STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 89-3269

)

JOHN RICHARD KLEE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Claude B. Arrington, held a formal hearing in the above-styled case on September 26, 1989, in Fort Lauderdale, Florida.

APPEARANCES

For Petitioner: Roy H. Schmidt, Esquire

S. Marc Herskovitz, Esquire Office of the Treasurer Department of Insurance Division of Legal Services

412 Larson Building Tallahassee, Florida 32399-0300

For Respondent: Greg Ross, Esquire

400 Southeast Eighth Street Fort Lauderdale, Florida 33316

STATEMENT OF THE ISSUES

Whether Respondent committed the offenses set forth in the Administrative Complaint and, if so, the penalty that should be imposed.

PRELIMINARY STATEMENT

On May 26, 1989, Petitioner filed an Administrative Complaint containing five counts charging Respondent, a licensed insurance agent, with multiple violations of the Florida Insurance Code.

Count I of the Administrative Complaint alleges that during the course of certain business dealings with Irene Goldberg, Respondent committed multiple violations of the Florida Insurance Code, including the making of material misrepresentations to Irene Goldberg.

Count II of the Administrative Complaint alleges that during the course of certain business dealings with Helen Krafft, Respondent committed multiple violations of the Florida Insurance Code, including the making of material

misrepresentations to Helen Krafft and the conversion of funds that had been delivered to him in a fiduciary capacity.

Count III of the Administrative Complaint, which related to Respondent's dealings with Bessie Young, was voluntarily dismissed by Petitioner.

Count IV of the Administrative Complaint alleges that during the course of certain business dealings with Steven R. Hill and Marilyn Hill, Respondent committed multiple violations of the Florida Insurance Code, including the failure to deliver a premium refund check and the conversion of a premium refund check.

Count V of the Administrative Complaint alleges that during the course of certain business dealings with First National, Respondent failed to remit sums owed to First National Life or that he misappropriated or converted sums of First National Life.

At the final hearing, Petitioner called seven witnesses and introduced 29 exhibits. All but two of Petitioner's exhibits were accepted into evidence.

Respondent testified on his own behalf and introduced four exhibits. All four of Respondent's exhibits were accepted into evidence.

A transcript of the proceedings has been filed. Rulings on the proposed findings of fact contained in the proposed recommended order submitted by the Petitioner are found in the appendix to this Recommended Order. Respondent did not file a post-hearing submittal.

FINDINGS OF FACT

1. At all times material hereto, Respondent was licensed by Petitioner as an insurance agent in the State of Florida licensed to sell health insurance.

   
   

2. At all times material hereto, Respondent was not formally affiliated with Cleveland Insurance Agency. However, Cleveland Insurance Agency often referred clients to Respondent for health and Medicare supplement policies because Cleveland Insurance Agency did not handle those type policies.

   
   

3. Prior to November 1987, Respondent, working in conjunction with Cleveland Insurance Company, sold to Irene Goldberg a health insurance policy issued through Provider's Fidelity Insurance Company (Provider's Fidelity). On November 29, 1987, Ms. Goldberg paid $1,504.56 as the annual renewal premium for this health insurance policy which extended her coverage through December 4, 1988.

   
   

4. In March of 1988, Ms. Goldberg contacted Cleveland Insurance Agency and requested that someone review her health insurance coverage. Cleveland Insurance Agency referred Ms. Goldberg's request to Respondent. Respondent was familiar with the terms and conditions of the health insurance coverage Ms. Goldberg had in place and he knew that she had paid the premium for this policy through December 1988.

   
   

5. Upon visiting with Irene Goldberg on or about March 10, 1988, Respondent presented Ms. Goldberg with a business card that intentionally misrepresented his status with Cleveland Insurance Company. Because Ms. Goldberg had placed most of her insurance needs through Cleveland Insurance Agency during the past few years, Respondent intentionally misled Ms. Goldberg into thinking that he was formally affiliated with Cleveland Insurance Agency.

   During that visit, Respondent recommended to Ms. Goldberg that she purchase a policy of insurance issued by First National Life Insurance Company (First National) to replace her Provider's Fidelity policy. Ms. Goldberg specifically discussed with Respondent a preexisting medical condition which required periodic medical treatment and the need for the treatment required by this condition to be covered by the new policy. Respondent assured Ms. Goldberg that the preexisting condition would be covered by the new policy. Respondent also told Ms. Goldberg that he would cancel the Provider's Fidelity policy and that he would secure on her behalf a pro rated refund of the premium she had paid to Provider's Fidelity. Based on Respondent's representations, Ms. Goldberg agreed to purchase the First National policy.

   
   

6. On March 30, 1988, Ms. Goldberg gave to Respondent a check made payable to First National Life Insurance Company in the amount of $1,892.00, the amount Respondent had quoted as the full annual premium. A few days later, Respondent contacted Ms. Goldberg and advised her that there would be an additional premium in the amount of $1,360.00, which Ms. Goldberg paid on April 4, 1988. This additional premium was, according to Respondent, for skilled nursing care coverage which First National had added as a mandatory feature of the policy Ms. Goldberg had purchased. The skilled nursing care coverage was, in fact, a separate policy which was not a mandatory feature of the policy Ms. Goldberg thought she was purchasing from First National. Respondent misled Ms. Goldberg as to the terms of the policies he had sold her and as to the number of policies he had sold her. Respondent represented that the premiums he had collected on behalf of First National were in payment of a single health insurance policy. Respondent had sold Ms. Goldberg four separate policies, and he collected a commission for each of the policies.

   
   

7. When Ms. Goldberg received her insurance documents from First National, she learned for the first time that Respondent had sold her four separate policies of insurance, including a cancer policy that she and Respondent had never discussed. In addition to the health and cancer policies, Respondent sold Ms. Goldberg a home convalescent care policy and a separate skilled nursing care policy. Respondent had sold Ms. Goldberg policies of insurance that Ms. Goldberg had not requested and that she did not know she was buying. Upon reading the health policy, Ms. Goldberg discovered that her new First National Life policy excluded her preexisting condition.

   
   

8. Ms. Goldberg contacted Respondent who told her that he had not cancelled the Provider's Fidelity policy as he had agreed to do and that he had not tried to get the pro rated refund of the Provider's Fidelity premium. Respondent told her that any claim she might have for the preexisting condition should be filed under the Provider's Fidelity policy.

   
   

9. Ms. Goldberg then complained to First National which, after an investigation, refunded to Ms. Goldberg the premiums she had paid for the three policies. Respondent had received a commission on the policies of insurance he had sold to Ms. Goldberg. As of the time of the hearing, Respondent had not reimbursed First National for the commission he had received based on the premiums that were subsequently refunded to Ms. Goldberg.

   
   

10. In February 1988, Respondent met with Helen Krafft to discuss her health insurance needs. During the course of the meeting, Respondent presented to Ms. Krafft a business card which intentionally misrepresented his affiliation with Cleveland Insurance Agency. This business card misled Ms. Krafft into believing that Respondent was formally affiliated with Cleveland Insurance Agency.

11. On February 18, 1988, Respondent sold to Ms. Krafft a health insurance policy through First National and a health insurance policy issued through American Sun Life, at which time he collected a premiums in the total amount of

    $519.80 for six months of coverage from each of the two policies. In July 1988, Respondent visited with Ms. Krafft at her place of work and told her that she should pay her renewal premiums for the health insurance policies on or before August 1, 1988, to avoid a premium increases. Respondent knew, or should have known, that there were no premium increases scheduled for those policies and that there were no discounts for early payment of the premiums

    
    

12. The renewal premiums Respondent quoted Ms. Krafft for the two policies totaled $485.40. At Respondent's instructions Ms. Krafft delivered to Respondent her signed check dated July 18, 1988, in the amount of $485.40 with the payee's name left blank. Respondent accepted these trust funds from Ms. Krafft in a fiduciary capacity. Instead of using these funds to pay the premiums as he had agreed to do, Respondent filled his name in on Ms. Krafft's check and cashed it. Ms. Krafft learned that Respondent had not used the funds she had given him to renew her two policies when she started getting late payment notices from the two insurance companies with accompanying threats of cancellation if the premiums were not paid. In late September 1988, Respondent paid to Ms. Krafft the sum of $485.40 in cash.

    
    

13. In June of 1988, Steven R. and Marilyn Hill applied, through Respondent, for a health policy with First National. The Hills paid the initial premium of $304.37 by check made payable to First National on June 26, 1988. Because of underwriting considerations, First National informed Respondent that the Hills would have to pay a higher premium to obtain the insurance they wanted. The Hills were not willing to pay the higher premium and requested a refund of the amount they had paid. First National made the refund check payable to Steven Hill and mailed the check to Respondent. There was no competent, substantial evidence as to what happened to the check other than First National Life stopped payment on the check and it never cleared banking channels. A second refund check was later delivered to Steven Hill.

    
    

14. First National contended at the hearing that Respondent had accrued a debit balance in the amount of $2,692.45 as a result of his dealings as an agent of the company. Respondent contended that he is entitled to certain offsets against the amount First National claims it is owed based on commissions he contends that he had earned but had not been paid. First National had not, prior to the hearing, submitted to Respondent any type of accounting of sums due, nor had it explicitly demanded any specific sum from Respondent. Instead, First National had made a blanket demand that Respondent return all materials belonging to First National and advised that future commission checks would be held in escrow. From the evidence presented it could not be determined that Respondent was indebted to First National.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Section 120.57(1), Florida Statutes

    
    

16. Petitioner has the burden of proving by clear and convincing evidence the allegations against Respondent. See Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

17. The Administrative Complaint alleges that Respondent violated the following provisions of the Florida Insurance Code:

    
    

    1. Section 626.561(1), Florida Statutes;

    2. Section 626.611(4), Florida Statutes;

    3. Section 626.611(5), Florida Statutes;

    4. Section 626.611(7), Florida Statutes;

       D. Section 626.611(8), Florida Statutes;

       1. Section 626.611(9), Florida Statutes;

       2. Section 626.611(10), Florida Statutes;

       3. Section 626.611(13), Florida Statutes;

       4. Section 626.621(2), Florida Statutes;

       5. Section 626.621(6), Florida Statutes;

       6. Section 626.9521, Florida Statutes;

       7. Section 626.9541(1)(a)1, Florida Statutes;

       8. Section 626.9541(1)(a)6, Florida Statutes;

       9. Section 626.9541(1)(e)1, Florida Statutes;

       10. Section 626.9541(1)(k)1, Florida Statutes;

       11. Section 626.9541(1)(1), Florida Statutes;

       12. Section 626.9541(1)(o)1, Florida Statutes;

       13. Section 626.9541(1)(o)2, Florida Statutes;

       
       

18. Section 626.561(1), Florida Statutes, provides as follows:

    
    

    (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.

    
    

19. Section 626.611, Florida Statutes, provides, in pertinent part, as follows:

    
    

    The department shall deny, suspend, revoke, or refuse to renew or continue the license of any agent, solicitor, or adjuster or the permit of any service representative, supervising or managing general agent, or claims investigator, and it shall suspend or revoke the eligibility to hold a license or permit of any such person, if it finds that as to the applicant, licensee, or permittee any one or more of the following applicable grounds exist:

    * * *

    1. If the license or permit is willfully used, or to be used, to circumvent any of the requirements or prohibitions of this code.

    2. 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.

    * * *

    1. Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

    2. Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or permit.

    3. Fraudulent or dishonest practices in the conduct of business under the license or permit.

    4. Misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insureds or beneficiaries or to others and received in conduct of business under the license.

    * * *

    (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.

20. Section 626.621 provides, in pertinent part, as follows: The department may, in its discretion,

    deny, suspend, revoke, or refuse to renew or continue the license of any agent, solicitor, or adjuster or the permit of any service representative, supervising or managing general agent, or claims investigator, and it may suspend or revoke the eligibility to hold a license or permit of any such person, if it finds that as to the applicant, licensee, or permittee any one or more of the following applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal is not mandatory under s. 626.611:

    * * *

    (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.

    
    

21. Section 626.9521, Florida Statutes, provides as follows:

    
    

    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. Any person who violates any provision of this part shall be subject to the penalties provided in s. 627.381.

    
    

22. The provisions of Section 626.9541, Florida Statutes, define unfair methods of competition and unfair or deceptive acts or practices.

    
    

23. Petitioner established by clear and convincing evidence that Respondent violated the provisions of Sections 626.561(1); 626.611(4); 626.611(7); 626.611(9); and 626.611(10), Florida Statues, during the course of his dealings with Helen Krafft. The funds collected by Respondent from Ms. Krafft were fuduciary funds received by Respondent in a transaction under his license and should have been accounted for and paid in the applicable regular course of business. Instead of paying the renewal premiums for the policies he had sold Ms. Krafft, Respondent cashed her check and converted the proceeds to his own use.

    
    

24. Petitioner established by clear and convincing evidence that Respondent violated the provisions of Sections 626.611(5), 626.611(7), and 626.611(9), Florida Statutes, by the misrepresentations he made during the course of his dealings with Irene Goldberg. Respondent misrepresented to Ms. Goldberg material information regarding the terms of the policy she wanted and sold her policies she did not know she was buying for coverage she did not request. Further, Respondent misled Ms. Goldberg in telling her that he would cancel her existing policy and seek a pro rated refund of the premium

    
    

25. Petitioner established by clear and convincing evidence that Respondent engaged in unfair methods of competition and unfair and deceptive acts or practices as defined by the provisions of Section 626.9541, Florida Statutes, and as prohibited by Sections 626.9521 and 626.621(6), Florida Statutes. These violations were established by the misrepresentations Respondent made to Ms. Goldberg and to Ms. Krafft during the course of his dealings with them.

    
    

26. Petitioner did not establish by clear and convincing evidence that Respondent committed any violations of the Florida Insurance Code during his dealings with Steven and Marilyn Hill.

    
    

27. Petitioner did not establish by clear and convincing evidence that Respondent was indebted to First National Life Insurance Company. The accounts between First National Life and Respondent had not, as of the time of the hearing, been settled.

28. Respondent's multiple violations of the provisions of Section 626.611, Florida Statutes, together with his other violations of the Florida Insurance Code, lead to the recommendation which follows

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a final

order which finds that Respondent committed the multiple violations of the

Florida Insurance Code as set forth in the Conclusions of Law portion of this Recommended Order and which further revokes all licenses issued by the Department of Insurance and Treasurer to Respondent, John Richard Klee.

DONE AND ENTERED this 30th day of November, 1989, in Tallahassee, Leon County, Florida.

CLAUDE B. ARRINGTON

Hearing Officer

The DeSoto Building 1230 Apalachee Parkway

Tallahassee, Florida 32399-1550 904/488-9675

Filed with the Clerk of the Division Of Administrative Hearings this 30th day of November, 1989.

APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 89-3269

The following rulings are made on the proposed findings of fact submitted by Petitioner:

1. The proposed findings of fact in paragraph 1 are adopted in material part by paragraph 1 of the Recommended Order.

2. The proposed findings of fact in paragraph 2 are adopted in material part by paragraph 1 of the Recommended Order.

3. The proposed findings of fact in paragraph 3 are adopted in material part by paragraph 12 of the Recommended Order. The proposed findings of fact in paragraph 3 are rejected in part as being a conclusion of law.

4. The proposed findings of fact in paragraph 4 are adopted in material part by paragraph 5 of the Recommended Order.

5. The proposed findings of fact in paragraph 5 are adopted in material part by paragraph 3 of the Recommended Order.

6. The proposed findings of fact in paragraph 6 are adopted in material part by paragraph 4 of the Recommended Order.

7. The proposed findings of fact in paragraph 7 are rejected as being unsubstantiated by the evidence.

8. The proposed findings of fact in paragraph 8 are adopted in material part by paragraph 5 of the Recommended Order.

9. The proposed findings of fact in paragraph 9 are adopted in material part by paragraphs 5 and 6 of the Recommended Order.

   10	are	adopted	in	material	part
   11	are	adopted	in	material	part
   12	are	adopted	in	material	part
   13	are	adopted	in	material	part
   14	are	adopted	in	material	part
   15	are	adopted	in	material	part
   16	are	adopted	in	material	part
   17	are	adopted	in	material	part
   18	are	adopted	in	material	part
   19	are	adopted	in	material	part
   20	are	adopted	in	material	part
   21	are	adopted	in	material	part
   22	are	adopted	in	material	part
   23	are	adopted	in	material	part
   24	are	adopted	in	material	part
   25	are	rejected	as	being

10. The proposed findings of fact in paragraph by paragraphs 5 and 6 of the Recommended Order.

11. The proposed findings of fact in paragraph by paragraph 5 of the Recommended Order.

12. The proposed findings of fact in paragraph by paragraph 6 of the Recommended Order.

13. The proposed findings of fact in paragraph by paragraph 6 of the Recommended Order.

14. The proposed findings of fact in paragraph by paragraph 6 of the Recommended Order.

15. The proposed findings of fact in paragraph by paragraph 6 of the Recommended Order.

16. The proposed findings of fact in paragraph by paragraphs 5 and 7 of the Recommended Order.

17. The proposed findings of fact in paragraph by paragraph 10 of the Recommended Order.

18. The proposed findings of fact in paragraph by paragraph 11 of the Recommended Order.

19. The proposed findings of fact in paragraph by paragraph 11 of the Recommended Order.

20. The proposed findings of fact in paragraph by paragraph 12 of the Recommended Order.

21. The proposed findings of fact in paragraph by paragraph 2 and 10 of the Recommended Order.

22. The proposed findings of fact in paragraph by paragraph 13 of the Recommended Order.

23. The proposed findings of fact in paragraph by paragraph 13 of the Recommended Order.

24. The proposed findings of fact in paragraph by paragraph 13 of the Recommended Order.

25. The proposed findings of fact in paragraph unsubstantiated by the evidence.

26. The proposed findings of fact in paragraph 26 are rejected as being unsubstantiated by the evidence.

27. The proposed findings of fact in paragraph 27 are rejected as being unsubstantiated by the evidence.

28. The proposed findings of fact in paragraph 28 are rejected as being unsubstantiated by the evidence.

29. The proposed findings of fact in paragraph 29 are adopted in material part by paragraph 14 of the Recommended Order.

30. The proposed findings of fact in paragraph 30 are adopted in material part by paragraph 14 of the Recommended Order.

COPIES FURNISHED:

Roy H. Schmidt, Esquire Office of the Treasurer Department of Insurance

412 Larson Building Tallahassee Florida 32399-0300

Greg Ross, Esquire

400 Southeast Eighth Street Fort Lauderdale, Florida 33316

Don Dowdell General Counsel The Capitol Plaza Level

Tallahassee, Florida 32399-0300

Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Docket for Case No: 89-003269

Orders for Case No: 89-003269