STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND ) TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 93-0909

)

RAFAEL ISIDRO PINEDA, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, final hearing in the above-styled case was held in Tampa, Florida, on September 14, 1993, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

The parties were represented at the hearing as follows: For Petitioner: John R. Dunphy

Division of Legal Services

Department of Insurance 612 Larson Building

Tallahassee, Florida 32399-0300

For Respondent: Rafael Isidro Pineda, pro se

1363 Eckles Drive

Tampa, Florida 33612-5159 STATEMENT OF THE ISSUE

The issue in this case is whether Respondent is guilty of mishandling premiums paid to him by three customers and, if so, what penalty should be imposed.

PRELIMINARY STATEMENT

By Second Amended Administrative Complaint, Petitioner alleged that Respondent, doing business as Las Americas Insurance

Agency, was licensed as a life insurance agent, life and health insurance agent, and general lines insurance agent.

Count I of the complaint alleges that, on or about April 13, 1992, Respondent received an automobile insurance application from Aurelio Ramos for coverage with Fortune Insurance Company and told Mr. Ramos that he would receive coverage from Fortune in return for a $323 premium downpayment. Count I alleges that Respondent gave Mr. Ramos an insurance ID card and policy declarations page

indicating that he had automobile insurance with Bankers Insurance Company. Count I alleges that Respondent deposited the premium check and failed to remit it to Fortune, Bankers, or any other insurer. Based on these allegations, Petitioner alleges that Respondent mishandled the premium and entire transaction in violation of Sections 626.561(1), 626.611(4), (5), (7), (9), (10), and (13),

626.621(2) and (6), 626.9521, and 626.9541(1)(e)1., Florida Statutes.

Count II makes the same allegations with respect to the sale of insurance to Antonio Sanchez on or about April 13, 1992. Mr. Sanchez allegedly paid a premium downpayment of $613.

Count III alleges that, on or about June 30, 1992, Respondent received from Maria Agudelo an application for automobile insurance. The application was allegedly on a preprinted form showing Old Dominion Insurance Company as the insurer. Respondent allegedly indicated on the application that the policy period would be from July 6, 1992, to July 6, 1993. Count III alleges that Respondent received from Ms. Agudelo premium-payment checks in the amounts of

$55 and $75.52 on June 30 and July 8, 1992, respectively. Count III alleges that Respondent failed to remit the premium payments to Old Dominion in the regular course of business and that Respondent failed to transmit the application to Old Dominion in a timely manner. Count III alleges that, on or about July 20, 1992, Ms. Agudelo was involved in an automobile accident, and, due to Respondent's failures, Old Dominion denied coverage. Count III alleges that Respondent thereby violated the above-cited statutes except Sections 626.9521, and 626.9541(1)(e)1., Florida Statutes.

Respondent timely demanded a formal hearing.

Respondent did not appear at the hearing until 45 minutes after it was scheduled to have begun. He missed the testimony of Mr. Ramos and a bank official, who identified his signature card and testified that certain checks had been deposited. The hearing officer summarized this testimony for Respondent.

Respondent protested that he had not received notice of the date of the hearing from his former attorney, who had withdrawn after the issuance of the Notice of Hearing, and had received inaccurate notice of when the hearing was due to begin and what it would cover from Mr. Dunphy in a recent telephone conversation. Respondent claimed that he thought that the hearing would cover only Count III and that he did not have with him documents concerning Counts I and II.

The hearing officer gave Respondent until September 22, 1993, to file a formal request, citing grounds, for an evidentiary hearing on the adequacy of the notice, as well as to file additional documents concerning Counts I and II. Respondent did not file anything by the deadline and is thus deemed to have waived his objections to notice.

At the hearing, Petitioner called seven witnesses and offered into evidence

16 exhibits. Respondent called one witness, himself, and offered no documents into evidence.

No transcript was ordered. Petitioner filed a proposed recommended order, and rulings on the proposed findings are in the appendix.

FINDINGS OF FACT

1. At all material times, Respondent has been a licensed life insurance agent, life and health insurance agent, and general lines insurance agent. At all material times, Respondent did business as Las Americas Insurance Agency, for whose bank account Respondent was the sole authorized signatory.

   
   

2. On or about April 13, 1992, Respondent received from Aurelio Ramos a signed, completed application for motor vehicle insurance together with a check for $323 payable to Las Americas and representing the downpayment on the premium. The application was a Fortune Insurance Company application. On the same day, Respondent provided Mr. Ramos with an insurance ID card indicating that he was insured, as of April 13, 1992, with Bankers Insurance Company through binder #100230.

   
   

3. Respondent deposited Mr. Ramos's check in the Las Americas bank account. However, Respondent did not timely send the funds and application to Fortune, Bankers, or any other insurer. Until June, 1992, Respondent did not have the authority to issue a Bankers insurance ID card, or even bind Bankers to coverage. Respondent has offered no explanation why he issued this ID card in April, 1992, to Mr. Ramos.

   
   

4. In any event, Mr. Ramos was without insurance coverage for his vehicle, which was an ice cream vending truck, until June 16, 1992, when he obtained coverage through another agent. Following demand made by Petitioner's representatives, Respondent refunded $323 to Mr. Ramos on June 12, 1993.

   
   

5. On or about April 13, 1992, Respondent received from Antonio Sanchez a signed, completed application for motor vehicle insurance together with a check for $613 payable to Las Americas and representing the downpayment on the premium. The application was a Fortune Insurance Company application. On the same day, Respondent provided Mr. Sanchez with an insurance ID card indicating that he was insured, as of April 13, 1992, with Bankers Insurance Company through binder #100229.

   
   

6. Respondent deposited Mr. Sanchez' check in the Las Americas bank account. However, Respondent did not timely send the funds and application to Fortune, Bankers, or any other insurer. Respondent has offered no explanation why he issued this ID card in April, 1992, to Mr. Sanchez two months before Respondent was authorized to bind Bankers or issue Bankers insurance ID cards.

   
   

7. In any event, Mr. Sanchez was without insurance coverage for his vehicles, which were two ice cream vending trucks, for a couple of months until he obtained coverage through another agent. Following demand made by Petitioner's representatives, Respondent later refunded $613 to Mr. Sanchez.

   
   

8. On or about June 30, 1992, Respondent received from Maria Agudelo a signed, completed application for motor vehicle insurance with Old Dominion Insurance Company for coverage to take effect July 6, 1992. Ms. Agudelo and her husband received credit on the premium because this was coverage replacing other, still-current coverage that Ms. Agudelo and her husband had purchased through Respondent with a company that was discontinuing business in Florida. They paid Respondent an additional $130.52 when submitting the application for coverage with Old Dominion.

9. On the same day, Respondent provided Ms. Agudelo with an insurance ID card indicating that she was insured, as of July 6, 1992, with Old Dominion through binder #100353. Mr. and Ms. Agudelo's old coverage was due to expire July 6, 1992.

   
   

10. It is unclear when Respondent forwarded the application or premium to Old Dominion, which claims to have received the materials on July 20, 1992. In any event, Respondent had authority to bind Old Dominion and issue an Old Dominion insurance ID card, although he was required by his agency agreement to submit the materials within 72 hours of binding.

    
    

11. However, due to the nature of the policy, which was a direct-bill policy, Respondent was not allowed to retain his commission from the premium that he remitted to Old Dominion. Respondent was not aware of this prohibition, so he remitted the premium less him commission $69.90.

    
    

12. At some point after receiving the application and premium, less Respondent's commission, Old Dominion returned the materials to him, declining to issue the insurance. Although Old Dominion had a right to the entire premium under its agency agreement with Respondent, it had not noticed that Respondent had previously retained his commission on two other direct-bill policies that Respondent had sent to the insurer in late June, 1992. The Agudelo policy apparently alerted Old Dominion to this problem. But, as to the two earlier cases, Old Dominion merely demanded that Respondent remit his commission, which he did, and did not suspend coverage.

    
    

13. On July 20, 1992, Ms. Agudelo had an accident involving one of the vehicles that was the subject of the above-described Old Dominion application. Although she did not contact Old Dominion, she called Respondent. The record is not clear whether he immediately called Old Dominion. It is possible that Old Dominion handled the Agudelo application differently from the two earlier applications because Old Dominion had not timely noticed the problem in the earlier submittals. But it would seem that the risk would be less in allowing Respondent to remedy the problem in the Agudelo application than in the earlier- submitted applications. It is also possible that Old Dominion learned of the accident and then elected not to cover Mr. and Ms. Agudelo,as it had the two earlier applicants. The evidence is unclear in this regard.

    
    

14. Mr. and Ms. Agudelo incurred property damages of about $2200 in the accident. Respondent paid them $1000 to compensate them partly for their loss for which Old Dominion denied coverage.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes. All references to Rules are to the Florida Administrative Code.)

    
    

16. Section 626.561(1) provides:

    
    

    All premiums, return 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. An agent shall keep the funds belonging to each

    insurer for which he is not appointed, other than a surplus line insurer, in a separate account so as to allow the department to properly audit such funds. The licensee in the applicable regular course of business shall account for an pay the same to the insurer, insured, or other person entitled thereto.

    
    

17. Section 626.611 provides that Petitioner shall suspend or revoke the license of any agent if he is guilty of any of the following:

    
    

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

       
       

    2. Willful misrepresentation of any insurance policy . . . or willful deception with regard to any such policy . . ., done either in person or by any form of dissemination of information or advertising.

       
       

       (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 appointment.

          
          

       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 or appointment.

       
       

       (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.

       
       

18. Section 626.621 provides that Petitioner may suspend or revoke the license of any agent if he is guilty of any of the following:

    
    

    (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 appointment.

    
    

    (6) In the course of business under the license of appointment, 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.

19. Section 626.9521 provides:

    
    

    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.

    
    

20. Section 626.9541(1)(e)1. identifies as an unfair method of competition and unfair or deceptive act or practice "knowingly . . . [c]ausing, directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false material statement."

    
    

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

    
    

22. The issuance of the Bankers insurance ID cards to Mr. Ramos and Mr. Sanchez constitutes a willful misrepresentation by Respondent of an insurance policy. This conduct represents two violations of Section 626.611(5). When coupled with Respondent's failure to send the premiums and applications to Fortune, Bankers, or any other insurer, Respondent has demonstrated lack of fitness or trustworthiness to engage in the business of insurance and fraudulent or dishonest practices in the conduct of insurance business. This conduct represents two violations of Section 626.611(7) and (9), respectively. The evidence concerning the Ramos and Sanchez transactions does not constitute violations of other subsections of Section 626.611. Given the relatively greater severity of violations of Section 626.611 than of Section 626.621, it is unnecessary to consider the question of violations of the latter section. Respondent's conduct also constitutes an unfair method of competition or unfair or deceptive insurance practice.

    
    

23. The evidence does not establish by the required standard of proof any violation with respect to the Agudelo transaction. The evidence is not clear and convincing that Respondent did not timely send the premium and application to Old Dominion. The erroneous withholding of the commission was inadvertent, and had Old Dominion timely reminded Respondent of this element of his agency agreement, the Agudelos' loss could have been avoided.

    
    

24. Rule 4-231.040(1) provides that the "violation [of Section 626.611 or 626.621] specifying the highest stated penalty will be considered for [a single act of misconduct]." Rule 4- 231.040(3) states that the final penalty shall be the highest penalty, "as adjusted to take into consideration any aggravating or mitigating factors." The rule adds that Petitioner may convert the total penalty to an administrative fine and probation in the absence of a violation of Section 626.611.

    
    

25. Rule 4-231.110(9) provides that the penalty for violating Section 626.561(1) is a nine months' suspension. Rule 4-231.100(5) provides that the penalty for violating Section 626.9541(1)(e) is six months' suspension.

26. Rule 4-231.080 provides the following penalties for the following violations:

    
    

    626.611(4)	surrender of license
    626.611(5)	suspension 6 months
    626.611(7)	suspension 6 months
    626.611(9)	suspension 9 months
    626.611(10)	suspension 9 months
    626.611(13)	suspension 6 months

    
    

27. Rule 4-231.090 provides the following penalties for the following violations:

    
    

    626.621(2) suspension 3 months

    626.621(6) suspension 6 months

    
    

28. Pursuant to the rules, the greatest penalty appropriate for the above- noted violations would be nine months for the Ramos transaction and nine months for the Sanchez transaction. No unusual aggravating or mitigating factors exist, so the appropriate penalty should be a suspension of Respondent's license for 18 months.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that the Department of Insurance enter a final order suspending Respondent's licenses for a period of 18 months.

ENTERED on September 29, 1993, 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 on September 29, 1993.

ENDNOTE

1/ The Second Amended Administrative Complaint makes no reference to 626.9521(2) (Fla.Stat. Supp. 1992), which adds specific fines in addition to other penalties. Likewise, old 626.9521, which is now 626.9521(1), was amended to incorporate 626.951 as a source of unlawful trade practices. These new provisions are not addressed in the recommended order.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-909

Treatment Accorded Proposed Findings of Petitioner

1-25: adopted or adopted in substance except that Mr. Ramos and Mr.

Sanchez made demands of Respondent for refund of their premium downpayments prior to the actual refunds.

26-28 (first sentence): rejected as unsupported by the appropriate weight of the evidence.

28 (second sentence)-29: adopted.

30-32: rejected as unsupported by the appropriate weight of the evidence. 33: adopted.

34: rejected as unsupported by the appropriate weight of the evidence. 35-36: adopted.

COPIES FURNISHED:

Honorable Tom Gallagher

State Treasurer and Insurance Commissioner

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

Bill O'Neil, General Counsel Department of Insurance

The Capitol, PL-11

Tallahassee, Florida 32399-0300

John R. Dunphy

Division of Legal Services Department of Insurance 612 Larson Building

Tallahassee, Florida 32399-0300

Rafael Isidro Pineda, pro se 1363 Eckles Drive

Tampa, Florida 33612-5159

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: 93-000909

Orders for Case No: 93-000909