STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

STATE OF FLORIDA, DEPARTMENT ) OF INSURANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 82-2047

)

RICHARD ALAN WHEELER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause came on for final hearing before Marvin E. Chavis, duly designated Hearing Officer of the Division of Administrative Hearings, in Orlando, Florida, on December 17, 1982.

APPEARANCES

For Petitioner: David A. Yon, Esquire

Legal Division Department of Insurance 413-B Larson Building

Tallahassee, Florida 32301

For Respondent: Paul H. Bowen, Esquire

Swann & Haddock, P.A. Post Office Box 7838 Orlando, Florida 32854

In response to the Administrative Complaint filed herein, the Respondent, Richard Alan Wheeler, filed his request for a formal hearing dated July 19, 1982. The Administrative Complaint alleged that the Respondent, while licensed as an insurance agent, replaced insurance policies currently in force for Gary and Darlene Davis and their family, and for James B. and Ruby L. Clinton of Orlando, Florida, and their family with policies issued by ITT Life Insurance Company. The Administrative Complaint further alleges that the Respondent failed to complete the proper replacement forms as required by Rule 4-24, Florida Administrative Code, and that the Respondent also made certain deceptive, misleading or untrue representations during the course of the replacement of the above-referenced policies.

During the course of the hearing, the Petitioner called five witnesses: James B. Clinton, Lawrence K. Taylor, Ruby Clinton, Louis Cerulli and Darlene Davis. The Respondent testified on his own behalf and also called as a witness Scott Stertzbach. Petitioner offered into evidence 12 exhibits. Exhibits 1 through 6 and 8 through 12 were accepted into evidence, and, during the course of the hearing, Exhibit 7 was withdrawn by the Petitioner. The Respondent had marked for identification two exhibits. Exhibit 1 for the Respondent was accepted into evidence, and Exhibit 2 was not.

Counsel for both Petitioner and Respondent have submitted proposed findings of fact for consideration by the Hearing Officer. To the extent that such findings of fact are not adopted in this Recommended Order, they have been rejected as being irrelevant to the issues in this cause, or as not having been supported by the evidence.

FINDINGS OF FACT

1. The Respondent is, and at all times material to the allegations in the Administrative Complaint, was a licensed ordinary life insurance salesman in the State of Florida. He first became licensed in 1977, and went to work initially for Occidental Life Insurance Company in Orlando, Florida. After approximately three to four weeks with Occidental Life, he went to work for Lincoln National Life and was transferred to St. Petersburg, where he worked for about three or four months selling health insurance and some life insurance as a rider to the health insurance policies. After leaving Lincoln National Life, he left the insurance business and went to work for a sign company. He worked for no further insurance companies before he joined Coordinated Planning Associates (hereinafter referred to as COPA). He went to work for COPA in April of 1979. In July, 1980, Mr. Wheeler was terminated by COPA and he then became employed by United Companies Life, his present employer.

   
   

2. In June or July of 1979, Mr. Wheeler contacted James and Ruby Clinton about purchasing insurance from him. He met with them in their home to discuss his product. At that time, Mr. and Mrs. Clinton had four policies in effect. (See Petitioner's Exhibits 8, 9, 10, and 11.) One policy covered Mr. Clinton and had a rider for his wife, and the other three policies were on each of their three children.

   
   

3. When there was an initial contact made by Mr. Wheeler with the Clintons, Mr. Clinton informed Mr. Wheeler that they had more insurance than they could afford. Prior to purchasing insurance from Mr. Wheeler, the Clintons showed Mr. Wheeler their policies, and he went through the policies and explained to the Clintons that he could obtain the same or better coverage from his company for less premium. He also informed them that they could obtain coverage for the children by paying a set premium per year per child per thousand dollars of coverage. After the Clintons purchased their policy from Mr. Wheeler, Mrs. Clinton actually requested insurance on the children, and Mr. Wheeler came by their home once again to pick up the $4.00 payment or deposit for the additional coverage for the children.

   
   

4. At the time that Mr. Wheeler sold the new insurance policy to Mr. and Mrs. Clinton, no replacement form was prepared or shown to the Clintons. The Clintons were not knowledgeable in insurance matters and relied upon Mr. Wheeler's representations as to the comparative coverages of his company's policy and their existing policies.

   
   

5. The coverage under the policy sold by Mr. Wheeler to the Clintons was not the same or better coverage than those which existed under the policies which were replaced. The policies replaced were whole life policies and covered the entire family. The program being sold by Mr. Wheeler was a retirement savings plan with a term insurance rider and was intended to only supplement and not replace existing coverage. Mr. Wheeler was aware that the Clintons intended to cancel their existing policies and replace them with the policy which he was selling. Mr. Wheeler testified regarding the Clintons on direct examination as follows:

   Q. Did they mention anything about re- placing their insurance?

   A. No. They insinuated that yes, they were going to drop it because they needed the money.

   The original reason we were there was because they needed money, and that's why we were there. And if they could get a good deal on their insurance, or if they could buy a good program and they could turn the

   other in and get money for it, that's what they were interested in.

   
   

   In fact, Mr. Wheeler's wife actually picked up the existing policies and took care of mailing them to the company after their cancellation.

   
   

6. In October of 1979, Mr. Wheeler met with Gary and Darlene Davis of Orlando, Florida, for the purpose of attempting to sell life insurance to them. At the time that they were approached by Mr. Wheeler, Mr. and Mrs. Davis had three life insurance policies issued by Prudential Life Insurance Company in effect. Mr. Wheeler was made aware of these three policies.

   
   

7. During the course of the sales presentation, the Respondent went through the existing policies and compared some of the benefits with those of the ITT policy he was attempting to sell. He represented to the Davises that the ITT policy would provide them with better coverage for the entire family for less premium than they were paying for the existing policies. Mr. Wheeler was informed by the Davises that they intended to cancel their existing policies when they purchased the ITT coverage.

   
   

8. When Mr. Wheeler met with Mrs. Davis, she showed him the insurance policies on her and her husband. The policy on Mr. Davis had a rider for the children and Mrs. Davis's policy contained an IRA. Mr. Wheeler represented to Mrs. Davis that the COPA program would give her family these same benefits plus a cancer policy for less money. He explained to Mrs. Davis that he could charge a lower premium because he was not an insurance man per se and that because of this his company did not have to pay high commissions like Prudential. He also explained that he worked more with helping people with their finances than with selling insurance and was salaried. In fact, Mr. Wheeler was an insurance salesman working on commissions. The COPA program did not contain an IRA and the cheaper insurance was a term rider not whole life. The basic COPA program which Mr. Wheeler sold to the Davises also did not contain coverage for the Davis children. The true reason the premium was lower was because of the different coverage and different type of insurance.

   
   

9. The ITT policy sold to the Davises in fact did not provide the same coverage as that of the policies which were cancelled by the Davises at the time of purchasing the ITT policy. The ITT policy specifically did not provide coverage for the Davis' children, and as a result of this lack of coverage, Mr. and Mrs. Davis were unable to recover any insurance proceeds after their daughter's death during the coverage period of the ITT policy. The ITT policy was a retirement plan designed to supplement existing life insurance and was not intended as a complete life insurance program for a family.

10. Mrs. Davis understood the ITS policy to contain an IRA as part of the policy. The evidence was unclear as to whether Mr. Wheeler actually represented that it contained an IRA or whether he represented that there was a tax benefit within the retirement savings program which the Davises interpreted to mean an IRA. It was clear, however, that Mr. and Mrs. Davis were not knowledgeable in matters of insurance and relied upon the expertise and representations of Mr. Wheeler in cancelling their existing policies and replacing them with the ITT policy. No replacement form comparing the coverage of the existing policies and the ITT policy was prepared or presented to the Davises at the time that they purchased the ITT policy.

    
    

11. Mr. Wheeler admitted that he filled out the applications on behalf of the Davises and the Clintons. Question No. Nine on the application forms for ITT of both the Clintons and the Davises asked whether the proposed policies were being issued in a replacement situation. This question on both applications was answered "No" by Mr. Wheeler.

    
    

12. Question No. One of the agent's report reads: "Will insurance on any proposed insured now applied for replace or change any life insurance or annuity?" This question was answered "No" on the agent's report for both the Davises and the Clintons. The signature block of the agent's report reflected that they were prepared by Mr. Richard Wheeler.

    
    

13. The Respondent admitted that he customarily intentionally avoided information from prospects which might reveal to him the fact that insurance was being replaced and did so in this instance.

    
    

14. When Mr. Wheeler began with COPA, he received two weeks' training.

    The training was designed to teach the "canned" presentation which COPA salesmen were required to use. This presentation was prepared by the more experienced and more knowledgeable officers and managers of COPA. This same presentation was utilized by Mr. Wheeler in the sales presentation to the Clintons and Davises. There was no training regarding replacement of other insurance.

    
    

15. Sometime in 1980, after the sales to the Clintons and Davises, Mr. Wheeler was informed by another COPA employee, Greg Gustin, as to particular representations within the canned presentation Mr. Gustin considered to be false. Sometime after this, Mr. Wheeler discussed this with Mr. Larry Taylor of COPA and an official of ITT Life Insurance Company. When Mr. Wheeler tried to change the presentation to eliminate the misrepresentations, he was fired. This occurred July 17, 1980.

    
    

16. Mr. Wheeler claimed ignorance of the misleading nature of the canned presentation prior to his discussions with Mr. Gustin. However, Mr. Wheeler admitted that he had intentionally avoided getting information from customers which indicated they were going to cancel their existing policies. The sales presentation also stated "Let me assure you I am not here to sell you anything. Mr. Wheeler's only purpose for visiting these people was to sell them insurance.

    
    

17. Mr. Wheeler sold approximately 250 policies while with COPA and has continued to sell life insurance since leaving COPA in July, 1980. The two complaints which are the subject of this administrative proceeding were the only two complaints made against Mr. Wheeler.

    
    

18. Since going to work for United Companies Life, Mr. Wheeler has been trained in using replacement forms and now uses those forms whenever his policy replaces existing insurance.

    CONCLUSIONS OF LAW

    
    

19. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this action.

    
    

20. As a licensed insurance salesman, the Respondent Richard Alan Wheeler was subject to the provisions of Chapter 626 of the Florida Statutes and the rules promulgated by the Department of Insurance.

    
    

21. In his presentation to the Clintons and the Davises, Mr. Wheeler made a comparison of the two policies and represented to those couples that by purchasing his policy, they would purchase the same or better insurance for less premium. This comparison and representation was made with knowledge on the part of Mr. Wheeler that the Clintons and the Davises intended to cancel their existing insurance and replace it with the plan being sold by Mr. Wheeler. Mr. Wheeler was aware at the time that he made the representation that the insurance he was selling was in fact not the same as the insurance which would be replaced by each of the counsel in that the program he was selling was a retirement program designed to supplement existing family coverage and not designed as a complete family insurance program. The purpose of Mr. Wheeler's presentation was to induce these persons to buy his insurance program. Mr. Wheeler admitted making a comparison of the cost of the two policies only. However, Mrs. Davis, as well as Mr. and Mrs. Clinton, testified that it was represented to them by Mr. Wheeler that the new program provided the same or better coverage for a lower premium. These misrepresentations by Mr. Wheeler constitute a violation of Florida Statute 626.9541(1)(a) as well as Florida Statute 626.621(5) and Rules 4-9.02 and 4-9.05 of the Florida Administrative Code.

    
    

22. Mr. Wheeler testified in connection with the presentation to the Clintons that he knew they were having money problems and needed cheaper insurance. He also testified that he was aware that following the purchase of his program, his wife picked up their policies and helped them send in the cancellation notice. In connection with his presentations to the Clintons, Mr. Wheeler testified that the Clintons insinuated they were going to drop their existing insurance because they needed the money. In his testimony about his presentation to the Davises, Mr. Wheeler also admitted that the Davises indicated they might cancel their policy. Mr. Wheeler also admitted that in his presentations he intentionally avoided obtaining information about replacement of existing insurance. He testified that with regard to the Davises when he became aware that they might cancel their policies, he told them that he didn't want to know about that. It was clear from the testimony of the Clintons and the Davises that Mr. Wheeler was made well aware that neither of them could afford additional insurance and would only be purchasing his program if they cancelled their previous program. Mr. Wheeler did not prepare replacement forms when he sold his program to the Clintons or the Davises and such failure constitutes a violation of Rules 4-24.21, 4-24.15(1) and 4-15(2) of the Florida Administrative Code. His failure to prepare these replacement forms also constitutes a violation of Florida Statutes Sections 626.621(3) and 626.611(13).

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED:

1. That the Department of Insurance enter a final order suspending Respondent's license for a period of 30 days. This case is more appropriately a

case for a civil fine or probation. However, a violation of Florida Statute Section 626.611 involves a mandatory suspension. There are strong mitigating factors which justify that the mandatory suspension be of short duration.

At the tinge the sales were made to Mr. and Mrs. Clinton and Mrs. and Mrs. Davis, the Respondent was relatively new in the insurance business. Upon being employed by COPA, he was given a prepared sales presentation to memorize and use in each sales contact. This presentation was prepared by the officers and managers of COPA who were more experienced and more knowledgeable than Mr.

Wheeler about insurance matters. Mr. Wheeler later tried to change the presentation and was fired as a result. These incidents occurred in 1979 and since that time Mr. Wheeler has continued to work as a licensed insurance salesman with no complaints or evidence of violations of the Florida Statutes or Rules of the Department of Insurance. The circumstances giving rise to the violations and the fact that the Respondent was advised by more experienced and knowledgeable individuals clearly bear upon the appropriateness of the particular penalty assigned. See, Drew v. Insurance Commissioner and Treasurer, 330 So.2d 794 (Fla. 1st DCA 1976).

RECOMMENDED this 11 day of April, 1983, in Tallahassee, Florida.

MARVIN E. CHAVIS

Hearing Officer

Division of Administrative Hearings 2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 12th day of April, 1983.

COPIES FURNISHED:

David A. Yon, Esquire Legal Division Department of Insurance 413-B Larson Building

Tallahassee, Florida 32301

Paul H. Bowen, Esquire Swann & Haddock, P.A. Post Office Box 7838 Orlando, Florida 32854

Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32301

Docket for Case No: 82-002047

Orders for Case No: 82-002047