STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 87-2692

)

JOHN LANAHAN BREWER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, an Administrative Hearing was held before William R. Cave, Hearing Officer with the Division of Administrative Hearings on February 22, 1988, in Jacksonville, Florida. The issue for determination is whether Respondent's license as an insurance agent in the State of Florida should be revoked, suspended or otherwise disciplined under the facts and circumstances of this case.

APPEARANCES

For Petitioner: S. Marc Herskovitz, Esquire

William W. Tharpe, Jr., Esquire 413-B Larson Building Tallahassee, Florida 32399-0300

For Respondent: Judith S. Beaubouef, Esquire

Peter L. Dearing, Esquire Post Office Box 4099 Jacksonville, Florida 32201

By a four count Administrative Complaint dated May 21, 1987, and filed with the Division of Administrative Hearings on June 26, 1987, Petitioner seeks to revoke, suspend or otherwise discipline Respondent's license as an insurance agent in the State of Florida. As grounds therefor, it is alleged that Respondent, or someone acting under his direct supervision and control, collected premium funds in a fiduciary capacity and failed to remit those funds to the insurer, United States Fidelity and Guaranty Company, in accordance with the agency agreement and in violation of Sections 626.561(1), 626.611(7)(8)(9)(10); 626.621(4)(6), 626.734, 626.9251 and 626.9541(1)(o)1.

Florida Statutes.

At the hearing, Petitioner voluntarily dismissed Count IV of the Administrative Complaint and by an ore tenus motion requested a continuance on Department of Insurance and Treasurer v. Donald Edward Brewer, Jr., Case No. 87- 2686, in that a settlement agreement had been reached which, if approved by the Commissioner of Insurance, would negate the necessity of a hearing. The Respondent was not present but the undersigned was advised by Petitioner that there was no opposition to the continuance. A continuance was granted with the understanding that Petitioner would advise the undersigned immediately upon the

settlement agreement being approved by the Commissioner of Insurance. As of this date, the settlement agreement has not been approved.

In support of its charges, Respondent presented the testimony of Linda Wynn, Felix A. Crawford, Jane Walker, S. Gordon Blalock, James Nelson and Richard V. Caligirui. Petitioner's exhibits 1-3 and 5-16 were received into evidence. Respondent testified on his own behalf. Respondent's exhibits 1 and

2 were received into evidence.

The parties submitted Proposed Findings of Fact and Conclusions of Law. A ruling on each proposed finding of fact has been made as reflected in the Appendix to this Recommended Order.

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found:

1. At all times material to this proceeding, Respondent was eligible for, and licensed as, an insurance agent in the State of Florida.

   
   

2. The Respondent is currently eligible for, and licensed as, an insurance agent in the State of Florida.

   
   

3. At all times material to this proceeding, Respondent was a licensed agent for United States Fidelity and Guaranty Company (USF&G).

   
   

4. At all times material to this proceeding, Respondent was an officer, director, and stockholder of D.E. Brewer and Company (Company), an incorporated general lines insurance agency primarily located in Jacksonville, Florida.

   
   

5. On or about April 24, 1986, the Company entered into an agency agreement with USF&G whereby the Company was given authority to solicit and sell insurance on behalf of USF&C. This agency agreement was cancelled unilaterally by USF&G on November 24, 1986.

   
   

6. At all times material to this proceeding, all funds received by the Company on behalf of USF&G represented premium funds paid by consumers for the purpose of obtaining insurance and were trust funds received in a fiduciary capacity to be paid over to USF&G in the applicable regular course of business.

   
   

7. Under the agency agreement with USF&G, accounts of premium funds received by the Company on behalf of USF&G were to be "rendered at the end of each month" and any "balance shown to be due to" USF&G was to "be paid to the designated reporting office not later than the twentieth day of the second succeeding month".

   
   

8. On or about October 27, 1986, Southland Services of Jacksonville, Inc. (Southland) issued a check to the Company in the amount of $15,799.00 as a monthly installment for an auto policy and a general liability policy issued by USF&G. These premium funds were collected by the Company on behalf of USF&G.

   
   

9. On or about November 21, 1986, Southland issued a check to the Company in the amount of $13,785.00 as a monthly installment for auto policy and a general liability policy issued by USF&G. These premium funds were collected by the Company on behalf of USF&G.

10. On or about November 12, 1986, S. Gordon Blalock (Blalock) issued a check to the Company in the amount of $1,341.00 as a premium on an auto policy issued by USF&G. These premium funds were collected on behalf of USF&G.

    
    

11. On or about December 3, 1986, USF&G notified Blalock that USF&G had not received the premium and unless Blalock remitted the premium within 15 days his policy would be cancelled. This matter was cleared up by Blalock with USF&G and the policy was not cancelled.

    
    

12. On or about November 5, 1986, Anita Grusenmeyer, on behalf of Grusenmeyer & Associates, Inc. (Grusenmeyer) issued a check to the Company in the amount of $2,810.00 as a premium payment for insurance policies issued by USF&G. These premium funds were collected by the Company on behalf of USF&G.

    
    

13. On or about December 15, 1986, USF&G requested documentation from Grusenmeyer as to proof of premium payment to the Company on these insurance policies since the Company had not rendered the premium payment to USF&G. This documentation was furnished and there was no interruption of the coverage.

    
    

14. On or about November 24, 1986, USF&G unilaterally terminated its agency agreement with the Company due to the Company's failure to remit premium funds collected on behalf of USF&G.

    
    

15. Prior to, and at the time of the termination of the agency agreement by USF&G, Respondent was Vice President, a director and stockholder (11%) of the Company, but on or about November 24, 1986, the date of the termination of the agency agreement, Respondent became president of the Company.

    
    

16. By letter dated December 12, 1986 and addressed to Respondent, USF&G, under paragraph 9 of the agency agreement, made a demand on the Company for the records pertaining to business dealings between the Company and USF&G. This demand was again made by letter on January 21, 1987. However, there was some concern on Respondent's part in turning these records over to USF&G and it was determined that USF&G could make copies of such records with someone from the Company being present. Due to conflicts in schedules of both parties this was never accomplished, and, in the interim, USF&G concluded that it had the capability to reproduce the records on its computer. No further demand for the records was made and the records were never turned over to USF&G by the Company.

    
    

17. Also in its letter dated January 2, 1987, USF&G advised the Company that the premium funds received in November, 1986, were overdue as well as the August, 1986, and October, 1986, account. The August, 1986, and October, 1986, account would be for premium funds received in June, 1986, and August, 1986, respectively. The September, 1986, account had been paid on or about November 20, 1986, using premium funds received from Southland on November 21, 1986, in the amount of $13,785.00 to cover a check previously issued by Donald Brewer on an account that did not have sufficient funds to cover the check. The deposit of the Southland check into the account made the check written by Donald Brewer "good".

    
    

18. In accordance with the agency agreement, the premium funds received from Southland ($15,799.00) in October, 1986, were due and payable on December 20, 1986, and the premium funds received from Southland ($13,785.00), Blalock ($1,341.00) and Grusenmeyer ($2,810.00) during November, 1986, were funds due and payable on January 20, 1987. However, these premium funds had been disposed of prior to Respondent becoming president of the Company on November 24, 1986, and the Company having insufficient funds that could be used to pay USF&G after

    Respondent became president, the funds were not remitted to USF&G in the regular course of business set forth in the agency agreement.

    
    

19. All the premium funds received by the Company from Southland ($15,799.00 and $13,785.00), Blalock ($1,341.00) and Grusenmeyer ($2,810.00) in October and November of 1986 were deposited in the Southeast Bank, N.A., of Jacksonville, Florida, Account No. 001632637, an account on which Respondent had no check writing authority. All of the above-referenced funds were deposited in that account prior to Respondent becoming president on November 24, 1986.

    
    

20. The Respondent was not the responsible agent for the three insurance accounts: Southland; Blalock; and Grusenmeyer, and none of the premium funds remitted to the company by these accounts were "received by" the Respondent. There is no evidence that these premium funds were "received by" any employee of the Company who was under the Respondent's direct supervision and control.

    
    

21. There is no evidence that Respondent had access to, or responsibility for, the premium funds paid by Southland, Blalock and Grusenmeyer during October and November of 1986. Likewise, there is no evidence that the Respondent diverted or appropriated any of such premium funds to his own use or to the use of anyone other than to those entitled to receive them.

    
    

22. Upon becoming president, Respondent opened a new bank account with the Florida National Bank, but there was no evidence that the account ever had sufficient funds, other than possibly premium funds belonging to other insurers which had been received on their behalf by the Company, to pay USF&G the premium funds due it from the Southland, Blalock and Grusenmeyer accounts. There was evidence that the Respondent had paid salaries to the employees out of the account, but no amount was established.

    
    

23. Upon becoming president, Respondent began negotiating a settlement with USF&G on the amount of premium funds due USF&G. There was a dispute as to the amount but a settlement of approximately $52,000.00 was reached. Some of this amount has been paid, but there is a remaining balance.

    
    

24. There was no evidence that Respondent, prior to becoming President of the Company, took any part in the policy decisions or administration of the Company, such as determining the manner in which the Company's receipts would be spent or to direct, control or supervise the activities of the employees or other insurance agents of the Company.

    
    

    CONCLUSIONS OF LAW

    
    

25. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, this proceeding, pursuant to Section 120.57(1), Florida Statutes.

    
    

26. Section 626.611, Florida Statutes, sets forth the grounds for compulsory suspension or revocation of an agent's license and in pertinent part is as follows:

    
    

    1. Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

    2. Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license

       or permit.

    3. Fraudulent or dishonest practices in the conduct of business under the license or permit.

    4. Misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insureds or beneficiaries or to others and received in conduct of business under the license.

       
       

27. Section 626.621, Florida Statutes, sets forth the grounds for discretionary suspension or revocation of an agent's license and in pertinent part is as follows:

    
    

    (4) Failure or refusal, upon demand, to pay over to any insurer he represents or has represented any money *coming into his hands belonging to the insurer*. (e.s. between *)

    (6) In the conduct of business under the license or permit, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part X of this chapter, or having otherwise shown himself to be a source of injury or loss to the public or detrimental to the public interest.

    
    

28. Section 626.9521, Florida Statutes, prohibits unfair methods of competition or deceptive acts or practices as defined in Section 626.9541, Florida Statutes, and subjects any violator to the penalties provided in Section 627.381, Florida Statutes.

    
    

29. Unfair methods of competition and unfair or deceptive acts or practices are defined in Section 626.9541(1)(o)1., Florida Statutes, and in pertinent part is as follows:

    
    

    (1)(o) Illegal dealings in premiums; excess or reduced charges for insurance.

    1. Kowingly collecting any sum as a premium or charge for insurance, which is not then provided, or is not in due course to be provided, subject to acceptance of the risk by the insurer, by an insurance policy issued by an insurer as permitted by this code.

    
    

30. All funds received by the agent in transactions "under his license shall be trust funds" received "in a fiduciary capacity" which "the licensee in the applicable regular course of business shall account for and pay the same to the insurer, insured, or other persons' entitled thereto". Section 626.561(1), Florida Statutes.

    
    

31. The liability of a general lines insurance agent is provided for in Section 626.734, Florida Statutes, which provides as follows:

    
    

    Any *general lines insurance agent* who is an officer, director, stockholder, or employee of an incorporated general lines insurance

    agency shall remain personally and fully liable and accountable for any wrongful acts, misconduct, or violations of any provisions

    of this code *committed by such licensee or bv any person under his direct supervision and control while acting on behalf of the corporation.* (e. s. between *)

    
    

32. In a disciplinary proceeding, the burden is upon the agency to establish facts upon which the allegations of misconduct are based. Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (1 DCA Fla. 1977). The evidence is clear that Respondent is currently, and was during all times material to this proceeding, a licensed "insurance agent" in the State of Florida, and thereby subject to the disciplinary action provided for in Chapter 626, Florida Statutes for violations of the provisions of that chapter. To the contrary, there is insufficient evidence to prove that the Respondent is currently, or was during all times material to this proceeding, a licensed general lines insurance agent in the State of Florida as that term is defined in Section 626.041, Florida Statutes and, even though he was an officer, director and stockholder of the company, is not subject to the provisions of Section 626.734, Florida Statutes. However, assuming arguendo that Respondent was a licensed general lines insurance agent during all times material to this proceeding, the evidence is clear that neither he nor any "person under his direct supervision and control while acting on behalf of the" Company violated any provisions of Chapter 626, Florida Statutes. See Hartnett v. Department of Insurance of State, 432 So.2d 155 (3 DCA Fla. 1983), review denied 440 So.2d 352 (3 DCA Fla. 1983). Likewise, the evidence is equally clear that Respondent, as an "insurance agent", did not violate any of the provisions of Chapter 626, Florida Statutes. The Petitioner has failed to sustain its burden of proof.

RECOMMENDATION

Based upon the Findings of Fact, Conclusions of Law, the evidence in the record and the candor and demeanor of the witnesses, it is

RECOMMENDED that the Petitioner, Department of Insurance and Treasurer enter a Final Order dismissing all counts of the Administrative Complaint filed against the Respondent, John Lanahan, Brewer in Case No. 87-2692.

Respectfully submitted and entered this 26th day of July, 1988, in Tallahassee, Leon County, Florida.

WILLIAM R. CAVE

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 26th day of July, 1988.

APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 87-2692

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case.

Specific Rulings on Proposed Findings of Fact Submitted by Petitioner

1. Adopted in Finding of Fact 2, except that there was no evidence presented as to the types of insurance licenses Respondent held.

   
   

2. Adopted in Finding of Fact 1.

3.-9. Adopted in Findings of Fact 3 through 9, respectively.

10. Adopted in finding of Fact 10 but clarified to show the date of the check to be November 12, 1986, rather than November 21, 1986.

11-14. Adopted in Findings of Fact 11 through 14. 15-16. Adopted in Finding of Fact 15.

17-18. Adopted in Finding of Fact 16.

19. Adopted in Findings of Fact 16 and 17.

20-22. Adopted in Finding of Fact 18.

1. Adopted in Finding of Fact 19 and 22.

   
   

2. Adopted in Finding of Fact 20 except that there is competent evidence to show that the Grusenmeyer payment was received and deposited prior to Respondent assuming the Presidency.

   
   

3. Adopted in Finding of Fact 18.

   
   

4. Adopted in Finding of Fact 23, but although there was a sincere dispute as to the amount there was no competent evidence that that amount was

$200,000 or that the settlement figure of $52,000 was not a fair representation of the amount owed to USF&G by the Company.

Specific Rulings on Proposed Findings of Fact Submitted by Respondent

1. Adopted in Findings of Fact 1 and 2.

   
   

2. Adopted in Findings of Fact 3, 19, and 24.

   
   

3. Adopted in Findings of Fact 8, 9, and 19 but clarified.

   
   

4. Adopted in Finding of Fact 18.

   
   

5. Adopted in Finding of Fact 12.

   
   

6. Adopted in Findings of Fact 18 and 19.

7-8. Adopted in Findings of Fact 12, 18 and 19.

1. Adopted in Findings of Fact 20, 21 and 22.

   
   

2. Adopted in Finding of Fact 23.

11-12. Rejected as being argument, not a finding of fact.

COPIES FURNISHED:

S. Marc Herskovitz, Esquire William W. Tharpe, Jr., Esquire 413-B Larson Building Tallahassee, Florida 32399-0300

Judith S. Beaubouef, Esquire Peter L. Dearing, Esquire Post Office Box 4099 Jacksonville, Florida 32201

Honorable William Gunter State Treasurer ana Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Docket for Case No: 87-002692

Orders for Case No: 87-002692