vs. ) CASE NO. 83-2994
Respondent. )
) STATE OF FLORIDA, DEPARTMENT ) OF INSURANCE, )
vs. ) CASE NO. 83-2995
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a consolidated hearing in the above-styled cases on November 15, 1983, at Tampa, Florida.
For Petitioner: Curtis A. Billingsley, Esquire
For Respondents: Thomas F. Woods, Esquire
By Administrative Complaint dated August 22, 1983, it is alleged, in Case 83-2994, that James Royal Patrick (JRP) Respondent, licensed as an Ordinary Life, including Disability, agent and General Lines agent, while his license was under a six-month suspension, notified Petitioner of his intent to open a branch office in Brooksville, Florida, with Larry Kinner as licensed agent, but in lieu thereof provided Martin Daniel Patrick (MDP) , Respondent in Case 83-2995, with rate manuals, applications, etc., to sell casualty insurance for which MDP was not licensed; that JRP knew MDP was not licensed; that JRP received applications for casualty insurance from the office of MDP from December, 1982, to March, 1983; that Larry Kinner was an automobile salesman and was not licensed as an insurance agent until April, 1983; that these applications were processed in the
Bartow office of JRP as the owner of Wardwell Insurance Company; and that Respondent thereby violated numerous provisions of Chapter 626, Florida Statutes.
By Amended Administrative Complaint forwarded to the Division of Administrative Hearings on October 28, 1983, it is alleged that Martin Daniel Patrick (MOP), Respondent in Case 83-2995, engaged in the sale of insurance during periods his license to do so was suspended. That he or his employees completed applications and sold insurance for which MDP was not licensed; and that he thereby violated various provisions of Chapter 625, Florida Statutes.
At the commencement of the hearing, Respondents stipulated that, as alleged in Counts I through IX of the Administrative Complaint in Case 83-2995, applications for insurance to Chela Shiflett, Deborah Onorato, Lucy Elliott, Catherine Ervin, Darlene Patterson, Ricky Fuller, Robert Higdon, Jerome Kemmett, and Richard Denmark were completed at the location of MOP's office in Brooksville, and forwarded to the Wardwell Insurance Agency at Bartow, from whence the policies were issued. Respondents denied that any employee handling these applications was in the employ of, or under the control of, MDP. Thereafter, Petitioner called eight witnesses Respondent called five witnesses, including Respondent; and 23 exhibits were offered into evidence. Objections to Exhibits 1, 2, 3 and 28 were sustained at the hearing. Objection to Exhibit 24 was reserved. That objection is now overruled, and Exhibit 24 is admitted with Exhibits 4 through 27, inclusive.
The parties' proposed findings which are incorporated herein are adopted; otherwise, they are rejected as not supported by the evidence or unnecessary to the result reached.
Martin Daniel Patrick has been a life insurance agent for some 32 years. At all times material hereto he was the owner of Dan Patrick & Associates insurance agency at Brooksville, Florida. By Consent Order dated January 7, 1983, MOP's license as an Ordinary Life, including Disability, agent was suspended for a period of 60 days. By Emergency Order of Suspension dated August 3, 1983, his license was suspended based upon the allegations contained in the Administrative Complaint dated August 23, 1983.
James R. Patrick has been in the insurance business since 1976. He owned the Jim Patrick Insurance Agency at all times relevant hereto and in August, 1982, purchased the Wardwell Insurance Agency. JRP is licensed as an Ordinary Life, including Disability, agent and as a General Lines agent, and is authorized to sell casualty insurance as well as life and health insurance. By Consent Order dated September 15, 1982 (Exhibit 9), JRP's license was suspended for a period of six months from the date of that order. After purchasing the Wardwell Insurance Agency, JRP decided to open a branch office in Brooksville and so notified the Insurance Commissioner (Exhibit 7). He intended to have Larry Kinner as office manager for the Brooksville office. Kinner had passed his examination but awaited licensure for a much longer period than usual. While awaiting Kinner's licensure, JRP took application forms to Brooksville, was given space in his brother's (MDP) office in Brooksville; employed his niece, Beverly Patrick, to take applications for automobile and other casualty insurance; visited Brooksville frequently to meet with customers to sell casualty insurance; was available by telephone to the Brooksville office when not physically in Brooksville; had another agent in the Wardwell office go to
Brooksville frequently to sell policies and accept applications; and had Beverly
Patrick forward all applications and premiums received to the Wardwell office at Bartow. After waiting about three months without Kinner receiving his license, JRP closed the Brooksville branch of Wardwell Insurance Agency. During the time this branch office was in existence in Brooksville, the Wardwell name did not appear on the door nor did Wardwell have a telephone number separate from that of Dan Patrick & Associates. The evidence was unrebutted that Beverly Patrick worked for and was under the supervision and control of the Wardwell Insurance Agency and not MDP.
One of MDP's clients is James Gordon, who is employed by the Hernando State Bank as loan officer. In the fall of 1982 Gordon wanted to update his policies and talked to MDP about this during an incidental visit by MDP to the bank. Gordon worked up a spread sheet on his policies and arranged an appointment for MDP to come to his house to present a program to him and his wife. The exact date of this meeting was not established. At this meeting MDP presented a program to the Gordons, who wanted additional time to think about it. Within about two weeks of this meeting, Gordon notified MDP that he accepted the program and would have a check for the premium available when MDP next visited the bank. Gordon signed this application on February 7, 1983 (Exhibit 23), and wrote a check for the premium the same date. The only one to whom Gordon spoke about this insurance was MDP; however, his signature on the application was witnessed by David Pugh, a son-in-law of MDP who is a licensed insurance agent and works in the Dan Patrick agency in Brooksville. For the 60- day period following January 7, 1983, the license of MDP was suspended.
Although the information regarding the program was probably prepared by MDP before January 7, 1933, the meeting with the Gordons at which the program was explained occurred subsequent to January 7, 1983.
MDP contacted Vera Cannon in April or May, 1983, to update life insurance policies. He had sold her the original policy some ten years ago. On August 1, 1983, MDP picked up the existing policies from Vera Cannon to prepare a proposal to update the policies. She made an appointmemt with MDP for August 17, 1983, at which meeting MDP presented to her a proposal. David Pugh accompanied his father-in-law at this appointment. Respondent testified that he told Curtis Cannon, the husband of Vera Cannon, that his license was suspended and that Pugh would be handling the insurance; however, at the meeting with Vera Cannon, Respondent presented the proposals.
MDP also contacted Becky Cannon, wife of Mark and sister-in-law of Vera, on August 18, 1983, for the purpose of selling additional life insurance. An appointmemt was made for August 22, 1983; however, Becky Cannon cancelled the appointment with MDP and set up another appointment for the following week. Before that date arrived, Becky recalled seeing something in the paper about Respondent's emergency suspension and called the insurance department. When told that MDP's license was suspended, Becky cancelled the appointment and told Vera that MDP's license was suspended. Vera then called Respondent's office to demand the return of the premium she paid. Pugh returned her check immediately.
Gene Daniel is part owner of Branche-Daniel Corp d/b/a Brooksville Crown and Bridge. He contacted MDP regarding health insurance for his employees and for casualty insurance for his property. For this insurance he was referred to JRP, and he testified he purchased health insurance for his employees from Brenda Coley, a licensed agent in the Wardwell agency. Daniel does not recall when he spoke to MDP regarding his application for health insurance. Exhibit 22 contains an application, which appears to be dated January 10, 1983 (and 3-7-83) which is signed by Deanna L. Pugh, as agent, and a check signed by Daniel dated January 11, 1983. Daniel described himself as an absentee owner of the business
to which he comes sporadically to sign documents and checks. No credible evidence was presented regarding the date of his conversation with MDP or that the latter did more than refer him to an agent licensed to sell the insurance Daniel desired.
None of the parties to whom Respondents sold insurance allegedly in violation of Chapter 626, Florida Statutes, suffered any loss or complained of the treatment received from Respondents.
During the time the Wardwell agency worked out of MDP's office in Brooksville, JRP's license was under suspension yet he was always available by telephone, when not in Brooksville, to answer questions from and give instructions to, Beverly Patrick. JRP testified that he made frequent trips to Brooksville, sometimes several days in one week. During these visits he met with customers to sell insurance.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.
With respect to the allegations in Case 83-2994, Respondent, James Royal Patrick, is charged with numerous violations of Chapter 626, Florida Statutes, for which no evidence was presented and the same acts are charged as violations of several provisions of the statutes. Despite the separate charges, one act will be considered to constitute one offense for any recommended disciplinary action.
All of the allegations regarding JRP involved the selling of casualty insurance from the site of MDP's office in Brooksville. If this was truly a branch office, as contended by Respondents and not a part of the Dan Patrick & Associates Insurance Agency, no violations have been proved against JRP other than his selling of insurance while his license was under suspension.
With respect to the allegations in Case 83-2995, Respondent, Martin Daniel Patrick, is also charged with violating numerous provisions of Chapter 626 by a single act. Regarding the sale of casualty insurance, for which MDP was not licensed, from the location of his office in Brooksville the evidence must show both Respondents guilty or both Respondents not guilty. Either there was a bona fide branch office established, in which case both Respondents are not guilty of these charges, or the branch office was a sham and both Respondents are guilty as alleged.
At the conclusion of the hearing Petitioner moved to amend the pleadings to conform to the evidence by adding the charge of violating Sections 626.505, 626.733, and 626.747, Florida Statutes. Respondents were not put on notice that they would have to defend such charges, and due process requires notice. A finding of guilty of a charge not contained in the Administrative Complaint constitutes a denial of due process rights. Wray v. Department of Professional Regulation, Board of Medical Examiners, 435 So.2d 312 (1 DCA 1983) Accordingly, the motion to amend is denied.
Here the burden is upon Petitioner to prove the charges alleged. Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977). The quality of the evidence required to sustain this burden has been variously described before and after the present Administrative Procedure Act was passed. In Reid v. Florida Real Estate Commission, 188 So.2d 846 (Fla.
2d DCA 1966) the court concluded that an action to revoke a license was penal in nature and that penal sanctions should be directed only towards those who by their conduct have forfeited their right to the privilege [of licensee] and then only upon clear and convincing proof of substantial causes justifying the forfeiture of license. Accord, Lewis v. Planned Financial Services, 340 So.2d 941 (Fla. 4th DCA 1976)
In Florida Department of Health and Rehabilitative Services v. Career Service System, 289 So.2d 412 (Fla. 4th DCA 1974), the court, after disapproving the holding of the Career Service System that the agency had failed to prove conclusively that the licensee committed the offense alleged, held that an administrative tribunal measures proof presented to it by the preponderance of the evidence standard. That case involved the quantum of evidence required to discharge an employee for cause. Lewis, supra, did not cite either Reid or HRS
v. CSS, supra.
Florida Department of Transportation v. JWC Corporation and Department of Environmental Regulation, 396 So.2d 778 (Fla. 1st DCA 1981) involved the burden of proof in a petition by the Department of Transportation for a permit from DER to construct a complex source of air pollution. In this case the court upheld the standards established by Rule 17-1.59, Florida Administrative Code, for permit proceedings involving DER which provides "The person requesting the hearing, variance, license, or other relief, shall have the burden of proof to establish, by a preponderance of the evidence, entitlement to the requested license, variance, or other relief.
Bowling v. Department of Insurance, 394 So.2d 165 (Fla. 1st DCA 1981), like the cases here being considered, involved a proceeding to revoke the license of an insurance agent. In retreating from the preponderance of the evidence standard without adopting the clear and convincing evidence standard, the court stated at p. 171-2:
Although the APA does not in terms descend to such particulars, we have recognized the Act's implication that evidence 'appropriate in form' may differ from one proceeding to
another depending on the 'nature of the issues involved.' Now we recognize also that in
both form and persuasiveness evidence may 'substantially' support some types of agency action, yet be wanting as a record foundation for critical findings in a license revocation. So holding, we need not attempt to resurrect the pre-APA 'clear and convincing proof' standard for license revocation proceedings.
Rather, we glean a requirement for more substantial evidence from the very nature of the licensee discipline
proceedings: when the standards of conduct to be enforced are not explicitly fixed by a statute or rule, but depend upon such debatable expressions as 'in the applicable regular course of business'; when the conduct to be assessed is past, beyond the actor's power to conform it to agency standards announced prospectively; and when the proceedings may result in the loss of a
valuable business or professional license, the critical matters in issue must be shown by evidence which is indubitably as 'substantial' as the consequences.
The United States Supreme Court has approached the burden of proof standards as a constitutional due process issue.
Addington v. Texas, 441 U.S. 425, 99 S.Ct. 1804 (1979) involved the standard of proof required to commit an individual involuntarily for an indefinite period to a state mental hospital. The court stated at p. 1808:
The function of standard of proof, as that concept is embodied in the Due Process Clause and in the realm of fact finding, is to 'instruct the factfinder concerning the degree of confidence our society thinks it should have in the correctness of factual conclusions for a particular type of adjudication.' In re Winship, 397 U.S. 358, 370, 90 S.Ct. 1068, 1076, 25 L.Ed. 2d 368
(1970)(J. Harlan concurring) The standards serve to allocate the risk of error between the litigants and to indicate the relative importance attached to the ultimate decision.
Generally speaking, the evolution of this area of the law has produced across a continuum three standards or levels of proof for different types of cases. At one end of the spectrum is the typical civil case involving a monetary dispute between private parties. Since society has a minimum concern with the outcome of such private suits, plaintiff's burden of proof is a mere preponderance of the evidence. The litigants thus share the risk of error in roughly equal fashion.
In a criminal case, on the other hand, the interests of the defendant are of such magnitude that historically and without any explicit constitutional requirement they have been protected by standards of proof designed to exclude as nearly as possible the likelihood of an erroneous judgment. In the administration of criminal justice, our society imposes almost the entire risk of error upon itself. This is accomplished by requiring under the Due Process Clause that the state prove the guilt of an accused beyond a reasonable doubt. In re Winship, supra.
The intermediate standard, which usually employs some combination of the words 'clear', 'cogent', 'unequivocal', and
'convincing', is less commonly used, but nonetheless is 'no stranger to the civil law.' Woodby v. INS, 385 U.S. 276, 285, 87 S.Ct)
483, 488, 17 L.Ed. 362 (1966). See also,
McCormick, Evidence 320 (1954); 9 J.Wigmore, Evidence 2498 (3rd ed. 1940). One typical use of the standard is in civil cases involving allegations of fraud or some other quasi-criminal wrongdoing by the defendant. The interests at stake in those cases are deemed to be more substantial than mere loss of money and some jurisdictions accordingly reduce the risk to the defendant of having reputation tarnished erroneously by increasing the plaintiff's burden of proof. Similarly this Court has used the 'clear, unequivocal and convincing' standard of proof to protect particularly important individual interests in various civil cases. See, e.g. Woodby v. INS, supra, at 285, 87 S.Ct. at 487 (deportation) ; Chaunt v.
United States, 364 U.S. 350, 353, 81 S.Ct.
147, 149, 5 L.Ed. 2d 120 (1960)
(denaturalization) ; Schneiderman v. United States, 320 U.S. 118, 125, 159, 63
S.Ct. 1333, 1336, 1357, 87 L.Ed. 1796(1943)
(denaturalization)
After noting the function of the legal process is to minimize the risk of erroneous decisions; that commitment for any purpose constitutes a significant deprivation that requires due process protection; that the state has a legitimate interest in providing care to its citizens unable because of emotional disorders to care for themselves; and that the state also has the authority under its police powers to protect the community from dangerous tendencies of the mentally ill, the court in Addington v. Texas, supra, concluded the middle ground between preponderance of the evidence and beyond a reasonable doubt, viz, "clear and convincing" evidence was required to meet the due process guarantees. Similarly, in Williams v. Williams, 424 So.2d 159 (Fla. 1st DCA 1983) the court held the standard of proof in proceedings for noncriminal involuntary confinement is clear and convincing evidence.
Santosky v. Kramer, 102 S.Ct. 1388 (1982) involved severing the rights of parents to their children upon a finding of permanent neglect. While holding that, before the state may sever completely and irrevocably rights of parents in their natural child, due process requires that the state support its allegation by at least clear and convincing evidence, the court stated at p. 1397:
The extent to which procedural due process must be afforded the recipient is influenced by the extent to which
he may he `condemned to suffer grievous loss.' Goldberg v. Kelly, 397 U.S. 254, 262-263,quoting Joint Anti-Facist Committee v. McGrath, 341 U.S. 123, 168, 71 S.Ct.
624, 646, 95 L.Ed. 817 (1951)(Frankfurter, J.
concurring). Whether the loss threatened by a particular type of proceeding is
sufficiently grave to warrant more than average certainty on the part of the factfinder turns on both the nature of the private interest threatened and the permanency of the threatened loss.
License revocation cases are clearly penal in nature. Vining v. Florida Real Estate Commission, 281 So.2d 487 (Fla. 1973). Furthermore, the consequences of these proceedings can result in the loss of an occupational or professional license for which the licensee has devoted many years to acquire. This is much more than a "money judgment. In an action to revoke a professional license the risk of error from using the preponderance standard is substantial; and the countervailing state interest favoring that standard is comparatively slight. The language in Bowling, supra, above-quoted, that "When the proceeding may result in the loss of a valuable business or professional license, the critical matter in issue must be shown by evidence which is indubitably as 'substantial' as the consequences" is another way of saying what was earlier stated in Matthews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed. 2d 18 (1976) that both the risk of erroneous deprivation of private interests resulting from use of a "fair preponderance" standard and the likelihood that a higher evidentiary standard would reduce the risk must be considered; and, when so considered, the standard of proof that by its very terms demands consideration of the quantity, rather than the quality, of the evidence, may misdirect the factfinder in the marginal case. Santosky v. Kramer, supra.
The reviewing court measures the correctness of the administrative orders under review by competent and substantial evidence standard. Florida Department of Health and Rehabilitative Services v. Career Service System, supra. While that appellate standard does not change, the court in Bowling, supra, has raised the evidentiary standard at the trial level in license revocation proceedings by saying competent and substantial evidence in license revocation proceedings requires more than a preponderance of the evidence. The court in Addington v. Texas, supra, teaches that the law has developed three standards or levels of proof for different type cases depending on the magnitude of the risk of error. Bowling holds that, in license revocation proceedings, "more substantial evidence" is required. Presumably, this connotes a higher standard than a mere preponderance of the evidence and less than the criminal standard of "beyond a reasonable doubt." Prior to Bowling the only standard between these extremes that has received serious judicial attention is the "clear," "cogent,"
"unequivocal," and "convincing" standard.
Bowling, supra, holds more substantial evidence is required in license revocation proceedings when: (1) the standards of conduct to be enforced are not explicitly fixed by statute or rule; (2) when the conduct to be assessed is past; and (3) when the proceedings may result in the loss of a valuable business or professional license. In license revocation proceedings, (2) and (3) are invariably present, leaving as the variable only (1).
Absent more judicial guidelines expanding on the meaning of the phrase "evidence which is indubitably as 'substantial' as the consequences" leaves us to wonder, as did Alice at the Mad Tea Party, whether the words so used by the court mean what they say or say what they mean. From a reading of the entire case, it is concluded an evidentiary standard comparable to the clear and convincing standard of proof was adopted.
Applying this standard of proof to the issues here involved, it is clear that Respondent, James Royal Patrick, continued to sell insurance while his license was under suspension; however, the evidence is insufficient to show any other violation. There was no violation by Martin Daniel Patrick involving the insurance policies issued to Shiflett, Onorato, Elliott, Ervin, Patterson, Fuller, Higdon, Kemmett, and Denmark (Counts I through IX). Nor does the evidence support a finding that MDP sold group health insurance to Gene Daniel while his license was suspended, and Respondent MDP must be found not guilty of all allegations in Count X.
With respect to Count XI, the evidence is clear and convincing that MDP met with the Gordons to explain the proposed coverage subsequent to January 7, 1983, and before the expiration of the 60-day suspension which commenced January 7, 1983. This constitutes a violation of Sections 626.071(2), 626.112(1) and (2), 626.641(4), and not a violation of other sections denoting specific offenses as opposed to those sections making it an offense to violate statutes and rules generally.
With respect to Count XII, the evidence is clear and convincing that MDP sold life insurance to Vera Cannon as alleged subsequent to August 3, 1983, when his license was suspended by the Emergency Order of Suspension.
With respect to Count XIII, the evidence does not support the allegation that MDP ever met with Becky and Mark Cannon for the purpose of selling them insurance subsequent to August 3, 1983, when his license was suspended under the Emergency Order of Suspension. Although MDP attempted to meet with Becky Cannon, no meeting was ever held (subsequent to August 3, 1983)
, and no presentation was made or other acts taken by MOP with respect to Becky Cannon which requires an insurance license.
From the foregoing it is concluded that the evidence is clear and convincing that James Royal Patrick continued to sell insurance through the Wardwell agency in Brooksville during the six-month period commencing September 15, 1982, while his license was suspended, thereby violating the order of the Commission. It is also concluded that during the 60-day period starting January 7, 1983, Martin Daniel Patrick sold life insurance to James Gordon as alleged; that during the period subsequent to August 3, 1983, while his license was suspended, Martin Daniel Patrick sold life insurance to Vera Cannon; that Martin Daniel Patrick violated the order of suspension; and that he is not guilty of all other charges.
RECOMMENDED that the license of James Royal Patrick as an Ordinary Life, including Disability, and General Lines agent be suspended for a period of one
(1) year.
RECOMMENDED that the license of Martin Daniel Patrick as an Ordinary Life, including Disability, agent be suspended for a period of one (1) year.
ENTERED this 14th day of December, 1983, at Tallahassee, Florida.
K. N. AYERS, Hearing Officer Division of Administrative Hearings The Oakland Building
Filed with the Clerk of the Division of Administrative Hearings this 14th day of December, 1983.
Curtis A. Billingsley, Esquire Department of Insurance
Thomas F. Woods, Esquire 1300 East Lafayette Street Suite 112
