STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF INSURANCE, )
)
Petitioner, )
)
vs. ) Case No. 85-3714
)
ROBERT NEAL GILBERT, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, a hearing was held in this cause on June 10, 1986, in Shalimar, Florida, before Diane A. Grubbs, a hearing officer with the Division of Administrative Hearings.
APPEARANCES
For Petitioner: Stephen Fredrickson, Esquire
Lauri A. Goldman, Esquire
Department of Insurance and Treasurer 413-B Larson Building
Tallahassee, Florida 32301
For Respondent: Stanley Bruce Powell, Esquire
Suite B, Bayou Executive Park
222 Government Street Niceville, Florida 32578
ISSUES
Whether, by the representation made and the actions taken in the course of respondent's business dealings with the Rigdons, the Perrys, Mr. Keller, the Willises and Mr. Stedham, respondent committed the violations alleged in the Amended Administrative Complaint, and if so, whether respondent's license should be revoked or suspended, or whether some other penalty should be imposed.
BACKGROUND
On September 25, 1985, a two-count Administrative Complaint was filed against the respondent charging in each count 22 violations of the Florida Insurance Code. On October 14, 1985,
the respondent filed a Petition for Formal Proceedings pursuant to section 120.57(1), Florida Statutes. On October 30, 1985, the matter was referred to the Division of Administrative Hearings for further proceedings.
On February 6, 1986, the petitioner moved for leave to amend the Administrative Complaint, and on February 27, 1986, the motion was granted. The Amended Administrative Complaint added three additional counts to the original complaint and added additional charges to Counts I and II.1
Counts I-IV allege that respondent made false, misleading, and deceptive statements regarding the financial condition of Old Southern Life Insurance Company (Old Southern) in an attempt to induce the insureds to replace their Old Southern policies with policies issued by Atlantic American Life Insurance Company (Atlantic American), which company respondent represented. Count I also alleges that respondent included, at additional expense, a rider to the Atlantic American policy which Mr. and Mrs. Rigdon had not requested and informed Mrs. Rigdon that the charge was in fact a seven per cent discount for paying her insurance premium annually on the policy. Count II alleges that respondent assured the Perrys that they could have nine months of the premium already paid on the Old Southern policy returned although respondent knew that the Perrys had no legal right to return of·the premium payment for the nine-month period. Count IV alleges that Mr. Willis contacted the respondent to request a refund of the premium paid on the Atlantic American policy and that the respondent wrongfully withheld from the Willises the premium monies for a period in excess of two months. Count V of the complaint alleges that respondent assured Mr. Stedham that he could get back the premiums he had already paid on a United American policy and that respondent would personally refund the money if united American would not. It further alleges that respondent knew Mr. Stedham had no legal right to return of the premium payment and that, by offering to personally refund the money, respondent offered an unlawful inducement not specified in the contract of insurance. All the counts of the complaint allege that the statements made by respondent to the insureds were for the purpose of obtaining a fee or commission from the sale of a Medicare Supplement policy to be issued by Atlantic American. Each of the five counts of the Amended Administrative Complaint charges respondent with 24 violations of the Florida Insurance Code, Chapter 626, Florida Statutes, and with violating Rule 4-46.03, Florida Administrative Code.
At the hearing, the petitioner presented the testimony of William K. Stokes, Administrative Vice-President of Old Southern;
J. B. Willis; Evalyn Rigdon; Richard M. Keller; and Marshall
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Matthew Stedham. Petitioner's Exhibit 1-15 were admitted into evidence. Respondent presented the testimony of James Lane, Regional Manager for Georgia Life and Health Insurance Company (Georgia Life), and the respondent. Respondent's Exhibits 1 and
2 were admitted into evidence.
Both parties timely filed proposed findings of fact and conclusions of law, and a ruling on each proposed finding of fact has been made in the appendix to this recommended order.
EVIDENTIARY RULING
Five days prior to hearing, the petitioner filed a Motion for Admission of the Deposition of Jack R. Perry, Sr., which requested that the deposition be admitted into evidence pursuant to Rule 1.330, Fla. R. Civ. P., on the grounds that Mr. Perry was
78 years old and lived more than 100 miles from the hearing site. The motion was argued at the hearing. Petitioner requested that judicial notice (official recognition) be taken of the fact that Graceville, Florida, the home of Mr. Perry, is greater than 100 miles from Shalimar, Florida. The request was denied, and no evidence was presented to establish that the witness lived 100 miles or more from the place of hearing. However, ruling on the admissibility of the deposition was reserved to allow the parties to present case law and arguments concerning the admissibility of the deposition pursuant to Rule 1.330(a)(3)(C), Fla. Civ. P.
Rule 1.330(a)(3)(C), Fla. R. Civ. P., reads as follows:
(3) The deposition of a witness, whether or not a party, may be used by any party for any purpose if the court finds:. . .(C) that the witness is unable to attend or testify because of age, illness, infirmity, or imprisonment. . ..
The contents of the deposition itself may be used to establish the predicate for its admissibility. Colonnades, Inc. v. Vance Baldwin, Inc., 318 So. 2d 515(Fla. 4th DCA 1975).
The deposition establishes that at the time of hearing Mr. Perry was 78 years old. He was taking sinus medication and also medication prescribed by his cardiologist. However, he had been taking heart medication for three years and had not had any problems during that time. He had not seen his doctors for a long period of time because he had been "getting along fine on this medication." Mr. Perry also stated that he had driven from Graceville to Marianna for the deposition, that he does his shopping in Dothan, and that he has many of his evening meals there. It cannot be concluded from this evidence that Mr. Perry
was infirm or ill at the time of the hearing. Thus, the only question remaining is whether Mr. Perry's deposition would be admissible solely due to his age.
Petitioner argues that age alone is a sufficient ground to admit the deposition of Mr. Perry. The undersigned has failed to find any state or federal2 cases which interpret the "age" provision of the rule, and petitioner has not referred to any.
However, the rule itself indicates that advanced age3 alone is not sufficient to establish the admissibility of a deposition. The rule requires a showing that the witness "is unable to attend or testify" due to his age or other disability. In this case, there was no evidence presented that Mr. Perry was unable to attend the hearing due to his age. Therefore, the deposition cannot be admitted into evidence under Rule 1.330(a)(3)(C), and respondent's objection to its admissibility is sustained.
Petitioner also argues, in his proposed order, that Mr.
Perry's deposition is admissible to corroborate and support other evidence regarding statements made by Mr. Gilbert concerning Old Southern's financial condition. This argument is apparently premised on the provision of Section 120.58(1)(a), Florida Statutes, which states that "[h]earsay evidence may be used for the purpose of supplementing or explaining other evidence. "
However, Mr. Perry's deposition relates only to respondent's dealings with Mr. Perry. The deposition does not supplement or explain the evidence presented at the hearing, which concerned representations made by respondent to other individuals. Since the deposition does not supplement or explain any evidence presented at the hearing, the deposition is not admissible under the provisions of Section 120.58(1)(a), Florida Statutes.
FINDINGS OF FACT
GENERAL BACKGROUND:
Respondent has been licensed as an insurance agent in Florida since 1980 and was so licensed at all times material to this cause.
Respondent has worked for American Insurance Marketers and James Lane for seven (7) years4. He represented Old Southern and Georgia Life through June of 1983. He resigned from Old Southern and Georgia Life effective July 1, 1983, and began working for Atlantic American. Atlantic American had developed a new Medicare supplement policy in April of 1983, and respondent began selling those policies in Florida in October or November of
2
3
4
1983.
RESPONDENT'S DEALING WITH MRS. RIGDON:
In April of 1983, Mrs. Evalyn R. Rigdon and her husband purchased an Old Southern Medicare supplement policy from respondent. Mrs. Rigdon had talked to respondent's aunt and thought the Old Southern policy sounded good. When the Ridgons purchased the policy they also purchased the "immediate benefit rider."
In 1984, just before the Old Southern policy would expire, Mrs. Rigdon received a call from respondent's aunt. The aunt began downgrading Old Southern. She said that they were going broke and not living up to their promises. This conversation caused Mrs. Rigdon to lose some confidence in Old Southern.
Subsequent to the conversation with respondent's aunt, Mrs. Rigdon met with respondent. Respondent informed Mrs. Rigdon that Old Southern was in financial trouble and showed her a newspaper clipping concerning a law suit against Old Southern. Respondent did not state that Old Southern was going bankrupt. Respondent advised Mrs. Rigdon that Atlantic American was a better company with assets much greater than those of Old Southern. He told her that the benefits under the Atlantic American policy were better. Mrs. Rigdon asked whether there would be a discount for paying cash for the policy, and respondent advised her that there would not be.
On March 12, 1984, the Rigdons purchased an Atlantic American Medicare supplement policy from respondent to be issued April 1, 1984. The Rigdons Old Southern policy remained in effect through April 14, 1984.
The Rigdons purchased a "preexisting reduction rider" (PRR) along with the policy. The rider cost an additional
$96.32. The PRR is equivalent to the immediate benefit rider that the Rigdons purchased with their Old Southern policy. It provides for payments for preexisting conditions after thirty
(30) days from the effective date of the policy, rather than the 6-month waiting period that is required for preexisting conditions under the terms of the policy. Although Mr. Rigdon was in excellent health and had no preexisting condition as defined by the policy, Mrs. Rigdon was on medication for a preexisting condition.
Respondent explained the immediate benefit rider to Mrs. Rigdon and explained that the $96.32 charge for the rider was a one time charge that would not be included in future premiums.
He also explained that there was a one time application fee of
$20.00 that would not be included in future premium charges. The rider and the application fee added $116.32 to the annual premium fee. There was no evidence that the Rigdons were overcharged on their premium payment.
Mrs. Rigdon admitted that she was confused when she purchased the Atlantic American policy. She stated that respondent "must have" informed her of the immediate benefit rider, although she could not recall what he said. The Rigdons did not rely on respondent's statements regarding the financial situation of Old Southern in making their decision to purchase the Atlantic American policy. The Rigdons had already decided to purchase a Medicare supplement policy with a company other than Old Southern prior to respondent's representations. Indeed, Mrs. Rigdon had already purchased another Medicare supplement policy with a different company to replace the Old Southern policy prior to purchasing the Atlantic American policy.
Immediately after respondent left her house, Mrs. Rigdon called the agent who had sold her the Medicare supplement policy which would replace the Old Southern policy. After discussions with the agent, Mrs. Rigdon decided to keep that policy and cancel the Atlantic American policy. The Rigdons received a full refund of the premium paid to Atlantic American.
Mrs. Rigdon's major complaint against the respondent was that he would not give the Rigdons a discount for paying the full year's premium in advance. She felt that he was being dishonest for not providing a discount.
RESPONDENT'S DEALINGS WITH THE PERRYS:
There was no evidence presented that respondent sold the Perrys an insurance policy. Respondent admitted talking with Mr. Perry. Respondent told Mr. Perry that he could read a Wall Street Journal article which discussed the financial problems of Blue Cross, but he did not tell him that Blue Cross and Blue Shield was going broke. He also advised the Perrys that they would have to write Old Southern to find out if they could get a refund of the premiums they had paid.
RESPONDENT'S DEALINGS WITH MR. KELLER:
Mr. Keller originally purchased an Old Southern Medicare supplement policy from respondent covering his mother- in-law, Mrs. Drozd, in 1982. The policy was renewed in November of 1983.
Shortly before the renewal date in 1984, respondent contacted Mr. Keller at his place of business. There was some conversation about the financial difficulties of Old Southern and lawsuits against the company. Respondent showed Mr. Keller some newspaper articles about the lawsuits. Respondent informed Mr. Keller that Atlantic American offered better benefits than Old Southern.
As a result of the conversation with respondent, Mr. Keller purchased an Atlantic American Medicare supplement policy for his mother-in-law effective October 1, 1984. The primary reason Mr. Keller determined to switch policies was respondent's comments about the financial condition of Old Southern. Mr. Keller felt that from the conversation with respondent it might be inferred that Old Southern might become insolvent.
There was no evidence presented as to what exactly respondent told Mr. Keller about the financial condition of Old Southern. However respondent admitted saying that Old Southern was in financial difficulty.
RESPONDENT'S DEALINGS WITH THE WILLISES
The Willises initially obtained a Georgia Life Medicare supplement policy from respondent's agency in June of 1982. In May of 1985, the respondent contacted Mr. Willis about the purchase of an Atlantic American policy. The Willises still had their policy with Georgia Life, and Mr. Willis told respondent that they were not very interested in purchasing a different policy but would listen to what the respondent had to say.
Respondent informed Mr. Willis that Georgia Life was going to discontinue doing business in Florida and that, although Georgia Life could not cancel policies that had been issued, it could raise the premiums to the point that the policyholders would have to drop the insurance.
Mr. Willis was informed that the Atlantic American policy provided better benefits than the Georgia Life policy. Respondent explained that the Atlantic American policy was a 100% Medicare supplement and that it would pay 100% of the approved amount in addition to Medicare's 80% payment. Mr. Willis interpreted respondent's representations concerning Atlantic
American's policy benefits to mean that Atlantic American would pay all of the medical expenses that Medicare didn't pay.
Due to respondent's representations about Georgia Life and Mr. Willis's understanding of the benefits offered, the Willises purchased an Atlantic American policy from respondent. However, when Mr. Willis received the policy from Atlantic American, apparently in the last days in June, he decided that the policy was no better than the Georgia Life policy because it would not pay for a medical bill that Medicare did not approve.5 Mr. Willis did not believe that respondent had necessarily tried to cheat him or mislead him as to the benefits offered by Atlantic American, but felt that there had been a complete misunderstanding as to the terms of the policy.
Because Mr. Willis was not satisfied with the terms of the Atlantic American policy, he sent the policy back to Atlantic American sometime in late June or the first part of July. Respondent advised Mr. Willis of the procedure to follow to get a refund. Mr. Willis wrote two letters to the company about his refund, but he didn't get a reply. He called respondent who informed him that he would eventually get his money and that he was covered with the insurance until he got his refund.
Mr. Willis received a complete refund of his policy premium from Atlantic American on September 4, 1985, after he had complained to the Department of Insurance about the delay in receiving his money. The refund was sent directly from the American Insurance Marketer's office in Montgomery, Alabama, to Mr. Willis and was not sent to the respondent to give to Mr. Willis. A letter from Ron Hadden, the vice-president of American Insurance Marketers, to counsel for the Department of Insurance, to which is attached a computer print-out constituting the business record concerning Mr. Willis's policy, indicates that a check was sent to respondent in July. The letter states, "As you can see from the print-out, our office sent a check to Mr. Gilbert on July 18, 1985; and then, due to Mr. Willis' indecision, made the refund directly to him on September 4, 1985." It is not at all clear from the computer print-out that the check sent to respondent was for the full refund of Mr. Willis' premium payment. Indeed, from the print-out it would appear that the check of July 18, 1985, was in the amount of
$642.32, whereas Mr. Willis's refund was $1,877.52. Further, it
cannot be found from respondent's testimony that he received a refund check for Mr. Willis. Respondent's testimony, in essence, was simply that he did not dispute the accuracy of the information provided by Mr. Hadden. Therefore, there is no
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competent evidence that respondent ever had in his possession a refund check for Mr. Willis.
However, the evidence shows that respondent may have been instrumental in causing a delay in the refund. Respondent testified as follows concerning the refund:
When a person first requests a refund, we don't just sent (sic) them I don't just go ahead and tell the Home Office to send the money and refund them. The first and the thing that makes sense to do is you try to conserve the business. That's why I talked to Mr. Willis two or three different times and he was undecided two or three different times and the last time I talked to him, when he made his final decision, then the money was refunded, gross refunded from the Home Office to him...
However, from the evidence presented, it is apparent that Mr. Willis was not at all undecided about keeping the Atlantic American policy. In fact, Mr. Willis had paid the renewal premium on his Georgia Life Policy to keep it in effect because he had decided not to keep the Atlantic American policy.
RESPONDENT'S DEALINGS WITH MR. STEDHAM:
Respondent talked with Mr. Stedham in May of 1985 about purchasing an Atlantic American Medicare supplement policy. At that time Mr. Stedham had just taken out a Medicare supplement policy with United American. Respondent asked Mr. Stedham how long it had been since he had applied for the United American policy, and Mr. Stedham told him that he wasn't sure, that it had been about a month. Respondent advised Mr. Stedham that he had
30 days from the receipt of the policy in which to cancel it, and that he could then get a full refund of the money paid to United American. Mr. Stedham asked respondent what would happen if United American would not refund the money, and respondent informed him that he could then get a refund for the premium paid to Atlantic American.
Based on respondent's representation that he could either yet a refund on the United American policy or he would receive a refund on the Atlantic American policy, Mr. Stedham purchased the Atlantic American policy on June 19, 1985. He requested a refund from United American on June 24, 1985. However, United American refused the request because the refund was requested after the thirty-day examination period. Mr. Stedham then requested a refund on the Atlantic American policy
which he received.
Mr. Stedham had no complaint with the Atlantic American policy, and he would have kept it if he had been able to get a refund on the United American policy. Mr. Stedham's only complaint was that it took longer than he thought it should to get his refund from Atlantic American.
FINANCIAL CONDITION OF OLD SOUTHERN AND GEORGIA LIFE:
In March of 1984, respondent advised Mrs. Rigdon that Old Southern was in serious financial trouble and they were not living up to their promises. He also showed her a newspaper clipping about a law suit brought against Old Southern. Mrs. Rigdon admitted that she could not remember exactly what respondent had said, just that they were in trouble and "going down". Mrs. Rigdon did recall that respondent did not say that Old Southern was going bankrupt. Respondent spoke with Mr. Keller in September of 1984 at which time respondent talked about the financial difficulties of Old Southern and law suits against the company. Mr. Keller did not state what respondent specifically said. Mr. Keller also was shown a newspaper clipping about suits against Old Southern. Respondent never informed Mr. Keller that Old Southern was or might become insolvent, although Mr. Keller indicated that "[t]here were conversations that might imply that."
At the time of the conversations with Mr. Keller and Mrs. Rigdon, respondent was aware of the content of the annual reports issued by Old Southern in 1982 and 1983. The 1984 annual report had not yet been issued. The "Financial Highlights" section of the 1982 annual report showed that there was a net operating loss of $299,150 for 1982. The 1983 annual report showed a net operating loss of $142,672.6
Old Southern was involved in several lawsuits, and in March of 1984 a jury awarded a $2,500,000 verdict against Old Southern because one of its agents represented, without authorization, that the Old Southern policy would pay everything Medicare did not pay. Prior to the award being reduced to judgment, the case was settled for $300,000. In 1985, a judgment was entered against Old Southern for one and one half million dollars. That judgment is currently on appeal. Obviously, these lawsuits were a financial burden to Old Southern. In the 1983 annual report, the president or Old Southern made the following statement:
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[W]e were a victim of litigation that became a burden to us in 1983 and into 1984. It is expected that this will continue to plague us and other companies as long as the courts and the legislature continue to expand their theories of liability and allow juries unlimited discretion of making punitive damage awards. Unfortunately, juries can become impassioned and prejudiced in making awards, particularly when an insurance company and an individual are adversaries.
This places insurance companies in a very precarious position in that failure to pay what appears to be a meritless claim can leave a company open to millions of dollars of damage and a potentially disastrous position for all of its Policyholders and employees. We hope and pray that this unpleasant atmosphere improves in the future.
It is quite clear from the remarks of the president, that Old Southern considered the lawsuits against it to be a financial burden which would continue to affect the financial outlook of the company.
The entire tenor of the president's message in the 1983 annual report would certainly indicate that Old Southern had financial problems. The president began his report by stating:
In my remarks at the Stockholders Meeting last April 1983, I felt that the problems of 1982 would subside and that 1983 would be a banner year. I must admit at this point I was wrong. The continued high volume of potentially risky business continued through most of 1983, causing higher claim losses and continued increases in the reserves for Policyholders.
The fact that Old Southern was experiencing financial difficulties is emphasized by the portion of the president's message which discusses the "corrective measures" that had to be implemented. In the 1983 annual report, the president announced that the following measures had been taken:
New health business has been curtailed by over 50%. Agency contacts were reduced, premium increases on all H&A policies were made where possible. High claim and
potential trouble areas were eliminated. All health products were removed from the Alabama market. Stiffer underwriting guidelines were announced and an overall cost of operation reduction in both Home Offices has been directed to management.
During the last six months of 1983, Old Southern informed their agents in the field that they would have to quit writing policies on an annual premium basis. Putting up the reserves required for such policies would have been extremely difficult for Old Southern due to its financial situation.
Respondent was aware of the annual reports issued in 1982 and 1983, he was aware of the lawsuits against Old Southern, he was aware that Old Southern had instructed its agents not to write any more annual premium policies, he was aware that Old Southern owed him approximately $30,000 in back renewals, and he was aware of several claims that had taken four or five months before being settled. Given these facts, it was not unreasonable for respondent to conclude that Old Southern was experiencing financial difficulties. Indeed, Mr. James Lane, the regional manager for Georgia Life, testified that respondent was not alone in his belief that Old Southern had financial problems. Mr. Lane stated:
We had a lot of agents that thought we was going broke. It was common knowledge.
Everybody thought Old Southern was going broke, which was not true, but the agency force thought that. . .
Although financial statements of Old Southern do not indicate that Old Southern was going bankrupt or was insolvent, there is certainly sufficient evidence to conclude that Old Southern was experiencing financial difficulties during the years 1982 and 1983. Respondent did not inform either Mrs. Rigdon or Mr. Keller that Old Southern was going bankrupt or was insolvent. Respondent stated that Old Southern had financial problems, which was obviously true. He also advised Mrs. Rigdon that Atlantic American had assets greater than those of Old Southern. There was no evidence presented to show that this statement was not true.
Respondent talked to Mr. Willis in May of 1985. He informed Mr. Willis that Georgia Life was going to discontinue doing business in Florida and that it could raise its premiums to the point that current Policyholders would have to drop their insurance. Although Old Southern and Georgia Life had discontinued issuing policies in Alabama, there was never any
intention on the part of Georgia Life to discontinue doing business in Florida. Indeed, 1984 had been a very good year for Georgia Life and for Old Southern. There was absolutely no basis for respondent's representation that Georgia Life would discontinue doing business in Florida.
BENEFITS UNDER ATLANTIC AMERICAN AND OLD SOUTHERN POLICIES:
Part A of the Old Southern policy and Part A of the Atlantic America policy are similar. Old Southern pays $10 per day for a private room, and $20 per day for a private nurse, whereas Atlantic American does not; Atlantic American pays 100% of the first three pints of blood, whereas Old Southern only pays up to $25 per pint of blood. Atlantic American pays 100% of the ambulance charge and Old Southern pays less than 100% of the ambulance charge. Depending upon the needs of the individual, it would be difficult to say that Atlantic American's policy was greatly superior to Old Southern's policy insofar as Part A is concerned.
However, the Atlantic American policy is superior to the Old Southern policy as to the benefits paid under Part B. Under Part B, Old Southern pays 20% of the amount approved by Medicare, up to a limit of $5,000 per year. Atlantic American pays 100% of the amount approved by Medicare without any calendar year limitation. For example, if a policyholder has a $1,000 doctor bill, of which Medicare approves $600, Medicare would pay 80% of $600, or $480. Under the Old Southern policy the policyholder would receive 20% of the $600, or $120. Under the Atlantic American policy, Medicare would pay $480, and Atlantic American would pay $520. In other words, under the Old Southern policy, the policyholder would still owe $400 after receiving benefits under the policy; the Atlantic American policyholder would owe nothing.
Although the Atlantic American policy costs more than the Old Southern policy, there was no evidence presented that the additional cost of the policy was excessive considering the additional benefits provided. Regardless of the additional cost of the policy, it is clear that the Atlantic American policy did offer better benefits than the Old Southern policy. In fact, due to market pressures, Old Southern came out with a new policy in 1985 which paid better benefits under Part B.
RESPONDENT'S REPUTATION IN THE INDUSTRY AND PRIOR DISCIPLINARY PROCEEDINGS:
The respondent has a good reputation as an insurance salesman and agent, and he has a very good reputation for truth and veracity. The respondent has worked for Mr. Lane for seven years, and the current charges constitute the only complaints filed against respondent that Mr. Lane is aware of.
On September 1, 1983, the Department of Insurance filed an Administrative Complaint against respondent. On March 7, 1984, a consent order was entered which adopted a settlement stipulation entered into by respondent and the Department. In the settlement stipulation, respondent admitted that he operated a place of business in Florida conducting business as a health insurance agency while only maintaining qualifications and/or licensure as a non-resident agent in violation of Section 626.835(3), Florida Statutes. Respondent was placed on probation for a period of 12 months from the date of entry of the consent order and was fined $500. Respondent's probationary period ended on March 7, 1985.
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.
Section 626.611, Florida Statutes, sets forth the grounds for compulsory suspension or revocation of the license of any insurance agent. Section 626.621, Florida Statutes, authorizes the Department to suspend or revoke, in its discretion, the license of any agent for the grounds set forth in that section, and for which suspension or revocation is not mandated under Section 626.11. Section 626.621(6) specifically authorizes disciplinary action to be taken against any agent engaging in unfair methods of competition as prohibited under part VIII of Chapter 626. Part VIII includes Section 626.9541 which sets forth unfair methods of competition and unfair or deceptive acts.
Based on the factual allegations set forth in the Amended Administrative Complaint, respondent was charged in each count of the five-count complaint with numerous violations of Section 626.11 and Section 626.621, Florida Statutes.
COUNT 1
Under Count 1 of the complaint, respondent was charged with making "false, malicious, and disparaging comments regarding
Old Southern by stating that Old Southern was not paying policyholders what they had promised; that Old Southern was in bad shape financially and that the company was going down (failing)." The evidence presented at the hearing showed that many of the statements concerning Old Southern made to Mrs.
Rigdon were not made by respondent but were made by respondent's aunt. However, respondent did inform Mrs. Rigdon that Old Southern was in financial trouble and showed her a newspaper clipping concerning a law suit against Old Southern. Further, the evidence showed that at the time the statements were made, old Southern was in financial difficulty and was financially burdened by law suits against it.
Count 1 also alleges that respondent "falsely stated and misrepresented" to Mrs. Rigdon that an alleged $116.32 overcharge was in fact a seven (7) percent discount for paying her insurance premium annually. . ." The evidence, however, showed that respondent's specifically informed Mrs. Rigdon that she was not entitled to a discount for paying her insurance premium annually, and the fact that she was not entitled to a discount was Mrs. Rigdon's major complaint against the respondent. The evidence also showed that there was no overcharge and that the $116.32 payment was for an immediate benefit rider and an application fee. Although Mrs. Rigdon could not remember specifically requesting the rider, the evidence showed that respondent did explain the rider, that Mrs. Rigdon had a preexisting condition, and that the Rigdons had an immediate benefit rider with their previous policy.
Mrs. Rigdon admitted that she was confused during respondent's sales presentation and stated that she could not remember specifically what respondent said about Old Southern's financial condition. Further, the evidence showed that the Rigdons did not rely on any of the statements relating to Old Southern's financial condition.
There was no competent substantial evidence to support the factual allegations alleged in Count I, and the facts as found do not support any of the charges alleged in the Administrative Complaint. Therefore, Count I of the Administrative Complaint should be dismissed.
COUNT II
Count II of the complaint alleges that respondent "falsely and maliciously represented to the Perrys that Old Southern was going bankrupt and that they would have no insurance coverage if they maintained their existing policy with Old Southern." Count II also alleges that respondent told the Perrys that Blue Cross and Blue Shield Insurance Company was going
broke. It further alleges that respondent assured the Perrys that they "could have returned nine (9) months of the premium already paid on her policy with Old Southern."
There was no competent substantial evidence presented to support any of these factual allegations, and the facts as found do not constitute any of the violations alleged in the Amended Administrative Complaint. Therefore, Count II of the Amended Administrative Complaint should be dismissed.
COUNT III
Count III alleges that respondent made false and misleading statements to Mr. Keller regarding Old Southern "by stating that Old Southern was in financial trouble and due to law suits being filed, [respondent] stated or implied that Old Southern might become insolvent." The count further alleges that the statements were made for the purpose of inducing Mr. Keller to replace his Old Southern policy with a policy issued by Atlantic American. The evidence presented at the hearing showed that respondent told Mr. Keller that Old Southern was in financial difficulties and that he showed Mr. Keller a newspaper article concerning a law suit against Old Southern. There was no competent substantial evidence presented to show that respondent made any false or misleading statements to Mr. Keller concerning Old Southern's financial condition. He did not state or imply that Old Southern might become insolvent. It cannot be concluded that by saying that Old Southern was in financial difficulty and by showing Mr. Keller an article concerning a law suit respondent implied Old Southern might become insolvent. Although Mr. Keller testified that "[t]here were conversations that might imply [that Old Southern might become insolvent]", Mr. Keller's only statement regarding the specifics of any conversation was that "there was some conversation about the Old Southern financial problem and some suits pending and whatever against Old Southern that may have questioned their financial abilities."
As there was no competent substantial evidence presented from which to find that respondent made any false or misleading statements to Mr. Keller, or stated or implied that Old Southern was or might become insolvent, the factual allegations set forth in Count III have not been proved. Further, the facts proved in relation to Count III do not constitute grounds for disciplinary action under any of the violations alleged. Therefore, Count II of the complaint should be dismissed.
COUNT V
Count V alleges that respondent assured Mr. Stedham that he could have returned the full amount of the premiums already paid on his policy with United American or that he, respondent, would personally refund the money if United American would not. The evidence presented showed that respondent advised Mr. Stedham that he might be able to obtain a refund on his United American policy because it was not clear that the thirty- day examination period had expired and that respondent stated Atlantic American would refund the premium paid for the Atlantic American policy if Mr. Stedham was unable to obtain a refund from United American. There was no evidence that respondent offered to personally refund any money.
In that there was no competent substantial evidence presented at the hearing to support the charge set forth in Count V, Count V should be dismissed.
COUNT IV
Count IV alleges that respondent made false and/or misleading statements regarding Georgia Life by stating that Georgia Life was planning to get out of the Medicare supplement Insurance business in Florida and was planning to enact substantial rate increases. Count IV also alleges that respondent falsely stated and mislead the Willises to believe that Atlantic American's policy would cover anything that Medicare did not pay or cover. The count also alleges that respondent wrongfully withheld the Willises' premium money in excess of two months and that respondent "misappropriated, converted, withheld and/or diverted for [his] own personal use monies forwarded to [respondent] in a fiduciary capacity by [the Willises] . . . and failed to return said monies, upon cancellation of above-referenced policies. . ."
There was competent substantial evidence presented that respondent informed Mr. Willis that Georgia Life was going to discontinue doing business in Florida and that, although it could not cancel policies already issued in Florida, Georgia Life could raise its premiums to the point that policyholders would have to drop their insurance. The statement that Georgia Life was planning to discontinue doing business in Florida was false and there was absolutely no basis for such representation by respondent. Based on respondent's representation, the Willises decided to let their Georgia Life policy lapse and purchase an Atlantic Aterican policy from respondent.
There was no competent substantial evidence that respondent falsely stated or mislead the Willises to believe that
the Atlantic American policy would cover anything that Medicare would not pay or cover. Although Mr. Willis was under the impression that the Atlantic American policy would pay all of the expenses that Medicare didn't pay, there was insufficient evidence to support a finding that respondent had misrepresented the terms of the Atlantic American policy.
There was absolutely no evidence presented that respondent withheld the premium monies paid by the Willises for the policy or that respondent misappropriated, converted, withheld or diverted for his own personal use any monies given to him by the Willises. There was absolutely no evidence that respondent did anything with the premium payment other than forward it to Atlantic American along with the Willises' application. Although the evidence shows that there was some delay in returning the Willises' refund, and that such delay might have been caused in part by respondent's attempt to change Mr. Willis' mind about cancelling the policy, there was no evidence that respondent ever had in his possession Mr. Willis' refund.
Based on the factual allegations set forth in Count IV, respondent was charged with the following violations and grounds for discipline:
Lack one or more of the qualifications for a license or permit as specified in the Insurance Code. (Section 626.611(1), Florida Statutes)
Willfully, under your license, circumvented the prohibitions of the Insurance Code. (Section 626.611(4), Florida Statutes)
Willfully misrepresented any insurance policy or annuity contract or were willfully deceptive with regard to any such policy or contract, done either in person or by any form of dissemination of information or advertising. (Section 626.611(5), Florida Statutes.)
Demonstrated a lack of fitness or trustworthiness to engage in the business of insurance. (Section 626.611(7), Florida Statutes)
Demonstrated a lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or permit. (Section 626.611(8), Florida Statutes)
Engaged in fraudulent or dishonest practices in the conduct of business under the license or permit. (Section 626.611(9), Florida Statutes.)
Misappropriated, converted or unlawfully withheld monies belonging to insurers, insureds, beneficiaries or others received in the conduct of business under your license. (Section 626.611(10), Florida Statutes.
Willfully failed to comply with, or willfully violated any proper order or rule of the Department or willfully violated any provision of this Code. (Section 626.611(13), Florida Statutes.
Violated a provision of the Insurance Code. (Section 626.621(2), Florida Statutes).
Violated an order, rule or regulation of the Department. (Section 626.621(3), Florida Statutes.)
Violated the provisions against twisting, as defined in Section 626.9541(1)(1), Florida Statutes. (Section 626.621(5), Florida Statutes).
Engaged in unfair methods of competition or in unfair or deceptive acts as prohibited under Part VIII of this Chapter. (Section 626.621(6), Florida Statutes).
Have shown yourself to be a source of injury or loss to the public or detrimental to the public interest. (Section 626.621(6), Florida Statutes)
Modified or altered a provision of a policy contrary to an express provision in the policy prohibiting such an act. (section 627.460, Florida Statutes).
Contrary to Sections 626.9521 and 626.621(6), Florida Statutes, engaged in unfair methods of competition or in unfair or deceptive acts or practices which are prohibited under Part VIII of Chapter 626 specifically: (Section 626.9521, Florida Statutes).
Made, issued, circulated or caused 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. (Section 626.9541(1)(a)(1), Florida Statutes)
Knowingly made, issued, circulated or caused to be made, issued or circulated an estimate, illustration, circular, statement, sales presentation, omission, or comparison which was a misrepresentation for the purpose of inducing or tending to induce the lapse, forfeiture, exchange, conversion or surrender of an insurance policy (Section 626.9541(1)(a)(6), Florida Statutes)
Made, published, disseminated, circulated or placed before the public or caused, directly or indirectly, to be made, published, disseminated, circulated or placed before the public an advertisement, announcement or statement with respect to the business of insurance, which is untrue, deceptive or misleading. (Section 626.9541(1)(b), Florida Statutes)
Knowingly filed with a supervisor or other public official, or made, published, disseminated, circulated, delivered to any person, or placed before the public, or caused, directly or indirectly to be filed with a supervisor or other public official, or made, published, disseminated, circulated, delivered to any person or placed before the public any false material statement.
(Section 626.9541(1)(e), Florida Statutes).
Knowingly made a false material statement. (Section 626.9541(1)(e), Florida Statutes).
Made false or fraudulent statements or representations on, or relative to, an application for an insurance policy for the purpose of obtaining a fee, commission, money or other benefit from any insurer, agent, broker or individual. (Section 626.954(1)(k)(1), Florida Statutes.)
Knowingly mane a false or fraudulent statement or representation in, or with reference to, any application or negotiation for insurance. (Section 626.9541(1)(k)(2), Florida Statutes.)
Knowingly made misleading representations or incomplete or fraudulent comparisons of any insurance policies or insurers for the purpose of inducing or tending to induce, a person to lapse, surrender, terminate, retain, pledge, assign, borrow on, convert, or forfeit an insurance policy or to take out a policy of insurance in another insurer. (Section 626.9541(1)(1), Florida Statutes.)
Made a misrepresentation or incomplete comparison by the insurance company or agent, by conversion or omission, for the purpose of inducing Medicare eligible persons to purchase, amend, lapse, forfeit, non-renew, change, duplicate coverage already in force, replace a policy that is only technically at variance with the policy or policies being offered, or otherwise surrender existing insurance. (Rule 4-46.04(3), Florida Administrative Code)
Violated the Policyholders' Bill of Rights. (section 626.9641, Florida Statutes).
Several of the charges listed are redundant or do not constitute separate grounds for discipline. For example, paragraph (1) and
(o) charge the same violation and are dependent upon proof of the acts alleged in paragraphs (p) through (w) to show a violation has occurred. Paragraphs (p) through (w) are not separate
violations but list only those acts set forth in Section 626.9541, Florida Statutes, which constitute unfair or deceptive practices. Paragraph (y) does not allege a ground for discipline since Section 626.9641 merely sets forth standards to be followed by the Department of Insurance in exercising its powers and duties.
By falsely representing to the Willises that Georgia Life was going to discontinue doing business in Florida and by implying that Georgia Life would get rid of its current Florida policyholders by increasing its premiums, respondent is guilty of "engaging in unfair methods of competition or unfair and deceptive acts or practices, as prohibited under Part VIII of [Chapter 626]", as alleged in paragraphs (1) and (o) of County
IV. Specifically, respondent committed those acts set forth in paragraph (q), (s) and (t) and (w).7 He knowingly made a sales presentation which was a misrepresentation for the purpose of inducing the lapse, forfeiture, change, conversion, or surrender of insurance policy, Section 626.954(1)(a)(6); he knowingly made a false material statement, Section 626.9541(1)(e); and he knowingly made a misleading representation regarding an insurer for the purpose of inducing persons to lapse, forfeit, surrender, terminate or convert their insurance policy, Section 626.9541(1)(1). The commission of those acts constitutes grounds for discipline under Section 626.621(6). Further, committing the act set forth in Section 626.9541(1)(1), Florida Statutes, constitutes grounds for discipline not only under Section 626.621(6), Florida Statutes, but is a specific and separate ground for disciplinary action under Section 626.621(5), Florida Statutes, as charged in paragraph (k).
By his conduct, respondent has also violated Section 626.611(7) and (9), Florida Statutes, by demonstrating a lack of trustworthiness to engage in the business of insurance and by committing fraudulent or dishonest practices in the conduct of business under his license, as charged in paragraphs (d) and (f). Under paragraph (h), respondent is charged with willfully violating a provision of the code, which is a ground for discipline under Section 626.611(13), and is charged in paragraph
(i) with violating a provision of the code, which is a ground for discipline under Section 626.621(2), Florida Statutes. However, these charges do not specify the provision of the code violated by respondent. Therefore they cannot stand as separate and independent grounds for disciplinary action. The charges set forth in paragraph (m) do not set forth separate grounds for discipline because, although respondent committed acts prohibited under part VIII of Chapter 626, he has not "otherwise shown himself to be a source of injury or loss to the public." Section
7
626.621(6), Florida Statutes.
In summary, respondent was charged with 25 violations or grounds for discipline under Count IV of the Administrative Complaint. He is subject to discipline pursuant to Section 626.621(6), as alleged in paragraph (o), for committing those acts specified in paragraphs (q), (t), and (w). He is subject to discipline pursuant to Section 626.621(5), as alleged in paragraph (k), for committing the act set forth in paragraph (w). Further, his actions constitute grounds for disciplinary action pursuant to Section 626.611(7) and (9), Florida Statutes, as alleged in paragraphs (d) and (f). The charges set forth in paragraph (a), (b), (c), (e), (g), (h), (i), (j), (m), (p), (r), (u), (v), (x), and (y) should be dismissed.
Based on the foregoing findings of fact and conclusions of law, it is
RECOMMENDED that a final order be entered dismissing Counts I, II, III, and V of the Amended Administrative Complaint, finding that respondent violated Sections 626.611(7) and (9), Florida Statutes, and Sections 626.621(5) and (6), Florida Statutes, as alleged in Count IV, and suspending respondent's license for a period of six (6) months.
DONE and ENTERED this 29th day of September, 1986, in Tallahassee, Florida.
DIANE A. GRUBBS, 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 29th day of September, 1986.
ENDNOTES
1/ Each count involved alleged similar violations but concerned different individuals. Count I involves respondent's dealings with the Ridgons; Count II, the Perrys; Count III, Mr. Keller; Count IV, the Willises; and Count V, Mr. Stedham.
2/ Rule 32(a)(3)(C), Fed. R. Civ. P. contains language identical to Rule 1.330(a)(3)(C), Fla. R. Civ. P.
3/ It is questionable whether the rule's reference to age even means advanced age. It is perhaps more reasonable to assume that "age" was included in the rule to cover children.
4/ James Lane is the president of American Insurance Marketers and Mortgage Company and the regional manager of Georgia Life. Georgia Life is a wholly owned subsidiary of Old Southern, and the Georgia Life and Old Southern policies are identical.
American Insurance Marketers represents Old Southern, Georgia Life, and Atlantic American, although respondent represented only Atlantic American after June of 1983.
5/ From Mr. Willis's testimony it is somewhat unclear whether he thought the policy would pay no more than the difference between the approved amount and the amount Medicare would pay on the approved amount, i.e., 20% of the approved amount, or whether he understood that the policy would pay 100% of the approved amount in addition to Medicare's payment. However, it is apparent from his testimony that prior to receiving the policy he believed that Atlantic American would pay anything that Medicare would not pay for and that after reading the policy he understood that was not the case.
6/ These figures reflect the combined figures for both Old Southern and Georgia Life, its wholly owned subsidiary. In 1982, Old Southern had a net gain from operations of $113,047, but Georgia Life had a net loss of $412,797. In 1983, Old Southern lost $323,214 and Georgia Life had a profit of $180,542.
7/ Paragraphs (s) and (t) allege the same unfair practice
COPIES FURNISHED:
Honorable William Gunter Department of Insurance and
Treasurer
The Capitol, Plaza Level Tallahassee, Florida 32301
Stephen Fredrickson, Esquire Lauri A. Goldman, Esquire Department of Insurance and
Treasurer
413-B Larson Building Tallahassee, Florida 32301
Stanley Bruce Powell, Esquire Suite B, Bayou Executive Park
222 Government Street Niceville, Florida 32576
APPENDIX
The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case.
Rulings on Proposed Findings of Fact Submitted by the Petitioners
1. Accepted Paragraph 1, except as to type of license which was not shown by petitioners' Exhibit No. 1.
2-4. Accepted in paragraph 39.
5-7. Accepted in paragraph 6.
Accepted as stated in paragraph 5.
Rejected as not supported by competent substantial evidence (CSE)-(lst sentence).· Second sentence rejected as irrelevant, but accepted that Mrs. Rigdon was confused in paragraph 9.
Rejected as stated in paragraph 8.
Accepted in paragraph 7.
Accepted as stated in paragraph 11, reject that Mrs. Rigdon was pressured as not supported by CSE.
13-14. Rejected, no CSE.
15. Rejected in paragraph 12. 16-19. Rejected, no CSE.
Accepted paragraph 16.
Accepted paragraphs 15 and 16.
First sentence rejected for lack of CSE. Remainder rejected as irrelevant.
Rejected as irrelevant, but fact that Atlantic American policy cost more accepted in paragraph 37.
Accepted in paragraph 21.
Accepted in paragraph 18.
Accepted in paragraph 19; last sentence rejected for lack of CSE in paragraph 21.
Accepted in paragraph 34.
Accepted in paragraph 21.
Accepted in part, rejected in part in paragraphs 22-24.
Accept as true, but reject as finding because irrelevant.
Rejected as not supported by CSE (See paragraph 23) 32-33. Accepted in paragraphs 25 and 26.
Accepted in part in paragraph 25, remainder rejected as not supported by CSE.
Accepted in paragraph 26.
Rejected as to what respondent stated as not supported by CSE. Last sentence rejected as merely recitation of testimony.
Accepted in part in paragraph 28, remainder rejected as irrelevant or not supported by CSE.
38-39. Rejected as to findings based on the 1984 annual report or statistics in that they were not available at the time of respondent's statements. Accepted that Old Southern wasn't bankrupt or insolvent in paragraph 33. However, totality of evidence showed Old Southern did have financial difficulties in 1983. (Paragraph 33)
40. Rejected by contrary findings in paragraph 32.
41-42. Rejected as irrelevant or by contrary findings in paragraph 29.
Rejected as irrelevant and because no CSE to show what information was available to respondent when he sold the Old Southern policies in 1982 and 1983.
Rejected as not supported by CSE and due to contrary findings in paragraphs 29-32.
Rejected as irrelevant.
Rejected as irrelevant.
Rulings on Proposed Findings of Fact Submitted by the Respondent
Accepted generally in paragraphs 28.
Accepted generally in paragraphs 35-37, and footnote 4. But reject that Part A was superior.
3a. Accepted in paragraphs 32 and 33.
3b. Rejected by contrary finding in paragraphs 34 and 19. 3c. Accepted in part in paragraph 9.=
3d-f. Accepted generally in paragraphs 14-17.
3g. Rejected in that deposition not admitted into evidence. 4a-e. Accepted generally in paragraphs 7 and 8.
4f. Rejected as conclusion of law and remainder as unnecessary in that no contrary finding made.
5a-d. Accepted generally in paragraphs 25 and 26.
5e. Rejected as unnecessary. Further, evidence showed that apparently in some cases Gilbert does receive the refund to disburse.
5f. Rejected as evidence showed the refund came through American Insurance Marketers then to Mr. Willis.
5g. Accepted paragraph 10. 5h. Rejected as irrelevant.
6a-b. Accepted in paragraph 2. 6c. Rejected, immaterial.
6d. Accepted in paragraph 1.l
Accepted in paragraphs 38 and 39.
Not a finding of fact.
| Issue Date | Proceedings |
|---|---|
| Sep. 29, 1986 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jan. 07, 1987 | Agency Final Order | |
| Sep. 29, 1986 | Recommended Order | Statement that client's insurance company planned to discontinue business in Florida by raising premiums constituted unfair competition. License was suspended. |
DEPARTMENT OF INSURANCE AND TREASURER vs JOSEPH DANIEL CORONA, 85-003714 (1985)
DEPARTMENT OF INSURANCE AND TREASURER vs THOMAS KEITH MCOWEN, 85-003714 (1985)
STEPHEN TODD DAGGETT vs DEPARTMENT OF INSURANCE AND TREASURER, 85-003714 (1985)
DEPARTMENT OF INSURANCE AND TREASURER vs. WILLIAM J. HARTNETT, 85-003714 (1985)
DEPARTMENT OF FINANCIAL SERVICES vs ELIZABETH DORIS OTTS, 85-003714 (1985)
