STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF INSURANCE AND ) TREASURER, )
)
Petitioner, )
)
vs. ) CASE NO. 86-0707
)
FRANK JOSEPH BRENNAN, )
)
Respondent. )
)
RECOMMENDED ORDER
This matter was heard by William R. Dorsey, Jr., the Hearing Officer designated by the Division of Administrative Hearings, on November 10, 1986, through November 13, 1986, in Fort Lauderdale, Florida. The transcript of the proceedings was filed on December 3, 1986, the parties filed their Proposed Findings of Fact and Conclusions of Law on December 22, 1986. Rulings on Proposed Findings of Fact are made in the Appendix to this Recommended Order.
For Petitioner: James F. Falco, Esquire
Tallahassee, Florida
For Respondent: Russell L. Forkey, Esquire
Pamela M. Burdick, Esquire Fort Lauderdale, Florida
The issues are framed by the Department of Insurance's First Amended Administrative Complaint filed April 17, 1986.
ISSUE
The issue is whether the licenses of Frank Joseph Brennan should be disciplined for actions of Mr. Brennan or of agents associated with Frank J. Brennan, P.A. with respect to the sale of insurance products to three (3) clients: Rebecca Fisher, Celine M. Rompre, and Mr. and Mrs. Joseph T. Nolan.
FINDINGS OF FACT
Frank Brennan
Frank Joseph Brennan holds licenses as an ordinary life agent, ordinary life including health, health agent, and ordinary-variable annuity agent.
Brennan is the owner and president of Frank J. Brennan, P.A., which sells life and health insurance products, including tax sheltered annuities of the National Western Life Insurance Company. The firm has several thousand tax sheltered annuity clients.
Brennan had been the president and the director of Lancer Securities Corporation. On March 22, 1979, he was enjoined by the U.S. District Court for the Middle District of Florida for acting as an officer or director of any registered investment company. That injunction states that it did not constitute evidence against or an admission by Brennan, and that the injunction did not "establish or prove any of the acts alleged or asserted in any pleadings."
Brennan was suspended from associating with any investment advisor for
120 days, and barred from associating thereafter with an investment advisor other than as a supervised employee in an order entered by the Securities and Exchange Commission on March 26, 1979.
Brennan was barred from associating with any member of the National Association of Securities Dealers, Inc. in the capacity of a principal in an order entered by that association on October 15, 1980.
Brennan was barred by the Securities and Exchange Commission in October 1980 from associating with any member in the capacity of a principal and fined
$1,000.
In May 1983, United Equitable Insurance Company terminated Brennan as an agent based on an adverse Equifax report. That report was not placed in evidence. (The foregoing findings 3 through 7 are based upon the Department of Insurance's Second Request for Admissions and Fifth Request for Official Recognition.)
The Relationship Of Gregory Langsett
And Betty Jones To The Frank J. Brennan, P.A.
Frank J. Brennan, P.A., has contracts with a number of licensed insurance agents, including Gregory Langsett and Betty Jones. Langsett has a producer agreement with National Western Life Insurance Company which describes him as an independent contractor, and an agent's agreement with the Brennan firm. Under the agent's agreement Langsett has with the Brennan professional association dated December 4, 1981, Langsett is
deemed an independent contractor and nothing in this agreement shall be construed to create the relationship of employer and employee. You are free to exercise your own judgement as to the persons from whom you solicit applications and the time and place of such solicitation. (Petitioner's Exhibit 28, Paragraph 1.)
Brennan had been involved in training of Langsett and Jones when they first were associated with the firm.
Agents such as Langsett and Jones are not listed on the employer's quarterly wage report made by the Frank J. Brennan, P.A. to the State of Florida Division of Unemployment Compensation.
Agents such as Langsett and Jones pay their own estimated income tax withholding and their own social security taxes.
The Brennan firm does provide agents with business cards (although Jones had her own cards printed). It also provides sales kits, telephone answering, postal services, makes available space for meeting with clients at the firm office and provides accounting services incident to the payment of commissions on business submitted to carriers through the firm, all without charge to the agents. Educational meetings are held on Fridays, which the agents are encouraged, but not required, to attend which discuss the various insurance products available through insurance companies the Brennan firm is associated with. Agents benefit from advertising done by the Brennan firm.
Brennan occasionally provides leads to agents. For example, January 1986 Brennan provided to Betty Jones and her husband (also a licensed insurance agent) a list of approximately 100 names of employees of the Boca Raton Academy so that they could be solicited for purchase of tax sheltered annuities, and an arrangement was worked out under which Brennan and the Joneses would divide commissions from any such sales. There is no evidence that Brennan controlled the time, place or manner of these solicitations, or of any other solicitations for the purchase of insurance products.
Langsett and Jones were not subject to the direct supervision and control of Brennan in their activities of soliciting insurance clients. They are not employees of the Professional Association -- they are independent contractors. This arrangement of appointing soliciting agents who are independent contractors is used by other sellers of tax sheltered annuities, and is not unique to the Brennan firm. (Tr. 496, 579). Brennan does have the authority, based on his contracts with insurance carriers, to appoint licensed agents as agents of insurance carriers.
Rebecca Fisher's Dealings With
Frank J. Brennan, P.A. and Frank Brennan
Rebecca Fisher is an employee of the Dade County School Board. She contacted Langsett concerning tax sheltered annuities offered by the National Western Life Insurance Company, after learning of Langsett from another employee. Under Section 403(b) of the Internal Revenue Code, employees of school boards may have a portion of their wages paid into a tax sheltered annuity. They pay no income tax on the amounts deposited in the annuity through payroll deduction and the interest paid on the amounts deposited is not taxed when earned. Such annuities are long term savings plans designed to supplement the participant's retirement income. Ms. Fisher already had a tax sheltered annuity with Northern Life Insurance Company which had a face value of over
$90,000. She had bought it through an insurance agent, Mr. Paul Indianer, with whom she had dealt over a number of years.
Langsett met with Mrs. Fisher at her home for about 15 to 20 minutes on a Saturday in June 1985. Mrs. Fisher was not able to spend much time with Mr. Langsett that day because she had to go to a funeral at about noon.
Thereafter, Mrs. Fisher attempted to call Langsett at the Brennan insurance offices. She called after 5:00 p.m. and Langsett was not there. Respondent Brennan answered the phone call. They discussed the possibility of opening a tax sheltered annuity account through National Western by rolling over into a new account money she had in her current tax sheltered annuity.
Mrs. Fisher knew if the money were rolled over she would incur a surrender charge. She also discussed with Brennan whether it would be possible to borrow money from a new National Western tax sheltered annuity for home
improvements. She was told money borrowed from a National Western annuity could be used for home improvements, and taxes would not have to be paid on the money borrowed from the annuity until her death. Her current annuity did not have a provision that permitted borrowing. At the hearing the provision permitting borrowing was referred to as the TEFRA provision -- so known , because it had its genesis in a portion of the Tax Equity and Fiscal Responsibility Act (TEFRA). (Tr. 45, 46, 80)
Reviewing the totality of Mrs. Fisher's testimony, the Hearing Officer is not persuaded that Mrs. Fisher is able to recall with clarity the conversation which she had with Mr. Brennan. For example, the Hearing Officer does not accept the testimony that Respondent or Langsett told Fisher that National Western would pay 20 percent interest the first year and 18 percent the second year on its annuities. Those figures represented the surrender charges on the Northern Life tax sheltered annuity she already had.
Neither did Brennan tell Fisher that she would get $75,000 of free life insurance in connection with a new tax sheltered annuity. One of the possibilities Brennan mentioned to Fisher was a more involved transaction in which her money would be rolled over into a new tax sheltered annuity, and a
$50,000 loan would be taken against that new annuity. The $50,000 might be used to purchase a single premium life insurance policy. Interest paid on the amount placed in that policy would accumulate without any income tax being owed on the interest as it was paid. National Western Life Insurance Company would provide
$75,000 of life insurance in connection with such a policy, over and above its
$50,000 face amount, for a $155,000 total life insurance benefit. The single premium life insurance policy does not make a specific charge for the $75,000 additional death benefit. There is, of course, a charge for this insurance in that the interest rate paid on the $50,000 deposited in the single premium life insurance policy is reduced by the mortality charge on the $75,000 additional death benefit. Mrs. Fisher confused these two different insurance products (the tax sheltered annuity and the single premium life insurance policy), and thought that the life insurance was part of the tax sheltered annuity, which is not what Brennan discussed.
Mrs. Fisher's notes of her conversation indicate that there would be a rollover penalty assessed against the face amount of her Northern Life tax sheltered annuity if she moved it to a National Western tax sheltered annuity. She had incurred penalties when she had moved money from her first annuity with Franklin Life to Standard Life the second annuity from Standard Life to Northern Life, both at the suggestion of her insurance advisor/agent, Mr. Indianer. (Tr. 57).
Those notes also appear to indicate that Brennan referred to her current Northern Life tax sheltered annuity as "antiquated," and described the method by which payments are made under the annuity as "suicide" from an income tax point-of-view. In view of the complexity of these insurance matters, and Mrs. Fisher's misunderstanding of what Brennan had said on other significant portions of the conversation, the Hearing Officer is not satisfied that the evidence is clear and convincing that Brennan used those terms to describe Mrs. Fisher's current insurance products in his conversation with Mrs. Fisher. Similarly, the testimony that Brennan referred to her old Franklin Life and Standard Life annuities (which Indianer had already persuaded her to replace) as "garbage" is not accepted.
Under the Internal Revenue Code, if money were borrowed from the annuity for the purpose of home improvements, no tax would be due on the amount
borrowed until the annuitant's death, or the surrender of the annuity for cash or annuitization. (Tr. 624, 781). Borrowings for other purposes must be paid back in five years or they are treated as a distribution from the shelter, and require that income tax be paid on that distribution. Neither the code nor case law requires a loan to be repaid when the annuitant reaches a certain age.
In short, contrary to the allegations of Count I of the Amended Administrative Complaint, the evidence is not convincing that Brennan made improper or defamatory remarks about Fisher's prior annuities or existing annuity, that he misrepresented the actual tax implications of the plans or the interest rate offered by the plans, or falsely represented that Fisher would receive $75,000 of free life insurance with a National Western annuity contract.
Celine Rompre's Dealings With Betty J. Jones
Betty J. Jones is an insurance agent licensed by the State of Florida. She also worked as an independent contractor through the Frank J. Brennan, P.A., selling tax sheltered annuity products of the National Western Life Insurance Company. Unlike Langsett there is no evidence that she has a written contract with the Brennan firm, but she does have a producer agreement with National Western Life Insurance Company.
On or about July 23, 1985, Ms. Jones solicited Celine M. Rompre for the purpose of selling her a National Western Life Insurance Company Section 403(b) tax sheltered annuity.
Rompre was an employee of the Palm Beach County School Board who already had a Section 403(b) tax sheltered annuity payroll deduction handled through Voyager Life Insurance Company; the insurance agency which had sold that annuity to her was owned by Edward Parmele.
Respondent Brennan personally had nothing to do with the solicitation which Betty J. Jones made of Celine Rompre. Betty J. Jones was not acting under the direct supervision and control of Frank J. Brennan in that transaction.
Betty Jones met with Celine Rompre and discussed the National Western tax sheltered annuity. Mrs. Rompre's husband also works and the Rompres do not need Mrs. Rompre's salary for living expenses. At the time she spoke with Betty Jones, Mrs. Rompre's annual salary was $5,500. She believed that it would increase to $7,200 at the beginning of the next school year, which did happen.
At the time Mrs. Rompre was putting $1,040 into her Voyager Insurance Company tax sheltered annuity each year.
Betty Jones discussed with Mrs. Rompre increasing her tax sheltered annuity contribution to approximately $4,000 per year. Jones told her that the maximum amount she could contribute would have to be separately calculated for each year. (Tr. 752). Mrs. Rompre was interested in this because Mrs. Rompre's daughter was then in the 8th grade, and it would be possible to borrow against that money to help with her daughter's education. Mrs. Rompre knew she would incur a substantial surrender charge on her current annuity if she switched to National Western. She signed papers prepared by Jones to accomplish the transfer of her annuity to National Western. Rompre was not eligible to increase her Section 403(b) annuity contribution immediately because she had changed her contribution once that year and only one change in the payroll deduction can be made annually. (Tr. 751).
When the paperwork went to the School Board to change the annuity from the Voyager annuity to the National Western annuity, Mrs. Rompre was contacted by Mr. Parmele about her Voyager annuity. He stated that Mrs. Rompre could not put $4,000 per year into a Section 403(b) tax sheltered annuity. This influenced Mrs. Rompre to cancel the transfer to National Western.
In fact, Mrs. Rompre was in a situation where she qualified to put as much as $5,051 into a tax sheltered annuity (this amount is known as the maximum exclusion allowance) over the next year under a catch-up provision of the Internal Revenue Code because she had not been contributing to an annuity for all eight years she had been employed by the Palm Beach County School Board. (Tr. 780). There is no evidence that Ms. Rompre was contributing to any other qualified retirement plans that would have affected her maximum exclusion allowance.
Betty Jones did not misrepresent to Celine Rompre the amount of her maximum exclusion allowance, the terms of the surrender charges for the Voyager life insurance policy or the National Western life insurance policy, or improperly affixed the signature of Celine Rompre to a letter to the Voyager Life Insurance Company requesting cancellation of her existing account.
Dealings Of Frank J. Brennan With The Nolans
In about March of 1985, Mr. and Mrs. Nolan went to Brennan for help preparing their tax return and for financial planning. Mr. Brennan had been highly recommended to them.
Mr. Nolan is a loss prevention manager for Radio Shack, and Mrs. Nolan is employed by the School Board of Broward County. Mr. Nolan had recently received an inheritance of about $30,000 and was looking for a way to invest it. The Nolans emphasized that the investment vehicle be liquid so they could access the money if they needed it. They were concerned that they might need it for the care of their parents.
When Mr. Nolan came to Brennan, he had whole life insurance policies with Prudential and Metropolitan Life which had some cash value. Brennan suggested those policies be cancelled so that the cash value could be invested, and this was done.
Mrs. Nolan's Section 403(b) Tax Sheltered Annuity
When the Nolans came to Brennan, Mrs. Nolan did not have a Section 403(b) tax sheltered annuity. Brennan suggested that she contribute to such an annuity program as a means of saving on income taxes. He also told them they could borrow against those funds, but this was of no interest to the Nolans. Mrs. Nolan purchased a tax sheltered annuity with Great American Life Insurance Company which currently paid 13.75 percent interest. One of the documents which is filled out to begin the payroll deduction with the Broward County School Board for Section 403(b) tax sheltered annuities is an amendment to the annuitant's employment contract to cause part of the salary to be paid directly into the annuity. On that form there are disclosures, including whether there is a sales charge, administration fee, or transfer fee, as well as whether there is a surrender charge. The amendment which she executed does not show any surrender charge in connection with the Great American Life Insurance Company Section 403(b) annuity she purchased.
Later the Nolans received another copy of the amendment which had the surrender charge portion filled in. It stated there would be a surrender charge of one-fifth of the first year's deposits only, which is waived if all proceeds are withdrawn over 36 months or longer. When Mr. Nolan received this he immediately called Mr. Brennan to ask about the surrender charge. Brennan told him that the annuity document itself explained the surrender charge and it should have been on the amendment to the employment contract as well. Brennan negligently failed to explain the surrender charge to the Nolans when the annuity was first taken out.
After receiving the altered amendment to employment contract, Mrs. Nolan instructed the School Board to stop the annuity deductions as of December
She had contributed $7,234 to the annuity at that time.
The Nolans then asked to cancel the annuity because they had not been made aware of the surrender charge. Mr. Brennan responded by stating that in order to get the refund, they would have to sign a release at the request of the insurance company, but the Nolans refused to sign any release. They prepared a short letter to the insurance company seeking the recision of the policy. Brennan also wrote to the company seeking the refund. The Nolans did receive their money back.
In connection with the rescission, the Nolans demanded and received from Brennan assurances that if the amount deposited in the annuity were not received by March 3, 1986, that Brennan would pay 10 percent interest per year on the proceeds until the Nolans received the proceeds. The Nolans received the amount before the agreed date when Brennan would begin to pay interest. The amount they received was only the principal paid in, however, and did not include any interest for the period the money had been held by Great American Life Insurance Company. Repayment of the $7,234 rendered these funds subject to current income taxes, because that income had not been subject to tax when placed in the annuity.
The Nolans' Other Insurance Purchases From Brennan
When the Great American Section 403(b) annuity was purchased, the Nolans also purchased other insurance products. These included two $2,000 individual retirement accounts (IRAs) for Mr. and Mrs. Nolan with National Western in the form of annuity policies, a Kemper Life Insurance policy on Mr. Nolan with a face value of $100,000 to replace the existing policies he had cancelled, and a $30,000 single premium endowment policy on Mrs. Nolan from National Western Life Insurance Company, which included a life insurance benefit so that the face amount of the policy was $200,602. These purchases saved the Nolans about $3,000 in income taxes.
The Nolan's had had IRA accounts at savings and loan institutions before they came to Brennan, which they would roll over when the instruments in which the money was deposited matured. Brennan explained that these National Western annuities were different than the accounts they had. These annuities were cancelled because the Nolans became dissatisfied with Brennan due to the non-disclosure of the surrender charge on the Section 403(b) annuity with Great American Life Insurance Company. Mr. Brennan arranged for those to be cancelled without penalty at the request of the Nolans. They received the principal paid in plus interest.
After the cancellation of the prior whole life policies at Brennan's suggestion, see Finding of Fact 37, above, Mr. Nolan purchased a Kemper Life Insurance term life insurance policy. At first he considered rescinding it along with the IRAs, also due to dissatisfaction with Brennan because of the failure to disclose the surrender charge on the Section 403(b) annuity. Ultimately he kept the Kemper policy, which was a better policy than the ones that had been cancelled.
The $30,000 inheritance Mr. Nolan received was used to purchase a
$30,000 single premium life endowment policy on Mrs. Nolan, which then paid
11.12 percent interest on the amount deposited and permitted borrowing from the policy at 7.4 percent. The policy was placed on Mrs. Nolan's life because she was the better underwriting risk. The interest which accrued on that policy was not subject to current federal income taxation, so the purchase was consistent with the Nolan's goal of achieving a high yield on the money with minimum taxation. That $30,000 premium purchased over $200,000 worth of life insurance on Mrs. Nolan, which Brennan described as "a freebie" in connection with the tax sheltered investment of the $30,000. This policy was cancelled under a policy provision which gave the right to cancel the policy during the first year, in part due to dissatisfaction with Brennan over the non-disclosure of the surrender charge on the Section 403(b) tax sheltered annuity.
Nolan was also dissatisfied with the endowment policy after he received it because (1) the interest guaranteed to be paid on the $30,000 was only 4 percent although he understood that the actual interest to be paid would fluctuate with economic conditions and be competitive and (2) to access the
$30,000 he could not withdraw money, but had to borrow from the policy. Although a loan could be processed quickly, Mr. Nolan did not like the idea of having to borrow his own money. The record is not clear whether the Nolans did or did not receive interest on the $30,000 for the time it was on deposit with National Western Life Insurance Company before the cancellation. The policy itself provides that on cancellation the insured "will be refunded the greater of the premium you paid or the cash value at that time." (Respondent's Exhibit 25)
Because Mrs. Nolan signed an application naming Mr. Nolan and beneficiary for the insurance purchased with the $30,000, because she had a physical examination to obtain the policy, and because the check to purchase it was made out to National Western Life Insurance, Mr. Nolan's testimony that he did not understand that the "investment" he was making with his $30,000 involved the purchase of an insurance policy is not accepted.
Brennan did sell the $30,000 policy to the Nolans in part on the basis that they would receive approximately $200,000 in free life insurance. The Nolans were more interested in a tax shelter for the $30,000 that would pay high interest, not in the insurance benefit.
In summary, Brennan failed to explain the surrender charge associated with the Great American Life Insurance Company Section 403(b) tax sheltered annuity to the Nolans when it was purchased. Brennan made no misrepresentations with respect to the sale of the two annuities from National Western Life Insurance which were to be used as the Nolans' individual retirement accounts. There were no misrepresentations made to Mr. Nolan with respect to the purchase of his Kemper Life Insurance policy, which he still has. Brennan told the Nolans that they would receive free life insurance associated with the deposit of $30,000 in the endowment policy on Mrs. Nolan's life, which had been purchased due to the tax free accumulation of interest on the $30,000 deposited.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over this matter, pursuant to Section 120.57(1), Florida Statutes.
The burden is on the Department of Insurance to prove that the allegations made in the Administrative Complaint. Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977). In a situation where the Respondent is at risk of losing a license to earn a living, the evidence must be as substantial as the potential consequences. Bowling v. Department of Insurance 394 So.2d 165 (Fla. 1st DCA 1981). In a situation such as this, to discipline a licensee the Department's evidence must be clear and convincing. Cf. Santosky v. Kramer, 455 U.S. 745, 102 S.Ct. 1388, 71 L.Ed.2d 599 (1982).
The evidence fails to show that Brennan made any misrepresentations in his telephone conversation with Rebecca Fisher. The evidence also fails to show that the agent who dealt with Mrs. Fisher, Gregory Langsett, worked under Brennan's direct supervision and control. Therefore, Section 626.795, Florida Statutes, provides no basis for imposing any liability on Brennan for anything Langsett may have said to Mrs. Fisher. In the one meeting which Langsett had with Fisher, however, no misrepresentations were made. Count I of the Amended Administrative Complaint should therefore be dismissed for failure of proof.
Similarly, Betty Jones was not under the direct supervision and control of Brennan in her dealings with Celine Rompre. She was also an independent contractor. Section 626.795, Florida Statutes, provides no basis for the imposition of discipline on Brennan for any acts of Jones. Moreover, Jones made no misrepresentations to Rompre and Count II of the Administrative Complaint should be dismissed for failure of proof.
Turning to Count III of the Administrative Complaint, dealing with Brennan's transaction with the Nolans, the Department proved only a portion of the allegations made in that count. They will be discussed seriatim.
The tax sheltered annuity from Great American Life Insurance Company was not an insurance policy which Brennan misrepresented as a tax sheltered annuity. It was a tax sheltered annuity, precisely as represented. No misrepresenta- tion as to the nature of that insurance product was made.
Brennan did negligently fail to explain the surrender charge if the funds paid into the annuity were withdrawn. Paragraph 15 and 16 of Count III have not been proven.
Brennan is guilty of a misconduct by telling the Nolan's that they would receive "free" life insurance on Mrs. Nolan's life in connection with the
$30,000 single premium endowment policy purchased with the inheritance that Mr. Nolan had received. Under Section 626.9541(1), Florida Statutes, which describes unfair methods of competition and unfair or deceptive acts, offering free insurance as an inducement to the purchase or sale of real or personal property or of services directly or indirectly connected with such real or personal property is prohibited. The statute defines free insurance as
insurance for which no identifiable and additional charges made to the purchaser of such real property, personal property, or services. Section 626.9541(1)(n)2.a., Florida Statutes. Brennan offered free life insurance in connection with the service of providing an investment vehicle for the Nolans'
$30,000. The evidence sustains paragraph 17 of Count III of the First Amended Administrative Complaint.
There was no evidence that Brennan misrepresented anything with respect to the Kemper Life Insurance policy purchased on the life of Mr. Nolan. Paragraph 18 of Count III is not sustained by the record evidence.
The evidence does not sustain the allegation of paragraph 19 of Count
III. Although misrepresentations are alleged with respect to the interest rate to be paid on the tax sheltered annuity issued by Great American Life Insurance Company, no such misrepresentation occurred. The paragraph also alleges a misrepresentation concerning the interest to be paid on the cash value of a Great American Life Insurance Company policy and the charges to borrow against that policy. There was no evidence of any offer to sell a Great American life insurance policy to the Nolans. Perhaps the charges are meant to refer to representations about the single premium endowment policy they purchased from Nation Western Life Insurance Company. Even indulging the assumption that the complaint misnames the insurance company involved, the National Western policy paid interest at the rate of 11.12 percent and the charge for borrowing against the policy was 7.4 percent, so no misrepresentations were made. The final allegation of that paragraph, that the IRAs sold to the Nolans were misrepresented because they were not IRAs but annuities is rejected, because these annuities were IRAs.
With respect to paragraph 20 of Count III, the only unauthorized change in the Nolan's policies was the interlineation of the disclose about surrender charges if the annuity were to be surrendered. Brennan had failed to explain this charge to Mr. and Mrs. Nolan at the time Mrs. Nolan purchased the Section 403(b) payroll deduction tax sheltered annuity from Great American Life Insurance Company. That oversight was corrected when the paperwork was processed in the Brennan firm, and a copy of the change was sent to the Nolans. This caused them to change their mind about contributing to a tax sheltered annuity because the funds were illiquid. At their request all money contributed was refunded. There was no act of misrepresentation about the surrender charge, only a negligent failure to disclose. It was not knowingly done, purposefully done, or done as part of a fraudulent or dishonest practice. Mere negligence in a single transaction which was rescinded after the omission was brought to Brennan's attention does not provide a basis for the imposition of discipline.
The Department has suggested that the penalty should include the payment of interest to the Nolans on the $7,234 deposited in the tax sheltered annuity, taxes paid on the $7,234, and interest on the $30,000 placed in the endowment policy. There is no evidence in the record on whether the Nolans did or did not receive interest on the $30,000. Tax would have been due on the
$7,234 which had been sheltered in the Section 403(b) annuity so those taxes are not an item of damage. While the Department has authority to fine Brennan for the offering of free insurance under Section 626.681, Florida Statutes, no authority is cited for the payment of any portion of a fine due to the state to the Nolans.
Based on the foregoing Findings of Fact and Conclusions of Law, it is
RECOMMENDED:
That Counts I and II of the Amended Administrative Complaint be DISMISSED.
That on Count III, for offering free life insurance as an inducement for the deposit of $30,000 in the single premium endowment policy, Brennan be FINED $2,500.00 and his license SUSPENDED for a period of three (3) months.
DONE AND ORDERED this 1st day of May, 1987, in Tallahassee, Florida.
WILLIAM R. DORSEY, JR.
Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399-1550
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 1st day of May, 1987.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-0707
The following constitute my specific rulings pursuant to Section 120.59(2), Florida Statutes (1985), on the proposed findings of fact submitted by the parties. See Rule 28-5.405(3), Florida Administrative Code.
Rulings on Proposed Findings of Fact Submitted by Petitioner
Before ruling on the individual proposals made by the Petitioner, it is appropriate to make some general comments. The proposals submitted by the Petitioner are exceptionally detailed, indeed unnecessarily so. Many are rejected as unnecessary or cumulative to the facts found in the Recommended Order. Others are irrelevant because they address issues not properly raised by the allegations of the First Amended Administrative Complaint. The testimony of the principal witnesses on counts one and two, Rebecca Fisher and Celine Rompre, was certainly sincere but generally unpersuasive. The testimony of the other expert witnesses who make their livings by selling tax sheltered annuities was also not convincing because their view of Mr. Brennan and his activities is so colored by their competition. Mr. Parmele's testimony left an abiding impression of hostility to Brennan for trying to persuade clients of Parmele to switch their annuities to companies represented by Brennan, and Parmele's testimony is discounted based upon his hostility. Mr. Indianer was not as hostile, but his financial interest in removing Brennan as a competitor also causes substantial discounting of his testimony. The opinions of Robert Storms are accorded little weight because he does not regard himself as an expert in tax sheltered annuities.
To the extent necessary, covered in Finding of Fact 1.
Covered in Findings of Fact 3-6.
Covered in Finding of Fact 7.
To the extent relevant, covered in Finding of Fact 2.
Rejected as irrelevant.
Rejected because it is not a finding of fact.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as a statement of law, not a finding of fact.
Covered in Finding of Fact 8.
Rejected as unnecessary.
To the extent relevant, covered in Finding of Fact 2.
Rejected as unnecessary.
Rejected as a statement of law, not a finding of fact.
Rejected as unsupported by the transcript citation given.
To the extent necessary, covered in Finding of Fact 10.
Rejected as irrelevant.
Although true, rejected as unnecessary.
Covered in Finding of Fact 8.
Rejected as unnecessary, and unsupported by the transcript citation given.
Covered in Finding of Fact 25.
Rejected as unnecessary.
Covered in Finding of Fact 13.
Rejected as unsupported by transcript citation given which only reflects a division of commissions between the Jones' and Brennan with respect to sales to employees of the Boca Raton Academy.
Rejected as irrelevant.
Rejected as unnecessary and not supported by the exhibit citation given. PX 25 authorizes Langsett to procure applications; whether this is a license as a "writing agent" is unclear.
Rejected as a statement of law.
Rejected because Betty Jones had no written contract with the Brennan firm. Langsett's relationships are covered in Finding of Fact 8.
Rejected because Jones had no written contract with the Brennan firm. With respect to Langsett's contract with the firm, rejected as irrelevant.
To the extent relevant, covered in Finding of Fact 8. Jones had no written contract with the firm.
Rejected because Langsett and Jones testified that being independent contractors included that they pay their own expenses, not meant that they pay their own expenses.
Rejected as irrelevant.
Covered in Finding of Fact 14.
Rejected as unnecessary.
Rejected as inconsistent with the transcript citations given.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
To the extent that the information was provided in the form of sales kits, covered in Finding of Fact 12.
Covered in Finding of Fact 12.
Rejected as not supported by the evidence.
Rejected as unnecessary.
Rejected as not constituting a finding of fact.
Rejected as not constituting a finding of fact.
Rejected as not constituting a finding of fact.
Rejected as subordinate and cumulative to Finding of Fact 12.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary and inconsistent with the transcript citation given.
Rejected as unnecessary and irrelevant.
Rejected as unnecessary and irrelevant.
Rejected as unnecessary and irrelevant.
Rejected as unnecessary and irrelevant.
Rejected as unnecessary and irrelevant.
Rejected as unnecessary and irrelevant.
Rejected as unnecessary and irrelevant.
Rejected as unnecessary and irrelevant.
Rejected as a recitation of testimony, not a finding of fact, also irrelevant.
Rejected as irrelevant.
Rejected as unnecessary and irrelevant.
Rejected as unnecessary
Rejected as unnecessary. The citation given supports only the statement made as to Betty Jones.
Rejected as unnecessary.
To the extent necessary, covered in Finding of Fact 9.
Rejected as unnecessary.
Covered in Finding of Fact 12.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Covered in Finding of Fact 15.
Covered in Finding of Fact 15.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
To the extent necessary, covered in Finding of Fact 12.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
To the extent necessary, covered in Finding of Fact 12.
Covered in Finding of Fact 12.
Rejected as unnecessary.
To the extent necessary, covered in Finding of Fact 15.
Rejected as unnecessary.
Rejected as unnecessary. -
Rejected as a statement of law, not a finding of fact, also unnecessary.
Rejected as a statement of law, not a finding of fact, also unnecessary.
Rejected as a statement of law, not a finding of fact.
Rejected as a statement of law, not a finding of fact.
Rejected as a statement of law, not a finding of fact.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Covered in Finding of Fact 23.
To the extent necessary, covered in Finding of Fact 23.
Rejected as subordinate to Finding of Fact 23.
Rejected as subordinate to Finding of Fact 23.
Rejected as inconsistent with Finding of Fact 23.
Rejected as unnecessary.
Rejected as unnecessary.
Subordinate to Finding of Fact 33.
Subordinate to Finding of Fact 33.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Covered in Finding of Fact 33.
Subordinate to Finding of Fact 33.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected for the reasons stated for the rejection of proposed finding of fact 32.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as cumulative to Finding of Fact 15.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as irrelevant and unnecessary. Further, Mr. Storm's testimony is not persuasive on the point.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected because the form, PX 9, is a creation of a committee which is advisory to the risk manager of the School Board of Broward County and has no legal status.
Rejected because the form, PX 9, is a creation of a committee which is advisory to the risk manager of the School Board of Broward County and has no legal status.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Mr. Storm's testimony as to what would be misleading is unpersuasive.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Although true, rejected as unnecessary. The power to appoint sub-agents who become producers for insurance carriers does not mean that Brennan exercised direct supervision and control over such persons, or over Langsett and Jones in the situations at issue in
this matter.
Although true, rejected as unnecessary.
Covered in Finding of Fact 14.
Covered in Findings of Fact 8 and 25.
Covered in Finding of Fact 2.
Rejected as irrelevant.
Covered in Finding of Fact 13.
Rejected as irrelevant.
Rejected as irrelevant.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as a recitation of testimony7 not a finding of fact.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Covered in Finding of Fact 12.
Rejected as unnecessary.
Rejected as unnecessary.
Covered in Finding of Fact 9.
Subordinate to Finding of Fact 12.
Rejected as
Rejected as unnecessary.
Rejected as irrelevant.
Rejected as irrelevant.
Rejected as irrelevant.
Rejected as unnecessary.
Rejected as irrelevant.
Rejected as irrelevant.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected because the finding is taken out of context. Agents such as Langsett submit business through the Brennan firm and receive their commission through the accounting system at the Brennan firm. When the files are submitted to the carriers, this does not imply that the firm has the right not to pay Langsett, it is
the medium through which his payments are processed. See Finding of Fact 12.
Covered in Finding of Fact 12.
Rejected as a misstatement of the testimony. That testimony occurred because Langsett was asked about commissions payable in a situation he never had experienced.
Rejected as unnecessary.
Rejected as irrelevant and unnecessary.
Rejected as irrelevant.
Rejected as irrelevant.
Covered in Finding of Fact 12.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as a recitation of testimony, not a finding of fact.
Rejected as a recitation of testimony, not a finding of fact.
Rejected as unnecessary.
Generally covered in Finding of Fact 12.
Covered in Finding of Fact 12.
Rejected as unnecessary.
Rejected as cumulative to Finding of Fact 12 concerning education.
Rejected as unnecessary.
Covered in Finding of Fact 12.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Covered in Finding of Fact 12.
Covered in Findings of Fact 12 and 25.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as cumulative to Finding of Fact 12.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as irrelevant and unnecessary.
Rejected as irrelevant and unnecessary.
Rejected as unnecessary.
Generally covered in Findings of Fact 15 and 16. As pointed out at the beginning of these rulings, Mrs. Fisher's version of her dealings with Langsett and Brennan were not found persuasive. For example, only one meeting occurred between Fisher and Langsett, not two.
Rejected as irrelevant to the allegations in the Amended Administrative Complaint and unnecessary.
Rejected as a recitation of testimony, not a finding of fact.
Rejected because I do not accept Mrs. Fisher's version of the events, rendering Mr. Indianer's comments on that version irrelevant and unnecessary. See also the general comment about Indianer at the beginning of this section. The issue of free life insurance is covered in Finding of Fact 20.
Rejected as unnecessary.
Rejected as a recitation of testimony, not findings of fact.
Covered in Findings of Fact 27, 29, 30 and 31. Many of the proposed findings are rejected as unnecessary.
Covered in Findings of Fact 29, 30 and 31. The proposal that Jones told Rompre she could deposit
$4,000 per year for five years is rejected and the contrary testimony of Ms. Jones, incorporated in Finding of Fact 31, has been accepted.
Rejected because the testimony of Mr. Storms is not found persuasive.
Rejected as a recitation of testimony, not findings of fact. Many of the proposals are unnecessary.
Rejected as unnecessary.
Generally rejected because Mr. Parmele's testimony is not found persuasive. Further, many of the proposals aggregated in the finding are unnecessary. That Jones told Rompre she could deposit $4,000 a year for five years has been rejected.
Rulings on Proposed Findings of Fact Submitted by Respondent
Covered in Finding of Fact 1.
To the extent relevant, covered in Finding of Fact 2.
To the extent necessary, covered in Finding of Fact 2.
Rejected as unnecessary.
Covered in Finding of Fact 8.
To the extent necessary, covered in Finding of Fact 8.
To the extent necessary, covered in Finding of Fact 25. The proposal that Jones had a written agent's agreement with the Brennan firm is rejected because no such document was offered in evidence.
To the extent necessary, covered in Findings of Fact 9 and 12.
Rejected as cumulative to Finding of Fact 9.
Rejected as unnecessary but discussed in the introduction to the rulings on the Petitioner's proposed findings of fact as relates to the credibility of Indianer and Parmele.
Rejected as unnecessary.
Rejected as unnecessary but discussed in the introduction to the rulings on the Petitioner's proposed findings of fact.
Rejected as unnecessary.
Rejected as not constituting a finding of fact.
Covered in Findings of Fact 8 and 14.
Covered in Findings of Fact 15 and 16.
Rejected as a recitation of testimony, not a finding of fact.
Rejected as a recitation of testimony, not a finding of fact.
Rejected as a recitation of testimony, not a finding of fact.
Rejected as a recitation of testimony, not a finding of fact.
Rejected as unnecessary.
To the extent necessary, covered in Finding of Fact 21.
Rejected as a recitation of testimony, not a finding of fact.
Rejected as a recitation of testimony, not a finding of fact.
Rejected as a recitation of testimony, not a finding of fact.
Rejected as unnecessary.
Rejected as unnecessary because Indianer's testimony has not been accepted.
Rejected as unnecessary.
Covered in Findings of Fact 14 and 25.
Covered in Findings of Fact 26, 27 and 31.
Covered in Finding of Fact 29.
Covered in Finding of Fact 31.
Covered in Finding of Fact 31.
Rejected as cumulative to Findings of Fact 30 and 31.
Rejected as unnecessary, and as a recitation of testimony, not a finding of fact.
Rejected as unnecessary.
Covered in Finding of Fact 32.
Rejected because the testimony of Mr. Parmele has not been accepted for the reasons. stated in the introduction to the rulings on the Petitioner's proposed findings of fact. See also Finding of
Fact 33.
Generally rejected as a recitation of testimony.
Rejected as unnecessary because it is based on income of $7,200 which was not Mrs. Rompre's income at the time of her meeting with Betty Jones.
Accepted in Finding of Fact 33.
To the extent not cumulative, covered in Finding of Fact 31.
Covered in Findings of Fact 35 and 38.
Covered in Finding of Fact 43.
Rejected as unnecessary.
Covered in Finding of Fact 43.
Covered in Findings of Fact 39, 44 and 46.
Rejected as a recitation of testimony and because the problem was not only that the form did not contain the surrender charge, but that Brennan had not explained the surrender charge to the Nolans when the Great American Section 403(b) tax sheltered annuity was first purchased.
Generally rejected as unnecessary. The surrender value is explained in the altered amendment to the employment contract. See Finding of Fact 39.
To the extent necessary, covered in Finding of Fact 41.
To the extent necessary, covered in Finding of Fact 44.
Covered in Finding of Fact 44.
Covered in Finding of Fact 46 and 47.
Rejected for the reasons stated in Finding of Fact 46.
Covered in Finding of Fact 46.
To the extent necessary, covered in Finding of Fact 46.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Rejected as unnecessary.
Covered in Finding of Fact 23.
Rejected as unnecessary and because the testimony of Mr. Indianer has not been found persuasive.
Rejected because the testimony of Mr. Parmele has not been accepted.
Covered in Finding of Fact 23.
Sentences 1 and 2, covered in Finding of Fact 14. The remainder, rejected as unnecessary.
Rejected as unnecessary.
Covered in Finding of Fact 12.
Covered in Findings of Fact 10 and 11.
Generally covered in Finding of Fact 12.
Covered in Findings of Fact 8 and 11.
Rejected as unnecessary.
COPIES FURNISHED:
James F. Falco, Esquire Department of Insurance and
Treasurer
Room 413-B, Larson Building Tallahassee, Florida 32399-0300
Russell L. Forkey, Esquire Pamela M. Burdick, Esquire
400 Southeast 12th Street
Fort Lauderdale, Florida 33316
Honorable William Gunter State Treasurer and
Insurance Commissioner The Capitol, Plaza Level
Tallahassee, Florida 32399-0300
Don Dowdell, General Counsel Department of Insurance and
Treasurer
The Capitol, Plaza Level Tallahassee, Florida 32399-0300
=================================================================
AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF INSURANCE AND TREASURER
IN THE MATTER OF:
FRANK JOSEPH BRENNAN DOAH Case No. 86-0707 Case No.: 86-L-11DS
Ordinary Life Agent
Ordinary Life, including Health Agent Health Agent
Ordinary-Variable Annuity Agent
/
FINAL ORDER
THIS CAUSE came before the undersigned Insurance Commissioner of the State of Florida for consideration and final agency action. On November 10-13, 1986, an administrative proceeding was conducted in Ft. Lauderdale, Florida, before a Hearing Officer of the Division of Administrative Hearings, Department of Administration, pursuant to Section 120.57(1), Florida Statutes. This administrative proceeding is recorded in the transcript of proceedings certified on November 30, 1986 and filed with the Division of Administrative Hearings on December 3, 1986. On May 4, 1987, the Hearing Officer filed his Recommended Order and on May 7, 8 and 11, 1987, this Agency received Exceptions to the Recommended Order from the parties. Upon a careful consideration of the record and submissions of the parties and being otherwise fully advised in the premises, it is
ORDERED:
The Hearing Officer's Recommended Order, including Appearances, Findings of Fact, and Conclusions of Law (with the exception of paragraph 10), is hereby adopted and incorporated as this Agency's Final Order. The Recommendation is not adopted as set forth herein.
Subsequent to the filing of the Recommended Order, the Department submitted Fifteen Notices of Supplemental Authority for consideration by the undersigned in reviewing the Recommended Order. The Respondent has filed numerous motions to strike said notices and requesting Attorneys Fees. The procedure of filing Notices of Supplemental Authority after the period for filing exceptions to a recommended order appears to be one of first impression, at least before this Agency. Based on the arguments of counsel I do not find that it is a prohibited practice under Chapter 120, Florida Statutes, although it is not specifically addressed or allowed. Section 120.57(1)(b)5., Florida Statutes, does provide that the record shall consist of "All notices, pleadings,
motions and intermediate rulings." emphasis added. Accordingly, all Notices of Supplemental Authority are made a part of the record herewith. The Respondent's Motions to Strike are denied and all requests for attorneys fees are likewise denied.
It would appear that in some situations that a Notice of Supplemental Authority would greatly assist the Agency head in making final decisions on conclusions of law which may be of critical importance in determining the interpretation of statutes and rules which the Department is required by law to interpret and enforce. However, in the case at bar I did not find that the additional authority disclosed directly affected conclusions of law necessary to render an Order in this matter. Primarily, the cases addressed evidentiary issues which are fully reviewable on appeal.
RULINGS ON THE RESPONDENT'S EXCEPTIONS
On May 11, 1987, the Respondent filed three exceptions to the Recommended Order and also took exception to the recommended penalty. I have reviewed the exceptions and make the following findings:
(1)(a)-(c)--Findings of Fact 3-7 were based upon the Department's Second Request for Admissions and Fifth Request for Official Recognition and therefore were properly made a part of the record in this matter. These facts would appear to address the issue of whether the Respondent lacks fitness and trustworthiness to engage in the business of insurance. However, since these actions were not charged in the Administrative Complaint and don't appear to be directly related to the charges contained in Counts I through III, I have not considered them in resolving the matters contained in this Final Order.
The Respondent requests that the Department reweigh the evidence and make a finding of fact that the Respondent did not offer free life insurance to the Nolans. He cites limited parts of the record to support his contentions. Clearly, the hearing officer was in a much better position to weigh "all" of the evidence and believed that Mr. Nolan was telling the truth when he stated that Mr. Brennan offered free life insurance to him and his wife in his presentation. This is clearly prohibited by the Insurance Code. The finding with reference to Mrs. Fisher is not in conflict. In the case of Mrs. Fisher the hearing officer did not find that the Respondent offered Free life insurance to her, but merely found that Mrs. Fisher confused as to what was discussed. Also Mr. Brennan did not "deny" that he offered free life insurance to the Nolans but merely stated that "I don't recall." It appears the hearing officer assigned very little weight to his so-called "denial." Therefore the Respondent's exception to this finding of fact is not well taken.
Again the Respondent is requesting that the Department reverse a finding of fact based on two small excerpts From the transcript. There is no question that the offer of free life insurance was made in connection with the sale of insurance products to the Nolans. It appears that there is clear, convincing, competent and I substantial evidence in the record to support the hearing officer's conclusion that the Respondent offered Free life insurance to the Nolans during the course of his solicitation. Therefore, this exception to the recommended order is not well-founded.
For the reasons set forth above I find that there is clear, convincing, competent and substantial evidence to support findings of fact 46, 49 and 50.
Respondent takes exception to the Hearing Officer's Conclusion of Law number 7 which concluded that the Respondent offered free life insurance to the Nolans as an inducement to purchase insurance products. The Hearing Officer found as a matter of fact that the Respondent did indeed offer Free life insurance AS an inducement. As previously discussed this finding will not be disturbed.
The Respondent's legal argument that there was no inducement is without merit. Obviously the only reason that Mr. Brennan would mention "free" life insurance in a solicitation would be to influence the consumer to purchase his product. Although the offer of free insurance may not have been the sole or deciding factor by the consumer to purchase, it was clearly offered with the purpose of factor influencing the consumer in making his or her decision to purchase. This is exactly the harm which the insurance Code intends to cure.
It is unfair to attempt a consumer to purchase an insurance product with a representation that he or she is receiving something extra without charge. Reliance on the offer is not necessary as the insurance Code makes the offer a violation in and of itself. Therefore, the Respondent's characteristic that the "offer" was not an inducement is not supported in the record or as a matter of law.
Section 626.9541(1)(n)1., Florida Statutes, provides for three ways in which it may be violated. One, by advertising, two, by offering and three, by providing "free" life insurance. The Respondent was charged and Found guilty of "offering" free life insurance. Therefore, the Respondent's contention that his act did not constitute a violation of Section 626.9541(1)(n)1. is without merit.
Respondent's reliance upon Section 626.9541(1)(n)3.d, Florida Statutes, is misplaced. The Department proved that the Respondent offered free life insurance in the course of his solicitation to the Nolans. There was no record evidence to indicate that the Respondent's offer was other than in the regular course of business. The referenced subsection is an "exception" to the general prohibition. The Respondent failed at any point to raise as a defense that the exception applied to the transaction at issue. Basically, the exception would be raised as an affirmative defense of which none were pursued by the Respondent. Therefore this exception is without merit and not supported by the record in this cause.
The Respondent's constitutional challenge is not properly before the Department, The Department does not have jurisdiction to consider constitutional issues. However the Department does believe that the referenced statute is constitutional. The referenced prohibition of offering free insurance has long been recognized as an unfair trade practice and does not impermissibly interfere with the Respondent's insurance business. The business of insurance is a highly regulated business and the Insurance Code was adopted to protect the insurance buying public. Especially in the area of unfair trade practices where the consumer may be put at a disadvantage by unscrupulous insurance agents. The constitutional issues raised by the Respondent were not properly raised at the hearing and therefore there is no record in which to determine these issues and accordingly this exception is without merit.
The Respondent has challenged the recommended penalty as improperly imposed and too severe for the violation committed. The recommended suspension of three (3) months is not too severe. The Respondent was found guilty of offering free insurance in violation of Sections 626.611(4), 626.621(6) and 626.9521, Florida Statutes, which constitutes the "Unfair Trade Practices Act." The Respondent's conduct is a most serious violation. The Act is a consumer
protection act and generally prohibits unfair methods of competition in the business of insurance. It is apparent from the hearing officer's recommended penalty that he felt the Respondent acted in a willful manner in offering free life insurance to the Nolans. He did not characterize the violation as negligent or in any way non-willful. Based on a fair reading of the record as a whole it appears that the Respondent wilfully violated Section 626.9541(1)(n)1., especially since the Respondent admitted that he knew it was a violation to advertise either directly or indirectly, free insurance.
Also, the Hearing Officer certainly concluded that the Respondent's actions were willful because he recommended that a fine in the amount of $2,500 be imposed, which is the maximum allowed for a wilful violation of the Code.
Therefore, a three (3) month suspension is not an adequate penalty in the case at bar as set forth herein. Additionally, the Respondent claims that the imposition of a $2,500 fine in addition to the suspension is unlawful. Insofar as the Hearing Officer has attempted to both suspend and fine the Respondent for the same violation the Respondent has raised a valid point. Therefore the
$2,500 fine will not be imposed.
Finally, the Respondent maintains that a three (3) month suspension is not consistent with other penalties imposed by the Department in cases which the Respondent feels are more serious violations. None of the cases cited by the Respondent dealt with a violation of the "Unfair Trade Practices Act." Further, In The Matter Of Timothy Paletti, Case No. 79-2442, 2 FALR 1448-A (1980) was a bail bond case and involved completely different issues of fact and statutory violations. Likewise In The Matter Of John Hargreaves. Case No. 86-L450LLM, 9 FALR 1219 does not support the imposition of a lesser penalty in this matter. Again Hargreaves was a bail bond case involving different factual and legal issues. The alleged misrepresentation in his application was found not to be intentional and the violation did not relate directly with his dealings with the public. Specifically, this case did not involve discipline for a violation of the Unfair Trade Practices Act. Wherefore the Respondent has not demonstrated that the penalty imposed in this matter is inconsistent with other penalties imposed by the Department in similar situations.
RULINGS ON THE DEPARTMENT'S EXCEPTIONS
On May 7,8 and 11, 1987, the Department filed exceptions to the Recommended Order. The vast majority of the exceptions raised by the Department address disputed issues of fact and conclusions based thereon. To the extent possible they will be addressed in numerical order.
(1.) The Department claims that the hearing officer failed to address ten of Its proposed findings of fact. The ten proposed findings addressed issues of fact regarding Count III of the Administrative Complaint. In fact the Hearing Officer did make findings regarding this count and found the Respondent guilty of offering free life insurance. He did not find any other violations. The failure of the Hearing Officer to address these ten (10) proposed findings may have constituted error, however it appear's that the findings of fact made by the Hearing Officer are sufficiently detailed to permit the entry of an order without remand to the Hearing Officer to consider the ten (10) proposed findings. Also, I do not glean a requirement in Chapter 120 for the Hearing Officer to specifically address proposed conclusions of law.
(2.) It appears the Hearing Officer was certainly aware of the legal issues regarding professional associations, employees and sub-agents. However, it is clear he has made a finding of fact that Betty Jones and Gregory Langsett were not under the direct supervision and control of the Respondent.
(3.) Apparently the Hearing Officer concluded that the rejected findings were unnecessary based on his determination that agents Jones and Langsett were not under the direct supervision and control of the Respondent.
(4.) through (13.)-Similarly, the Department requests rulings on each alleged legal error committed by the Hearing Officer which affected ultimate findings of fact. This function of second-guessing every ruling of the Hearing Officer and its "possible" affect on a finding of fact would be, in essence, a reweighing of the evidence and may result in rejecting findings that may have been properly entered by the Hearing Officer. I respectfully decline this invitation. If the Hearing Officer has made reversible errors that have prejudiced the Department in the presentation of its case or in making his findings of fact, then these issues are properly resolved if this matter is appealed.
(6.) The Department's argument under Point II is likewise rejected as requiring the reconsideration of the evidence and reversal of the Hearing Officer's findings of fact based on alleged improper application of legal principles.
(7.) The Department's exceptions under Point III have been considered, however do not impact upon the basic findings of fact and conclusions of law reached by the Hearing Officer. The key issue was whether the Respondent exercised supervision and control over agents Jones and Langsett.
(8.) Insofar as the Hearing Officer did not find that a misrepresentation had occurred in any of the counts, the discussion under Point IV is of little relevance.
(9.) The Department's contention that the recommended penalty is too lenient is well taken and is discussed further herein.
(10.) Again on May 8, 1987, the Department filed thirty-eight pages of additional exceptions to the recommended order. Under Point I the Department urges the undersigned to reject findings of fact based on alleged legal errors which resulted in a failure to comply with the essential requirements of the law. I respectfully decline the Department's suggestion, recognizing that it is for the District Court to review the proceedings to determine if legal errors have been committed. If I were to improperly resolve a legal issue and reject or modify a finding of fact then conceivably this Order could be rendered improperly entered. I prefer to let the Courts decide if the Hearing Officer committed error prejudicial to the Department and order a remand of the case for a new hearing, if necessary. With reference to the Department's argument in subsection (2) on pages 11 and 12, it may be true that the representations concerning loans were misleading but the essential determination made by the Hearing Officer was that the Respondent was not responsible for the acts of agents Jones and Langsett in Counts I and II. Also, in order to establish the misleading representations it would be necessary to reverse a finding of fact, which I am reluctant to do.
The Department further requests that I make additional findings and reject others made by the Hearing Officer based on the determination of credibility
issues and certain conduct of the Hearing Officer. These arguments are contained in pages 19 through 38. An exercise of this nature would invite conflicts with valid findings of fact and interfere with the Hearing Officer's determination of the ultimate issues of fact Conflicts in the evidence are properly resolved by the Hearing Officer. Possible errors in the application of rules of evidence are better resolved by the District Courts of Appeal.
Therefore decline to make additional findings of fact that would be contrary to those found by the Hearing Officer.
(11.) Finally on May 11,1987, the Department filed another 17 pages of exceptions to the recommended order. In the first exception the Department disputes the Hearing Officer's finding that no defamation had occurred. There was conflicting evidence on this point and therefore I decline to reweigh the evidence and reverse this ultimate finding of Fact. Basically, the Hearing Officer did not find that Mrs. Fisher's testimony was clear and convincing regarding the conversation she had with the Respondent. In Point 2 the Department disagrees with the qualification of Mr. Puritz as an expert witness and the weight to be assigned to his testimony and findings based thereon. I decline this further invitation to reweigh the evidence presented and modify findings of fact. In Point 3 the Department disagrees with the weight the Hearing Officer gave to the testimony of Mr. Storms. Since this is a matter of credibility of the witness I will defer to the finding of the Hearing Officer.
Finally, the Department alleges error in the rejection of its proposed findings of fact 36 and 232. It appears that the issues were effectively addressed by the Hearing Officer and rejected through his ultimate Finding that agents Jones and Langsett were not under the direct supervision and control of the Respondent.
INCREASED PENALTY
I have reviewed the entire record and the arguments and exceptions presented by the parties and conclude that the recommended penalty is too lenient. Pursuant to Section 120.57(1)(b)9., Florida Statutes, I find the penalty should be increased for the following reasons:
The hearing officer recommended a penalty of a three (3) month suspension and a fine of $2,500 based on the Respondent's improper conduct in offering free life insurance to the Nolans. As pointed out by the Respondent the Department may not impose both a suspension and a fine for a single violation of the Insurance Code. However, it is also abundantly clear that by recommending a $2,500 fine, the hearing officer has concluded that the Respondent's conduct was wilful. The maximum fine that may be imposed for a wilful violation is $2,500. Since the Department cannot impose both a fine and a suspension, the Department elects to impose an increased period of suspension.
The offense in this matter is of serious concern. The Respondent personally committed the violation in the course of his business activities. A hearing officer's recommended penalty can be enhanced by evidence of dishonesty in the licensee's professional dealings (as opposed to his personal dealings). LaRosa v. Department of Professional Regulation, 474 So.2d 322 (Fla 3d DCA 1985).
The Respondent was found guilty of committing an "Unfair Trade Practice". See Part X Chapter 626, Florida Statutes. Also the Respondent acknowledged that it was improper to advertise free insurance. (TR 145). Insurance is a business greatly affected by the public trust and the holder of an agent's license stands in a fiduciary relationship to both the client and the
insurance company. Natelson v. Department of Insurance, 454 So.2d 31 (Fla. 1st DCA 1984). By violating "Unfair Trade Practices Act" the Respondent has violated that trust.
The hearing officer found that the Respondent "negligently" failed to disclose the surrender charges to the Nolans during the course of his solicitation. (F.O.F. 38-9). Also the undisputed facts showed that when Mrs. Nolan signed the disclosure form, the portion indicating the amount of surrender charges was blank. (F.O.F. 38). Subsequently without prior notification or authorization this signed disclosure form was altered by Janet Derby an employee (not an agent or independent contractor) of Mr. Brennan. (TR 658, 738). The hearing officer made no specific finding regarding the propriety of this action. Also Mr. Brennan admitted that he signed the disclosure form as representative and witnessing Mrs. Nolan's signature. (TR 658). Additionally, Mr. Brennan met with the Nolans, by his own admission ten or fifteen times and the surrender charges were never discussed or disclosed by him. (TR 643, F.O.F. 39).
The Hearing Officer's Conclusion of Law, paragraph 10 which concluded that the Respondent may not be disciplined for "negligently" violating the Insurance Code is erroneous. The Department specifically charged the Respondents with violations of Sections 626.611(7) and (8), Florida Statutes, which permit disciplinary action if the agent has demonstrated a lack of fitness or trustworthiness to engage in the business of insurance or demonstrated a lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or permit it does not appear that the hearing officer addressed this violation, but was specifically concerned with whether an intentional misrepresentation had occurred in the solicitation of the Nolans. By finding that the omission was negligent he failed to consider whether this negligence constituted a demonstrated lack of technical competence to engage in the transactions under his license. Due to the direct violation of the Unfair Trade Practices Act by offering free insurance, and the negligent omission of failing to disclose surrender charges, and then unilaterally altering a signed document to indicate that said disclosure had been made, certainly at the very least demonstrates a lack of technical competence to engage in transactions under his license. As well as his lack of fitness and trustworthiness to engage in the business of insurance.
The record also establishes that the disclosure of surrender charges is "critical" in any sales presentation to the proposed insured. Mr. Storms (TR
255) and Mr. Indianer (TR 463) testified as to the "critical" nature of this disclosure. Also Mr. Parmele testified that "full" disclosure is very important to the best interests of the client. (TR 591). The failure to disclose even to the extent that it may have been done negligently appears to indicate that said conduct would be a source of injury or loss to the public or detrimental to the public interest. The neglect does not go to a minor point but one which is critical to the insured in making an informed decision. It was such an important omission to the Nolans' that in fact they cancelled several of their policies as the result of this material omission.
Finally, it is also readily apparent that the hearing officer did not deem a three (3) month suspension an adequate penalty in this matter. He additionally imposed a fine in the amount of $2,500, which is the maximum allowed for a wilful violation of the Insurance Code. As previously indicated Section 626.681, Florida Statutes, does not provide for both a suspension and administrative fine as he recommended in his recommended order. Therefore, based on the clear intent of the hearing officer to impose a penalty in excess of a three (3) month suspension, the wilful nature of the violation and for the
reasons indicated herein, I find that a three (3) month suspension is too lenient of a penalty. It is further my considered opinion that short suspensions, those less than six-months, do not sufficiently penalize wilful violations of the Insurance Code.
Therefore, based on the foregoing the Respondent, FRANK JOSEPH BRENNAN'S licenses and eligibility for licensure as an insurance agent in this State are hereby SUSPENDED for a period of one (1) year.
Any party to these proceedings adversely affected by this Order is entitled to seek review of this Order pursuant to Section 120.68, Florida Statutes, and Rule 9.110, Fla.R.App.P. Review proceedings must be instituted by filing a petition or notice of appeal with the General Counsel, acting as the agency clerk, at 413-B Larson Building, Tallahassee, Florida, and a copy of the same with the appropriate district court of appeal within thirty (30) days of rendition of this Order.
DONE and ORDERED this 13th day of August, 1987.
BILL GUNTER
Insurance Commissioner and Treasurer
ANN WAINWRIGHT
Assistant Insurance Commissioner and Treasurer
| Issue Date | Proceedings |
|---|---|
| May 01, 1987 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Aug. 13, 1987 | Agency Final Order | |
| May 01, 1987 | Recommended Order | Counts I & II dismissed: liab. of others not imposed upon respondent. Count III; Guilty of misconduct, false & misleading info. Fined & Suspended 3 mos. |
