STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND )

TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 95-2631

)

ALLISON KAY WERNER, )

)

Respondent. )

)

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on September 8, 1995, at Hollywood, Florida, before Errol H. Powell, a duly designated Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Beverly B. Brewster, Esquire

Department of Insurance and Treasurer Division of Legal Services

612 Larson Building

Tallahassee, Florida 32399-0333

For Respondent: Wendy Russell Wiener, Esquire

Mang, Rett & Minnick, P.A. 660 East Jefferson Street Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

The issue for determination is whether Respondent committed the offenses set forth in the administrative complaint, and if so, what action should be taken.

PRELIMINARY STATEMENT

On April 28, 1995, the Department of Insurance and Treasurer (Petitioner) filed an administrative complaint against Allison Kay Werner (Respondent).

Petitioner charged Respondent with violating Subsections 626.611(5), (7), (8),

(9), and (13), Florida Statutes, Subsections 626.621(2), and (6), Florida Statutes, Subsection 626.988(2), Florida Statutes, Subsections 626.9541(1)(a)1 and 5, (b), and (k)1, Florida Statutes, and Rules 4-215.230(1) and (2), Florida Administrative Code. Respondent disputed the allegations of fact in the administrative complaint and requested a formal hearing. On May 23, 1995, this matter was referred to the Division of Administrative Hearings.

At hearing, Petitioner presented the testimony of one witness and entered five exhibits into evidence. Respondent testified in her own behalf, presented the testimony of one witness and entered nine exhibits into evidence.

A transcript of the formal hearing was ordered. The parties submitted proposed findings of fact which are addressed in the appendix to this recommended order.

FINDINGS OF FACT

1. At all times material hereto, Allison Kay Werner (Respondent) was licensed by the Department of Insurance and Treasurer (Petitioner) as a life and variable annuity contracts and life insurance agent. She was issued license number 106486443 in 1989.

   
   

2. Prior to being licensed in Florida, in or around 1981 Respondent was a licensed agent in the State of New York.

   
   

3. On February 15, 1991, Ms. Estelle Lewis went to the California Federal Bank (Bank), located at 4601 Sheridan Street, Hollywood, Florida, to redeem a

   $10,000 Certificate of Deposit (CD) which had matured.

   
   

4. Ms. Lewis was 81 years old. Also, she was unemployed even though, in her earlier years, she worked. Through the years, Ms. Lewis engaged in short term, two year investments, not long term investments. Nor did she invest in annuities for her belief was that annuities were for young people who are planning towards retirement. Being a senior citizen and unemployed, Ms. Lewis needed her money for income, using the proceeds from her investments as income. She did not want to tie-up her money for long periods of time.

   
   

5. Ms. Lewis approached the teller at the Bank to redeem her CD. The teller referred Ms. Lewis to Respondent to discuss re-investing her money.

   
   

6. It was not unusual for a teller at the Bank to refer a Bank customer to Respondent. Also, at times, Bank employees assisted with scheduling appointments with Respondent.

   
   

7. Respondent's office was located inside the Bank, within a glass enclosure, and could be seen from the teller's location. A sign identified Respondent's office as Kemper-Invest Financial Corporation for which Respondent was a representative.

   
   

8. Respondent provided Ms. Lewis with her business card which only identified Respondent as an Invest Financial Corporation (Invest) representative located at the Bank. No where on the business card was Respondent identified as an insurance agent. No where on the business card were the terms "insurance" or "annuity."

   
   

9. Furthermore, Respondent did not inform Ms. Lewis that she was an insurance agent.

   
   

10. Ms. Lewis trusted the Bank and her trust extended to Respondent even though Ms. Lewis understood that Respondent was a representative of Invest and not employed by the Bank. Because the Bank teller had referred Ms. Lewis to Respondent and because Respondent's office was located within the Bank, Ms. Lewis believed that Respondent had a connection with the Bank. Without this trust, Ms. Lewis would not have engaged in any business with Respondent.

11. Ms. Lewis informed Respondent that she wanted a two year investment. Respondent was not unfamiliar with discussing investments with senior citizens for most of her clients were age 70 and above. Ms. Lewis agreed upon a two year investment at a return of eight percent.

    
    

12. Unbeknownst to Ms. Lewis, she had invested in an annuity which would mature in 20 years. The annuity also had an investment time of seven years, which meant that the annuity could be surrendered without a surrender charge in its seventh year. The maximum issuance age for the annuity was 85 which meant that anyone up to age 85 could purchase the annuity.

    
    

13. That same day, February 15, 1991, Respondent completed an account application for the investment, which included writing Ms. Lewis' responses to questions on the application which included Ms. Lewis' age and date of birth. Respondent submitted the application to Ms. Lewis for her review. Ms. Lewis skimmed the application only for responses that she felt were important, i.e., her name and social security number. Finding those items correct, she signed the account application.

    
    

14. No where on the account application were the terms "life insurance" or an "annuity" mentioned. Invest Financial Corporation and Kemper Fiancial Services were clearly displayed on the application. Also, the investment objective indicated on the application was growth instead of income.

    
    

15. An application for an annuity, referred to as the All Savers Plan on the application, was also completed on that same date. However, this application contained the terms life insurance and annuity. Believing that life insurance or an annuity did not apply to her since neither were requested and were not agreed upon, Ms. Lewis signed this second application.

    
    

16. Additionally, on February 15, 1991, Ms. Lewis gave Respondent the

    $10,000 and Respondent provided Ms. Lewis a receipt for the $10,000. The receipt contained a notation that the money was received for "Kemper All Savers." Invest and Kemper Financial Services were displayed on the receipt. No where on the receipt were the terms annuity or life insurance.

    
    

17. As with other annuities sold by Respondent, she received a commission for the annuity that she sold Ms. Lewis. Paying commissions to insurance agents for annuities sold is a common practice.

    
    

18. Subsequently, Ms. Lewis received an undated letter of thanks from Respondent for obtaining the services of Invest. The letter was on Invest letterhead, with Kemper Financial Services indicated on it. Additionally, on the letter Respondent identified herself as an Invest representative. The letter made no mention of what services Ms. Lewis had obtained or of life insurance or an annuity.

    
    

19. Further, Ms. Lewis received two letters dated February 20, 1991 and February 28, 1991 from Kemper. The letters were on "Kemper Investors Life Insurance Company" letterhead and referenced Ms. Lewis' investment as an annuity.

    
    

20. Ms. Lewis did not believe that the two letters applied to her since she had not purchased an annuity or life insurance. Consequently, she ignored the letters.

21. Ms. Lewis received a copy of the annuity policy in the mail but did not read it. She filed it away with the rest of her documents associated with the transaction.

    
    

22. Ms. Lewis received account summaries regarding her investment. The summaries indicated that they reflected the activity for an annuity called Kemper All Savers Annuity and that they were from the Kemper Investors Life Insurance Company. The summaries showed the performance of her investment.

    
    

23. Ms. Lewis ignored the summaries as reflecting activities for an annuity in which she had invested. She continued to believe that she had not invested in an annuity.

    
    

24. On or about February 15, 1993, approximately two years after the transaction, Ms. Lewis returned to Respondent's office located in the Bank to redeem her investment. At that time, Ms. Lewis was informed by Respondent that a penalty fee of $525.89 would be assessed for early withdrawal. Respondent advised Ms. Lewis further that she had an annuity which could be cashed-in at no penalty (no surrender charges) after seven years.

    
    

25. The meeting on February 15, 1993, was the first time that Ms. Lewis was informed of a penalty by Respondent. Also, the meeting was the first time that Respondent had informed Ms. Lewis that she had purchased an annuity and that the annuity was a seven year investment.

    
    

26. Ms. Lewis did not want to wait the additional years to avoid the penalty and insisted on surrendering what she knew now to be an annuity. Subsequently, Ms. Lewis received her $10,000 plus interest less the penalty.

    
    

27. Respondent has vast experience in annuities. She has sold annuities since around 1981 when she was employed with Merrill Lynch and Shearson in New York.

    
    

28. At all times material hereto, Ms. Lewis had no mental or physical infirmity which interfered with her mental capacity to think and understand.

    
    

29. At all times material hereto, Ms. Lewis could read and write.

    
    

30. Ms. Lewis has never been offered restitution or a refund of the penalty.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

32. License revocation proceedings are penal in nature. The burden of proof is on the Petitioner to establish the truthfulness of the allegations of the administrative complaint by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

33. Section 626.611, Florida Statutes (Supplement 1990), provides compulsory grounds upon which an agent's license is suspended or revoked and provides in pertinent part:

    (5) 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.

    
    

34. Section 626.621, Florida Statutes (Supplement 1990), provides discretionary grounds upon which an agent's license may be suspended or revoked and provides in pertinent part:

    
    

    (2) 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.

    * * *

    (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 detri- mental to the public interest.

    
    

35. Part X, Subsection 626.9541(1), Florida Statutes (Supplement 1990), provides acts or practices which are unfair or deceptive and methods of competition which are unfair and provides in pertinent part:

    
    

    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, commission, 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 misrepre- senting 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.

       
       

36. Section 626.988, Florida Statutes (Supplement 1990), provides in pertinent part:

    
    

    (2) No insurance agent or solicitor licensed by the Department of Insurance under the provisions of this chapter who is associated with, under contract with, retained by, owned or controlled by, to any degree, directly or indirectly, or employed by, a financial institution shall engage in insurance agency activities as an employee, officer, director, agent, or associate of a financial institution agency.

    
    

37. Subsection 626.988(1) provides definitions for financial institution, insurance agency activities, and financial institution agency and provides in pertinent part:

    
    

    1. "Financial institution" means any bank, bank holding company, savings and loan, savings and loan association holding company, or savings and loan association service corporation or any subsidiary, affiliate, or foundation of any of the foregoing...

    2. "Insurance agency activities" means the procurement of applications for, or the solici- tation, negotiation, selling, effectuating, or servicing of, any policy or contract of insurance other than credit life insurance and credit disability insurance.

    3. "Financial institution agency" means any person, firm, partnership, or corporate entity which is engaged in insurance agency activities, as herein defined, and is associated with, or

       owned, controlled, employed, or retained by, a financial institution as herein defined.

       
       

38. Rule 4-215.230, Florida Administrative Code, provides in pertinent part:

    
    

    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 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 pub- lication, or in the form of a notice, circular, pamphlet, letter or poster,... 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.

    
    

39. An insurance agent is in a fiduciary relationship and holds a position of trust. Natelson v. Department of Insurance, 454 So.2d 31, 32 (Fla. 1st DCA 1984) ("Insurance is a business greatly affected by the public trust, and the holder of an agent's license stands in a fiduciary relationship to both the client and insurance company.")

    
    

40. Petitioner has shown by clear and convincing evidence that Respondent violated Subsections 626.611(5), (7), (9), and (13), Subsections 626.621(2) and (6), Subsections 626.9541(1)(a)1 and 5, (b), and (k)1, Subsection 626.988(2), and Rules 4-215.230(1) and (2).

    
    

41. However, Petitioner has failed to show by clear and convincing evidence that Respondent violated Subsection 626.611(8).

    
    

42. Regarding penalty, Respondent's violations are based upon a single act of misconduct and Respondent is charged with a single count in the administrative complaint.

    
    

43. Rule 4-231.040(1), Florida Administrative Code, provides in pertinent part:

    
    

    1. The Department is authorized to find that multiple grounds exist under sections 626.611 and 626.621, Florida Statutes, for disciplinary action against the licensee based upon a single count in an administrative complaint based upon a single act of misconduct by a licensee. However, for the

       purpose of this rule chapter, only the violation specifying the highest stated penalty will be considered for that count. The highest stated penalty thus established for each count is referred to as the "penalty per count".

       
       

44. The highest stated penalty for the single count is a 9-month suspension for a violation of Subsection 626.611(9). Rule 4-231.080(9), Florida Administrative Code.

    
    

45. Rule 4-231.160, Florida Administrative Code, provides aggravating or mitigating factors to be considered in imposing a penalty upon a licensee. Mitigating factors to be considered are: Respondent has been licensed by the State of Florida for five years and has not been disciplined by Petitioner; no evidence was presented that Respondent engaged in the violative acts with any other client; and some of the documents presented to Ms. Lewis at the time of the transaction showed that the transaction involved an annuity. Aggravating factors to be considered are: Ms. Lewis was 81 years old at the time of the transaction; Ms. Lewis was never offered restitution; and Respondent received a financial gain from the sale of the annuity to Ms. Lewis. Here, the aggravating factors outweigh the mitigating factors.

    
    

46. Petitioner suggests that, because of the aggravating factors, a 9- month suspension should be extended to a two year suspension which, according to Petitioner, is equivalent to a revocation. A two-year suspension is too harsh under the totality of the circumstances.

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 suspending the license of Allison Kay Werner for one-year.

DONE AND ENTERED this 1st day of March, 1996, in Tallahassee, Leon County, Florida.

ERROL H. POWELL

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 March, 1996.

ENDNOTE

1/ Invest Financial Corporation (Invest) was founded by five savings and loans for the purpose of further serving their clients. One of the savings and loans was California Federal Bank. These savings and loans were keenly aware that

having representatives of Invest located in banking facilities gave credence and trustworthiness to the representatives.

APPENDIX

The following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact

1. Partially accepted in finding of fact 1.

2. Partially accepted in finding of fact 7.

3. Partially accepted in finding of fact 3.

4. Partially accepted in finding of fact 5.

5. Partially accepted in findings of fact 6, 7, and 10.

6. Partially accepted in findings of fact 7, 8, and 9.

7. Partially accepted in finding of fact 11.

8. Partially accepted in finding of fact 11.

9. Partially accepted in findings of fact 13, 14, and 15.

10. Partially accepted in finding of fact 15.

11. Partially accepted in findings of fact 13 and 14.

12. Partially accepted in finding of fact 16.

13. Partially accepted in findings of fact 8 and 9.

14. Partially accepted in findings of fact 12 and 25.

15. Partially accepted in findings of fact 8, 12, 13, 14, 15, 16 and 25.

16. Partially accepted in findings of fact 12, 13, 15, and 16.

17. Partially accepted in findings of fact 12 and 25.

18. Partially accepted in finding of fact 18.

19. Partially accepted in findings of fact 24 and 25.

20. Rejected as being argument, or a conclusion of law.

21. Partially accepted in findings of fact 2, 4, 10, 11, 12, 25, and 27.

Respondent's Proposed Findings of Fact

1. Partially accepted in finding of fact 1.

2. Partially accepted in findings of fact 3 and 7.

3. Partially accepted in finding of fact 7.

4. Rejected as being unnecessary, or irrelevant.

5. Rejected as being unnecessary, or irrelevant.

6. Partially accepted in finding of fact 11.

7. Partially accepted in finding of fact 27.

8. Partially accepted in finding of fact 27.

9. Partially accepted in finding of fact 12.

10. Partially accepted in finding of fact 12.

11. Rejected as being unnecessary, or irrelevant.

12. Partially accepted in finding of fact 12.

13. Partially accepted in finding of fact 12.

14. Rejected as being unnecessary, or irrelevant.

15. Partially accepted in findings of fact 3 and 5.

16. Partially accepted in findings of fact 7 and 11.

17. Partially accepted in findings of fact 7 and 10.

18. Partially accepted in finding of fact 10.

19. Rejected as being unnecessary, or irrelevant.

20. Partially accepted in finding of fact 28.

21. Partially accepted in findings of fact 4 and 13.

22. Partially accepted in finding of fact 29.

23. Rejected as being contrary to the more credible evidence.

24. Rejected as being unnecessary, or irrelevant.

25. Rejected as being unnecessary, or irrelevant.

26. Rejected as being unnecessary, or irrelevant.

27. Rejected as being contrary to the more credible evidence. Ms. Lewis did not know that the investment was an annuity or the conditions associated therewith.

28. Partially accepted in findings of fact 12, 22, and 25.

29. Rejected as being contrary to the more credible evidence.

30. Rejected as being unnecessary, or irrelevant.

31. Rejected as being unnecessary, or irrelevant.

32. Partially accepted in finding of fact 12.

33. Rejected as being contrary to the more credible evidence.

34. Partially accepted in findings of fact 11 and 28. Also, see rulings numbered 27, 29, and 33 above.

35. Partially accepted in findings of fact 13 and 15.

36. Partially accepted in finding of fact 13.

37. Partially accepted in finding of fact 15.

38. Partially accepted in finding of fact 14.

39. Partially accepted in finding of fact 13.

40. Partially accepted in finding of fact 19.

41. Partially accepted in findings of fact 20 and 21.

42. Partially accepted in finding of fact 22.

43. Partially accepted in finding of fact 22.

44. Partially accepted in finding of fact 23.

45. Partially accepted in finding of fact 24.

46. Partially accepted in finding of fact 24.

47. Rejected as being contrary to the more credible evidence.

48. Rejected as being unnecessary, or irrelevant.

49. Rejected as being unnecessary, or irrelevant.

50. Rejected as being unnecessary, or irrelevant.

51. Rejected as being unnecessary, or irrelevant.

52. Partially accepted in findings of fact 12 and 25.

53. Rejected as being unnecessary, or irrelevant.

54. Rejected as being unnecessary, or irrelevant.

55. Rejected as being unnecessary, or irrelevant.

56. Rejected as being unnecessary, or irrelevant.

NOTE - Where a proposed finding has been partially accepted, the remainder has been rejected as being unnecessary, irrelevant, cumulative, not supported by the more credible evidence, argument, or a conclusion of law.

COPIES FURNISHED:

Beverly B. Brewster, Esquire Division of Legal Services 612 Larson Building

Tallahassee, Florida 32302

Douglas A. Mang, Esquire Wendy Russell Wiener, Esquire Mang, Rett & Minnick, P.A.

660 East Jefferson Street Post Office Box 11127

Tallahassee, Florida 32302-3127

Mr. Bill Nelson State Treasurer and

Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Mr. Dan Sumner

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 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: 95-002631

Orders for Case No: 95-002631