vs. ) CASE NO. 84-0188
Respondent. )
Pursuant to notice this cause came on for formal hearing before P. Michael Ruff, duly designated Hearing Officer on July 22, 1985, in Fort Myers, Florida.
For Respondent: Mark A. Steinberg, Esquire
Pursuant to an Administrative Complaint filed by the Petitioner, Respondent has been charged with numerous violations of Chapter 626, Florida Statutes. The Respondent, an ordinary life, disability and general lines insurance agent licensed in the State of Florida is alleged to have sold a homeowner's policy to one Tony Williams of Fort Myers, Florida, to have received his premium payment and then to have failed to remit that premium payment to the insurer. The Respondent is charged with converting those fiduciary funds to her personal use and benefit. As a result of this failure the Respondent is charged with having violated Sections 626.561(1), 626.611(4), (5), (7), (8), (9), (10), (13), and
Section 626.621(2), (3), (4), (6), and (b).
Concerning Count 2 of the Administrative Complaint, the Respondent is charged with having failed to remit fiduciary funds, representing premium payments she collected, to MacNeill and Son, Incorporated, as required in the regular course of business. It is charged that the Respondent failed to remit approximately $6,500.00 in premium collections to MacNeill and Son, Inc. after repeated demands for payment by that insurance agency, all of which is allegedly in violation of the above-cited statutory authority with the exception, as to Count 2, of Section 626.611(2) and Section 626.621(b), Florida Statutes.
Petitioner seeks to revoke the Respondent's licensure as an insurance agent in the State of Florida.
At the hearing Petitioner presented the testimony of five witnesses and twenty exhibits, all of which were admitted into evidence. The Respondent elected to assert her constitutional privilege against self-incrimination and declined to testify. The Respondent presented no exhibits.
The Petitioner presented Proposed Findings of Fact and Conclusions of Law which were addressed in this Recommended Order and which are addressed again in the Appendix attached hereto and incorporated by reference herein. The Respondent filed a post- hearing pleading styled "Proposed Findings of Fact," but which in reality consists of legal argument of counsel and discussion of testimony. Respondent thus presented no actual Proposed Findings of Fact which are amenable to specific rulings in the attached Appendix. All of the subject matters raised in Respondent's post-hearing pleading are however dealt with in this Recommended Order and Appendix and disposed of.
The issue to be resolved in this proceeding concerns whether the Respondent received premiums from various insureds for whom she wrote insurance coverage and failed to forward those premiums to the insurers for whom she was agent who accepted the risks represented by those policies, and if that is determined to be the case, what if any penalty is warranted.
The Respondent, Teresa Jean Watson, at all times material to this proceeding was licensed as an ordinary life agent, a disability insurance agent and a general lines insurance agent. She was the only general lines agent licensed to sell insurance at the T. J. Watson Insurance Agency, Inc. and all insurance sold by that firm at times pertinent hereto was sold and issued under authority of her license. During times material to this proceeding, Teresa Jean Watson sold insurance coverage under authority of her general lines license either as direct agent for various insurance companies for whom she was general agent or, on behalf of MacNeill and Son, Inc. (MacNeill), her managing agency, which represented various insurance companies for whom the Respondent wrote coverage.
Between February 1st and February 15, 1982, a homeowner's insurance policy was sold to Tony and Martha Williams by the Respondent's agency under the authority of the Respondent's general lines insurance agent's license. That homeowner's policy required a premium of $211.00. The policyholder, Tony Williams, wrote two checks to the T. J. Watson Agency dated January 22, 1982 and February 12, 1982. Those two checks totalled $174.00. The checks were cashed by the Respondent's agency on January 26, 1982 and on February 6, 1982. The Independent Fire Insurance Company issued the policy to Tony and Martha Williams and on August 4, 1982 a representative of the Independent Fire Insurance Company wrote the Respondent to advise her that she owed that company a balance of
$179.35, as of May 1982. Petitioner asserts that the $179.35 represents the amount of Tony Williams' premium owed to the insurer, less the Respondent's commission, which if added together would equal the $211.00 premium on the Williams' policy. Although it was established that $179.35 was owed by the Respondent to the Independent Fire Insurance Company, and never paid, it was not established that it represented the premium due specifically for the Williams' policy as was charged in count 1 of the Administrative Complaint. For instance, the checks paid by the Williamses to the Watson Agency total $174.00 and therefore there is a discrepancy between the total of those checks and the
$179.35 amount Independent Fire Insurance company was owed by the Respondent. This fact coupled with the fact that the dates on the checks from the Williamses (January and February) substantially predate the May 1982 billing date to
Respondent from Independent Fire, renders it unproven that the checks written to the Watson Agency which Respondent negotiated and retained the benefit of, related to the amount of unremitted premium owed by Respondent to the Independent Fire Insurance Company.
In short, it was established that $174.00 was paid the Respondent and her agency by the Williamses. But, it was not established that the premium paid by the Williamses became misappropriated fiduciary funds converted by the Respondent to her own use and benefit. It was merely established that as of May 1982 the Respondent owed the Independent Fire Insurance Company $179.35 as a past-due account
It was not established that the Williamses ever suffered a lapse of insurance coverage or were otherwise harmed by the Respondent's failure to pay Independent Fire the $179.35. Indeed, the $179.35 figure was not proven to be more than a mere debt owed by Respondent to Independent Fire Insurance Company. The figure was not shown to have been related to any particular policy.
The Respondent and her insurance agency in the regular course of business wrote insurance coverage for companies represented by MacNeill and Son, Inc., the Respondent's managing agency. The regular business practice between the Respondent and MacNeill was for the Respondent to write coverage on behalf of insurers represented by MacNeill and to remit on a regular open account" basis insurance premiums due MacNeill on behalf of its insurance company principals on a monthly basis.
The Respondent became delinquent in submitting premiums to MacNeill and Son in November 1981. After unsuccessful efforts to collect the delinquent premium funds from the Respondent, MacNeill and Son, Inc. suspended T. J. Watson Insurance Agency and the Respondent from writing further coverage for companies they represented in January 1982. The Respondent purportedly sold her agency to one Thomas Zinnbauer in December 1981, but had already fallen into a pattern of failing to remit insurance premiums over to MacNeill before that time. In any event, the purported sale to Thomas Zinnbauer was a subterfuge to avoid collection of delinquent premiums inasmuch as the Respondent held herself out, in correspondence with MacNeill, (See Petitioner's Exhibit 4) to be the president of the agency at least as late as April 1982 and, at that time and thereafter, the agency continued to sell insurance under the aegis of the Respondent's license.
After the Respondent made up the delinquency in premium remissions to the MacNeill Agency that agency restored her underwriting authority in January 1982. Shortly thereafter however, the Respondent and the T. J. Watson Agency again became delinquent in remitting insurance premiums to the MacNeill Agency and followed a quite consistent pattern of failing to forward these fiduciary funds to MacNeill for some months. Ultimately the Respondent and her agency failed to forward more than $6500.00 in premium payment funds to MacNeill and Son, Inc. as was required in the regular course of business.
MacNeill and Son, Inc. made repeated futile attempts to secure the misappropriated premium payments from the Respondent and her agency. MacNeill made several accountings of the amount of the acknowledged debt to the Respondent. The Respondent communicated with MacNeill concerning the delinquent premium payments and acknowledged the fact of the debt, but sought to reach an amicable arrangement for a repayment schedule. Re- payment was never made, however, and ultimately the Petitioner agency was informed of the deficiencies and prosecution resulted. The Respondent knew that the premiums had been
collected by herself and her agency and had not been forwarded to those entitled to them. She knew of and actively participated in the improper withholding of the premium payments. This withholding and diversion of premium payments from the agency and companies entitled to them was a continuing pattern of conduct and Respondent failed to take action to halt the misappropriation of the premium payments.
Further, it is established by the testimony of Matthew Brewer, who investigated the delinquent premium accounts for MacNeill, that Ms. Watson failed to advise MacNeill of the purported sale of her agency until November of 1982, almost a year after it is supposed to have occurred and then only in response to Brewer's investigation. When confronted by Mr. Brewer concerning the ownership of her agency Ms. Watson refused to tell him to whom she had sold the agency. When Mr. Brewer learned that Thomas Zinnbauer had apparently bought the agency from the Respondent Mr. Brewer conferred with him and he refused to release the agency records unless Ms. Watson gave her permission. This fact, together with the fact that Ms. Watson held herself out as president of the agency some four months after she had purportedly sold the agency to Zinnbauer, establishes that Respondent, by representing to Brewer and other personnel of MacNeill and Sons, Inc. that she had sold her agency, was attempting to evade liability for failure to forward the fiduciary premium funds obtained under the authority of her agent's license.
As a result of the failure to forward the above- mentioned premium payments some of the insureds who had paid those premiums suffered lapses in coverage and cancellations of policies because MacNeill and Company and the insurers they represented believed that no premiums had ever been paid. Ultimately, MacNeill and Company learned that the premiums had been paid by the policyholders, but not remitted by the Respondent and her agency and undertook steps to reinstate coverage, but those policyholders in some instances had substantial periods of time when their coverage was lapsed due to the Respondent's failure to remit the premium funds to the managing agency and the insurance companies involved. MacNeill and Company ultimately reimbursed the appropriate insurers and insureds at its own expense, incurring substantial financial detriment as a result of the Respondent's failure to have premium payments obtained under her licensed authority properly forwarded. Had the insureds who had their policies cancelled suffered losses for which claims could have been filed during the period of the lapses of coverage, they could have encountered substantial financial difficulty.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter of and the parties to this proceeding. Section 120.57(1), Florida Statutes.
At hearing, counsel for the Respondent moved to dismiss counts 1 and 2 of the Administrative Complaint. Count 1 of the Complaint concerns the charges related to the alleged failure by the Respondent to remit the premium payment attributable to the Tony and Martha Williams insurance policy over to the company entitled to it, The Independent Fire Insurance Company. The charges in count 1 have not been established inasmuch as the above Findings of Fact and the evidence of record reveal that indeed the Respondent owed The Independent Fire Insurance Company $179.35, however, the charge in count 1 concerns the alleged failure to remit the specific premium attributable to the Williams Insurance Policy over to that company and, for the reasons delineated in the above Findings of Fact it has not been established that the specific "Williams
premium" was not remitted to the company, rather the proof shows that $179.35 was never paid the company. It has not been proven that the premium derived from the Williams policy was not paid to the company, especially in view of the fact that the two checks from the Williamses total a different amount and the checks paid the Respondent and her agency by the Williamses bear substantially earlier dates from the date the transaction for which that $179.35 was owed was purportedly entered into. In short, the proof, although it shows that the Respondent owed Independent Fire Insurance Company $179.35, does not establish that the Respondent received and withheld the premiums attributable to the Williams policy and failed to remit them over to the company. Thus, the specific charges in count 1 have not been established and the Respondent's motion to dismiss that count should be granted.
The Respondent has also moved to dismiss count 2 on the basis that the witnesses in support of the charges in count 2 were not among the witnesses whose names were supplied to the Respondent in Petitioner's Answers to Interrogatories, dated May 2, 1985. These witnesses, Mr. Gaskins and Mr. Nash, were allowed to testify and their testimony was ruled admissible at the hearing. That ruling is hereby reaffirmed on the following grounds:
Pursuant to Rule 1.280(e), Florida Rules of Civil Procedure, the party responding to a discovery request with a complete response when made is under no duty to supplement that response to include information thereafter acquired in the absence of a later discovery request by the opposing party concerning that same subject matter.
In the instant case when counsel for the Petitioner answered Respondent's Interrogatories he had already been informed that Mr. Gaskins, the witness in question, had left his employment with the MacNeill Company and had moved to North Carolina and would be unavailable to testify. Therefore, petitioner named in his stead, Mr. Joseph McCurdy as the company representative who would testify. That response to the Interrogatory was complete at the time it was made. At that time Petitioner believed that Joseph McCurdy would indeed be the only witness as to the subject matter of the Interrogatory in question concerning who the company's representative witness would be.
The Respondent made no additional discovery efforts in the nature of Interrogatories, Requests to Produce and the like since that answer was made. Therefore, no duty to supplement the response existed. The case of In Re: The Estate of Lockhead, 443 So. 2d 283 (Fla. 4th DCA 1983) is authority for the general rule that there indeed is no continuing duty to supplement discovery responses. The court in that case held that a witness in question should not have been excluded from testifying even though the name of that witness had never been given to opposing counsel where, as in the instant case, the objecting party never sought to compel a more explicit answer than "additional witnesses as needed". In the instant case the Petitioner had given the Respondent notice in its answered interrogatories that other witnesses might be called who were "yet to be determined". The focus of the Lockhead opinion was on the need to eliminate prejudicial surprise to opposing parties by compelling disclosure of witnesses. In the instant case there is no evidence of any intention to procedurally surprise the Respondent. Indeed, counsel for Petitioner did not learn that Mr. Gaskins would be an available witness for testimony until the Thursday prior to the hearing. Immediately upon learning of that availability counsel for Petitioner telephoned Respondent on July 18, 1985 and informed him that Mr. Gaskins would be testifying at hearing as Respondent acknowledges.
Counsel for Respondent was aware for many months before hearing that a company representative from the MacNeill Company would be testifying regarding precisely the same subject matter and documents which Mr. Gaskins (and Mr. Nash) ultimately testified to and indeed, counsel for Petitioner supplied copies of the pertinent documents months before trial to counsel for Respondent. Thus, it cannot be concluded that any surprise or prejudice attaches to the testimony of Mr. Gaskins and there is no evidence of any bad faith on the part of the Petitioner.
In the interim, between the Answers to Interrogatories in early May 1985, when Respondent was informed that Joseph McCurdy would testify as the MacNeill Company's representative, Respondent made no effort to depose Joseph McCurdy, nor any other witness whose name was supplied Respondent by Petitioner to determine the substance of their testimony. The fact that Mr. Gaskins possibly gave more probative testimony than Mr. McCurdy would have on the issues at bar is not a sufficient basis to show prejudice to the Respondent. Prejudice cannot be demonstrated sufficiently so that a court would exclude the testimony of a witness merely because of the adverse nature of that witness's testimony. Binger vs. King Pest Control, 401 So. 2d 1310 (Fla. 1981). Mr. McCurdy was the immediate assistant to Donald Gaskins at times pertinent to this proceeding and, custodian of the documents involved and sponsored by witness Gaskins, (admitted as Petitioner's exhibits at hearing) and could have competently testified regarding the same subject matter that Gaskins testified to. The mere fact that Mr. Gaskins might have more complete knowledge concerning the subject matter of the business transactions at issue between the Respondent, her agency and MacNeill and Sons, Inc. does not render his testimony in the stead of Mr. McCurdy more prejudicial to Respondent.
Exclusion of the testimony of the witness is a "drastic remedy which should be invoked only under the most compelling circumstances." Lobue vs. Travellers Insurance Company, 388 So. 2d 1349, 1351 (Fla. 4th DCA 1980). The circumstances in this case are certainly not such as to compel exclusion of Gaskins' testimony on the above-referenced basis when it was otherwise probative, competent and offered in good faith. Accordingly, for the reasons delineated above, the testimony of Mr. Gaskins is admissible and the previous ruling to that effect is hereby reaffirmed. The factual and procedural situation relative to the testimony of Mr. Joseph Nash is substantially identical and for the reasons already delineated, Mr. Nash's testimony is also deemed admissible in this proceeding. Thus, the Motion to Dismiss count 2 is hereby recommended to be denied.
Section 626.561, Florida Statutes, provides that premiums collected by an agent under his license belonging to insurers or others shall be considered trust funds received in a fiduciary capacity by the agent licensee. Section 626.561(1) provides:
"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."
Thus an agent situated as the Respondent who receives premium funds or which funds are received under the authority of that agent's license receives those funds in a trustee's fiduciary capacity and that agent is responsible for proper disposition of any funds received pursuant to a policy sold under authority of his license. Such an interpretation comports with the logic and legislative intent behind enactment of the "Insurance code" since, to interpret this section otherwise would do violence to the legislative purpose of protecting the "insurance consuming" public. Otherwise dishonest insurance agency employees could circumvent the requirements of the insurance code through the simple device of not being licensed and the licensed agent could not be held accountable. Thus, the general lines agent is responsible for all operations conducted and monies received under the authority of her license. See Lash, Inc. vs. State Department of Business Regulations 411 So. 2d 276 (Fla. 3rd DCA 1982).
Section 626.611 provides:
"The Department shall deny, suspend, revoke, or refuse to renew or continue the license of any agent, solicitor or adjustor or the permit of any service representative, supervising or managing general agent or claims investigator, and it shall suspend or revoke the eligibility to hold the license or permit of any such person, if it finds that as to the applicant, licensee or permittee, any one or more of the following applicable grounds exist:
. . . . if the license or permit is willfully used or to be used, to circumvent any of the requirements or prohibitions of this code.
* * *
Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.
Demonstrated lack of reasonable adequate knowledge and technical competence to engage in the transaction authorized by the license or permit.
Fraudulent or dishonest practices in the conduct of business under the license or permit.
Misappropriation, conversion or unlawful withholding of monies belonging to insurers or insureds or beneficiaries or to others and received in conduct of business under the license.
(13) Willful failure to comply with or willful violation of any proper order or rule of the Department or willful violation of any provision of this code."
Section 626.621, Florida Statutes, provides grounds for discretionary denial, suspension, revocation or refusal to renew licensure authority by the Department as to any agent who has committed one or more of the following acts:
". . . . (4) Failure or refusal upon demand
to pay over to any insurer he represents or has represented any money coming into his hands belonging to the insurer.
(3) Violation of any lawful order or rule of the Department.
(6) In the conduct of business under the license or permit, engaging in unfair methods of competition or in unfair or deceptive practices as prohibited under Part 8 of this chapter, or having otherwise shown himself to be a source of injury or loss to the public
or detrimental to the public interest "
There is no question given the above Findings of Fact and the Evidence of Record that the above statutory provisions have been violated by the Respondent. Respondent willfully used her license and allowed it to be used to circumvent the requirements and prohibitions of the insurance code by selling insurance policies and allowing employees of her agency to sell insurance policies under the auspices of her license, receiving the premiums or allowing her agency to receive the premiums without forwarding them to the parties entitled to them, i.e.
Because of the repetitive nature of this pattern of conduct and the relatively large amount of delinquent converted, misappropriated premiums that resulted (approximately $6500.00), it is clear also that the Respondent has demonstrated a lack of fitness or trustworthiness justifying her continued engagement in the business of insurance. She allowed or participated directly in the use of her license in a way which resulted in severe pecuniary loss to her managing general agency and temporary, but potentially severe losses to some of the insureds who had their policies temporarily cancelled.
The fact that this pattern of failure to remit premium funds to those entitled to them was a consistent, continuing pattern as opposed to one or two infrequent incidents of such conduct which were immediately redressed, demonstrates a significant lack of fitness or trustworthiness justifying her continuance in the conduct of insurance business under her license. If the Respondent's accounts had merely been short by a relatively small amount of unpaid premiums, on one or two occasions, which shortage she immediately satisfied, then it could he understandable that such deficiencies occurred through inadvertence, mistake, or temporarily adverse financial circumstances. Such is not the case here. Respondent clearly demonstrated a continuing, knowing pattern of willfully withholding monies belonging to companies with whom she did business and appropriating the funds instead to inappropriate uses. In short, the violations of Section 626.611(4) and 626.611(7) have been proven.
Petitioner however failed to prove that the Respondent lacks a reasonably adequate technical knowledge and knowledge sufficient to competently engage in the transactions authorized by her license, as for instance the transactions or policy sales involved in the complaint at bar. The Respondent's acts and omissions were reprehensible enough, but they stem more from willful deprivation of insurers of their properly earned funds and fraudulent and dishonest business practices, rather than mere lack of competence to engage in the business of insurance sales. Although the Respondent's actions have been established clearly to be in violation of a number of statutory subsections it has not been proven that she demonstrated a lack of competence with regard to the transactions at issue, so it is concluded that she has not violated Section 626.611(8), Florida Statutes.
There is no question that the Respondent has engaged in fraudulent and dishonest business practices. The Hearing Officer understands that the Respondent found herself in severely straitened financial circumstances which resulted in her financial inability to pay the premiums when due to the companies entitled to them. However, the Respondent knowingly allowed this deficiency to continue for a long period of time and allowed a substantial delinquent sum to become due the company which she converted to her own private purposes. She knew these were trust funds collected within the scope of her fiduciary duty as a licensed insurance agent and knowingly allowed or directly participated in their diversion to unauthorized uses. This constitutes a fraudulent practice since it is intentional deprivation of money or property from those lawfully entitled to it with knowledge by the one misappropriating the funds that others are properly entitled to them. See 27 Fla. Jur. 2d Fraud and Deceit, s. (3), (14) and (39). This misconduct is aggravated by the Respondent's lack of effort to make amends for this situation when given a number of opportunities by MacNeill and Sons, Inc., before it ultimately referred the matter to Petitioner for prosecution. The violation of Section 626.611(9) is established. For similar reasons the charged violations of Subsections 626.611(10) and (13) have been proven.
In summary the Respondent, by willfully, systematically and continually utilizing her license in the manner delineated above has violated all the statutory provisions cited in Count 2 of the complaint, with the exception of Section 626.611(8) and, because of the Respondent's long-standing pattern of such conduct, the substantial financial loss it caused her managing general agency and the potential great public harm which could have been caused to the insured policyholders involved, coupled with her lack of effort to correct the situation after being given a number of opportunities to do so, short of prosecution, a substantial penalty is warranted.
Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is therefore recommended that the General Lines Insurance Agent's license of Respondent Teresa Jean Watson be revoked.
DONE and ORDERED this 27th day of December, 1985, in Tallahassee, Florida.
P. MICHAEL RUFF Hearing Officer
FILED with the Clerk of the Division of Administrative Hearings this 27th day of December, 1985.
Respondent submitted a post-hearing document entitled "Proposed Findings of Fact." There are few actual Proposed Facts in that one-and-a-half page pleading which is interlaced throughout with argument of counsel. However, to the extent the six paragraphs of that document contain Proposed Findings of Fact they are ruled on as follows:
Mark A. Steinberg, Esquire Post Office Box 2366
Ft. Myers, Florida 33902
