STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF INSURANCE )
AND TREASURER, )
)
Petitioner, )
)
vs. ) CASE No. 83-1188
)
KENNETH E. SCHNEIDER, )
)
Respondent. )
)
RECOMMENDED ORDER
This matter came on for hearing in Pensacola, Florida, before the Division of Administrative Hearings by its duly designated Hearing Officer, Robert T. Benton, II, on March 11, 1985. The hearing was continued later the same day, then reconvened and concluded in Tallahassee, Florida on April 25, 1985. The Division of Administrative Hearings received a transcript of the proceedings on June 28, 1985. Respondent filed its proposed recommended order on August 30, 1955, and petitioner filed his proposed recommended order on September 11, 1985. The parties are represented by counsel:
APPEARANCES
For Petitioner: William W. Tharpe, Jr., Esquire
413-B Larson Building Tallahassee, Florida 32301
For Respondent: Thomas F. Woods, Esquire
Woods & Carlson, Suite 112 1030 East Lafayette Street Tallahassee, Florida 32301
By first amended administrative complaint dated January 12, 1984, petitioner alleged that respondent Schneider was, at all pertinent times, "licensed as an Ordinary Life, including Disability Insurance Agent and a General Lines-Property, Casualty, Surety and Miscellaneous Lines Agent," and was "President, director and registered General Lines Agent for CT Friendly Auto Insurance Agency . . . [its] owner, manager and operator . . . [who] exercised, or should have exercised supervision and control over all . . . employees;" that respondent "maintained a sub-agency relationship with Florida General Agency, Inc." under an agreement requiring petitioner "to immediately remit net cash (total policy cost less agent's commission) with each application;" that respondent was "provided an accounting each month which identified cancellations and specified return commissions due under a specific policy;" that respondent sold "an automobile insurance policy, number SPP0401130 issued by Southern Insurance Company, to one Victor Barahona"; that "Mr. Barahona's premium payments for said policy were financed through Time Premium Company of North Miami;" that "on or about February 25, 1983, Mr. Barahona's policy was cancel led"; that the "cancellation left an unearned premium refund of . . . $127.95 .
. . from Southern Insurance Company and an unearned commission refund of . . .
$39.59" owed by respondent; that "Southern Insurance Company informed . . . [respondent] of the cancellation and of the amount of unearned commission due the premium finance company due to the cancellation" but that respondent "failed to forward the unearned commission of . . . $39.59 . . . to the Time Premium Company . . . in the regular course of business, or at any other time;" that the "unearned commission represented trust funds received by . . . [respondent] in a fiduciary capacity in transactions under [his] license;" that, on account of the foregoing, respondent "withheld or otherwise misappropriated said funds," all in violation of Sections 626.561(1), 626.611(5), (7), (9), (10) and (13), and
626.621(2) and (4), Florida Statutes.
In Count II, the first amended complaint alleges that respondent "sold an automobile insurance policy number SPP0401319 issued by Southern Insurance Company, to one James M. Taylor;" that "Mr. Taylor's premium payments . . . were financed through Time Premium Company;" that "on or about March 2, 1983, Mr.
Taylor's policy was cancelled . . . [leaving] an unearned premium refund of . .
. $88.02 . . . from Southern Insurance Company and an unearned commission refund of . . . $23.31" owed by respondent; that "Southern Insurance Company informed .
. . [respondent] of the cancellation and of the amount of unearned commission due the premium finance company due to the cancellation" but that respondent failed "to forward the unearned commission of . . . $23.31 . . . to the Time Premium Company . . . in the regular course of business, or at any other time;" that the "unearned commission represented trust funds received by . . . [respondent] in a fiduciary capacity in transactions under [his] license;" that, on account of the foregoing, respondent "withheld or otherwise misappropriated said funds," all in violation of "Sections 626.561(1), 626.611(70), 626.611(3), 626.621(2), 626.611(7), 626.621(4), 626.611(9), and 626.611(5), Florida
Statutes."
In Count III, the first amended administrative complaint alleges that respondent "sold an automobile policy, number SPP0401124 issued by Southern Insurance Company, to one Walter L. Bivins;" that "Mr. Bivins' premium payments for said policy were financed through Time Premium Company of North Miami;" that "on or about March 2, 1983, Mr. Bivins' policy was cancelled . . . [leaving] an unearned premium refund of . . . $26.64" owed by respondent; that "Southern Insurance Company informed [respondent] of the cancellation and of the amount of unearned commission . . . due the premium finance company due to cancellation" but that respondent "failed to forward the unearned commission of . . . $26.64 .
. . to the Time Premium Company in the regular course of business or at any other time;" that the "unearned commission represented trust funds received by .
. . [respondent] in a fiduciary capacity in transactions under [his] license;" that, on account of the foregoing, respondent "withheld or otherwise misappropriated said funds," all in violation of "Sections 626.561(1), 626.611(10), 626.611(3), 626.621(2), 626.611(7), 626.621(4), 626.611(9), and
626.611(5), Florida Statutes."
In Count IV, the first amended administrative complaint alleges that respondent "sold an automobile policy, number SPP0403316 issued by Southern Insurance Company, to one James T. Gorecki;" that "Mr. Gorecki's premium payments . . . were financed through Time Premium Company of North Miami;" that "on or about March 3, 1983, Mr. Gorecki's policy was cancelled . . . [leaving] an unearned premium refund of . . . $148.33 . . . and an unearned commission refund of . . . $33.67" owed by respondent; that "Southern Insurance Company informed . . . [respondent] of the cancellation and of the amount of unearned commission . . . due the premium finance company due to the cancellation" but that respondent "failed to forward the unearned commission of . . . $33.67 . . .
to the Time Premium Company . . . leaving a balance due of . . . $33.67;" that the "unearned commission represented trust funds received by [respondent] in a fiduciary capacity in transactions under [his] license;" that on account of the foregoing, respondent "withheld or otherwise misappropriated said funds," all in violation of "Sections 626.561(1), 626.611(10), 626.611(3), 626.621(2),
626.611(7), 626.621(4), 626.611(9), and 626.611(5), Florida Statutes."
In Count V, the first amended administrative complaint alleges that respondent "sold an automobile policy, number SPP0401300 issued by Southern Insurance Company, to one Fred R. Garnsey;" that "Mr. Garnsey's premium payments were financed through Time Premium Company"; that "on or about March 4, 1983, Mr. Garnsey's policy was cancelled . . . [leaving] an unearned premium refund of
. . . $88.83 . . . from Southern Insurance Company and an unearned commission refund of . . . $26.46" owed by respondent; that "Southern Insurance Company informed . . . [respondent] of the cancellation and of the amount of unearned commission due the premium finance company" but that respondent "failed to forward the unearned commission of . . . $26.46 . . . to Time Premium Company .
. . leaving a balance due of . . . $26.46;" that the "unearned commission represented trust funds [which respondent] withheld or otherwise misappropriated, "all in violation of "Sections 626.561(1), 626.611(10), 626.611(3), 626.621(2), 626.611(7), 626.621(4), 626.611(9), and 626.611(5),
Florida Statutes."
In Count VI, the first amended administrative complaint alleges that respondent "sold an automobile policy, number SPP0403324 issued by Southern Insurance Company, to one Edward C. Bourgeois"; that "Mr. Bourgeois' premium payments . . . were financed through Time Premium Company;" that "on or about March 29, 1983, Mr. Bourgeois' policy was cancelled . . . [leaving] an unearned premium refund of . . . $135.29 . . . from Southern Insurance Company and an unearned commission refund of . . . $37.01" owed by respondent; that "Southern Insurance Company informed . . . [respondent] of the cancellation and of the amount of unearned commission . . . due to the cancellation" but that respondent failed "to forward the unearned commission of . . . $30.71," leaving that sum "due the finance company;" that "the unearned commission represented trust funds received by . . . [respondent] in a fiduciary capacity . . . under [his] license;" that, on account of the foregoing, respondent "withheld or otherwise misappropriated said funds," all in violation of "Sections 626.561(1), 626.611(10), 626.611(3), 626.621(2), 626.611(7), 626.621(4), 626.611(9) and
626.611(5), Florida Statutes."
In Count VII, the first amended administrative complaint alleges that respondent "sold an automobile insurance policy, number 09-014802 issued by Allied Fidelity Insurance Company, to one Hang Tsi-Bui Le;" that "on or about the months of March or April 1983, Ms. Le requested . . . [that respondent] cancel her automobile policy"; that "the automobile policy was cancelled;" that "on or about April 29, 1983, . . . [respondent] received from Auto Sure Underwriting, Inc., check number 3973, which . . . included . . . $50.15 . . . [which] represented Ms. Le's unearned premium"; that "on numerous occasions, Ms. Le contacted [respondent] . . . to try and receive her refund;" that respondent "represented that the delay was due to a delay in the paperwork and that [respondent] did not have the refund;" that, on her return from a week's absence, Ms. Le "found check number 1518 in the amount of . . . $50.15 . . . from Friendly Auto Insurance of Pensacola, Inc. in her mail" more than three months after respondent had received the money, all in violation of "Sections 626.561(1), 626.611(10), 626.611(3), 626.621(2), 626.611(7), 626.621(4),
626.611(9), and 626.611(5), Florida Statutes."
In Count VIII, the first amended administrative complaint alleges that respondent "did on or about the month of October 1982 sell an automobile policy to one Avis P. Brown, who is now Avis P. Turner;" that "Mrs. Turner's premium payments were financed through Time Premium Finance Company;" that "on or about February 8, 1983 . . . [respondent] received . . . $10.20 . . . from Autosure Underwriters, Inc. . . . represent[ing] an overpayment due the insured;" that respondent "did never return the . . . overpayment which was due Mrs. Turner;" all in violation of "Sections 626.561(1), 626.611(10), 626.611(3), 626.621(2),
626.611(7), 626.621(4), 626.611(9), and 626.611(5), Florida Statutes."
Count IX alleges that respondent "or another agent or one of [his] unlicensed employees, acting under [his] direction, supervision or control, on or about March 29, 1982, sold insurance coverage to Edward T. Lagos . . . [who] wished to purchase only the required PIP coverage and . . . so stated" but that Mr. "Lagos was quoted a . . . price of . . . $52.00," which he paid and which included a $35.00 "charge for a membership in the Nation Motor Club . . . [even though] Edward T. Lagos neither requested nor denied membership in an auto club and would not knowingly have purchased such a membership at additional cost;" that respondent signed Mr. Lagos' application for insurance without Mr. Lagos' having spoken with him; that Mr. "Lagos never requested an . . . $8,000 . . . deductible on the PIP coverage and would not knowingly have purchased coverage with such a deductible" and that respondent or somebody acting under his direction "sold Edward T. Lagos auto insurance coverage including a $8,000 deductible without his knowledge or consent;" and that respondent "did not mail Mr. Lagos' policy to him until on or about May 13, 1982, after . . . [Mr.] Lagos brought [certain] matters . . . to the attention of the Florida Department of Insurance;" all in violation of Sections 626.611(5), (7), (9) and (13),
626.621(2) and (6), 626.9521, and 626.9541(1)(a) and (2), and Part VII of
Chapter 626, Florida Statutes.
In Count X, the first amended administrative complaint alleges that respondent or somebody "acting under [his] direction, supervision, or control, on or about September 13, 1981, sold auto insurance coverage to Mary C. Salter;" that the "application for insurance was signed by . . . [respondent] even though Mary C. Salter never spoke with" respondent; that Ms. Salter "wished to purchase only the required auto liability and PIP coverage and . . . so stated;" that respondent or somebody "acting under [his] direction, supervision or control, charged Mary C. Salter . . . $15.00 . . . for an . . . accidental death and disability insurance policy and charged her for a Southern Management Company Auto Accident Insurance policy without her knowledge or consent" and that each policy "was for coverage Ms. Salter would not have knowingly purchased at additional cost;" all in violation of Sections 626.611(5), (7), (9), (10) and
(13), 626.621(2) and (6), 626.561(1), 626.9521 and 626.9541(1)(1) and (2) and
Part VII of Chapter 626, Florida Statutes.
In the eleventh and final count, the first amended administrative complaint alleges that respondent "on or about June 27, 1982, and on or about July 3, 1982
. . . falsely stated in a . . . newspaper advertisement that [he] represented .
. . 15 . . . auto insurance companies" when he "represented only three fire and casualty insurance companies," and so was "misleading and deceptive in the newspaper advertisement," all in violation of Sections 626.611(7), (9) and (13), 626.621(6), and 626.9541(5), Florida Statutes.
In petitioner's proposed findings of fact and conclusions of law to the hearing officer, petitioner concedes that counts V, VIII, X, and XI were not proven. For specific rulings, see Appendix.
ISSUE
Whether petitioner should take action against respondent for the reasons alleged in the administrative complaint?
FINDINGS OF FACT
The parties stipulated that respondent Kenneth E. Schneider has been a general lines agent and so licensed by respondent, at all pertinent times. He has been doing business in Pensacola, Florida, as Friendly Auto Insurance of Pensacola, Inc. (Friendly). Mr. Schneider was "agent for Friendly," Petitioner's Exhibit No. 16, and he and his wife ran the office (T. 124) with the help of a clerical assistant. Respondent was the licensed agent who "waited on customers." (T. 125) At the time of the final hearing, he was licensed to represent Protective Casualty Insurance Company, and Allied Fidelity Insurance Company. Petitioner's Exhibit 20. Additionally, and "only during 1982," petitioner was licensed to represent Dixie Insurance Company, Kenilworth Insurance Company, Colonial Insurance Company of California, and Fortune Insurance Company. Petitioner's Exhibit No. 19.
When Mr. Schneider wrote policies for insurance companies other than those he was licensed to represent, he did so by agreement with "a managing general agency." (T. 141). Not all of these agreements he had with managing general agencies were in writing and the Department of Insurance was apprised of none of them. (T. 142, 143). Respondent "broker[ed] . . . business through a general agency in the State of Florida . . . [or] in Atlanta." (T. 141).
Time Premium Company (TPC) of Hollywood, Florida, finances insurance premiums. TPC supplies Friendly (and other insurance agencies) with form contracts and blank drafts. Customers of Friendly wanting to borrow money to pay part of their insurance premiums sign a form contract filled in by a Friendly employee obligating the customer to repay TPC the portion of the premium it finances, on an installment basis. Among other things, the form contract provides:
That in consideration of the payment by TIME to the respective insurance companies, or their agents, of the balance of the premiums upon the policies of insurance hereinbefore described, the assured agrees with TIME as follows:
The assured hereby assigns to TIME as security for the total amount payable hereunder, any and all unearned return premiums and dividends which may become payable under the policies listed in the schedule and loss payments under said policies which reduce the unearned premiums.
. . .
4. The assured hereby appoints TIME his attorney in fact to cancel and give notice of cancellation of said policies for non-payment of any amounts due hereunder, and said insurance companies are hereby authorized and directed, upon the demand or request of TIME, to cancel said policies and to pay TIME the unearned return premiums pursuant to the
assignment contained in paragraph 1 about thereon without proof of default hereunder or breach thereof or of the amount owning hereunder. In the event that the unearned return premiums are not sufficient to pay the total amount due hereunder, the assured shall pay the deficiency with interest at the highest allowable rate. Petitioner's Exhibit No. 1.
A Friendly employee consummates the loan by drawing on TPC and forwarding the draft to the insurance company (or agency) for whom Friendly is writing the insurance. In the event that a company fails to repay TPC, TPC causes the insurance coverage to be cancelled and applies return premiums against the outstanding indebtedness, including, when received, unearned commissions in Friendly's hands at the time of cancellation.
TPC notifies Friendly of any shortfall, once it has received return premiums from the insurance companies (or agencies), and Friendly forwards all or part of its unearned commission to TPC, as appropriate. By print-out mailed four times monthly, TPC notifies Friendly of unearned commissions Friendly owes TPC. If return premiums, including unearned commissions, do not satisfy the debt, TPC duns the customer. Friendly is under an obligation to return to the customer any part of an unearned commission it does not owe to TPC or some other premium finance company.
BARAHONA
On November 29, 1982, Victor Barahona bought insurance from Friendly. Friendly wrote policy No. FAP508054 on Horizon Insurance Company (Horizon) on behalf of Guaranteed Insurance Underwriters (Guaranteed) for liability coverage; and, for comprehensive and collision coverage, policy No. SPP0401130 on Southern Insurance Company (Southern), on behalf of Florida General Agency. Mr. Barahona made a downpayment of $159.00 and Friendly effected a loan to him from TPC in the amount of $386.00 for the remainder of the combined premiums. Together with the finance charge and documentary stamps, Mr. Barahona's obligation to TPC aggregated $437.60, which he was to repay in eight monthly installments of
$54.70 each, the first being due on December 30, 1982.
On January 6, 1983, TPC notified Mr. Barahona that it had not received an installment payment, and that the policies would be cancelled if the payment was not received within ten days. On January 17, 1983, TPC requested cancellation of both policies. Later TPC notified Mr. Barahona that the policies were cancelled effective February 25, 1983.
As a result of the cancellation of the Barahona policies, TPC received a total of $311.63 in return premiums, $127.95 from Florida General Agency and
$183.68 from Horizon or Guaranteed. As of September 2, 1983, Barahona still owed TPC $114.78, and TPC had not received any part of the unearned commission on Barahona's policies from Friendly, but it was not until August that TPC had received the last insurance company return premium. Some time thereafter it billed Friendly on the entire unearned commission. In July of 1984, Friendly paid TPC the money it owed TPC on account of the cancellation of the Barahona policies.
TAYLOR
December 6, 1982, Friendly wrote policy No. SPP0401329 on Southern on behalf of Florida General Agency and policy No. 389868 on Protective Casualty Insurance Company (Protective) on behalf of Specialty Insurance Underwriters (Specialty) for James M. Taylor. Mr. Taylor made a down payment of $97.00, and Friendly effected a loan to him from TPC in the amount of $226.00 for the remainder of the combined premiums. Together with the finance charge and documentary stamps, Mr. Taylor's obligation to TPC aggregated $264.43, which he was to repay in eight equal monthly installments of $33.06, the first being due January 7, 1983.
On January 12, 1983, TPC notified Mr. Taylor that it had not received an installment payment, and that the policies would be cancelled if the payment was not received within ten days. At TPC's behest, both policies were cancelled effective February 28, 1983, leaving an outstanding balance of $274.48.
As a result of the cancellation of the Taylor policies, TPC received a total of $185.62 in return premiums, $88.02 from Florida General Agency and
$97.60 from Protective in March of 1983. A notice of cancellation was sent to Friendly as well as to Protective and Southern, but Friendly did not pay the unearned commission it owed TPC until July of 1984. (T. 19).
BIVINS
On November 29, 1982, Friendly wrote policy No. 0401124 on Southern on behalf of Florida General Agency for Walter L. Bivins. Of the $159.00 total premium, Delores T. Bivins paid $99.00 as a cash downpayment, and Friendly effected a loan to her from TPC in the amount of $60.00 for the remainder of the premium. Together with the finance charge and documentary stamps, Mr. Bivins' obligation to TPC aggregated $81.93, which he was to repay in three equal installments of $27.31, the first of which was due December 30, 1982.
Delores T. Bivins mailed TPC a check for $30.31 ($27.31 plus a $3.00 late charge) dated December 31, 1982. TPC deposited this check, but it was returned unpaid. As a result TPC assessed a $10.00 delinquency charge, and an additional $10 charge, because the check was returned, and caused the cancellation of Mr. Bivins' policy, effective March 2, 1983, claiming a balance due of $104.93. TPC received a return premium from Southern or Florida General Agency later the same month. TPC received the $12.80 unearned commission Friendly owed it in July of 1984.
GORECKI
On January 6, 1983, Friendly wrote policy No. SPP0403316 on Southern on behalf of Florida General Agency and policy No. 031555 on Allied Fidelity Insurance Company on behalf of Specialty Insurance Underwriters, Inc. for James
T. Gorecki. The combined premiums amounted to $481.00. Mr. Gorecki made a down payment of $144.00 and financed the remaining $337.00 through TPC. Friendly effected the loan from TPC. Together with the finance charge and documentary stamps, Mr. Gorecki's total obligation to TPC aggregated $384.56, which he was to repay in eight equal monthly installments of $48.07, the first being due February 6, 1983.
Mr. Gorecki sold his car and requested cancellation of both insurance policies in February of 1983. He executed documents at Friendly's office to effect the cancellation. Mr. Gorecki made no payment to TPC and TPC requested
cancellation of both policies as a result, although at least one of them had already been cancelled. The Southern policy, No. SPP0403316, was cancelled March 3, 1983, and on March 17, 1983, a check for Southern's return premium, in the amount of $145.33, was sent to TPC, and TPC received it shortly thereafter. The return premium check for Allied Fidelity's policy No. 031555 reached TPC no later than May of 1983. (T. 26).
On June 21, 1983, Mr. Gorecki's mother filled out an "insurance consumer service request" complaining that "[t]hey have been telling us since February they would send us a check for the unearned premium." After applying both return premium checks against Mr. Gorecki's indebtedness, a balance of
$45.16 remained. TPC notified Friendly by written statement mailed June 23, 1983, that unearned commissions up to $45.16 should be forwarded to TPC. Unearned commissions in excess of $45.16, if any, should have been returned to Mr. Gorecki. (T. 41).
BOURGEOIS
On January 5, 1983, Friendly wrote policy No. SPP0403324 on Southern on behalf of Florida General Agency and policy No. 031572 on Allied Fidelity Insurance Company on behalf of American Underwriters, Inc. for Edward Bourgeois. The combined premiums amounted to $397.00. Mr. Bourgeois made a down payment of
$119.00 and financed the remaining $278.00. Friendly effected the loan from TPC. Together with the finance charge and documentary stamps, Mr. Bourgeois' total obligation to TPC aggregated $320.64, which he was to repay An eight equal monthly installments of $40.08, the first being due February 8, 1983.
Mr. Bourgeois made no payments to TPC and TPC caused the cancellation of both policies, effective March 29, 1983, as a result. Notice of cancellation went to both insurance companies and Friendly. On April 27, 1983, TPC received an insurance company return premium of $135.29 and the other insurance company return premium arrived in May of 1983. (T. 27). Friendly paid TPC the unearned commission in July of 1984.
A YEAR BEHIND
TPC deals with some four or five hundred insurance agencies in Florida. TPC normally receives unearned commissions from agencies within 45 to
60 days after billing, although a TPC employee testified that 90 days was "acceptable." (T. 30). TPC bills the agencies with a computer printout, representing an accumulation of accounts. Possibly one other agency has taken longer than a year to repay moneys owed under similar circumstances. (T. 29).
When respondent Schneider fell behind in forwarding unearned commissions, TPC telephoned to discuss the problem. He began sending money to reduce his indebtedness and continues to do so. TPC "would like him to do better, but . . . [is] working with him on this." (T. 31-32).
Respondent Schneider sent TPC checks for $800.00 on April 26, 1983, for $500.00 on July 21, 1983, for $400.00 on May 25, 1983, for $400.00 on June 15, 1983, and for $500.00 on July 21, 1983. At the time of the hearing, he was paying $3,000.00 a month "[a]gainst old accounts that . . . [TPC needs] money on on the unearned commissions," (T. 42) but TPC has "asked him to raise it to four or five." (T. 38). TPC applies money it gets from respondent to the oldest accounts first, and Mr. Schneider was aware of this. (T. 38). The money TPC received in 1983 was applied to "possibly `81 or `82 files." (T. 32). A
TPC employee testified without contradiction that unearned commissions insurance agencies like Friendly owed it would be TPC's money in the hands of the agent.
LE
On September 9, 1982, Hang Thi Le purchased Allied Fidelity Insurance Company's policy No. 09-104802 from Friendly for automobile liability, property damage and personal injury protection coverage. She paid Friendly $123.00 on September 9, 1982. Friendly forwarded $104.55 to Allied Fidelity and retained the balance as its commission. On January 26, 1983, Ms. Le made a written request that coverage be cancelled, by executing a form which stated, "I have sold my car." Petitioner's Exhibit No. 12. Allied Fidelity Insurance Company cancelled the policy and, on April 22, 1985, mailed Friendly a check "in the amount of $532.10 with a notation on the bottom of the check indicating that this involved return premium[s] . . . for two policyholders, one being Hang Thi Le . . . indicating the amount of return [for Ms. Le] to be $50.15." (T. 51). Ms. Le was due a total return premium of $59.00, of which $8.85 was unearned commission still in respondent's hands.
After she had telephoned Friendly three times and been told at least once that Mr. Schneider was not in, Ms. Le received a refund check in the amount of $50.15 dated July 21, 1983. The check bore the notation "returned premium" and was signed by respondent Schneider, Petitioner's Exhibit No. 12, but did not include the $8.85 respondent owed Ms. Le.
In a separate transaction with Friendly, Ms. Le bought insurance and financed the premium. She "put a down payment and . . . ma[d]e a[nother] payment," (T. 69) before deciding to cancel her insurance and stop payment on a check.
LOGOS
On March 29, 1982, Edward T. Logos went to Friendly's office because he had seen an advertisement on the back of the Pensacola News-Journal's "TV Tab", to wit:
[Graphic image of Petitioner's Exhibit 16, as displayed on page 16 of the original Recommended Order, has been omitted. To view this portion of this document, please contact the Clerk's Office.]
Mr. Logos "told the lady [in Friendly's office that he] wanted to buy PIP and that's all. [He] assumed they were honorable enough that they would sell [him] what [he] asked for." (T. 91). He was quoted $52.00 and complained about the price.
He had waited an hour and a half or two for his turn to buy insurance and signed multiple documents where a woman in respondent's employ had marked them with "x"s. Among the papers he signed was an application for membership in Nation Motor Club, Inc., even though he never asked to join and would have declined an offer to purchase a membership. He also signed the following document:
[Graphic image of Petitioner's Exhibit 15, as displayed on pages 17-18 of the original Recommended Order, has been omitted. To view this portion of this document, please contact the Clerk's Office.]
The premium for the PIP policy with its $8,000 deductible, was $17.00. The
$35.00 difference between the PIP premium and what Mr. Logos paid was apparently the cost of the motor club membership.
More than a month later Mr. Logos received his policy in the mail, along with papers indicating he was a member of the Nation Motor Club. Mr. Logos never asked to join Nation Motor Club and would not knowingly have paid to do so. He made inquiries, then complained to the Insurance Commissioner. Respondent refunded the entire $52.00 by check dated August 27, 1982.
CONCLUSIONS OF LAW
With respondent Department's transmittal of petitioner Schneider's request for hearing to the Division of Administrative Hearings, "the division has jurisdiction over the formal proceeding." Section 120.57(1)(b)(3), Florida Statutes (1984 Supp.).
Petitioner is required to "suspend, revoke or refuse to renew or continue the license of any agent . . . and . . . suspend or revoke the eligibility to hold a license or permit of any such person, if it finds" the agent guilty of
(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 information or advertising.
. . .
(7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.
. . .
Fraudulent or dishonest practices in the conduct of business under the license or permit.
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.
Section 26.611 Florida Statutes (1983).
Petitioner is authorized, but not required, to take such disciplinary action against agents who are only found guilty of
(2) violation of any provision of State insurance code or of any other law applicable to the business of insurance in the course of dealing under the license or permit.
. . .
(6) In the conduct of business under the license or permit, engaging in unfair methods of competition or in unfair and deceptive arts or practices, as prohibited under Part VIII of this chapter. . . .
Section 626.621, Florida Statutes (1983).
Specifically pleaded as provisions of the insurance code respondent is alleged to have violated are the following:
626.561. Reporting and accounting for funds
(1) All premiums, return premiums, or other funds belonging to insurers or others received by an agent, solicitor, or adjuster 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 person entitled thereto.
. . .
626.9541. Unfair methods of competition
and unfair or deceptive acts or practices defined
Unfair methods of competition and unfair or deceptive acts.--The following are defined as unfair methods of competition and unfair or deceptive acts or practices:
Misrepresentations and false advertising of insurance policies.--Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which:
Misrepresents the benefits, advantages, conditions, or terms of any insurance policy.
Misrepresents the dividends or share of the surplus to be received on any insurance policy.
Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy.
Is misleading, or is a misrepresentation, as to the financial condition of any person or as to the legal reserve system upon which any life insurer operates.
Uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof.
Is a misrepresentation for the purpose of inducing, or tending to induce, the lapse, forfeiture, exchange, conversion, or surrender or any insurance policy.
Is a misrepresentation for the purpose of effecting a pledge or assignment of, or effecting a loan against, any insurance policy.
Misrepresents any insurance policy as being shares of stock or misrepresents ownership interest in the company.
False information and advertising generally.--Knowingly making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public:
In a newspaper, magazine, or other publication,
In the form of a notice, circular, pamphlet, letter, or poster,
Over any radio or television station,
or
In any other way, an advertisement,
announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance, which is untrue, deceptive, or misleading.
Section 626.9541, Florida Statutes (1984 Supp.) appears in Part VIII of the insurance code.
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, even in the absence of a recommendation of revocation, since the penalty for the infraction alleged lies within the discretion of the disciplining authority, if allegations of misconduct are established at a hearing. Florida Real Estate Commission v Webb, 367 So. 2d 201 (Fla. 1979).
License revocation proceedings have 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
Florida State Board of Dentistry, 378 So. 2d 34 (Fla. 1st DCA 1979) (reh. den. 1980).
The evidence did not establish the relationship between Kenneth E. Schneider and Friendly Auto Insurance of Pensacola, Inc. with the same precision with which the relationship was alleged in the Administrative Complaint. The inescapable inference to be drawn from the evidence as a whole is that Mr.
Schneider was Friendly's "manager and operator," and an employee, but the evidence did not prove that Schneider was Friendly's president, director or owner. This is so even though, in examining Mr. Schneider, his counsel referred to "your insurance agency in Pensacola." (T. 139). The reference to Friendly in respondent's proposed recommended order as "the Respondent's agency," at page 2, does not unambiguously concede ownership. Mr. Schneider testified about, "My partner, Mr. Robinson," (T. 143) with whom he was in business in 1983, but made clear that he, not Mr. Robinson, "was the licensed agent." (T. 144). Both Mrs. Schneider and the clerical assistant were under Mr. Schneider's "direct supervision and control while acting on behalf of the corporation." Section 626.734, Florida Statutes (1983).
I, II, III, IV, and VI
Insurance agents have a fiduciary duty with respect to "premiums, return premiums, or other funds belonging to insurers or others received by an agent .
. . in transactions under his license." Section 626.561(1), Florida Statutes (1983). Such moneys are "trust funds" for which "the licensee in the applicable regular course of business shall account." Id. Unearned commissions are, however, in a different category. When an agent sells an insurance policy, he receives a commission which is money that belongs to him. In the event the policy is cancelled, the agent is under an obligation promptly to refund the unearned portion of the commission to the person entitled.
If, as a result of a cancellation, an agent receives a return premium, he holds the return premium only as a fiduciary, and must promptly disburse it to the insured, or other entitled person. The unearned commission, if any, that accompanies the return premium differs only in that it once belonged to the agent and only became the property of the insured or another upon cancellation of the policy.
The evidence clearly showed that Friendly and respondent had what respondent's counsel called "slow pay problems" as far as refunding unearned commissions to TPC. Although no single unearned commission amounted to very much money, the arrearages grew to many thousands of dollars, and respondent fell a year behind. TPC stood in the shoes of the insured persons whose premiums it financed.
When the insured bought the policy, respondent received the entire premium, including the commission, under his license, and the commission became his property. With the policy's cancellation, the unearned portion of the commission became the property of TPC. Failure to forward unearned commissions to TPC for as long a time as the evidence showed elapsed here, in the face of repeated demands, amounts at least to "unlawful withholding" within the meaning of Section 626.611(10), Florida Statutes (1983).
VII
Ms. Le was the only insured, as far as the evidence showed, to whom respondent owed an unearned commission directly. She had never been paid the unearned commission, although she did eventually receive the return premium she was owed. Failure to return the unearned commission to Ms. Le was to misappropriate, convert and unlawfully to withhold it, unless respondent was authorized to apply, and did apply it against some outstanding debt Ms. Le owed to him. While the evidence fails to prove the existence of any such obligation on Ms. Le's part, or the existence of any such authority on respondent's part, petitioner had the burden to disprove both clearly and convincingly. Petitioner did not carry this burden.
IX
The evidence showed that Mr. Logos was the victim of an unfair and deceptive practice, within the meaning of Section 626.611(10), Florida Statutes, when he appeared, asked for PIP insurance, and was sold, along with the PIP policy, a motor club membership he never requested or knew he was purchasing.
The form reproduced in paragraph 25 suggests that this maneuver was not an isolated incident. In any event, respondent is liable as supervising agent for Friendly, for the single episode proven. Section 626.734, Florida Statutes (1983).
It is, accordingly, RECOMMENDED:
That petitioner dismiss counts V, VII, VIII, X and XI.
That petitioner suspend respondent's license for one hundred eighty
(180) days.
DONE AND ENTERED this 14th day of November, 1985, at 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 14th day of November, 1985.
APPENDIX
Petitioner's proposed findings of fact as to Count I were supported by the weight of the evidence except as to the amount of the unearned commission.
Petitioner's proposed findings of fact as to Count II were supported by the weight of the evidence except as to the
amount of the unearned commission.
Petitioner's proposed findings of fact as to Count III were supported by the weight of the evidence except as to the amount of the unearned commission.
Petitioner's proposed findings of fact as to Count IV were supported by the weight of the evidence except as to the amount of the unearned commission.
Petitioner's proposed findings of fact as to Count VI were supported by the weight of the evidence except as to the amount of the unearned commission.
Petitioner's proposed findings of fact as to Count VII and IX, and the findings based on Ms. Peeples' testimony at pages 8 and 9 of the petitioner's proposed findings of fact and conclusions of law to the hearing officer are supported by the weight of the evidence.
COPIES FURNISHED:
Don Dowdell, Esquire General Counsel
Department of Insurance & Treasurer The Capitol - Plaza Level Tallahassee, Florida 32301
Honorable William' Gunter
State Treasurer and Insurance Commissioner The Capitol - Plaza Level
Tallahassee, Florida
32301 William W. Tharpe, Jr., Esquire Department of Insurance & Treasurer
413-B Larson Building Tallahassee, Florida 32301
Thomas Woods, Esquire 1030 E. Lafayette Street Suite 112
Tallahassee, Florida 32301
| Issue Date | Proceedings |
|---|---|
| Nov. 14, 1985 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jan. 24, 1986 | Agency Final Order | |
| Nov. 14, 1985 | Recommended Order | Six-month suspension for agent who "slid a motor club" and failed to pay unearned commissions despite repeated demands. |
DEPARTMENT OF FINANCIAL SERVICES vs JAY LAWRENCE POMERANTZ, 83-001188 (1983)
DEPARTMENT OF INSURANCE AND TREASURER vs. LLOYD ELDO REGISTER, 83-001188 (1983)
DEPARTMENT OF FINANCIAL SERVICES vs FRANCOIS NOEL, 83-001188 (1983)
DEPARTMENT OF INSURANCE AND TREASURER vs JOANNE MARIE SHEPHERD, 83-001188 (1983)
DEPARTMENT OF FINANCIAL SERVICES vs MADELINE HERNANDEZ SYKES, 83-001188 (1983)
