STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 94-0089

)

RICHARD MICHAEL RINKER, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was scheduled to be held in this case in Clearwater, Florida on June 23, 1994, before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Daniel T. Gross, Esquire

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

The issue for consideration in this case is whether Respondent's license as a health insurance agent in Florida should be disciplined because of the matters alleged in the Administrative Complaint.

PRELIMINARY MATTERS

By Administrative Complaint filed November 23, 1993, Tom Gallagher, Insurance Commissioner for the State of Florida has charged that Respondent misrepresented to potential purchasers the scope of coverage on medical insurance policies in violation of the provisions of Chapter 626, Florida Statutes. Respondent requested formal hearing and this proceeding followed.

By Notice of Hearing and subsequent Order Granting Continuance, the hearing in this matter was scheduled for June 23, 1994 in Clearwater, Florida. Because of circumstances beyond the control of the parties, the hearing was not held as scheduled and the parties thereafter agreed to preserve the testimony of the witnesses for both sides by deposition and to submit the depositions and documentary evidence for both parties to the Hearing Officer who would render this Recommended Order based on the depositions and documentary evidence.

The depositions and documentary evidence were received at the Division of Administrative Hearings on August 4, 1994. Consistent with the terms of the Hearing Officer's Order of July 19, 1994, upon receipt of the depositions, the Hearing Officer coordinated with the parties' counsel and arranged a telephone conference hearing at which counsel could argue their objections noted in the depositions and, thereafter submit Proposed Recommended Orders. This hearing was held on August 25, 1994.

Prior to the telephone hearing, Petitioner submitted the testimony, by deposition, of Levon H. Sprauge; Joan Sprague, his wife; and Pamela Diane Sprauge, his daughter-in-law. Petitioner also submitted Petitioner's Exhibits 1

- 7. Respondent presented his testimony by deposition and presented the testimony of James C. Quinn, an expert in insurance practices. Respondent also introduced his Exhibits 1 - 5. Both parties submitted Proposed Findings of Fact which have been ruled upon in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. At all times pertinent to the issues herein, the Petitioner, Department of Insurance, was the state agency responsible for the licensure of insurance agents and the regulation of the insurance business in Florida. Respondent, Richard M. Rinker, was licensed by the Petitioner as a health insurance agent engaged in the business of soliciting, selling and servicing health insurance policies for National States Insurance Company.

   
   

2. Levon H. and Joan D. Sprague, husband and wife, moved to Florida from New York in August, 1991. Prior to moving to Florida, the Spragues operated a restaurant in New York and purchased health insurance from Blue Cross/Blue Shield for themselves and some of their employees. They also owned a H.I.P. policy which was similar to a health maintenance organization, but both that coverage and the Blue Cross/Blue Shield coverage were dropped when they moved to Florida.

   
   

3. Because both Mr. and Mrs. Sprague were getting older, and because both had indications of possible future health problems based on experience and family history, upon the recommendation of Mrs. Sprague's father, who had purchased coverage from Respondent and was satisfied with the service received, they contacted Respondent and met with him about purchasing health insurance.

   
   

4. The first meeting was on January 6, 1992. At that time, the Sprague's made Respondent aware of the fact that they had no health insurance coverage at that time and that they wanted to purchase coverage which would give them 100 percent reimbursement of all bills for medical care rendered. After some discussion, they agreed to accept less coverage for doctors' bills and other professional services, but were quite adamant in reiterating they wanted a policy that would cover 100 percent of the cost of hospitalization. They emphasized this because of Mr. Sprague's family's history of heart problems and they wanted to be sure the hospital expense would be covered in full. They felt the doctors could wait a while for payment of the full amount of their bills.

   
   

5. During the course of his presentation, Respondent utilized a document called a National States Limited Medical-Surgical Hospital Confinement Plan which purportedly outlined the specifics of policy coverage. Under that portion entitled "Specific Benefits", the form read, "This policy pays percent of usual and customary expenses of the following type:". Under the blank space, in smaller type, were the numbers "10, 20, 30, 40". In the blank

   area, Respondent, by hand, inserted 80 percent. Above, and to the right of that insertion, he also placed the numbers, "100 percent" and "40 percent."

   
   

6. Respondent explains this as being his attempt to provide answers to questions asked of him by Mrs. Sprague. He noted that his company does not offer a major medical policy such as desired by the Spragues, and that the only way he could provide coverage close to that which they wanted was to combine policies.

   
   

7. Using a yellow highlighter, he also highlighted the words, "Doctor's charges", "doctor's office", "clinic", "hospital", "home", and "surgical or medical center." He also highlighted the terms "annual mammography screening" because Mrs. Sprague had specifically inquired about coverage of that procedure.

   
   

8. On that visit, Respondent sold the Spragues two policies each. These were "MSH-1" and "MSH-2" policies which, the Spragues recall, Respondent indicated would provide the total coverage they wanted. Initially, the premium was to be $3,600.00 for the year, but when the Spragues indicated they could not afford that much, after calling his office, Respondent was able to offer them 6 months coverage for one half the price. They were satisfied with this and accepted the policies. Mr. Rinker received as his commission 45 percent of the premium paid in by the Spragues for the first year of the policy. When he departed the Spragues' home, he left with them the policy outline he utilized in his presentation, a large manila envelope containing information regarding his office hours and phone number, and a MSP form required by law.

   
   

9. The coverage was not heavily used at first. When, during the first six month period, claims were initially denied because of the waiting period, the Spragues accepted that. After the expiration of the waiting period, all claims submitted for doctors' visits and mammography were covered to at least 80 percent of the amount expected by the Spragues. This was, however, because of the combined benefits paid by the two policies. Neither policy, alone, paid 100 percent percent of the claim. The Spragues were satisfied with this because it was not hospitalization.

   
   

10. Later on, however, it became apparent that Mr. Sprague would have to enter the hospital for coronary bypass surgery, and he was admitted on an emergency basis. Before the surgery was done, however, the Spragues wanted to be sure the hospital bills would be paid in full, and they had their daughter- in-law, who had extensive experience in the insurance business prior to that time, to examine the policies. Her review of the policies generated some questions in her mind as to whether they provided 100 percent coverage of all hospital costs.

    
    

11. To satisfy herself and her in-laws, utilizing the telephone number for Respondent on the materials left by him with the Spragues, she contacted him and asked, specifically, whether the policies he had sold to the Spragues, provided the 100 percent coverage they desired. His answer was somewhat evasive and non- responsive to her inquiry. He said, "Don't worry. She'll [Ms. Sprague] be able to sleep at night. She has a good policy."

    
    

12. This did not satisfy either Ms. Sprague or her mother-in-law, and so she called Respondent again. During this second conversation he admitted that for at least a part of the cost, there was a 40 percent coinsurance provision. Respondent claims that during these calls, Ms. Sprague did not tell him that her father-in-law was to have surgery but only told him about tests. The tests were covered and the bills therefor paid by National States. By the time of these

    calls, however, Mr. Sprague was already in the hospital and facing the surgery the following morning. There was little that could be done. Mr. Sprague wanted to cancel the surgery but his wife would not allow this and the operation was accomplished.

    
    

13. The hospital bills received by the Spragues amounted to approximately

    $140,000. Of this, the insurance company paid approximately $18,000. Ultimately, the Spragues and the hospital were able to reach an agreement for settlement of the obligation for $40,000. In order to satisfy this, Mr. Sprague was required to liquidate all his investments. He still owes the doctors a substantial sum but is making periodic payments to liquidate those obligations.

    
    

14. The policies which Respondent sold to the Spragues were limited medical and surgical expense policies which pay only a limited percentage of incurred medical expenses over a limited period of time. Neither policy pays

    100 percent of any medical or surgical expense. Respondent did not clearly communicate this fact to the Spragues. They suffered from the misconception that the policies sold to them by the Respondent paid 100 percent coverage for hospital expense, 80 percent for doctor fees, and 40 percent for medication.

    
    

15. Petitioner presented no evidence that what Respondent did was below the standards accepted of sales agents within the health insurance industry. On the other hand, James Quinn, an insurance agent since 1975, who has taught life and health insurance and the legal responsibility of agents in the health insurance area with the approval of the Department since 1985, testified on behalf of Respondent. Mr. Quinn noted that there are three types of medical policies in use, including basic medical expense, major medical, and comprehensive major medical. The first of these, basic medical expense, permits liberal underwriting and pays policy limits.

    
    

16. In Mr. Quinn's opinion, based on the age and preexisting conditions that the Sprague's have, major medical coverage, like they wanted, would cost between seven and ten thousand dollars annually, excluding deductibles. Health insurance coverage outlines, such as used by Respondent in his presentation to the Spragues are, according to Mr. Quinn, reasonably self-explanatory and are left with the insured either when the policy is applied for or is delivered. In the former case, the client is able to read the outline and cancel the policy before delivery, if he so desires. In the latter case, the insured has a set number of days to read the policy after delivery and cancel if he so desires. These outlines do not substitute for the policy, however, and generally, the agent prefers to deliver the policy personally so he can go over it again with the insured.

    
    

17. According to Mr. Quinn, it is difficult to explain coverage to prospective insureds because of their unfamiliarity with the terminology and the available benefits. He concluded that the action of the Respondent, in issue here, whereby he used the coverage outline to explain the coverages to the Spragues, was consistent with proper agent conduct and was within industry standards. He also concluded that based on what Respondent had available to sell to the Spragues, he sold them the best package he could, at the time.

    
    

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this case. Section 120.57(1), Florida Statutes.

19. In its Administrative Complaint, Petitioner alleges Respondent committed various violations of the statutes governing the sales of insurance in this state in violation of Chapter 626, Florida Statutes, in that he:

    
    

    1. willfully misrepresented an insurance policy,

    2. evidenced a demonstrated lack of fitness or trustworthiness to engage in the insurance business,

    3. engaged in fraudulent or dishonest practices in the conduct of business under his license,

    4. willfully failed to comply with, or wilfully violated a rule of the department or a provision of the insurance code,

    5. violated a provision of the code or any other law applicable to the business of insurance in the course of dealing under his license,

    6. engaged in unfair methods of competition or in unfair or deceptive acts of practices, or showed

       himself to be a source of injury or loss to the public,

    7. engaged in an unfair trade practice, an unfair method of competition, or a deceptive act or practice involving the business of insurance.

    8. knowingly made a sales presentation which misrepresented the benefits, advantages, conditions or terms of an insurance policy,

    9. knowingly disseminated false material information to a client, and

    10. made false or fraudulent statements or representations on or relative to an application

        for an insurance policy for the purpose of obtaining a commission or other benefit from an insurer, broker or individual.

        
        

20. Section 626.611, outlines the compulsory grounds for refusal, suspension or revocation of an agent's license and the provisions of subparagraphs a - d of the paragraph next above are defined in subsections (5), (7), (9), and (13) of that section. Section 626.621 outlines the discretionary grounds for refusal, suspension or revocation of an agent's license, and subparagraphs e and f of the paragraph next above are defined in subsections (2) and (6) of that section. Subparagraphs g through j of paragraph 19, supra, are defined as unfair methods of competition and unfair or deceptive practices, and made punishable by Section 626.9521, and 626.9541.

    
    

21. The burden of proof in this case rests with the Petitioner to establish the allegations of misconduct contained in the administrative complaint by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

22. The evidence is clear that Mr. and Mrs. Sprague were injured, financially, by the failure of the policies sold to them by Respondent to cover

    100 percent of the hospital costs as they requested. To prevail in this case, Petitioner must establish that Respondent misrepresented the benefits and coverage of the policies he sold to the Spragues. To be sure, the "outline of coverage", (Exhibit 5), which Respondent utilized as a demonstrative exhibit in his sales presentation, and which he left with the Spragues when he closed the sale, is not at all clear as to what was represented. The blank space filled in by Respondent, reflects only 80 percent, and there is an additional set of

    figures, 100 percent and 40 percent, which appear on the documents, but their placement there gives no clue as to what they represent.

    
    

23. Respondent claims he clearly outlined the coverage which would be provided, but when his explanation is considered against the testimony of the Spragues, there is can be little doubt that they wanted, expected, and believed they had purchased 100 percent hospital coverage. They admitted understanding they would be covered for only 80 percent of the doctors' bills but rationalized that by claiming the doctors could wait, and they also admitted understanding they would receive only a 40 percent coverage on medications. The testimony of the Sprague daughter-in-law, demonstrates that when she called Respondent to check on her in-laws' coverage, he was less than circumspect in his responses to her questions. The only question he answered directly was whether Mrs. Sprague could sleep freely that night.

    
    

24. Mr. Quinn indicated that the actions of the Respondent were consistent with the standards followed in the profession and that he could see no impropriety in Respondent's performance under consideration. He noted that Respondent sold the Spragues the best package he had available to sell and appears to justify their receipt of less than what they wanted on that basis.

    It is clear that what Respondent sold the Spragues did not do what they wanted and what they clearly communicated to him they wanted when he sold them coverage.

    
    

25. The expectations of the Spragues were unrealistic. According to Mr. Quinn, the coverage they wanted would have cost between seven and ten thousand dollars, it is was clear early on that they did not have that kind of money to spend on insurance coverage. They did not want to pay the full year premium quoted by Respondent initially. Nonetheless, their lack of sophistication, and the fact that their desires were unrealistic, does not excuse Respondent's misconduct. The evidence shows misrepresentation on the part of Respondent, and his fitness and trustworthiness to engage in the business of insurance is in question. His misconduct resulted in a loss to the Sprauges, but it cannot be said that his receipt of a commission on the sale is an aggravating factor. Payment of a commission in insurance sales is a given and had Respondent not received a commission on the sale, it would not have mitigated the seriousness of his misrepresentation of coverage to the Spragues.

    
    

26. Though Petitioner has listed ten different statutory violations, it has combined them all in one count. Rule 4-231.040, F.A.C., provides that in assessing penalty, only the specification carrying the highest penalty will be considered for each count. In this case, the highest penalty for any of the offenses alleged, and of which Respondent has been determined to be guilty, is a suspension of his license for nine months. In light of the extreme financial loss sustained by the Spragues in this matter, no mitigation is considered appropriate.

RECOMMENDATION

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

RECOMMENDED that a Final Order be issued in this matter finding Respondent, Richard Michael Rinker, guilty of a violation of Sections 626.611(5), (7), (9), and (13); 626.621(2) and (6); 626.9521, and 626.9541(1)(a)(1), (1)(e)(1), and

(1)(k)(1), Florida statutes, and suspending his license as a health insurance agent for nine months.

RECOMMENDED this 13th day of October, 1994, in Tallahassee, Florida.

ARNOLD H. POLLOCK, 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 13th day of October, 1994.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 94-0089

The following constitutes my specific rulings pursuant to

Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case.

FOR THE PETITIONER:

1. & 2. Accepted and incorporated herein.

3. & 4. Accepted and incorporated herein.

1. & 6. Accepted and incorporated herein.

   1. Accepted and incorporated herein.

   2. Accepted and incorporated herein.

   3. & 10. Accepted and incorporated herein.

      
      

      FOR THE RESPONDENT:

      
      

      1. Accepted and incorporated herein.

      2. Accepted as to finding Mr. Quinn is an expert regarding insurance standards and business practices, but rejected as insinuating those opinions are binding on the Hearing Officer.

      3. Rejected notwithstanding the opinions of Mr. Quinn.

      4. Accepted, as there is no evidence to the contrary.

      5. Rejected as contra to the weight of the evidence.

      6. First sentence rejected as contra to the evidence. Second sentence accepted as to the furnishing, but the quality of the information was less than clear. Balance accepted.

      7. & 8. Rejected.

COPIES FURNISHED:

Daniel T. Gross, Esquire Department of Insurance

and Treasurer

Division of Legal Services 612 Larson Building

Tallahassee, Florida 32399-0333

Thomas F. Woods, Esquire

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

Tallahassee, Florida 32308

Tom Gallagher

State Treasurer and Insurance Commissioner

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

Bill O'Neill 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 consult with the agency which will issue the Final Order in this case concerning its rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency which will issue the Final Order in this case.

Docket for Case No: 94-000089

Orders for Case No: 94-000089