vs. ) CASE NO. 82-3540
Respondent. )
Pursuant to notice, a hearing was held before Arnold H. Pollock, Hearing Officer with the Division of Administrative Hearings, on July 20, 1983, in West Palm Beach, Florida. The issue for determination was whether Respondent's license as a general lines agent for insurance in the State of Florida should be suspended, revoked, or otherwise disciplined because of alleged violations of Florida statutes as contained in the Administrative Complaint.
For Petitioner: Daniel Y. Sumner, Esquire
William W. Tharpe, Jr., Esquire Department of Insurance
1483 S.W. 25th Way
In an Administrative Complaint dated December 6, 1982, and amended after motion filed on February 3, 1983, upon approval by the Hearing Officer dated February 16, 1983, Respondent is alleged in ten of the counts to have misled and deceived individuals applying for minimum insurance coverage of the actual cost of the automobile insurance desired and selling either accidental death and dismemberment insurance and/or automobile club memberships along with the basic minimum coverage when individuals did not desire these extras. In Count of the Administrative Complaint, Respondent is alleged to have perpetrated a fraud upon a customer of his agency by affixing the customer's signature to a premium finance agreement which if not rescinded would have cost the customer additional sums in finance charges when the customer was ready, willing, and able to pay cash for the premium.
At the hearing, Petitioner voluntarily dismissed Counts II, III, IV, and VIII of the Administrative Complaint. Therefore, these allegations are dismissed and no further action will be taken on them herein.
on December 22, 1982, Respondent submitted a request for a formal hearing. Petitioner presented the testimony of Eduardo J. Cutie, Joseph W.
Rachinsky, James A. Bonfiglio, Clifford A. Ragsdale, Steven B. Atkinson, Frank
3 Diane Phillipy McDonald contacted the Okeechobee Insurance Agency in April, 1979, because she had heard on the radio that their prices were inexpensive. All she wanted was personal injury protection (PIP), which was what she thought the law required to get tags on her automobile. When she first called the agency and asked how much the coverage she wanted would be, she was told she could pay a percentage down and finance the rest. When she entered the agency, she was waited on by a man whose name she cannot remember. However, she did not ask for auto club coverage or accidental death and dismemberment coverage, nor did those subjects ever come up in the conversation. She asked only for PIP, and she paid a $50 deposit on her coverage. In return for her deposit, she was given a slip of paper that reflected that she had purchased PIP coverage. She was not told she was charged for auto club membership or accidental death and dismemberment. The forms that she signed, including those which reflect a premium for all three coverages in the total amount of $137, bear her signature, and though she admits signing the papers, she denies having read them or having them explained to her before she signed them. In fact, she cannot recall whether they were even filled out when she signed them. In regard to the papers, the premium finance agreement signed by the witness on April 3, 1979, reflects in the breakdown of coverage total premium of $137. However, immediately below, the total cash premium is listed as $158, $21 more than the total of the individual premiums for the three coverages, and the financing charge is based on that amount1 less the down payment.
Marvin W. Niemi purchased his auto insurance from the Okeechobee Insurance Agency in March, 1979, after he heard their advertisement on the radio and went in to get the insurance required by the State in order to get his license tags. When he entered the agency, he asked personnel there for the minimum insurance required to qualify for tags because he was strapped for money at the time and could not afford anything else. He definitely did not want auto club membership. In fact, discussion of that did not even arise, nor did he want the accidental death policy. When he left the agency, he thought he was only getting what he had asked for; to wit, the PIP minimum coverage. All the forms that he signed were blank when he signed them. This application process took place very quickly during his lunch hour from work. He admits giving his son's (David Robert) name as the beneficiary on his insurance, but did not realize at the time that he was purchasing coverage other than the minimum coverage required. His rationale for giving his son's name as beneficiary was that agency personnel asked and the witness felt if there was any money involved, it should go to his son. In fact, Mr. Niemi was sold not only the PIP, but membership in an auto club and PIP coverage with an $8,000 deductible. Again, the total premium was $137, when the actual premium for the coverage he asked for was only
$24.
Frank Johnson purchased his insurance from Okeechobee Insurance Agency in April, 1979, because he had heard and seen their advertisement on radio and television and it appeared to be reasonable. He wanted only PIP coverage as required by law sufficient to get his license tags. When he entered the agency, he spoke with a man whose name he does not know, who after consulting the books came up with the premium for the coverage to be purchased. During this meeting, the question of motor club or AD&D coverage was not mentioned. His signature does not appear on the statement of understanding, which outlines the coverage and the premium therefor. In this case, because Mr. Johnson had had some prior traffic tickets, his total premium came to $243. His coverage, however, included bodily injury liability, property damage liability, PIP, and auto club. After paying a $50 down payment, he made two additional payments which totaled approximately $50, but thereafter failed to make any additional payments.
On August 1, 1980, Marguerite and Steven von Poppel entered the Federal Insurance Agency in Lake Worth, Florida, to purchase their automobile insurance coverage. They purchased policies which included bodily injury and property damage liability, PIP coverage, and comprehensive and collision coverage. The PIP coverage had a deductible of $8,000, and the comprehensive and collision coverage both had $200 deductibles. Mrs. von Poppel indicates that it was not their intention to have such large deductibles on their coverage. In any event, on that day, they gave a check for down payment in the amount of $320 and advised the employee of the agency that upon billing for the balance due of the
$915 total premium, they would send the check. Neither Mrs. von Poppel nor Mr. von Poppel desired to finance the balance due of $595, and Mrs. von Poppel did not affix her signature to an application for premium financing with Devco Premium Finance Company dated the same day which bears the signature of Kevin D. Cox as agent. This premium finance agreement lists a cash premium of $966, as opposed to $915. The receipt given to the von Poppels initially reflects a down payment of $320, which is consistent with the receipt, and an amount financed of
$646, as opposed to $595, which would have been the balance due under the cash payment intended and desired by the von Poppels. Somewhat later, Mrs. von Poppel received a premium payment booklet from Devco in the mail. When she received it, she immediately went to the Federal Insurance Agency, told them she did not desire to finance the payments, and that day1 September 3, 1980, gave them a check in the amount of $595, which was the balance due on their insurance
coverage. This check was subsequently deposited to the account of Federal Insurance Agency and was cashed. This did not end the von Poppel saga, however, as subsequently the von Poppels were billed for an additional amount of $116.18, which reflects the interest on the amount ostensibly financed. When the von Poppels received this statement, they contacted the Federal Insurance Agency and were told that there was some mistake and that the matter would be taken care of. They therefore did not make any further payments, except a total payment of
$20, which they were told was still owing. This $20 payment was made on May 29, 1981, after their insurance had been cancelled for nonpayment of the balance due on the finance agreement. The policy was, however, subsequently reinstated,
back-dated to the date of cancellation, after the von Poppels complained. Their complaints, however, did nothing to forestall a series of dunning letters from a collection agency to which Devco had referred the von Poppels' account. It is obvious, therefore, that Federal Insurance Agency did not notify Devco of the fact that the amount due and payable had been paid, and did not clear the von Poppels with Devco or with the collection agency thereafter. As a result, the von Poppels filed a complaint with the Insurance Commissioner's office. That terminated their difficulty on this policy.
On September 15, 1980, Federal Insurance Agency submitted a check in the amount $595, the amount paid to them by the von Poppels in full settlement of their account, to Devco. There appears to have been no additional letter of explanation, and though Devco credited this amount to the von Poppel account, it did not know to cancel the finance charges since the von Poppels' decline to finance their premium.
Of the total amount of the von Poppel premium, the majority, $636, was attributable to the basic insurance in the amount of $10,000-$20,000 liability written by American Risk Assurance Company of Miami, Florida. The supplemental liability carrying a premium of $180 and covering $40,000-$80,000 liability was written by Hull and Company, Inc., out of Fort Lauderdale for Empire Fire and Marine Insurance Company.
The third portion of the coverage carrying a charged premium in the amount of $150 covered the AD&D covered by Reliance Standard Life Insurance Company (RSLIC) of Philadelphia, Pennsylvania. This coverage, in the principal sum of $10,000 in the case of Mr. von Poppel and $5,000 in the case of Mrs. von Poppel, was included without the knowledge or the cosnet of the von Poppels. The policies, numbered 10753 R and 10754 R, were never delivered to the von Poppels as, according to an officer of RSLIC, they should have been, but are in the files of the Federal Insurance Agency. Further, the von Poppels were overcharged for the coverage.
Respondent, however, did not remit any of the premium to Reliance Standard Life Insurance Company Instead, on August 1, 1980, the same day the von Poppels were in to purchase their insurance, he issued a sight draft drawn on Devco Premium Finance Company to Reliance Standard Life in the amount of $150. Reliance Standard Life was not the same company as Reliance Standard Life Insurance Company, was not controlled by Reliance Standard Life Insurance Company, and in fact had no relation to Reliance Standard Life Insurance Company. Reliance Standard Life was a corporation duly organized and existing under the laws of the State of Florida in which Kevin D. Cox was president and Howard I. Vogel was vice president-secretary. Of the $150 premium, 90 percent was retained by Respondent or his company as commission and 10 percent was transmitted to Nation Motor Club along with a 10 percent commission on policies written for other individuals. Nation Motor Club would then transmit the bona fide premium of 24 cents per $1,000 coverage to RSLIC. More than a year later,
on October 16, 1981, Federal Insurance Agency reimbursed the von Poppels with a check for $42.50, representing the unearned portion of the unordered AD&D coverage.
Clifford A. Ragsdale went to the Federal Insurance Agency in Lake Worth on April 19, 1982, to purchase his auto insurance because after calling several agencies by phone and advising them of the coverage he wanted, this was the least expensive. To do this, he would read off the coverage from his old policy and get a quote for the identical coverage. After getting this agency's quote, he went to the office where, after talking with two different ladies to whom he described the coverage he desired, he got to the person with whom he had talked on the phone and read his current coverage, and who already had some of the paperwork prepared. During all his discussions with the agency's employees on the phone and in person, he did not speak of, request, or desire auto club membership. He has been a member of AAA since 1977, and his membership there covers all the contingencies he is concerned with. Additional auto club membership in another club would be redundant. He gave the agency representative a check for $247 as a down payment and agreed to finance the balance due through Premium Service Company. Though he was given a receipt for the $247 deposit, the premium finance agreement he signed that day at the Federal Insurance Agency reflected a cash down payment of only $147, thus falsely inflating the balance due to be paid by the client. The $100 difference was refunded to Mr. Ragsdale by Federal Insurance Agency on October 25, 1982, some six months later after he complained to the Insurance Commissioner's office and was told that the $100 difference was for membership in a motor club that he did not desire or agree to. As late as December 29, 1982, over eight months later, the agency had still not remitted the $147 to Premium Service Company, who then added this deposit already paid by the client back to the account balance.
Mr. Ragsdale did not read all the documents he signed at the agency, and he never received the policy he ordered. He was told he was signing an application for insurance and signed several instruments in blank at the request of the personnel at Federal Insurance Agency. He was told they would later fill in what wad needed.
Respondent was the general lines agent of record for the Okeechobee Insurance Agency, located at 1874 Okeechobee Boulevard, West Palm Beach, Florida, during March and April, 1979, and at the Federal Insurance Agency, 3551 South Military Trail, Lake Worth, Florida, during the period which included August, 1980, and April, 1982. In each agency, he had instructed his' personnel how to serve and handle customers who came to the agency requesting the lowest minimum required insurance in which the agency specialized and which the agency, through its advertising program, purported to offer. As testified to by Linda Holly, an employee of Federal Insurance Agency, and as admitted by Respondent, when a prospective customer entered the agency requesting the minimum required coverage, the agent was to ask if the customer knew what the minimum was. The agent would then explain what was required and quote a premium which included not only the minimum required insurance, but also some additional service which, depending on the time, could be AD&D, towing, motor club, or the like, none of which was required by the State of Florida. Respondent instructed his employees to do this on the rationale that the premiums and commissions on the minimum required insurance were so low that the agency could not make sufficient profit on the sale of it, alone, to stay in business.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding.
In the Administrative Complaint as amended, Respondent is alleged to have violated eleven different sections of Florida Statutes for each of the seven counts on which evidence was presented, to wit: I, V, VI, VII, IX, X, and
The alleged violations are:
Being willfully deceptive with regard to an insurance policy [Section 626.611(5)];
Demonstrating a lack of fitness or trustworthiness [Section 626.611(7)];
Engaging in fraudulent or dishonest practices [Section 626.611(9)];
Willfully violating a provision of the Insurance Code [Section 626.611(13)];
Willfully circumventing the prohibitions of the Insurance Code [Section 626.611(4)];
Violating a provision of the Insurance Code [Section 626.621(2)];
Engaging in unfair or deceptive acts
or practices as prohibited under Part VII of Chapter 626, Florida Statutes [Section 626.621(6)];
Engaging in unfair or deceptive acts
or practices involving the business of insurance (Section 626.9521);
Knowingly making false statements or representations with reference to any application for insurance [Section 626.9541(11)(a)];
Knowingly causing false material statements to be made to an insured [Section 626.9541(5)(a)]; and
Knowingly collecting excess premiums [Section 626.9541(15)(b)].
The complaint, as drafted, is a perfect example of multiple charging. Eleven different statutory provisions are utilized to describe, in each count, conduct which could easily and properly be described in three. For example, (a) (b), (c), (g), (h), (i), and (j) basically allege the same thing, deceptive practices by Respondent in his business practices. Also, (d) and (e) both basically allege violation of the Insurance Code. Only (k) stands alone. Not only does this multiple charging increase the chance of error or omission on the part of counsel, it also increases the complexity of the case for the Hearing officer, who, in the Recommended Order, normally must address each allegation, thereby increasing the possibility for overlooking something important on his or her part.
Consequently, I am not going to address each violation seven times (once for each count) I will merely conclude that the conduct of Respondent or his agents, for whose conduct he is, here, responsible, constitutes multiple violations of the statutes as alleged in those counts of the complaint on which evidence was presented.
Respondent, as general lines agent for two different agencies, held himself and the agencies out as ready to provide a needed service. The clients
who dealt with the agencies in question did so on the basis of trust that having asked for a specific, yet complicated, product, they would get what they asked for and would pay only for what they requested. The insurance business is often not easy for the layman to comprehend. Therefore, those who work in positions of trust within that business, one subject to abuse, are licensed in the effort to provide the best possible protection to the consumer. For a client who requests a particular coverage to be sold and charged for coverage beyond that for which he asked, without being told of this or, when told, being also falsely told that the additional product was required, constitutes a clearly deceptive practice and is overcharging. Further, when Respondent trained his employees in how to engage in these deceptive practices and instructed them to follow them, he bears the responsibility for each and every instance where his instructions are carried out, whether he knows of the particular incident or not. He knows what policies are being applied--his--and that is sufficient to impute knowledge to him in the individual cases alleged. Lash, Inc. v. Department of Business Regulation, 411 So.2d 276 (3 DCA Fla. 1982). What is more, there can be no doubt that the utilization of these deceptive practices, knowingly and by his own direction, to procure for himself and his agency more income than is actually appropriate, constitutes a clear case of untrustworthiness.
Equally as convincing of the questionable practices followed by Respondent or with his concurrence is the showing of irregularities in premium financing agreements, utilization of blank forms to be filled in after signature by the client, the failure to send in premiums paid by the client until months after payment was made, and the utilization of a scheme which, if not dishonest, clearly conceals a trail of responsibility in a field where integrity is a sine qua non. In substance, I am convinced beyond doubt that Respondent's license merits discipline here, and the allegations, except those referred to above as dismissed, have been proven.
The Petitioner has filed a proposed recommended order which includes proposed findings of fact and conclusions of law. The proposed findings and conclusions have been adopted only to the extent that they are expressly set out in the Findings of Fact and Conclusions of Law above. They have been otherwise rejected as contrary to the better weight of the evidence, not supported by the evidence, irrelevant to the issues, or legally erroneous.
That Respondent's license as a general lines agent in the State of Florida be revoked.
RECOMMENDED this 3rd day of August, 1983, in Tallahassee, Florida.
ARNOLD H. POLLOCK
Filed with the Clerk of the Division of Administrative Hearings this 3rd day of August, 1983
Daniel Y. Sumner, Esquire William W. Tharpe, Jr., Esquire Department of Insurance
Mr. Kevin Denis Cox 1483 S.W. 25th Way
