STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 94-4812

)

BLAIR JOHN REUTHER, )

)

Respondent. )

)

RECOMMENDED ORDER

On December 15, 1994, a formal administrative hearing was held in this case in St. Petersburg, Florida, before J. Lawrence Johnston, Hearing Officer, Division of Administrative Hearings.

APPEARANCES

For Petitioner: James A. Bossart, Esquire

Department of Insurance

412 Larson Building

Tallahassee, Florida 32399-0300 For Respondent: Blair John Reuther, pro se

STATEMENT OF THE ISSUE

The issue in this case is whether the Department of Insurance should discipline the Respondent on charges contained in the Administrative Complaint filed June 1, 1994. The Administrative Complaint charges that the Respondent failed to accurately disclose certain aspects of the true physical condition of two applicants for health insurance and failed to disclose to the applicants the existence of certain deductibles and a six-month waiting period for preexisting conditions.

PRELIMINARY STATEMENT

After being served with a copy of the Administrative Complaint, the Respondent timely denied the charges and demanded formal administrative proceedings. The Department referred the matter to the Division of Administrative Hearings (DOAH) on August 30, 1994. A hearing officer was assigned, and the matter was set for final hearing in St. Petersburg, Florida, on December 15, 1994.

At the final hearing, the Department presented the Respondent's licensure records as Petitioner's Exhibit 1, which was admitted in evidence, and presented testimony of the two applicants for the insurance in question through the transcripts of their depositions, which were admitted in evidence as Petitioner's Exhibits 2 and 3. Six additional Department exhibits were attached

to Petitioner's Exhibit 2 and were admitted in evidence as part of that exhibit. The Department also called one additional witness. The Respondent testified in his own behalf and also had Respondent's Exhibits 1 through 7 admitted in evidence.

At the end of the hearing, the parties were given ten days to file proposed recommended orders, but only the Department filed one. Explicit rulings on the proposed findings of fact contained in the Department's proposed recommended order may be found in the Appendix to Recommended Order.

FINDINGS OF FACT

1. The Respondent, Blair John Reuther, is eligible for licensure and is licensed in Florida as an insurance agent. At the times referred to in this case, the Respondent was licensed to solicit health insurance on behalf of National States Insurance Company (National States).

   
   

2. Some time prior to April, 1993, National States solicited health insurance from Earl and Jessie Lane, an elderly couple who lived in Ft. Pierce, Florida, and invited them to return a postcard in order to express their interest in more information about health insurance policies National States had to offer. They sent in the postcard, and their names were referred to the Respondent.

   
   

3. Without an additional contact with the Lanes, the Respondent went to their home during the week preceding April 3, 1993, and asked to be permitted to talk with them about National States health insurance policies in which they had expressed an interest. The Lanes invited him in, and the Respondent discussed their existing coverage. At the time, the Lanes had a Level A Medicare Supplement policy, which carried the standard deductibles for such a policy. After some additional discussion, the Respondent promised to return with his proposals and with applications.

   
   

4. On Saturday, April 3, 1993, the Respondent returned to the Lane home and proposed to sell each of them a National States Level A Medicare Supplement policy and a limited benefit medical expense policy. It is found, contrary to the Lanes' testimony, that the Respondent did not tell the Lanes that the National States policies would "cover everything," that the Respondent told the Lanes that the National States Medicare Supplement policies had deductibles (just like their previous Level A Medicare Supplement policies), and that there was a six-month waiting period for preexisting conditions under the National States limited benefit medical expense policies. (There was no waiting period for preexisting conditions under any of the Medicare Supplement policies.) After discussing the proposal, the Lanes decided to apply for the National States policies being proposed by the Respondent.

   
   

5. It is found that the Respondent went over the applications for the National States policies with the Lanes and filled out the applications in accordance with the information given to him by the Lanes. As to the medical questions on the applications, it is found that the Respondent read the questions aloud and recorded the answers given to him by the Lanes. Specifically, question 5 on the Medicare Supplement applications asked, in pertinent part:

   
   

   Does the Applicant have or had within the past 5 years any of the following: (Underline condition)

   1. Tumor, cancer, malignancy or growth of any kind?

      * * *

      c. High or low blood pressure, varicose veins or disorder of the heart or circulatory system?

      * * *

      1. Amputation, because of sickness, paraplegia, disease of the back or spine?

      2. Disease of the rectum or intestine, stomach, kidney, prostate, urinary bladder, liver, gall bladder?

      
      

      Question 6.b. asked, "Has the Applicant been confined in a hospital in the last five years?

      
      

6. The Lanes answered, "no," to all of the questions set out in the preceding paragraph. They also signed the applications, which state in part: "I agree that all answers above are true and complete to the best of my knowledge."

   
   

7. Effective April 14, 1993, National States issued the limited benefit medical expense policies for which the Lanes had applied; the Medicare Supplement policies were issued with effective dates of April 18, 1993. All four policies were delivered on April 22, 1993. The Respondent returned to the Lane home on April 30, 1993, to go over the policies with the Lanes and answer any questions they had. During the review of the policies after delivery, the Lanes never expressed to the Respondent any dissatisfaction with any of the policies. To the contrary, they both signed a statement that they had reviewed their policies with the Respondent, who had explained them in full.

   
   

8. Jessie Lane contends that she told the Respondent that she "had had a heart problem, a small heart problem." She testified that, at the time of her deposition, she had a pace maker but that, at the time of the application, she "wasn't that bad . . . I was just having--missing heart beats." She also testified that she has: "a light case of arthritis. . . . Not bad." She also testified that she had been hospitalized during the five years preceding the applications: "That's when I had my heart problem too."

   
   

9. Earl Lane contends that he told the Respondent that he had a back injury that required hospitalization several times, but he did not testify that he told the Respondent that he was hospitalized, or that he continued to have back problems, within the five years preceding the application. He testified that he had a swollen prostate that required surgery, but he did not testify that the surgery was within the five years preceding the application. He testified that he had skin cancer "at one time," but that it "was successfully treated" and "didn't amount to nothing." He did not testify that the cancer or the treatment was within the five years preceding the application. He contended for the first time in his deposition testimony that he had a "rupture," but not that he had it within the five years preceding the application. He testified during his deposition: "I've been in the hospital in the last five years." Later during his deposition, he was asked: "How many times have you been in the hospital in the last five years?" He answered: "Just once, I guess, before he was here." He did not clearly testify that he had been hospitalized within the five years preceding the application.

   
   

10. Earl Lane also contended for the first time in his deposition testimony that he told the Respondent that he had varicose veins, but he did not

    testify that they were not surgically removed or that he still had them within the five years preceding the application.

    
    

11. The Lanes also filed a complaint listing other alleged violations by the Respondent: (1) that the Respondent misrepresented that the National States policies covered dental and eyeglasses; (2) that these coverages duplicated policies the Lanes already had; (3) that the National States policies were more expensive than policies the Lanes already had; (4) that the National States policies did not pay skilled nursing; and (5) that the Respondent tricked the Lanes into signing a bank draft agreement. The Department chose not to charge those alleged violations, presumably either because there was insufficient evidence that they were true or because they were not violations.

    
    

12. It appears that someone helped the Lanes draft their requests for refunds from National States and their initial list of complaints against the Respondent. Although the evidence was not clear who helped, it may well have been the insurance agent whose Medicare Supplement policies were replaced by National States and who was trying to recover the business.

    
    

13. In response to the Lanes' request, dated May 7, 1993, to cancel the policies, National States cancelled the Medicare Supplement policies as if the request had been made within the 30 day cancellation period and refunded all but

    5 percent of the premium, which was retained as a processing fee.

    
    

14. In their cancellation request, the Lanes' alleged: "Our health conditions were not accurately written on the applications by agent Blair Reuther and we will not take any chances on not being paid on future medical bills for misrepresentations by this agent." Nonetheless, National States refused to cancel the limited benefit medical expense policies. They remained in full force and effect until they lapsed a year later for failure to pay the premium when next due. There is no evidence that National States investigated the Lanes' true health status.

    
    

15. During the year that the National States limited benefit medical expense policies were in effect, National States paid out more in claims under the policies than the Lanes paid in premiums.

    
    

    CONCLUSIONS OF LAW

    
    

16. The Department asserts that the Respondent is guilty of violating the following sections of the Florida Statutes: 626.611(4), prohibiting the willful use of a license to circumvent the Insurance Code; 626.611(5), prohibiting willful misrepresentation of, or deception in regard to, an insurance policy; 626.611(7), requiring fitness and trustworthiness; 626.611(8), requiring reasonably adequate knowledge and technical competence; 626.611(9), prohibiting fraudulent or dishonest practices; 626.611(13), prohibiting willful failure to comply with provisions of the Insurance Code; 626.621(2), prohibiting violation of any provision of the Insurance Code or of any other law applicable to the business of insurance in the course of dealing under a license or permit; 626.621(6), prohibiting, in the conduct of business under the license or permit, engaging in unfair methods of competition or in unfair and deceptive acts or practices, as prohibited under part X of Chapter 626, or having otherwise shown himself to be a source of injury or loss to the public or detrimental to the public interest; 626.9521, prohibiting unfair methods of competition or unfair or deceptive acts or practices, as defined by 626.9561; 626.9541(1)(a)1, which prohibits, in pertinent part, knowingly making, issuing, circulating a statement, sales presentation, omission, or comparison which misrepresents the

    benefits, advantages, conditions, or terms of any insurance policy; 626.9541(1)(e)1, which prohibits, in pertinent part, knowingly making, publishing, disseminating, circulating, or delivering any false material statement; 626.9541(k)1, which prohibits 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 or individual; and 626.9541(1)(l), which prohibits knowingly making any misleading representations or incomplete or fraudulent comparisons of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, or convert any insurance policy, or take out a policy of insurance in another insurer.

    
    

17. The Department also asserts that the Respondent is guilty of violating

    F.A.C. Rule 4-156.05(2), prohibiting any misrepresentation or incomplete comparison by the insurance company or agent, by commission or omission, for the purpose of inducing or which would reasonable be expected to induce Medicare eligible persons to purchase, amend, lapse, forfeit, non-renew, change, duplicate coverage already in force, replace a policy that is only technically at variance with the policy or policies being offered, or otherwise surrender existing insurance.

    
    

18. Under Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987), the Department had the burden of proving the allegations in this case by clear and convincing evidence. The standard of clear and convincing evidence to be used in administrative licensing cases was outlined by the First District Court of Appeal in Evans Packing Company v. Department of Agriculture and Consumer Services, 550 So. 2d 112, 116, fn. 5 (Fla. 1st DCA 1989):

[C]lear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the evidence must be precise and explicit and the witnesses must

be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact the firm belief of conviction, without hesitancy,

as to be the truth of the allegations sought to be established.

In this case, the key evidence was presented through transcripts of deposition testimony. As reflected by the Findings of Fact, the Department's evidence did not meet the burden of proof.

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 dismissing the Administrative Complaint in this case.

RECOMMENDED this 1st day of February, 1995, 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 1st day of February, 1995.

APPENDIX TO RECOMMENDED ORDER

To comply with the requirements of Section 120.59(2), Fla. Stat. (1993), the following rulings are made on the Department's proposed findings of fact (the Respondent not having filed any):

1.-2. Accepted and incorporated.

1. Accepted and incorporated; however, the Respondent was responding to a "lead" given to him by his employer after the Lanes returned a postcard expressing interest.

2. Accepted and incorporated.

3. Rejected as not proven. (It was not clear from the evidence what the Respondent was told.)

4. Accepted and incorporated; however, it is not clear from the evidence whether the Respondent should have answered the medical history questions on the application differently based on the information given to him by the applicants.

5. First sentence, rejected as not proven. Second sentence, accepted but subordinate and unnecessary.

6. First sentence, accepted and incorporated. Second sentence, rejected as not proven that there were health conditions that should have been disclosed; otherwise, accepted and incorporated. Last sentence, accepted and incorporated.

COPIES FURNISHED:

James A. Bossart, Esquire Department of Insurance

412 Larson Building

Tallahassee, Florida 32399-0300

Blair John Reuther

8535 Blind Pass Drive, #202 Treasure Island, Florida 33706

Honorable Bill Nelson State Treasurer and

Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Dan Sumner, Esquire Acting 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 to the Department of Insurance written exceptions to this Recommended Order. All agencies allow each party at least ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should consult with the Department of Insurance concerning its rules on the deadline for filing exceptions to this Recommended Order.

Docket for Case No: 94-004812

Orders for Case No: 94-004812