vs. ) CASE NO. 86-3659
Respondent. )
Final hearing in the above-styled action was held in Orlando, Florida on April 23, 1987, before Mary Clark, Hearing Officer of the Division of Administrative Hearings.
For Petitioner: William W. Tharpe, Jr., Esquire
For Respondent: James R. Lavigne, Esquire
On August 26, 1986, Petitioner ("Agency") filed its Administrative Complaint alleging a series of violations of Chapter 626 F.S., relating to practices as a licensed insurance agent. Respondent ("Bonafide") made a timely request for formal hearing, answered the complaint and requested dismissal of the complaint.
The administrative complaint was amended without objection, by Order dated January 29, 1987.
At the final hearing, the agency presented the testimony of six witnesses and eighteen exhibits; all exhibits were admitted without objection, except Petitioner's exhibits 17 and 18, which were marked for identification but were rejected. Richard Bonafide testified in his own behalf and presented testimony of two other witnesses.
After hearing, the record was kept open, upon stipulation of the parties, for the receipt of an additional exhibit from one of Petitioner's witnesses.
That exhibit, a letter and computer-generated information from Jefferson-Pilot Life Insurance Co. has been received as Petitioner's Exhibit No. 19.
At the close of the agency's case in chief, Respondent moved for dismissal of the complaint, as amended. The motion was taken under advisement and is now denied, as more specifically addressed in my conclusions of law. After hearing, both parties submitted proposed recommended orders and written arguments on the law. These have all been carefully considered. The agency's proposed findings have been substantially adopted herein; Respondent's proposed findings No. 1-3 have been adopted and the remainder have been rejected as inconsistent with the weight of evidence.
The primary issue in this proceeding is whether Respondent committed the alleged multiple violations of Chapter 626 F.S. through misrepresentation and fraud relating to the surrender and issuance of certain policies to Melvin and Clara Smith.
The ancillary issue raised by Respondent's motion to dismiss is whether this proceeding, filed approximately ten years after the questioned events, is barred by a statute of limitations or laches, or is a violation of due process or right to a speedy trial.
Prior to hearing, in a Prehearing Statement filed on April 21, 1987, Bonafide admitted the following allegations or the amended administrative complaint:
You, RICHARD ANTHONY BONAFIDE,
are currently eligible for licensure and licensed in this state as an Ordinary- Variable Annuity, including Health Agent and as an Ordinary Life, including Health Agent.
At all times pertinent to the
dates and occurrences referred to in this Administrative Complaint you, RICHARD ANTHONY BONAFIDE, were eligible for licensure and licensed as an insurance agent in this state.
You, RICHARD ANTHONY BONAFIDE, were licensed in this state to represent
Jefferson Standard Life Insurance Company (hereinafter referred to as "Jefferson Standard") from January 1, 1972 through
December 31, 1978.
You, RICHARD ANTHONY BONAFIDE, were licensed in this state to represent
Jefferson National Life Insurance Company (hereinafter referred to as "Jefferson National") from August 31, 1976 through
June 23, 1978.
References in this Administrative Complaint to you, RICHARD ANTHONY BONAFIDE, includes persons acting under your direct supervision and control.
Sometime during October 1976 Melton H. Smith of Orlando, Florida
contacted the Orlando office of Jefferson Standard concerning two life insurance policies issued to Melton H. Smith and his wife, Clara B. Smith.
At that time Jefferson Standard
had in force policy number 945382 insuring the life of Melton H. Smith which was issued in 1947; and policy number 1144867 insuring the life of Clara B. Smith which was issued in 1951.
Melvin Smith's purpose in contacting Jefferson Standard was to determine the cash value of the two policies and to purchase paid-up life policies for himself and his wife with the accumulated funds.
Bonafide was the Jefferson Standard regional agency manager. He went to the Smith's home and assisted them in getting the information they needed and in obtaining cash surrender checks for the two policies. Those checks were issued by Jefferson Standard on October 26, 1976, and were mailed to the regional agency office.
On or about November 1, 1976, Bonafide visited the Smiths again. He had the checks: No. 419184 payable to Melton H. Smith in the amount of
$8,608.22 and No. 419186 payable to Clara B. Smith in the amount of $5,208.73. He gave the Smiths the checks and took their two surrendered policies.
In their discussions with Bonafide, the Smiths indicated their desire to have the funds utilized for paid up policies which would not require periodic premiums. Bonafide recommended that the couple go with Jefferson National life insurance rather than Jefferson Standard, as Jefferson Standard was in the process of merger with Pilot Life and rates were not available for the type of policy they were seeking.
On the occasion of that same visit, Bonafide prepared two applications for Jefferson National life insurance for the Smiths, a $25,000.00 whole life policy for Melton Smith, and a $20,000.00 whole life policy for Clara Smith. The application forms signed by the Smiths clearly indicate an annual mode of premium payment and the amount of the premium: $1,061.00 for Melton Smith's
policy, $592.20 for Clara Smith's policy. The application forms were filled out by Bonafide, who explained that the only way the policies could be written was in this manner, as it was difficult to come up with premium rates for a paid-up policy. Bonafide told the couple that he would handle the premium payments for paid up policies.
The couple endorsed their two cash surrender checks and gave them to Bonafide. In return he gave them a check in the amount of $735.78, which he said represented the difference between the premiums for the paid up insurance and the cash surrender checks they turned over to him. The $735.78 check was written on Atlantic Bank of Orlando account No. 272-04-155-9, printed with "Richard Bonafide, 2699 Lee Road, Winter Park, Florida 32789".
In his testimony at hearing, Melvin Smith stated that Bonafide had secured their trust with his very cordial and helpful manner. He had visited their home on several occasions in working with them to obtain the Jefferson Standard refunds.
The Smith's two checks, totalling $13,816.95 were deposited in Bonafide's account No. 272-04-155-9 on November 2, 1976. Bonafide, alone, had the authority to draw on this account. It was not the account maintained by the Jefferson Standard regional office for the deposit of premiums nor was it the account maintained by the office for the payment of office expenses. The address printed on the checks and maintained on bank records was the address for the Jefferson Standard regional office. Bonafide claimed that the account was for his business as an insurance agent, that he used the account to make premium payments to the various companies he represented and for business expenses. He could also write checks to himself on that account. Copies of the checks and deposit slips are kept by the bank for seven years and have been destroyed. Copies of the signature card for the account and copies of monthly statements were available and were admitted into evidence at the hearing.
Bonafide forwarded the Smiths' two applications to Jefferson National along with ten percent of the annual premium due on each policy, for a total of
$165.32. A debit in this amount appears in the December 9, 1976 bank statement for account No. 272-04-155-9. It was customary, and in accordance with company policy, for the agent to retain his commission portion of the premium payment.
Subsequently, Jefferson National issued two policies to the Smiths: No. 00278718, effective November 17, 1976, for Clara E. Smith; and No. 00278717, effective December 9, 1976, for Melton H. Smith. The policies were mailed to the agent, Bonafide, who in turn delivered them to the Smiths at their home.
The policies, as delivered to the Smiths, included standard terms, copies of the signed application forms and policy specifications. Those specifications, in computer-generated type, establish an annual premium amount, and alternate schedule of premiums for annual semi-annual and quarterly payments. However, on both policies, at the bottom of the policy specifications page, is found this language, in typewritten form:
*Premium schedule amended Premiums paid in advance as of 11-7-76 full term of contract.
[Petitioner's exhibits No. 4 and No. 5]
Bonafide explained carefully and in detail, the provisions of the policies to the Smiths. In particular in response to Melvin Smith's question, Bonafide explained the type- written notation regarding premiums. He said that the computers were not set up to handle a paid up full life policy and there was difficulty getting premium rates because this was an unusual occurrence. He assured the Smiths that they had paid up policies.
The typewritten notation is not the sort of notation the home office would have added.
For some reason that is not clear, Jefferson National sent two letters dated May 5, 1977 to the Smiths on each policy indicating that they understood the Smiths did not want their policies and including refund checks in the amounts of $106.10 and $59.22. The Smiths, upon receipt of the letter immediately called Bonafide. He assured them that the home office made an error and that he would get an explanation. A few days later the Smiths received a memo on a green Jefferson National Life Insurance memo form, purportedly from Robert Jackson, Underwriting Division, to Dick Bonafide. The memo explained the error and asked Bonafide to have the checks returned for cancellation. At the bottom of the memo was Bonafide's handwritten note to Melvin Smith asking that
he return the checks in the furnished self-addressed, stamped envelope. Mr. Smith called Bonafide again and was told to put the checks in the envelope. He did this on May 17, 1977.
Jefferson National's cash journal transaction register, virtually the only company records remaining of these policies, indicate that the entries made on May 5, 1977 were reversed in June 1977, and the policies were approved and issued.
The memo received by the Smiths was neither signed nor generated by Robert Jackson. It does not reference policy numbers, a practice unheard of at the company, and it references a company division and section that never existed. The memo forms were available to company agents, such as Bonafide, in the field.
The Smith's next and final contact with Bonafide was in November 1979 when he visited them and tried unsuccessfully to sell them some more life insurance.
In October or November 1985, Mr. Smith's income status had changed and he was curious about the cash surrender value of the Jefferson National policies. If enough, he thought he might take the money and invest it elsewhere. He wrote to the company and the immediate response was that the policies had lapsed. Further correspondence and the investigation which led to this proceeding ensued. The Smiths also filed a civil suit, presumably still pending.
Unknown and uninitiated by the Smiths, the company processed a change of address notice for them in October 1977. The address was changed from 1101 Powers Drive, Orlando, where they lived, to 100 Partridge Circle, Maitland, where Bonafide lived.
All Company notices regarding the Smith's policies were sent to the
100 Partridge Circle address, including premium notices, late payment offers and lapse notices. Annual premiums on the policies were due in November and December, 1977, and were not paid. In due course, after a series of notices were sent and not answered, the polices were lapsed and dividend checks of
$48.50 and $24.00 were issued to the Smiths and presumably sent to the Partridge Circle address. The checks were never cashed by anyone.
When Jefferson National makes a policyholder address change, a notice of that change is also sent to the agent. It was not the company practice to send policyholder's notices to their agents' home addresses.
Neither Jefferson standard nor Jefferson National Life Insurance Company records reveal policies for the Smiths other than the ones addressed above.
In 1976, while employed by Jefferson Standard Life Insurance Company under a contract which prohibited the representation of other companies, Bonafide had contacts with or represented several other insurance companies.
As agent, Bonafide would have received copies of lapse notices sent to his policyholders. Depending on various factors, including the amount of the business, he would have followed up with a contact to the policyholder. In Bonafide's view, in those days the $20,000 and $25,000 policies for the Smiths were "a sizable sale". [Tr-293]
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and parties to this proceeding pursuant to Subsection 120.57(1), Florida Statutes (1985).
Ruling on Respondent's motions to dismiss
In his request for administrative proceeding, and again during the hearing the Respondent moved for dismissal of the administrative charges on several grounds. Respondent's motions are denied for the reasons set forth below. Some of these motions are consolidated based on their similarities:
Statute of limitations - In the absence of specific legislative authority, civil or criminal statutes of limitations are inapplicable to administrative licensing proceedings. Donaldson v. Department of Health and Rehabilitative Services, 425 So.2d 145, 147 (Fla. 1st DCA 1983); Landes v. Department of Professional Regulation, 441 So.2d (Fla. 2d DCA 1983).
Speedy trial - Procedures governing criminal proceedings are inapplicable to administrative licensing proceedings, especially since they have not been adopted into the governing rules of procedure for administrative proceedings and also because Rule 3.010, Florida Rules of Criminal Procedure specifically confine those rules to persons charged with a crime by indictment or information. Fla. R. Crim. P. 3.010; Gordon v. Savage, 383 So.2d 646 (Fla. 5th DCA 1980).
Doctrine of laches; estoppel; prejudice - The doctrine of laches, usually utilized in equitable proceedings, is usually inapplicable to administrative license revocation proceedings. Farzad v. Department of Professional Regulation, 433 So.2d 373 (Fla. 1st DCA 1983). Even if this doctrine were applied, there are several elements which must be established. Devine v. Department of Professional Regulation, Board of Dentistry, 451 So.2d 994 (Fla. 1st DCA 1984). One seeking to establish laches must show that the plaintiff, having had knowledge or notice of the defendant's conduct and having been afforded the opportunity to institute suit, is guilty of not asserting his rights by suit. Id. at 996. The evidence in this case demonstrates that the Petitioner, Department of Insurance, was not made aware of the Smiths' complaint until late 1985 or early 1986 and that after an investigation the administrative complaint was filed on August 26, 1986. The Smiths, themselves relying on Bonafide's assurances, had no reason to question the existence of their policies until they were informed of their lapse by the Company in 1985. Accordingly, the doctrine of laches is not applicable here and for the same reasons the Petitioner, Department of Insurance, is not estopped to seek license disciplinary action against the Respondent's license.
Bad faith; Department knew Respondent was without records - There is no evidence that the Petitioner, Department of Insurance, has acted in bad faith. There is also no evidence that the Department waited until Bonafide was without records before deciding to file these administrative charges. There is an indication that Bonafide talked to the Department representatives in January of 1986 about the bank records (TR 289) and it would appear that the Department learned of the limited availability of bank records during its investigation. This, however, does not mean that the Department proceeded in bad faith by filing administrative charges against the Respondent.
Constitutional due process of law - This issue has been preserved to the extent necessary. See Department of Environmental Regulation v. Leon County, 344 So. 2nd 297, 298 (Fla. 1st DCA (1977)). The evidence presented in this proceeding does not support a finding of violation of due process.
To the extent that the Smiths should be held to have knowingly purchased annual policies from Jefferson National because the applications and policy language so indicate, parol evidence is always admissible to show fraud or misrepresentation in inducement of an insurance contract. Central Mutual Insurance Company v. Cropper, 296 So.2d 69 (Fla. 2d DCA 1979).
The administrative complaint alleges that Bonafide violated the following provisions of the Insurance Code:
626.561 Reporting and accounting for funds.
(1) All premiums, return premiums, or other funds belonging to insurers or others received by an agent, solicitor, or adjuster in transactions under his license shall be trust funds so received by the licensee in a fiduciary capacity; and the licensee in the applicable regular course of business shall account for and pay the same to the insurer, insured, or other person entitled thereto.
* * *
626.611 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--
* * *
(5) Willful misrepresentation of any insurance policy or annuity contract or willful deception with regard to any such policy or contract, done either in person or by any form of dissemination of information or advertising.
* * *
Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.
Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transaction authorized by the license or permit.
Fraudulent or dishonest practices in the conduct of business under the license or permit.
Misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insureds or beneficiaries or to others and receiving in conduct of business under the license.
* * *
(13) Willful failure to comply with, or
willful violation of any proper order or rule of the Department or willful violation of any provision of this code.
* * * 626.621 Grounds for discretionary
refusal, suspension, or revocation of agent's, solicitor's, or adjuster's license or service representative's supervisory or managing general agent's, or claims investigator's permit--
* * *
(2) Violation of any provision of this code or of any other law applicable to the business of insurance in the course of dealing under the license or permit.
* * *
(6) In the conduct of business under the license or permit, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part X of this chapter, or having otherwise shown himself to be a source of injury or loss to the public or detrimental to the public interest.
* * * 626.9521 Unfair methods of competition
and unfair or deceptive acts or practices prohibited.-- No person shall engage in this state in any trade practice which is defined in this part as, or determined pursuant to s. 626.9561 to be, an unfair method of competition or an unfair or deceptive act or practice involving the business of insurance. Thy person who violates any provision of this part shall be subject to the penalties provided in s. 627.381.
* * * 626.9541 Unfair methods of competition
and unfair or deceptive acts or practices defined--
(1) UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE ACTS. The following are defined as unfair methods of competition and unfair or deceptive acts or practices:
* * *
(e) False statements and entries--
1. Knowingly:
Filing with any supervisor or other public official,
Making, publishing, disseminating, circulating
Delivery to any person,
Placing before the public,
Causing, directly or indirectly, to be made, published, disseminated,
circulated, delivered to any person, or placed before the public,
any false material statement.
* * *
(k) Misrepresentation in insurance applications--
1. Knowingly making false or fraudulent statement 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.
It is noted that the statutory violations charged in this case by the Petitioner are those found in 1985 Florida Statutes. A tracing of the statutes back to 1975 reveals that the statutory wording is essentially the same, then as now, with the exception of Sections 626.9541(1)(e)1. and 626.9541(1)(k)1., Florida Statutes. These two violations as worded cannot be specifically traced to Part VII or the 1975 Florida Statutes which are now generally found in Part X of the 1985 Florida Statutes. It is not necessary to address Petitioner's argument regarding a continuing fraud, as it is concluded below that ample evidence of other violations exists to support a recommendation of revocation.
The correct standard of proof for the revocation of a professional license is that the evidence must be clear and convincing. Ferris v. Turlington, 12 FLW 393 (Fla. S. Ct. opinion filed July 16, 1987).
The Department proved by clear and convincing evidence that Bonafide deliberately and fraudulently misled the Smiths and misrepresented the type of policies he sold to them.
The Smiths wanted paid up policies, clearly communicated that desire and were told by Bonafide that the policies were paid up. He knew that the policies required annual premiums.
Competent circumstantial evidence established that Bonafide misappropriated approximately $13,000.00 from the Smiths and actively engaged in fraud to conceal that misappropriation. He took their $13,816.95 and gave them back $735.78. They thought they were receiving two paid up life insurance policies, but in fact, received nothing.
Circumstantial evidence is proof of certain facts and circumstances from which the trier of fact may infer that the ultimate fact in dispute existed or did not exist. Lake Co. Sheriff's Department v. Unemployment Appeal Commission, 478 So. 2nd 880, 881 (Fla 5th DCA 1985).
Fraud is rarely susceptible of direct and positive proof and direct evidence is not necessary. A charge of fraud cannot be sustained by mere suspicion, conjecture, or doubtful circumstances, but the evidence itself may be wholly circumstantial, or a combination of direct and circumstantial evidence. Florida East Coast Ry. Co. v. Thompson, 111 So. 525, 528 (Fla. 1927).
The general standard in criminal cases is that a circumstantial evidence case should not be submitted to the jury unless the record contains competent substantial evidence which is susceptible of only one inference and this inference is clearly inconsistent with the defendant's hypothesis of
innocence. Fowler v. State of Florida, 11 FLW 1329 (Fla. 1st DCA, opinion filed June 12, 1986).
In a civil case, Anheuser-Busch, Inc. v. Campbell, 306 So. 2nd 198 (Fla. 1st DCA, 1975) the court held that circumstantial evidence was sufficient to sustain a verdict for the plaintiff in an action for damages arising out of an alleged conspiracy, if the evidence met the standards required in civil case generally.
Whether this is a lesser standard than that applied in criminal cases is immaterial. From the totality of evidence addressed here, only one reasonable inference is found-- that Bonafide himself, and not (as he suggests) the Smiths or the insurance company, was responsible for the Smith's loss of funds and lapse of policies.
The Smiths could have altered the policies, but there is no plausible explanation for why they would have given up $13,000.00, funds which undisputably were deposited in Bonafide's checking account. The insurance company could have erred in changing the Smiths address, but Bonafide and his office had at least two occasions to become aware of the error and correct it: when the address change notice would have been sent, and when the lapse notices were sent. It was uncontroverted, indeed emphasized by Melvin Smith, that Bonafide was a careful and conscientious agent.
The Smiths were credible witnesses.
Bonafide, while extolled by his character witness, admittedly violated his contract with his employer, Jefferson Standard, by representing other companies at the same time. That fact was first denied at the hearing, on direct examination, but was later conceded on cross-examination. (T-294, 322)
The violations of sections 626.611(8) and (13) F.S., and sections 626.621(2) F.S., charged by the Department, are either cumulative or unsubstantiated by the evidence presented.
That Richard Anthony Bonafide be found guilty of violations of sections 626.561(1), 626.611(5), (7), (9), and (10), and 626.621(6) F.S. and that his
licenses and eligibility for licensure as an insurance agent in this state be revoked.
DONE and RECOMMENDED this 10th day of August, 1987 in Tallahassee, Florida.
Filed with the Clerk of the Division of Administrative Hearings this 10th day of August, 1987.
William W. Tharpe, Jr., Esquire 413-B Larson Building Tallahassee, Florida 32399-0300
James R. Lavigne, Esquire
