.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 82-233

)

EARL RICHARD JACOBS, )

)

Respondent. )

)

RECOMMENDED ORDER

This matter came on for hearing in St. Petersburg, Florida, before the Division of Administrative Hearings by its duly designated Hearing Officer, Robert T. Benton II, on May 27, 1982. The Division of Administrative Hearings received the hearing transcript on July 19, 1982. At hearing, the parties were represented by counsel:

APPEARANCES

For Petitioner: Susan E. Koch, Esquire

Curtis Billingsley, Esquire Franz Dorn, Esquire

428-A Larson Building Tallahassee, Florida 32301

For Respondent: William A. Patterson, Esquire

The Legal Building, Suite 208

447 Third Avenue North

St. Petersburg, Florida 33701

By administrative complaint dated December 29, 1981, petitioner alleged, in count one, that respondent had been guilty of misconduct in the sale of health insurance to Patricia A. Kruitt. Count one was abandoned at the hearing.

In count two, petitioner alleged that "on or about May 9, 1979 . . . [respondent] solicited and sold to Edward A. Dudek insurance coverage with the Founders Life Assurance Company . . . [and] represented to Edward A. Dudek that membership in the American Benevolent Society was preliminary to applying for insurance coverage with Founders Life Assurance Company . . . [even though respondent] knew or should have known that membership in the American Benevolent Society, Inc., was not a prerequisite for Edward A. Dudek to obtain insurance coverage with Founders Life Assurance Company"; that "Edward A. Dudek, acting upon [respondent's] representations . . . purchased membership in the American Benevolent Society, Inc., at . . . $10.00 per year in order to purchase insurance from the Founders Life Assurance Company"; and that respondent "stamped or imprinted, or caused to be stamped or imprinted, the words 'American Benevolent Society, Inc.' on the policies issued by the Founders Life Assurance Company to Edward A. Dudek prior to delivery to him." Also in count two, petitioner alleged that respondent "on or about July 2, 1979 . . .

sold to Josephine Evelyn Dudek a health insurance policy issued by Founders Life Assurance Company," then, "on or about April 15, 1980 . . . advised Josephine Evelyn Dudek to replace the coverage provided by Founders . . . with coverage by Union Fidelity Life Insurance Company [a change respondent] represented would be to her benefit"; that Ms. Dudek followed this advice; that respondent "answered 'no' to the question on the Union Fidelity Life Insurance Company application regarding whether the policy would replace any existing accident or health insurance policy . . . [even though he] knew or should have known that the coverage provided by Union Fidelity Life Insurance Company was replacing coverage provided by the Founders Life Assurance Company"; that respondent "failed to include Josephine Evelyn Dudek's complete medical history on both .

. . application[s] . . . [even though she] fully disclosed her medical history to [respondent] . . . at the time the applications were taken"; that "statements [respondent] made . . . with regard to the purchase of insurance were false, misleading, and deceptive"; and that "on or about May 21, 1981, the Union Fidelity Life Insurance Company refused to pay claims submitted by Josephine Evelyn Dudek, rescinded their coverage, and refunded the premiums paid by Mrs. Dudek for the reason that the application submitted by Mrs. Dudek did not contain her complete medical history," all contrary to "Sections 626.611(5), (7), (8), (9), (13); 626.621(2), (3), (6), (9); 626.9541(1)(a), (1)(e), (2),

(5)(a), (11)(a), and (15)(b), Florida Statutes."

Count three alleges that respondent "on or about August 14, 1979 . . . sold to Eleanore A. Hubble health insurance coverage with the CNA Insurance Company"; that respondent "represented the premium [$934.86] was a group rate, available only through membership in the American Benevolent Society, Inc. [even though he] knew or should have known that membership in the American Benevolent Society, Inc., did not entitle Eleanore A. Hubble to group rate premiums for the insurance purchased"; that Ms. Hubble "acting upon [respondent's] representations . . . purchased membership in the American Benevolent Society, Inc., at . . . $20.00 per year"; that respondent "knew or should have known that the insurance coverage sold to Eleanore A. Hubble was not sold at a group rate premium," and that his "statements . . . with regard to the purchase of insurance by Eleanore A. Hubble, were false, misleading and deceptive," all contrary to "Sections 626.611(5), (7), (8), (9), (13);

626.621(2), (3), (6), (9); 626.9541(1)(a), (1)(e), (2), (5)(a), (11)(a) , and

(15)(b), Florida Statutes."

Petitioner's motion to amend the complaint by adding a fourth count was withdrawn at hearing.

FINDINGS OF FACT

1. At all pertinent times respondent was licensed by petitioner as an insurance agent, Petitioner's Exhibit No. 1, and the parties so stipulated.

   
   

   COUNT TWO

   
   

2. After friends of Edward A. Dudek recommended respondent Jacobs, Mr. Dudek set up an appointment with him to discuss buying insurance, and Mr. and Mrs. Dudek met respondent at his office for that purpose on or about May 9 and 11, 1980.

   
   

3. At this meeting, Mr. Dudek purchased two supplemental hospital insurance policies underwritten by Founders Life Assurance Company of Florida, Nos. 0A0616733 and 0A0616734. Petitioner's Exhibit Nos. 2 and 3. After these purchases, respondent Jacobs offered to sell and Mr. Dudek agreed to buy a

   membership in the American Benevolent Society, Inc., in order to obtain discounts on certain goods and services. Mr. Dudek drew check No. 389 in favor of American Benevolent Society, Inc., in the amount of $10 in payment of annual dues. Petitioner's Exhibit No. 4. At the time, Mr. Dudek did not believe that joining the American Benevolent Society had anything to do with purchasing insurance.

   
   

4. When Mr. Dudek received the insurance policies, Petitioner's Exhibit Nos. 2 and 3, each was stamped "American Benevolent Society, Inc." and "LOCAL OFFICE Gulf Health Agency, Inc., 5736 Central Avenue, St. Pete., Fla. 33707."

   
   

5. Founders Life Assurance Company of Florida has never had any arrangement to market group insurance through the American Benevolent Society nor was any company employee or agent authorized to stamp insurance policies "American Benevolent Society, Inc." This stamped legend did not affect the policies' validity or terms, in the company's view.

   
   

   COUNT THREE

   
   

6. In response to Eleanore A. Hubble's telephone call, respondent Jacobs visited the real estate office where Ms. Hubble was employed, on or about August 14, 1979, and sold her two insurance policies. With respect to each (T. 28) of these policies, respondent informed Ms. Hubble that she would "get into the group rate," (T. 24) if she joined the American Benevolent Society.

   
   

7. At respondent's request, Ms. Hubble drew two checks, one in the amount of $934.86 in favor of "C.N.A." and another in the amount of $20 in favor of "A.B.S." Petitioner's Exhibit No. 7. The check in favor of CNA was in payment of insurance premiums for policies Nos. 076104103 and 076104104 underwritten by Continental Casualty Company. Petitioner's Exhibit Nos. 5 and 6. Ms. Hubble gave respondent the check she had drawn in favor of the American Benevolent Society "[t]o join so [she could] get group insurance and a bunch of coupons and junk." (T. 25.)

   
   

8. The CNA policies that respondent sold Ms. Hubble were a major hospital medical policy and a basic hospital policy. The major hospital medical policy premium was five dollars less because she joined the American Benevolent Society before she purchased the policy. There is also a five-dollar differential between annual renewal premiums for policyholders who are members of sponsoring organizations like the American Benevolent Society and annual premiums for policyholders who are not. These differentials notwithstanding, CNA's manager of individual health products testified without contradiction that the major hospital medical policy that Ms. Hubble bought from respondent was an individual product, an individual policy, "individually priced," (T. 38) and not group insurance.

   
   

9. The other CNA policy respondent sold Ms. Hubble in August of 1979 was not even arguably a group policy. Her membership in the American Benevolent Society had no bearing on the price of that policy. She saved no money on the basic hospital policy premium by joining the American Benevolent Society.

   
   

   CONCLUSIONS OF LAW

   
   

10. Petitioner "may, in its discretion . . . suspend [or] revoke . .

    . the license of any agent . . . [and his] eligibility to hold a license," Section 626.621, Florida Statutes (1981), for violating the statutes or rules or, if a life agent, the code of ethics, governing the business of insurance or

    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 prohibited under part VII of this chapter, or has other- wise shown himself to be a source of injury or loss to the public or detrimental to the public interest. Section 626.621(6), Florida Statutes (1981).

    
    

    Petitioner has no discretion, moreover, and must "suspend [or] revoke . . . the license of any agent . . . [and his] eligibility to hold a license," Section 626.611, Florida Statutes (1981), for willful violation of the Insurance Code or regulations promulgated under it or for

    
    

    (5) 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 infor- mation or advertising.

    1. For demonstrated lack of fitness

       or trustworthiness to engage in the business of insurance.

    2. For demonstrated lack of reason- ably adequate knowledge and technical com- petence 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. Section 626.611, Florida Statutes (1981)

    
    

    Among the "unfair or deceptive acts" specifically pleaded is using "any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof." Section 626.9541(1)(e), Florida Statutes (1981).

    
    

11. In a matter as grave as license revocation proceedings, the duty allegedly breached by the licensee must appear clearly from applicable statutes or rules or have a "substantial basis," Bowling v. Department of Insurance, 394 So.2d 165, 173 (Fla. 1st DCA 1981), in the evidence. Disciplinary licensing proceedings like the present case are potentially license revocation proceedings, since the penalty for the infraction alleged lies within the discretion of the disciplining authority, if allegations of misconduct are established at the hearing. Florida Real Estate Commission v. Webb, 367 So.2d

    201 (Fla. 1979). License revocation proceedings have, indeed, been said to be "'penal' in nature." State ex rel. Vining v. Florida Real Estate Commission,

    281 So.2d 487, 491 (Fla. 1973); Kozerowitz v. Florida Real Estate Commission,

    289 So.2d 391 (Fla. 1974); Bach v. Florida State Board of Dentistry, 378 So.2d 34 (Fla. 1st DCA 1979)(reh. den. 1980).

    
    

12. At the formal hearing, petitioner had the burden to show by clear and convincing evidence that respondent committed the acts alleged in the administrative complaint. Walker v. State, 322 So.2d 612 (Fla. 3d DCA 1974); Reid v. Florida Real Estate Commission, 188 So.2d 846 (Fla. 2d DCA 1966).

13. Petitioner did not meet its burden of proof to establish the violations alleged in count two of the administrative complaint. Mr. Dudek testified unequivocally that respondent did not represent to him that joining the American Benevolent Society pertained to the purchase of insurance. As for the stamping of the policies with the legend "American Benevolent Society," the evidence leaves unanswered the question of who was responsible.

    
    

14. As for count three, the evidence clearly and convincingly established that respondent misled Ms. Hubble as to the effect joining the American Benevolent Society would have on her health insurance premiums. He inaccurately characterized a purely individual policy as a group policy; and misled Ms. Hubble as to the nature of the other policy, as well. Petitioner showed that respondent violated Section 626.9541(1)(e), Florida Statutes (1981), and, therefore, Section 626.621(6), Florida Statutes (1981).

RECOMMENDATION

It is, accordingly, RECOMMENDED:

That petitioner suspend respondent's license as an insurance agent for ninety (90) days.

DONE AND ENTERED this 4th day of August, 1982, in Tallahassee, Florida.

ROBERT T. BENTON, II

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 4th day of August, 1982.

COPIES FURNISHED:

Susan E. Koch, Esquire Curtis Billingsley, Esquire Franz Dorn, Esquire Department of Insurance 428-A Larson Building

Tallahassee, Florida 32301

William A. Patterson, Esquire The Legal Building, Suite 208

449 Third Avenue North

St. Petersburg, Florida 33701

The Honorable Bill Gunter Insurance Commissioner and

Treasurer

The Capitol, Plaza Level Tallahassee, Florida 32301

Docket for Case No: 82-000233

Orders for Case No: 82-000233