STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND ) TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 93-7105

)

SHIRLEY ARLENE COOK, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly- designated Hearing Officer, James E. Bradwell, held a formal hearing in this case on May 10, 1994, in Clearwater, Florida.

APPEARANCES

For Petitioner: Daniel T. Gross, Esquire

Department of Insurance and Treasurer Division of Legal Services

612 Larson Building

Tallahassee, Florida 32399-0333

For Respondent: Thomas F. Woods, Esquire

Gatlin, Woods, Carlson & Cowdery 1709-D Mahan Drive

Tallahassee, Florida 32308 STATEMENT OF THE ISSUES

Whether or not Respondent's licenses should be disciplined for allegedly engaging in improper and unlawful conduct in the course of operating her insurance business.

PRELIMINARY STATEMENT

On November 29, 1993, Petitioner, the Department of Insurance filed an Administrative Complaint against Respondent, Shirley Arlene Cook, for acts allegedly committed while acting in her capacity as a licensed insurance agent. Respondent exercised her right to a formal hearing and on December 16, 1993, this matter was referred to the Division of Administrative Hearings for the assignment of a hearing officer.

The final hearing in this matter was initially scheduled for April 8, 1994. On February 18, 1994, Respondent filed a Motion for Continuance, and on February 21, 1994, Petitioner filed a Motion for Leave to File First Amended Administrative Complaint. On February 24, 1994, an order was entered granting Petitioner's Motion to Amend the Administrative Complaint, and on February 28,

1994, an Amended Motion for Continuance was filed by Respondent. An order was entered on March 10, 1994, granting the Amended Motion for Continuance. The hearing was rescheduled for May 10, 1994, and was heard as scheduled.

At hearing, Petitioner presented the testimony of Catherine Payne, Barbara Cecil, Edith Purcell, Kimberley Jones, Mary Ann Mafetone, Wendy Wardle, Patricia

1. Caventer, Dale Curtsinger, Mike Walters, Marilola Guerra, Maria E. Diaz, Mandy Fernandez and Catherine Friz. Respondent testified on her own behalf, and also presented the testimony of John Morgan, David Cretella, and Richard Paul Lucas.

   
   

   On June 8, 1994, Petitioner filed the deposition of John J. Narkin, III, and on June 20, 1994, Respondent filed the deposition of Andrew M. Beverly in lieu of their live testimony. The parties also stipulated to use of the depositions of John and Michelle Rock, Anna Maria Garcia and Karen Klein as hearing testimony.

   
   

   On July 8, 1994, the parties filed a Joint Stipulation whereby it was agreed that proposed recommended orders would be filed by the close of business on July 22, 1994. On July 22, 1994, the parties filed a second stipulation agreeing to file proposed recommended orders on July 29, 1994. The parties also agreed that Petitioner's proposed recommended order, which was not filed until August 1, 1994, would be considered timely filed.

   
   

   Petitioner introduced twenty-eight exhibits and Respondent filed five (5) exhibits, all of which were received in evidence at the hearing.

   
   

   The parties filed proposed recommended orders which were considered in preparation of this Recommended Order. Proposed findings of fact which are not incorporated herein are the subject of specific rulings in an appendix.

   
   

   Based upon my observation of the witnesses, their demeanor while testifying and the entire record compiled herein, I hereby make the following relevant:

   
   

   FINDINGS OF FACT

   
   

   1. Respondent, Shirley Arlene Cook, is currently licensed by Petitioner as a life agent, a life and health agent, and a general lines agent, and has been so licensed since February 17, 1982, February 17, 1982, and February 13, 1980, respectively. Respondent has been employed in the insurance business since 1954. She has operated her current agency, American Family Insurors, since January 1990.

      
      

   2. During times material, Respondent engaged in the business of insurance through the corporate entity, American Family Insurors, Inc. (Family Insurors). Respondent was the sole officer and director of Family Insurors, Inc. from May 25, 1990 through February 26, 1992. As corporate officer and director of Family Insurors, Respondent was personally liable and accountable for wrongful acts, misconduct, or other violations of any provision of the insurance code committed by herself or agents who worked under her direct supervision and control.

      
      

   3. During times material, Respondent maintained a business bank account No. 1263147295 at Barnett Bank, in the name of Family Insurors. Respondent and Richard Rock were the authorized signators on the Respondent's account. Sometime in 1990, Rock was taken from the account as an authorized signator. Richard Rock was employed by Respondent as an outside producer and primarily solicited new accounts and canvassed existing accounts to pick up deposits and

      insurance applications which were collected by auto salesmen. He paid such salesmen ten dollars for every property damage referral that materialized into a policy with Family Insurors. Richard and his wife, Michelle Rock, who was also employed by Respondent, left Respondent's agency during June 1992. They left Respondent's agency due to personal problems stemming from Richard's drug and alcohol abuse, and when Respondent learned that he was paying referral fees to auto salesmen. Richard paid the salesmen the referral fees from Respondent's petty cash account, an account which was maintained and controlled by his wife, Michelle. Respondent was not aware of the referral fees and other gratuities which Richard would give to outside salesmen from time to time. The gratuities consisted of gift certificates to various retail establishments which were primarily restaurants.

      
      

   4. Funds received by Respondent and deposited into bank account No. 1263147295, which were received from or on behalf of consumers, represented premiums for insurance polices and were trust funds received in a fiduciary capacity. As such, they were to be accounted for and paid over to an insuror, insured, or other persons entitled thereto in the applicable regular course of business.

      
      

   5. During times material, Onyx Underwriters, Inc. (Onyx) was the sole managing general agent for Orion Insurance Company, now known as Aries, and American Skyhawk Insurance Company (American Skyhawk).

      
      

   6. On January 16, 1990, Respondent entered into an Insurance Broker's Agreement with Onyx. The broker's agreement was cancelled on March 19, 1992. While the broker's agreement was effective, all insurance placed by Respondent with Orion/Aries or American Skyhawk was pursuant and subject to the provisions of the broker's agreement with Onyx and constituted brokerage business.

      
      

   7. Pursuant to the broker's agreement with Onyx, Respondent retained agency commissions on policies issued and was responsible for forwarding the net premium to Onyx. This procedure is known in the industry as "netting authority" and is a procedure whereby the agent deducts the commissions that he or she is entitled to from gross premiums received on policies and forward the net premium to, in this case, Onyx.

      
      

      THE BARBARA CECIL TRANSACTION

      
      

   8. On October 13, 1990, Barbara Cecil (Cecil) purchased an automobile from Tony Taylor of Taylor Automotive in Pinellas Park. In connection with the sale, Tony Taylor, an unlicensed individual, solicited automobile insurance from Cecil on behalf of Respondent.

      
      

   9. Cecil paid Tony Taylor eighty dollars ($80.00) as the premium down payment, and Respondent later deposited Cecil's payment into her bank account.

      
      

   10. Respondent represented to Cecil that she was bound on October 13, 1990; however, the insurance documents indicate that coverage was bound for Cecil on October 27, 1990, or approximately fourteen (14) days after the date that she purchased her auto from Taylor Automotive. Cecil was, however, given a binder on October 13, 1990.

       
       

   11. Respondent later completed a policy application and submitted it to Orion Insurance Company (Orion). Orion thereafter issued a policy to Cecil for the policy period of October 27, 1990 through October 27, 1991.

   12. Orion cancelled Cecil's policy on February 6, 1991, due to the absence of photographs of her automobile. In this connection, Respondent had previously submitted a set of photographs to Orion which did not clearly depict the automobile. Therefore, a second set of photos were requested by Orion. The second set of photos was not sent to Orion prior to the cancellation date.

       
       

   13. The cancellation of Cecil's policy resulted in an unearned premium of one hundred eighty dollars and ninety-two cents ($180.92), and an unearned commission of thirty-eight dollars and seventy cents ($38.70).

       
       

   14. Cecil was without automobile insurance from February 6, 1991 to October 27, 1991, and she was informed of the cancellation.

       
       

   15. During times material, Tony Taylor was not licensed in Florida as an insurance agent, customer representative, or solicitor.

       
       

       THE KIMBERLEY JONES TRANSACTION

       
       

   16. On June 20, 1991, Kimberley Jones purchased an automobile from Tony Taylor of Taylor Automotive. In connection with this automobile purchase, Tony Taylor solicited insurance on behalf of Jones from Respondent's agency.

       
       

   17. Kimberley Jones paid Taylor one hundred dollars ($100.00) as the premium down payment and Taylor issued a receipt to Jones.

       
       

   18. Respondent did not bind coverage with American Skyhawk for Jones until one week later, i.e., June 27, 1991. The Jones' policy ran its full term.

       
       

       THE KAREN KLEIN TRANSACTION

       
       

   19. On August 26, 1991, Karen Klein purchased an automobile from Keith Rice of Car Stop Automobile Sales. In connection with this purchase, Keith Rice, an unlicensed insurance individual, solicited automobile insurance from Klein on behalf of Family Insurors. Klein paid Keith Rice approximately one hundred dollars ($100.00) as a premium down payment for issuance of an insurance policy on her newly purchased automobile, which was to be effective on August 26, 1991.

       
       

   20. American Skyhawk issued a policy to Klein for the period effective August 27, 1991 through August 27, 1992.

       
       

   21. Onyx cancelled Klein's policy on December 3, 1991, for underwriting reasons. That cancellation resulted in an unearned premium of three hundred thirty-three dollars and thirty-one cents ($333.31), and an unearned commission of seventy-three dollars and sixty-eight cents ($73.68).

       
       

       THE EDITH PURCELL TRANSACTION

       
       

   22. On September 27, 1991, Edith Purcell purchased an automobile from Bill Hoskins of Taylor Automotive. In connection with that purchase, Hoskins solicited automobile insurance from Purcell on behalf of Family Insurors. Hoskins advised Purcell that her coverage would be effective September 29, 1991, upon receipt of her down payment of one hundred dollars ($100.00).

   23. Purcell paid Hoskins the premium down payment on September 29, 1991, and Hoskins issued a receipt indicating Family Insurors as the recipient. Hoskins, on behalf of Family Insurors, represented to Purcell that she had full coverage for the policy period, September 27, 1991 through September 26, 1992, pursuant to binder number P91-1022. American Skyhawk thereafter issued a policy to Purcell for the period of October 3, 1991 through October 3, 1992.

       
       

   24. Purcell's policy was cancelled on December 26, 1991, for underwriting reasons. That cancellation resulted in an unearned premium of four hundred forty-two dollars ($442.00), and an unearned commission of seventy-seven dollars and thirty-five cents ($77.35).

       
       

       THE JOHN J. NARKIN, III TRANSACTION

       
       

   25. On October 4, 1991, John J. Narkin, III (Narkin) purchased an automobile from Bill Hoskins of Taylor Automotive. In connection with that purchase, Hoskins, an individual who was not licensed as an insurance agent, representative, or solicitor, solicited an automobile insurance policy for Narkin on behalf of Family Insurors. Hoskins requested and Narkin paid him the one hundred dollar down payment for issuance of the policy.

       
       

   26. Hoskins issued Narkin a receipt from Family Insurors for the down payment indicating full coverage for the period October 4, 1991 through October 3, 1992, pursuant to binder number N91-1059.

       
       

   27. American Skyhawk issued a policy to Narkin effective for the period of October 7, 1991 through October 7, 1992.

       
       

   28. American Skyhawk issued a notice of cancellation for nonpayment of an additional premium of fifty-four dollars ($54.00), because Narkin failed to provide proof of holding a Florida Driver's License when he was requested to do so. Respondent notified Narkin of this request by letter dated December 7, 1991. Narkin was told that he had until December 27, 1991 to remit his payment. Narkin paid Respondent the additional premium by check on December 13, 1991, which deposit was entered into Family Insuror's business bank account on December 18, 1991. The additional premium was not forwarded by Respondent to Onyx prior to the December 27, 1991 cancellation date with the result that Narkin's policy was cancelled.

       
       

   29. Narkin was without insurance from December 27, 1991 through October 7, 1992, and he had no knowledge of this fact.

       
       

   30. The cancellation of Narkin's policy resulted in an unearned premium of six hundred fifty dollars and eighty-two cents ($650.82), and an unearned commission of one hundred forty-nine dollars and sixty-three cents ($149.63).

       
       

       THE WENDY WARDLE TRANSACTION

       
       

   31. On May 17, 1991, Family Insurors solicited an American Skyhawk application for automobile insurance from Wendy Wardle. Wendy Wardle paid Respondent ninety-eight dollars ($98.00) as the premium down payment, and the policy was thereafter issued to Wardle.

       
       

   32. On August 19, 1991, American Skyhawk cancelled Wardle's policy for underwriting reasons, resulting in an unearned premium of two hundred dollars and fifty-seven ($200.57), and an unearned commission of sixty-one dollars and seventy-eight cents ($61.78).

       THE MARY ANN MAFETONE TRANSACTION

       
       

   33. On October 28, 1991, Mary Ann Mafetone purchased an automobile for her daughter, Cindy Mafetone, from John Rosa of River Auto Sales. In connection with this purchase, John Rosa, an individual who was not licensed as an insurance agent, broker, or solicitor, solicited automobile insurance for the Mafetones from Family Insurors.

       
       

   34. Mafetone paid Rosa one hundred twelve dollars ($112.00) as the premium down payment for issuance of a policy in the name of her daughter, Cindy.

       
       

   35. In exchange for soliciting insurance on behalf of or from Family Insurors, Family Insurors, through Richard Stock, paid various automobile salesmen commissions, ranging from ten dollars to twenty per transaction. These commissions were based on specific coverage being purchased by the consumer.

       
       

       Respondent's Position

       
       

   36. Andrew Beverly, an expert in the field of insurance, is a chartered property and casualty underwriter, a chartered life underwriter and a chartered financial consultant. He is the owner and operator of the Florida Insurance School, a statewide firm that prepares individuals for entry level positions in the insurance industry. Beverly reviewed Respondent's binder books and practices respecting the subject insureds in this proceeding.

       
       

       The binder book and procedures utilized by Respondent are typical industry practices for agents and agencies writing policies with nonstandard companies. In the process of taking an insurance application to an actual hard copy policy, three sets of numbers are used. They are the binder number signed by the agent in numerical sequence as customers make application for coverage, the working number which is assigned by an underwriter until the actual (hard copy) policy is issued and the policy number which is computer generated by the company.

       Discrepancies between the binding date and the coverage date is normal within the industry and coverage is effective as of the binder date. Thus, in all of these transactions, the insureds had coverage the instant they received binders from Respondent.

       
       

   37. Respondent's files indicate that Barbara Cecil was timely notified that the pictures taken on her vehicle were not properly developed and she needed to return to the agency with her vehicle to take new pictures to be forwarded to her insuror. Mrs. Cecil did not return in a timely manner and her policy was therefore cancelled.

       
       

   38. Respondent's records respecting Edith Purcell indicate that Purcell was given a quote, and coverage for her was bound on October 3, 1991. An application for insurance was taken and she was provided the paperwork including a copy of the premium finance agreement. Purcell was notified on November 13, 1991, that her driver license information could not be verified. On November 21, 1991, Purcell visited Respondent's office and provided the necessary information. Respondent telecopied the information to the underwriting company; however, she was not reinstated. Respondent contacted the company about the cancellation, but the company refused to rescind the cancellation and underwrite that risk.

   39. Kimberly Jones was given a quote of $276.00 for insurance coverage by Respondent and she paid a $100.00 down payment. The balance was to be paid in installments. However, during the policy period, Ms. Jones was involved in an automobile accident which resulted in an increase in her premiums. Respondent advised Ms. Jones to pay the additional premium of approximately of forty percent as required by the company and add the balance of that additional premium to her contract. Ms. Jones complied and her policy remained in effect the full term.

       
       

   40. Ms. Mafetone paid Respondent a down payment of $112.00 and Respondent notified her that an additional $32.00 was required. Ms. Mafetone erroneously remitted the additional money to the (premium) finance company instead of the insurance company. As a result, her account was not properly credited and her policy was cancelled. Respondent thereafter notified the premium finance company and found that she had been given a credit on her monthly account statement. Respondent had not been provided a statement to reflect that credit when Mafetone's policy was cancelled. A portion of Respondent's statement was telecopied to her and she immediately remitted the $212.00 to the insuror to reinstate Ms. Mafetone's policy. Ms. Mafetone's policy was reinstated and remained in full force for its term.

       
       

   41. Respondent's files respecting Wendy and Douglas Wardle indicate that Mr. Wardle did not have a valid Florida driver's license at the time his policy was purchased. Based on Mr. Wardle's failure to provide proof of a driver's license, the company cancelled his policy.

       
       

   42. Karen Klein was provided a quote by Michelle Rock. An application was prepared for her on August 17, 1991, and coverage was bound on August 27, 1991. Klein's policy was cancelled because she did not have a valid Florida driver's license. Ms. Klein was notified in writing and she did not return to Respondent to handle the matter. As a result, the company cancelled her policy.

       
       

   43. Respondent's file relating to Narkin reveals that he was given a quote of $320.00, of which he paid $100.00 as a down payment. Narkin was billed the balance of the premium. Narkin's policy was issued on October 7, 1991, and he paid the balance. Respondent notified Narkin that the company was unable to ascertain that he had a valid Florida driver's license. This problem was ultimately resolved and his policy was reinstated. However, an additional premium was required from Narkin because of his license status at the time he made his application. The additional $54.00 was remitted by Narkin to the agency and Respondent forwarded it on to the company. Narkin was cancelled for failing to timely make the payment. Although Respondent maintains that it was the insuror's obligation to notify Narkin that his policy was cancelled, the records indicate that Narkin promptly paid Respondent and the amount was not timely remitted to the company which resulted in the cancellation. Respondent therefore did not timely remit the additional premium amount paid by Narkin to his policy was cancelled.

       
       

   44. Respondent utilizes a practice of binding coverages on applications the moment a completed application is filed. In each of the above referenced transactions, Respondent timely issued binder numbers and each applicant was bound the moment their application was completed and when the binder was issued. In each instance, Respondent promptly bound each of the above referred insureds.

   45. Respondent was unaware that Michelle and Richard Rock were providing kickbacks and other gratuities to automobile salesmen who are not insurance agents, customer representatives, or solicitors. When she did discover that this activity was ongoing, she took immediate steps to terminate this practice. As a result of that activity, she terminated her relationship with Michelle and Richard Rock.

       
       

       CONCLUSIONS OF LAW

       
       

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

       
       

   47. The parties were duly noticed pursuant to Chapter 120, Florida Statutes.

       
       

   48. The authority of the Petitioner is derived from Chapter 626, Florida Statutes.

       
       

   49. Petitioner has the burden of establishing, by clear and convincing evidence, that Respondent engaged in the unlawful activities set forth in the first Amended Administrative Complaint filed herein.

       
       

   50. Petitioner established, by clear and convincing evidence, that Respondent failed to properly forward the additional premium paid by Narkin to Onyx Underwriters by the cancellation date of December 27, 1991. As such, Respondent engaged in proscribed conduct within the purview of Section 626.611(7), Florida Statutes.

       
       

   51. In all other respects, Petitioner failed to establish, by clear and convincing evidence, that Respondent engaged in any of the remaining violations alleged in the first Amended Complaint filed herein. I therefore recommend that the remaining complaint allegations be dismissed.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that:

Petitioner enter a Final Order imposing an administrative fine of $500.00 to be payable to Petitioner within thirty (30) days of the entry of its Final Order for the violation derived in paragraph 50.

In all other respects, Petitioner shall enter a Final Order dismissing the remaining allegations of the first Amended Administrative Complaint filed herein.

DONE AND ENTERED this 6th day of December, 1994, in Tallahassee, Florida.

JAMES E. BRADWELL

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 6th day of December, 1994.

APPENDIX TO RECOMMENDED ORDER, IN CASE NO. 93-7105

Rulings on Petitioner's proposed findings of fact:

Paragraph 10 rejected, contrary to the greater weight of evidence. Paragraphs 13, 14, 15, 17, 18, 20, 23, 24, 25, 27, 29, 30, 31, 32, 35, 37,

38, 39, 42, 43, 45, 47, 48, 51, 53, 54, 55 rejected, contrary to the greater weight of evidence, paragraphs 37-46 recommended order.

Paragraph 56 adopted as modified, paragraphs 36 and 46 recommended order.

Rulings on Respondent's proposed findings of fact:

Respondents proposed findings are in the form of a review of the testimony and written argument on that testimony. As such, although considered, no specific rulings are made with respect to Respondent's proposed findings of fact.

COPIES FURNISHED:

Daniel T. Gross, Esquire Division of Legal Services 612 Larson Building

Tallahassee, Florida 32399-0300

Thomas F. Woods, Esquire

Gatlin, Woods, Carlson & Cowdery 1709-D Mahan Drive

Tallahassee, Florida 32308

Tom Gallagher

State Treasurer and Insurance Commissioner

Department of Insurance and Treasurer

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

Bill O'Neil General Counsel

Department of Insurance Treasurer

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the agency written exceptions to this Recommended Order. All agencies allow each party at least ten 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: 93-007105

Orders for Case No: 93-007105