STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND )

TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 92-4371

)

THOMAS FELIX DIAZ, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this case on October 14, 1993, in Miami, Florida, before J. Stephen Menton, a duly designated Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Daniel T. Gross, Esquire

Division of Legal Services

412 Larson Building Tallahassee, Florida 32399-0300

For Respondent: Thomas Felix Diaz, pro se

14415 Southwest 42nd Terrace Miami, Florida 33175

STATEMENT OF THE ISSUE

The issue in this case is whether Respondent, Thomas Felix Diaz, has violated various provisions of the Florida Insurance Code as alleged in an Administrative Complaint dated March 26, 1992 and, if so, what disciplinary action should be imposed against his license as an insurance agent in Florida.

PRELIMINARY STATEMENT

In a one-count Administrative Complaint dated March 26, 1992, the Petitioner, Department of Insurance and Treasurer (the "Department"), charged Respondent with violating Sections 626.561(1), 626.611(7), 626.611(9),

626.611(10), 626.611(13), 626.621(2), 626.621(6), 626.9541(1)(e)1.,

626.9541(1)(e)2., and 626.9541(1)(o)1., Florida Statutes, in connection with certain insurance policies sold to the Delta Picture Frame Company in March of 1991. Respondent denied the allegations contained in the Administrative Complaint and requested a formal hearing pursuant to Section 120.57(1), Florida Statutes. The case was referred to the Division of Administrative Hearings which noticed and conducted the hearing.

At the hearing, Petitioner presented the testimony of three witnesses: Alan Mandel, president of Delta Picture Frame Company; Amalia Cordova, an

employee of Delta Picture Frame Company; and Ray Hodges, the Director of Government Relations for Primerica Financial Services. Petitioner offered five exhibits into evidence, all of which were accepted without objection.

Respondent testified on his own behalf. Respondent did not present the testimony of any other witnesses or offer any exhibits into evidence.

No transcript of the proceedings has been filed. At the conclusion of the hearing, the parties were advised of their right to submit proposed findings of fact and conclusions of law. Petitioner has timely filed such proposals.

Respondent has not filed any post-hearing submittals. A ruling on each of Petitioner's proposed findings of fact is contained in the Appendix to this Recommended Order.

FINDINGS OF FACT

Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made:

1. At all times relevant to this proceeding, Respondent was licensed in this state as a life insurance agent. Respondent is currently licensed as a life insurance agent, as a life and health insurance agent, and as a health insurance agent.

   
   

2. At all times pertinent to this proceeding, Respondent was appointed to sell life insurance with Mass Indemnity and Life Insurance Company (MILICO) which has recently changed its name to Primerica Financial Services. In that capacity, all funds received by, from or on behalf of consumers, representing premiums for insurance policies, were trust funds received in a fiduciary capacity and were to be paid over to an insurer, insured, or other persons entitled thereto in the regular course of business.

   
   

3. Sometime around March of 1991, the president of Delta Picture Frame Company ("Delta" or the "Company") of Miami decided to change the health insurance for two of his employees. The insurance was being provided at company expense. The prior policy included a small life insurance component as part of the coverage. The president of the Company contacted the MILICO agency to inquire regarding their group health policy and asked to see an agent.

   
   

4. On or about March 18, 1991, Respondent accompanied another agent for MILICO, Nelson Barrera, to Delta's office to meet with the president of the Company. At the time of the meeting, Respondent was only licensed as a life insurance agent. He did not obtain his health and life license until approximately April 15, 1991.

   
   

5. At the meeting, Barrera explained the coverage and price for health insurance. The president of Delta agreed to purchase the health insurance policies but never verbally expressed any interest in purchasing life insurance for his employees. In fact, he specifically rejected a proposed life and health insurance package stating that the company would only pay for health insurance.

   
   

6. Respondent spoke separately with the employees. Applications for both life and health insurance were filled out and signed by the employees.

7. The evidence was inconclusive as to whether life insurance was actually discussed with either of the employees. Only one of the employees testified at the hearing. She verified her signature on the application for life insurance, but she claims that she only discussed health insurance with the agents and did not knowingly apply for life insurance.

   
   

8. The president of Delta signed the last page of the life insurance applications which authorized automatic withdrawals to pay MILICO for the life insurance policies. The circumstances surrounding the execution of the life insurance applications was not clearly established by the evidence.. However, the evidence was clear that the president of the Company never intended to purchase life insurance and never knowingly agreed to authorize bank withdrawals for life insurance. The evidence established that the president of the Company clearly indicated that the Company would only pay for health insurance and he never knowingly assented to the issuance of life insurance policies for the employees at company expense.

   
   

9. When the president of the Company noticed that the bank records reflected withdrawals payable to MILICO, he inquired further and learned that the deductions were for life insurance. He immediately called Respondent who agreed to cancel the life insurance policies and provide a refund.

   
   

10. Respondent was entitled to receive a commission of 75 percent of the first year's premiums for the sale of the life insurance policies to the employees of Delta.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

12. "Insurance is a business greatly affected by the public trust, and the holder of an agent's license stands in a fiduciary relationship to both the client and the insurance company." Natelson v. Department of Insurance, 454 So.2d 31,32 (Fla. 1st DCA 1984). Petitioner is the state agency empowered to enforce the provisions of the Florida Insurance Code.

    
    

13. Petitioner is required to suspend or revoke the license of any agent who is found to have violated any of the provisions of Section 626.611, Florida Statutes. Petitioner has discretion to impose disciplinary action against any agent who is found to violate any of the provisions of Section 626.621, Florida Statutes.

    
    

14. Petitioner has the burden to prove the violations alleged in the Administrative Complaint filed against Respondent by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

15. Although the Administrative Complaint filed against the Respondent contains only one count, it alleges violations of several different sections of the Florida Insurance Code. Respondent is charged with violating Section 626.56(1), Florida Statutes, by failing to account for and/or properly apply premiums and or other funds received under his license in the regular course of business. Respondent has also been charged with violating Section 626.611(10), Florida Statutes, which prohibits the misappropriation, conversion, or unlawful withholding of monies belonging to insurers or insureds or beneficiaries or to others and received in conduct of business under the license. The evidence in

    this case did not establish that any money was ever directly turned over to Respondent and/or that he failed to properly account for or pay over any money. Accordingly, the evidence did not establish that Respondent violated these sections. Respondent is also charged with knowingly collecting a sum as a premium or charge for insurance, which is not then provided, or is not in due course to be provided in violation of Sections 626.9541(1)(o)1., Florida Statutes. The life insurance policies in this case were issued, so this charge has not been sustained.

    
    

16. The Administrative Complaint also charges Respondent with violating Sections 626.611(7), 626.611(9) and 626.621(6), Florida Statutes, as a result of a demonstrated lack of fitness or trustworthiness to engage in the business of insurance, by engaging in fradulent or dishonest practices in the conduct of business under the license and/or by engaging in unfair or deceptive acts or practices and by having shown himself to be a source of injury or loss to the public or detrimental to the public interest.

    
    

17. The evidence established that Respondent did not fully explain the life insurance coverage to the president of the Company. Furthermore, Respondent never obtained the conscious assent of the Company president to the issuance of the life insurance policies.

    
    

18. Respondent may well have discussed the purchase of life insurance policies with the individual employees. However, Respondent was aware that the president of the Company was ultimately responsible for deciding whether to purchase life insurance policies for the employees at Company expense. Respondent did not explain the policies to the president of the Company and never obtained his verbal approval to issue the policies. The circumstances surrounding the execution of the applications indicate that there was some confusion as to what was being signed. However, after considering all the evidence especially the lack of full disclosure to the president of the Company it is concluded that the execution of the life insurance applications was not merely the result of confusion, but, instead, reflected overly aggressive business tactics on the part of Respondent. Such tactics raise concern as to Respondent's fitness and trustworthiness to engage in the business of insurance. However, since there is no evidence of any prior misconduct by Respondent and there was obviously some confusion surrounding the execution of the documents, it cannot be concluded that Respondent does not possess the fitness and trustworthiness necessary to engage in the business of insurance.

    
    

19. While Respondent's actions constitute an unfair or deceptive practice within the scope of Section 626.621(6), a more difficult question arises as to whether his activities constitute a fraudulent or dishonest practice for purposes of Section 626.611(9). Since the life insurance applications were signed by the president of the Company and by the individual employees, it is concluded that Respondent's actions do not rise to the level of misconduct necessary to establish violations of Section 626.611(7) and/or (9), Florida Statutes.

    
    

20. In view of the foregoing, it is also concluded that Respondent has violated Section 626.621(2), Florida Statutes.

    
    

21. Respondent has also been charged with violating Sections 626.9541(1)(e)1. and 2., Florida Statutes, for knowingly making false material statements and/or false entries of material facts. It is not clear what statements or entries these allegations refer to. In view of the foregoing findings, these charges are redundant and unnecessary.

22. Section 626.681(1), Florida Statutes, provides:

    
    

    . . . If the Department finds that one or more grounds exist for the suspension, revocation or refusal to renew or continue any license or appointment issued under this chapter, the Department may in its discretion, in lieu of such suspension, revocation, or refusal, and except on a second offense or when such a suspension revocation or refusal is mandatory, impose upon the licensee or appointee an administrative penalty in an amount up to $500 or, if the Department has found willful misconduct or willful violation on the part of the licensee or appointee, up to $2,500. . . .

    [emphasis added]

    
    

23. Section 626.691(1), Florida Statutes, provides as follows:

    
    

    If the Department finds that one or more grounds exist for the suspension, revocation or refusal to renew or continue any license or appointment issued under this part, the Department may, in its discretion, except when an administrative fine is not permissible under s626.681 or when such suspension, revocation or refusal is mandatory, in lieu of such suspension, revocation, or refusal, or in connection with any administrative monetary penalty imposed under s626.681, place the offending licensee or appointee on probation for a period, not to exceed two years, as specified by the Department in its order.

    
    

    (2) As a condition to such probation or in connection therewith, the Department may specify in its order reasonable terms and conditions to be fulfilled by the probationer during the probation period . . .

    
    

24. The proper interpretation of this sometimes confusing regulatory scheme was elucidated in Dyer v. Department of Insurance and Treasurer, 585 So.2d 1009, (Fla. 1st DCA 1991). As noted by the court in that case,

    
    

    The statutory scheme is abundantly clear that when a licensed insurance agent has violated Section 626.611, such violation requires mandatory suspension or revocation, precluding the application of Section 626.621 and use of the alternative sanctions as provided in Section 626.681 and 626.691. In this circumstance, the Department is obligated to impose either suspension or revocation pursuant to Section 626.611, with the severity of the penalty to be based upon the number and

    severity of all offenses of which the licensee has been found guilty at that time. 585 So.2d at 1015.

    
    

25. In this case, Respondent has been found guilty of misconduct under Section 626.621. There is no finding of guilt under Section 626.611, so suspension is permissive not mandatory. The Department is authorized to impose an administrative fine or probation in lieu thereof. 1/

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance issue a Final Order finding

Respondent guilty of violating Section 626.621(6) and that Respondent's licenses

be suspended for a period of three months, or, in lieu of a suspension, Respondent should be required to pay to the Department a fine of $500 and be placed on probation for a period of two years subject to such terms and restrictions as the Department may apply.

RECOMMENDED this 3rd day of June 1993, at Tallahassee, Florida.

J. STEPHEN MENTON 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 3rd day of June 1993.

ENDNOTE

1/ This penalty is only appropriate if there is no finding of guilt under Section 626.611.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-4371

Only the Petitioner has submitted a Proposed Recommended Order. The following constitutes my rulings on the proposed findings of fact submitted by the Petitioner.

The Petitioner's Proposed Findings of Fact

1. Adopted in substance in Findings of Fact 1 and 2.

2. Adopted in substance in Findings of Fact 2.

3. Adopted in substance in Findings of Fact 3 and 4.

4. Subordinate to Findings of Fact 4 and 5.

5. Subordinate to Findings of Fact 6-8.

6. Subordinate to Findings of Fact 6-8.

7. Subordinate to Findings of Fact 6-8.

8. Subordinate to Findings of Fact 10.

9. Subordinate to Findings of Fact 9.

COPIES FURNISHED:

Daniel T. Gross, Esquire Division of Legal Services

412 Larson Building Tallahassee, Florida 32399-0300

Thomas Felix Diaz

14415 S.W. 42nd Terrace Miami, Florida 33175

Thomas Gallagher

State Treasurer and Insurance Commissioner

Department of Insurance The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Bill O'Neil, General Counsel Department of Insurance

The Capitol, PL-11

Tallahassee, Florida 32399-0300

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: 92-004371

Orders for Case No: 92-004371