STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
STATE OF FLORIDA, DEPARTMENT ) OF INSURANCE, )
)
Petitioner, )
)
vs. ) CASE NO. 82-2048
)
LLOYD ELDO REGISTER, )
)
Respondent. )
) STATE OF FLORIDA, DEPARTMENT ) OF INSURANCE, )
)
Petitioner, )
)
vs. ) CASE NO. 82-2178
)
SHIRLEY JEAN HOPKINS, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, a formal hearing was held before Marvin E. Chavis, duly designated Hearing Officer of the Division of Administrative Hearings, on February 1 and 2, 1983, in Orlando, Florida.
APPEARANCES
For Petitioner: Curtis A. Billingsley, Esquire
Dennis Silverman, Esquire Department of Insurance 413-B Larson Building
Tallahassee, Florida 32301
For Respondents: Thomas F. Woods, Esquire
1030 East Lafayette Street, Suite 112
Tallahassee, Florida 32301 ISSUES AND BACKGROUND
This case concerns the issue of whether the licenses of the Respondents as insurance agents should be suspended, revoked, or otherwise disciplined for engaging in deceptive and dishonest practices in selling motor club or accidental death benefit policies to individual customers. The above-styled cases were consolidated for discovery and hearing and this Recommended Order is being entered as the Recommended Order in Case No. 82-2048 and Case No. 82-2178.
At the formal hearing, the Petitioner called as witnesses John A. Hoback, Dale Clark Branham, Alice Lear Dickson, Ellison Eady, Patricia Edwards, Bruce Edwards, Brenda Conner, Charles M. Meadows, Ruben Simpson, James Richard Johns, Barbara Barbato, Elizabeth Jones, Joann Brooks, and Phillip Johnson. The Respondent called as witnesses James R. Hansen, Thomas McCorcle, Anne Zugelder, Wilford George Bates, Respondent Lloyd Register, and Respondent Shirley Jean Hopkins. The Petitioner offered and had admitted 18 exhibits and the Respondent offered and had admitted 24 exhibits. In addition, the prehearing stipulation and compliance with the prehearing order was entered in each case as Joint Exhibit 1 and 2.
Counsel for the Petitioner and counsel for the Respondents submitted proposed findings of fact and conclusions of law. To the extent that those proprosed findings of fact and conclusions of law are inconsistent with the findings of fact made in this Recommended Order, they were considered to be not supported by the evidence or unnecessary to the resolution of this cause.
FINDINGS OF FACT
THE INSURANCE AGENCY
At all times material to the instant case, Lloyd Eldo Register was a licensed insurance agent in the State of Florida, licensed as an Ordinary Life, including Disability, General Lines and Disability Agent.
The Respondent, Lloyd Eldo Register (hereinafter Register) at all times material herein, was the president, owner, and registered agent for Friendly Auto Insurance, Incorporated (hereinafter referred to as Friendly Auto). In his capacity as president and registered agent, the Respondent, Register, was responsible for and exercised supervision and control over the employees and sales agents employed by Friendly Auto.
At all times material herein, Respondent, Shirley Jean Hopkins was a licensed insurance agent and was employed by Friendly Auto to sell various types of auto insurance and coverages. Specifically, Shirley Hopkins was licensed as an Ordinary Life, including Disability Agent, General Lines Agent, and an Independent Adjuster. As an employee of Friendly Auto, she worked under the supervision and control of the Respondent, Lloyd Register.
At the time of the various transactions which are the subject of this administrative proceeding, Florida law required personal injury protection (hereinafter PIP) insurance coverage for each owner of a motor vehicle in Florida. (See Section 627.733 and 627.736, Florida Statutes (1981)). Because it was necessary to show proof of such PIP coverage in order to purchase a license tag for an automobile, this type of insurance was and is commonly referred to as "tag insurance." Friendly Auto offered and sold PIP or tag insurance as well as other types of insurance, including motor club policies, which included as its primary benefit an accidental death benefit.
The accidental death benefit (hereinafter referred to as ADB) which was sold by Friendly Auto, was one of the benefits under a motor club policy very similar to that sold by AAA (American Automobile Association). The motor club policies also included such benefits as theft reward, hit and run services, rental car discounts, credit card services, vacation travel arrangements, trip routing, and lost baggage service. The amount of premium paid and type of plan applied for determined the benefits to be received.
During the period of the transactions in this action, the Respondent, Lloyd Register, had established a policy of not selling PIP alone. Customers were required to buy PIP coupled with a motor club policy. The reason for this policy was that the commission on minimum PIP coverage was too low to justify the cost of selling it alone. The commission on the motor club policies was as high as 80 percent of the premium charged. The sales agents were instructed by Mr. Register to not sell a customer PIP unless they also purchased the ADB policy. This policy was followed by the sales agents during 1981 and the first eight months of 1982.
Customers, upon entering the Friendly Auto office, would indicate the kind of insurance they wanted and they were then given a quote by a sales agent for the coverage requested plus ADB. The cost of the ADD or ADB policy was added to the cost of the coverage requested without informing the purchaser and a single quote was given to the customer. If a customer inquired about the ADB coverage, they were told it was part of the coverage and that the requested coverage could not be purchased without the accidental death benefit. The customers were not informed by the salesperson nor the forms used in the transaction that they were being charged a separate and distinct premium for the ADB or that they could reject the ADB coverage. The basic PIP coverage also included a death benefit
Although the Respondent, Lloyd Register, testified that in order to make a profit, it was necessary to sell the ADB with the minimum PIP coverage, the ADB was sold inn the same manner to persons purchasing PIP, as well as liability and collision coverage.
The premium for the ADB ranged from $15 to $25. The decision as to which premium to charge was made by the employee of Friendly Auto and was not discussed with the customer. The sales agents had been instructed by the Respondent, Lloyd Register, to base premium charged for ADB on the customer's driving record. However, the premium charged only affected what motor club benefits would be received. No reason was given as to what effect a person's driving record had upon the premium or benefits or risk involved.
After the customer was given the quote and agreed to purchase, the sales agent then filled out and gave to the customer several documents to be signed and initialed. The places to be initialed were marked by the sales agent with a red square, rubber stamped onto the appropriate points of the forms by the sales agent, and a check mark or "X" was placed next to where they were to sign. One of the documents was an application for the motor club or ADB. Respondents contend that by signing the application and the acknowledgement at the bottom of the liability coverages rejection form, the customers were made aware that they were purchasing a separate coverage for ADB. However, when inquiry was made by customers about the ADB, they were told it was part of the coverage and had to be purchased. They were not told a separate premium was involved or that it was a separate policy. The majority of the complaining witnesses in this case were not even aware they had purchased the motor club or ADB.
Most of the complaining witnesses admitted they did not read the documents they were asked to sign. The sales agents did not pressure them to sign or hurry them in any way that prevented them from reading the documents. Most of the complaining witnesses had limited education, very little knowledge of insurance and basically relied upon the sales agent to give them the coverage they requested. No complaining witness requested ADB or motor club coverage. Anne Zugelder, office manager for Friendly Auto, and Shirley Hopkins testified
generally regarding the procedures used, but neither person testified about the facts of the specific transactions in this case.
Shortly after January 18, 1982, Mr. John A. Hoback, an investigator for the Department of Insurance, went to the offices of Friendly Auto where he reviewed approximately 35 to 40 files relating to customers who had purchased insurance from Friendly Auto. He discovered that many of these files contained the original policy for ADB coverage; the identification card on PIP coverage; and the original policy for PIP coverage. Some of these policies had been in the files for four, five, and six months.
Specifically, Mr. Hoback examined the file of James Richard Johns and found the original copy of the auto policy issued by Fortune and the ADD policy issued by American Travelers Association. The auto policy had been issued on June 4, 1981.
Mr. Hoback examined the file of Charles Meadows and found that the Fortune PIP policy had been issued on June 2, 1981, and the original was still in the file. The original ADD policy issued by American Travelers was also in the file.
In the file of Phillip Johnson, Mr. Hoback found the original copy of the Fortune auto policy issued to Mr. Johnson on June 1, 1981, and also found the original ADD policy in the file.
The file relating to Ruben Simpson was also examined and the original copies of the Fortune auto policy and the ADD policy were still in the file.
These original policies were supposed to have been sent to the insureds by the agency upon receipt from the insurance company.
The deposition of Mr. James T. Harrison, Jr., was admitted and considered. However, because Mr. Harrison's opinion was based upon incomplete facts in terms of the actual sales procedures used, his opinion relating to Respondents' meeting the standard of care in the industry was given no weight.
FORMS
In each of the purchases involved in this action, Friendly Auto's agents used several preprinted forms as part of each sale. These forms include primarily: (1) a quote sheet, (2) rejection of liability coverages form, (3) prenumbered receipts, and (4) motor club or ADB application.
QUOTE SHEET
The quote sheet is a small yellow form with spaces for entering information about the insured and the cars to be insured. The quote sheet in the Section titled "Type of Coverage" reflects "PIP, LIAB, COMP, COLL". These terms refer to personal injury protection, liability, comprehensive, and collision. Nowhere on the form does ADB or motor club coverage appear.
There is a space at the bottom of the form for computations.
LIABILITY COVERAGES REJECTION FORM
The Rejection of Liability Coverages form is divided into four main parts. The top part of the form informed the customer that they had the right
to purchase liability coverage and that they can also reject liability coverage. If the customer desired to reject liability coverage, there was a signature block where the customer signed rejecting such coverage.
The second portion of the form dealt with PIP and had optional blocks to be checked in order to reflect the deductible desired. The deductible ranged from $250 to $8,000. There were also optional blocks to select the type of PIP coverage and at the bottom of this section was again a signature block.
The third section dealt with uninsured motorist coverage and had a block where the customer entered the limits of coverage desired if they were purchasing uninsured motorist coverage. There was a block to be checked if the customer was rejecting uninsured motorist coverage. At the bottom of this section, was again a signature block.
The last section referred to an accidental death benefit and contained the following language:
I UNDERSTAND THE ACCIDENTAL DEATH BENEFIT THROUGH MY NATION MEMBERSHIP IS A SEPARATE ITEM, THAT PAYS IN ADDITION TO MY AUTO INSURANCE POLICY. I UNDERSTAND THE ADDITIONAL CHARGE FOR THIS COVERAGE IS INCLUDED IN
WITH MY DOWN PAYMENT.
The above language was followed only by a signature block. There were no blocks to be checked or initialed rejecting or accepting the accidental death benefit. (this statement is referred to hereafter as the acknowledgement.)
The Rejection of Liability Coverages form was used in all sales of automobile insurance at Friendly Auto. The reference in the acknowledgement above to "MY NATION MEMBERSHIP" refers to a company which provided an ADB policy prior to the time Friendly Auto began using American Travelers Association.
Once Friendly Auto decided to stop using the Nation Company, the Respondent, Register, elected not to reprint the form. He also considered, but did not feel it necessary, to have the sales agents mark through Nation and pencil in American Travelers Association. Mr. Register felt that the American Travelers Association policy could be interpreted to be a "Nation membership" because it covered the insured anywhere in the nation. However, Mr. Register could not specifically recall having instructed his sales agents to give this explanation to the customers.
Prior to July or August of 1982, Mr. Register had not instructed his employees to explain that the accidental death benefit referred to in the form was optional. Beginning in July or August, 1982, Mr. Register instructed his sales agents to begin telling customers the ADB was optional. This change occurred about the same time the law relating to the $8,000 deductible PIP changed and was due in part to "heat" which Friendly Auto had been getting from the Department of Insurance.
RECEIPT
The receipt form contained basic information blocks for date, amount, received from, and signature block for the sales agent of Friendly Auto. There was a line preceded by "In re:" which was used to reflect the coverages for
which the premium was being paid. A copy of the receipt was kept in the Friendly Auto file on each customer.
AMERICAN TRAVELERS ASSOCIATION APPLICATION
The last of the four forms was a motor club application for "Travel/Accident Benefits including Accidental Death and Dismemberment Coverage." The form contained spaces for the name and address of the applicant and name and address of their beneficiary. Just above the signature block of the applicant, were spaces for the effective date, the expiration date, the plan, amount of ADD coverage, and the fee. (See Respondent's Exhibit 24.) An almost identical form was used when the ADB policy was written with Southern Management Company.
THE SALES
Each count of the First Amended Administrative Complaint against Respondent, Lloyd Register, relates to a sale to a particular customer. Several of these same transactions were also the subject of the Administrative Complaint against the Respondent, Shirley Hopkins. The following facts are found as to both the counts of the First Amended Administrative Complaint against Lloyd Register and the Administrative Complaint against Respondent Shirley Hopkins: (the count number refers to the First Amended Administrative Complaint in Case No. 82-2048).
COUNT I
SALE TO BRENDA CONNER
On October 9, 1981, Brenda Conner went to Friendly Auto to purchase PIP insurance. She informed the Respondent, Shirley Hopkins, that she wanted to purchase PIP only. No other coverages were explained to her, but there was some discussion about who she wanted as her beneficiary. She signed the documents she was requested to sign but did not read them. She thought she had paid for PIP only. Her receipt from Friendly Auto was for $37.00 and listed only PIP as the only coverage purchased. The receipt was signed by the Respondent, Shirley Hopkins. She never received a policy from American Travelers Association. She was charged $15.00 as part of the $37.00 premium for the American Travelers Association ADB policy. She received her policy for the PIP coverage.
COUNT II
SALE TO BRUCE T. EDWARDS
On September 15, 1981, Bruce T. Edwards purchased insurance from Friendly Auto. Mr. Edwards was sold the insurance by Respondent, Shirley Hopkins. The receipt received by Mr. Edwards reflected a total premium of
$43.00 and listed only "PIP" as the coverage purchased. Mr. Edwards was unaware that as part of the $43.00 premium, he purchased accidental death and dismemberment coverage (ADB) from American Travelers Association. The premium for the ADB was $20.00. Mr. Edwards signed but did not fill out the yellow ADB application form. Shirley Hopkins explained the PIP coverage but made no mention that he was purchasing a separate ADB insurance policy. He did not read the documents he signed, but merely initialed and signed the blocks Ms. Hopkins marked. He did not request ADB coverage and thought he was getting PIP only.
He had no intention of buying any insurance other than PIP.
Prior to Mr. Edwards going to Friendly Auto, his wife had called and obtained a quote of $43.00 for tag insurance. She specifically told the person on the phone that her husband wanted the cheapest coverage necessary to get a tag.
COUNT III
SALE TO PATRICIA EDWARDS
On or about August 28, 1981, Patricia Edwards purchased insurance from Friendly Auto through its sales agent Shirley Hopkins. Patricia Edwards first called Friendly Auto and requested a quote for PIP coverage only. She also gave the person all the necessary information over the phone for the needed documentation. The person who actually went to Friendly Auto and purchased the insurance and signed the documents was Bruce Edwards, Patricia Edwards' husband. Patricia Edwards requested only minimum coverage needed to get her tag. She was given a quote of $37.00. The receipt given by Friendly Auto was signed by the Respondent, Shirley Hopkins, and reflected a $37.00 payment for PIP coverage only. The total payment of $37.00 included a $15.00 payment for an Accidental Death and Dismemberment (ADB) and travel benefits with Southern Management Company. Mr. Edwards signed the Accidental Death and Dismemberment application as well as the accident death benefits acknowledgement at the bottom of the Rejection of Liability Coverages form. The acknowledgement referred to "Accidental Death Benefit Through My Nation Membership" and not to an "Accidental Death and Dismemberment" coverage with Southern Management Company. (See Respondent's Exhibit 5.) Neither Bruce Edwards nor Patricia Edwards requested Accidental Death and Dismemberment coverage and neither was aware that such coverage had been purchased.
COUNT IV
SALE TO ELIZABETH JONES
On September 1, 1981, Elizabeth Jones purchased insurance from Friendly Auto. She first called and asked for a quote for PIP and liability insurance for a `71 Oldsmobile Delta 88. She was given a quote of $42.00 for PIP and liability. Ms. Jones then went to the office of Friendly Auto where she first talked with two different men and then Respondent, Shirley Hopkins. Shirley Hopkins informed her the premium would be $63.00 rather than $42.00.
Ms. Jones had obtained quotes from several agencies for the PIP and liability in an attempt to obtain the needed coverage for no more than the 560.00 which she had available for insurance. Ms. Jones has a fifth grade education and had never purchased insurance before. She specifically told the sales people at Friendly Auto that she did not understand insurance.
Because the cost was $63.00 rather than $42.00, Ms. Jones had to return home to obtain additional money. When she returned, Ms. Hopkins had the forms prepared and had marked with an the places where she needed to sign. The receipt from Friendly Auto reflects that Ms. Jones purchased "Liab. PIP. ADB" for a premium of $63.00. Ms. Jones signed the accidental death and dismemberment coverage application and the accidental death benefit acknowledgement at the bottom of the Rejection of Liability Coverage form. Prior to returning home, Ms. Jones was told by one of the sales agents that she needed the accidental death benefit that could be willed to her daughter. Ms. Jones asked if that was included in the liability and PIP and did not recall whether the person replied or not. She was not aware nor did she understand that she was purchasing a separate travel and accidental death benefit policy
and paying a separate premium. She did not read the documents before she signed them and relied upon Ms. Hopkins and the other two agents to give her the coverage she had requested. Ms. Jones did not receive her ADB policy.
COUNT V
SALE TO BARBARA BARBATO
On September 21, 1981, Barbara Barbato purchased insurance from Respondent, Shirley Hopkins, at the Friendly Auto agency. Before going to the agency, Ms. Barbato called and obtained a quote for "full coverage" on her new Camero. She spoke with a gentleman named Mike. When she arrived at the agency, she informed Ms. Hopkins that she wanted full coverage on her Camero. Ms. Hopkins did not explain the various coverages to her. Ms. Barbato paid for the insurance and signed the documents without reading them. The Friendly Auto receipt received by Ms. Barbato was signed by Shirley Hopkins and reflected a payment of $138.00 for "Liab. and Coll. and Comp.".
Ms. Barbato signed the ADD coverage application and the accidental death benefit acknowledgement at the bottom of the Rejection of Liability Coverages form. She named her mother as beneficiary of the accidental death benefit and understood that benefit to be part of the auto insurance she was purchasing. She was not aware the accidental death benefit was separate and extra. She did not receive a policy for the ADB coverage with American Travelers Association.
COUNT VI
Count VI was voluntarily dismissed by Petitioner and no evidence was presented as to Count VI.
COUNT VII
Mary Beth Jones did not appear and testify and no other testimony was presented as to Count VII.
COUNT VIII
SALE TO JOANN BROOKS
On September 1, 1981, Joann Brooks purchased insurance from Respondent, Shirley Hopkins, at the Friendly Auto Agency. Ms. Brooks is a farm laborer who completed the eleventh grade. Upon arriving at Friendly Auto, Ms. Brooks informed Ms. Hopkins that she wanted full coverage on her automobile.
Ms. Brooks understood full coverage to include collision, liability, and PIP and she had no intention of purchasing any type of coverage other than these.
Although Ms. Brooks received some explanation of the accidental death and dismemberment coverage, she signed the accidental death application form and named herself as beneficiary. Ms. Brooks thought the death benefit was part of the full coverage she requested. This was the first time she had purchased insurance and did not understand insurance matters. Ms. Brooks signed and initialed the documents she was given by Ms. Hopkins. She did not read them.
The receipt Ms. Brooks received from Friendly Auto was signed by Shirley Hopkins and reflected that she paid $86.00 for "Liab. & Comp. & Coll.".
COUNT IX
SALE TO RUBEN SIMPSON
On May 7, 1981, Ruben Simpson purchased auto insurance from Friendly Auto. Mr. Simpson is from Jamaica and does not read because of his very limited education. When he arrived at Friendly Auto, Mr. Simpson informed the sales agent that he wanted to buy PIP insurance in order to get his tag. Mr. Simpson could not recall the full details of the discussion but remembered giving them his mother's name as the person who would receive money if he were killed in an accident. Mr. Simpson signed his name where he was shown to sign. When he left the agency, Mr. Simpson believed he had purchased only the PIP insurance required to get his tag. Mr. Simpson signed the Southern Management Company Accidental Death and Dismemberment application and received a copy of it when he left the agency. (See Respondent's Exhibit No. 13.) The receipt given to Mr. Simpson at Friendly Auto reflects he paid $44.50 for "PIP ADB". The premium for the ADB was $22.50. At no time did Mr. Simpson request or agree to purchase anything other than tag insurance. Mr. Simpson signed the acknowledgement of the ADB at the bottom of the Rejection of Liability Coverages form, but was unaware that he was paying a separate premium for a policy which was neither PIP nor required to obtain his tag.
COUNT X
Prior to taking evidence in the formal hearing, Petitioner voluntarily dismissed Count X of the First Amended Administrative Complaint. No evidence was presented in support of Count X.
COUNT XI
On September 3, 1981, Mr. Ellison J. Eady, Jr., purchased insurance from Friendly Auto. Mr. Eady informed the sales agent at Friendly Auto that he wanted the necessary minimum insurance to get a tag for a new car he had purchased. The agent asked Mr. Eady some brief questions about his driving record and then gave him a quote for the price of the insurance he requested. The agent did not suggest any coverages in addition to what Mr. Eady had requested, but included the cost of an ADB policy in the quote he gave Mr. Eady. Mr. Eady agreed to the price quoted, and the agent then brought out several forms for Mr. Eady to fill out and sign. All Mr. Eady wanted was insurance for his tag and to his knowledge, that was all he purchased.
At the time he purchased his insurance, Mr. Eady signed and received a copy of the American Travelers Association application form. (See Petitioner's Exhibit 2.) He did not ask any questions about the form. Mr. Eady thought that the American Travelers Association coverage was part of the insurance he was purchasing. However, the agent did not specifically tell him it was part of the insurance he was purchasing. At the time he purchased his insurance, Mr. Eady already had a motor club policy with Montgomery Ward which provided similar services to the American Travelers coverage.
Mr. Eady did not read the various forms he signed. The agent gave him a brief explanation of what each form was. Mr. Eady just relied upon what the agent told him. Mr. Eady had no knowledge of Florida insurance. When he left Friendly Auto, he thought the only thing he had purchased was the minimum required by the state. One of the documents he signed was the acknowledgement of the accidental death benefit at the bottom of the Rejection of Liability Coverages form. (See Respondent's Exhibit 14.) Mr. Eady already had separate
life insurance coverage. The agent did not explain the accidental death benefit to him. Mr. Eady did not request any coverage other than the state minimum to get his tag. The receipt given Mr. Eady reflected an $82.00 payment for "PIP.
. . ADB. . . C&C". (See Respondent's Exhibit 14.) Fifteen dollars of the premium paid by Mr. Eady was for the American Travelers Association motor club policy.
COUNT XII
SALE TO MARY GOOD
On March 17, 1981, Mr. Edward T. Good and his wife Mary Good purchased insurance at Friendly Auto. Mr. Good informed the sales agent at Friendly Auto that he wanted the cheapest insurance required by the state to get his license tag. The agent explained to him the other auto coverages he could obtain, but Mr. Good insisted that he only wanted minimum tag insurance. He was then given a lump sum quote by the agent.
One of the forms Mr. Good signed was an ADB application for Southern Management Company. The agent explained that this would pay he or his wife money if they were killed in an auto accident. The agent did not explain that there was an extra charge for this benefit or that it was optional. Mr. and Mrs. Good understood the ADB coverage to be part of the PIP coverage they had requested. The receipt they were given at Friendly Auto reflected a payment of
$37.00 but did not list the coverages purchased. (See Respondents' Exhibit 1.) When Mr. and Mrs. Good left Friendly Auto, they thought they had purchased only tag insurance. However, $15.00 of the $37.00 premium paid was for the ADB policy with Southern Management Company.
COUNT XIII
SALE TO ALICE LEAR DICKSON
On or about September 3, 1981, Alice Lear Dickson (formerly Alice J. Lear) purchased auto insurance from a sales agent of Friendly Auto. Ms. Dickson called Friendly Auto to obtain quotes for full coverage for a newer automobile and minimum coverage for an older one. After obtaining these quotes, Ms. Dickson went to the office of Friendly Auto where she informed the sales agent on duty that she wanted full coverage insurance on two autos. She informed the sales agent she wanted fire, theft, windstorm, collision, liability, and uninsured motorist coverage.
The sales agent also suggested a coverage for such things as towing charges. Ms. Dickson informed the agent she did not want that coverage because she already was a member of an auto club. In signing the various documents to purchase the insurance, Ms. Dickson was asked to sign a document designating a beneficiary of a life insurance benefit. She did not want this life insurance coverage, but was told by the sales agent that it was required and went along with her automobile policy and had to be purchased. In reliance upon this representation, Ms. Dickson accepted the coverage.
Ms. Dickson paid a total premium of $144.03 for collision, liability, PIP, and accidental death benefit. Her receipt from Friendly Auto reflected the
$144.03 was for "C&C, LIAB., PIP, ADB." (See Respondents' Exhibit 11.) The accidental death benefit purchased by Ms. Dickson was one of the travel and accident benefits provided in the American Travelers Association policy which cost Ms. Dickson $15 of the $144.03 premium she had paid. At the bottom of a
Rejection of Liability Coverage form used by Friendly Auto, Ms. Dickson signed the acknowledgement relating to the ADB, but she was not aware that she could reject this coverage or that it was part of a separate motor club policy. Ms. Dickson did not desire to purchase a motor club policy and would not have purchased the motor club policy had she been aware that it was not required as an included coverage with the PIP coverage.
COUNT XIV
Prior to the taking of evidence at the formal hearing, the Petitioner voluntarily dismissed Count XIV of the First Amended Administrative Complaint and presented no testimony in support of that Count.
COUNT XV
SALE TO CHARLES MEADOWS
On June 2, 1982, Charles Meadows purchased auto insurance from Friendly Auto. Mr. Meadows went to Friendly Auto to purchase PIP insurance, and upon arriving at Friendly Auto's office, he informed the sales agent he wanted only PIP insurance. When he left the Friendly Auto office, Mr. Meadows thought he had only purchased PIP.
At the time he purchased his insurance, Mr. Meadows signed an American Travelers Association application. (See Respondents' Exhibit 2.) The only explanation he was given by the sales agent regarding this coverage was that if he were killed, someone would receive some money and he needed to designate who that would be. The amount of the fee charged for the American Travelers Association policy was not reflected in the appropriate block on the application form. He was not given any explanation regarding the price of this coverage.
In purchasing the insurance, Mr. Meadows initialed and signed several forms. He did not read them before signing. Mr. Meadows does not read and write very well and has a problem understanding insurance policies. He completed the seventh grade in school. One of the forms signed by Mr. Meadows was the acknowledgement relating to the accidental death benefit at the bottom of the Rejection of Liability Coverages form.
The quote sheet used to give Mr. Meadows his quote of $48.00 makes no reference to any coverage other than PIP. PIP is circled on the form. The receipt Mr. Meadows received from Friendly Auto reflects a $48.00 premium for "PIP. . .ADB". The cost of the PIP coverage was $23.00 and the cost of the American Travelers Association policy was $25.00. Mr. Meadows never received a policy or certificate informing him of the coverages under the American Travelers Association policy.
Mr. Meadows never intended to purchase any coverage other than PIP to obtain his tag. He never requested any coverage other than PIP.
COUNT XVI
SALE TO PHILLIP JOHNSON
On July 1, 1982, Mr. Phillip Johnson purchased auto insurance from a sales agent at Friendly Auto. Mr. Johnson went to Friendly Auto to purchase tag insurance. He informed the sales agent that he wanted just the PIP or tag insurance. The agent then prepared the necessary forms and Mr. Johnson
initialed and signed the documents where he was instructed by the agent to sign and initial. No explanation of the coverages was given by the agent.
Mr. Johnson was asked to name a beneficiary and was given a pink copy of an American Travelers Association application which he had signed. That form reflects a $20.00 fee was charged for the American Travelers Association policy. The receipt which Mr. Meadows received at Friendly Auto reflects a $42.00 premium paid for "8,000 PIP". (See Respondents' Exhibit 3.)
Mr. Johnson also signed the accidental death benefit acknowledgement at the bottom of the Rejection of Liability Coverages form. Mr. Johnson felt when he left Friendly Auto that he had purchased only PIP insurance. Mr. Johnson completed the ninth grade in school and has difficulty reading and writing.
COUNT XVII
SALE TO JAMES RICHARD JOHNS
On June 4, 1982, Mr. James Richard Johns purchased insurance from the Respondent, Shirley Hopkins at Friendly Auto. Mr. Johns told Shirley Hopkins he would like to purchase PIP insurance in order to get his tag for his car. Ms. Hopkins then gave him a quote for PIP and also a quote for liability coverage and she then gave him several forms to initial and sign. She gave no explanation regarding the forms and he did not read them before signing.
Although Mr. Johns thought he was only purchasing PIP insurance, he was, in fact, sold PIP with an $8,000 deductible plus an American Travelers Association policy. The cost of the PIP coverage was $24.00 and the cost of the American Travelers Association policy was $25.00. Mr. Johns signed the American Travelers Association application and was given a copy of it. He also designated a beneficiary. At the time of purchase, Mr. Johns understood that the death benefit was part of the PIP insurance he was purchasing. No explanation was given by Ms. Hopkins regarding the American Travelers Association policy or coverage.
Mr. Johns also signed the acknowledgement of the accidental death benefit at the bottom of the Rejection of Liability Coverages form. The receipt he received from Friendly Auto was for $50.23 paid for "PIP. . . ADB. . . 123(illegible)". When Mr. Johns left the Friendly Auto Agency, he felt he had purchased only PIP insurance. He did not receive an American Travelers Association policy and did not receive his Fortune Insurance policy for his PIP insurance until December of 1982 or January, 1983.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this action.
Florida Statutes 626.611 and 626.621 empowers the Department of Insurance to suspend, revoke, or otherwise discipline a licensed insurance agent for those grounds set forth in Sections 626.611 and 626.621.
The Respondent, Lloyd Register, is charged under various counts with violations of the following sections of Section 626.611, Florida Statutes (1981):
If the license or permit is will- fully used, or to be used, to circumvent any of the requirements or prohibitions of this code.
Willful misrepresentation of any insurance policy or annuity contract or willful deception with regard to any such policy or contract, done either in person or by any form of dissemination of information or advertising.
(7) For demonstrated lack of fitness or trustworthiness to engage in the business of insurance.
Fraudulent or dishonest practices in the conduct of business under the license or permit.
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.
(13) Willful failure to comply with, or willful violation of, any proper
order, rule, or regulation of the depart- ment or willful violation of any provi- sion of this code.
The Respondent is also charged with violating the following sections of Florida Statute 626.621 (1981).
Violation of any provision of this code or of any other law applicable to the business of insurance in the course of dealing under the license or permit.
Violation of any lawful order or rule or regulation of the department.
(6) If in the conduct of business under the license or permit he has engaged in unfair methods of competition or in unfair or deceptive acts or practices, as
prohibited under part VII of this chapter, or has otherwise shown himself to be a source of injury or loss to the public or detrimental to the public interest.
Section 626.9521, Florida Statutes, authorizes the Department of Insurance to impose a monetary penalty on licensees who engage in unfair or deceptive acts or practices as defined in Section 629.9541, Florida Statutes. The Respondent, Register, is charged with having committed the following unfair and deceptive acts or practices as enumerated in Section 629.9541, Florida Statutes.
1(a) Knowingly making, issuing, circul- ating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation,
omission, or comparison which misrepresents the benefits, advantages, conditions, or terms of any insurance policy.
5(a) Knowingly filing with any supervisory or other public official, making, publishing, disseminating, circulating, delivering to
any person, placing before the public, causing directly, or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false material statement.
11(a) Knowingly making false or fraudulent statements or representations on, or relative to, an application for an insurance policy for the purpose of obtaining a fee, commis-
sion, money, or other benefit from any insurer, agent, broker, or individual.
15(b) Knowingly collecting as a premium or charge for insurance any sum in excess of or less than the premium or charge applicable to such insurance, in accordance with the applicable classifications and rates as filed with and approved by the department, and as specified in the policy;
or, in cases when classifications, premiums, or rates are not required by this code to
be so filed and approved, premiums and charges in excess of or less than those specified in the policy and as fixed by the insurer. This provision shall not be deemed to prohibit the charging and col- lection, by surplus lines agents licensed under part VI of this chapter, of the amount of applicable state and federal taxes in addition to the premium required by the insurer.
24(c) In addition to other provisions of this code, the refusal to insure, or con- tinue to insure, any individual or risk solely because of the insured's or applicant's failure to agree to place collateral business with a particular insurer.
The Respondent is also charged with having violated Sections 627.421(1), 627.736(1), 627.843, Florida Statutes (1981). Section 627.421(1), provides in relevant part:
(1) Subject to the insurer's requirement as to payment of premium, every policy shall be mailed or delivered to the insured or to the person entitled thereto within a reasonable period of time after its issuance, except where a condition required by the insurer
has not been met by the applicant or insured.
Section 627.736(1) sets forth the required personal injury and protection benefits (PIP) under Florida law and as to such PIP coverage provides:
Only insurers writing motor vehicle liability insurance in this state may provide the required benefits of this section, and no such insurer shall require the purchase of any other motor vehicle coverage as a condition for providing such required bene- fits. Such insurers shall make such bene- fits available through normal marketing channels. Any insurer writing motor vehicle liability insurance in this state failing
to comply with such availability requirement as a general business practice shall be deemed to have violated part VII of chapter 626, and such violation shall constitute
an unfair method of competition or an unfair or deceptive act or practice involv- ing the business of insurance, and any such insurer committing such violation shall be subject to the penalties afforded in such
part, as well as those which may be afforded elsewhere in the Insurance Code.
Section 627.843 provides:
Before the due date of the first install- ment payable under a premium finance agree- ment, the premium finance company holding the agreement or the insurance agent shall deliver to the insured, or mail to him at his address as shown in the agreement, a copy thereof or, if the agreement contained any blank space when it was signed and such blank space was subsequently filled in, in accordance with s. 627.839(5), a copy of the agreement as so filled in.
The Respondent, Shirley Hopkins, was charged with multiple violations of Sections 626.611(4), 626.611(5), 626.611(7), 626.611(1), 626.611(10) , 626.611(13), 626.621(2), 626.621(3), 626.621(6), 626.9521, 626.621(6), 626.9541(1)(a), 626.9541(5)(a), 626.9541(11), 626.9541(15)(b) , 626.9541(24)(c), 627.421, 627.736(1), Florida Statutes (1981).
The gravamen of the complaint against the Respondents is that they, through their sales policies and procedures, sold motor club policies whose primary benefit was an accidental death benefit to purchasers who neither requested or intended to buy such coverage and who were not aware they had, in fact, purchased a separate motor club ADB policy for a separate and added premium to the insurance they had actually requested.
The sales procedure established by Lloyd Register and followed by Shirley Hopkins and the other sales agents was designed to sell an ADB motor club policy to any customer buying PIP insurance as well as other coverages. Neither the forms used nor the explanations given by the agent informed the
purchasers that they were being sold a separate policy for a separate premium. When the customers asked for PIP or tag insurance, only the were given a single quote which included ADB, even though they had specifically requested only PIP. The agents had not been instructed to tell the purchasers that the ADB was optional. The agents had been told that PIP was not to be sold without an ADB policy. Only when customers specifically asked were they given any explanation regarding the ADB policy and then were told that it was part of the coverage and had to be purchased.
Although Respondent, Shirley Hopkins, and witnesses Anne Zugelder both testified that a full explanation of the ADB was given in each sale they made, neither of them testified with regard to the facts surrounding the specific sales to the individuals who testified on behalf of the Petitioner. The testimony of fourteen complaining witnesses was very consistent with regard to the sales procedures used by the agents of Friendly Auto. Their testimony revealed a calculated and intentional procedure for selling an ADB policy to persons who had not requested the coverage and who were not aware they were purchasing the coverage. Several of these people never received a policy from Friendly Auto for the ADB coverage they had purchased.
The Respondent, Lloyd Register, had a clearly established policy of not selling PIP without an ADB policy. The sole reason for this policy was to increase the amount of commission on each sale. The purchaser was not even consulted as to which of the various ADB premium options they would prefer to pay. The agent was instructed to charge a premium selected by the agent without discussing it with the customer. These factors resulted in numerous purchasers being sold an ADB policy without even being aware they had done so. Through these policies and procedures, the Respondent, Lloyd Register, by and through his employees, mislead and deceived customers into purchasing motor club ADB policies which they neither requested or intended to purchase. These acts constitute violations of Sections 626.611(5), (7), and (9); 626.621(6), 626.9521, 626.9541(1)(a), 626.9541(5)(a), and 626.9541(11)(a), Florida Statutes, as alleged in Counts I, II, III, IV, V, VIII, XIV, XI, XII, XIII, XV, XVI and XVII of the First Amended Administrative Complaint and Section 627.421(1), Florida Statutes, through 626.621(2) as alleged in Counts I, IV, V, IX, XV, XVI, and XVII.
The facts also establish violations by Respondent, Shirley Hopkins, of Section 626.611(5), (7), and (9), 626.621(6), 626.9521, 626.9541(5)(a), and 626.9541(11)(a), Florida Statutes, as alleged in Counts I, II, III, IV, and VII of the Administrative Complaint.
Section 627.736(1), Florida Statutes, on its face applies to "insurers". "Insurer" is defined in Section 624.03 Florida Statutes (1981), as:
'Insurer' includes every person engaged as indemnitor, surety, or contractor in the business of entering into contracts of insurance or of annuity.
This definition does not include agents, and there, Section 627.736(1) does not apply to agents such as the Respondents. Therefore, although the evidence clearly establishes that the Respondents were requiring the purchase of another coverage in order to obtain PIP, they are not "insurers" and, therefore, cannot be found guilty of a violation of Section 627.736(1). The evidence also did not establish violations of Sections 626.611(4) and (10), 626.9541(15)(b), and 24(c) and 627.843, Florida Statutes.
At the close of Petitioner's case, Petitioner moved to amend the pleadings to add additional charges revealed by the evidence. That motion is denied and only those charges which were expressly contained in the pleadings prior to formal hearing were considered by the Hearing Officer in entering this Recommended Order.
Penalty: The sales policies and procedures established by Lloyd Register were violative of Florida law and intended only to increase the profitability of Mr. Register's agency. The policies were sold to these individuals without regard to whether they needed or wanted the policies. The Respondent, Shirley Hopkins, although a licensed insurance agent, was an employee carrying out the instructions given her by the employer, Lloyd Register. In light of these facts, an appropriate penalty for Respondent, Lloyd Register, is the suspension of his insurance licenses for a period of one year. An appropriate punishment for Respondent, Shirley Hopkins, is a suspension of her insurance license for a period of 90 days and a $500 fine.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED:
That the Department of Insurance enter a Final Order finding Respondent, Lloyd Register, guilty of the violations as set forth above and that his insurance licenses be suspended for a period of one (1) year.
That the Department of Insurance enter a Final Order finding Respondent, Shirley Hopkins, guilty of the violations as set forth above and that her license be suspended for a period of 90 days and that she be required to pay a civil penalty of $500.
DONE and ENTERED this 1st day of August, 1983, in Tallahassee, Florida.
MARVIN E. CHAVIS, Hearing Officer Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32301
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 1st day of August, 1983.
COPIES FURNISHED:
Curtis A. Billingsley, Esquire Dennis Silverman, Esquire Department of Insurance
413-B Larson Building Tallahassee, Florida 32301
Thomas F. Woods, Esquire 1030 East Lafayette Street Suite 112
Tallahassee, Florida 32301
Honorable Bill Gunter Insurance Commissioner and
Treasurer
The Capitol, Plaza Level Tallahassee, Florida 32301
| Issue Date | Proceedings |
|---|---|
| Oct. 30, 1990 | Final Order filed. |
| Aug. 01, 1983 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Oct. 27, 1983 | Agency Final Order | |
| Aug. 01, 1983 | Recommended Order | Respondent sold auto insurance with Accidental Death Benefits (ADB) policy without telling customers that it was inseparable from Personal Injury Protection (PIP). Recommend suspension/penalty. |
DEPARTMENT OF INSURANCE AND TREASURER vs. THOMAS HOLLIDAY VEAL, 82-002048 (1982)
DEPARTMENT OF FINANCIAL SERVICES vs VICTORIA NOLEN COLON, 82-002048 (1982)
OFFICE OF THE TREASURER, DEPARTMENT OF INSURANCE vs. LORI ANN THOMAS, 82-002048 (1982)
DEPARTMENT OF INSURANCE AND TREASURER vs. RICHARD ELLIOTT TEMPLIN, 82-002048 (1982)
JOHN DEERE INSURANCE COMPANY vs DEPARTMENT OF INSURANCE, 82-002048 (1982)
