vs.
Respondent.
) Case No. 02-2115PL
Administrative Law Judge (ALJ) Daniel Manry conducted the administrative hearing of this case on August 27, 2002, in St. Petersburg, Florida, on behalf of the Division of Administrative Hearings (DOAH).
For Petitioner: David J. Busch, Esquire
Winter Park, Florida 32790-0030. STATEMENT OF THE ISSUES
The issues for determination in this proceeding are whether Respondent committed the acts alleged in the Administrative
Complaint, and, if so, what penalty, if any, should be imposed on Respondent's license.
Petitioner filed an Administrative Complaint against Respondent on April 11, 2002. Respondent timely requested an administrative hearing.
At the hearing, Petitioner presented the testimony of two witnesses and submitted 17 exhibits for admission into evidence. Respondent presented the testimony of one witness and submitted four exhibits for admission into evidence. The identity of witnesses and exhibits, and the rulings regarding each, are set forth in the Transcript filed on September 16, 2002.
The ALJ granted the parties' joint request for leave to file their proposed recommended orders (PROs) 30 days after the filing of the Transcript. Petitioner timely filed its PRO on October 16, 2002. Respondent timely filed his PRO on
October 15, 2002.
Petitioner is the state agency responsible for regulating insurance and insurance-related activities in Florida pursuant to Chapters 626 and 627, Florida Statutes (2001). Respondent is licensed as a general lines insurance agent pursuant to license number A152865. (All references to statutes
are to those promulgated in Florida Statutes (2001) unless otherwise stated.)
Respondent is the primary agent for Cash Register Auto Insurance of Pinellas Park, Inc. (Cash Register). Cash Register is a Florida Corporation engaged in the business of selling insurance and is an insurance agent with its principal place of business at 6251 U.S. Highway 19, North, Pinellas Park, Florida.
In August 2001, Mr. Maksim Segal (Segal) spoke by telephone with an unidentified representative of Cash Register and obtained a quote of $1,036 for the annual cost of the minimum insurance required by law for his 1981 Mercedes 300D vehicle (minimum coverage). Segal obtained similar quotes from several agencies, but Cash Register offered the lowest cost for the minimum coverage that Segal wanted.
On August 15, 2001, Segal entered the office at Cash Register to purchase automobile insurance. Ms. Kelly Comstock (Comstock), a Cash Register employee, assisted Segal. Comstock gave the quote to Segal, took an application, and accepted the premium payment from Segal. Segal completed the transaction in approximately 10 to 20 minutes and left the office at approximately 1:37 p.m.
Segal paid Cash Register $1,036 for the annual cost of the minimum coverage that Segal had requested. However, the insurance company subsequently billed Segal an additional $76
for unpaid premium pursuant to an invoice dated November 8, 2001. Segal contested the additional premium but paid it so that he could continue driving his car.
An additional premium was due because Segal failed to disclose on his insurance application that his mother, another licensed driver in his household, had a previous accident. The accident increased the annual premium to $1,046.
The insurance company did not bill Segal $10 for the difference between the new premium of $1,046 and the $1,036 that Segal paid to Cash Register. The insurance company billed Segal
$76 because Cash Register paid the insurance company only $970 even though Cash Register collected $1,036 from Segal. Cash Register deducted $6 as a charge for the cost of two driving record reports for Segal and his mother and deducted $60 as a charge for membership in Colonial Touring Association, Inc. (CTA or motor club). The membership purports to provide accidental death and dismemberment benefits to Segal's mother as his designated beneficiary. After deducting the $66 from Segal's
$1,036, Cash Register sent the remaining $970 to the insurance company.
If Cash Register had not retained the $60 it charged for the motor club, the amount that Cash Register would have forwarded to the insurance company would have been $1,030. The
additional premium billed on November 8, 2001, would have been
$16 rather than $76.
The primary allegation against Respondent is that he sold the motor club membership to Segal without Segal's informed consent or represented that the membership was part of the minimum coverage required by law when it was not. The act of selling an unwanted product to a customer in such a manner is statutorily defined as "sliding."
Segal was 18 years old on August 15, 2001. He graduated from high school with a 3.5 grade point average and was a member of several honor societies, including the National Honor Society. In high school, Segal passed six International Baccalaureate courses.
As a high school junior, Segal performed well on the SAT exams. He attained scores of 680 and 720, respectively, in the verbal and math parts of the exam. Segal is now enrolled in the University of Florida and is pursuing a degree in engineering.
Segal is a native of Russia and a naturalized citizen of the United States. Segal speaks and reads his native language and is fluent in Spanish. Segal learned to speak and read English in one year and writes essays in English. At the time of the transaction on August 15, 2001, Segal was alert and was not under the influence of drugs or alcohol.
On August 15, 2001, Segal signed numerous documents that disclose the specific coverage that Segal purchased and rejected. The documents include a confirmation of coverage form that discloses that Segal purchased motor club insurance in the amount of $6,000.
The confirmation of coverage form discloses that ancillary products such as the motor club membership are:
. . . high commission items that allow the agency to make a reasonable profit and continue to offer you the most competitive rates available on your auto insurance.
These are separate plans from your auto policy and are optional.
The confirmation of coverage form also contains the following declarations:
I have read, confirm and consent to the coverages and benefits indicated on this form.
DO NOT SIGN THIS FORM IF IT CONTAINS ANY BLANKS OR UNINITIALED MARK THROUGHS. GET A COPY FOR YOURSELF! READ THIS FORM AFTER YOU GET HOME.
Segal also signed a motor club form. The form designates his mother as beneficiary of insurance in the amount of $6,000 and discloses that the insurance costs $60.
Segal also signed an application for automobile insurance. The application discloses that Segal paid an annual premium of $970 for automobile coverage. The coverage consisted of property damage in the amount of $10,000 and personal injury
protection in the amount of $10,000, subject to a deductible of
$2,000.
Neither party called Comstock as a witness or submitted her deposition testimony. No other witnesses observed the exchange between Comstock and Segal. Segal was the only witness who was present during the transaction between him and Comstock.
Findings pertaining to the exchange between Segal and Comstock are based on the deposition testimony of Segal, the documents he signed, and the activities that Comstock was authorized to perform. That evidence is clear and convincing to the trier of fact.
Comstock did not rush Segal through the transaction.
Comstock gave Segal an opportunity to read the documents he signed on August 15, 2001, and no one stopped him from reading the documents. No document was concealed from Segal. Segal did not read the documents and did not ask questions about the documents.
Comstock provided Segal with copies of all of the documents he signed. In addition, Cash Register provided Segal with a copy of a New Business Receipt that itemizes the charges that comprise the total charge of $1,036. The New Business Receipt shows premium charges of $642 for property damage, $328
for personal injury protection, $60 for accidental death and dismemberment, and $6 for fees.
Both the New Business Receipt and the insurance application disclosed a premium for automobile insurance in the amount of $970. However, Segal paid $1,036 to Cash Register. Segal did not notice the disparity. Segal merely confirmed that the total amount due was consistent with the original quote and trusted Respondent to provide Segal with the insurance coverage he originally requested.
Neither Comstock, Respondent, nor any other employee at Cash Register orally explained to Segal the coverage that he accepted or rejected in the documents he signed. Comstock was not licensed as a customer service representative and had no authority to explain insurance coverage to Segal. However, an unlicensed person in an insurance agency can give quotes, take an application for insurance, sell a motor club membership, and receive cash and premiums from customers.
Neither Comstock, Respondent, nor any other employee at Cash Register orally explained to Segal that his membership was optional and was not required by law as part of the minimum insurance coverage that Segal originally requested. None of the licensed or unlicensed persons at Cash Register explained to Segal that the cost of the membership did not actually purchase
life or automobile insurance or that the cost of the membership was not included in the premium for no additional charge.
Segal did not realize that he was purchasing a motor club membership as well as the requested insurance. Respondent did not have Segal's informed consent to sell Segal the motor club membership. As Segal explains in this testimony:
. . . I came into "Cash" Register to buy insurance . . . . I got something I didn't want, and . . . I owed $76. . . .
Q. When you're talking about something you didn't want . . . . you're talking about the motor club?
A. Yes.
Q. At what point did you decide you didn't want it?
A. When I found out I had it.
Petitioner's Exhibit 1 at 61-62.
Respondent is the primary agent for Cash Register.
Section 626.592 makes Respondent responsible for supervising all individuals at Cash Register. Respondent is responsible and accountable for the acts and omissions of any employee at Cash Register, including the sliding that occurred in the transaction with Segal in violation of Section 626.9541(1)(z).
In addition to the violation of Section 626.9541(1)(z), the Administrative Complaint alleges that the
Segal transaction violated 14 statutory provisions. The following findings address those alleged violations.
The sliding that occurred on August 15, 2001, demonstrates a lack of fitness or trustworthiness to engage in the business of insurance within the meaning of Section 626.611(7). The sliding also constitutes a dishonest practice in the conduct of business under Respondent's license within the meaning of Section 626.611(9). The sliding constitutes a source of injury or loss to the public and is detrimental to the public interest within the meaning of Section 626.621(6). The sliding is a violation of a provision of Chapter 626 within the meaning of Section 626.621(2). Finally, the sliding is an unfair or deceptive act or practice involving the business of insurance within the meaning of Section 626.9521.
The evidence is less than clear and convincing that Respondent violated Section 626.621(12) by knowingly aiding, assisting, procuring, advising, or abetting any person in the violation of Section 626.9541(1)(z) or any other provision in Chapter 626. Respondent did not testify, and the evidence of his personal knowledge of the Segal transaction on August 15, 2001, is less than clear and convincing.
The evidence is less than clear and convincing that Comstock violated Rule 4-222.060, Florida Administrative Code, by holding herself out as an insurance agent, customer
representative, or any other licensed person, or performing any function that required Comstock to be licensed. Rather, the evidence shows that Comstock did not engage in a substantive discussion of insurance products but performed only those functions for which she is authorized in Rules 4-222.020 and 4- 222.050, Florida Administrative Code. (Unless otherwise stated, all references to rules are to rules promulgated in the Florida Administrative Code on the date of this Recommended Order.)
The evidence is less than clear and convincing that others licensed as customer representatives and employed at Cash Register violated Subsections 626.112(1) and (2). Petitioner failed to make a sufficient showing that anyone exceeded the scope of activities authorized by their respective licenses.
On August 15, 2001, Respondent did not violate Sections 626.611(13) and 626.621(3) by failing, willfully or otherwise, to comply with any order of the Department of Insurance (Department). The Department entered a Final Order against Respondent in a separate case on December 24, 2001. Respondent could not have violated the terms of that order on August 15, 2001.
The evidence is less than clear and convincing that Respondent otherwise violated Section 626.611(13). An essential element of a violation of the statute is that the alleged violation must be "willful." Respondent did not testify
concerning the requisite intent, and the remaining evidence is insufficient to support an inference of intent. The Administrative Complaint does not charge Respondent with willful deception in regard to an insurance policy within the meaning of Section 626.611(5).
The evidence is less than clear and convincing that Respondent violated Subsections 626.9541(1)(a) and (b). Those provisions generally address public statements in advertising. This is a license discipline proceeding and is penal in nature. Terms within relevant statutes must be construed against the imposition of discipline and in favor of the licensee.
The representation that the payment of $1,036 by Segal was for automobile insurance was a false statement within the meaning of Section 626.9541(1)(e). The false statement occurred in the form of an omission when the employees at Cash Register failed to orally explain that the motor club membership was optional and was not part of the minimum coverage requested by Segal.
The evidence was less than clear and convincing that Respondent engaged in "twisting" within the meaning of Section 626.9541(1)(l). The evidence is insufficient to show that any act or omission by Respondent or his employees was intended to induce Segal to:
. . . lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any insurance policy or to take out a policy of insurance in another insurer.
Petitioner spent a significant amount of time during the hearing on the issue of whether Respondent properly bound the insurance company when Segal left Cash Register on August 15, 2001. As a threshold matter, the Administrative Complaint contains 18 paragraphs of factual allegations that must support the charges contained in 26 paragraphs. None of the factual allegations contain any references to the issue of whether Respondent properly bound the insurance company when Segal left Cash Register.
Petitioner complains that Respondent violated the policies of the insurance company by not signing the completed application before Segal left Cash Register in order to bind the insurance company. Petitioner's proof then leads down a winding trail.
Petitioner's proof shows that if Respondent had signed the application, the act would have been ineffective to bind an intermediary company responsible for assigning new business to the actual insurance company. The intermediary company authorizes agents to bind the company only by an electronic binding system performed over the telephone. However, the evidence shows that the intermediary company was not the actual
insurance company. The actual insurance company allows agents to bind the company by signing the application.
Respondent completed the required electronic binding procedure three hours after Segal left Cash Register, a period that is faster than the industry norm. The insurance company did not issue the policy for more than 60 days after Segal left Cash Register because the intermediary company was too busy to assign the new business to a specific company any sooner. When the company did issue the policy, the effective time and date that the company was bound was approximately 13 hours before Segal left Cash Register on August 15, 2001.
During much of the hearing, Petitioner cited to policies and procedures published by the intermediary company. However, Petitioner acknowledged that the intermediary company is not a state agency, and its rules are not the rules at issue in this proceeding.
In a similar vein, Petitioner spent much of its energy during the hearing attempting to prove that Respondent did not sign the application as soon as it was submitted. There is no relevant factual allegation in the Administrative Complaint, and Petitioner cited no statute or rule that requires Respondent to sign the application at a prescribed time.
Respondent has a history of discipline against his license for a similar offense. On December 24, 2001, Petitioner
entered a Final Order in DOAH Case Number 01-1863PL. Petitioner adopted the Recommended Order of ALJ Robert E. Meale.
Petitioner suspended Respondent's license for three months.
CONCLUSIONS OF LAW
DOAH has jurisdiction over the subject matter of this proceeding and the parties. The parties were duly noticed for the administrative hearing.
The burden of proof is on Petitioner. Petitioner must show by clear and convincing evidence that Respondent committed the acts alleged in the Administrative Complaint and the appropriateness of any proposed penalty. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).
Petitioner satisfied its burden of proof concerning the allegations that Respondent engaged in sliding. Petitioner failed to substantiate the other allegations by clear and convincing evidence.
In his PRO, Respondent relies on judicial decisions holding that a person who signs an insurance form cannot escape the consequences of the signature by alleging that the person did not read or understand the form. Vasquez v. Bankers Insurance Company, 502 So. 2d 894 (Fla. 1987); Alejano v. Hartford Accident, 378 So. 2d 104 (Fla. 3d DCA 1979). The cases and analogous decisions cited by Respondent are inapposite to
this case. Those decisions generally involve an insured's relationship with his or her insurance company.
This case involves a customer's relationship with his insurance agent, the agent's statutory responsibilities to the customer and the public, and the legislative intent to serve the public interest. Thomas v. State, Department of Insurance and
Treasurer, 559 So. 2d 419, 421 (Fla. 2d DCA 1990). In this case, the insurance agent must orally explain to the customer that the motor club membership is optional and is not part of the insurance coverage requested by the customer. The agent must also orally explain that the membership is not actually life or auto insurance.
Respondent also cites the recent case of Gouveia v.
Phillips, 823 So. 2d 215 (Fla. 4th DCA 2002), that involves informed consent for medical treatment. In Gouveia, the court addressed situations in which a patient admits signing a consent but disputes that he or she was informed. The court held that the issue of whether consent is informed must be determined by expert testimony concerning the adequacy of disclosure of the risks involved. Although the decision in Gouveia may be analogous, the decision in Thomas is directly on point.
The sliding committed by Respondent on August 15, 2001, violated Sections 626.112(2), 626.611(7) and (9), 626.621(6), 626.9521, and 626.9541(1)(z). The maximum penalty
authorized by rule for the sliding violation is a suspension of Respondent's license for nine months.
Several aggravating factors are present in this case.
Segal was only 18 years old at the time that the violations occurred. The sliding was motivated by financial gain.
Respondent has a history of disciplinary action against his license.
Several mitigating factors are present in this case.
The evidence is insufficient to support a finding that the violations were willful. The financial injury to Segal was small. Segal did not lose insurance coverage or lose his driving privileges. There was no potential injury from the alleged failure of Respondent to bind the insurance company. The multiple statutory violations arose from a single act that did not continue over time. The multiple statutory violations did not arise from multiple acts or omissions on a single date.
RECOMMENDED that Petitioner enter a Final Order finding Respondent guilty of the charges pertaining to sliding and suspending Respondent's license for six months.
DONE AND ENTERED this 4th day of December, 2002, in Tallahassee, Leon County, Florida.
Filed with the Clerk of the Division of Administrative Hearings this 4th day of December, 2002.
David J. Busch, Esquire Division of Legal Services Department of Insurance,
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.
