fronton, Inc., that he had actually paid the premium when he had not, constitute violations of the foregoing statutes. It is therefore compulsory that the Department suspend or revoke the Respondent's license.

      
      

10. There are mitigating factors with respect to the penalty that should be imposed upon the Respondent. It appears that at the time that he committed the violations, the Respondent was newly engaged in business. It also appears that he was financially troubled in part because various of his clients had not paid him what they owed him. The insurance policy issued by the Insurance Company of the State of Pennsylvania was legally in force during its entire term, and the cancellation was not effective. Thus, although the Respondent misappropriated the insurance premium, The Fronton, Inc., did not thereby suffer any loss. It appears that the Respondent has, since this occurrence, honorably engaged in the insurance business. His competence to do that is verified by the fact that be is teaching courses in the field.

    
    

11. Despite these mitigating factors, it is clear that the Respondent violated his fiduciary obligations, used money that was not his to satisfy his obligations, and misrepresented to the insured that he had paid the premium. These are serious offenses, and a less than minimal penalty is justified.

RECOMMENDED ORDER

Based upon the foregoing findings of fact and conclusions of law, it is, hereby,

RECOMMENDED:

That the Department of Insurance issue a final order finding the Respondent, Donald William Mackland, guilty of the offenses charged in the Administrative Complaint issued by the Department, and suspending the license of the Respondent as an ordinary life, including disability, agent and a general lines agent for a period of six months.

RECOMMENDED this 23rd day of July, 1980, in Tallahassee, Florida.

G. STEVEN PFEIFFER Hearing Officer

Division of Administrative Hearings Department of Administration

Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 23rd day of July, 1980.

COPIES FURNISHED:

Patrick F. Maroney, Esquire Legal Division

Department of Insurance 428-A Larson Building

Tallahassee, Florida 32301

Frank G. Cibula, Jr., Esquire 1551 Forum Place

Plaza 1551, Suite 200-D

West Palm Beach, Florida 33401

The Honorable Bill Gunter Insurance Commissioner The Capitol

Tallahassee, Florida 32301

Docket for Case No: 79-001573

Orders for Case No: 79-001573