STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA DEPARTMENT OF INSURANCE ) AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 95-1944

)

CAPITAL NATIONAL FINANCIAL )

CORPORATION, )

)

Respondent. )

)

RECOMMENDED ORDER

The parties in this case agreed to submit memoranda of law and proposed recommended orders based on stipulated facts in lieu of an evidentiary hearing. Oral argument was made to the Division of Administrative Hearings' designated Hearing Officer, Susan B. Kirkland, on November 22, 1995, by telephonic conference.

APPEARANCES

For Petitioner: Alan J. Liefer, Esquire

Division of Legal Services 612 Larson Building

Tallahassee, Florida 32399-0333

For Respondent: Alberto R. Cardenas, Esquire

Matias R. Dorta, Esquire Tew & Beasley

201 South Biscayne Boulevard, Suite 2600 Miami, Florida 33131-4336

STATEMENT OF THE ISSUES

Whether Respondent has violated Section 627.8405, Florida Statutes.

PRELIMINARY STATEMENT

On August 30, 1994, the Petitioner, the Florida Department of Insurance (Department), issued a Notice of Intent to Non-renew the Respondents, Capital National Financial Corporation's (Capital), certificate of authority to transact the business of premium financing in Florida, pursuant to Section 627.829, Florida Statutes. The grounds for nonrenewal were stated as: 1) the illegal financing of the purchase of automobile club memberships in conjunction with an insurance transaction, a violation of Section 627.8405, Florida Statutes, and 2) the utilization of a form in conjunction with the premium financing transaction without the requisite Departmental review and approval, a violation of Section 627.838, Florida Statutes. Capital timely requested an administrative hearing.

On April 21, 1995, the case was referred to the Division of Administrative Hearings for assignment to a Hearing Officer. The final hearing was scheduled for August 18, 1995. On August 15, 1995, the parties advised the Hearing Officer that they had agreed to stipulate to certain facts and that an evidentiary hearing was not necessary. The parties agreed that the remaining issue to be determined by the Hearing Officer was whether Capital had violated Section 627.8405, Florida Statutes. An order was entered allowing the parties to file proposed recommended orders and memoranda of law. The parties requested and were granted extensions of time in which to file their proposed recommended orders.

Oral arguments were presented on November 22, 1995, by telephonic conference.

The parties' proposed findings of fact are addressed in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Respondent, Capital National Financial Corporation (Capital), is transacting the business of insurance premium financing pursuant to a certificate of authority issued by the Petitioner, Florida Department of Insurance (Department).

   
   

2. The Department is responsible for regulating the premium finance business affairs of Capital.

   
   

3. On August 30, 1994, the Department issued a Notice of Intent to Non- renew Capital's certificate of authority to transact premium financing in Florida pursuant to Section 627.829, Florida Statutes.

   
   

4. As authority for issuing the Notice of Intent to Non-renew, the Department cited two grounds. First, the Department alleged that Capital was illegally financing the purchase of automobile club memberships in conjunction with an insurance transaction, a violation of Section 627.8405, Florida Statutes. Second, the Department alleged that Capital was utilizing a form in conjunction with the premium financing transaction without the requisite Departmental approval, a violation of Section 627.838, Florida Statutes. The parties have stipulated that the only issue to be determined is whether there was a violation of Section 627.8405.

   
   

5. Capital finances insurance premiums and has agreed to collect installment payments for automobile club memberships which the insurance agent sells to the customer when the customer is buying automobile insurance. The customer makes a down payment on the automobile club membership. Capital does not advance the remainder of the membership cost to the insurance agent. The customer executes a billing service disclosure form.

   
   

6. The billing service disclosure form contains the following language:

   
   

   In conjunction with your insurance, you have purchased through your insurance agent the supplemental service disclosed above. The

   amount which you are charged for this supplemental service, after deduction of any down payment which you have paid, will be divided equally into monthly installments payable to Capital National Financial

   Corporation due at the same time, and in addition to, your monthly installment payable to Capital National for the financing of the purchase of your insurance. Capital National is acting as

   a collection agent for your insurance agent and is not charging any interest or other fee for collecting and processing the amount due for your purchase of this supplemental service.

   The monthly installment you will pay for the supplemental service will be added to the payment amount for your insurance and this aggregate amount will be reflected on your payment coupon. However, your insurance can not be cancelled by reason of your failure to pay the amount of the monthly installment attributable to the purchase of the supplemental service.

   
   

7. The billing service disclosure form used by Capital is executed by the customer on the same day the premium finance agreement is executed.

   
   

8. The billing disclosure form is a separate document from the premium finance agreement.

   
   

   CONCLUSIONS OF LAW

   
   

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

   
   

10. The Department has alleged that Capital has violated Section 627.8405(1), Florida Statutes, which provides:

    
    

    No premium finance company shall, in a premium finance agreement, provide financing for the cost of:

    1. A membership in an automobile club. The term 'automobile club' means a legal entity which, in consideration of dues, assessments, or periodic payments of money, promises its members or sub- scribers to assist them in matters relating to the ownership, operation, use, or maintenance of a motor vehicle; however, this definition of 'automobile club' does not include persons, associations, or corporations which are organized and operated solely for the purpose of conducting, sponsoring, or sanctioning motor vehicle races, exhibitions, or contests upon racetracks, or

       upon racecourses established and marked as such for the duration of such particular events. The words 'motor vehicle' used herein have the same meaning as defined in chapter 320.

       
       

11. A premium finance agreement is defined in Section 627.827, Florida Statutes, as:

    
    

    [A] promissory note or other written agreement by which an insured promises or agrees to pay to, or to the order of, a premium finance company

    the amount advanced or to be advanced under the agreement to an insurer or to an insurance agent, in payment of premiums on an insurance contract, together with a service charge as authorized

    and limited by law.

    
    

12. The Department argues that the premium finance agreement and the billing disclosure statement were parts of a contemporaneous transaction and therefore merged. The contemporaneous transaction rule has been described by the courts as follows:

    
    

    The law is well established that two or more documents executed by the same parties, at or near the same time, and concerning the same transaction or subject matter are generally construed together as a single contract. (Citations omitted.) The writings must be construed together because they are part of a contemporaneous transaction. (Citations omitted.) The term 'contemporaneous' has been interpreted as 'so approximate in time as to grow out of, elucidate and explain the quality and character of the transaction, or an occurrence within such time as would reasonably make it part of the transaction.' (Citation omitted.)

    
    

    Citicorp Real Estate v. Ameripalms 6B GP, Inc., 633 So.2d 47, 49 (Fla. 3rd DCA 1994).

    
    

13. The documents were between the same parties, Capital and the insured. The parties have stipulated that the documents were executed on the same day. The documents arose out of the same transaction. The billing disclosure statement says, "In conjunction with your insurance, your have purchased through your insurance agent the supplemental service described above." (Emphasis supplied) The documents deal essentially with the same subject matter, i.e., the monthly payments that the insured will make to Capital. The costs of both the insurance and the automobile club membership are lumped together for the purposes of payment. The premium finance agreement and the billing service disclosure form should be construed as a single contract.

    
    

14. Having determined that the billing disclosure statement is part of the premium financing agreement, the issue becomes whether Capital is financing automobile club memberships. The term "finance" as a verb is defined by Black's Law Dictionary, 5th Edition as follows:

    
    

    [T]o supply with funds through the issuance of stocks, bonds, notes, or mortgages; to provide with capital or loan money as needed to carry on business.

    
    

    Webster's Second New Riverside University Dictionary defines the verb "finance" as

    
    

    1. To supply the funds or capital for <financed new publishing venture> 2. To supply funds to

    <financing us in a new business> 3. To provide

    credit to.

    
    

    In the instant case, Capital is not supplying funds, providing credit, or loaning money. Capital has not advanced funds to the insurance agent or to the insured for the automobile memberships. It is acting merely as a collection agent. The credit provided to the insured comes either from the insurance agent or the automobile club.

    
    

15. The Department has not established that Capital has violated Section 627.8405, Florida Statutes.

    
    

16. Because the parties have stipulated that the only issue to be determined in this proceeding is whether there was a violation of Section 627.8405, it is unnecessary to address whether there is a violation of Section 627.838, Florida Statutes.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Capital National

Financial Corporation did not violate Section 627.8405, Florida Statutes.

DONE AND ENTERED this 8th day of January, 1996, in Tallahassee, Leon County, Florida.

SUSAN B. KIRKLAND

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 8th day of January, 1996.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-1944

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

Petitioner's Proposed Findings of Fact.

1. Paragraphs 1-4: Accepted in substance.

2. Paragraphs 5-19: Rejected as unnecessary.

3. Paragraph 20: Rejected as not supported by the record. Capital disputes that they are "financing" the automobile club fees.

4. Paragraphs 21-23: Accepted in substance.

5. Paragraphs 24-29: Rejected as unnecessary.

Respondent's Proposed Findings of Fact.

1. Paragraphs 1-4: Accepted in substance.

2. Paragraphs 5-6: Rejected as unnecessary.

3. Paragraphs 7-11: Accepted in substance.

4. Paragraphs 12-13: Rejected as unnecessary.

COPIES FURNISHED:

Alan J. Leifer, Esquire

Department of Insurance/Legal Services

1. East Gaines Street Tallahassee, Florida 32399-0333

   
   

   Alberto R. Cardenas, Esquire Matias R. Dorta, Esquire

   Tew & Garcia-Pedrosa

2. South Biscayne Boulevard Miami, Florida 33131-4336

Bill Nelson

State Treasurer and Insurance Commissioner

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

Dan Sumner

Acting General Counsel Department of Insurance The Capitol, PL-11

Tallahassee, Florida 32399

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 ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 95-001944

Orders for Case No: 95-001944