STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

OFFICE OF TREASURER, )

INSURANCE COMMISSIONER, )

)

Petitioner, )

)

vs. ) CASE NO. 80-1278

)

JEFFREY ALLAN AZIS, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Sharyn L. Smith, held formal hearings in the above styled cause on February 5, 1981, in Gainesville, Florida and April 7, 1981, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Richard P. Harris, Esquire

Department of Insurance 428-A Larson Building Tallahassee, Florida 32301

and (at the David Yon, Esquire April 7, 1881 Department of Insurance hearing) 428-A Larson Building

Tallahassee, Florida 32301

For Respondent: Thomas F. Woods, Esquire

1030 East Lafayette Street, Suite 112

Tallahassee, Florida 32301

By Administrative Complaint dated June 27, 1980, as amended by Orders entered on October 28, 1980 and March 3, 1981, the Petitioner, Office of Treasurer and Insurance Commissioner, seeks to revoke, suspend or otherwise discipline the license of Jeffrey Allan Azis, Respondent as a general lines insurance and ordinary life, including disability, agent. In the six count Amended Administrative Complaint, it is alleged that Respondent or his agents or employees acting under his direction or supervision violated various provisions of Chapter 626, Florida Statutes, by including membership in a motor club with automobile insurance policies without the complaining witnesses knowledge or consent. By the acts alleged, Respondent is charged with engaging in unfair methods of competition or deceptive acts or practices; engaging in fraudulent or dishonest practices; being willfully deceptive with regard to an insurance policy; demonstrating a lack of fitness or trustworthiness to engage in business of insurance; knowingly making false or fraudulent representations respecting an application for automobile insurance for the purposes of obtaining a fee, commission or other benefit; knowingly making, disseminating, or delivering to

an insured false material statements; knowingly collecting as premium or charge for insurance a sum in excess of the applicable premium or charge, all in violation of Sections 626.611, 626.621, 626.9521 and 626.9541, Florida Statutes.

At the hearing in Gainesville, Deborah Zapp and James Rippy testified for the Petitioner and Petitioner's Exhibits 1-9 were offered and admitted into evidence. The Respondent and Andrew Beverly, an expert witness, testified for the Respondent, and Respondent's Exhibits 1-5 where offered and admitted into evidence.

At the hearing held on August 7, 1981, in Tallahassee, Florida, Petitioner's Exhibits 10-12 were offered and admitted into evidence as were Respondent's Exhibits 6 and 7. The depositions of Mr. Richard B. Divins (Petitioner's Exhibit 11) and Mr. Charles D. Smith (Petitioner's Exhibit 10) were admitted in lieu of live testimony and without waiving Respondent's right to enforce the subpoenas served on both parties for purposes of testifying at the final hearing.

Proposed findings of fact and conclusions of law were submitted by the parties. Those proposed findings not included in this Recommended Order were not considered relevant to the issues, were not supported by competent and substantial evidence or were considered immaterial to the results reached.

FINDINGS OF FACT

1. The Respondent, Jeffrey Allan Azis, is licensed by the Florida Department of Insurance as a General Lines Agent and did business as the American Automobile Insurance Agency, Inc., 603 NW 10th Avenue, Gainesville, Florida, during the period of time delineated in the Amended Administrative Complaint.

   
   

2. The Respondent transacted the sale of motor vehicle insurance and an automobile club membership to the persons identified in Counts I, II, IV and V of the Administrative Complaint. Each of the persons identified in Counts I, II, IV and V of the Amended Administrative Complaint was charged for membership in an automobile club by the Respondent or his employees.

   
   

3. With respect to Counts I through VI of the Amended Administrative Complaint, the following findings are made:

   
   

   1. Count I

      
      

      James E. Rippy, Jr., purchased automobile insurance directly from the Respondent at the American Auto Insurance Agency, Inc., Gainesville, Florida, on or about June 10, 1979. He requested the minimum coverage necessary to insure his vehicle to obtain a license tag. (Vol. 1, T-35) Mr. Rippy did not request motor club coverage and was not aware of what a motor club covered. (Vol. 1, T-

      32) Sometime after purchasing insurance from the Respondent, Mr. Rippy discovered that his coverage included membership in a motor club. (Vol. 1, T- 33-34) At the Respondent's office, Mr. Rippy and his wife Norma, signed documents which included a membership application in Nation Motor Club with a membership fee of $25.00 [Respondent Exhibit 2(1)] and an application for coverage which included the following disclosure statement also signed by Mr. Rippy in addition to the application form:

      
      

      I understand the Nation Motor Club (NMC) membership applied for this date 6/30/79,

      through the American Auto Insurance Agency, Inc. is a separate item, that pays in addition to my auto insurance policy. I understand the additional charge for this coverage is included with my down payment.

      Applicant (signed)

      
      

      Mr. Rippy was not pressured by the Respondent to sign these documents and could have taken additional time to read and ask questions if he had desired. (Vol. 1, T-49-50) write and do mathematics at a basic level.

      
      

   2. Count II

      
      

      On or about December 4, 1979, Deborah M. Zapp purchased automobile insurance from American Auto Insurance Agency, Inc. Gainesville, Florida, from an employee of the Respondent's identified as "Judy". (Vol. 1, T-17) Ms. Zapp was unclear regarding the coverage she requested from Judy, but was sure that she would not have purchased motor club membership since she regarded it as an "extra". (Vol. 1, T-18-20) While at the agency on December 4, 1979, Ms. Zapp was asked to sign various papers which she read before signing. (Vol. a, T-20) These included a membership application in Nation Motor Club (Respondent's Exhibit 1) and an application form which contained the following disclosure statement:

      
      

      I understand the Nation Motor Club membership applied for this date 12/4/79, though the American Auto Insurance Agency, Inc. is a separate item, that pays in addition to my auto insurance policy. I understand the additional charge for this coverage is included in my down payment.

      Applicant (signed) (Respondent's Exhibit 1)

      
      

      Ms. Zapp was not rushed while reading the documents presented to her for signing and could have taken as much time as she wanted to go over them. (Vol. 1, T-20) However, notwithstanding reading and signing the membership application and disclosure statement regarding the motor club, Ms. Zapp did not know she had purchased motor club coverage when she left the Respondent's office. (Vol. 1,

      T-21) Ms. Zapp is a graduate of Sante Fe Community College and attended a university for one year following her graduation. (Vol. 1, T-16) At the hearing on February 5, 1981, she appeared bright and fairly assertive.

      
      

   3. Count III

      
      

      In Count III, Petitioner alleges that the Respondent in the conduct of business under his license violated various provisions of the Insurance Code. The allegations of Count III requires an application of the facts found in Counts I and II to Sections 626.9521, 626.9541(11)(a), 626.9541(5)(a), 626.9541(15)(b), and 626.621(b), Florida Statutes. Count III is duplicated by Count VI and calls for legal conclusions which will be discussed in the conclusions of law section of this Recommended Order.

      
      

   4. Count IV

      
      

      The deposition of Charles D. Smith was admitted into evidence as Petitioner's Exhibit 10. Mr. Smith currently holds an insurance license and has

      a bachelor's degree. (Petitioner's Exhibit 10 at 4) Mr. Smith purchased automobile insurance from the American Auto Insurance Agency, Inc. on or about May 1, 1980 (Petitioner's Exhibit 10 at Appendix) Mr. Smith thought he was purchasing only Personal Injury Protection (PIP). (Petitioner's Exhibit 10 at

      4) In order to get an auto tag, Mr. Smith requested the minimum coverage. (Petitioner's Exhibit 10 at 5) Like Mr. Rippy and Ms. Zapp, Mr. Smith signed an application for motor club membership and disclosure statement stating he understood he was purchasing motor club coverage at the time of his application for insurance. (Petitioner's Exhibit 10 at 7) Mr. Smith intended to purchase the minimum amount of insurance at the lowest price but did not require of either the Respondent or his employees whether motor club coverage was included in the price quoted. (Petitioner's Exhibit 10 at 8,9) Neither the Respondent nor his employees orally explained motor club coverage to Mr. Smith. At the bottom of Mr. Smith's insurance application the following disclosure statement was signed by him:

      
      

      I understand the interstate membership applied for this date 5/1/79, through the American Auto Insurance Agency, Inc. is a separate item that pays in addition to my auto insurance policy. I understand the additional charge for this coverage is included in my down payment.

      Applicant (signed) (Petitioner's Exhibit 10 at Appendix)

      
      

      Mr. Smith's decision to purchase from the Respondent was based solely on cost and not on any information provided by the Respondent or his employees. (Petitioner's Exhibit 10 at 13).

      
      

   5. Count V

      
      

      The deposition of Richard B. Divins was admitted into evidence as Petitioner's Exhibit 11. Mr. Divins' testimony parallels the other witnesses in that he also signed an application for motor club membership and a disclosure statement acknowledging the purchase and price. (Petitioner's Exhibit 11 at 11, 15, 16, 26) He purchased insurance and motor club coverage on July 13, 1979, from an employee of the Respondent at American Auto Insurance Agency, Inc., 603 NW 10th Avenue, Gainesville, Florida. (Petitioner's Exhibit 11 at 4,5) Mr.

      Divins thought he was purchasing only minimum liability insurance and was unaware that he had also purchased motor club coverage. (Petitioner's Exhibit

      11 at 7,8) Mr. Divins is a senior in the School of Architecture at the University of Florida. (Petitioner's Exhibit 11 at 4.

      
      

   6. Count VI

      
      

      In Count VI, Petitioner alleges that the Respondent in the conduct of business under his license violated various provisions of the Insurance Code. Count VI requires an application of the facts found in Counts IV and V to Sections 626.9521, 626.9541 (11)(a), 626.9541(5)(a), 626.9541(15)(b) and

      626.621(b), Florida Statutes. Count VI duplicates Count III and calls for legal conclusions and will therefore, be discussed in the legal conclusion section of this Recommended Order.

      
      

4. Assuming that the witnesses who testified at the final hearing were representative of the Respondent's customers, his business was generally

   directed at persons who desired minimum automobile insurance coverage at the lowest possible price. (Vol. 1, T-17 and 31, Petitioner's Exhibit 11 at 7-8,

   Petitioner's Exhibit 10 at 8,9)

   
   

5. An economic incentive existed to sell motor club memberships among agents whose customers desired minimum coverage due to the high commission rates associated with motor club policies. (Petitioner's Exhibit 9, Vol. 1, T-94-95, 97)

   
   

6. Mr. Andrew Beverly was qualified as an expert witness on insurance matters and testified on behalf of the Respondent. (Vol. 1, T-29) Mr. Beverly owns the Florida Insurance School, serves as a consultant for several hundred insurance agencies and is a member of the Advisory Committee on Insurance Education of the Florida Insurance Department. (Vol. 1, T-78-79) A study by Mr. Beverly completed in 1979 for the Professional Insurance Agents Association of Florida demonstrated that insurance agents have been contacted by claimants or attorneys for claimants for failure to provide coverage or what is known in the industry as "errors and omissions." (Vol. 1, T-81-82) The Respondent is the first agent that Mr. Beverly has ever encountered who had difficulties arising from selling too much coverage. (Vol. 1, T-82-83) Mr. Beverly's conclusion concerning the value of motor club coverage and supplemental coverage generally is shared by Dr. Ronald T. Anderson, a colleague of Mr. Beverly's on the national faculty of the Society of Certified Insurance Counselors and an Insurance Commissioner of Colorado. (Vol. 1, T-83-85) In particular regard to this case, Mr. Beverly examined the application and disclosure statement signed by the witnesses for the Petitioner and responded to questions from counsel as follows:

   
   

   Q. Now, these documents -- if you would just take a look through those, you'll see in Respondent's Exhibits 3 and 4, I believe --

   Respondent's Exhibit 1, for example, where in boldface type, the applicant for the insurance signs a statement regarding Motor Club. is that a common practice in the industry?

   
   

   A. It's a practice that is becoming extremely common with the careful and appropriate insurance agents to have a thorough documentation of each coverage, accepted or rejected by an injured.

   
   

   Q. And why is that?

   
   

   A. Partially because of the high incidents (sic) of Errors and Omissions insurance, claims coming in against insurance agents, and then partly so that the client himself will be completely aware of what it is that he's throwing away when he rejects a coverage so he'll know he hasn't bought that.

   
   

   Q. Does the type of procedure meet the standards of the industry in Florida for fire and casualty agents?

   A. It exceeds them.

   
   

   Q. Okay. What else, in your opinion, could Mr. Azis do in this type of situation other than have him sign the statements and advise him as he has testified to.

   
   

   A. Mr. Woods, there's nothing an insurance agent could possibly do, in my opinion, beyond explaining the coverage to the insured and then having him sign in his own handwriting. I can't believe that there is anything else that he could do. He's being as cautious as he possibly can.

   
   

   Q. You're not aware of any other practices or procedures that might even be better than this?

   
   

   A. I can't think of anything that you could do that could add to this great amount of documentation of the insurers election of what they purchased.

   
   

   Q. In your experience, is it common for people who have bought insurance to come back and question coverages?

   
   

   A. Yes, sir, it happens all the time. I have more than a hundred insurance agencies under contract at this hour, and I am constantly receiving long distance calls from agents:

   What do you do with this?

   What's the answer to it?

   
   

   Q. So, that's why they require the need for this documentation?

   
   

   A. Yes, sir. (Vol. 1, T-85-87)

   
   

7. Mr. Beverly's testimony was not rebutted by the Petitioner and is accepted as credible.

   
   

8. Although Respondent's license as a general lines agent in Florida expired as of August 30, 1980, he retains eligibility to become licensed for a period of two years from the date of licensure. Section 626.221(3)(f), Florida Statutes. (Petitioner's Exhibit 8)

   
   

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of these proceedings.

   
   

10. Respondent is charged with violating Sections 626.611(4), (5), (7), (9) and (13); 626.621(2), (3) and (6); 626.9521; and 626.9541(5)(a), (11)(a) and (15)(b), Florida Statutes.

11. Section 626.611, Florida Statutes, provides grounds upon which the Department of Insurance shall revoke the license of any agent and provides the Department shall suspend the eligibility of any such person to hold a license or permit if it finds as to the license any one or more of the following grounds exist:

    
    

    1. If the license or permit is willfully used, or to be used, to circumvent any of

       the requirements or prohibitions of this code.

    2. Willful misrepresentation of any in- surance policy or annuity contract or willful deception with regard to any such policy or by form of dissemination of information or advertising.

    (7) For demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

    (9) Fraudulent or dishonest practices in the conduct of business under the license or permit.

    (13) Willful failure to comply with, or willful violation of, any proper order, rule, or regulation of the department or willful

    violation of any provisions of this code.

    
    

12. Section 626.621 provides, inter alia, the following grounds for discretionary revocation of license:

    
    

    1. 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.

    2. Violation of any lawful order or rule or regulation of the department.

    (6) Engaged in unfair methods of competition or in unfair or deceptive acts or practices

    as prohibited under Part VII of Chapter 626, Florida Statutes, or have shown yourself to be a source of injury or loss to the public or detrimental to the public interest.

    
    

13. Section 626.9521, Florida Statutes, provides the department may impose a monetary penalty on any person subject to the department's jurisdiction who has engaged in unfair or deceptive acts or practices enumerated in Section 626.9541, which include:

    
    

    (5)(a) Knowingly making or causing to be made, any false material statement.

    (11)(a) Knowingly making false or fraudulent statements or representation on, or relative to, an application for an insurance policy for the purpose of obtaining a fee, commission, money or other benefit from any insurer, agent, broker or individual.

    (15)(b) Knowingly collecting as a premium or charge for insurance any sum in excess of... the premium or charge applicable to such insurance...

14. Essentially, the Department has alleged that the Respondent, by his procedures for the sale of motor club memberships to customers and without the customer knowing he had purchased a motor club membership with a separate charge imposed for such membership, violated the above-quoted statutory provisions.

    The facts do not demonstrate that the Respondent misrepresented coverage, only that he failed to orally explain the coverage to each of the complaining witnesses in addition to having them sign a motor club membership application and disclosure statement. In effect, the Respondent is charged with misleading, misinforming and coercing his customers through his silence at the time of their purchase of motor club coverage.

    
    

15. The Department argues that the Respondent had a duty to orally disclose motor club coverage in addition to any written statements because the customers were in a fiduciary relationship with the Respondent and the witnesses relied on the Respondent's expertise to provide them with the coverage they requested. Therefore, assuming that the Respondent had a duty to disclose motor club coverage to the complaining witnesses, the issue presented is whether his procedure of requiring that the insured sign a membership application and disclosure statement are legally sufficient to meet his duty to his customers.

    
    

16. Under the facts developed in this case, the conclusion which must be reached is that they were. The Respondent did not pressure customers to sign the application or disclosure statement; they were given as much time as they desired to read the material and ask questions. The disclosure statement was simple and straightforward and would have alerted persons of average intelligence and abilities that they were purchasing motor club coverage. See Section 626.9641(1)(f), Florida Statutes, mandating that policyholders be furnished a "readable policy." No evidence was presented that the Respondent had a "bonus" policy for employees to encourage their writing of motor club coverage or refused to sell personal injury protection without motor club coverage. In this respect, the facts as established in the instant case differ in material respects from those found in Office of Treasurer and Insurance Commissioner v. Harry Joseph Finn, DOAH Case No. 80-1291, in which a general lines agent's license was revoked for the policies and procedure utilized in selling motor club coverage to customers. Additionally, unlike the situation in Finn, supra, the uncontradicted expert testimony in this case was that the Respondent's procedures for selling motor club coverage met or exceeded industry standards.

    
    

17. Thus, the Department has failed to carry its burden through a record foundation of competent substantial evidence that the Respondent violated Sections 626.611(4), (5), (7), (9) and (13); 626.621(2), (3) and (6); 626.9521; and 626.9541(5)(a),(11)(a), (15)(b). See Bowling v. Department of Insurance, 394 So.2d 165 (1st DCA 1981).

RECOMMENDATION

It is therefore RECOMMENDED that the Amended Administrative Complaint filed against the licensee, Jeffrey Allan Azis, be dismissed.

DONE AND ORDERED in Tallahassee, Leon County, Florida, this 3rd day of June, 1981.

SHARYN L. SMITH

Hearing Officer

Division of Administrative Hearings Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 3rd day of June, 1981.

COPIES FURNISHED:

Richard P. Harris, Esquire Department of Insurance 428-A Larson Building Tallahassee, Florida 32301

David Yon, Esquire Department of Insurance 428-A Larson Building Tallahassee, Florida 32301

Thomas F. Woods, Esquire 1030 East Lafayette Street Suite 112

Tallahassee, Florida 32301

=================================================================

AGENCY FINAL ORDER

=================================================================

OFFICE OF THE TREASURER DEPARTMENT OF INSURANCE

IN THE MATTER OF JEFFREY ALLAN AZIS

Revocation of License and CASE NO. 80-1278 Eligibility for Licensure

General Lines Insurance Agent

/

FINAL ORDER

This cause came before the undersigned Insurance Commissioner and Treasurer for consideration and final agency action after an administrative proceeding designated Case No. 80-1278 was conducted before the Division of Administrative Hearings, Department of Administration and a Recommended Order was rendered by the Hearing Officer.

After a review of the entire record including a consideration of the Recommended Order, attached hereto and hereby made a part of this Order and the record of the proceedings it is therefore:

ORDERED:

1. That the Findings of Fact of the Hearing Officer are hereby adopted.

   
   

2. The Conclusion of Law of the Hearing Officer that the Department has failed to carry its burden through a record foundation of competent substantial evidence that the Respondent violated Sections 626.611(4), (5), (7), (9), and (13); 626.621(2), (3), and (6); 626.9521; and 626.9541(5)(a), (11)(a) is hereby adopted. All other Conclusions of Law of the Hearing Officer are rejected.

   
   

3. That the Amended Administrative Complaint filed against the licensee, Jeffrey Allan Azis, be dismissed.

DONE AND ENTERED this 23rd day of June, 1981, in Tallahassee, Florida.

BILL GUNTER

Insurance Commissioner and Treasurer

ALLAN J. KATZ, Assistant Insurance Commissioner and Treasurer

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the Final Order has been furnished by US Mail this 23rd day of June, 1981, to Thomas F. Woods, Esquire, 1030 Lafayette Street, Tallahassee, Florida 32301.

RICHARD P. HARRIS

Attorney

Department of Insurance 428-A Larson Building Tallahassee, Florida 32301

(904) 488-4540

Docket for Case No: 80-001278

Orders for Case No: 80-001278