STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NOS. 95-6210

) 96-0992

JACOB FRANKLIN KOONTZ and )

CAROLYN ANN DAVIS, )

)

Respondents. )

)

RECOMMENDED ORDER

A formal hearing was conducted in this proceeding on April 25-26, 1996, in Lakeland, Florida, before Daniel Manry, Administrative Law Judge, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Ross S. Burnaman, Esquire

Diana M. Macumber, Esquire

Department of Insurance and Treasurer Division of Legal Services

612 Larson Building

Tallahassee, Florida 32399-0333

For Respondent, Jed Berman, Esquire Jacob Koontz: Infantino and Berman

Post Office Drawer 30 Winter Park, Florida 32790

For Respondent, Carolyn Ann Davis, pro se Carolyn Davis: 1401 West Granfield

Plant City, Florida 33566 STATEMENT OF THE ISSUES

The issues for determination in this proceeding are whether Respondents committed the acts alleged in two administrative complaints and, if so, what, if any, penalties should be imposed.

PRELIMINARY STATEMENT

Petitioner filed separate administrative complaints against Respondents on December 11, 1995, and on February 2, 1996. Each of the Respondents timely requested a separate formal hearing. The separate proceedings were consolidated on March 22, 1996.

At the formal hearing, Petitioner presented the testimony of five witnesses and submitted 18 exhibits for admission in evidence. Respondent, Davis, testified in her own behalf. Respondents cross-examined Petitioner's witnesses and submitted no exhibits for admission in evidence. Respondent, Koontz, submitted the deposition testimony of one witness as a late-filed exhibit.

Petitioner also submitted the deposition testimony of a witness as a late-filed exhibit. The identity of witnesses and exhibits, and the rulings regarding each, are set forth in the transcript filed on May 7, 1996.

Petitioner timely filed its proposed recommended order ("PRO") on October 14, 1996. Respondents timely filed their respective PROs on October 11, 1996.

FINDINGS OF FACT

1. Parties

   
   

   1. Petitioner is the state agency responsible for regulating insurance and insurance related activities in Florida. Petitioner regulates persons engaged in activities prohibited under Chapters 626 and 627, Florida Statutes. 1/

      
      

   2. Respondent, Koontz, is licensed as a general lines agent for property, casualty, surety, and miscellaneous insurance. 2/ His agent number is 300429666.

      
      

   3. Mr. Koontz is the primary agent and vice president for Cash Register Auto Insurance of Polk County, Inc., ("Cash Register"). Cash Register sells insurance and is an insurance agency within the meaning of Section 626.094.

      
      

   4. Respondent, Davis, is employed by Cash Register. She is licensed under customer service representative number 534548407.

      
      

   5. Mr. Koontz is the appointing and supervising agent for Ms. Davis. He is responsible for her acts and representations pursuant to Florida Administrative Code Rule 4-213.100. 3/

      
      

   6. Cash Register is a Florida corporation wholly owned by Mr. Lloyd Register III and LR3 Enterprises, Inc. ("LR3"). 4/ Cash Register's principal place of business is 2810 South Florida Avenue, Number B, Lakeland, Florida 33803.

      
      

2. Background

   
   

   1. Prior to August, 1994, Mr. Ernest C. Carey maintained automobile insurance on his 1987 Toyota truck through Allstate Insurance Company ("Allstate"). Allstate cancelled the policy.

      
      

   2. During August, 1994, Mr. Carey obtained replacement insurance. Mr. Carey telephoned five insurance agencies to obtain premium quotes for the minimum insurance required by law.

      
      

   3. One of the insurance agencies that Mr. Carey telephoned was Cash Register. Mr. Carey sought to finance the insurance premium, make the minimum down payment, and obtain the minimum monthly payment available. The quote given to Mr. Carey was stored in the Cash Register computer.

   4. On August 17, 1994, Mr. Carey went to the Cash Register office and discussed the purchase of insurance with Respondent, Davis. Ms. Davis retrieved Mr. Carey's quote from the computer and offered Mr. Carey the same premium, down payment, and terms that were quoted to Mr. Carey by telephone.

      
      

   5. The quoted premium was $275 for personal injury protection, a $2,000 deductible, and $10,000 in liability insurance. The insurer was Armor Insurance Company ("Armor"). The down payment was $67.

      
      

   6. The quote was based on Mr. Carey's purchase of two additional policies. One policy was a $1,000 accidental death benefit ("ADB"). The second was hospital indemnification.

      
      

   7. The additional premium for the ADB policy was $10. The additional premium for the hospital indemnity policy was $100.

      
      

   8. Mr. Carey had the option of rejecting the two additional policies. His down payment on the cost of automobile insurance alone would have increased to $97.50, and his monthly payment would have also increased. However, the finance charge and total cost would have decreased.

      
      

   9. Mr. Carey was unhappy with his financing alternatives but did not choose to pay the premium in full rather than finance it. Nor did he choose to reduce his total cost by purchasing automobile insurance only.

      
      

   10. Mr. Carey chose a lower down payment, lower monthly payment, ADB, and hospital indemnification. Mr. Carey paid $67 to Respondent, Davis, signed the appropriate documents including a premium finance agreement, and left.

   
   

3. Premium Financing

   
   

   1. Respondents are each charged with violating former Sec. 627.8405(3), Fla. Stat. (1994 Supp.)("former Section 627.8405(3)"). 5/ Former Section 627.8405 provided inter alia:

      
      

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

      * * *

      (3) Any amount in excess of 70 percent of the original premium . . . on any insurance contract

      . . . of 12 months' or more duration . . . .

      
      

   2. Respondents did not violate former Section 627.8405(3) in the Carey transaction unless they satisfied three conjunctive requirements. Respondents must have:

      
      

      1. provided financing;

      2. in a premium finance agreement;

      3. for more than 70 percent of the original premiums.

         
         

         Respondents satisfied only one of the foregoing requirements.

         
         

         1. Provided Financing

   3. The term "financing" is not defined in Chapter 627, Part XV. The plain and ordinary meaning of the term "finance" is to supply money, credit, or capital ("money or credit"). 6/ Respondents did not supply money or credit to pay insurance premiums in the Carey transaction.

      
      

   4. Equity Premium, Inc. ("Equity") 7/ provided financing in the Carey transaction. Equity supplied money to the insurer or insurance agent, supplied credit to Mr. Carey, and imposed a finance charge for the money and credit supplied.

      
      

   5. Equity is a premium finance company, within the meaning of Section 627.826, and, on August 17, 1994, was subject to the provisions of former Section 627.8405(3). However, Equity is not a party to this proceeding.

      
      

   6. Respondents do not own stock in Equity. Nor do they own stock in Cash Register or LR3.

      
      

   7. Equity, Cash Register, and LR3 may be related entities because the stock of each corporation may be owned by common shareholders. However, any such relationship does not include Respondents.

      
      

   8. Petitioner failed to show by clear and convincing evidence that Respondents provided financing as principals. Petitioner failed to show by clear and convincing evidence that Respondents were authorized as agents to bind Equity irrevocably without the subsequent consent and approval of Equity.

      
      

      1. In A Premium Finance Agreement

         
         

   9. The financing document used in the Carey transaction was labeled a premium finance agreement. However, a written agreement is not a premium finance agreement merely because of the label affixed to the document. To be a premium finance agreement, a written agreement must satisfy the statutory definition of a premium finance agreement.

      
      

   10. A premium finance agreement is defined in Section 627.827 8/ as:

       
       

       . . . a written agreement by which an insured promises or agrees to pay to . . . a premium finance company the [amount advanced] . . . to the insurer or insurance agent, in payment of premiums on an insurance contract, [together with a service charge]. . . .

       [emphasis supplied]

       
       

       In relevant part, a premium finance agreement is a written agreement in which the insured promises to pay the amount advanced together with a service charge

       
       

   11. A written agreement in which the insured promises to pay the amount advanced without a service charge is not a premium finance agreement. Section 627.826(3) 9/ clearly states:

       
       

       The inclusion of a charge for insurance on a bona fide sale of goods or services on installments is not subject to the provisions of this part

       
       

   12. Section 627.826(3) makes it clear that financing provided without a service charge was not subject to the prohibition in former Section 627.8405(3).

       Former Section 627.8405(3) prohibited only financing in a written agreement in which the insured agreed to pay the amount advanced together with a service charge

       
       

   13. The amount advanced in the Carey transaction was $319.40. The amount advanced was determined by reducing original premiums of $375 by $57 of the down payment and by increasing the $318 remainder by D.O.C. stamps of $1.40.

       
       

   14. Of the amount advanced, Mr. Carey agreed to pay only $137.69 together with a service charge. The $43.66 service charge was calculated at an annual interest rate of 31.71 percent. 10/ If Mr. Carey had agreed to pay the entire

       $319.40 together with a service charge of 31.71 percent, he would have agreed to pay a service charge of $101.28. 11/

       
       

   15. If Respondents provided financing in the Carey transaction, they provided financing in a premium finance agreement for only $137.69 because that is the only part of the amount advanced that Mr. Carey agreed to pay together with a service charge. Respondents did not provide financing in a premium finance agreement for $181.71 because Mr. Carey agreed to pay that part of the amount advanced without a service charge. 12/

       
       

   16. The single written agreement that was labeled a premium finance agreement was, by statutory definition, a dual-use document. That part of the document in which Mr. Carey agreed to pay $137.69 together with a service charge was a premium finance agreement within the meaning of Section 627.827. That part of document in which Mr. Carey agreed to pay $181.71 without a service charge did not satisfy an essential requirement in the statutory definition of a premium finance agreement.

       
       

   17. Financing provided in that part of the document that was not a premium finance agreement was not prohibited by former Section 627.8405(3). Section 627.826(3) provides that such financing is not subject to the finance provisions of Chapter 627, Part XV, including the prohibition in former Section 627.8405(3).

       
       

       1. More Than 70 Percent Of The Original Premium

       
       

   18. If Respondents provided financing in the Carey transaction, they did not violate former Section 627.8405(3) by providing financing in a premium finance agreement for more than 70 percent of the original premiums. The

       $137.69 that Mr. Carey agreed to pay together with a service charge is only 37 percent of the $375 in original premiums.

       
       

   19. Respondents failed to show by clear and convincing evidence that a disproportionate share of the $137.69 represented more than 70 percent of the

       $100 premium for hospital indemnification. Nor did Petitioner show that Mr. Carey agreed to pay the $100 premium together with a service charge. All of the

       $137.69 and the $43.66 service charge arguably could have been attributable to the $275 automobile premium.

       
       

   20. Even if the $100 premium for hospital indemnification were actually a charge for products other than insurance, $137.69 comprises only 50 percent of the $275 automobile premium. As the premium finance agreement stated, "FINANCE CHARGES HAVE BEEN CALCULATED ON NO MORE THAN 70 PERCENT OF THE PREMIUM."

4. Automobile Club

   
   

   1. Section 627.8405(1) 13/ provides, in relevant part:

      
      

      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 subscribers to assist them in matters relating to the ownership, operation, use, or maintenance of a motor vehicle. . .

         
         

   2. Respondents did not violate Section 627.8405(1). Respondents did not provide financing in a premium finance agreement for the cost of a membership in an automobile club.

      
      

   3. Both the ADB and hospital indemnification policies Mr. Carey purchased were issued by Home Insurance Company ("Home") to Colonial Touring Association, Inc. ("CTA") as group policies for CTA members. 14/ CTA is an automobile club within the meaning of Section 627.8405(1). 15/

      
      

   4. Ms. Beverly Robinson operates CTA and maintains its books and records. Ms. Robinson is licensed as an insurance agent pursuant to agent number 081505068. On August 17, 1994, Ms. Robinson was authorized to sell ADB and hospital indemnity group insurance for Home. 16/

      
      

   5. Respondents did not charge Mr. Carey for the cost of a membership in an automobile club. 17/ Respondents charged Mr. Carey $110 for ADB and hospital indemnification premiums. Respondents paid the entire $110 to CTA. CTA paid Home for the amount owed Home and retained the balance as commissions earned on the sale of group insurance.

      
      

   6. The ADB and hospital indemnification premiums were high commission items. Of the $10 charged to Mr. Carey for ADB, CTA paid only $1 to Home. CTA retained the remaining $9 as commission. Of the $100 charged to Mr. Carey for hospital indemnification, CTA paid Home only $10 and retained the balance.

      
      

   7. Neither Respondents, Ms. Robinson, nor the books and records of CTA treat any portion of the $99 commission included in the premiums for ADB and hospital indemnification as the cost of a membership in CTA. Mr. Carey was covered for ADB and hospital indemnification from August 17, 1994, through August 16, 1995.

      
      

   8. Petitioner failed to show by clear and convincing evidence the portion of the $99 commission, if any, that should be treated as the cost of the CTA membership. Similarly, Petitioner failed to show the portion of the $99 commission that should be treated as commission earned on the sale of insurance.

      
      

   9. Even if some or all of the $99 commission retained by CTA should be treated as the cost of membership in CTA, Respondents did not provide financing in a premium finance agreement for that cost. Petitioner failed to show by clear and convincing evidence that Mr. Carey agreed to pay the amount advanced for a CTA membership together with a service charge. 18/

5. ADB

   
   

   1. Section 627.8405(2) provides, in relevant part:

      
      

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

      * * *

      (2) An accidental death and dismemberment policy sold in combination with a personal injury protection and property damage only policy.

      
      

   2. Respondents did not violate Section 627.8405(2). Respondents did not provide financing in a premium finance agreement for the cost of an ADB policy irrespective of whether it was sold in combination with a personal injury protection and property damage policy.

      
      

   3. The $10 premium for the ADB policy was paid entirely from Mr. Carey's

      $67 down payment. CTA received the $10 from Cash Register, retained a $9 commission, and transmitted the $1 cost for the group ADB policy to Home.

      
      

   4. No part of the $10 premium for the ADB policy was financed. Mr. Carey did not agree to pay any part of the amount advanced for the ADB premium together with a service charge.

   
   

6. Informed Consent, Unfair Practices, And Deception

   
   

   1. Respondents did not violate Sections 626.611(7) or (9). Respondents did not demonstrate a lack of fitness or a lack of trustworthiness to engage in the business of insurance. Nor did they commit fraudulent or dishonest practices in their business.

      
      

   2. Respondents did not violate Sections 626.611(13) and 626.621(2). Respondents did not willfully fail to comply with applicable statutes, rules, or Petitioner's final orders.

      
      

   3. Respondents did not violate Section 626.611(5). Respondents did not willfully practice deception with regard to an insurance policy.

      
      

   4. Respondents did not violate Sections 626.621(6) and 626.9541(1) and (2). Respondents did not engage in unfair or deceptive acts or practices including misrepresentation and sliding. Respondents did not otherwise show themselves to be a source of injury or loss to the public or to be detrimental to the public interest.

      
      

      1. The Insured

         
         

   5. Mr. Carey made his choices for his own economic convenience. He was interested solely in complying with state requirements for insurance at the minimum down payment and at the minimum monthly cost.

      
      

   6. Mr. Carey was not interested in the details of the insurance he purchased. He was not interested in reading the documents he signed, and he chose not to do so.

   7. Mr. Carey does not travel frequently and has little or no need for the benefits of the ADB and hospital indemnity policies. However, he did have an economic need to obtain automobile insurance for the lowest down payment and for the lowest monthly cost.

      
      

      1. The Documents

         
         

   8. Mr. Carey signed a confirmation of coverages form disclosing his purchase of the ADB and hospital indemnity policies. The confirmation of coverage form signed by Mr. Carey expressly states that the ADB and hospital indemnity premiums are high commission items.

      
      

   9. The confirmation of coverages form made the following disclosure to Mr. Carey concerning his ADB policy:

      
      

      Separate in the price of some of our policies is separate coverage for accidental death and dismemberment resulting from an auto accident. Yours includes 1 THOUSAND DOLLARS coverage for 12 months and the premium is $10 . You may increase this coverage if you desire.

      Remember coverage is subject to the terms and conditions in the policy. If you do not wish this coverage please advise the agent. This is a high commission item that allows us to

      sell you auto insurance at the lowest possible premium. We will have to change your options if you do not wish this coverage.

      
      

   10. The confirmation of coverages form made the following disclosure to Mr. Carey concerning his hospital indemnification policy:

       
       

       Separate in the price of some of our policies is separate coverage for hospital indemni- fication resulting from an auto accident.

       Yours includes 1 THOUSAND DOLLARS coverage for 12 months and the premium is $100. You may increase this coverage if you desire.

       Remember coverage is subject to the terms and conditions in the policy. If you do not wish this coverage please advise the agent. This is a high commission item that allows us to

       sell you auto insurance at the lowest possible premium. We will have to change your options if you do not wish this coverage.

       
       

   11. Mr. Carey also signed an insurance application for automobile coverage with Armor Insurance, a premium finance agreement with Equity, and CTA forms including a designation of beneficiary form. Respondent, Davis, submitted each document to Mr. Carey separately. He signed each document in her presence in separate "intervals." Ms. Davis did not rush Mr. Carey through the transaction.

       
       

   12. The premium finance agreement adequately discloses the terms of financing. The agreement discloses: the types of premiums financed; the amount of premiums for each policy; a down payment of $57; an unpaid balance of $318; an amount financed of $319.40; a finance charge of $43.66; total payments of

       $363.06; a total sales price of $420.06; an annual percentage rate of 31.71; and nine monthly payments of approximately $40.30 each. 19/

       
       

   13. Mr. Carey had a reasonable opportunity to read the documents he signed but declined to do so. Mr. Carey understood that by signing the confirmation of coverages form he certified that he understood the insurance he purchased even though he chose not to read the documents.

       
       

   14. Respondent, Davis, provided Mr. Carey with a copy of all of the documents that Mr. Carey signed except the confirmation of coverages form and the CTA forms. Both were available for Mr. Carey to review at the Cash Register office. 20/

       
       

   15. Mr. Carey never requested copies of the confirmation of coverages form or the CTA forms. Nor did he object to not receiving copies of those forms.

       
       

       1. The Explanation

       
       

   16. Even though Mr. Carey did not read the documents he signed, Respondent, Davis, explained each document to Mr. Carey. Her explanation was adequate, accurate, and did not misrepresent material facts. Her explanation was consistent with the documents signed by Mr. Carey.

       
       

   17. Respondent, Davis, discussed the confirmation of coverages form with Mr. Carey, including the ADB and hospital indemnification. She explained to Mr. Carey that the ADB and hospital indemnity policies were optional. She further explained that the premium and down payment would be adjusted if Mr. Carey rejected the ADB and hospital indemnification and that an agent would have to provide a new quote to Mr. Carey.

       
       

   18. Ms. Davis reviewed the premium finance agreement with Mr. Carey. She explained the total premiums, finance charge, down payment, and monthly payments. She explained that the $100 charged in the agreement was the annual premium for the group hospital indemnity policy from Home.

       
       

   19. Ms. Davis explained that the premium for the ADB policy would not be financed but would be paid from Mr. Carey's $67 down payment. Mr. Carey recognized that he paid $67 as a down payment but received credit on the premium finance agreement for a down payment of only $57. Mr. Carey understood that the

       $10 difference paid for the ADB policy.

       
       

   20. Mr. Carey designated Ms. June Wilson, his mother, as the beneficiary of the ADB policy. Mr. Carey understands the meaning of a beneficiary.

       
       

   21. Mr. Carey is a high school graduate. 21/ He understands, speaks, and reads English as his primary language. At the time of the transaction, Mr. Carey was alert and was not under the influence of drugs or alcohol.

       
       

   22. Mr. Carey received his automobile insurance policy from Armor and kept the coverage until his first monthly payment was due. He failed to make the first payment and allowed the policy to lapse. Mr. Carey was covered for ADB and hospital indemnification from August 17, 1994, through August 16, 1995.

7. Supervision

   
   

   1. Respondents did not violate Rules 4-213.100(1) and (2). Respondent, Koontz, did not fail to properly supervise Respondent, Davis, in her transaction with Mr. Carey. Neither Respondent knowingly aided, assisted, procured, advised, or abetted the other in violating applicable statutes or rules.

      
      

   2. Respondent, Davis, has extensive experience as a customer representative. She processes approximately six customers a day or approximately 1,000 to 1,500 customers a year. 22/ She has had only two complaints from customers other than Mr. Carey concerning her customary practice.

      
      

   3. Ms. Davis followed her customary practice in dealing with Mr. Carey. She did not conceal any documents from Mr. Carey, did not misrepresent material facts, and is not trained to do so by Respondent, Koontz.

   
   

8. Apparent Authority

   
   

   1. Respondents did not violate Rule 4-213.130(5). Respondent, Davis, did not allow Mr. Carey to form the impression that she is an insurance agent rather than a customer service representative. Respondent, Koontz, did not allow Ms. Davis to create such an impression or to misrepresent herself as an insurance agent.

      
      

   2. Ms. Davis stated to Mr. Carey that if he elected to decline the ADB and hospital indemnity policies, an agent would need to quote Mr. Carey's new down payment and monthly payments. She explained to Mr. Carey that she would need to have an agent provide that information.

      
      

      CONCLUSIONS OF LAW

      
      

   3. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and the parties. The parties were duly noticed for the formal hearing.

      
      

   4. The burden of proof is on Petitioner. Petitioner must show by clear and convincing evidence that Respondents are guilty of the acts alleged in the administrative complaints and the appropriateness of any proposed penalties. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

      
      

   5. Petitioner failed to satisfy its burden of proof. Petitioner failed to show by clear and convincing evidence that Respondents are guilty of the violations alleged in the administrative complaints.

   
   

9. Premium Financing

   
   

   1. Respondents did not violate former Section 627.8405(3). Respondents did not provide financing in the Carey transaction. They did not supply money or credit in the transaction.

      
      

   2. Equity provided financing to Mr. Carey. Respondents have no ownership interest in Equity. Respondents received no part of the service charge imposed by Equity.

   3. Former Section 627.8405(3) did not prohibit all financing. It prohibited only that financing provided in a premium finance agreement for more than 70 percent of the original premiums.

      
      

   4. Sections 627.826(3) and 627.827, read in pari materia, provide the statutory test for determining when financing is or is not, provided in a premium finance agreement. Financing is provided in a premium finance agreement when an insured agrees in a written agreement to pay the amount advanced together with a service charge. Section 627.827. Financing is not provided in a premium finance agreement when insurance premiums are charged in installments without a service charge. Section 627.826(3).

      
      

   5. Financing was provided to Mr. Carey in a premium finance agreement for only $137.69 of the $319.40 advanced by Equity. Mr. Carey agreed in a written agreement to pay only $137.69 together with a service charge.

      
      

   6. Financing was not provided to Mr. Carey in a premium finance agreement for the remaining $181.71 advanced by Equity. Mr. Carey agreed in a written agreement to pay the remaining $181.71 without a service charge.

      
      

   7. The written agreement labeled as a premium finance agreement was a dual-use document. To the extent Mr. Carey agreed to pay $137.69 together with a service charge, the document was a premium finance agreement within the meaning of Section 627.827. To the extent Mr. Carey agreed to pay $181.71 without a service charge, the document was not a premium finance agreement. The latter use of the document is excluded by Section 627.826(3) from the finance provisions of Chapter 627, Part XV.

      
      

   8. Respondents did not provide financing in a premium finance agreement for more than 70 percent of the original premiums. If Respondents provided financing at all, they provided financing in a premium finance agreement for less than 70 percent of the original premiums.

      
      

   9. Even if Sections 627.826(3) and 627.827 create some ambiguity in the interpretation and application of former Section 627.8405(3), such ambiguity should be strictly construed in favor of Respondents. Former Section 627.8405(3) is penal in nature. 23/ Any ambiguity in a statute that is penal in nature should be strictly construed in favor of the licensee. Lester v. Department of Professional and Occupational Regulations, State Board of Medical Examiners, 348 So.2d 923 (Fla. 1st DCA 1977).

   
   

10. Automobile Club

    
    

    1. Respondents did not violate Section 627.8405(1). Respondents did not provide financing in a premium finance agreement for the cost of a membership in an automobile club.

       
       

    2. Petitioner failed to show by clear and convincing evidence that any portion of the $99 commission retained by CTA was consideration for ". . . dues, assessments, or periodic payments . . . ." The commissions were consistently treated as part of the insurance premiums: in the documents signed; in the explanations provided by Ms. Davis; and in CTA books and records.

       
       

    3. Even if a portion of the $100 premium for hospital indemnification were in fact a charge for CTA membership, Respondents did not provide financing in a premium finance agreement for the cost of CTA membership. Petitioner

    failed to show by clear and convincing evidence what portion of the cost of CTA membership, if any, Mr. Carey agreed to pay together with a service charge.

    
    

11. ADB

    
    

    1. Respondents did not violate Section 627.8405(2). They did not provide financing in a premium finance agreement for the cost of the ADB policy.

       
       

    2. The ADB premium was not paid in installments. Nor was it paid together with a service charge. Mr. Carey paid the entire $10 ADB premium out of the $67 lump sum payment.

    
    

12. Other Charges

1. For reasons stated previously in the Findings of Fact and not repeated here, Respondents did not violate Sections: 626.611(5), (7), (9), and (13); 626.621(2), (6), and (12); and 626.9541(1)(a) and (z). Nor did Respondents violate Rules 4- 213.100(1) or (2) or 4-213.130(5).

   
   

2. Mr. Carey made choices for his own economic convenience. He was not interested in details. He signed unread documents and ignored the explanation provided to him.

   
   

3. The explanation provided to Mr. Carey was consistent with the documents he signed. Neither the documents nor the explanation misrepresented material facts.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondents not

guilty of the charges in the administrative complaints.

RECOMMENDED this 17th day of December, 1996, in Tallahassee, Florida.

DANIEL S. MANRY

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 17th day of December, 1996.

ENDNOTES

1/ All chapter and section references are to Florida Statutes (1995) unless otherwise stated.

2/ Mr. Koontz, is licensed as a residential, property, and casualty joint underwriter; life insurance agent; health insurance agent; and dental health care service contract salesman.

3/ All references to rules are to rules promulgated in the Florida Administrative Code in effect as of the date of this Recommended Order

4/ The record does not evidence the stock ownership of LR3. Therefore, a finding can not be made concerning the relationship between LR3 and Cash Register. The percentage of Cash Register stock owned by LR3 and Mr. Register may be such that LR3 is the parent company, Cash Register is a subsidiary, and Mr. Register is a minority shareholder of both companies. Alternatively, Mr. Register may own enough stock of both companies that LR3 and Cash Register are sibling corporations of a common shareholder. There may be shareholders of LR3 other than Mr. Register. For example, the Cash Register board of directors are: Mr. Register, Ms. Sharon Register, and Mr. Lloyd Register IV. The first two directors share the same address, but their relationship, for purposes of stock attribution, is not evidenced in the record. See, n. 7, infra.

5/ Former Sec. 627.8405(3), Fla. Stat. (1994 Supp.), was enacted on November 10, 1993, and repealed on June 18, 1995. Compare Sec. 927.8405, Fla. Stat.

(1993); Sec. 627.8405, Fla. Stat. (1994 Fla. Supp.), Ch. 93-410, s. 21, Laws of

Fla.; and Sec. 627.8405, Fla. Stat. (1995), Ch. 95-424, s. 1, Laws of Fla. 6/ The American Heritage Dictionary, 504 (2d ed. 1982).

7/ Equity is wholly owned by Ms. Sharon Register. See n. 2 supra. 8/ The terms of Sec. 627.827 has remained unchanged since 1993

9/ The terms of Sec. 627.826(3) has remained unchanged since 1993.

10/ The portion of the total premium that is subject to a finance charge can be calculated from the following formula: .3171X = 43.66. X = 43.66 divided by

.3171. X = 137.69.

11/ The premiums for automobile, ADB, and hospital indemnity insurance were annual premiums.

12/ Not all of the $181.40 was a charge for insurance premiums. D.O.C. stamps comprised $1.40. Such stamps are a local tax. They are not a service charge.

13/ The language in Sec. 627.8405(1) is the same as it was in 1994.

14/ In January, 1995, Home terminated CTA's authority to offer benefits under the group policy.

15/ Sec. 627.8405 prohibits Respondents from providing financing in a premium finance agreement for membership in an automobile club. A premium finance agreement is defined in Sec. 627.827, in relevant part, as:

. . . a written agreement by which an insured promises or agrees to pay . . . the amount advanced . . . in payment of premiums on an insurance contract. . . .

Assuming arguendo that Respondents provided financing for membership in an automobile club rather than for premiums on an insurance contract, the written agreement through which Respondents provided financing for the CTA membership arguably would not have been a premium finance agreement. Sec. 627.8405 does not prohibit Respondents from providing financing in an agreement that is not a premium finance agreement.

16/ Neither of Respondents was authorized to sell insurance for Home, but Petitioner did not charge Respondents with the unauthorized sale of insurance for Home.

17/ The only charges incurred by Mr. Carey were for: an automobile insurance premium of $275; a hospital indemnity premium of $100; an ADB premium of $10; a finance charge of $43.66; and D.O.C. stamps of $1.40.

18/ Petitioner failed to show by clear and convincing evidence whether the finance charge was applied entirely to the cost of CTA membership, entirely to the cost of the premium for hospital indemnity coverage, or allocated to the cost of each item in the same proportion as each bears to the total cost of

$100.

19/ The last digit in the monthly payment column is not legible in Exhibit 3.

20/ Mr. Carey lives one mile from the Cash Register office and passes by the office each day.

21/ Mr. Carey has a GED from high school.

22/ Six customers a day for 50 weeks at five days a week would equal 1,500 customers.

23/ A violation of former Section 627.8405(3) would have subjected Respondents' licenses to disciplinary action, including revocation

COPIES FURNISHED:

Ross S. Burnaman, Esquire Diana M. Macumber, Esquire Division of Legal Services

Department of Insurance and Treasurer 612 Larson Building

Tallahassee, Florida 32399-0300

Jed Berman, Esquire Infantino and Berman Post Officer Drawer 30

Winter Park, Florida 32790

Carolyn Davis, pro se 1401 West Granfield

Plant City, Florida 33566

Honorable Bill Nelson

State Treasurer and Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Daniel Y. Sumner Acting General Counsel

Department of Insurance and Treasurer The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within fifteen (15) days from the date of 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: 95-006210

Orders for Case No: 95-006210