STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE ) AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 94-4317

) SAMUEL LOFTON DAY, JR., )

)

Respondent. )

)

RECOMMENDED ORDER

Upon due notice, this cause came on for formal hearing on August 28, 1995 and September 22, 1995, in Panama City, Florida, before Ella Jane P. Davis, a duly assigned hearing officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Beverly B. Brewster, Esquire

Lisa S. Santucci, Esquire Division of Legal Services 612 Larson Building

Tallahassee, Florida 32399-0333

For Respondent: Donald S. Modesitt, Esquire

115 North Franklin Boulevard, Suite B Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

Whether Respondent has violated many named statutory sections, all impinging upon willful misrepresentation to insureds and unlawful withholding of premiums from insurers and if so, what is the appropriate disciplinary penalty.

PRELIMINARY STATEMENT

This cause arose by a three count administrative complaint. Count II was dismissed by the Department of Insurance at the commencement of formal hearing. Evidence was heard only upon Counts I and III.

Formal hearing commenced on August 28, 1995, as previously scheduled. Inez

S. McCall, an essential witness for Count I, had been subpoenaed by the Department. Its attorney presented a physician's excuse explaining Ms. McCall could not appear for medical reasons on that date.

Respondent moved to dismiss Count I. That motion was denied. After possible alternatives were explored, it was ordered that the

Department put on all of the evidence it could on August 28, 1995 and the

remainder of the case would be continued to a date when Ms. McCall was able to testify. On September 22, 1995, the Department concluded its case in chief, and Respondent presented its defense. During the whole of this period, the witnesses were subject to the rule of sequestration.

At formal hearing, Petitioner presented the oral testimony of Inez S. McCall, Joyce E. Wedge, Sibyl Gordey, and Constanzo LaRussa, and had nine exhibits (some of which were composites) admitted in evidence.

Respondent presented the oral testimony of Barbara Day and Cynthia Elaine Day England and testified on his own behalf. Respondent had two exhibits admitted in evidence.

A transcript of the proceedings was filed November 20, 1995.

Subsequently, it was discovered that Petitioner's Exhibit 9, which had been admitted over objection, could not be located. Pursuant to stipulation of the parties, Petitioner was permitted to introduce a copy thereof. After the elapse of a period during which objections to this procedure could be filed and during which no objections were filed, the substituted copy of P-9 has been considered with all other evidence as if it were the original exhibit.

All timely-filed proposed findings of fact have been considered and are specifically ruled upon in the appendix to this recommended order, pursuant to Section 120.59(2) F.S.

FINDINGS OF FACT

1. At all times material, the Respondent was licensed as a life and health insurance agent.

   
   

2. Respondent has been licensed to sell insurance in Florida for approximately 25 years with no administrative disciplinary complaints filed against him until the one giving rise to this action. He worked for Liberty National Insurance Company for approximately 21 years without any complaints being lodged by insureds with the company other than those herein.

   
   

3. In 1991, Respondent was terminated by Liberty National based upon company policy not to employ agents with a high claims to premiums ratio. Apparently, he was not terminated for any reason arising from the events alleged in the administrative complaint.

   
   

4. Respondent filed a federal age discrimination claim against Liberty National as a result of his termination. That litigation is still pending.

   
   

   Count I: Inez McCall

   
   

5. Inez S. McCall originally met Respondent and his wife through a local political activist group which met in her home. Sibyl Gordey, a friend of Ms. McCall, was also a member of this group. From approximately April 17, 1991 through the date of formal hearing, Ms. Gordey and Ms. McCall were resentful of Respondent and his wife, Barbara, for reasons related to this group.

   
   

6. Every effort has been made to reconcile conflicting testimony without attributing falsehood to anyone. However, due to the foregoing mind-set of Mesdames McCall and Gordey, their candor and demeanor while testifying, the internal and external conflicts in witnesses' testimony,1 and the proximity of

   the dates that McCall and/or Gordey and Respondent and his wife acted upon their mutual disgust with each other to the dates of the events giving rise to this disciplinary complaint,2 Ms. McCall and Ms. Gordey are found to be the less credible witnesses, and the following findings of fact are based upon that analysis.

   
   

7. On or about March 26, 1991, Respondent visited Ms. McCall's home in Lynn Haven, Florida for the purpose of soliciting health insurance.

   
   

8. At that time, Respondent sold Ms. McCall, then 65 years of age, a Liberty National Life Insurance Company cancer insurance policy and collected a

   $29 premium, paid by check.

   
   

9. The application form required disclosure of all prior cancers, including melanomas, except for skin cancers.3

   
   

10. Ms. McCall and Respondent were alone when the cancer policy provisions were discussed and the application signed.4

    
    

11. The completed application form which Ms. McCall admittedly verified by her signature denied that she previously had cancer and left blank the spaces provided to fill in the name or names of anyone who had prior cancers. In fact, Ms. McCall had undergone a mastectomy in 1983.

    
    

12. Ms. McCall variously explained that part of the application could have been incomplete or that she signed it without noticing the "no" answer and blank spaces which effectively denied that she had any prior cancers or that maybe she did not read the application and just trusted the Respondent to correctly make it out. She also suggested that she might have been too busy packing to move her household furnishings so as to have thoroughly read the application before signing it. Nonetheless, she did verify the contents of the application with her signature. If there were any misrepresentations or misunderstandings with regard to her prior medical history, Ms. McCall had the opportunity to correct them at that time and did not.

    
    

13. Respondent denied that Ms. McCall ever mentioned a mastectomy during the application process.

    
    

14. While it is more likely that Ms. McCall was confused and inadvertently did not make full disclosure of her prior medical history, the relative reasons for intentional non-disclosure on the application weigh heavily against believing Ms. McCall that she made full disclosure of her prior cancer. If the policy stayed in effect without any cancer claims for two years, the company would have been estopped to deny thousands of dollars in payments for any subsequent cancer claims by Ms. McCall, but the total amount of commission that Respondent could have earned for this policy each year was a relatively small amount of between $95 and $150.

    
    

15. The policy that Ms. McCall received approximately two weeks after her application clearly stated on it that it would not cover someone who previously had cancer.

    
    

16. Ms. McCall interpreted the policy to contain the presumption that she had never had cancer, when she knew that she had, in fact, had cancer. Her primary goal at that time was to "be honest" with the insurance company. Despite the clear language of the policy stating that if she disclosed prior cancers she would not be covered, she still wanted to be covered for cancer.

    She testified first that she telephoned Respondent and told him to come pick up the policy and "redo" it because she had had cancer in the past. However, she also acknowledged that she considered the policy terminated when she called Respondent's office, and in light of all the evidence, this last explanation of her thinking is found to be more credible.

    
    

17. Respondent denied speaking to Ms. McCall on the telephone after she got her policy. He asserted that he only got a message to pick up the policy, which he was willing to do because her request was within the company's 10 day "free look" period which, in practicality, extends to 30 days. He went to Ms. McCall's home and picked up the policy. His version is accepted as more credible.

    
    

18. Ms. McCall did not recall the exact words she said when Respondent picked up the policy. Respondent denied that Ms. McCall said anything about fixing the policy or her previous cancer. He had her sign a form saying she did not want the cancer policy and told her the company would send a check in a few weeks.

    
    

19. The company ultimately did not rescind coverage but considered Ms. McCall's cancer policy as never having been issued in the first place because it was returned by the insured within the time permitted by the language of the policy itself.

    
    

20. Because Respondent did not return further phone calls and did not return her money, Ms. McCall phoned the company. Someone took a statement from her, and she got a refund check in June or July 1991. Respondent represented that he delivered the company's refund check to her when it arrived.

    
    

21. After receiving her refund check, Ms. McCall treated the policy as terminated and did not pursue the matter further. Ms. Gordey, on the other hand, complained to the Department of Insurance on behalf of Ms. McCall at a time Ms. Gordey and Respondent's wife were bitter political enemies.5

    
    

    Count III: Joyce Wedge

    
    

22. Richard Wedge had purchased insurance from Respondent before his death. At the time of his death, August 8, 1990, his wife of 43 years, Joyce E. Wedge, did not know what kind or how many insurance policies he had purchased from Respondent or other sources. They had many children, and at the time of Richard's death, one 21 year old Down's Syndrome child, Clyde, was living at home.

    
    

23. Ms. Wedge admittedly had never handled the family's financial affairs until her husband's death. Her husband had taken care of insurance purchases from Liberty National through the Respondent for the preceding 20 years. During that period, the couple had been happy with Respondent's services. She was used to her husband writing checks which she would then hand out the door to the Respondent because Respondent was afraid of their dog.

    
    

24. At all times material to the administrative complaint, Ms. Wedge was understandably emotional due to her recent bereavement and overwhelmed by the myriad details of life she suddenly had to face alone. Her testimony was candid and credible so far as it went but was extremely vague and confused.6

25. The Department had four checks signed by Joyce E. Wedge admitted in evidence as Exhibits P-7 and P-8. These checks were made out and notated as follows:

    
    

    8/28/90 to Respondent for $187.44.

    9/6/90 to Respondent for $39.91 for "Clyde insurance" 9/19/90 to Cash for $190.44 for "insurance"

    10/3/90 to Cash for $219.00 for "insurance."

    
    

26. Ms. Wedge had no credible recollection of the circumstances for her writing any of the four checks comprising Exhibits P-7 and P-8, nor with regard to applications for any insurance policies applied for on those dates. No applications bearing those dates were admitted in evidence.

    
    

27. Respondent, contrary to Liberty National policy and contrary to the printed instructions on all its applications taken by him during this period of time, allowed the foregoing August-October checks to be made out as set out above in Finding of Fact 25 and not to the insurance carrier. Also contrary to Liberty National's policy and corporate instructions, Respondent initially cashed the August-October checks listed in Finding of Fact 25 and used them for working expenses, mostly cashing third party checks for other clients so that those clients could pay their premiums in cash. He thus effectively commingled, at least temporarily, Ms. Wedge's money with his own money, other clients' money, and the insurance carrier's money. Respondent admittedly knew that the company policy forbade this procedure. He offered the excuse that this commingling was a common practice allowed by the company's sales managers over many years, even though the practice was contrary to the company policy. No business records in evidence account for these fiduciary transactions or substantiate that these amounts were reported and remitted to the insurance carrier on at least a weekly basis as required by Liberty National.

    
    

28. Although the evidence supports a finding that the individual amounts and checks listed in Finding of Fact 25 were never received in that form by Liberty National on behalf of Joyce Wedge, the evidence falls short of establishing that these monetary amounts were never received in some form at some time on behalf of some Liberty National policy held by the Wedges. In large part, this is because Liberty National's representative, Mr. LaRussa, was unable to explain what these checks might apply to.7 Moreover, Respondent credibly testified (TR-260-261) that he ultimately converted most of the proceeds of the checks described in Findings of Fact 25 and 27 to the use of Liberty National via the Hilton Company, as more fully described below in Findings of Fact 35-38. Accordingly, it cannot be inferred that Respondent ultimately converted most of the August-October checks to his own use.

    
    

29. The Department had admitted in evidence Exhibit P-5, a cancer policy application signed by Joyce Wedge and for which Respondent collected a $29.00 premium on August 29, 1990. Ms. Wedge had no credible recollection concerning this application or its premium. Mr. LaRussa, Liberty National's representative, testified that this premium was credited and a new cancer policy was issued September 1, 1990 to replace a prior cancer policy in Ms. Wedge's own name.

    
    

30. On August 27, 1990, Ms. Wedge applied through Respondent for a life insurance policy in the amount of $50,000. The life insurance policy was issued by Liberty National Insurance Company with an effective date of November 1, 1990. (Exhibit P-4).

31. Ms. Wedge represented that she threw her new life insurance policy away almost as soon as she got it in December 1990 because she decided she could not afford it.

    
    

32. However, Liberty National's representative, Mr. LaRussa, acknowledged that between November 1990 and February 1991, Joyce Wedge made four payments by check to Liberty National for the life insurance policies issued on herself and Clyde Wedge. These four checks were not the four August-October checks referred to above in Finding of Fact 25 as Exhibits P-7 and P-8. According to Mr. LaRussa, three of the November-February checks credited to Joyce Wedge's new life insurance premiums were made out to Liberty National and one was made out to "cash." (TR-127) According to Respondent, he forwarded to Liberty National that check of Joyce Wedge made out to "cash" and, even though it was against their printed policy, Liberty National processed that "cash" check to her benefit. (TR-288).

    
    

33. When Ms. Wedge failed to pay the premiums on it, her new life insurance policy lapsed. This resulted in a sizeable charge back (loss to Respondent) of $529.22 of a $700.00 commission which Liberty National had already paid Respondent.

    
    

34. Ms. Wedge testified that the Respondent induced her to purchase this

    $50,000 life insurance policy (P-4) by misrepresenting she could cash in a Liberty National cancer policy on her husband which would enable her to pay the premiums on a larger life insurance policy for herself and that Liberty National's home office told her that it had no cancer policy on Richard Wedge for her to cash in.8 There was no support for this bald allegation concerning Respondent's alleged misrepresentations. Ms. Wedge's time frame recollection was so confused that it is not possible to determine whether she was told before or after she purchased the $50,000 life insurance policy from Respondent that her deceased husband had no cancer policy with Liberty National. She admitted cashing in at least one policy of some type from another insurer on her husband. She had no idea how many policies she or her family members had with Liberty National as of the date of her husband's death. Liberty National's witness, Mr. LaRussa, also was unsure whether or not the company had ever issued a cancer policy on Richard Wedge. Ms. Wedge, in fact, replaced an old Liberty National cancer policy on herself with a new cancer policy on herself. (See, P-5 and Finding of Fact 29).

    
    

35. It was not in Respondent's interest to induce the sale of insurance policies people could not continue to pay for, because in addition to losing part of his commission as a "charge back" he also suffered an incremental decrease in commission rate on all future sales for every policy which lapsed.

    
    

36. A life insurance policy application dated September 4, 1990 for Clyde Wedge, Ms. Wedge's son, truthfully disclosed that Clyde Wedge was afflicted with Down's Syndrome.9 Although Liberty National's policy is to regard persons with Down's Syndrome as being incapable of entering into a life insurance contract, Liberty National accepted the application, issued a policy to Clyde Wedge, and received checks for premium payments for this policy in November and December 1990 and January and February 1991. None of these payments correlate to the August-October 1990 checks. (See Findings of Fact 25 and 32) Then, Clyde Wedge's policy also lapsed due to non-payment.

    
    

37. Through an admitted error of the Respondent, the Joyce E. Wedge life insurance policy and the Clyde Wedge life insurance policy were initially reported to Liberty National Insurance Company and to the Hilton Company as

    payable through a payroll deduction plan franchise. Under this system, policies written before the 15th of a month are issued approximately 45 days later and policies written after the 15th of the month are issued approximately 75 days later. The premiums are paid as one monthly check by the employer for all employees who have authorized payroll deductions. The first premium payment is not always received by Liberty National before it issues the individual insured's new policy. Due to employee turnover, vacation schedules, and sloppy fail-safe procedures, Hilton Company did not catch Respondent's error that the Wedges were not Hilton Company employees. Prior to the error being corrected, Hilton Company paid premiums on behalf of the Wedges to Liberty National.

    Respondent's error resulted in commingling Hilton Company money and the insurance carrier's money, at least temporarily.

    
    

38. Respondent caught his own error and contacted his daughter, Cynthia England, who was Hilton Company's paymaster. Between them, they straightened out the bookkeeping errors. Respondent, using cash ultimately derived from Joyce Wedge's approximately $600 in August-October checks as described in Finding of Fact 25, reimbursed Hilton Company the same amount of money it already had paid out to Liberty National on behalf of Joyce E. Wedge and Clyde Wedge. Respondent's daughter removed the Wedges from Hilton Company's employee debit rolls. Respondent arranged for future direct payment of the Wedges' life insurance premiums to Liberty National, as related in Findings of Fact 32 and 36, above.

    
    

    CONCLUSIONS OF LAW

    
    

39. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this cause, pursuant to Section 120.57(1), F.S.

    
    

40. The duty to go forward is upon the agency in license discipline cases. Herein, in order to prevail, Petitioner Department of Insurance must prove the alleged violations by clear and convincing evidence. See, Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987)

    
    

41. Count I of the administrative complaint charges that Respondent willfully misrepresented and sold Inez S. McCall a policy which would exclude her from coverage due to her prior cancer even though she fully informed him that she had been diagnosed with cancer and undergone a radical mastectomy in 1983.

    
    

42. With regard to the Inez S. McCall matter, the evidence is insufficient as a matter of law to establish by clear and convincing evidence that Respondent committed any violation charged in Count I. It constitutes a dispute of "he said" versus "she said", and in this instance, it is concluded that Respondent and his witness were more credible.

    
    

43. Respondent is charged by Count III of the administrative complaint with willfully misrepresenting to Joyce E. Wedge that her recently-deceased husband had a cancer insurance policy with Liberty National Life Insurance Company and that the proceeds from this policy could be used to pay the premiums on a new life insurance policy for Joyce Wedge when, in fact, Ms. Wedge's husband had no cancer policy, and further, that Respondent misappropriated, converted, or unlawfully withheld premium monies belonging to Ms. Wedge without remitting them to Liberty National or to any other authorized insurer as required.

44. Count III alleges the following statutory sections were violated: Sections 626.611 (4), (5), (7), (8), (9), (10), and (13); 626.621(2), (3), (5),(6), and (9); 626.9521, 626.9541(1)(k)l, 626.9541(1)(l), and 626.9541(1)(o)1, F.S. The Department seeks a two year suspension of Respondent's license.

    
    

45. The Department did not demonstrate by evidence, and did not argue in its proposals, that Joyce E. Wedge or Clyde Wedge was deprived of coverage on their two new life insurance policies between the date of issuance and the date Ms. Wedge allowed the policies to lapse, or that Respondent deprived Liberty National of any premiums related to the two new life insurance policies or the new cancer policy substituted for Joyce E. Wedge's old cancer policy, or that Hilton Company lost any money as a result of Respondent's error.

    
    

46. It is apparently the agency's position that the insurance carrier or Ms. Wedge somehow lost the amounts of money represented by the four August- October checks (Exhibits P-7 and 8) described in Finding of Fact 25 because the checks were not paid directly to the insurance carrier. Mr. LaRussa testified that these amounts of money were never received by Liberty National, but if all payments on the two new life insurance policies and the new cancer policy were received by Liberty National and Mr. LaRussa did not have any knowledge of any other policies to which the August-October checks should have been applied, it is difficult to understand what Liberty National lost. Respondent testified that he commingled funds from the August-October checks but that the bulk of these amounts were "washed out" by Respondent in his correction of the Hilton Company fiasco. Consequently, there is not clear and convincing evidence that Respondent is guilty of final conversion of approximately $600 to his own use.

1. Nonetheless, there is no question that Respondent flaunted his insurance carrier principal's internal regulations with regard to the handling of the August-October premium checks. There may have been no permanent "conversion" to his own use of roughly $600, but there was commingling of fiduciary funds and failure to meet his fiduciary duties to timely remit them, thus constituting "unlawful withholding of monies due an insurer."

   
   

2. Also, there is no doubt that his error with regard to the franchised premium deductions was the result of "lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by his license." In mitigation, it may be said that Respondent has only one such inadvertent mistake to his 25 year record and he discovered his own error and acted immediately to correct it.

   
   

3. Upon the foregoing findings of fact and conclusions of law it is concluded that Respondent is guilty of violating Sections 626.611(8) and (10) as part of a single transaction.

   
   

4. In arriving at a penalty, Rules 4-231.040(1)(a) and 4-231.080(8) and

(10) F.A.C. have been considered. Pursuant thereto, the maximum stated penalty for these two violations arising out of a single transaction is a nine months' suspension. There having been no loss of real money demonstrated and mitigating circumstances having been shown, a three months' suspension should be adequate to impress upon Respondent the need for greater care in bookkeeping and for timely remittance of premiums.

RECOMMENDATION

Upon the foregoing findings of fact and conclusions of law, it is

RECOMMENDED that the Department of Insurance enter a final order finding Respondent guilty of Sections 626.611(8) and (10) F.S. in a single transaction under Count III, assigning a three months' suspension as penalty therefor, dismissing all other violation charges within Count III and dismissing Count I as to all charges.

RECOMMENDED this 1st day of April, 1996, in Tallahassee, Florida.

ELLA JANE P. DAVIS, 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 1st day of April, 1996.

ENDNOTES

1/ Ms. McCall's testimony was vague concerning her reasons for doing certain things and what she said, whereas Ms. Gordey, who apparently was not present for both sides of all conversations, was very definite about all aspects of what had transpired, even when it was doubtful that she had been present at all.

Among other things, Ms. Gordey represented that she personally had three melanomas and other skin cancers and was interested in whether Respondent's insurance company would cover her for cancer although she had been turned down by other companies and further that she had Ms. McCall phone Respondent and from what she heard Ms. McCall say over the phone, she deduced that Respondent was on the other end of the phone saying "it would make no difference". Her testimony is unclear whether Ms. McCall was at that time discussing her own hysterectomy and mastectomies or was discussing Ms. Gordey's skin cancers (TR 183-184). Ms. McCall's testimony concerned phone calls to Respondent only after receiving the policy, is less clear on chronology and content of these calls, and does not quite fit the scenario related by Ms. Gordey. Respondent denies any similar phone call.

Ms. McCall and Respondent each testified that no one was present in her house except themselves and Mr. McCall at the time the application was filled out and signed and that Mr. McCall did not participate in their discussion.

Both Ms. McCall and Respondent maintained the whole application took very little time. Respondent's wife, waiting outside, also considered it a short period of time that he was in Ms. McCall's house, and she and Respondent observed that Ms. Gordey never entered the house while he was inside. Ms. Gordey, on the other hand, testified that she and Mr. McCall were present and participated in a long conversation between Ms. McCall and Respondent concerning Ms. McCall's several operations.

Ms. Gordey testified that she was present when Respondent picked up the McCall policy. Ms. McCall was unsure Ms. Gordey was present at that time.

Respondent denied that Ms. Gordey was present at that time.

2/ Approximately April 17, 1991, within three weeks after the McCall policy was applied for and at approximately the time it was received by Ms.

McCall, Ms. Gordey and Ms. McCall, resigned their offices in the political group due to offenses they believed to have been committed against them and others by Respondent and his wife.

In January 1993, Ms. Gordey admittedly copied an official Department of Environmental Regulation letter, added written material at the bottom thereof, and distributed the altered letter to the public (TR 198-199). That same month, Respondent's wife complained of this action of Ms. Gordey to the Florida Elections Commission and the Department of Environmental Regulation.

In March 1993, Respondent and/or his wife filed a complaint with the Ombudsman Council of the State of Florida, attempting to oust Ms. Gordey from that council. However, Ms. Gordey was not disciplined as a result.

In approximately June 1993, Ms. Gordey complained against Respondent without Ms. McCall's knowledge but on behalf of Ms. McCall to the Department of Insurance, even though she knew the premium had been refunded to Ms. McCall and even though she assumed that the policy had been cancelled over two years before.

3/ Id. to paragraph two of n. 1, above. Putting the best light on some of Ms. Gordey's and Ms. McCall's testimony, it may be that they transposed to Respondent Ms. Gordey's own skin cancer disclosures to Ms. McCall and Ms.

McCall's disclosures to Ms. Gordey about Ms. McCall's mastectomy and/or they considered other cancers might be covered by the policy like skin cancers.

4/ Ibid. to paragraph three of n. 1, above.

5/ Ibid. to the last two paragraphs of n. 2, above.

6/ The Department's post-hearing proposal asserted that some misrepresentation occurred because Respondent sold several insurance policies on several different days while Ms. Wedge was grieving and very confused, but there is no clear evidence of undue influence. The sum total of the evidence on this score is that Respondent sold policies on different days during this period and Mr.

LaRussa commented that such sales are highly unusual for Liberty National. No statutory or rule standard precludes selling policies on successive days instead of selling all the policies at one time as Mr. LaRussa maintained was more common. Ms. Wedge's confusion cannot automatically be assigned to misrepresentations by the Respondent.

7/ An audit by Liberty National was admitted over objection as P-9. This exhibit was offered to illustrate, supplement, or explain the direct testimony of Mr. LaRussa, Liberty National's representative, who had been disclosed as a witness pursuant to pretrial order. However, this exhibit does not explain his testimony or support much of it.

For instance, Mr. LaRussa testified to the receipt of four Wedge checks, including one made out to cash, and Respondent testified to forwarding a check made out to cash (Finding of Fact 32). There was no explanation by Mr. LaRussa why Liberty National would credit checks made out to "cash," contrary to the company's own policy (See Finding of Fact 32) or why the company would continue to collect premiums on an application signed by a Down's Syndrome child. (See finding of Fact 36)

Contrary to some of Mr. LaRussa's testimony, Exhibit P-9 could be showing all payments were made by payroll deduction, but the amounts thereon do not necessarily correlate to the rest of the evidence. No check for $29.00 was introduced to correlate to one application (P-5 at Finding of Fact 29) but Exhibit P-9 shows that such a separate check was received by the company.

Exhibit P-9 also lists other policies in Joyce Wedge's name with no clear explanation of how payments on these policies were divided out or credited.

Exhibit P-9, admitted to bolster Mr. LaRussa's assertion that the August-October approximately $600 had never been received by Liberty National, addressed Joyce Wedge's client number, but it did not explain or clarify whether or not Richard Wedge was ever assigned a different client number or if his number was transferred to Joyce Wedge or how many policies, if any, were still in force in Richard Wedge's name or under his name/number for family members in August- October 1990. Exhibit P-9 shows other policies in Joyce Wedge's name besides those at issue here. Also, in checking the original data, Mr. LaRussa concluded that the money from the August-October checks was never received, but he also stated that he did not know what these checks were for.

Therefore, where there are discrepancies, Mr. LaRussa's testimony has been relied upon over Exhibit P-9.

8/ Ms. Wedge started out saying that she was induced to buy a larger cancer policy on herself, and the Department indeed introduced a cancer policy application by her for a policy to replace an earlier cancer policy on herself, not her husband, as P-5 (see Finding of Fact 29). However, from the evidence as a whole, the undersigned is persuaded that Ms. Wedge was referring to Exhibit P- 4, the $50,000 life insurance policy, when she asserted that she was being induced to cash in a cancer policy on her husband.

9/ Ms. Wedge denied the signature on this 9/4/90 application (Exhibit P-6) was in her own or Clyde Wedge's handwriting. Clyde Wedge did not testify. The 9/6/90 check signed by Ms. Wedge (see Finding of Fact 25) bears a notation for "Clyde's insurance", but she had no recollection what the check related to or even that she wrote it. The insurance carrier's witness testified it had been paid a premium for Clyde's new life insurance policy, but not by this check. (See this Finding of Fact and Finding of Fact 32) Based on all the other evidence, the vagueness and agitation of Ms. Wedge while testifying and her frequent admission that she made numerous mistakes about insurance during this period, it is concluded that her denial of this signature is probative of nothing at all.

APPENDIX TO RECOMMENDED ORDER

The following constitute specific rulings, pursuant to S120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF).

Petitioner's PFOF:

1-3 Accepted, except for unnecessary, subordinate or cumulative material.

4-7 Rejected, primarily upon credibility assessment of the witnesses as set forth in the Recommended Order.

8 Rejected in Findings of Fact 34-35.

9-12 Accepted except for legal argumentation.

13 Rejected as legal argumentation or a conclusion of law.

Respondent's PFOF:

1-49, 51-57 Accepted, except for unnecessary, subordinate, or cumulative material.

50 Rejected as legal argumentation or a conclusion of law.

COPIES FURNISHED:

Beverly B. Brewster, Esquire Department of Insurance

612 Larson Building

Tallahassee, FL 32399-0333

Donald S. Modesitt, Esquire Suite B

115 North Franklin Boulevard Tallahassee, FL 32301

Bill Nelson

State Treasurer and Insurance Commissioner

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

Dan Sumner, Esquire Department of Insurance

The Capitol, Plaza Level - 11 Tallahassee, Florida 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

================================================================= AGENCY FINAL ORDER

=================================================================

THE TREASURER OF THE STATE OF FLORIDA DEPARTMENT OF INSURANCE

IN THE MATTER OF CASE NO.: 94-L-345DTG SAMUEL LOFTON DAY, JR. DOAH CASE NO.: 94-4317

/

FINAL ORDER

THIS CAUSE came on before the undersigned Treasurer of the State of Florida, acting in his capacity as Insurance Commissioner, for consideration and final agency action. On April 4, 1994, the Department of Insurance (hereinafter referred to as the "Department") filed a three count Administrative Complaint against SAMUEL LOFTON DAY, JR. (hereinafter referred to as the "Respondent")

charging him with various violations of the Insurance Code. The Respondent timely filed a request for formal proceeding pursuant to Section 120. 57(1), Florida Statutes. The Department voluntarily dismissed Count II prior to hearing. Pursuant to notice, Counts I and III were heard before Ella Jane P. Davis, Hearing Officer, Division of Administrative Hearing, on August 28, 1995 and September 22, 1995.

After consideration of the evidence, argument and testimony presented at the hearing, and subsequent written submissions by the parties, the Hearing Officer issued her Recommended Order (attached as Exhibit A). The Hearing Officer recommended that the Department enter a Final Order dismissing Count I of the Administrative Complaint and find Respondent guilty of violating Sections 626.611(8) and (10), Florida Statues in a single transaction under Count III, assign a three month suspension as the appropriate penalty, and dismiss all other violations charged within Count III. The Respondent timely filed several Exceptions to the Hearing Officer's Recommended Order which have been considered and addressed herein. The Department's prosecutor filed no Exceptions.

RULINGS ON RESPONDENT'S EXCEPTIONS

Respondent did not number the paragraphs in his Exceptions pleading, nor did he number the Exceptions, so that reference to Respondent's Exceptions herein must be by general description.

1. Respondent first excepts to the Finding of Fact contained in paragraph

   27 in the Recommended Order, contending that, because Liberty National had on at least one occasion accepted from Respondent a check made out to cash, the Hearing Officer erred when she concluded that Liberty National had a company rule prohibiting an agent from having client's insurance premium checks made out to the agent or cash. The one incident pointed to by Respondent is insufficient to undercut the clear testimony that the rule did exist (T-114). Accordingly, Respondent's Exception on this point is REJECTED.

   
   

2. Respondent also urges that the Hearing Officer improperly concluded that Respondent effectively co-mingled Mrs. Wedge's money with his own money, other client's money, and the insurance carrier's money. The testimony indicates that an agent was required to remit money to the insurer each Friday (T-100,101). When Respondent was asked if he converted any of the Wedge monies (checks) to his own use, he admitted that he co-mingled "...a couple of them . .

   .to cash, for my own use." (T-253). There is substantial evidence to support the Hearing Officer's finding. Accordingly, that portion of Respondent's Exception on this point is also REJECTED.

   
   

3. A related Exception, taken by Respondent, is made to the Hearing Officer's having found that "...respondent admittedly knew that the company forbade this procedure." In this Exception Respondent points to testimony (T-

   114) by Respondent to the effect that the field check-cashing activities of Liberty National agents on debit routes were an approved alternative to the company policy forbidding such activity. Respondent's Exception here goes to the weight of the evidence. The Hearing Officer recognized in the Recommended Order the testimony which Respondent cites to regarding this Exception. However, there was testimony in the record (e.g., T- 114, 112, 100) to the effect that it was company policy that checks be made out only to the company, and specifically not to the agent or to "cash." It is apparent that the Hearing Officer gave more weight to the latter testimony, than to Respondent's testimony. Respondent's Exception in this regard is REJECTED.

4. Respondent further Excepts to paragraph 27 of the Finding of Facts in the Recommended Order where the Hearing Officer noted that "...no business records in evidence account for these fiduciary transactions or substantiate that these amounts were reported and remitted to the insurance carrier on at least a weekly basis as required by Liberty National." Respondent argues that this finding put the burden of proof on Respondent. However, the proper interpretation of the quoted language is that the Department had presented evidence to prima facie show that Respondent failed to follow the company rules, and that Respondent was afforded an opportunity to, but did not, introduce evidence in rebuttal to show that there was no breach of his fiduciary obligation. Accordingly, Respondent's further Exception to paragraph 27 of the Finding of Facts of the Recommended Order is REJECTED.

   
   

5. Respondent takes further Exception to the Hearing Officer's findings, in view of the Hearing Officer's reasoning in endnote 7, concerning exhibit 9, and Respondent specifically quotes the Hearing Officer saying that there was "no clear explanation of how payment on these policies were divided out or credited." In the quoted language the Hearing Officer was noting weakness in certain of the agency's evidence. However, elsewhere in the Recommended Order the Hearing Officer found and notes evidence which the Hearing Officer concluded to be sufficient to support a finding of violation. Respondent's Exceptions here go to the weight the Hearing Officer decided to assign to the evidence. Respondent is in essence contesting whether the evidence rose to the level of clear and convincing. Because the Hearing Officer's factual findings are not without substantial support, neither the Respondent nor the Department can substitute its judgment for that of the Hearing Officer on this point. Respondent's Exception is REJECTED.

   
   

6. Respondent takes Exception to the Conclusion of Law stated in paragraph

   48 of the Recommended Order, that Respondent violated section 626.611(8), under the charges in Count III. Respondent asserts that he was not charged in Count III with violating 626.611(8). Section 626.611(8) relates to lack of reasonably adequate knowledge and technical competence.

   
   

   1. The Hearing Officer recommended that Respondent be found guilty under Count III of violating 626.611(8). However, as pointed out in Respondent's Exceptions, Count III did not specifically cite 626.611(8), nor did Count III recite the language of 626.611(8).

      
      

   2. Count III did cite by section number the sections allegedly violated, and among the statutes cited, is section 626.621(8), which relates to being found guilty or having plead nollo contendre to a felony. After Count III cites the various statutes charged, it goes on to state that the listed statutes are charged "as more particularly alleged in Count I above." Count I sets out the actual language of all the statutes cited, except 626.621(8). However, 626.611(8) is set out in Count I. From this it might be concluded that the citation in Count III to 626.621(8) was a typographical error, and that it was intended to be a citation to 626.611(8). However, this is just speculation, as the issue of whether the cite in Count III to 626.621(8) was just a typographical error and was intended to be a cite to 626.611(8), was never discussed or brought up in the pretrial pleadings, the hearing transcript, or the Department's Proposed Recommended Order. The issue is first brought up in Respondent's Exceptions. In this context it must be admitted that there is at least some ambiguity as to whether 626.611(8) was charged in Count III, and at this point in the proceeding the ambiguity must be resolved in Respondent's favor. Accordingly, Respondent's Exception on this point is ACCEPTED, and the

   Hearing Officer's recommendation that Respondent be found guilty in Count III of violating 626.611(8), is REJECTED.

   
   

7. Respondent takes Exception to the Hearing Officer's Conclusion of Law that Respondent violated 626.611(10), which generally relates to misappropriation, conversion, or unlawful withholding of moneys. The Administrative Complaint in Count III properly charged Respondent with violating Section 626.611(10), F.S. The Hearing Officer's Conclusion of Law regarding the violation of 626.611(10) stated that

   
   

   Nonetheless, there is no question that Respondent flaunted his insurance carrier principal's internal regulations with regard to the handling of the August-October premium checks. There may have been no permanent "conversion" to his own use of roughly $600, but there was commingling of fiduciary funds and failure to meet his fiduciary duties to timely remit them, thus constituting "unlawful withholding of monies due an insurer".

   
   

   It was not contested that Respondent erroneously reported to the Liberty National Insurance Company that the premiums in issue would be paid through payroll deductions of the "Hilton Company." In fact, the insureds were not employed by the Hilton Company. The Hilton Company continued to pay out to Liberty National amounts totaling approximately $600.00 for several weeks, until such time as Respondent sought to stop additional payments made by the Hilton Company on behalf of the insureds. Only then did Respondent reimburse the Hilton Company in the approximate amount of $600.00, an amount that the Respondent had long since received from the insureds but had not remitted to the Hilton Company or to the insurance company on behalf of the insureds until that time. (T-236-240,259- 260) There was substantial evidence that Respondent was under a duty to remit premium moneys weekly to the insurer, yet he held the $600 well more than a week, His failure to promptly remit the $600 to the insurer is not connected to or explained by his error as to who the insureds worked for.

   That he thought the insureds were employed by the Hilton Company did not authorize or justify him in simply retaining the $600, remitting it neither to the insurer nor the Hilton Company, until well beyond one week. The facts found support the conclusion that Respondent is guilty of misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insureds or beneficiaries or to others and received in the conduct of business under the license or appointment. It is well-established that an agency's interpretation of the statutes it is charged with administering is entitled to great deference. Natleson v. Department of Insurance, 454 So.2d 31 (Fla. 1st DCA 1984); School Board of Pinellas County v. Department of Administration, 492 So.2d 767 (Fla.

   1st DCA 1986). For these reasons, Respondent's Exceptions to the Conclusions of Law in the Recommended Order, relating to section 626.611(10), are REJECTED.

   
   

8. Because this Final Order rejects one of the two recommendations of the Hearing Officer as to statutory sections violated, the recommended penalty will be accordingly reduced by half. The Hearing Officer recommended a three month suspension, but this shall be reduced to a forty-five (45) day suspension. This penalty is less than the maximum, is based upon the Department's having considered all mitigation factors disclosed in the record, and is not based on the application, in any manner, of Rule 4-231.080(8), F.A.C., or upon any act of the Respondent regarding Section 626.611(8), F.S., which the Department finds was insufficiently pled.

Upon careful consideration of the Record, the submissions of the parties and being otherwise advised in the premises, it is

ORDERED:

1. The Findings of Fact of the Hearing Officer, as modified by this order, are adopted as the Department's Findings of Fact.

   
   

2. The Conclusions of Law of the Hearing Officer, as Modified by this Order, are adopted as the Department's Conclusions of Law.

   
   

3. That portion of the Hearing Officer' Recommendation which recommends that the Department find the Respondent guilty of Section 626.611(8) and 626.611(10), F.S. in a single transaction under Count III is REJECTED.

   
   

4. That portion of the Hearing Officer' Recommendation that the Department find the Respondent guilty of Section 626.611(10), F.S. is ACCEPTED.

   
   

5. That portion of the Hearing Officer's Recommendation that the Department dismiss all other violations charged within Count III and dismiss Count I as to all charges, is ACCEPTED.

   
   

6. The Hearing Officer's Recommendation that the Department enter a three month suspension of all licenses, registrations and eligibility for licensure held by SAMUEL LOFTON DAY, JR., as predicated upon any violation of Section 626.611(10), F.S. is REJECTED.

   
   

7. The Department finds that a forty-five day suspension of all licenses, registrations and eligibility for licensure held by SAMUEL LOFTON DAY, JR. is the appropriate disposition of this case.

ACCORDINGLY, SAMUEL LOFTON DAY, JR. is deemed to have violated Sections 626.611 (10), Florida Statutes, and all licenses, registrations and eligibility for licensure held by SAMUEL LOFTON DAY, JR. are SUSPENDED for a period of

forty-five (45) days, said suspension to commence ten (10) days from the date of this Order.

Any party to these proceedings adversely affected by this order is entitled to seek review of this Order Pursuant to Section 120.68, Florida Statutes, and Rule 9.110, Florida Rules of Appellate Procedure. Review proceedings must be instituted by filing a Notice of Appeal with the Insurance Department's General Counsel, acting as the Agency Clerk, at 612 Larson Building, Tallahassee, Florida 32399- 0333, and copy of the same and the filing fee with the appropriate District Court of Appeal within thirty (30) days of rendition of this Order.

DONE and ORDERED this 3rd day of June, 1996.

BILL NELSON TREASURER AND

INSURANCE COMMISSIONER

COPIES FURNISHED

Ella Jane P. Davis, Hearing Officer Division of Administrative Hearings 1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Samuel Lofton Day, Jr. 1120 Tennessee Avenue

Lynn Haven, Florida 32444-2263

Samuel Lofton Day, Jr.

P.O. Box 1444

Lynn Haven, Florida 32444-6244

Donald S. Modesitt, Esquire Suite B

115 North Franklin Boulevard Tallahassee, Florida 32301

Beverly B. Brewster, Esquire Department of Insurance

612 Larson Building

Tallahassee, Florida 32399-0333

Docket for Case No: 94-004317

Orders for Case No: 94-004317