STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES,

Petitioner,

vs.

JERROD KEITH ZELANKA,

Respondent.

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) Case No. 03-1447PL

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DEPARTMENT OF FINANCIAL SERVICES,

Petitioner,

vs.

FREDRIC STUART ZELANKA,

Respondent.

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) Case No. 03-1448PL

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RECOMMENDED ORDER

Pursuant to notice, a final hearing was conducted on

June 17, 2003, by video teleconference between Tallahassee and West Palm Beach, Florida, before Administrative Law Judge Claude B. Arrington of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: James A. Bossart, Esquire

Department of Financial Services

200 East Gaines Street, Room 612 Tallahassee, Florida 32399

For Respondents: Jerrod Keith Zelanka, pro se1

750 East Sample Road

Pompano Beach, Florida 33064

Fredric Stuart Zelanka, pro se 5099 Monterey Lane

Delray Beach, Florida 33484 STATEMENT OF THE ISSUES

As to DOAH Case No. 03-1447PL, whether the licensure as an insurance agent in Florida held by Respondent Jerrod Keith Zelanka (Jerrod Zelanka) should be disciplined based on the allegations of the Administrative Complaint filed against him and, if so, the extent of such discipline.

As to DOAH Case No. 03-1448PL, whether the licensure as an insurance agent in Florida held by Respondent Fredric Stuart Zelanka (Fredric Zelanka) should be disciplined based on the allegations of the Administrative Complaint filed against him and, if so, the extent of such discipline.

PRELIMINARY STATEMENT

Fredric Zelanka is the father of Jerrod Zelanka. At the times material to these consolidated proceedings, they engaged in the business of insurance from the same business address.

The two Administrative Complaints at issue in this proceeding pertain to the Respondents' dealings with an insurance company named Explorer Insurance Company (Explorer). In almost identical language, the two Administrative Complaints alleged certain facts pertaining to their dealings with Explorer and,

based on those factual allegations, allege that each Respondent violated the following provisions of the Florida Insurance Code:

1. Section 626.561(1), Florida Statutes (failing to account for and/or pay premiums received in a fiduciary capacity);

2. Section 626.611(7), Florida Statutes (demonstrated lack of fitness or trustworthiness);

3. Section 626.611(9), Florida Statutes (fraudulent or dishonest practice);

4. Section 626.611(10), Florida Statutes (misappropriation, conversion, or unlawful withholding of moneys belonging to others); and

5. Section 626.621(4), Florida Statutes (failure or refusal, upon demand, to pay over money belonging to an insurer).

Respondents requested a formal administrative hearing to challenge the allegations of the Administrative Complaints, and the matters were referred to the Division of Administrative Hearings and thereafter consolidated. At the final hearing, Petitioner presented the testimony of Gary Smith (an employee of Explorer); Jose Martine (an employee of MetroBank); and Karen Walker (an employee of BankAtlantic). Petitioner offered ten exhibits, each of which was admitted into evidence. Respondent Fredric Zelanka testified but offered no exhibits. Respondent Jerrod Zelanka did not testify and did not offer any exhibits.

The Transcript of the proceeding was filed July 23, 2003. Petitioner and Respondents filed Proposed Recommended Orders, which have been considered by the undersigned in the preparation of this Recommended Order.

FINDINGS OF FACT

1. Jerrod Zelanka is currently eligible for licensure and licensed in Florida as a general lines insurance agent.

2. Fredric Zelanka is currently eligible for licensure and licensed in Florida as a general lines insurance agent.

3. American Insurance Management, Inc. (AIM) was incorporated as a Florida corporation on December 16, 1994. AIM was dissolved as a corporation on August 23, 1996.

4. At all times pertinent to this proceeding, Accredited Insurance Group, Inc. (AIG) was an active Florida corporation and Fredric Zelanka was a director and officer of that corporation.

5. At all times pertinent to this proceeding, American Professional Insurance Services, Inc. (APIS) was an active Florida corporation and Jerrod Zelanka was a director and officer of that corporation.

6. There was no evidence as to any formal relationship between AIG (Fredric Zelanka's corporation) and APIS (Jerrod Zelanka's corporation), although the two corporations shared the same offices.

7. At all times pertinent to this proceeding, Explorer was an insurance company doing business in Florida.

8. On May 13, 1999, Explorer, as insurer, entered into an agency agreement with "Accreditted (sic) Insurance Group, Inc.:

   DBA American Insurance Management," as agent (the Agency Agreement).2 Fredric Zelanka signed the Agency Agreement on behalf of the agent. At all times pertinent to this proceeding, Fredric Zelanka was the agent of record with Explorer. The Agency Agreement authorized the agent to bind policies of insurance on behalf of Explorer.

9. Paragraph 4 of the Agency Agreement was as follows:

   
   

   4. The Company (Explorer) authorizes the Agent to collect, receive and receipt for premiums on insurance submitted by the Agent to, and accepted by, the Company. All premiums and return premiums received by the Agent either before or after the termination of this Agreement shall be held by the Agent in a fiduciary capacity as trustee for the Company until delivered to the Company, or in the case of return premiums, to the insured.

   
   

10. Paragraph 5.B.(2) of the Agency Agreement required the agent to send to Explorer the required premium down payment or payment in full for the policy within five days of binding an insurance policy.

11. Explorer received nine checks drawn on an account held by APIS at the MetroBank branch office located in Lighthouse Point, Florida. The first of these nine checks was dated August 9, 2001, and the last was dated September 14, 2001. Jerrod Zelanka signed eight of these checks. Each check represented the total or partial payment of premium for a policy of insurance bound pursuant to the Agency Agreement. MetroBank

    dishonored each of these checks because the check was not properly signed (one check), the account did not have sufficient funds to pay the check (three checks), the funds were uncollected3 (one check), or the account was closed when the checks were presented for payment (four checks).

12. Explorer received ten checks drawn on an account held by APIS at the BankAtlantic branch office located in Deerfield Beach, Florida. The first of these ten checks was dated September 24, 2001, and the last was dated October 28, 2001. Jerrod Zelanka signed each check. Each check represented the total or partial payment of premium for a policy of insurance bound pursuant to the Agency Agreement. BankAtlantic dishonored each check because the account did not have sufficient funds to pay the check when it was presented.

13. The 19 dishonored checks totaled $5,597.00.

    
    

14. Fredric Zelanka was not a signatory on the account at MetroBank or on the account at BankAtlantic.

15. Although the checks remitted by APIS to Explorer were dishonored, Explorer issued the policies of insurance that had been bound pursuant to the Agency Agreement.

16. After the checks were dishonored, Explorer demanded payment of the premiums from Respondents. Explorer thereafter terminated the Agency Agreement because Respondents failed to remit the premiums to Explorer.

17. After the termination of the Agency Agreement, Explorer withheld from Respondents commissions that had been earned pursuant to the Agency Agreement, which reduced the debt Respondents owed Explorer. On April 17, 2003, Jerrod Zelanka, on behalf of American Insurance Management, agreed that it owed Explorer the sum of $1,699.11 and agreed to a payment schedule. At the time of the final hearing, Respondents owed Explorer approximately $1,600.00.

18. Fredric Zelanka was hospitalized with health problems and unable to work when the checks at issue in this proceeding were written by Jerrod Zelanka.

    CONCLUSIONS OF LAW

    
    

19. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

20. Petitioner has the burden of proving by clear and convincing evidence the allegations against Respondents. See

    Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

    
    

21. Section 626.561(1), Florida Statutes, provides as follows:

    1. All premiums, return premiums, or other funds belonging to insurers or others received by an agent, customer representative, or adjuster in transactions under his or her license are trust funds

       received by the licensee in a fiduciary capacity. An agent shall keep the funds belonging to each insurer for which he or she is not appointed, other than a surplus lines insurer, in a separate account so as to allow the department to properly audit such funds. 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.

       
       

22. Section 626.611, Florida Statutes, provides, in pertinent part, as follows:

    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, adjuster, customer representative, service representative, or managing general agent, 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 exist:

    
    

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    (7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

    
    

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    1. Fraudulent or dishonest practices in the conduct of business under the license or appointment.

    2. 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 or appointment.

23. Section 626.621, Florida Statutes, provides, in pertinent part, as follows:

    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, adjuster, customer representative, service representative, or managing general agent, 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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    (4) Failure or refusal, upon demand, to pay over to any insurer he or she represents or has represented any money coming into his or her hands belonging to the insurer.

    
    

24. Petitioner proved by clear and convincing evidence that Jerrod Zelanka violated the provisions of Section 626.561(1), Florida Statutes, by failing to account for premiums belonging to Explorer but received by his corporation (APIS).

25. Petitioner proved by clear and convincing evidence that Jerrod Zelanka violated the provisions of Section 626.611 (7), (9), and (10), Florida Statutes, as alleged in the Administrative Complaint, by proving that he had written a series of checks to Explorer that had been dishonored because the respective accounts had insufficient funds, uncollected funds, or had been closed. One check had not been properly

    signed. That conduct constituted a dishonest practice and established a lack of trustworthiness.

26. Petitioner did not prove by clear and convincing evidence that Jerrod Zelanka violated the provisions of Section 626.621(4), Florida Statutes, as alleged in the Administrative Complaint because Petitioner did not prove that Jerrod Zelanka or APIS represented Explorer, which is an essential element of the statute.

27. Petitioner proved by clear and convincing evidence that Fredric Zelanka violated the provisions of Section 626.561(1), Florida Statutes, by failing to account for premiums belonging to Explorer that were received in full or partial payment of insurance policies that had been written pursuant to the Agency Agreement. Although Fredric Zelanka did not write any of the dishonored checks, he was the agent of record and remained responsible for these fiduciary funds. His health problems explained why he did not write any of the dishonored checks, but those problems did not explain why Explorer had not been paid in full at the time of the final hearing.

28. Petitioner proved by clear and convincing evidence that Fredric Zelanka violated the provisions of Section 626.611(10) and 626.621(4), Florida Statutes, by unlawfully withholding premiums from Explorer and by failing to pay over money belonging to Explorer that had come into his hands.

29. Petitioner did not prove by clear and convincing evidence that Fredric Zelanka violated the provisions of Section 626.611(7) or (9), Florida Statutes.

30. Rules 4-231.080, 4-231.090, and 4-231.110, Florida

Administrative Code, set forth penalty guidelines pertinent to this proceeding. Rule 4-231.160, Florida Administrative Code, sets forth aggravating and mitigating circumstances in determining an appropriate penalty.

1. The recommended penalty that follows for Jerrod Zelanka is consistent with the penalty guidelines and with the recommendation set forth in Petitioner's Proposed Recommended Order.

2. The recommended penalty that follows for Fredric Zelanka is less than that set forth in both the guidelines and in Petitioner's Proposed Recommended Order because the undersigned finds as a mitigating factor that his ability to attend to his affairs was impaired by his health problems and hospitalization. See Rule 4-231.160(1)(m), Florida

Administrative Code.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order finding Jerrod Zelanka guilty of violating the provisions of Sections 626.561(1) and 626.611(7), (9), and (10), Florida

Statutes. As penalty for these violations, it is RECOMMENDED that Petitioner suspend Jerrod Zelanka's insurance licenses and eligibility for licensure for a period of nine months.

It is FURTHER RECOMMENDED that Petitioner enter a final order finding Fredric Zelanka guilty of violating the provisions of Sections 626.561(1), 626.611(10), and 626.621(4), Florida Statutes. As penalty for these violations, it is recommended that Petitioner suspend Fredric Zelanka's insurance licenses and eligibility for licensure for a period of three months.

DONE AND ENTERED this 15th day of August, 2003, in Tallahassee, Leon County, Florida.

S

CLAUDE B. ARRINGTON

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 15th day of August, 2003.

ENDNOTES

1/ James Curran, Esquire, of 633 Southeast Third Avenue,

Suite 201, Fort Lauderdale, Florida 33301, appeared on behalf of the Respondents following the final hearing and prepared their Proposed Recommended Order.

2/ When Fredric Zelanka executed the Agency Agreement on May 13, 1999, American Insurance Management was not organized as a corporation in Florida.

3/ MetroBank considers a check to be uncollected when the funds in the account at the time the check is presented are not available to be drawn against. This most frequently occurs when a deposit has been made by check and that check has not been in the account long enough to be negotiated by MetroBank.

COPIES FURNISHED:

James A. Bossart, Esquire Department of Financial Services

200 East Gaines Street, Room 612 Tallahassee, Florida 32399

Jerrod Keith Zelanka 750 East Sample Road

Pompano Beach, Florida 33064

Fredric Stuart Zelanka 5099 Monterey Lane

Delray Beach, Florida 33484

James Curran, Esquire

633 Southeast Third Avenue, Suite 201 Fort Lauderdale, Florida 33301

Honorable Tom Gallagher Chief Financial Officer

Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

Mark Casteel, General Counsel Department of Financial Services 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

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: 03-001448PL

Orders for Case No: 03-001448PL