vs. ) Case No. 97-5893
Respondent. )
Pursuant to notice, a final hearing was held in this case on May 22, 1998, by video teleconference at sites in West Palm Beach and Tallahassee, Florida, before Judge Michael M. Parrish, an Administrative Law Judge of the Division of Administrative Hearings.
For Petitioner: James A. Bossart, Esquire
For Respondent: Orrin R. Beilly, Esquire
This is a license discipline proceeding in which the Petitioner seeks to take disciplinary action against the Respondent on the basis of allegations of misconduct set forth in an Administrative Complaint. The violations charged in the
Administrative Complaint relate primarily to alleged mishandling of funds received on behalf of an insurer.
At the final hearing the Petitioner presented the testimony of two witnesses and offered eight exhibits, all of which were received. The Respondent testified on his own behalf. The Respondent offered seven exhibits, all of which were received.
At the conclusion of the hearing, the parties requested, and were granted, twenty days from the filing of the transcript within which to file their proposed recommended orders. The transcript was filed with the Division of Administrative Hearings on June 22, 1998. On July 8, 1998, the Petitioner filed a timely proposed recommended order. The Respondent requested, and was granted, an extension of time for filing his proposed recommended order. The Respondent's proposed recommended order was filed on August 31, 1998. The parties' proposals have been carefully considered during the preparation of this Recommended Order.1
The Respondent, Louis Iannucci, is currently eligible for licensure and is licensed in this state as a life insurance agent, life and health insurance agent, and health insurance agent, and was so eligible and so licensed at all times relevant to these proceedings.
At all times pertinent to these proceedings the Respondent was an officer and director of Certified Insurance
Associates, Inc., an incorporated insurance agency doing business in Fort Lauderdale, Florida.
At all times pertinent to these proceedings, the Respondent was a duly appointed agent in this state under contract with United American Insurance Company.
At all times relevant to these proceedings, Respondent was the sole authorized signatory on his business bank account with Capital City Bank, now known as Union Planters Bank.
On or about February 12, 1997, Respondent received a check from Gretchen Smith of Titusville, Pennsylvania, in the amount of $1,833.00 and made payable to United American Insurance Company. This sum was intended as the renewal premium payment of Mrs. Smith's United American Medicare supplement insurance policy. Respondent endorsed this check and deposited it into his business bank account on February 18, 1997.
Even though the premium was due on or before March 1, 1997, the Respondent waited until April 14, 1997, to remit only
$486.00 of the money received from Gretchen Smith to United American Insurance Company in payment of a quarterly premium on her policy. Respondent retained the remainder of the funds for his own use and benefit.
A short while later it was brought to the attention of United American Insurance Company that Gretchen Smith had paid an annual, not quarterly, premium for the policy. United American Insurance Company wrote to Mrs. Smith and requested a copy of her
cancelled check for $1,833.00 that she had given to the Respondent.
Upon receiving Gretchen Smith's response and a copy of her premium check, the insurance company credited her account with payment of an annual premium and reversed out the quarterly payment that had been posted to her account. The Respondent was charged for the difference of $1,347.00.
On or about September 6, 1996, Respondent received a check from Mr. and Mrs. Lew Kisver of Plantation, Florida, in the amount of $3,666.00 and made payable to United American Insurance Company. This sum was intended as the renewal premium payments of Mr. and Mrs. Kisvers' United American Medicare supplement insurance policies. Respondent endorsed this check and deposited it into his business account.
The Respondent, on or about September 25, 1996, remitted only $1,894.00 of the money received from Mr. and
Mrs. Kisver to United American Insurance Company in payment of a semi-annual premium on each Kisver policy. Respondent retained the remainder of the funds for his own use and benefit.
On or about March 7, 1997, it was brought to the attention of United American Insurance Company by Mr. and Mrs. Kisver that they had paid an annual, not semi-annual,
premium for each of their policies. United American requested Mr. and Mrs. Kisver to provide a copy of their cancelled check or receipt for their payment of the premium. In response, the
Kisvers mailed to the insurance company a copy of their cancelled check for $3,666.00 that they had given to the Respondent to pay their policy premiums.
Upon receiving the Kisvers' response and copy of their premium check, the insurance company credited their account with payment of annual premiums and reversed out the semi-annual payments that had been posted to their accounts. The Respondent was charged the difference of $1,894.00.
By coincidence, at this same time in March 1997, Respondent remitted $1,894.00 to the insurance company in payment of the next semi-annual premium due on the Kisver policies. The insurance company subsequently credited the money to
Mr. Iannucci's account as he had already been charged for the premiums.
The Respondent's agency contract then in effect with United American Insurance Company provided in relevant part:
The Agent shall immediately remit to the Company all premiums collected by the Agent or sub-agents in excess of the Agent's initial commission thereon.
In addition, the contract limited the agent's authority to collect premiums by specifically providing that the Agent shall not "collect or receipt for premiums other than initial premiums with applications for insurance."
At all times material, the United American Insurance Company had on file at the Capital Bank a letter of
authorization. The letter of authorization read as follows, in pertinent part:
This letter will authorize the captioned General Agent of United American Insurance Company [the Respondent] to endorse and deposit to the General Agent's account with your bank checks made payable to the United American Insurance Company for premiums collected at the time of application for insurance with this Company. The General Agent may also withdraw or disburse any such funds so deposited.
Pursuant to both the agency contract and the letter of authorization on file with the bank, the Respondent lacked authority to deposit and cash checks received from customers in payment of their renewal premiums. Similarly, the Respondent lacked authority to hold premium funds in his bank account for lengthy periods of time. The Respondent was aware, or should have been aware, of these limitations on his authority.
Between September 1996 and April 1997, the balance of Respondent's business bank account with Capital City Bank at the end of each month was less than the amount of the premium funds that Respondent had received from the Kisvers and Gretchen Smith but had not remitted to the insurance company. At the end of September and October 1996, Respondent's bank account had an ending balance of $1,659.91, and $1,589.82 respectively. At this time he should have been holding $1,894.00 of unremitted funds in trust on behalf of the Kisvers and the insurance company. In February 1997, the end of the month balance of the business account was only $71.19, even though Respondent should have been
holding not only the $1,894.00 previously received from the Kisvers but also the $1,347.00 received from Gretchen Smith on February 12, 1997, but not remitted to the insurance company.
Respondent had apparently applied the insurance premium payments received from the insureds for his own use and benefit, even though the funds were fiduciary in nature and were held in trust.
At all times material to this case, it was the practice of United American Insurance Company to forward monthly statements to the Respondent. If the Respondent had a credit balance, the statement would be accompanied by a check in the amount of the credit balance. If the Respondent had a debit balance, the statement would request that the Respondent make "payment in full by return mail." Although the United American Insurance Company debited the Respondent's account for the portions of the Smith and Kisver funds that were not promptly forwarded to the insurance company, there is no clear and convincing evidence that the United American Insurance Company ever made demand on the Respondent to pay those specific amounts.
There is no clear and convincing evidence that the Respondent had any fraudulent or dishonest intent in connection with his handling of the Smith and Kisver funds discussed above. The Respondent's handling of those funds does, however, demonstrate a lack of fitness to engage in the business of insurance as well as a lack of reasonably adequate knowledge and
technical competence to engage in the transactions authorized by his license.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties of this proceeding. Section 120.57, Florida Statutes.
In a case of this nature, proof greater than a mere preponderance of the evidence is required. See Department of Banking and Finance, Division of Securities and Investor Protection v. Osborne Stern and Company, 670 So. 2d 932, 935 (Fla. 1996); Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987); McKinney v. Castor, 667 So. 2d 387, 388 (Fla. 1st DCA 1995); Tenbroeck v. Castor, 640 So. 2d 164, 167 (Fla. 1st DCA 1994); Nair v. Department of Business and Professional Regulation, 654 So. 2d 205, 207 (Fla. 1st DCA 1995); Pic N' Save v. Department of Business and Professional Regulation, 601 So. 2d 245 (Fla. 1st DCA 1992); Munch v. Department of Business and Professional Regulation, 592 So. 2d 1136 (Fla. 1st DCA 1992); Newberry v. Florida Department of Law Enforcement, 585 So. 2d 500 (Fla. 3d DCA 1991); Pascale v. Department of Insurance, 525 So. 2d 922 (Fla. 3d DCA 1988); and Section 120.57(1)(h), Florida Statutes. ("Findings of fact shall be based on a preponderance of the evidence, except in penal or licensure disciplinary proceedings or except as otherwise provided by statute.")
"'[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 testimony 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 a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established,'" In re Davey, 645 So. 2d 398, 404 (Fla. 1994), quoting, with approval, from Slomowitz v. Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983).
The disciplinary action taken against the licensee may be based only upon those offenses specifically alleged in the administrative complaint. See Cottrill v. Department of Insurance, 685 So. 2d 1371 (Fla. 1st DCA 1996); Kinney v. Department of State, 501 So. 2d 129, 133, (Fla. 5th 1987); and Hunter v. Department of Professional Regulation, 458 So. 2d 842, 844 (Fla. 2d DCA 1984).
The statutory provisions the Respondent is alleged to have violated are, in effect, penal statutes. Accordingly, those statutory provisions must be strictly construed. Furthermore, any ambiguities in such statutory provisions must be resolved in favor of the Respondent. Lester v. Department of Professional and Occupational Regulations, 348 So. 2d 923 (Fla. 1st DCA 1977).
Section 626.561, Florida Statutes, provides, in pertinent part:
All premiums, return premiums, or other funds belonging to insurers or others received by an agent, solicitor, or adjuster in transactions under his license shall be trust funds so received by the licensee in a fiduciary capacity; and the licensee in the applicable regular course of business shall account for and pay the same to the insurer, insured, or other person entitled thereto.
Section 626.611, Florida Statutes, provides in pertinent part:
The department shall deny, suspend, revoke, or refuse to renew or continue the license of any agent solicitor, or adjuster or the permit of any service representative, supervising or managing general agent, or claims investigator, and it shall suspend or revoke the eligibility to hold a license or permit of any such person, if it finds that as to the applicant, licensee, or permittee any one or more of the following applicable grounds exist:
* * *
Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.
Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or permit.
Fraudulent or dishonest practices in the conduct of business under the license or permit.
Misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insureds or beneficiaries or to others and received in conduct of business under the license.
Section 626.621, Florida Statutes, provides, in pertinent part:
The department may, in its discretion, deny, suspend, revoke, or refuse to renew or continue the license of any agent, solicitor, or adjuster or the permit of any service representative, supervising or managing general agent, or claims investigator, and it may suspend or revoke the eligibility to hold a license or permit of any such person, if it finds that as to the applicant, licensee, or permittee any one or more of the following applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal is not mandatory under s. 626.611:
* * *
(4) Failure or refusal, upon demand, to pay over to any insurer he represents or has represented any money coming into his hands belonging to the insurer.
In this case, Respondent was an officer and director of Certified Insurance Associates, Inc., and the agent of record on behalf of the corporation for United American Insurance Company. Respondent had sole control over the business bank account. Respondent did not dispute that the Smith and Kisver premium funds were not promptly remitted or that he retained possession of a portion of the funds and utilized the funds for his own use and benefit.
In this case, the Department has established by clear and convincing evidence that Respondent failed to remit premiums due to United American Insurance Company and wrongfully withheld such funds by neither remitting them to the insurer nor refunding
same to the insureds. Pursuant to Sections 626.795 and 626.839, Florida Statutes, the Respondent is personally responsible for the acts and misconduct of the corporation of which he was the agent of record. That the Respondent knowingly withheld the funds, failed to remit the funds, and utilized the premium funds for his own private purposes, is shown by the fact that the Respondent received the funds but remitted only a portion of the funds to the insurer. A review of the Respondent's business bank records indicates that the unremitted funds were not in Respondent's business bank account during the relevant time period. Respondent did not dispute at hearing that the premium funds were not in the bank account, and were unaccounted for.
Respondent did not explain the whereabouts of the money during this time.
Under his agency contract with United American Insurance Company, the Respondent was not authorized to collect and deposit renewal premium funds in his business bank account. Similarly, the insurance company's letter of authorization to the Respondent's bank did not authorize the Respondent to collect and deposit renewal premium funds in his bank account. Under his agency contract, the Respondent's sole authority, as well as his duty, was to forward all renewal funds directly to the United American Insurance Company.2 The Respondent's failure to promptly forward the Smith and Kisver checks to the United American Insurance Company was a deviation from the regular
course of business established by the agency contract. It was also a violation of Section 626.561(1), Florida Statutes, and a violation of Section 626.611(10), Florida Statutes, because it was an "unlawful withholding of moneys belonging to insurers or insureds."3
The Respondent's handling of the Smith and Kisver checks was in complete disregard of the requirements of the Respondent's agency contract and the terms of the bank authorization. By completely disregarding such matters, the Respondent demonstrated a lack of fitness to engage in the insurance business, in violation of Section 626.611(7), Florida Statutes, and also demonstrated a lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by his license, in violation of Section 626.611(8), Florida Statutes.4
The evidence is insufficient to establish that the Respondent violated either Section 626.611(9) or Section 626.621(4), Florida Statutes.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a Final Order to the following effect:
DONE AND ENTERED this 18th day of November, 1998, in Tallahassee, Leon County, Florida.
MICHAEL M. PARRISH
Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 1998.
1/ The Petitioner's proposed recommended order is consistent with the majority of the findings of fact reached by the Administrative Law Judge. In writing the findings of fact in this Recommended Order, I have drawn extensively from that document.
2/ The Respondent testified that he had frequently deposited renewal premiums in his business account and forwarded the proceeds to the insurance company after the insureds' checks had cleared. He also testified that the insurance company had never complained about him doing so. I do not find this testimony to be persuasive. It is inconsistent with the documentary evidence
and there is no persuasive evidence that the insurance company ever waived or modified the terms of the agency contract or its bank authorization.
3/ See Section 626.561(3), Florida Statutes, which makes it a criminal offense for an insurance agent to either temporarily or permanently divert or misappropriate funds belonging to insurers or others received by an insurance agent in transactions under his license.
4/ In reaching these conclusions, I have not overlooked the Respondent's testimony and argument to the effect that he was simply doing what he thought his clients, the insureds, wanted him to do. Such testimony and arguments are irrelevant, because the Respondent had no authority to cash the checks he received from the insureds. His only option was to return the checks to the insureds or forward the checks to the United American Insurance Company. He was not authorized to cash the checks and keep part of the proceeds and forward part of the proceeds.
James A. Bossart, Esquire
Orrin R. Beilly, Esquire
Daniel Y. Sumner, General Counsel Department of Insurance and Treasurer The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300
All parties have the right to submit written exceptions within 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.
