STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 90-7320

)

GERARD JOSEPH BARNES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, final hearing in the above-styled case was held in Kissimmee, Florida, on May 7, 1991, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

The parties were represented at the hearing as follows: For Petitioner: Attorney Willis F. Melvin, Jr.

Division of Legal Services

412 Larson Building

Tallahassee, Florida 32399-0300

For Respondent: Gerard Joseph Barnes, pro se

600 Thacker Avenue, Suite C-19 Kissimmee, Florida 34741

STATEMENT OF THE ISSUE

The issue in this case is whether Respondent violated certain statutes governing the business of insurance.

PRELIMINARY STATEMENT

By Administrative Complaint filed November 6, 1990, Petitioner alleges that Respondent, who was licensed as a life and health agent, general lines agent, and life agent, received $598 from a client for the purchase of automobile insurance,failed to submit the premium to the insurer, and failed to refund the money to the client, who was never issued a policy.

Count I of the Administrative Complaint alleges that Respondent thereby violated Section 626.561(1), Florida Statutes, which requires a licensee to account for all premiums received in the regular course of business; Section 626.611(4), Florida Statutes, which prohibits the wilful use of a license to circumvent the provisions of Chapter 626, Florida Statutes; Section 626.611(7), Florida Statutes, which prohibits a demonstrated lack of fitness or trustworthiness to engage in the business of insurance; Section 626.611(10),

Florida Statutes, which prohibits the misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insureds and received in the conduct of business under the license; Section 626.621(2), Florida Statutes, which prohibits the violation of any provision of Chapter 626, Florida Statutes, or any other provision of law governing the business of insurance; Section 626.621(6), Florida Statutes, which prohibits engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited by Part X, Chapter 626, Florida Statutes, or otherwise demonstrating that the licensee is a source of injury or loss to the public or detrimental to the public interest; and Section 626.9541(1)(o)1., Florida Statutes, which prohibits knowingly collecting any premium for insurance not later provided, subject to acceptance of the risk by the insurer.

Count II of the Administrative Complaint alleges that Respondent's failure to remit the premium in June, 1989, violated the provisions of a Consent Order entered October 26, 1989, which required Respondent, in an unconnected matter involving his limited surety agent license, to adhere to all provisions of the Insurance Code and rules of the Department. Count II alleges that, as a result of the failure to remit the premium to the insurer, Respondent violated a proper order of the Department of Insurance and Treasurer and thereby violated Sections 626.611(4) and (7), which are quoted above; Sections 626.611(2) and (6), which are quoted above; Section 626.611(9), which prohibits fraudulent or dishonest practices in the conduct of business under the license; Section 626.611(13), which prohibits a wilful failure to comply with, or wilful violation of, any proper order or rule of Petitioner or any wilful violation of the Insurance Code; and Section 626.621(3), which prohibits the violation of any lawful order or rule of Petitioner.

By letter dated November 9, 1990, Respondent disputed the material facts and requested a formal hearing.

At the hearing, Petitioner called three witnesses and offered into evidence six exhibits. Respondent called three witnesses and offered into evidence eight exhibits. All exhibits were admitted.

The transcript was filed on June 7, 1991. Each party filed a proposed recommended order. All of the proposed findings are adopted except that Respondent's proposed finding concerningan offer of refund on July 30, 1990, is rejected as unsupported by the evidence.

FINDINGS OF FACT

1. Respondent is currently licensed in the State of Florida as a general lines agent, life and health agent, and life agent.

   
   

2. Respondent has been licensed in the State of Florida as a limited surety agent. Pursuant to a Consent Order filed October 26, 1989, Respondent voluntarily surrendered his limited surety agent's license, which the Consent Order recites "shall have no force or effect on the remaining licenses and eligibility for licensure of the Respondent."

3. In the Consent Order, Respondent was fined $250. Inconsistent with the provision that the Consent Order would have no effect on Respondent's other licenses, they 1/ were placed on probation for one year, during which time Respondent

   
   

   shall strictly adhere to all provisions of the Florida Insurance Code and the Rules of the Department of Insurance and Treasurer. If, during the period of probation, the Department has good cause to believe that Respondent has violated the terms or conditions of his probation, it shall immediately initiate proceedings to suspend or revoke the licenses and eligibility for licensure of the Respondent.

   
   

4. On or about June 22, 1989, George and Sandra Oakes decided to purchase automobile insurance. They had previously done insurance business with the Friendly Insurance Agency in Kissimmee and were sufficiently satisfied with the service to seek the policy from the same agency.

   
   

5. Friendly Insurance Agency was a trade name used by Friendly Surety and Insurance Services of Osceola, Inc., formerly Friendly Auto Insurance of Kissimmee, Inc. Respondent was president of the corporation through June, 1989, and owned shares in the company. Although Respondent was apparently selling insurance through another agency by June, 1989, he still possessed business cards showing him as an agent of Friendly Insurance Agency located at 417 E. Vine St. in Kissimmee.

   
   

6. In June, 1989, the corporation was financially troubled. Respondent was no longer receiving pay from the company. As early as June 16, 1989, Respondent had contacted a representative of Petitioner for advice that, by no later than the end of the month, culminated in the winding up of the agency's business.

   
   

7. On June 22, 1989, Mrs. Oakes visited Respondent at the Friendly Insurance Agency. While there she completed an application for automobile insurance, which Respondent signed on behalf of the agency, and gave Respondent a check in the amount of $598 payable to Friendly Insurance. She received a receipt from Friendly Insurance of Kissimmee, Inc. and signed by Respondent. The check was endorsed by Friendly InsuranceKissimmee--417 E. Vine St. and then deposited into the

   corporate account.

   
   

8. The Oakes' application was never submitted to the insurer, Dairyland Insurance Company. The record is silent as to what attempts the Oakes took to find out from Respondent why they had received no policy.

   
   

9. However, a Dairyland representative, after notification from Petitioner's office of a client complaint, visited and telephoned the Friendly Insurance Agency in Kissimmee numerous times. During these visits, he could see piles of mail by the mail slot and hear the telephone ringing unanswered. Dairyland had already experienced problems with the Friendly Insurance Agency in June, 1989, when five checks had been returned unpaid, either because of insufficient funds or the closure of the account. The insurer terminated its relationship with the agency in August, 1989.

10. The state attorney's office later commenced a criminal action against Respondent concerning the Oakes' transaction. On January 25, 1991, Respondent refunded to the Oakes, either directly or through the state attorney's office, the $598 that they had paid over eighteen months' earlier for automobile insurance. The criminal case was closed without further action.

    
    

11. The Consent Order is based on Respondent's failure to supply financial reporting information in a timely fashion to Petitioner. No loss to the public or client complaint isinvolved in the Consent Order. The record does not indicate whether the failure involved the same insurance agency, when it took place, or the magnitude of the reporting violation, except to the extent that the magnitude may be inferred from a $250 fine, license surrender, and probation for one year (in effect with respect to Respondent's other licenses rather than his limited surety license, which was surrendered).

    
    

    CONCLUSIONS OF LAW

    
    

12. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes (1989), unless otherwise noted.)

    
    

13. Petitioner is required to "suspend or revoke" the license of any agent if the licensee is guilty of any of the following provisions of Section 626.611:

    
    

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

    (7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

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

    2. 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 [Petitioner] or willful violation of any provision of this code.

    
    

14. Petitioner may "suspend or revoke" the license of any agent if the licensee is guilty of any of the following:

    
    

    1. 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.

    2. Violation of any lawful order or rule of [Petitioner].

    (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.

    
    

    Section 626.621.

    
    

15. Section 626.561(1) provides:

    
    

    All premiums . . . or other funds 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, insured, or other person entitled thereto.

    
    

16. Section 626.9541(1)(o)1., Florida Statutes (1990 Supp.) provides that an unfair method of competition and unfair or deceptive act or practice consists of:

    
    

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

    
    

17. Petitioner must prove the material allegations against Respondent by clear and convincing evidence. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

    
    

18. Petitioner has proved that Respondent violated Section 626.611(7) by demonstrating his lack of fitness or trustworthiness to engage in the business of insurance. However the responsibilities between Respondent and the Friendly Insurance Agency may have been divided, Mrs. Oakes entrusted her insurance premium to Respondent. A responsibility attached that Respondent could not delegate. Respondent demonstrated his unfitness in the business of insurance by failing to ensure that the money was forwarded to the insurer or, at minimum, that Mrs. Oakes received a full refund in a timely fashion, as opposed to after the commencement of a criminal prosecution.

    
    

19. Respondent tried to defend his acts and omissions by suggesting the matter was out of his control. Even ignoring the fact that his duty toward Mrs. Oakes is nondelegable, Respondent ignores two critical facts in presenting this defense. First, he was president of the Friendly Insurance Agency. Second, he was aware of its financial condition well in advance of receiving Mrs. Oakes' premium. By mid-June, Respondent had been discussing with a representative of Petitioner the agency's financial problems and questions involving the winding up of its affairs. It is impossible to believe, on the basis of this record, that Respondent was not aware of the precariousness ofthe agency's existence when Mrs. Oakes paid him the premium on June 22, especially when the agency was closed down about 10 days later.

20. It is unnecessary to consider whether the acts and omissions alleged in Count I also constitute violations of the other cited provisions of Chapter 626. As Petitioner tacitly acknowledges in the fact that all of these violations are alleged in one Count, the acts and omissions that violate Section 626.611(7) do not represent separate counts or offenses even though the same acts and omissions may violate other provisions as well.

    
    

21. Petitioner failed to prove that Respondent violated the provisions of the Consent Order, which was entered October 26, 1989. Respondent accepted Mrs. Oakes' premium on June 22, 1989. The violation thus took place four months prior to entering into the Consent Order. The ongoing failure to repay Mrs. Oakes does not constitute a violation of the Consent Order for several reasons because the ongoing failure was not, itself, proved as a basis for disciplining Respondent in this case. The failure to repay Mrs. Oakes until criminally prosecuted serves instead as proof tending to establish the nature of the violation that took place when Respondent accepted Mrs. Oakes' premium and failed to follow through at the time to ensure that she received her policy or a refund.

    
    

22. In determining the appropriate penalty, relevant factors include Respondent's past discipline, although for amatter that did not involve injury to the public; Respondent's restitution to Mrs. Oakes, albeit somewhat late; and Respondent's attempt to obtain assistance from Petitioner in winding up the affairs of the Friendly Insurance Agency, which attempt appears to have been successful based upon a single person who appeared at the final hearing to testify about mishandling of her premium. In its proposed recommended order, Petitioner seeks revocation of the license. Although a violation of Section 626.611(7) calls for mandatory suspension or revocation, revocation in this case is an harsh and inappropriate penalty.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that the Department of Insurance and Treasurer enter a final order finding Respondent guilty of violating Section 626.611(7) and suspending his licenses for a period of six months.

ENTERED this 19th day of June, 1991, in Tallahassee, Florida.

ROBERT E. MEALE

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 19th day of June, 1991.

ENDNOTES

1/ Based on the text of the Consent Order, as quoted below, and the fact that Respondent surrendered his limited surety agent's license at the time of the Consent Order, the probationary conditions could only have been intended to apply to Respondent's other licenses, which are the subject of the present proceeding.

COPIES FURNISHED:

Hon. Tom Gallagher

State Treasurer and Insurance Commissioner The Capitol, Plaza Level

Tallahassee, FL 32399-0300

Bill O'Neil, General Counsel Department of Insurance

The Capitol, Plaza Level Tallahassee, FL 32399-0300

Attorney Willis F. Melvin, Jr. Division of Legal Services

412 Larson Building Tallahassee, FL 32399-0300

Gerard Joseph Barnes, pro se 600 Thacker Avenue, Suite C-19 Kissimmee, FL 34741

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 90-007320

Orders for Case No: 90-007320