vs. ) CASE NO. 82-866
Respondent. )
This case was heard pursuant to notice on October 12, 1982, in West Palm Beach, Florida, by Stephen F. Dean, assigned Hearing Officer of the Division of Administrative Hearings. This case arose upon an Administrative Complaint filed by the Office of Treasurer, Insurance Commissioner against Emory Daniel Jones as Respondent, seeking to suspend or revoke Respondent's license to do business in the insurance industry.
For Petitioner: David A. Yon, Esquire
For Respondent: Paul H. Bowen, Esquire
The four-count Administrative Complaint alleges that Respondent met with and sold to four persons a United Sun Life (USL) insurance policy, representing to each of the persons that "he or she could participate in an investment scheme by signing an application and making an initial down payment." The Administrative Complaint alleges that these representations were untrue. All of the alleged violations of the rules and statutes are based upon the alleged misrepresentation. The sole factual issue is whether Respondent misrepresented the policy which he sold to the four persons. The offense requires that Respondent knowingly misrepresented the policy.
The Respondent, Emory Daniel Jones, was not involved or engaged in the insurance business prior to August, 1977. (Tr. 177.) In approximately August of 1977, United Sun Life Insurance Company (USL) hired Respondent as an agent.
(Tr. 176, 177.) Respondent passed the insurance test administered by the State of Florida in August, 1977, and was scheduled for a seminar given by USL. (Tr. 178.)
In late August, 1977, Respondent attended a three-day seminar established by USL for all its new agents. (Tr. 178.) At this seminar, USL taught the agents about a policy known as T.O.P. This was the only policy taught to the agents even though USL had other policies available. (Tr. 128.)
The T.O.P. contract is a life insurance policy. This policy has two primary benefits. (Tr. 230, 231.) The first is the death benefit provided by all life insurance policies. Under the death benefit provision, the owner of the T.O.P. pays a premium to USL. When the insured dies, USL will pay the death benefit (money) to the beneficiary listed on the policy. (Tr. 128, 251.) The second major benefit provided by the T.O.P. is the life benefit feature. (Tr. 251.) The T.O.P. is an insurance policy which provides for the payment of dividends to the owner of the policy. The T.O.P contract states that the owner will share in the divisible surplus earnings of USL as determined by the Board of Directors. (Tr. 120; contract page 5, Exhibit #3.) The dividends were to be paid after the second year. (Tr. 129, 130.) The owner would participate in the divisible surplus earnings of USL through the payment of a dividend. (Tr. 129, 188.) As long as the T.O.P. was in effect, the owner would receive these dividends.
USL developed a presentation to be given by the agents to prospective customers. This presentation was taught in the training session by USL. (Tr. 183, 249, 260, 270.) The agents were to memorize the presentation and were not to vary from the wording when they were attempting to sell the T.O.P. to prospective customers. (Tr. 185, 249.) The presentation taught by USL stressed the life benefit feature of the T.O.P. contract. (Tr. 251, 271.) The death benefit was only minimally covered because of the relatively high cost for the life insurance portion of the contract. This presentation further explained several features which made the T.O.P. contract life benefit provisions attractive to future customers:
The T.O.P. contract owner was to participate in the divisible surplus earnings of USL. The only other persons that would also participate in the divisible earned surplus were the shareholders. (Tr. 196.)
The T.O.P. contract was to be sold only to a limited number of people. After an undisclosed number of T.O.P. contracts were sold, the T.O.P. contract was to be taken off the market. (Tr. 234, 261, 276.)
USL was not going to sell or issue any other policies which would participate in the divisible earned surplus of USL. (Tr. 234, 255, 261, 276.)
USL would grow (increase its divisible earned surplus) by selling policies other than the T.O.P. contract. The more policies that were sold, the greater the divisible surplus earnings that would be available to the T.O.P. contract owners for dividends. (Tr. 196, 276.)
Since the T.O.P. owners were limited and no other participating policies were to be issued, the T.O.P. owners would share in any increases in the divisible surplus earnings of USL. The greater the number of policies sold, the greater the dividends.
The T.O.P. owners were then solicited to help the agents sell insurance policies of USL to their friends. This help would reduce the cost of advertising and increase the sales of insurance. The lower expenses and greater
volume would mean more divisible surplus earnings in USL and greater dividends available to the T.O.P. owners. (Tr. 201.)
To illustrate these points, USL taught the agents to draw circles representing other insurance policy owners. Lines were then drawn from these circles to the T.O.P. owner's circle. The lines between the circles represented the premiums paid on the other policies, which would increase divisible surplus earnings that would increase the dividends of the T.O.P. owners. (Tr. 196, 232, 263, 270.) USL taught the agents to illustrate the features of the life benefit by dollar signs. As the agent would talk about the other policies increasing the dividends to the T.O.P. owners, he was to increase the size of the dollar sign. (Tr. 233.) The whole emphasis of this presentation was on the participating feature.
Another feature emphasized in the USL presentation was that the T.O.P. owner would participate in the divisible surplus earnings of USL as long as he was alive. Therefore, the agents were to stress that the T.O.P. owner should be a younger person in the family. If that person lived 70 years, then USL would pay dividends for 69 of those 70 years. This feature of the policy was stressed in the memorized presentation. (Tr. 204, 205, 232, 233, 252, 264, 270.)
In late August of 1977, Respondent attended the training session and memorized the presentation. (Tr. 181, 184, 185.) At the end of the training session, USL reviewed the Respondent's presentation and found nothing wrong. (Tr. 187.) In late August of 1977, Respondent went into the field to sell the
T.O.P. contract to potential customers. (Tr. 187.)
Count I
On September 7, 1977, Respondent met with Louis Charles Morrison and made the USL presentation on the T.O.P. policy to Morrison. Respondent made the presentation in the way he had been taught.
Morrison was aware that he was purchasing an insurance policy. He was led to believe through USL's sales presentation as given by Respondent that the participating feature of the T.O.P. policy made this policy a good investment. Morrison concluded it was not a good investment because the dividends were not as great as he had anticipated they would be.
Respondent's representations to Morrison with regard to the T.O.P. policy were not false.
Count II
On September 12, 1977, Respondent met with Fred Menk and gave to him the USL presentation on the T.O.P. policy. Respondent gave the presentation as he had been taught.
Menk was aware that he was purchasing insurance. (Tr. 51.) Respondent made no representation about future dividends. (Tr. 59.) The interest rate was represented to increase as USL grew, which it did. (Tr. 59.)
Menk was dissatisfied and felt the policy was misrepresented because he did not get the rate of return he had anticipated. (Tr. 59.)
According to Menk, Respondent's representations made with regard to interest rate increases were accurate, and Respondent made no representations regarding future dividends.
Count III
Respondent met with Paul Loudin in September of 1978, and gave him the USL presentation on the T.O.P. policy as Respondent had been taught.
Loudin was aware he was purchasing insurance. (Tr. 21, 26, 27, 31.) His interest was in life insurance and retirement compensation. (Tr. 36.)
In part, Loudin's dissatisfaction was the belief he had lost his money because he did not receive a dividend on his first year's premium. The policy reflects that no dividends are payable in the first year. (Respondent's Exhibit #7.) A copy of the policy was provided to Loudin by Respondent. (Tr. 45.) Loudin also anticipated a dividend of 12 to 18 percent on his premiums based upon Respondent's general comments. However, he did not remember the exact conversation with Respondent. (Tr. 31, 32, 38, 39.)
Loudin received a letter from USL which reflects a dividend history based upon an 18-year-old insured with an annual premium of $1,000 as follows:
End of 2nd year $100.35 End of 3rd year 130.66 End of 4th year 162.86
The rate of return in the fourth year would be 11.6 percent on the fourth year's premium.
The representations made to Loudin by Respondent were substantially true, or the relevant information was made available to Loudin by the Respondent.
Count IV
On November 30, 1977, Respondent met with Gayle Mason and gave the USL presentation on the T.O.P. policy as he had been taught.
Mason knew she was purchasing insurance. (Tr. 107.) Respondent represented that the number of participants in the T.O.P. policy would be limited. (Tr. 108.) The current rate of return was taken by Respondent to be 11 percent, and it was represented that the return could be more. (Tr. 109.) Dividends were to be paid from surplus earnings. (Tr. 114.) Mason called the Better Business Bureau and the State Insurance Commissioner's office, and she was aware that USL was an insurance company and she was engaged in an insurance transaction. (Tr. 115.) Respondent represented that as USL grew, the dividends would increase. (Tr. 118.) Mason received a dividend in the second year in accordance with the policy.
The representations made to Mason by Respondent were true or thought by Respondent to be true.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction to hear this cause and enter this Recommended Order pursuant to Section 120.57(1), Florida
Statutes. The Department of Insurance has authority to discipline its licensees pursuant to Chapter 626, Florida Statutes.
The four counts in the Administrative Complaint against Respondent all alleged that he represented a life insurance policy as an investment scheme and thereby violated Sections 626.611(5), (7), (8), (9) and (13) , 626.621(2), (3) and (9), and 626.9541(2)(d) and (11)(a), Florida Statutes; and Rule 4-9.05, Florida Administrative Code.
The facts reveal that all the complainants knew they were purchasing insurance. The basis for all the complaints arose from the emphasis placed in the USL prepared presentation on the benefits of the participating feature of the T.O.P. policy. The Respondent's representations were based directly upon USL's presentation, data and representations. Respondent made no representations that were known to him to be false.
The participating feature could have made the T.O.P. policy a good investment. However, initially USL elected to pay the dividends only on the annual premium and not upon the accumulated cash value. Therefore, in succeeding years the policy holder received no benefit from prior premiums paid on the policy. In addition, USL decided to issue other participating policies, which further diluted the benefits of the participating feature. The result was a very expensive life insurance policy with a participating feature of negligible benefit. This caused the purchasers to complain about their investment. However, their dissatisfaction was not the result of specific misrepresentations, knowing or unknowing, by Respondent. Although USL did eventually introduce additional participating policies, the agents were advised that the T.O.P. policy was the only such policy and it could be discontinued at any time. Respondent made no representations regarding the future dividends or future rates that were not accurate. The benefits of the participatory feature as presented in USL's prepared sales presentation oversold and over-emphasized the policy's investment value based upon USL's decisions affecting the size of dividends payable under the policy.
The parties submitted post-hearing proposed findings of fact in the form of a proposed recommended order. To the extent the proposed findings of fact have not been included in the factual findings in this order, they are specifically rejected as being irrelevant, not being based upon the most credible evidence, or not being a finding of fact.
Having found the Respondent, Emory Daniel Jones, not guilty of violating any of the statutes or rules as alleged, it is recommended that the Administrative Complaint against Respondent be dismissed.
DONE and RECOMMENDED this 17th day of January, 1983, in Tallahassee, Leon County, Florida.
STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings The Oakland Building
Filed with the Clerk of the Division of Administrative Hearings this 17th day of January, 1981.
David A. Yon, Esquire Department of Insurance 413-B Larson Building
Paul H. Bowen, Esquire
