STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF INSURANCE AND ) TREASURER, )
)
Petitioner, )
)
vs. ) Case No. 85-1290
)
JOHN WAYNE PENNINGTON, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice this cause came on for administrative hearing before P. Michael Ruff, duly designated Hearing Officer on October 15, 1985, in Fort Myers, Florida. The appearances were as follows:
APPEARANCES
For Petitioner: Stephen C. Fredrickson, Esquire
Department of Insurance 413-B Larson Building
Tallahassee, Florida 32301
For Respondent: Harry A. Blair, Esquire
Post Office Box 1467
Fort Myers, Florida 33902
By Administrative Complaint filed February 5, 1985, the Respondent has been charged with violating numerous provisions of the Insurance Code in four different counts. On May 2, 1985, an Amended Administrative Complaint was filed charging the Respondent with instances of mishandling premium payments in three additional counts.
The essence of the charges against Respondent, a licensed insurance agent, is that, he failed to forward premium payments in the regular course of business or failed to properly account for such collections as required by the Insurance Code. The Respondent has admitted to collecting most of the relevant premium payments from the insured in question in the Complaint and Amended Complaint, however the Respondent maintains that he was authorized to withhold many of these premium collections for
his use in coverage of office expenses. In a prehearing stipulation of fact, the Respondent has admitted to the collection of all premium payments alleged in the Administrative Complaint and Amended Administrative Complaint in the following paragraphs numbered 8, 17, 27, 37, 38, 47, 58, 60, 62, 64, 66,
68, 70, 72, 74, 76, 78, 80, 82 and 84. At the hearing, the Petitioner presented the testimony of Joseph P. McCurdy, Barbara Arnold, Walter O. Gibson, Jr., and Mary G. Stratton in its direct case, as well as the testimony of Joseph P. McCurdy, Walter O. Gibson, Jr. and Mary G. Stratton as rebuttal. The Respondent presented the testimony of Ernest L. Middleton, the Respondent John Wayne Pennington and the Respondent's testimony again as surrebuttal. The Petitioner presented 17 exhibits, all of which were admitted into evidence. The Respondent presented 8 exhibits, all of which were admitted into evidence.
At the conclusion of the hearing, the parties elected to order a transcript of the proceedings and to file proposed findings of fact and conclusions of law, in the case of the Petitioner. The Respondent elected to file a brief instead. These post-hearing pleadings were timely submitted. The Petitioner's proposed findings of fact are addressed in this Recommended order and are separately dealt with in the Appendix attached hereto and incorporated by reference herein, which contains specific rulings on those proposed findings of fact.
The issue to be resolved in this proceeding concerns whether the Respondent committed the alleged misconduct set forth in the Administrative Complaint and the Amended Administrative Complaint; whether he violated the statutory authority cited in the Complaints, and, if so, what, if any, penalty is warranted.
FINDINGS OF FACT
The Respondent was licensed as a General Lines Insurance Agent at all times material hereto. He generally wrote insurance for the various insurance companies he represented through General Agents such as Frank MacNeill and Son, Inc. and Amalex, Inc. The Respondent operated his insurance agency under the corporate name Pennington Insurance Agency, Inc. The Respondent was owner and President of Pennington Insurance Agency, Inc. and exercised supervision and control over its employees, and in particular the employee Earnest L. Middleton. All funds collected from insured pertinent to this proceeding were premium payments and represented trust funds held by the Respondent in a fiduciary capacity on behalf of his General Agent or the insurance companies whose policy contracts generated the premiums.
From August through December, 1981, the Respondent engaged in negotiations with representatives of Amalex, Inc. and specifically, Mr. Walter Gibson, President of Amalex, Inc. and Mr. Larry Durham of Durham and Company Insurance Agency. These negotiations ultimately led, in November of 1981, to the Respondent becoming an employee-agent of Amalex, Inc. The Respondent was to be paid a salary which was to be an advance upon commissions earned at the rate of 75% on new policies and 60% on "renewals." This commission-salary arrangement was entered into pursuant to an oral agreement between the Respondent and Walter Gibson of Amalex. There was never any written contract between the Respondent and Amalex, Inc. delineating the employment arrangement or the compensation which Respondent was to be provided by Amalex, Inc. in return for his "brokering" business for Amalex, Inc. There was never any written contract concerning the method of forwarding of premium payments to Amalex, Inc. This oral agreement was modified at the behest of Amalex, Inc. on or about March 19, 1982, so as to reduce the compensation of the Respondent. The Respondent's new compensation under the modified arrangement provided for a 60% draw against commissions for new business and a 50% draw against commissions on renewal business. The Respondent received payments from Amalex, Inc., totaling $5,980 as advances on commissions for times pertinent to the allegations in the Complaints. The regular course of business practice established by Amalex, Inc. with the Respondent, required the Respondent to forward premium collections within 45 days of receiving a statement or bill from Amalex, Inc.
During the period August, 1981, until December, 1981, numerous discussions and negotiations were had between the Respondent and Mr. Gibson in an effort to work out the details of the employment terms between Respondent and Amalex, Inc. Additionally, these negotiations hinged somewhat upon a proposed merger of Durham and Company and Amalex, Inc., which never occurred.
In any event, the Respondent held the good faith belief that during the period of time from August, 1981, through December, 1981, until their business relationship got successfully started, that he had been authorized by Mr. Gibson to retain all premiums on commercial lines policies written by his office. In his testimony, Mr. Gibson disagreed with the Respondent's version of their arrangement concerning business insurance premiums. There was clearly a disagreement between Gibson and Respondent as to what the terms of the Respondent's compensation were to be. In fact, the Respondent received notice no later than March 19, 1982, in a letter from Gibson to the Respondent, that indeed there was a dispute as to his compensation arrangement and the manner in which he was to remit
premium payments to Amalex, Inc. In a letter to Mr. Gibson of May 27, 1982, the Respondent reveals his recollection of the oral agreement and states it to be his belief that he was authorized to retain commercial account premiums only from September 1, 1981, through December, 1981. The letter reveals, by its content, that he was aware that Amalex, Inc. opposed his retention of commercial policy premiums, at least after December, 1981 (Respondent's Exhibit 5, in evidence). The Respondent was clearly not permitted by Amalex to retain all premiums collected on commercial policies sold by him during the entire period of their business relationship. Indeed, many of the commercial accounts were, in fact, paid when collected, in whole or in part, by the Respondent during the business relationship with Amalex which extended through most of 1982. One account, the American Legion Policy Account, eventually was paid in full by Respondent to Amalex.
The Respondent's testimony and that of his former employee, Ernest Middleton, is at odds with that of Mr. Gibson, the president of Amalex and the Respondent's own testimony, in different portions of the record, is to some extent, inconsistent. At one point the Respondent indicated that he was authorized to retain all commercial premiums for coverage of his office operating expenses. At another point, both he and Middleton testified there was an allowance of $1,200 a week from Amalex for expenses to run the office. At still another point, by way of an exhibit (Petitioner's Exhibit No. 13 in evidence), the Respondent appeared to be of the belief that the expense allowance from Amalex was to be $400 per week for operating his office. In any event, by his letter of May 27, 1982, to Amalex and Mr. Gibson, the Respondent clearly reveals it to be his belief that the authorization to retain all commercial account premiums did not extend beyond December, 1981, which arrangement is more logical since it was, in the Respondent's own words, an arrangement to cover expenses until the business "got rolling." Thus the Respondent knew no later than May 27, 1982, by his own admission, that he was expected, after December, 1981, to forward all premium payments, both on personal lines and commercial lines policies to Amalex or the policies would be cancelled. This letter, the letter of March 19, 1982, from Mr. Gibson to the Respondent, portions of the Respondent's testimony, as well as the testimony of Mr. Gibson and his employee Mary Stratton, taken together, belies the Respondent's assertion that he could retain the commercial premiums to cover his own office expenses without accounting for them and forwarding them to Amalex. Such was clearly not the case after December 31, 1981, at the very latest.
The Respondent additionally had agency contracts with Frank MacNeill and Son, Inc., a General Agent, for which concern the Respondent wrote insurance policies. These contracts
required him to forward premium collections within 30 days of receipt of them from the insured. On or about March 20, 1984, the Respondent sold to Ollie Rodgers an automobile insurance policy and collected $211 from Mr. Rodgers as a down payment and also received $428 from National Premium Budget Plan for financing the balance of the premium payment over time. Count 1 of the Administrative Complaint involves solely the Ollie Rodgers policy. That policy was brokered through Frank MacNeill and Son, Inc. This only count concerning the MacNeill business arrangement with the Respondent does not charge a general failure to remit premiums to MacNeill in violation of the agency agreements and Chapter 626, Florida Statutes. Thus, although evidence is of record concerning the Ollie Rodgers incident and several thousand dollars in disputed other premium amounts MacNeill maintains the Respondent owes it, the charge in the Administrative Complaint concerning MacNeilles and the Respondent's business arrangement, and the question concerning the withholding of premiums due MacNeill, only concerns the Ollie Rodgers' policy and account. The alleged failure of the Respondent to remit several thousand dollars in premiums owed to Frank MacNeill contained in the testimony of Petitioner's witnesses at hearing, specifically Joe McCurdy, the secretary- treasurer of Frank MacNeill and Son, Inc., is not the subject matter of any charge or allegation in the Administrative Complaint.
Mr. McCurdy testified that the Respondent had ultimately paid all monies due Frank MacNeill except for $734.23 in court costs and attorneys fees. He was the only witness testifying concerning the Frank MacNeill business arrangement and none of his testimony linked the premiums paid by Ollie Rodgers to the Respondent with any delinquent premium amount actually owed Frank MacNeill and Son, Inc. There was no testimony tying the account balance which Pennington ultimately paid MacNeill, after litigation ensued, with the Ollie Rodgers account and premium amount paid to the Respondent by Rodgers. There is no specific proof that the Ollie Rodgers account itself was unpaid by the Respondent.
From March 4, 1982, to November 9, 1982, the Respondent received premium payments from one Irving Herman in the amount of $7,161 on a commercial insurance premium account. The Respondent forwarded some of these funds to Amalex, Inc., but an outstanding balance of $2,353 remains which has not been paid by the Respondent to Amalex. The Respondent has asserted that he could lawfully retain this balance because it was a commercial account and he was authorized to keep all premiums for commercial insurance to pay his office expenses. For the reasons found above, the Respondent was not authorized to retain any commercial premium funds in his own account and in his own
business after December, 1981, as he admits himself in his letter of May 27, 1982, to Gibson of Amalex, Inc. The Respondent was required to forward all the premium payments attributable to the Herman policy, and in this instance, he forwarded only some of them, without accounting to Amalex as to why he retained the balance of the Herman premiums.
The Respondent also collected $799 in premium payments from Irving Herman on an individual insurance policy. The Respondent forwarded most of this premium to Amalex, Inc. but retained $95 of it. The business practice of Amalex was to send a monthly statement to the Respondent detailing amounts payable on new business. When a policy was sent to the Respondent for coverage he had written, an invoice was included. Additionally, Amalex and its president, Mr. Gibson, sent numerous letters to the Respondent requesting payment of the large amount of past due accounts. The premium amounts paid by Mr. Herman for his individual policy and his commercial policy to Respondent was received on behalf of his General Agent, Amalex, a substantial amount of which he failed to remit. Since the above amounts were not remitted to Amalex, Inc. by the Respondent, it can only be inferred that he used the unremitted funds for his own purposes.
On September 23, 1982, or thereafter, the Respondent collected premium payments from Joseph S. Middleton on behalf of his company, Florida Lamps, Inc., in the amount of $1,467. The Respondent remitted a portion of this to Amalex, but retained
$917.55. This premium, for insurance for that business, was collected for insurance written well after the Respondent was on notice from Amalex that he was not authorized to retain premiums collected on commercial lines or business insurance, as found above.
A monthly statement, invoice, as well as numerous letters were directed from Amalex to the Respondent requesting payment of this past due amount, to no avail. Thus, the above- referenced balance of the premiums related to the Florida Lamps, Inc. insurance policy and account were retained by the Respondent for his and his agency's own benefit and use rather than remitted to Amalex, the entity entitled to them. The Respondent failed to properly account to Amalex regarding the use of or the whereabouts of these funds.
On or about October 20, 1982, the Respondent received from Eric Gunderson, on behalf of Eric's Garage, $182, which represented the premium down payment on a garage liability policy, a type of commercial-lines insurance. About the same time, the Respondent also received $438 as the remaining balance., on the premium on this policy from the Capitol Premium Plan, Inc., a premium financing company. This premium payment
was received by the Respondent well after notice by Amalex, his General Agent, that it was not acceptable for the Respondent to retain commercial account premiums on policies written for companies for whom Amalex was General Agent. None of this premium payment was ever forwarded to Amalex, even after repeated demands for it. Rather, the premium funds were retained by the Respondent and used for other purposes.
On March 3, 1982, the Respondent sold to Citiweld Welding Supply, a package business policy including workers' compensation coverage issued by the Insurance Company of North America through Amalex, Inc., as its General Agent. The Respondent collected a total of $2,162.62 in premium payments from Citiweld. He collected those payments in six monthly installments following a down payment of $500.
The Respondent made monthly payments of $163 to Amalex, Inc., and then later monthly payments of $153. The Respondent collected a total of $2,162.62 which was $80.62 in excess of the actual premium due on the policy. This policy was not financed by a financing agreement, which might be characterized by an additional financing fee, thus the Respondent collected $80.62 in excess of the amount of premium due on the policy. The Respondent ultimately remitted to Amalex a total of $1,275.
Thus, $807 is still due and owing to Amalex by the Respondent. The Respondent, according to his own former employee, Earnest Middleton, was collecting an additional $20 a month service charge on the Citiweld account. There is no evidence that he was authorized to collect the additional $20 per month service charge, and no portion of that service charge was ever forwarded to Amalex. It was retained by the Respondent.
The fact that the Respondent was making periodic monthly payments to Amalex during this period, without the existence of a financing agreement with the insured, corroborates the position of Amalex, established by Mr. Gibson and Ms. Stratton, that there was no authority to withhold commercial account premium payments at this time, and that premiums due Amalex from the Respondent were to be paid pursuant to monthly statements or billings sent to the Respondent. Ms. Stratton's and Mr. Gibson's testimony in this regard is corroborated by the letter of March 19, 1982, to the Respondent from Gibson (in evidence), wherein he was informed that such commercial insurance business and related premiums should be billed and paid for on a monthly basis.
On or about August 31, 1981, Respondent sold a package workman's compensation policy to B & L Groceries, Inc. to be issued through Amalex, Inc., who represented the insurance company for whom the policy was written. The Respondent received
approximately $3,350 from B & L Groceries, which represented the premium on the above policies. The premium payments were not forwarded in the regular course of business to Amalex, the General Agent. On or about December 17, 1981, the Respondent sold to B & L Seafood Restaurant, Inc., a package commercial insurance policy and endorsement also issued through Amalex. The Respondent collected $2,112 premium on that policy. That premium was not forwarded in the regular course of business to Amalex.
On September 1, 1981, the Respondent sold to Parker's Septic Tank Company, a general liability and business automobile insurance policy, also issued through the General Agent, Amalex, Inc. He collected from that business approximately $2,542 as premium payment on the insurance policies. The automobile policy was cancelled thereafter, such that a total net premium of $1,056 remained due and owing to Amalex, which the Respondent failed to forward in the regular course of business.
These policies sold to B & L Groceries, B & L Seafood Restaurant and Parker's Septic Tank Company, were sold during the time when the Respondent believed that he was authorized by Amalex, Inc., and its president, Mr. Gibson, to retain premiums on all such commercial or business insurance policies to cover his office expenses, and thus it cannot be found that he willfully retained and misappropriated those premiums, although Amalex's entitlement to those premiums was later the subject of a civil action between the Respondent and Amalex, Inc., such that Amalex did demand payment of those premiums, which the Respondent failed to do.
On or about March 4, 1982, the Respondent sold to The Cypress Gallery a package business insurance policy and endorsement issued through Amalex, Inc. The Respondent collected at least $883 from The Cypress Gallery, representing the earned premium on that policy which was cancelled on July 22, 1982. He failed to forward the earned premium in the regular course of business to Amalex, the General Agent.
On March 16, 1982, Respondent sold to Eurohouse Custom Builders, Inc., fire, general liability, automobile and builder's risk policies together with several endorsements issued through Amalex, Inc. He collected premium payments on those policies in the earned amount of $1,197, although the policies were later cancelled after that amount of premium was earned by the insurance company and Amalex. He failed to forward the $1,197 earned premium to Amalex in the regular course of business.
On July 9, 1982, the Respondent sold to Byron Hood, a package commercial insurance policy and automobile policies issued through Amalex, Inc., on which the Respondent collected a
total premium amount of $1,430 from IMAC, a premium finance company. The Respondent failed to forward this premium amount in the regular course of business to Amalex, Inc.
On May 14, 1982, the Respondent sold to Jeanes Swap Shop, a package commercial insurance policy with an endorsement which was issued through Amalex, Inc., and upon which the Respondent collected and received a $314 premium. The Respondent forwarded most of the premium to Amalex, but failed to forward
$39 of it.
On or about March 31, 1982, the Respondent sold to Lawns Unlimited a commercial policy issued through Amalex, Inc. The Respondent collected and received from Lawns Unlimited $816, which represented the premium payment for that policy. This premium payment was never forwarded to Amalex in its entirety and an earned premium of $242 is still due Amalex as General Agent.
On or about July 2, 1982, the Respondent sold to Robert Lewis a package commercial insurance policy issued through Amalex. The Respondent received $500 from Lewis as a premium payment for that policy. The Respondent failed to forward $150 of that premium to Amalex.
On or about April 1, 1982, the Respondent sold to Joe Strickland a homeowners and boat insurance policy issued through Amalex, Inc. He collected a premium from Mr. Strickland in the amount of $353 which he failed to forward in the regular course of business to Amalex, the General Agent. This was a personal homeowners and marine insurance policy issued to Mr. Strickland, and the $353 premium could not possibly have been the subject of any misunderstanding concerning Respondent's retention of it for coverage of office expenses.
On April 30, 1982, the Respondent sold to "Pop-a Top Lounge" a general liability and fire insurance policy issued through Amalex, Inc. The Respondent collected a premium of $647 on that policy and failed to forward it in the regular course of business to Amalex, the party entitled to it as General Agent.
Near the end of 1982, the Respondent sold to Arnold Construction Company various endorsements on its existing business insurance coverage so as to add coverage for additional motor vehicles. That policy and the endorsements were issued through Amalex, Inc. The Respondent collected from Arnold Construction Company a premium payment in the amount of $1,302 and failed to forward it in the regular course of business to Amalex, the General Agent.
Numerous requests were made of the Respondent by Amalex, Inc. for the payment of the delinquent premiums the Respondent owed it on all outstanding accounts beginning in March, 1982.
In October, 1982, Amalex began requiring cash remissions with applications for insurance written by the Respondent. The Respondent has failed to pay the outstanding account balances representing premium trust fund payments due to Amalex, Inc., such that in excess of $18,000 in outstanding premium payments have not been remitted to that firm. It is true that two of the amounts billed and depicted on Exhibit No. 12 as constituting that approximate $18,000 outstanding premium payment amount, represent $1,368 and $174 for business written in November and December of 1981, during which time the Respondent was under the genuine belief that he had an agreement with Amalex, Inc., to retain in his office all business insurance premium payments.
Even though that is the case, and the B & L Groceries, B & L Seafood and Parker Septic Tank Co. premiums are attributable to this time period, the fact remains that the greater portion of the disputed approximate $18,000 amount remains outstanding and has never been paid by the Respondent to Amalex, Inc., the entity entitled to the funds.
The amounts collected and not remitted by the Respondent on the insurance accounts delineated above constitute trust funds held in a fiduciary capacity by the Respondent on behalf of the General Agent, Amalex, Inc., who is General Agent for the insurance companies for whom the Respondent wrote the policies.1 The Respondent thus misappropriated these trust funds by failing to remit them in a timely fashion to the General Agent, Amalex, Inc., in the regular course of business.
Although the Respondent clearly failed to properly account for and deliver the subject funds, there is no evidence to show that the Respondent was guilty of faulty record keeping in his own agency. In fact, Petitioner did not adduce any competent, substantial evidence to indicate what manner of record keeping the Respondent engaged in, good, bad or indifferent.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Section 120.57(1), Florida Statutes.
The Respondent, John Wayne Pennington, is a licensed insurance agent in the State of Florida. The Petitioner is an agency of the State of Florida, charged with applying and enforcing the provisions of the Florida Insurance Code embodied in Chapter 626, Florida Statutes, and with enforcing the
provisions therein related to the licensure and practice standards of licensed insurance agents under its jurisdiction.
There is no question that the funds collected by the Respondent as insurance premiums were trust funds held in a fiduciary capacity by the Respondent on behalf of the insurer companies who wrote the various policies of insurance involved on the above-named insured, as well as Amalex. These are fiduciary funds which must be remitted over to the insurers or other entities entitled to them. See Section 626.561(1), Florida Statutes.
Concerning Count 1 of the Complaint, it is charged that the Respondent failed to account for or forward to insurers through the General Agent, Frank MacNeill and Son, Inc., certain premium payments received by him related to the Ollie Rodgers insurance policy and premium account. This charge has not been proven inasmuch as, although the Respondent clearly sold a policy of insurance to Ollie Rodgers and collected a premium, the proof offered by Petitioner at hearing did not establish that the particular premium amount attributable to the Ollie Rodgers policy was not remitted over to the MacNeill company. Further, although testimony and evidence was adduced of amounts owed to MacNeill for premiums collected by the Respondent and allegedly not remitted over to NacNeill, there is no charge whatever in the Complaint or the Amended Complaint concerning any failure to remit premiums as to any policies sold or brokered through the MacNeill General Agency other than the single policy sold to Ollie Rodgers. See Wray v. Department of Professional Regulation, Board of Medical Examiners, 435 So. 2d 312 (Fla. 1st DCA 1983). The Petitioner's witnesses and evidence did not link the various amounts allegedly owed Frank MacNeill and Son, Inc., to the amount collected specifically from Ollie Rodgers, thus the charge in Count 1 must fail for insufficient, competent, substantial, credible evidence.
Concerning the remaining counts, after demand for payment of the premium funds collected by the Respondent by Amalex, Inc., he still refused to forward the premiums in violation of Section 626.621(4), Florida Statutes, which provides:
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.
The premium funds received by a licensed agent in the course of his business are fiduciary funds, which are funds entrusted to the agent for a specific purpose for which the agent
is charged with a special and higher duty and standard of care. In effect, the agent holds the funds on behalf of the entity rightfully entitled to them, being the General Agent in this case, or the insurer companies who write the policies themselves. Any salary or commission arrangement and entitlement the Respondent may have in such an instance is not the proper subject of an "offset" against the premium trust funds due and owing to the Respondent's General Agent or the insurance company for whom he has written the coverage. The Respondent here clearly failed to remit to Amalex, Inc., a substantial amount of premium funds collected after December, 1981, when he was clearly on notice, by his own admission in his letter of May 27, 1982, that he was no longer allowed to withhold premiums for business insurance for purposes of operating his office. He thus willfully and wrongfully withheld the premium funds attributable to this time period and misappropriated them to some unknown benefit and use of his own (probably to defray operating expenses), and failed to properly and carefully account for those funds in contravention of Sections 626.611(10), 626.621(4), 626.9541(1)(u)(2), as well
as 626.561(1), Florida Statutes. Those provisions provide as
follows:
Section 626.611 Grounds for compulsory refusal, suspension, or revocation of agent's, solicitor's, or adjuster's license or service representative's, supervising or managing general agent's, or claims investigator's permit.
(10) Misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insured or beneficiaries or to others and received in conduct of business under the license.
Section 626.621 Grounds for discretionary refusal, suspension, or revocation of agent's, solicitor's, or adjuster's license or service representative's, supervising or managing general agent's, or claims investigator's permit.
(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.
Section 626.9541 Unfair methods of competition and unfair or deceptive acts or practices defined.
(l)(u)(2) Any agent, solicitor, collector, or other person who represents any insurer or collects or does business without the authority of the insurer, secures cash advances by false statements, or fails to turn over when required, or satisfactorily account for, all collections of such insurer.
Section 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.
The Respondent has thus, by unilaterally withholding the premium funds due Amalex, Inc. after repeated demands, when he knew he was not entitled to those collected after December 31, 1981, demonstrated a lack of fitness or trustworthiness to bonafidely engage in the business of insurance, in violation of Section 626.611(7), Florida Statutes. It has not been proven that he lacks reasonably adequate knowledge and technical competence to engage in the type of transactions in the insurance industry authorized by his license and thus, to that extent he has not violated Section 626.611(8), Florida Statutes.
Further, the fact that the Respondent is currently in litigation over amounts he claims he does not owe Amalex, Inc., is no defense to the charges of mishandling fiduciary funds because they are trust funds which he was not free to use to offset alleged debts he believes were owed to him by Amalex, Inc., regarding salary or commission and the like. See, generally, Hershey v. Kennedy and Ely Ins., Inc., 294 F. Supp. 554, Affirmed 405 F.2nd 888; U. S. v. Bowen, 290 F.2d 40; Charles v. Virgin Insurance Agency v. Alabama General Insurance Co., 114 So. 2d 524. In fact, if the Respondent had felt he had a claim against Amalex, Inc., for office expense or other funds he felt were due him, he should have forwarded the premium payments as trust funds in spite of his own claim against Amalex, Inc., and then sought relief independently of the premium funds themselves, instead of withholding premium funds and then forcing the insurer or its General Agent to pursue recovery of those premium payments through civil litigation. He thus has violated Section
626.561(1), Florida Statutes and, derivatively, Section 626.621(2), Florida Statutes, which provides that it is a ground for discretionary suspension of revocation of licensure if a licensee has violated a provision of the Insurance Code embodied the various provision of Chapter 626, Florida Statutes.
The Respondent, by collecting the $20 extra charge per month on the Citiweld Welding Supply premium account has knowingly collected a sum as a premium or charge for insurance in excess of the premium or charge applicable to such insurance as established by Amalex, Inc.'s witnesses, Mr. Gibson and Ms. Stratton, as well as Petitioner's Exhibits. He has thus violated Section 626.9541(1)(o)(2), Florida Statutes, which prohibits knowingly collecting a premium or charge in excess of the premium applicable to such insurance, as fixed by the insurer. This too, is a derivative violation of Section 626.621(2), Florida Statutes.
In summary, although Count 1 as to the Ollie Rodgers policy concerning the MacNeill General Agency and amounts allegedly due that entity from the Respondent, has not been proven, to the contrary, the Respondent has been proven to have withheld for his own use for operating his office or otherwise, the major portion of the approximately $18,000 in premiums which he was charged to owe to Amalex, Inc., the general agent entitled to them. There is no question that the withholding and misappropriation of these premiums was willful in that, by the Respondent's own admission in the letter of May 27, 1982 (Respondent's Exhibit 5, in evidence) the Respondent was aware that his authorization to withhold business insurance premium amounts for purposes of using those funds to operate his office only extended through December of 1981 by the verbal agreement he had with Mr. Gibson of Amalex. There is no doubt that after that date the Respondent knew that he should have forwarded all premium payments collected to Amalex, Inc., both for business and personal lines insurance and he clearly failed to do so. In short, the competent, substantial, credible evidence of record and the above Findings of Fact reveal that the Respondent in these particulars has committed the charged violations of the above-referenced statutory authority. The remaining factual allegations and statutory violations charged were not proven. Thus, it can only be concluded that in view of the repetitive and long-standing nature of the misappropriation of premium trust funds and the failure to pay them after repeated demands by the entity entitled to them, that the above-discussed charges in the Complaint, as to the statutory provisions discussed, with the exception of Count 1, have been proven, and that 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 Respondent, John Wayne Pennington's General Lines Insurance Agent's license be suspended for a period of two years, in accordance with Section 626.641, Florida Statutes.
DONE and RECOMMENDED this 3rd day of March, 1986 in Tallahassee, Florida.
P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 3rd day of March, 1986.
ENDNOTE
1/ See Section 626.561(1), Florida Statutes.
COPIES FURNISHED:
Stephen C. Fredrickson, Esquire Department of Insurance
413-B Larson Building Tallahassee, Florida 32301
Harry A. Blair, Esquire Post Office Box 1467
Fort Myers, Florida 33902
Honorable William Gunter State Treasurer and Insurance
Commissioner
The Capitol, Plaza Level Tallahassee, Florida 32301
APPENDIX
The following specific rulings are made on the proposed findings of fact submitted by the Petitioner to the extent that the proposals actually constitute proposed findings of fact as opposed to recitations of testimony and evidence, conclusions and arguments of law.
PETITIONERS' PROPOSED FINDINGS OF FACT
Accepted.
Accepted.
Accepted.
Accepted.
Accepted.
Accepted.
Accepted as to the period after December, 1981.
Accepted.
Accepted.
Accepted, except that the second sentence is contrary to facts found in the Recommended Order and is irrelevant and unnecessary to disposition of the issues presented.
Accepted.
Accepted.
Rejected as subordinate, cumulative or unnecessary.
Contrary to facts found in the Recommended Order.
Contrary to facts found in the Recommended Order.
Contrary to facts found in the Recommended Order.
Accepted.
Accepted.
Accepted.
Accepted as to the first sentence only. The remainder of No. 20 is contrary to facts found in the Recommended Order and not supported by competent, substantial, credible evidence.
Accepted.
Rejected as subordinate, cumulative or unnecessary.
Accepted as to first sentence only. The remainder of No. 23 is contrary to facts found in the Recommended Order and not supported by competent, substantial, credible evidence.
Accepted.
Accepted.
Accepted as to first sentence only. The remainder of No. 26 is contrary to facts found in the Recommended Order and not supported by competent, substantial, credible evidence.
Accepted.
Accepted.
Accepted.
Rejected as subordinate, cumulative or unnecessary.
Rejected as subordinate, cumulative or unnecessary.
Rejected as not supported by competent, substantial, credible evidence of record.
Rejected as subordinate, cumulative or unnecessary.
Accepted.
Accepted.
Accepted except for the last sentence which is irrelevant to the charges in the Complaint at issue.
Accepted.
| Issue Date | Proceedings |
|---|---|
| Mar. 03, 1986 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Apr. 14, 1986 | Agency Final Order | |
| Mar. 03, 1986 | Recommended Order | Agent can't offset fiduciary funds (premiums) versus funds he believes parent Insurance Company owes him. Agent shows lack of fitness and charged excess premiums. Recommend two-year suspension. |
