STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE ) AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 94-2220

) JOHN EDWARD GONZALEZ, )

)

Respondent. )

)

RECOMMENDED ORDER

On May 28, 1996, a formal administrative hearing was held in this case. It was held before J. Lawrence Johnston, Hearing Officer, Division of Administrative Hearings by televideo. (The hearing officer was in a specially- equipped hearing room in Tallahassee, and the other hearing participants were in a specially-equipped hearing room in Tampa, Florida. The two hearing rooms were connected by televideo.)

APPEARANCES

For Petitioner: Willis F. Melvin, Jr., Esquire

Department of Insurance and Treasurer 612 Larson Building

Tallahassee, Florida 32399-0333

For Respondent: Stacey L. Turmel, Esquire

Maney, Damsker, Harris and Jones, P.A. 606 East Madison Street

Tampa, Florida 33672 STATEMENT OF THE ISSUE

The issue in this case is whether the Department of Insurance should discipline the Respondent for alleged violations of provisions of the Insurance Code governing agents.

PRELIMINARY STATEMENT

On or about March 7, 1994, the Department of Insurance filed an Administrative Complaint against the Respondent, John Edward Gonzalez, in Department Case No. 94-L-246 WFM. The Respondent requested formal administrative proceedings under Section 120.57(1), Fla. Stat. (1993), and the Department referred the matter to the Division of Administrative Hearings (DOAH) for assignment of a hearing officer on April 21, 1994.

After receipt of responses to the initial orders, a prehearing conference was held in this and other cases involving MetLife agents on June 7, 1994. As a

result of the prehearing conference, no action was taken in this and several other MetLife agent cases pending settlement negotiations.

On January 18, 1996, an Order to Show Cause why this case should not be dismissed based on the absence of any record activity was entered. The Department requested that the case not be dismissed due to ongoing settlement discussions and the Department's new request for admissions.

When settlement discussions reached an impasse, final video hearing was scheduled for May 28, 1996. At final hearing, the Department published the Respondent's Admissions 1 through 4 and had Petitioner's Exhibits 1 and 2 admitted in evidence (Petitioner's Exhibit 1 being the transcript of the deposition of the Department's complaining witness.) The Respondent testified in his own behalf and had Respondent's Exhibits 1 through 4 admitted in evidence.

At the end of the hearing, the Department ordered the preparation of a transcript of the final hearing, and the parties were given ten days from the filing of the transcript in which to file proposed recommended orders. The transcript was filed on June 20, 1996.

Explicit rulings on the proposed findings of fact contained in the parties' proposed recommended orders may be found in the Appendix to Recommended Order, Case No. 94-2220.

FINDINGS OF FACT

1. The Respondent, John Edward Gonzalez, is licensed in the State of Florida as a life and variable annuity agent and as a life, health and variable annuity agent. During 1992, he was employed by Metropolitan Life Insurance Company (MetLife).

   
   

2. The Respondent worked out of MetLife's Southeastern Head Office in Tampa under its marketing head, Rick Urso. Under Urso, the Tampa office developed a scheme for marketing whole life insurance to nurses as an "insured nurses' retirement" plan or program. The goal of the scheme was for the nurses to apply for a whole life insurance policy before they realized that the "insured nurses' retirement" plan or program consisted of nothing more than a whole life insurance policy.

   
   

3. Under the marketing scheme, MetLife's Tampa office would mail unsolicited "pre-approach" letters to nurses informing them of a supposedly new retirement savings plan available to professional nurses. The "pre-approach" letter touted the retirement investment's high current interest rates, the availability of the investment's cash fund for emergencies and opportunities, the ability to make "deposits" monthly, an optional "disability benefit," and a guaranteed income at retirement. The wording of the "pre-approach" letter was designed to disguise the fact that the supposedly new retirement savings program was nothing more than a whole life insurance policy. The "pre-approach" letter allowed the recipient to tear off a form at the bottom of the letter to fill in and mail to MetLife for more information.

   
   

4. In the spring of 1992, an unsolicited "pre-approach" letter was mailed from MetLife's Tampa office to Sharon Ward, a registered nurse living in Fort Worth, Texas. The letter was signed by the Respondent.

5. If the "pre-approach" letter had given Ward notice that she was being solicited for life insurance, she would have disregarded it. She already had all the life insurance she wanted. However, she was interested in saving and investing for retirement, so she responded by requesting more information.

   
   

6. Under the marketing scheme, responses from recipients of the "pre- approach" letter ordinarily would be referred to the MetLife insurance agent who mailed the letter. The agent would telephone to schedule an appointment.

   Ward's response was referred to the Respondent as the agent who signed the "pre- approach" letter to her.

   
   

7. The Respondent was trained in MetLife's Career Success School (CSS) to telephone nurses responding to "pre-approach" letters to schedule an appointment. No information was intended to be imparted during this telephone contact; certainly, the agent was not to reveal that whole life insurance was being solicited. In accordance with his CSS training, the Respondent telephoned Ward during the spring of 1992 and scheduled an appointment to meet with her at her home in Fort Worth.

   
   

8. If the Respondent had revealed to Ward that he was soliciting for life insurance, she would not have agreed to the appointment. However, as planned by the MetLife Tampa office and the Respondent, she agreed to an appointment to learn more about the "nurses' retirement savings" plan.

   
   

9. CSS also trained the Respondent and other MetLife agents in how to deliver a scripted presentation to a nurse at the scheduled appointment. The script was carefully worded to entice the nurse to apply to be accepted in the "nurses' retirement savings" plan or program without revealing that it consisted of nothing more than a whole life insurance policy. Whole life insurance was not mentioned in the script; once in the eleven page script, it was mentioned that "the retirement account provides an insurance benefit to protect it." Otherwise, the script gave no indication that life insurance was involved. The script never mentioned insurance premiums; instead, it referred only to "deposits," "contributions," or "savings." While the "optional disability benefit" referred to in the "pre-approach" letter was nothing more than the standard life insurance "disability waiver of premium," those words were not used; instead, the script described how, in the event of a disability, "Met will keep saving for you." The word "policy" was not mentioned; instead, the script offered to have MetLife "open an account" for the prospect.

   
   

10. One of the big selling points emphasized in the script was MetLife's reputation, assets and security. Another big selling point was flexibility. While informing the prospect that the retirement savings plan is meant for long- term investment, the plan is contrasted with IRA's and other investments that penalize withdrawal of cash before retirement.

    
    

11. CSS trained the Respondent and other MetLife agents to use a "Track Book" for illustrative purposes while delivering the scripted presentation. Life insurance was mentioned in parts of the "Track Book," but the "Track Book" was to be shown to prospects during the course of a presentation in a manner designed to preserve the disguise of the nature of the "nurses' retirement savings" plan or program.

    
    

12. When the Respondent met with Ward in the spring of 1992 at her home in Fort Worth, he followed the CSS scripted presentation exactly, and it worked as designed. When Ward agreed to "apply," she had no idea that she was applying for a whole life insurance policy; she thought she was opening a retirement

    savings and investment account. Had she known that the Respondent was soliciting life insurance, she would have declined.

    
    

13. When Ward agreed to apply, the Respondent took information from Ward and filled out the application for her, as he was trained to do in CSS. Some of the information for the application--e.g., the names of beneficiaries--was consistent with a life insurance application, but also not inconsistent with information required for opening a retirement savings account. Other information was less consistent with opening a retirement savings account, such as health history; but that type of information may not have been considered to be inconsistent with the "insurance protection" and "disability option" the plan was supposed to have.

    
    

14. After completing the information on the application, the Respondent had Ward sign. Under the marketing scheme, it was hoped that the nurse would sign the application without reading it to determine that it was an application for life insurance. On the other hand, a nurse who read the application and determined that it was a life insurance application might assume that it was an application for the "insurance protection" and "disability option" the plan was supposed to have.

    
    

15. In Ward's case, the scheme worked to perfection. While the Respondent did not prevent Ward from reading the application, he did not encourage her to, and she did not read it. She did not know it was an application for life insurance. Had Ward known that it was an application for life insurance, and that the "retirement savings" program was nothing more than a whole life insurance policy, she would not have applied.

    
    

16. In accordance with the CSS marketing scheme, the Respondent left a brochure with Ward before he returned to Tampa. The brochure reiterated the major selling points of the "Nurses Insured Retirement Plan." Like the other marketing literature, the brochure was worded so as not to reveal that the "retirement plan" consisted of nothing more than a whole life insurance policy.

    
    

17. In accordance with the CSS marketing scheme, after the Respondent's return to Tampa, a letter was sent to Ward signed by the Respondent as "Account Representative," dated August 13, 1992, congratulating Ward on her "foresight in starting an insured retirement savings program." (The Respondent denied that he signed the letter or authorized it to be signed for him by someone else. But the Respondent knew the substance of the congratulatory letter sent to a prospect at this stage of the sales process, and he did not protest when he learned that one had been sent to Ward over his signature.) As with prior communications with Ward, the letter was worded so as not to alert her to the nature of the "program"--i.e., that it was nothing more than a whole life insurance policy. It never mentioned life insurance.

    
    

18. In accordance with the CSS marketing scheme, the Respondent's manager also sent Ward a letter of congratulation later in August, 1992, advising her that her "plan" had been approved and that her "Account Representative" (the Respondent) would be telephoning to make an appointment to "review the benefits and flexibility of your Retirement Program in detail." As with the Respondent's August 13 letter, the manager's letter was worded so as not to alert Ward to the nature of the "program"--i.e., that it was nothing more than a whole life insurance policy. It never mentioned life insurance.

    
    

19. When Ward received a whole life insurance policy in the mail, she filed it away without reading it. Had she read it, she probably would have been

    able to determine what it was. If she had made this determination within ten days of receipt of the policy, she might have been able to cancel it and get a full refund; on the other hand, she might have assumed that it was the "insurance protection" her "retirement savings plan" was supposed to have.

    
    

20. After about a year of making her monthly payments as they came due, Ward changed jobs, and her new employer gave her the opportunity to begin a Section 401K retirement account. When she attempted to transfer her MetLife funds into it, she learned for the first time that her MetLife retirement "account" consisted of a whole insurance policy that had no cash value yet. Ward tried to contact the Respondent to complain but he did not return her calls. When she pursued it further with MetLife, MetLife initially refused to refund her money. MetLife asked for the Respondent's version of what had happened, and the Respondent reported essentially that he had followed the CSS training. The Respondent let MetLife handle the matter from there. It was not until after Ward requested the assistance of the Texas Insurance Commissioner that MetLife finally refunded her money.

    
    

21. The Respondent did not question the legality of the marketing scheme devised by the Tampa office of MetLife. He assumed that MetLife and the Florida Department of Insurance had approved it. There was no evidence that the Department or even MetLife had in fact approved the scheme.

    
    

22. The Respondent sold many whole life insurance policies using the CSS methods. (He received MetLife's Leader's Conference Award for high sales.) No customer other than Ward has filed a complaint against him.

    
    

    CONCLUSIONS OF LAW

    
    

23. In disciplinary proceedings such as this, the burden is on the agency to prove the allegations in the Administrative Complaint by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

24. Section 626.611, Fla. Stat. (1993), sets out the grounds for compulsory refusal, suspension, or revocation of agent's, solicitor's, adjuster's, service representative's, managing general agent's, or claims investigator's license or appointment:

    
    

    The department shall deny, suspend, revoke, or refuse to renew or continue the license or appointment of any agent, solicitor, adjuster, service representative, managing general agent, or claims investigator, and it shall suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds

    that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist:

    * * *

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

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

       * * *

       1. Demonstrated lack of fitness or trustworth- iness to engage in the business of insurance.

       2. Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment.

       3. Fraudulent or dishonest practices in the 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.

       
       

25. Section 626.621, Fla. Stat. (1993), set out the following grounds for discretionary refusal, suspension, or revocation of agent's, solicitor's, adjuster's, service representative's, managing general agent's, or claims investigator's license or appointment:

    
    

    The department may, in its discretion, deny, suspend, revoke, or refuse to renew or continue

    the license or appointment of any agent, solicitor, adjuster, service representative, managing general agent, or claims investigator, and it may suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that

    as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist under circumstances for which such denial,

    suspension, revocation, or refusal is not mandatory under s. 626.611:

    * * *

    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 appointment.

    2. Violation of any lawful order or rule of the department.

    * * *

    (6) In the conduct of business under the license or 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.

    
    

    The last clause of Section 626.621(6) recently has been held to be unconstitutionally vague. Whitaker v. Dept. of Ins. and Treasurer, 21 F.L.W. 1353D, 1354D (Fla. 1st DCA 1996).

    
    

26. Section 626.9541, Fla. Stat. (1993), provided in pertinent part:

    
    

    1. UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE ACTS.--The following are defined as unfair methods of competition and unfair

       or deceptive acts or practices:

       1. Misrepresentations and false advertising of insurance policies.--Knowingly making, issuing, circulating, or causing to be made,

          issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which:

          1. Misrepresents the benefits, advantages, conditions, or terms of any insurance policy.

          * * *

          5. Uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof.

          * * *

       2. False information and advertising generally.-- Knowingly making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed

    before the public:

    1. In a newspaper, magazine, or other publication,

    2. In the form of a notice, circular, pamphlet, letter, or poster,

    3. Over any radio or television station, or

    4. In any other way,

    an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of

    insurance, which is untrue, deceptive, or misleading.

    * * *

    (k) Misrepresentation in insurance applications.--

    1. Knowingly making a false or fraudulent written or oral statement or representation on, or relative to, an application or negotiation for an insurance

    policy for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, agent, broker, or individual.

    
    

27. Section 626.99(5)(b), Fla. Stat. (1993), provided:

    
    

    An agent shall inform the prospective purchaser, prior to commencing a life insurance sales presentation, that he is acting as a life insurance agent and shall inform the prospective purchaser

    of the full name of the insurance company which he is representing. In sales situations in which

    an agent is not involved, the insurer shall identify its full name.

    
    

28. In addition, Part III of F.A.C. Rule Chapter 4-9, governing insurance agents, was entitled "Code of Ethics--Life Underwriters," and included as F.A.C. Rule 4-9.005:

    
    

    1. Misrepresentations are declared to be unethical. No person shall make, issue, circulate, or cause to be made, issued, or circulated, any estimate, circular, or statement misrepresenting

       the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received thereon, or make any false or misleading statement as to the dividends or share of surplus previously paid on similar policies, or make any misleading representation or any misrepresentation as to the financial condition of any insurer, or as to the legal reserve system upon which any life insurer operates, or use any name or title of any policy or class of policies misrepresenting the true nature thereof.

    2. No person shall make, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio or television station, or in any other way, any advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or misleading.

    
    

29. It is clear from the findings that the Respondent went along with MetLife's marketing scheme to sell whole life insurance to Sharon Ward (and other nurses) by representing the product as a nurses retirement savings account or investment program or plan instead of as a whole life insurance policy. This misrepresentation violated the foregoing statutes and rules, including Section 626.611, Fla. Stat. (1993), which provided for compulsory suspension or revocation. The fact that the marketing scheme was completely successful, and that Ward signed the insurance application form without reading it and did not read the life insurance policy when she received it, does not absolve the Respondent. See Thomas v. Dept. of Ins. and Treas., 559 So.2d 419 (Fla. 2d DCA 1990).

    
    

30. Under the F.A.C. Rule 4-231 Penalty Guidelines for Insurance Representatives, the highest penalty provided for any single violation is the applicable penalty guideline. In this case, the nine month suspension provided in the guidelines for violation of Section 626.611(9), Fla. Stat. (1993), is the applicable penalty guideline. See F.A.C. Rule 4-231.080(9).

    
    

31. In addition, F.A.C. Rule 4-231.160 provides for aggravating and mitigating factors. In this case, after balancing the aggravating and mitigating factors, especially the fact that the Respondent was following a mandatory marketing scheme devised and imposed by his employer, MetLife, it is concluded that a six-month suspension is adequate punishment in this case.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Insurance and Treasurer enter a final order finding the Respondent guilty of the violations charged and suspending his licenses and eligibilities for six months.

DONE and ENTERED this 7th day of August, 1996, in Tallahassee, Florida.

J. LAWRENCE JOHNSTON, 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 7th day of August, 1996.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2220

To comply with the requirements of Section 120.59(2), Florida Statutes (1995), the following rulings are made on the parties' proposed findings of fact:

Petitioner's Proposed Findings of Fact.

1.-37. Accepted and incorporated to the extent not subordinate or unnecessary.

1. Cumulative.

2. Cumulative and argument.

Respondent's Proposed Findings of Fact. 1.-2. Accepted and incorporated.

3. Conclusion of law.

4.-5. Accepted and incorporated to the extent not subordinate or unnecessary.

6. Accepted but subordinate and unnecessary. 7.-10. Accepted and incorporated.

1. Rejected as contrary to the greater weight of the evidence that the Track Book "consistently referred to life insurance" or that it was used as a "visual aid." It contained some references to life insurance but did not, and was not used so as to, make it clear that what the Respondent was selling was a whole life insurance policy.

2. Accepted and incorporated.

3. Rejected as contrary to the greater weight of the evidence in that the entire marketing scheme gave him reason to believe it was illegal; accepted and incorporated that MetLife did not indicate to him that its scheme was illegal.

4. In part, rejected as contrary to the greater weight of the evidence. See 13., above. In part, accepted and incorporated. See Finding 21, above.

5. Cumulative.

6. Rejected as contrary to the greater weight of the evidence.

7. Accepted and incorporated.

8. Accepted but subordinate and unnecessary.

9. Rejected as contrary to the greater weight of the evidence that he gave her "every opportunity"; otherwise, accepted and incorporated.

10. Rejected as contrary to the greater weight of the evidence that all were sent out by MetLife management or that any were approved by the Department. Otherwise, accepted and incorporated.

    
    

    it.)

11. Accepted but subordinate and unnecessary. (The Respondent identified

    
    

12. Rejected as contrary to the greater weight of the evidence.

13. Accepted and incorporated.

14. Accepted and incorporated. However, it was MetLife's explanation as

    to why she could not transfer funds from her MetLife "retirement account" that finally revealed to her that it was nothing more than a whole life insurance policy.

15. Accepted but subordinate and unnecessary.

16. Accepted and incorporated.

COPIES FURNISHED:

Willis F. Melvin, Jr., Esquire Department of Insurance and Treasurer 612 Larson Building

Tallahassee, Florida 32399-0333

Stacey L. Turmel, Esquire

Maney, Damsker, Harris and Jones, P.A. Post Office Box 172009

Tampa, Florida 33672

Bill Nelson

State Treasurer and Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Dan Sumner

Acting General Counsel

Department of Insurance and Treasurer The Capitol, PL-11

Tallahassee, Florida 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the Department of Insurance and Treasurer 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 Department of Insurance and Treasurer concerning its rules on the deadline for filing exceptions to this Recommended Order.

Docket for Case No: 94-002220

Orders for Case No: 94-002220