STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND ) TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 86-3565

)

RICHARD T. PASCALE, )

)

Respondent. )

) DEPARTMENT OF INSURANCE AND ) TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 86-3566

)

LEONARD C. CHANDLER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William J. Kendrick, held a public hearing in the above-styled cases on March 24, 1987, in Miami, Florida.

APPEARANCES

For Petitioner: William W. Tharpe, Esquire

Department of Insurance and Treasurer 413-B Larson Building

Tallahassee, Florida 32399-0300

For Respondent: Thomas F. Woods, Esquire

Gatlin, Woods, Carlson & Cowdery 1709-D Mahan Drive

Tallahassee, Florida 32308 PRELIMINARY STATEMENT

By administrative complaints dated August 21, 1986, Petitioner charged Respondent, Ronald T. Pascale, a general lines agent and officer of Briar Bay Insurance Agency, Inc. (Briar Bay), and Respondent, Leonard C. Chandler, a general lines agent for Briar Bay, with violating various provisions of Chapter 626, Florida Statutes. These cases were ultimately consolidated.

The gravamen of the complaints is that Respondents are responsible for misrepresentations made to five customers of Briar Bay. Petitioner charges that

these customers went to the agency to purchase automobile insurance, and were charged for accidental death or life insurance and motor club memberships without their knowledge or consent.

At hearing, Petitioner called as witnesses: David Trudnak, Herbert Cone, David Peters, Juan M. Leon, Jesus Rivero, Carol Lynn Wilson, Larry A. Smith, and Amy Brown. Petitioner's exhibits 1-4 and 6A-6B were received into evidence.

Respondents called as witnesses: Ernesto Martinez, Loretta Chavez, William Flett, and Ronald T. Pascale. Respondents' exhibits 1 and 2 were received into evidence. Additionally, joint exhibits 1-6 were received into evidence. 1/

The transcript of hearing was filed May 5, 1987, and the parties were granted leave until June 11, 1987, to file proposed findings of fact and conclusions of law. Consequently, the par ties waived the requirement that a recommended order be filed within thirty (30) days of the date a transcript is filed. Rule 22I-6.31, Florida Administrative Code. The parties' proposed findings of fact have been addressed in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Respondent, Ronald T. Pascale (Pascale), was at all times material hereto licensed by the State of Florida as a general lines agent and health agent. Pertinent to these proceedings, Pascale was licensed by Fortune Life Insurance - Company (Fortune Life) as a health insurance agent, but not as a life insurance agent.

   
   

2. Respondent Leonard C. Chandler (Chandler), was at all times material hereto licensed by the State of Florida as a general lines agent, and as a life and health agent. Pertinent to these proceedings, Chandler was licensed by Fortune Life as a health insurance agent, but not as a life insurance agent.

   
   

3. Pascale and Chandler did business through Briar Bay Insurance Agency, Inc. (Briar Bay). Briar Bay is an incorporated general lines insurance agency selling general lines insurance products through licensed agents and unlicensed sales people acting under the supervision and control of a licensed general lines agent.

   
   

4. Briar Bay conducted business from two agency locations: 14229 South Dixie Highway, Miami, Florida (the Dixie Highway office); and 13061 North Kendall Drive, Miami, Florida (the Kendall office). Pascale is the president and a director of Briar Bay, and the general lines agent for its Kendall office. Chandler is the general lines agent for the Dixie Highway office. Pascale did, however, frequently visit the Kendall office to oversee and manage the writing of insurance.

   
   

5. As the general lines agent for their respective offices, Pascale and Chandler were required to be in active full time control of their operations. The parties have stipulated that, pursuant to Section 626.734, Florida Statutes, Pascale and Chandler are personally and fully liable and accountable for any wrongful acts, misconduct, or violations of any provisions of this code by them or any person who sold the insurance cover ages at issue in this proceeding. David Trudnak (Pascale Complaint-Count I)

   
   

6. On January 18, 1986, David Trudnak called the Kendall office to get a quote for automobile insurance on his 1984 Gran Prix. Mr. Trudnak's automobile was financed through GMAC, and he informed the salesperson, Ernesto Martinez,

   that he wanted the minimum coverage necessary to satisfy that company. Mr. Trudnak was given a quote of approximately $1,230.

   
   

7. Late that afternoon, near closing time, Mr. Trudnak went to the Kendall office and was waited on by Mr. Martinez. Mr. Trudnak again told Mr. Martinez that he wanted the minimum coverage necessary to satisfy GMAC. Mr. Martinez laid a number of papers before Mr. Trudnak and told him to "sign here, here, here, and here". Among the papers he signed were two applications to Fortune Life for accidental death policies and an application to Nation Motor Club, even though he never asked for or desired such additional coverages. 2/ The two Fortune Life policies generated a premium of $250, and the motor club member- ship a premium of $20.

   
   

8. Mr. Trudnak was misled to believe that the quote he was given, and the premium he paid, was for the minimum coverage he had requested. Had he been accorded the minimum coverage he requested, Mr. Trudnak's premium would have been $1,006 instead of the $1,276 he was charged.

   
   

   Juan M. Leon (Pascale Complaint-Count II)

   
   

9. Late in the afternoon of January 20, 1986, Juan M. Leon went to the Kendall office and was waited on by Mr. Martinez. Mr. Leon informed Mr. Martinez that he had just purchased a new van, and that he needed automobile insurance to satisfy the financing agency. Mr. Martinez laid a number of papers before Mr. Leon to sign. Among the papers he signed were three applications to Fortune Life for accidental death policies and an application to Nation Motor Club, even though he never asked for or desired such additional coverages. The three Fortune Life policies generated a premium of $400, and the motor club membership a premium of $20.

   
   

10. Mr. Leon was misled to believe that the quote he was given, and the premium he paid, was for the automobile coverage he had requested. Had he been accorded the coverage he requested, Mr. Leon's premium would have been $1,367 instead of the $1,787 he was charged.

    
    

    Carol Lynn Wilson

    (Pascale Complaint-Count III, Chandler Complaint-Count I)

    
    

11. On January 22, 1986, Carol Lynn Wilson went to the Dixie Highway office, along with her father, to purchase automobile insurance. She was waited on by a man named Bill, but Pascale also participated in the transaction. Ms. Wilson advised the salesman that she wanted the least expensive full coverage policy she could get. The salesperson laid a number of papers before Ms. Wilson to sign. Among the papers she signed was an application to Fortune Life for a life insurance policy 3/ and an application to nation Motor Club, even though she never asked for or desired such additional coverages. 4/ The Fortune Life policy generated a premium of $35, and the motor club membership a premium of

    $20.

    
    

12. Ms. Wilson was misled to believe that the quote she was given, and the premium she paid, was for the least expensive policy she had requested. She was never informed that the life insurance policy or motor club membership were separate from, and in addition to, the basic coverage she desired. Had she been accorded the coverage she requested, Ms. Wilson's premium would have been $593 instead of the $748 she was charged.

    David Peters

    (Pascale Complaint-Count IV, Chandler Complaint-Count II)

    
    

13. On January 23, 1986, David Peters went to the Dixie Highway office to purchase automobile insurance. After explaining to the salesperson that he needed full coverage because his car was financed, the salesperson laid a number of papers before him to sign. Among the papers he signed was an application to Fortune Life for a life insurance policy and an application to Nation Motor Club, even though he never asked for or desired such additional coverages. 5/ The Fortune Life policy generated a premium of $150, and the motor club membership a premium of $20.

    
    

14. Mr. Peters was misled to believe that the quote he was given, and the premium he paid, was for the automobile coverage he had requested. Had he been accorded the coverage he requested, Mr. Peter's premium would have been $1,686 instead of the $1,856 he was charged.

    
    

    Herbert Cone

    (Pascale Complaint-Count V, Chandler Complaint-Count III)

    
    

15. On January 21, 1986, Herbert Cone went to the Dixie Highway office to purchase automobile insurance. After explaining to the salesperson that he desired liability coverage, the salesperson laid a number of papers in front of him to sign. Among the papers Mr. Cone signed was an application to Fortune Life for a life insurance policy and an application to Nation Motor Club, even though he never requested or desired such additional coverages. The Fortune Life policy generated a premium of $50, and the motor club membership a premium of

    $20.

    
    

16. Mr. Cone was misled to believe that the quote he was given, and the premium he paid, was for the automobile coverage he had requested. Had he been accorded the coverage he requested, Mr. Cone's premium would have been $425 instead of the $495 he was charged.

    
    

    Briar Bay Agency Forms

    
    

17. In each of the foregoing transactions the Briar Bay agency representative obtained the signature of the customer on numerous forms, including the auto binder application, the Nation Motor Club application, and the Fortune Life application. Each of these applications were printed on what is commonly referred to as NCR paper, which consists of an original and two copies. The original is designed to be submitted to the issuing company, a copy retained by the agency, and a copy given to the customer. The Briar Bay representatives consistently failed to provide their customers with a copy of any of these applications, and thereby further obscured their deceptions.

    
    

18. The Briar Bay representative also secured the signature of its customers on its own form. This form, consisting of one sheet of paper printed front and back, contained spaces for the customer's signature in up to 5 places. By signing the form, the customer was ostensibly acknowledging the rejection of certain coverages, the limitation on who would be covered in the operation of the vehicle, and an explanation of the coverages and their costs (the "Coverage and Cost Breakdown").

    
    

19. While the customers in each of the foregoing transactions signed the "Coverage and Cost Breakdown" portion of Briar Bay's form, as well as other sections, the proof established that such acknowledgment was routinely obtained

    in blank, or without the cost portion of the breakdown completed. The customers were routinely told to sign where the representative had marked an "X, and were led to believe that what they signed comported with the coverage they had requested. Under such circumstances, the customer's signature did not constitute an informed or meaningful acknowledgement. 6/

    
    

    Policy Mixing

    
    

20. The proof further established that Briar Bay representatives would routinely assemble the automobile insurance policies to include the Fortune Life policy and the Nation Auto Club "auto rental reimbursement riders. This practice further obscured the fact that such cover ages were not part of the automobile insurance its customers had sought to purchase.

    
    

    Commission Schedules

    
    

21. An agent's commission on the sale of automobile insurance coverage (such as liability, PIP, comprehensive and collision) averages between 10-15 percent. The commission paid by Fortune Life on its policies was 90 percent, and the commission paid by Nation Motor Club was 80 percent.

    
    

22. In the instant case, between January 18, 1986, and January 23, 1986, Briar Bay's representatives generated $796.50 in commissions on Fortune Life policies and $80 in commission on Nation Motor Club memberships through only five customers. 7/ Clearly, Respondents had a strong financial motive to push these products.

    
    

    CONCLUSIONS OF LAW

    
    

23. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

    
    

24. The proof established that Briar Bay's sales- persons engaged in the practice of "sliding" insurance coverages, and collecting premiums for coverages, without the knowledge or consent of their customers. Such practices violated the provisions of Sections 626.611(5), (7) and (9); 626.621(2) and (6); 626.9521; and 626.9541(1)(k)(1), Florida Statutes, and Respondents are, pursuant to Section 626.734, Florida Statutes, fully liable therefor.

    
    

25. The proof fails to support the conclusion that Pascale violated the provisions of Section 626.311(4), Florida Statutes, and that Chandler violated the provisions of Sections 626.311(4) and 626.331(3), Florida Statutes, because they were not licensed by Fortune Life to sell life policies. As noted in the findings of fact, Respondents were authorized to and did routinely solicit applications for automobile accidental death policies through Fortune Life. For some inexplicable reason, Fortune Life sent Briar Bay application forms for life insurance and not automobile accidental death. Briar Bay's representatives used these forms, which were similar to the accident forms, in applying for what they thought was accident insurance. Consequently, while life insurance was written, it was not knowingly done.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED:

That the licenses and eligibility for licensure as an insurance agent of Respondents, Ronald T. Pascale and Leonard C. Chandler, be REVOKED.

DONE AND ORDERED this 24th day of June, 1987, in Tallahassee, Florida.

WILLIAM J. KENDRICK

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 24th day of June, 1987.

ENDNOTES

1/ Subsequent to hearing the parties agreed that the original binder book of Briar Bay, from which excerpts were introduced as Respondents' exhibit 2, be admitted into evidence. This binder book has been marked as joint exhibit 6.

2/ Notably, Mr. Trudnak already had a 5 year motor club membership through GMAC.

3/ Ms. Wilson, together with Mr. Peters and Mr. Cone, infra, executed applications for, and received, life insurance policies even though Pascale and Chandler were not licensed to write life insurance for Fortune Life. The proof established that Respondents routinely solicited applications for automobile accidental death policies through Fortune Life, but not all-causes accidental death life insurance. The applications are, however, similar and apparently Fortune Life sent Briar Bay the wrong forms. Consequently, while Respondents did write life coverage, it was not knowingly done.

4/ Notably, Ms. Wilson already had motor club benefits through her membership in AAA.

5/ Notably, Mr. Peters already had motor club benefits through his Honda dealer.

6/ Respondents suggest that there was no evidence of coercion, hurrying or other pressure brought to bear on its customers to sign the forms discussed in paragraphs 17-19, supra. While the customers may have been accorded the time to read the forms if they had insisted, the proof established that they were signed in an atmosphere where they reasonably assumed that what they signed comported with the coverage they had requested.

7/ Respondents sought to downplay the import of this aspect of their business by offering testimony that only 10-20 percent of their customers took accidental death coverage. Even if this were true, sales to 10-20 percent of their customers, as evidenced by these cases, would not be inconsequential. However, the proof established that during various times substantially more than 20 percent of their customers were sold such coverage. Joint exhibit 6, the binder book for the Dixie Highway office, demonstrates such sales figures.

Inexplicably, such binder fails to contain any space to record such sales commencing at or about July 16, 1986. The binder book for the Kendall office was not produced at hearing.

APPENDIX TO RECOMMENDED ORDER, CASE NOS. 86-3565

86-3566

Petitioner's proposed finding of fact are addressed as follows:

1. Addressed in paragraphs 3 and 4.

2. Addressed in paragraphs 1, 4 and 5.

3. Addressed in paragraphs 2, 4 and 5.

4-6. Addressed in paragraphs 6-8 and 17-19.

7-9. Addressed in paragraphs 9-10 and 17-19.

10-12. Addressed in paragraphs 11-12 and 17-19.

13-15. Addressed in paragraphs 13-14 and 17-19.

16-18. Addressed in paragraphs 15-16 and 17-19.

1. To the extent pertinent, addressed in paragraphs 17-19. There was no proof that anyone was misled by the manner in which coverages were listed on the "Coverage and Cost Breakdown, as opposed to the subterfuge practiced

   by Briar Bay's representatives, and so, for that reason, such findings are rejected.

2. Addressed in paragraph 20.

21-22. Addressed in paragraphs 21-22.

1. Not a findings of fact but, rather, a recitation of testimony.

2. Addressed in paragraph 1.

3. Addressed in paragraph 2.

Respondent's proposed findings of fact are addressed as follows:

1. Addressed in paragraphs 17-19.

2. Addressed in footnote 6.

COPIES FURNISHED:

William W. Tharpe, Esquire Department of Insurance and

Treasurer

413-B Larson Building Tallahassee, Florida 32399-0300

Thomas F. Woods, Esquire Gatlin, Woods, Carlson & Cowdery 1709-D Mahan Drive

Tallahassee, Florida 32308

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

Docket for Case No: 86-003565

Orders for Case No: 86-003565