STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

STATE OF FLORIDA, OFFICE OF ) TREASURER AND INSURANCE )

COMMISSIONER, )

)

Petitioner, )

)

vs. ) CASE NO. 78-1432

)

MAXEY ROGER WATSON, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a hearing was held before Charles C. Adams, a Hearing Officer with the Division of Administrative Hearings. The case was heard at 6501 Arlington Expressway, Suite 205, Jacksonville, Florida, at 10:15 a.m., December 15, 1978.

APPEARANCES

For Petitioner: Edward L. Kutter, Esquire

Office of Treasurer and Insurance Commissioner

428-A Larson Building Tallahassee, Florida 32304

For Respondent: Frederick B. Tygart, Esquire

Suite 400, Fletcher Building

100 Riverside Avenue Jacksonville, Florida 32204

ISSUE

1. Whether or not the Respondent, Maxey Roger Watson, is guilty of violations of Sections 626.561, 626.611(3), 626.621(2), 626.611(9), 626.611(10), 626.621(6) and 626.611(7), Florida Statutes, through his business transactions with James B. Galloway.

   
   

2. Whether or not the Respondent, Maxey Roger Watson, is guilty of violations of Sections 626.561, 626.611(3), 626.621(2), 626.611(9), 626.61L(10), 626.621(6) and 626.611(7), Florida Statutes, through his business transactions with Nancy E. Galloway.

FINDINGS OF FACT

1. THIS CAUSE comes on for consideration based upon the Administrative Complaint filed by the State of Florida, Office of Treasurer and Insurance Commissioner, against Maxey Roger Watson. The case number before the State of Florida, Office of Treasurer and Insurance Commissioner is Case No. 78-L-42K.

2. The Petitioner, State of Florida, Office of Treasurer and Insurance Commissioner, is an agency of the State of Florida having among other functions the regulation of the insurance industry operating in the State of Florida. The authority for such regulation is found in Chapter 626, Florida Statutes.

   
   

3. The Respondent, Maxey Roger Watson, is licensed by the Petitioner in the various categories of licenses set forth in the Petitioner's Composite Exhibit No. 2 admitted into evidence.

   
   

4. The facts in this case reveal that between January of 1974 and April of 1977, inclusive, one James B. Galloway of Lake Butler, Florida, had been issued policy number VA 33672 through the Hartford Variable Annuity Life Insurance Company. During that same period, Nancy E. Galloway of Lake Butler, Florida, had been issued policy number VA 33671 with the Hartford Variable Annuity Life Insurance Company. Those two policies were part of an annuity program which the Respondent's company, First Jacksonville Corporation, had negotiated for the benefit of the Galloways and other employees of the Union County, Florida, School Board. During the time periods pertinent to this administrative complaint, the Respondent, Maxey R. Watson, was the majority stockholder of First Jacksonville Corporation, and did business as First Jacksonville Corporation. In addition, he was knowledgeable of the negotiations concerning the aforementioned Galloway policies.

   
   

5. The specific terms and conditions of the arrangement which First Jacksonville Corporation had with the Union County School Board were to the effect that the payment of the premiums on the annuity plan would be handled by a payroll deduction from the warrants of the employees in the category of the Galloways. In turn, this money for the premium payments would be transmitted to First Jacksonville Corporation. First Jacksonville Corporation would then be responsible for the transmittal of the premium payments to the Hartford Variable Annuity Life Insurance Company and commissions would be forwarded to the First Jacksonville Corporation upon receipt of the premium payments. Another aspect of the arrangement, in theory, was to have the Hartford Variable Annuity Life Insurance Company submit billings for the premium payments directly to the First Jacksonville Corporation to aid the First Jacksonville Corporation in determining the amounts to be submitted to the insurer. However, even without those billing statements the premiums belonged to the insurer and were to be transmitted to it by First Jacksonville Corporation.

   
   

6. Between January of 1974 and April of 1977, inclusive, the Union County School Board paid the premium payments on the policies of the Galloways to Maxey Roger Watson d/b/a First Jacksonville Corporation. The amount of the premium payments in this time sequence was a total of $2,164.00 for James B. Galloway and $2,164.00 for Nancy E. Galloway. These amounts, set forth as premium payments due and owing to the Hartford Variable Annuity Life Insurance Company on the accounts of the Galloways, were never remitted by First Jacksonville Corporation to the Hartford Variable Annuity Life Insurance Company, notwithstanding the obligation of the Respondent through his company to do so. The money received as premium payments on the Galloway accounts was placed in a bank account of the First Jacksonville Corporation and it was kept there together with other monies than the Galloway premiums. The Respondent had access to this bank account and used the proceeds of the premiums for personal and business reasons.

   
   

7. The Respondent's explanation of why he used the premium payments for purposes of his own is tied in with his contention that the Hartford Insurance

   Group was acting unreasonably when it forwarded the billing statements on the accounts such as the Galloways directly to the Union County School Board, as opposed to the First Jacksonville Corporation, which had been agreed to.

   Respondent found out about this problem in 1973. He then began to take steps to have the arrangement changed to send premium notices directly to the various school boards he dealt with and have them remit the premiums directly to the insurance company and remove his organization from the responsibility.

   Nonetheless, the problem with the non-payment of premiums from First Jacksonville Corporation to the Hartford Variable Annuity Life Insurance Company continued to exist from 1973 through April of 1977 related to the accounts of the Galloways. During the pendency of that time period the Respondent used the Galloways' premiums for personal and business purposes, knowing that he was obligated to remit the premiums to the Hartford Variable Annuity Life Insurance Company.

   
   

8. The Respondent was responsible for the bookkeeping of the First Jacksonville Corporation during the period of January of 1974 through and including April of 1977 and had the further expertise of being a licensed C.P.A. in the State of Florida. The Respondent had what he characterized as being an open-ended invoicing system for dealing with the premium payments. Under this system, according to the Respondent, it was difficult to ascertain what premium payments were due and owing to the various insurance companies, unless First Jacksonville Corporation received current billing statements on the amounts due and owing to the insurer. However, under the circumstances, the action of the Respondent in not remitting the Galloway premium payments to the Hartford Insurance Group constituted a willful violation of the provisions of the Insurance Code under Chapter 626, Florida Statutes.

   
   

9. In view of these facts, the Petitioner has charged the Respondent with various violations of Chapter 626, Florida Statutes, in his transactions with James B. Galloway and Nancy E. Galloway. The first allegation pertains to Section 626.561, Florida Statutes. The Respondent has violated the conditions of that section in that he took the trust funds constituted of the premium payments in behalf of the Galloways and failed to account for and pay those premium payments to the insurer in the regular course of business and, not being lawfully entitled to those premiums, diverted and appropriated the funds to his own use. The complaint next alleges that the Respondent violated Section 626.611(13), Florida Statutes. That provision has been violated because the Respondent has willfully failed to comply with the requirements of Section 626.561, Florida Statutes, for the reasons stated above.

   
   

10. The Administrative Complaint makes an allegation that the Respondent has violated the provisions of Section 626.611(9), Florida Statutes. This allegation has been established because the evidential facts show the Respondent is guilty of fraud and dishonest practices in the conduct of the business transactions involving the Galloways.

    
    

11. A further allegation of the Administrative Complaint concerns an alleged violation of Section 626.611(10), Florida Statutes. The Respondent is guilty of a violation of that provision in that he misappropriated, converted and unlawfully withheld monies belonging to the Hartford Variable Annuity Life Insurance Company in the matter of the premium payments of the Galloways.

    
    

12. There is an allegation that the Respondent has violated the provision of Section 626.621(6), Florida Statutes. Likewise, the Respondent has been shown to be guilty of that provision in that he has shown himself to be a source of injury or loss to the public or a detriment to the public's interest in his

    willful conversion and misappropriation of the Galloway premium payments to his own use, when those payments were properly to be remitted to the Hartford Variable Annuity Life Insurance Company.

    
    

13. Finally, the Respondent has been charged with the violation of Section 626.611(7), Florida Statutes. That substantive allegation is one that the Respondent has demonstrated a lack of fitness or trustworthiness to engage in the business of insurance. Taking into account all of the facts of this case, this contention of the Administrative Complaint has been shown.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction in this cause.

    
    

15. Based upon a full consideration of the facts set forth in this case, it is concluded as a matter of law that Maxey Roger Watson in his dealings with the account of James B. Galloway, policy no. VA 33672 issued by the Hartford Variable Annuity Life Insurance Company, has violated the provisions of Section 626.561, Florida Statutes, and is subject to the penalties established in Section 626.621(2), Florida Statutes; and it is further established that the Respondent has violated the provisions of Sections 626.611(13), 626.611(9), 626.611(10), 626.621(6) and 626.611(7), Florida Statutes, and is subject to the penalties set forth in those provisions.

    
    

16. Based upon a full consideration of the facts set forth in this case, it is concluded as a matter of law that Maxey Roger Watson in his dealings with the account of Nancy E. Galloway, policy no. VA 33671 issued by the Hartford Variable Annuity Life Insurance Company, has violated the provisions of Section 626.561, Florida Statutes, and is subject to the penalties established in Section 626.621(2), Florida Statutes; and it is further established that the Respondent has violated the provisions of Sections 626.611(13), 626.611(9), 626.611(10), 626.621() and 626.611(7), Florida Statutes, and is subject to the penalties set forth in those provisions.

RECOMMENDATION

It is recommended that the various licenses held by the Respondent, Maxey Roger Watson a/k/a Maxey Roger Watson, stated in the Petitioner's Composite Exhibit No. 2, be revoked. This recommendation takes into account the facts reported herein and the additional consideration of the Respondent's failure to comply with an agreement to repay the Hartford Insurance Group the premiums due on the Galloway accounts after entering into such agreement to make whole the Hartford Insurance Group.

DONE and ENTERED this 30th day of January, 1979, in Tallahassee, Florida.

CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

COPIES FURNISHED:

Edward L. Kutter, Esquire Office of the Treasurer and

Insurance Commissioner 428-A Larson Building Tallahassee, Florida 32304

Frederick B. Tygart, Esquire Suite 400, Fletcher Building

100 Riverside Avenue Jacksonville, Florida 32204

Docket for Case No: 78-001432

Orders for Case No: 78-001432