STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AMERILOSS PUBLIC ADJUSTING CORP. )

)

Petitioner, )

)

vs. ) Case No. 10-2089RX

) DEPARTMENT OF FINANCIAL SERVICES, )

)

Respondent. )

)

FINAL ORDER OF DISMISSAL

The instant matter is before the undersigned on Respondent's Motion to Dismiss Rule Challenge Petition.

Argument on the motion was heard by telephone conference call on June 25, 2010.

APPEARANCES

For Petitioner: Patrick K. Wiggins, Esquire

Stephanie Alexander, Esquire Tripp Scott, P.A.

200 West College Avenue, Suite 216 Tallahassee, Florida 32301

For Respondent: William W. Tharpe, Esquire

Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-0333

STATEMENT OF THE ISSUE

Whether Petitioner's Petition Seeking an Administrative Determination of the Invalidity of an Existing Rule (Petition) should be dismissed on the ground that the "challenged rule in

this proceeding has been effectively repealed by the Florida Legislature by Section 626.854(11), Florida Statutes, effective October 1, 2008," as requested by Respondent.

PRELIMINARY STATEMENT

On April 16, 2010, Petitioner filed with the Division of Administrative Hearings (DOAH) a "petition requesting a formal administrative hearing seeking a final order determining that Rule 69B-220.201(5)(d), Florida Administrative Code, of Respondent, Department of Financial Services ("DFS"), regarding a retroactive and perpetual fee cap of ten percent (10%) on public adjuster contracts that relate to claims arising out of a declared State of Emergency, is an invalid exercise of delegated legislative authority within the meaning of § 120.52(8), Florida Statutes."

On April 28, 2010, the undersigned issued a notice advising Petitioner and Respondent that an evidentiary hearing on the Petition would be held on May 28, 2010. The hearing was twice continued at the joint request of the parties, and it is currently scheduled for August 16, 2010.

On June 17, 2010, Respondent filed a Motion to Dismiss Rule Challenge Petition, arguing that the Petition should be dismissed because the "challenged rule in this proceeding has been effectively repealed by the Florida Legislature by Section 626.854(11), Florida Statutes, effective October 1, 2008."

Petitioner filed a response opposing the motion on June 24, 2010. Argument on the motion was heard by telephone conference call on June 25, 2010.

UNDISPUTED FACTS

Challenged Rule Provision

1. Florida Administrative Code Rule 69B-220.201 is a rule adopted by Respondent.

2. The effective date of the version of Florida Administrative Code Rule 69B-220.201 currently published in the Florida Administrative Code was September 3, 2006.

3. Subsection (5) of the rule provides as follows:

   
   

   Public Adjusters, Ethical Constraints During State of Emergency. In addition to considerations set forth above, the following ethical considerations shall apply to public adjusters in the event that the Governor of the State of Florida issues an Executive Order, by virtue of the authority vested in Article IV, Section 1(a) of the Florida Constitution and by the Florida Emergency Management Act, as amended, and all other applicable laws, declaring that a state of emergency exists in the State of Florida:

   
   

   1. No public adjuster shall require, demand, charge or accept any fee, retainer, compensation, commission, deposit, or other thing of value, prior to receipt by the insured or claimant of a payment on the claim by the insurer.

      
      

   2. As to any one insured or claimant, no public adjuster shall charge, agree to, or accept as compensation or reimbursement any

      
      

      payment, commission, fee, or other thing of value equal to more than ten percent of the amount of any insurance settlement or claim payment.

      
      

   3. No public adjuster shall enter into any contract, agreement or other arrangement with any person, including an attorney, building contractor, architect, appraiser or repairman, by which the person would enter into an agreement to assist a claimant or insured on an insurance claim, utilize the services of the adjuster to carry out the agreement and pay the adjuster an amount that would exceed the limitation of the adjuster's compensation or reimbursement as provided in paragraph (b) above.

      
      

   4. This subsection applies to all claims that arise out of the events that created the State of Emergency, whether or not the adjusting contract was entered into while the State of Emergency was in effect and whether or not a claim is settled while the State of Emergency is in effect.

      
      

4. The Petition challenges Subsection (5)(d)'s placing "a retroactive and perpetual fee cap of ten percent (10%) on public adjuster contracts that relate to claims arising out of a declared State of Emergency" as "an invalid exercise of delegated legislative authority within the meaning of § 120.52(8), Florida Statutes."

   Section 626.854(11), Florida Statutes:

   
   

5. As Petitioner correctly observed in the Petition:

   
   

   In June 2008, Senate Bill 2012 was enacted by the Florida Legislature and signed into law by Governor Crist (Florida Laws Ch.

   2008-220). Section 10 of the Bill amended § 626.854 ("Public adjuster defined;

   
   

   prohibitions"), by adding subsections (5) through (12), with an effective date of October 1, 2008. New subsection (11) establishes, inter alia, that the ten percent cap of the fees of a public adjuster is limited to one year from the [declaration] of the State of Emergency, directly overriding and repudiating the approach of Rule 69B-220.201. That subsection provides as follows:

   
   

   1. If a public adjuster enters into a contract with an insured or claimant to reopen a claim or to file a supplemental claim that seeks additional payments for a claim that has been previously paid in part or in full or settled by the insurer, the public adjuster may not charge, agree to, or accept any compensation, payment, commission, fee, or other thing of value based on a previous settlement or previous claim payments by the insurer for the same cause of loss. The charge, compensation, payment, commission, fee, or other thing of value may be based only on the claim payments or settlement obtained through the work of the public adjuster after entering into the contract with the insured or claimant. The contracts described in this paragraph are not subject to the limitations in paragraph (b).

      
      

   2. A public adjuster may not charge, agree to, or accept any compensation, payment, commission, fee, or other thing of value in excess of:

      
      

      1. Ten percent of the amount of insurance claim payments by the insurer for claims based on events that are the subject of a declaration of a state of emergency by the Governor. This provision applies to claims made during the period of 1 year after the declaration of emergency.

         
         

      2. Twenty percent of the amount of all other insurance claim payments.

      
      

      Respondent's Response to the Statutory Change

      
      

6. Notwithstanding that it recognizes that Section 626.854(11), Florida Statutes, "clearly superseded" Florida Administrative Code 69B-220.201(5)(d),1 Respondent has not yet taken all of the steps required by Section 120.54, Florida Statutes, to formally delete Subsection (5)(d) from the published version of the rule (although it has begun rulemaking in an effort to accomplish this objective).

   CONCLUSIONS OF LAW

   
   

7. The instant challenge is being made pursuant to Section 120.56(3), Florida Statutes, which allows substantially affected persons to administratively challenge an existing rule's facial validity and, if successful, to obtain from a DOAH Administrative Law Judge a declaration of the rule's invalidity (which declaration has prospective effect only). See Fairfield

   Communities v. Florida Land and Water Adjudicatory Commission,

   
   

   522 So. 2d 1012, 1014 (Fla. 1st DCA 1988)("At the outset, we note that we are being asked [in this appeal of a final order in a DOAH rule challenge proceeding] to determine the facial validity of these two rules [being challenged], not to determine their validity as applied to specific facts, or whether the agency has placed an erroneous construction on them."); State

   
   

   Board of Optometry v. Florida Society of Ophthalmology, No. 88- 142, 1989 Fla. App. LEXIS 1518 **6-7 (Fla. 1st DCA February 10, 1989)("It is apparent that the statutory scheme in chapter 120 for invalidating agency rules contemplates that once a

   rule . . . has been issued and acted or relied upon by the agency or members of the public in conducting the business of the agency, the rule will be treated as presumptively valid, or merely voidable, and must be given legal effect until invalidated in a section 120.56 rule challenge

   proceeding. . . . The statutory scheme is obviously intended to avoid the chaotic uncertainty that would necessarily flow from retroactively invalidating agency action taken in reliance on the presumed validity of its rule prior to a proper rule challenge proceeding holding the rule invalid. Applying the theory underlying section 120.56(3)[2] to this case, we hold that rule 21Q-10.001, which was held invalid by the hearing officer and our opinion, will become void and ineffective as of the date the decision of this court becomes final."); MDG Capital Corporation v. Florida Housing Finance Corporation, No. 09- 5115RX, slip op. at 2 (Fla. DOAH October 6, 2009)(Final Order of Dismissal)("[B]ecause rules can be invalidated only on a prospective basis, Petitioner, in consequence of the Rule's expiration, already enjoys the very relief that would be available via a successful rule challenge, namely a status quo

   
   

   in which the Rule is void and ineffective.")(citation omitted); The Florida Retail Federation, Inc. v. Agency for Health Care Administration, No. 04-1828RX, 2004 Fla. Div. Adm. Hear. LEXIS 2018 *26 (Fla. DOAH July 19, 2004)(Final Order), aff'd per

   curiam, 903 So. 2d 939 (Fla. 1st DCA 2005)(table)("[A]n administrative decision invalidating a rule cannot be applied retroactively."); and Advantage Therapy and Nursing Center (Beverly Health and Rehabilitative Services, Inc.) v. Agency for Health Care Administration, No. 97-1625RX, 1997 Fla. Div. Adm.

   Hear. LEXIS 5550 *17 (Fla. DOAH July 29, 1997)(Final

   
   

   Order)("Additionally, in a rule challenge, the issue to be determined is whether the rule, either proposed or adopted, is valid on its face.").

8. Section 120.56(3), Florida Statutes, provides as follows:

   Challenging existing rules; special provisions.

   
   

   1. A substantially affected person may seek an administrative determination of the invalidity of an existing rule at any time during the existence of the rule. The petitioner has a burden of proving by a preponderance of the evidence that the existing rule is an invalid exercise of delegated legislative authority as to the objections raised.

      
      

   2. The administrative law judge may declare all or part of a rule invalid. The rule or part thereof declared invalid shall become void when the time for filing an

      
      

      appeal expires. The agency whose rule has been declared invalid in whole or part shall give notice of the decision in the Florida Administrative Weekly in the first available issue after the rule has become void.

      
      

9. It is clear from a reading of Section 120.56(3), Florida Statutes, that it "does not authorize a rule challenge to a rule that is no longer in existence, and [that] therefore, DOAH [would be] acting in excess of its jurisdiction" were it to consider the merits of such a challenge. Department of Revenue v. Sheraton Bal Harbour Association, 864 So. 2d 454 (Fla. 1st DCA 2003).

10. "A rule that has no force or effect because it has been . . . superseded by statute is, like a repealed rule, no longer in existence in any meaningful sense." The Florida Retail Federation, Inc., 2004 Fla. Div. Adm. Hear. LEXIS 2018

    *20; Yeoman v. Department of Business and Professional Regulation, Construction Industry Licensing Board, No. 04- 2414RX, 2004 Fla. Div. Adm. Hear. LEXIS 2507 *17 (Fla. DOAH

    December 3, 2004)(Final Order)(same); see also Nicholas v. Wainwright, 152 So. 2d 458, 460 (Fla. 1963)("When such conflicts [between statutes and agency rules] appear, the Act of the Legislature must control."); Florida Department of Revenue v.

    A. Duda & Sons, 608 So. 2d 881, 884 (Fla. 5th DCA 1992), rev. denied, 621 So. 2d 431 (Fla. 1993)("A regulation is operative and binding from its effective date 'until it is modified or

    
    

    superseded by subsequent legislation . . . .'"); Hulmes v. Division of Retirement, Department of Administration, 418 So. 2d 269, 270 (Fla. 1st DCA 1982), rev. denied, 426 So. 2d 26 (Fla.

    1983)("An administrative rule or regulation is operative and binding on those coming within its terms from its effective date until it is modified or superseded by subsequent

    legislation . . . ."); and MIC Development, LLC v. Department of Transportation, No. 05-3815BID, 2006 Fla. Div. Adm. Hear. LEXIS

    156 *17 (Fla. DOAH April 20, 2006)(Recommended Order)("When a rule is superseded by legislation enacted after the rule's effective date, the rule loses all force and effect immediately upon such legislation's becoming law.").

11. Because Florida Administrative Code 69B-220.201(5)(d) has been superseded by Section 626.854(11), Florida Statutes, effective October 1, 2008, it is no longer in "existence" and therefore not subject to challenge as an "existing rule" pursuant to Section 120.56(3), Florida Statutes, notwithstanding that this now defunct rule provision may still appear in the Florida Administrative Code and that there may be pending or potential litigation involving allegations that fees charged under certain pre-October 1, 2008, public adjuster contracts exceeded the amount then allowed by Florida Administrative Code 69B-220.201(5)(d). See Sheraton Bal Harbour Association, 864 So. 2d at 454; Pasco CWHIP Partners v. Florida Housing Finance

Corporation, No. 09-3330, slip op. at 43 n. 12 (Fla. DOAH February 18, 2010)(Recommended Order)("This remedy [a rule challenge pursuant to Section 120.56(3), Florida Statutes] was, moreover, available only during the existence of the Emergency Rules, which rules lasted just 180 days; then the remedy was gone."); MDG Capital Corporation, slip op. at 2 ("Once the Rule ceased to exist, the jurisdiction of the Division of Administrative Hearings to entertain a challenge to the Rule expired as well."); Indemnity Insurance Company of North America v. Department of Financial Services, No. 08-1060RX, 2008 Fla.

Div. Adm. Hear. LEXIS 138 *4-5 (Fla. DOAH March 11, 2008)(Final Order)(administrative law judge dismissed petition filed pursuant to Section 120.56(3), Florida Statutes, challenging rule provision that, as result of rule amendment, was no longer in existence--notwithstanding that there was pending before DOAH, at the time of the dismissal, a Section 120.57(1) proceeding involving proposed agency action based upon the challenged rule provision); The Florida Retail Federation, Inc., 2004 Fla. Div. Adm. Hear. LEXIS 2018 **18-19 ("[T]he general principle announced in Sheraton--that rules no longer in existence cannot be challenged--extends beyond Section 120.56 proceedings involving rules that have been formally repealed.

Sheraton, in short, cannot be dismissed as inapposite simply because the Reimbursement Rule has not been repealed

administratively."); and Yeoman, 2004 Fla. Div. Adm. Hear. LEXIS 2507 **22-23 n.3 ("In the interest of clarity, it would probably be in the best interest of all concerned for the Board to go through the rule-making process to formally repeal Rule 61G4- 12.006, citing as grounds for the repeal that the Board no longer possesses the statutory authority it had when the rule was adopted. But with or without such formal action, the rule has expired and no longer exists in any meaningful way."); but see Service Insurance Company v. Office of Insurance Regulation and Financial Services Commission, No. 09-3042RX, 2009 Fla. Div. Adm. Hear. LEXIS 792 (Fla. DOAH October 22, 2009)(Final Order)(held that repeal of statute implemented by challenged rule did not act as jurisdictional bar to DOAH's hearing rule challenge, where the rule "still appear[ed] as an existing Rule in the Florida Administrative Code" and the Office was seeking to take disciplinary action against the challenger "based upon [the challenged] rule" and was "still operating under the [r]ule").

ORDER

Based on the foregoing, it is ORDERED that:

The Petition filed by Petitioner pursuant to Section 120.56(3), Florida Statutes, seeking an administrative determination that Florida Administrative Code Rule 69B-

220.201(5)(d) is an invalid exercise of delegated legislative authority is hereby DISMISSED.

DONE AND ORDERED this 29th day of June, 2010, in Tallahassee, Leon County, Florida.

S

STUART M. LERNER

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 29th day of June, 2010.

ENDNOTES

1 On this issue, both Petitioner and Respondent agree.

2 Section 120.56(3), Florida Statutes, then provided, in pertinent part, as follows:

The hearing officer may declare all or part of a rule invalid. The rules or part thereof declared invalid shall become void when the time for filing an appeal expires or at a later date specified in the decision.

COPIES FURNISHED:

Julie Jones, CP, FRP, Agency Clerk Department of Financial Services Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399-0390

Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307

Honorable Alex Sink, Chief Financial Officer Department of Financial Services

The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

Scott Boyd, Executive Director and General Counsel

Administrative Procedures Committee Holland Building, Room 120 Tallahassee, Florida 32399-1300

Liz Cloud, Program Administrator Administrative Code

Department of State

R. A. Gray Building, Suite 101 Tallahassee, Florida 32399

Patrick K. Wiggins, Esquire Stephanie Alexander, Esquire Tripp Scott, P.A.

200 West College Avenue, Suite 216 Tallahassee, Florida 32301

William W. Tharpe, Esquire Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-0333

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order of Dismissal is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing the original Notice of Appeal with the agency clerk of the Division of Administrative Hearings and a copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the Appellate District where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 10-002089RX

Orders for Case No: 10-002089RX