vs.
Respondent.
) Case No. 02-2745PL
A formal hearing was conducted in this case on September 13, 2002, in Pensacola, Florida, before Suzanne F. Hood, Administrative Law Judge with the Division of Administrative Hearings.
For Petitioner: James A. Bossart, Esquire
For Respondent: Thomas E. Wheeler, Esquire
626.611(7), Florida Statutes, and if so, what penalty should be imposed.
On September 6, 2001, Petitioner Department of Insurance (Petitioner) filed an Administrative Complaint against Respondent Michael Hamada's (Respondent) licenses and eligibility for licensure to solicit and sell insurance in Florida. The complaint alleged that Respondent had violated Sections 626.611(7), 626.611(14), 626.621(8), Florida Statutes. Respondent filed a timely request for an administrative hearing to contest the allegations in the complaint.
Petitioner referred the case to the Division of Administrative Hearings on July 11, 2002.
A Notice of Hearing dated July 24, 2002, scheduled the case for hearing on September 13, 2002.
When the hearing commenced, Respondent moved to dismiss portions of the Administrative Complaint based on violations of Sections 626.611(14) and 626.621(8), Florida Statutes.
Petitioner concurred with the motion, which was granted.
During the hearing, Petitioner did not present the testimony of any witnesses. Petitioner offered five exhibits that were accepted into evidence.
Respondent testified on his own behalf and presented the testimony of one additional witness. Respondent offered four exhibits that were accepted into evidence.
A Transcript of the proceeding was filed on October 3, 2002.
The parties filed Proposed Findings of Fact and Conclusions of Law on October 11, 2002.
At all times relevant to this proceeding, Respondent was eligible for licensure and licensed in the following areas:
(a) as a health insurance agent; (b) as a life insurance agent;
(c) as a life and health insurance agent; (d) as a life, health, and variable annuity agent; (e) as a surplus lines insurance agent; and (f) as a general lines insurance agent.
In June 1992, the insurance agency that Respondent worked for was purchased by another insurance agency. Ronald Palmerton was a client of the owner of Respondent's former employer. Mr. Palmerton held a workers' compensation policy issued by Liberty Mutual Insurance Company (Liberty Mutual). After the owner of Respondent's former employer left the new agency, Respondent handled Mr. Palmerton's requests for additional insurance with Liberty Mutual.
Respondent was never paid a commission for any work performed on Mr. Palmerton's behalf. Even so, Respondent's
testimony that Mr. Palmerton was not up front with information that he provided to Respondent and that Respondent never told Mr. Palmerton that he could avoid his workers' compensation experience modification if he started another company is not persuasive.
In a Fourth Amended Information dated April 16, 2001, Respondent and Mr. Palmerton, were charged in the Circuit Court of the First Judicial District, in and for Escambia County, Florida, Case No. 99-2081 CF, with several felony and misdemeanor violations. Specifically, Respondent was charged as follows: (a) with racketeering, a first-degree felony in violation of Section 895.03, Florida Statutes; (b) with conspiracy to commit racketeering, a first-degree felony in violation of Sections 895.03(4) and 777.04(3), Florida Statutes; and (c) conspiracy to commit workers' compensation fraud, a misdemeanor in violation of Sections 440.37(4) and 777.04(3), Florida Statutes.
The misdemeanor criminal charge was based on allegations that, beginning on April 4, 1993, Respondent and Mr. Palmerton did unlawfully and knowingly conspire to commit workers' compensation fraud by knowingly making false or misleading oral or written statements and representations and/or knowingly omitting or concealing material information required by Section 440.381, Florida Statutes. According to the Fourth
Amended Information, the purpose of the conspiracy was to avoid or diminish the amount of payment of any workers' compensation premiums to be paid by Mr. Palmerton and/or his related companies to a carrier or self-insurance fund.
The criminal trial was scheduled for April 16, 2001.
On April 12, 2001, the State of Florida offered a plea agreement to Respondent. Respondent initially refused the offer but changed his mind after learning that Mr. Palmerton had agreed to plead guilty to felony charges for perjury and racketeering, with a sentence for 18 months' house arrest and 15 years of probation. Respondent understood that Mr. Palmerton would testify against Respondent if he elected to proceed to trial.
On April 16, 2001, Respondent entered into a Plea Agreement in which he agreed to plead no contest to one count of conspiracy to commit workers' compensation fraud, a first-degree misdemeanor. The agreement included a provision for a sentence of one year of probation. Under the agreement, a sentence of nine months' incarceration in the Escambia County jail would be suspended pending Respondent's successful completion of all terms and conditions of probation. The agreement also provided that Respondent's probation would include the payment of any restitution ordered by the Court during a subsequent hearing.
On April 16, 2001, the Court adjudicated Respondent guilty, withholding imposition of sentence and placing
Respondent on one year of probation. The terms of Respondent's probation included, but are not limited to, the following:
payment of a fine and court costs in the amount of $1,000;
payment of the costs of prosecution in the amount of $5,000; and (c) payment of restitution as determined at a subsequent hearing.
A few days after being adjudicated guilty, Respondent contacted Petitioner's staff to determine the effect of his nolo contendere plea to a misdemeanor offense on his licensure status. Petitioner's staff subsequently informed Respondent that a misdemeanor offense would not result in an automatic suspension of an insurance license.
On April 11, 2002, the Court conducted a restitution hearing. During the hearing, the State of Florida and Respondent agreed and stipulated to the entry of a restitution order and judgment satisfactory to the victim, Liberty Mutual.
On June 3, 2002, the Court entered a Restitution Order and Judgment against Respondent. The Order required Respondent to pay restitution in the amount of $225,000. Pursuant to the Order, Respondent and Mr. Palmerton are jointly and severally liable for payment of the restitution, with Respondent receiving credit toward the total obligation for $200,000 previously paid by Mr. Palmerton and $10,000 paid by Respondent on April 11,
2002. As such, the effective amount of the Restitution Order and Judgment was a $15,000 balance due from Respondent.
In June 2002, Petitioner issued a renewal notice for Respondent's surplus lines insurance license. The notice requested the appointing insurance company or agency to certify that Respondent had not pled guilty, or nolo contendere to, or had not been found guilty of a felony since originally being appointed by the appointing entity. The notice did not inquire whether Respondent had pled guilty, or nolo contendere to, or found guilty of a misdemeanor.
At the time of the formal hearing, Respondent and
Mr. Palmerton were still jointly and severally obligated to pay
$15,000 in unpaid restitution. Respondent had successfully completed his probation in all other respects.
During the hearing, Petitioner denied any wrong doing in relation to the misdemeanor offense to which he pled no contest. Specifically, Respondent denied that he ever intended to assist Mr. Palmerton in any type of scheme to defraud or otherwise do harm to Liberty Mutual. Respondent's testimony in this regard in not persuasive.
Respondent has been a licensed insurance agent for 32 years. Prior to the instant proceeding, Respondent's insurance licenses have not been the subject of a disciplinary proceeding or lawsuit. Liberty Mutual did not name Respondent as a party
in its civil suit against Mr. Palmerton. Instead, Respondent cooperated with and testified on behalf of Liberty Mutual in that proceeding. Until Respondent committed the offense at issue here, his reputation in the insurance community indicates that he was an honest and trustworthy agent.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. Sections 120.569 and 120.57(1), Florida Statutes.
Petitioner has the burden of proving by clear and convincing evidence that Respondent violated Section 626.611(7), Florida Statutes. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).
Section 626.611, Florida Statutes, states as follows in pertinent part:
626.611 Grounds for compulsory refusal, suspension, or revocation of agent's title agency's solicitor's, adjuster's customer representative's service representative's, managing general agent's, or claims investigator's license or appointment.--The department shall deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, title agency, solicitor, adjuster, customer representative, service representative, managing general agent, or claims investigator, and it shall suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or
appointee any one or more of the following applicable grounds exists:
* * *
(7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.
* * *
(14) Having been found guilty of or having pleaded guilty or nolo contendere to a felony or a crime punishable by imprisonment of 1 year or more under the law of the United States or America or of any state thereof or under the law of any other country which involves moral turpitude, without regard to whether a judgment of conviction has been entered by the court having jurisdiction of such cases.
Section 626.621, Florida Statutes, provides as follows in relevant part:
626.621 Grounds for discretionary refusal, suspension, or revocation of agent's, solicitor's, adjuster's, customer representative's, service representative's, managing general agent's, or claims investigator's license or appointment.--The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, solicitor, adjuster, customer representative, services representative, managing general agent, or claims investigator, and it may suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee 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:
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(8) Having been found guilty of or having pleaded guilty or nolo contendere to a felony or a crime punishable by imprisonment of 1 year or more under the law of the United States of America or of any state thereof or under the law of any other country, without regard to whether a judgment of conviction has been entered by the court having jurisdiction of such cases.
Agencies have wide discretion in interpreting statutes that they are charged with enforcing, "but that discretion is somewhat limited where the statute being interpreted authorizes sanctions or penalties against a person's professional license." Elmaria, M.D. v. Department of Professional Regulation, Board of Medicine, 574 So. 2d 164 (Fla. 1st DCA 1990).
Statutes providing for the revocation or suspension of a license to practice are deemed penal in nature and must be strictly construed, with any ambiguity interpreted in favor of the licensee.
Elmaria, M.D., 574 So. 2d at 165.
In this case, Petitioner agreed during the hearing to dismiss its charge against Respondent for violating Sections 626.611(14) and 626.621(8), Florida Statutes. Instead, Petitioner asserts that Respondent's misdemeanor conviction based on a plea of nolo contendere to conspiracy to commit workers' compensation insurance fraud is sufficient to support a
violation of Section 627.611(7), Florida Statutes. Petitioner makes this claim based solely on the conviction and despite Respondent's denial of the underlying facts resulting in the conviction.
Petitioner relies on Natelson v. Department of Insurance, 454 So. 2d 31 (Fla. 1st DCA 1984) and Paisley v.
Department of Insurance, 526 So. 2d 167 (Fla. 1st DCA 1988). These two cases are indistinguishable from the instant case.
In Natelson, the insurance agent pled guilty, was convicted, and sentenced to 30 months for a federal offense involving conspiracy to traffic in illicit drugs. In a subsequent administrative proceeding, Petitioner charged
Mr. Natelson with violating Sections 626.611(7), 626.611(14), and 626.621(8), Florida Statutes. The hearing officer issued a Recommended Order dismissing all counts of the complaint. The Court in Natelson affirmed a Final Order revoking the agent's license on the basis of a violation of Section 627.611(7), Florida Statutes. Natelson, 454 So. 2d at 32-33.
In Paisley, a jury found that the insurance agent was guilty of five federal offenses including conspiring to defraud the United States, mail fraud, and using a fictitious name or address to commit mail fraud. Mr. Paisley was sentenced to five years in federal prison.
In a subsequent administrative proceeding, Petitioner charged Mr. Paisley with violating Sections 626.611(7), 626.611(14), and 626.621(8), Florida Statutes. The administrative hearing officer issued a Recommended Order dismissing the charges against Mr. Paisley. In regard to the violation of Section 626.611(7), Florida Statutes, the hearing officer specifically considered the underlying facts that resulted in Mr. Paisley's convictions. The court in Paisley affirmed a Final Order revoking Mr. Paisley's license based on a violation of Section 626.611(7), Florida Statues. Paisley, 526 So. 2d at 169.
Referring to the holding in Natelson, 454 So. 2d at 32-33, the Paisley court stated as follows in pertinent part:
The Court held that regardless of whether the criminal conviction was of a felony involving moral turpitude--or for that matter a felony at all--the Department's construction of the term "lack of fitness or trustworthiness to engage in the business of insurance" as including the conviction of the federal crime with which Natelson was charged was well within the range of permissible constructions of Section 626.611(7). (Emphasis supplied).
Paisley, 526 So. 2d at 169.
Respondent's argument that the principal of "espressio unius est exclusio alterius" precludes discipline in this case is without merit. Sections 626.611(7), 626.611(14), and 626.621(8), Florida Statutes, constitute separate and distinct
disciplinary grounds. The reference to a felony conviction or a sentence in excess of one year in Sections 626.611(14) and 626.621(8), Florida Statutes, does not imply that Petitioner cannot rely on a misdemeanor or felony conviction under Section 626.611(7), Florida Statutes, when the offense relates directly to the licensee's fitness or trustworthiness to engage in the business of insurance. This is especially true here where the conviction involves a crime directly related to insurance transactions.
An insurance licensee has fiduciary relationships with his client and his client's insurance company. An insurance agent violates those relationships when he conspires to commit insurance fraud.
Respondent knew when he entered into the plea agreement that the Court would adjudicate him guilty. He entered into the agreement freely and voluntarily. His conviction stands regardless of whether he pled guilty or no contest, or was found guilty after a jury trial.
Under Natelson and Paisley, evidence of Respondent's misdemeanor conviction for conspiracy to commit workers' compensation insurance fraud is clear and convincing evidence that he violated Section 626.611(7), Florida Statutes. There is no persuasive evidence to the contrary. Accordingly, Petitioner's insurance licenses are subject to discipline.
Rule 4-231.030(6), Florida Administrative Code, provides the range of penalties that apply in this case. Violations of Section 626.611(7), Florida Statutes, are punishable by suspension for six months per violation or revocation of licensure.
Rule 4-231.160, Florida Administrative Code, sets forth aggravating and mitigating factors to be considered in determining penalties in this case. Respondent has not accepted responsibility for his criminal behavior. However, he has completed his probation and made restitution pursuant to court order. He has been an insurance agent for over 30 years with no prior complaints against his licenses. Based on these factors, a six-month suspension of Respondent's licenses is appropriate.
That Petitioner enter a final order imposing a six-month suspension of Respondent's insurance licenses.
DONE AND ENTERED this 28th day of October, 2002, in Tallahassee, Leon County, Florida.
SUZANNE F. HOOD
Filed with the Clerk of the Division of Administrative Hearings this 28th day of October, 2002.
James A. Bossart, Esquire Department of Insurance Division of Legal Services
Thomas E. Wheeler, Jr., Esquire Post Office Box 12564 Pensacola, Florida 32573-2564
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.
