STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND ) TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 89-6117

)

RALPH EDWARD CARTER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on January 31, 1990 in St. Petersburg, Florida.

APPEARANCES

For Petitioner: Willis F. Melvin, Jr., Esquire

412 Larson Building Tallahassee, Florida 32399-0300

For Respondent: Richard J. DaFonte, Esquire

P. O. Box 41750

St. Petersburg, Florida 33743-1750 STATEMENT OF ISSUES

The issue is whether respondent's license as a life insurance agent, health insurance agent and general lines agent should be disciplined for the reasons stated in the administrative complaint.

PRELIMINARY STATEMENT

In a two-count administrative complaint filed on October 4, 1989, petitioner, Department of Insurance and Treasurer, charged that respondent, Ralph Edward Carter, licensed as a life and health insurance agent and general lines agent - property, casualty, surety, and miscellaneous lines, had violated various provisions within Chapter 626, Florida Statutes (1987). More specifically, the complaint alleged that respondent, while licensed as an agent for Bankers Life Insurance, accepted an application and premium check from a customer on July 6, 1988 for automobile comprehensive and collision coverage but did not remit the same to the insurance carrier, and returned the money to the customer only after she threatened to file a complaint with petitioner. The complaint alleged further that respondent accepted an application and premium check from a customer on October 10, 1988 for full automobile coverage with Underwriters Guarantee Insurance Company, that after the customer received a notice of non-insurance from the lienholder, respondent required an additional payment from the customer and then issued a second binder on December 2, 1988

and that the application and check were never forwarded to the insurance carrier nor did the customer receive an insurance policy. Petitioner alleges that the foregoing conduct constituted a violation of Subsections 626.561(1), 626.611(4), (5), (7), (8), (9), (10) (11), and (13), 626.621(6), 626.734, and

626.9541(1)(o)1., Florida Statutes (1987). Respondent disputed the above allegations and requested a formal hearing pursuant to Subsection 120.57(1), Florida Statutes (1989). The matter was referred by petitioner to the Division of Administrative Hearings on November 8, 1989, with a request that a hearing officer be assigned to conduct a formal hearing. By notice of hearing dated November 30, 1989, a final hearing was scheduled on January 31, 1990 in St. Petersburg, Florida. On January 30, 1990, the case was transferred from Hearing Officer J. Lawrence Johnston to the undersigned.

At final hearing petitioner presented the testimony of Carl E. Adams, David

1. Wardlow, Betty Jean Andrews, and Johnnie Ruth Bell. It also offered petitioner's exhibits 1 - 7. All exhibits were received in evidence. Respondent testified on his own behalf and offered respondent's exhibits 1 - 4. All exhibits were received in evidence.

   
   

   The transcript of hearing was filed on February 16, 1990. Proposed findings of fact and conclusion of law were filed by petitioner and respondent on February 26 and March 6, 1990, respectively. A ruling on each proposed finding has been made in the Appendix attached to this Recommended Order.

   
   

   FINDINGS OF FACT

   
   

   Based upon all of the evidence, the following findings of fact are determined:

   
   

   1. At all times relevant hereto, respondent, Ralph Edward Carter, was licensed and eligible for licensure as a life and health insurance agent and general lines agent - property, casualty, surety and miscellaneous lines by petitioner, Department of Insurance and Treasurer (Department). When the events herein occurred, respondent was licensed as a property and casualty insurance agent for Bankers Insurance Company (BIC) and Underwriters Guarantee Insurance Company (UGIC). In March 1987 respondent purchased an insurance franchise and began operating an insurance firm under the corporate name of Mr. Auto of South St. Petersburg, Inc. Records on file with the Department of State reflect that effective June 25, 1988 the name of the corporation was changed to Reliable Insurance of South St. Petersburg, Inc. Since February 1989 the business has been located at 3135 18th Avenue, South, No. C- 3, St. Petersburg, Florida. The corporation was primarily engaged in doing business as a general lines insurance agency. Respondent has been licensed as an agent since 1968, and during his tenure as an agent, has worked in sales with several large insurance companies.

      
      

   2. In January 1988 Betty Andrews purchased from respondent liability and property damage coverage on her two automobiles, a 979 Ford station wagon and a 1980 Chrysler. The insurance was written through UGIC and was effective for the year beginning January 8, 1988. Shortly after May 16, 1988 Andrews received a notice from UGIC reflecting that she owed an additional

      $38.90 on her policy. For some undisclosed reason, Andrews did not pay the additional premium owed.

      
      

   3. On July 6, 1988 Andrews visited respondent's office for the purpose of adding comprehensive and collision coverage on her two automobiles. After respondent quoted a rate, she agreed to purchase the additional coverage, filled

      out an application, and gave respondent two checks totaling $166. These monies were deposited into respondent's business account. The balance was to be paid in three monthly payments of approximately $55 each month through a finance company. Respondent gave Andrews a document entitled "Receipt and Binder Certificate" reflecting she had comprehensive and collision coverage with "Bankers" effective from July 6, 1988 to January 6, 1989. "Bankers" was in fact Bankers Insurance Company.

      
      

   4. When Andrews did not receive a policy from BIC, she attempted to contact respondent on several occasions to ascertain its whereabouts. Andrews could not recall when or how many times she telephoned respondent's office but indicated she was never able to reach him. This was probably because respondent operated a one-man office with no clerical help and was frequently absent from his office. In late August 1988 Andrews received a notice from UGIC advising that UGIC intended to cancel her policy effective September 7, 1988 because she failed to pay the $38.90 premium still due. At about this same time Andrews' husband sold the station wagon and purchased a truck. Accordingly, Andrews needed to transfer her insurance to the new vehicle. She went to respondent's office in early September 1988 and asked him why she had never received the new policy. She also asked him to find out why her existing policy was being cancel led and requested him to transfer coverage from the station wagon to the new truck. In Andrews' presence, respondent made a telephone call to UGIC and learned that Andrews' husband had failed to disclose on the insurance application that he had received a traffic ticket. This in turn caused a $38.90 increase in the annual premium, and because that amount had not been paid, the policy was being cancelled. Respondent attempted to persuade UGIC to reinstate the policy but was unsuccessful. Dissatisfied, Andrews told respondent she intended to file a complaint with the Department of Insurance. Respondent then wrote her a check for $166 which represented a full refund of her monies. There is no evidence to establish that respondent intended to defraud Andrews or to evade the requirements of the insurance code. Despite the fact that Andrews did not receive a policy, she was covered until September 1988 by her original policy and respondent's errors and omissions policy.

      
      

   5. Through testimony by an underwriting manager for BIC, David R. Wardlow, it was established that respondent had entered into a correspondent agreement with an agent of BIC. Wardlow's review of BIC's records reflected that BIC had never received Andrews' application and premium nor was a policy written on her behalf. However, there was no evidence to establish how promptly respondent was required to remit a new application and premium to BIC or whether respondent violated BIC policy by retaining the application and monies for some sixty days until he learned that the existing policy had been cancel led.

      
      

   6. Respondent readily conceded that he never forwarded the application and premium monies to BIC. He explained his actions by pointing out that after Andrews left his office he decided to secure the coverage from UGIC rather than BIC in order to have the entire coverage with one company at a cheaper rate. When he later learned that UGIC intended to cancel Andrews' policy for nonpayment of premium, he thought he might be able to persuade UGIC to reinstate the policy but was unsuccessful. He offered no excuse except inadvertence as to why he had not promptly followed up on Andrews' application.

      
      

   7. Petitioner also presented the testimony of Johnnie Ruth Bell who purchased automobile insurance from respondent in October 1988. Although Bell's testimony was often vague and confusing, the following facts were established. On or about October 1, 1988 Bell went to respondent's office to

      purchase full insurance coverage on her 1987 Toyota Corolla. After discussing various options with respondent, Bell agreed to purchase a policy issued through Redmond-Adams, a Sarasota underwriter for UGIC. Bell gave respondent a check in the amount of $227 as a down payment and agreed to finance the balance through a finance company at a rate of $78 per month for eight months. These monies were deposited into respondent's bank account. Respondent issued a "Receipt and Binder Certificate" reflecting coverage with "Underwriter - Redmond Adams".

      Because Bell had financed the car with a local bank, it was necessary for respondent to furnish the bank with evidence of insurance. Through inadvertence, but not intentionally or willfully, respondent misplaced the application and never forwarded the application and premium to the insurance company nor did he notify the bank of Bell's insurance coverage. However, Bell was covered during this period of time by respondent's errors and omissions policy.

      
      

   8. After Bell did not receive a copy of her policy from Redmond-Adams, but received a number of telephone calls and notices from her bank, she met with respondent around December 2, 1988. Respondent accepted an additional $156 in cash from Bell and issued her a new binder effective that date which was identical to the first binder except for the date. It is unknown why the additional money was collected. He then tore up the first binder. When Bell had still not received her policy by April 1989, she filed a complaint with petitioner. After respondent learned that Bell had filed a complaint, he contacted her in May 1989 and refunded all of her monies.

      
      

   9. There was no evidence to establish how promptly respondent was required to submit applications and premiums to UGIC or how that company construed the term "in the regular course of business" in the context of agents remitting applications and premiums.

      
      

   10. Respondent blamed his problems on the fact that he is the sole employee of his office and, according to his estimate, services some 500 active clients per year and more than 1,500 accounts. He desires to continue in the insurance profession and points to the fact that, of the many insurance transactions handled by him over the last twenty-two years, the Andrews and Bell transactions are the only two that have spawned any

       significant problems. Moreover, he has never been disciplined by petitioner during his tenure as an agent. Respondent asks that any penalty be limited to a period of probation during which time he can have the opportunity to improve his management and bookkeeping skills.

       
       

   11. There was no evidence to establish whether respondent's conduct demonstrated a lack of fitness or trustworthiness to engage in the insurance profession. As to respondent's knowledge and technical competence to engage in the transactions authorized by his licenses, he conceded he lacks training in bookkeeping and management skills, both needed for a general lines agent, but denied that he lacks the necessary skills in the sales part of the business. This was not contradicted. Finally, respondent has taken curative steps to insure that applications are not misplaced and the customer receives the requested insurance.

       
       

       CONCLUSIONS OF LAW

       
       

   12. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties hereto pursuant to Subsection 120.57(1), Florida Statutes (1989).

   13. Since respondent's life insurance licenses are at risk, the Department is obliged to establish by clear and convincing evidence that the charges in the administrative complaint are true. See, e.g., Pascale and Chandler v. Department of Insurance, 525 So.2d 992 (Fla. 3rd DCA 1988).

       
       

   14. The administrative complaint alleges that respondent violated numerous statutes by his conduct in the Andrews and Bell transactions. First, he is charged with having violated Subsection 626.561(1), Florida Statutes (1987), which provides in relevant part as follows:

       
       

       1. All premiums . . . belonging to insurers or others received by an agent . . . 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

          
          

          Respondent is also charged with violating Section 626.611, Florida Statutes (1987) in eight respects. Those violations, if true, would subject respondent to compulsory suspension or

          revocation of his licenses or eligibility to hold such licenses. The alleged statutory violations are as follows:

          
          

          The department shall deny, suspend, revoke or refuse to renew or continue the license of any agent . . . 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 . . . licensee . . . any one or more of the following applicable grounds exist:

          * * *

          1. If the licensee 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.

          5. Rebating, or attempt thereat, or unlawfully dividing or offering to divide his commission with another.

          * * *

          (13) Willful failure to comply with, or willful violation of any provision of this code.

          * * *

          
          

          Respondent is next charged with violating one provision within Section 626.626, Florida Statutes (1987). If that violation is established, it would give the Department the discretion to suspend or revoke respondent's licenses or eligibility to hold the same. That provision reads as follows:

          
          

          The department may, in its discretion,. suspend, revoke . . . the license of any agent . . . , 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 . . . licensee . . . any one or more of the applicable grounds exist under circumstances for which such denial,

          suspension, (or) revocation . . . is not mandatory under s. 626.611:

          * * *

          (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.

          * * *

          
          

          Respondent is further charged with violating Section 626.734, Florida Statutes (1987) which provides as follows:

          
          

          Any general lines insurance agent who is an officer, director, stockholder, or employee of an incorporated general lines insurance agency shall remain personally and fully liable and accountable for any wrongful acts, misconduct, or violations of any provisions of this code committed by such licensee or by any person under his direct supervision and control while acting on behalf of the corporation.

          Finally, respondent is alleged to have violated Subsection 626.9541(1)(o)1., Florida Statutes (1987). That subsection makes unlawful the following conduct:

          
          

          1. Knowingly collecting any sum as a premium or charge for insurance, which is not then provided, or is not in due course to be provided, subject to acceptance of the risk by the insurer, by an insurance policy issued by an insurer as permitted by this code.

          
          

   15. In its proposed order, petitioner posits that respondent received monies from Andrews and Bell in a fiduciary capacity, that "in the regular course of business these funds should have been accounted for and paid to the insurer", and that by failing to do so, respondent misappropriated, converted and unlawfully withheld said monies and therefore violated Subsections 626.561(1), 626.611(4), (7), (9), (10), and (13), 626.621(2) and (6), and 626.9541(1)(o)1., Florida Statutes (1987). However, there was no evidence to establish the requirements of UGIC and BIC for agents remitting monies in "the regular course of business" or whether respondent violated his agency agreements by retaining the applications and premiums given the circumstances present in this case. Therefore, there is less than clear and convincing evidence to establish a violation of subsection 626.561(1). Bowling v. Department of Insurance, 394 o.2d 165 (Fla. 1st DCA 1981) (in order to prove a violation of s. 626.561(1), agency is required to make a record foundation as to the meaning of the term "in the applicable regular course of business"). In addition, because there was an insufficient factual showing

       to support an inference that respondent intended to circumvent the requirements of the insurance code, the charge that respondent violated subsections 626.611(4) and (13) must fail. The lack of intent also negates the charges that respondent misappropriated, converted or unlawfully withheld moneys belonging to others, engaged in a fraudulent transaction, and knowingly collected money with the intention of not providing insurance as proscribed by subsections 626.621(9) and (10) and 626.9541(1)(o)1. Bowling at 170-71. As to the charge that respondent lacked the necessary fitness or trustworthiness to engage in the insurance business, there was no specific evidence concerning this issue and thus no basis to find him guilty of violating subsection 626.611(7).

       As to the charge that respondent lacks reasonably adequate knowledge and technical competence to engage in the transactions authorized by his licenses, respondent conceded he lacked the necessary training in bookkeeping and management when he purchased his insurance franchise. Although he has taken corrective steps to insure that no further errors occur, it is concluded that a violation of subsection 626.611(8) has been established as to his general lines agency license only. This in turn constitutes a violation of section 626.734. Finally, since respondent did not intend to engage in a deceptive or unfair act, and no harm accrued to his customers, it is

       concluded that no violation of subsection 626.621(6) has been proven.

       
       

   16. In its proposed order, petitioner suggests that respondent's licenses be revoked. This recommended penalty is presumably based upon the premise that all violations would be proven. Given the fact that only two unintentional violations have been established and respondent has an otherwise unblemished record over the past twenty-two years, a far less severe penalty is warranted. Because a violation of section 626.611 requires mandatory suspension or revocation of a license, a thirty day suspension of respondent's general lines agency license is deemed to be appropriate. His other licenses, and for which no lack of skills was shown, should not be disciplined.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of violating sections

626.611(8) and 626.734 and that his general lines license be suspended for thirty days. All other charges should be dismissed with prejudice.

DONE AND ORDERED this 13 day of March, 1990, in Tallahassee, Leon County, Florida.

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

Filed with the Clerk of the Division of Administrative Hearings this 13 day of March, 1990.

APPENDIX

Petitioner:

1-4. Partially adopted in finding of fact 1. 5-7. Partially adopted in finding of fact 3. 8-11. Partially adopted in finding of fact 6.

Note - Where a finding has been partially adopted, the remainder has been rejected as being irrelevant, unnecessary, cumulative, subordinate, not supported by the evidence, or a conclusion of law.

Respondent:

A Partially adopted in findings of fact 5 and 6.

Rejected as being irrelevant.

Partially adopted in finding of fact 3. Partially adopted in finding of fact 5. Partially adopted in finding of fact 6.

Rejected since respondent did not move his office until February 1989.

Partially adopted in finding of fact 4. Partially adopted in finding of fact 6.

I. Partially adopted in findings of fact 3 and 8. Partially adopted in findings of' fact 7 and 8. Partially adopted in findings of fact 6 and 7. Partially adopted in finding of fact 10.

Partially adopted in finding of fact l. Partially adopted in finding of fact 10. Partially adopted in finding of fact 1.

Note - Where a finding has been partially used, the remainder has been rejected as being irrelevant, cumulative, unnecessary, subordinate, not supported by the evidence or a conclusion of law.

COPIES FURNISHED:

Honorable Tom Gallagher Insurance Commissioner Plaza Level, The Capital Tallahassee, FL 32399-0300

Willis F. Melvin, Jr., Esquire

412 Larson Building Tallahassee, FL 32399-0300

Richard J. DaFonte, Esquire

1. O. Box 41750

   St. Petersburg, FL 33743-1750

   
   

   Donald A. Dowdell, Esquire General Counsel

   Department of Insurance The Capitol, Plaza Level

   Tallahassee, FL 32399-0300

   
   

   =================================================================

   AGENCY FINAL ORDER

   =================================================================

   
   

   OFFICE OF THE TREASURER DEPARTMENT OF INSURANCE

   
   

   INSURANCE COMMISSIONER FIRE MARSHAL

   
   

   IN THE MATTER:

   
   

   RALPH EDWARD CARTER DOAH CASE NO. 89-6117

   /

   
   

   FINAL ORDER

   
   

   THIS CAUSE came before the Treasurer and Insurance Commissioner of the State Of Florida for consideration and final agency action. On October 4, 1989, the Petitioner, Department of Insurance, filed an Administrative Complaint charging Ralph Edward Carter, Respondent, with numerous violations of Chapter

   626, Florida Statutes. The charges arose from Respondent's alleged failure to remit applications and premium payments to an insurer.

   
   

   Respondent denied the factual allegations and requested a formal hearing. On November 8, 1989, the case was forwarded to the Division of Administrative Hearings. A formal hearing was held in St. Petersburg, Florida on January 31, 1989, before the Honorable Donald R. Alexander, Hearing Officer for the Division of Administrative Hearings. Said hearing was held in accordance with the provisions of Section 120.57(1), Florida Statutes.

   After consideration of the evidence and arguments presented

   at the hearing, the Hearing Officer on March 13, 1990, issued his Recommended Order to the Insurance Commissioner. (Attached as Exhibit A). The Hearing Officer recommended that Ralph Edward Carter be found guilty of violating sections 626.611(8) and 626.734, Florida Statutes, and that his general lines license be suspended for thirty (30) days. It was recommended that all other charges be dismissed.

   
   

   RULINGS ON RESPONDENT'S EXCEPTIONS

   
   

   Petitioner's exception objects to the Hearing Officer's recommended penalty of a thirty (30) day suspension of Respondent's general lines license only.

   
   

   Section 626.651(1), Florida Statutes provides:

   
   

   Upon suspension, revocation, or refusal to renew or continue any one license of an agent or solicitor, or upon suspension or license or permit, the department shall at the same time likewise suspend or revoke all other licenses or status of eligibility held by the licensee under this code.

   
   

   In light of this statute the Petitioner' assertion that when one license is suspended, all licenses and eligibility for licensure held by the licensee must be suspended is correct. The Petitioner's exception is accepted.

   
   

   Upon consideration of the foregoing and the record and being otherwise fully advised in the premises, it is:

   
   

   ORDERED:

   
   

   1. That the Findings of Fact of the Hearing Officer are adopted in toto as the Department's Findings of Fact.

      
      

   2. The Conclusions of Law of the Hearing Officer are adopted in toto as the Department's Conclusions of Law.

      
      

   3. The Hearing Officer's recommendation that the general lines license of Ralph Edward Carter be suspended for thirty (30) days is rejected. The more appropriate disposition of this case would be that all licenses and eligibility for licensure held by Respondent, Ralph Edward Carter, be suspended for a period of thirty (30) days.

ACCORDINGLY, the insurance licenses and eligibility for licensure of Ralph Edward Carter are SUSPENDED for a period of thirty (30) days. As provided by Section 626.641(4), Florida Statute, Ralph Edward Carter, during the period of suspension, shall not engage in or attempt to profess to engage in any transaction or business of insurance for which a license or permit is required.

Any party to these proceedings is entitled to seek review of this Order pursuant to Section 120.68, Florida Statutes, and Rule 9.110, Florida Rules of Appellate Procedure. Review proceedings must be instituted by filing a Petition or Notice of Appeal with the General Counsel, acting as the agency clerk, at 412 Larson building, Tallahassee, Florida 32399-0300, and a copy of the same with the appropriate District Court of Appeal within thirty (30) days of rendition of this Order.

DONE and ORDERED this day 11 April of 1990.

Copies Furnished To:

Donald R. Alexander Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Ralph Edward Carter (Certified Mail) 3135 18th Avenue South

St. Petersburg, Florida 33712

Richard J. DaFonte, Esquire

P. O. Box 41750

St. Petersburg, Florida 33743

Willis F. Melvin, Esquire

412 Larson Building Office of Legal Services

Tallahassee, Florida 32399-0300

Docket for Case No: 89-006117

Orders for Case No: 89-006117