STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FIRST NATIONAL LIFE INSURANCE ) COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 87-5751RX

) DEPARTMENT OF INSURANCE AND ) TREASURER, )

)

Respondent. )

)

FINAL ORDER

This matter came on for final hearing in Tallahassee, Florida, before Robert T. Benton, II, Hearing Officer of the Division of Administrative Hearings, on February 24, 1988. The Division of Administrative Hearings received the transcript of proceedings on February 26, 1988. Both parties filed proposed final orders. The appendix treats proposed findings of fact by number.

The parties are represented by counsel:

For Petitioner: Frank J. Santry

David P. Heath

Granger, Santry, Mitchell and Heath, P.A. Post Office Box 14129

Tallahassee, Florida 32308

For Respondent: Sharon N. Goldstein

Gabriel Mazzeo

413-B Larson Building Tallahassee, Florida 32399-0300

By petition seeking determination that rules are invalid filed December 31, 1987, petitioner challenges respondent's Rules 4-6.012(2), 4-6.013(2) and 4- 46.003(1), Florida Administrative Code, pursuant to Section 120.56, Florida Statutes (1987). Originally set for January 28, 1988, final hearing was continued on the parties' joint motion for continuance.

ISSUE

Whether Rules 4-6.012(2), 4-6.013(2) and 4-46.003(1), Florida Administrative Code, or any of them, constitute an invalid exercise of delegated legislative authority?

The parties' commendably thorough prehearing stipulation has yielded verbatim the first 15 paragraphs of the following

FINDINGS OF FACT

1. First National Life Insurance Company ("First National Life") is an authorized foreign insurer operating under a certificate of authority issued by the Department of Insurance and Treasurer ("Department") pursuant to Section 624.401(1), Florida Statutes.

   
   

2. First National Life is subject to the jurisdiction and regulation of the Department pursuant to the Florida Insurance Code.

2. First National Life is an authorized foreign insurer organized under the Laws of Alabama and domiciled in the State of Alabama.

1. First National Life maintains its regional home office in Pensacola, Florida.

   
   

2. In 1985, the Florida Legislature passed Chapter 85-305 titled An Act Relating to the Florida Retirement System; authorizing the Department of Administration to select a State Licensed Insurance Company to offer and administer a Medicare Supplement Policy to eligible retirees of a state or local public employer; authorizing health insurance coverage; providing an appropriation; providing for health insurance coverage for certain retired persons and their spouses; providing a retroactive effective date. Pursuant to this act under Section 1, Sub-Section 1:

   
   

   The Department of Administration shall solicit competitive bids from state licensed insurance companies to provide and administer a fully insured Medicare Supplement Policy for all eligible retirees of a state or local public employer. Such Medicare Supplement Policy shall meet the provisions of

   ss. 627.671-627.675 Florida Statutes. For the purpose of this sub-section, "eligible retirees" means any public employee who is retired from a state or local public employer who covered by Medicare, Parts A and B. The Department of Administration shall authorize one company to offer the Medicare Supplement Coverage to all eligible retirees. All premiums shall be paid by the retiree.

   
   

3. Said legislation empowered the Florida Department of Administration to authorize one company to offer the Medicare Supplement Coverage to all eligible retirees, with premiums to be paid by the retirees.

   
   

4. As a result of the aforementioned competitive bidding process, pursuant to Section 110.1234, Florida Statutes, the Department of Administration authorized First National Life Insurance Company to be the one insurance company to offer Medicare Supplement Coverage to all eligible public employee retirees as defined in the act.

   
   

5. The First National Life Insurance Company has sent printed or published material and descriptive literature of First National Life through the United States mail to eligible retirees under the statute.

6. Rule 4-6.012 cites as its specific authority Chapters 624.308 and 626.9611 and recites implementation of Chapter 626.9541(1), (2), Fla. Stat.

   
   

7. Rule 4-6.013 recites as its specific authority Chapter 624.308 and 626.9611 Fla. Stat. It recites implementation of Chapter 626.9541(1), (2) Fla. Stat.

   
   

8. Rule 4-46.003 recites as its specific authority Chapter 624.308(1), 626.9611, 626.9641 Fla. Stat. It recites implementation of Chapter 626.830 and 626.9541(1), (2), (3), (5), (11), (12), and Chapter 626.9641 (1)(a), (c), (e), (h).

   
   

9. The Retired Public Employee Group Medicare Supplement Plan authorized by chapter 85-305 Laws of Florida, constitutes one of the "State Group Health Insurance Plans" as defined in chapter 110.123 Fla. Stat. (1987).

   
   

10. First National Life Insurance Company in the above- described group plan, its financial condition or status, or the payments of its claims, or the merits, desirability, or advisability of its policy forms or kinds of plans of insurance, are approved, endorsed, or accredited by a division or agency of the State of Florida.

    
    

11. The solicitations of group coverage for the above- described group plan are in some manner connected with an agency of state government.

    
    

12. The Medicare Supplemental Insurance Plan offered by First National Life Insurance Company is affiliated with or authorized by a governmental agency.

    
    

13. The rule provisions under challenge are set out in Petitioner's Exhibit No. 4, together with the history notes as they appear in the Florida Administrative Code:

    
    

    4-6.012 Jurisdictional Licensing and Status of Insurer.

    (2) An advertisement shall not create the impression directly or indirectly that the insurer, its financial condition or status, or the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds of plans of insurance are approved, endorsed, or accredited by any division or agency of this State or the United States Government.

    
    

    Specific Authority 624.308, 626.9611 FS.

    Law Implemented 626.9541(1), (2) FS. History - Revised 1-19-73, Repromulgated 12-24-74, Formerly 4-6.12

    
    

    4-6.013 Identity of Insurer.

    (2) No advertisement shall use any combination of words, symbols, or physical materials which by their content, phraseology, shape, color or other characteristics are so similar to combination of words, symbols, or physical materials used

    by agencies of the federal government or of this State, or otherwise appear to be of such a nature that it tends to confuse or mislead prospective insureds into believing that the solicitation is in some manner connected with an agency of the municipal, state or federal government.

    
    

    Specific Authority 624.308, 626.9611 FS.

    Law Implemented 626.9541(1), (2) FS.

    History - Revised 1-19-73, 7-20-73,

    Repromulgated 12-24-74, Formerly 4-6.13

    
    

    4-46.003 Unfair or Deceptive Acts or Practices Defined.

    It shall be deemed an unfair or deceptive act or practice in the direct solicitation or sale of Medicare supplemental insurance policies, to:

    1. Make any verbal or written statement which implies or conveys the impression that any Medicare supplemental insurance plan, by use of promotional materials, titles, initials or trade names being offered or used by a company or agent, is affiliated with or authorized by the Federal Government, the Medicare Program, the Social Security Administration or any other governmental agency.

       
       

       Specific Authority 624.308(1), 626.9611,

       626.9641 F.S. Law Implemented 626.830,

       626.9541(1), (2), (3), (5), (11), (12)

       626.9641(1)(a), (c), (e), (h) F.S.

       History - New 7-1-79, Formerly 4-46.03

       
       

       Each of these provisions is cited in the administrative complaint respondent filed against petitioner on December 2, 1987. Petitioner's Exhibit No. 5.

       
       

       CONCLUSIONS OF LAW

       
       

14. The Division of Administrative Hearings has jurisdiction of petitions like the present one challenging provisions of existing administrative rules as an invalid delegation of legislative authority. Section 120.56, Florida Statutes (1987).

    
    

15. Respondent's motion to reconsider, filed March 1, 1988, and addressed to the ruling sustaining petitioner's objections to certain portions of Mr. Nettles' deposition, was met with petitioner's response to respondent's motion to reconsider, filed March 11, 1988, and is hereby denied. This has not, however, affected rulings on any proposed findings of fact.

16. As the "one who attacks the rule", Agrico Chemical Co. v. State Department of Environmental Regulation, 365 So.2d 759, 763, (Fla. 1st DCA 1978) rev. den. 376 So.2d 74 (Fla. 1979), the petitioner has the burden to:

    
    

    show that (1) the agency adopting the rule has exceeded its authority; (2) that the requirements of the rule are not appropriate to the ends specified in the legislative act; and (3) the requirements contained in the rule are not reasonably related to the purpose of the enabling legislation but are arbitrary or capricious. Department of Administration, Division of Retirement v.

    Albanese, 455 So.2d 639, 641 (Fla. 1st DCA

    1984).

    
    

    The challenger's burden "is a stringent one indeed." Agrico Chemical Co. v. State Department of Environmental Regulation, 365 So.2d 759, 763 (Fla. 1st DCA 1978) rev. den. 376 So.2d 74 (Fla. 1979).

    
    

17. Having been called upon to defend an administrative complaint predicated on the rule provisions questioned here, petitioner has standing to maintain the challenge, but "the validity of ... [a challenged] rule must be upheld if it is reasonably related to the purpose of the legislation interpreted and it is not arbitrary and capricious." Department of Professional Regulation

    v. Durrani, 455 So.2d 515, 517 (Fla. 1st DCA 1984). Florida Beverage Corporation v. Wynne, 306 So.2d 200 (Fla. 1st DCA 1975).

    
    

    ANACHRONISTIC CITATION

    
    

18. Initially, petitioner contends that Section 626.854(1) and (2), Florida Statutes (1987), cited in the Florida Administrative Code as the law implemented by Rules 4-6.012 and 4-6.013 cannot be looked to as statutory authority for the rules, because Section 626.9541 had not come into existence at the time the rules were promulgated. See Department of Health and Rehabilitative Services v. Florida Psychiatric Society, Inc., 382 So.2d 1280 (Fla. 1st DCA 1980).

    
    

19. Section 120.54(7), Florida Statutes (1987) requires, for each rule, explicit "reference to the section or subsection of the Florida Statutes or the Laws of Florida being implemented, interpreted, or made specific," "in order to make it perfectly clear wherefrom a rule gains its power." Florida Power and Light Co. vs. Florida Public Service Commission, 471 So.2d 526, 528 (Fla. 1983)(reh. den. 1985). See Section 120.52(8), Florida Statutes (1987). But here, the statutory provisions cited as the law implemented when the rules were certified on December 20, 1974, were later incorporated in a different statutory provision.

    
    

20. For the first time on rehearing, the agency involved in Shell Oil Company v. Department of Revenue, 461 So.2d 959 (Fla. 1st DCA 1984) argued that an administrative rule crucial to the case should be read as implementing a particular statute, viz., Section 220.42(1). The court "found that the rule itself contains no reference to Section 220.42(1)," at 963, and reiterated the proposition that "each rule is required to contain a reference to `the section or subsection of the Florida Statutes or Laws of Florida being implemented, interpreted, or made specific.'" At 963. In denying the agency's petition for rehearing, on the ground "that authority . . . not cited and issues not raised

    in the brief or on oral argument cannot be raised for the first time on motion for rehearing," at 963, the Shell Oil court observed:

    
    

    We may speculate that had this statute been urged in the court below, in support of the department's interpretation of its rule, the trial judge's decision might well have been favorable to the department on this issue.

    At 962.

    
    

    This language suggests that the absence of a statutory reference in the published rule does not require invalidation of the rule, even if the rule implements the unlisted statute, and not the statute cited. In the Shell Oil case, moreover, the statute cited was not, as in the present case, a mere recodification of a substantially identical statutory provision.

    
    

21. In any event, the failure to name the statute a rule implements should ordinarily be deemed harmless error, in the same way erroneous or incomplete economic impact statements do not render administrative rules invalid unless the deficiencies are material, and impair either the fairness of rulemaking proceedings or the correctness of the rule. See e.g., Humhosco, Inc. d/b/a Humana Hospital Mandarin v. Department of Health and Rehabilitative Services,

    476 So.2d 258 (Fla. 1st DCA 1985); State Department of Insurance v. Insurance Service Office, 434 So.2d 908 (Fla. 1st DCA 1983); Plantation Residents' Association v. School Board of Broward County, 424 So.2d 879 (Fla. 4th DCA 1983); Division of Worker's Compensation v. McKee, 413 So.2d 805 (Fla. 1st DCA 1982).

    
    

22. Eschewal of the per se invalidity approach leaves intact important incentives for agencies to list statutory authority carefully and comprehensively in rule adoption proceedings, as in fact occurred in the present case. Adequate statutory references may obviate an agency's having to defend rule challenges predicated on misapprehension omissions have induced.

    Rulemakers should also anticipate the chariness with which claims that omitted statutes confer rulemaking authority will inevitably be greeted. But see Department of Health and Rehabilitative Services v. Florida Ass'n of Academic Nonpublic Schools, Jacksonville Country Day School and the Customer School, 510 So.2d 102 (Fla. 1st DCA 1987), where the court stated, "In further contravention of Section 120.54, the legal authority cited by the proposed rule provides neither specific nor implied rulemaking authority to HRS with regard to the rule in question." Nor did any other statute provide such authority in that case, however.

    
    

    LAW IMPLEMENTED

    
    

23. Section 626.9541(1) and (2), Florida Statutes (1987), cited in the Florida Administrative Code as authority for all three challenged provisions, contains the requirement, otherwise codified when Rules 4-6.012 and 4-6.013 (then 4-6.12 and 4-6.13) were adopted, that insurers doing business in Florida not resort to misrepresentations as to their financial condition or as to the nature of the policies they offer and that they refrain generally from untrue, deceptive, false or misleading advertising

    
    

24. The gravamen of petitioner's rule challenge is that the rules complained of forbid an insurer to advertise or "create the impression directly or indirectly" that a government agency has endorsed or approved an insurance policy or been in any way affiliated with it, even when a governmental agency

    has, in fact, approved, endorsed or otherwise been affiliated with the policy. With respect to Rule 4-6.013(2), Florida Administrative Code, petitioner's contention does not bear up under scrutiny. That rule forbids advertising that "tends to *confuse or mislead* prospective insureds into believing that the solicitation is in some manner connected with an agency of . . . government." Rule 4-6.013(2), Florida Administrative Code. (emphasis supplied between *) Where such a connection exists, advertising the fact would not confuse or mislead, and the rule would not apply. Witnesses testified, moreover, that respondent had not applied Rule 4-6.013(2), Florida Administrative Code, in cases in which no confusion or misleading occurred.

    
    

25. Similarly, testimony was adduced to the effect that respondent had not and would not apply Rules 4-6.012(2) and 4-46.003(1), Florida Administrative Code, unless an insurer created a false impression regarding governmental affiliation. But the language of those rules does not require that the impression be false, confusing or misleading, and administrative agencies are bound to follow their own rules, regardless of any past administrative practice otherwise. Section 4, Ch. 84-173, Laws of Florida (1984). Woodley v. Department of Health and Rehabilitative Services, 505 So.2d 676 (Fla. 1st DCA 1987); Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 493 So.2d 1055 (Fla. 1st DCA 1986) (Until an impractical rule is amended, "expedience cannot be permitted to dictate its terms." At 1057); and Kearse v. Department of Health and Rehabilitative Services, 474 So.2d 819 (Fla. 1st DCA 1985).

    
    

26. Although the defect in Rules 4-6.012(2) and 4-46.003(1), Florida Administrative Code, could not be raised by an insurer who had no affiliation with a governmental agency, petitioner does have the requisite standing to raise the defect. Because rule challenge proceedings do not contemplate "as applied" determinations, which are reserved for substantial interest proceedings convened pursuant to Section 120.57, Florida Statutes (1987), the defective portions must be invalidated. If respondent elects, it will be a simple matter to repair the defect. In the interim, both Rule 4-6.013, Florida Administrative Code, and the language of the statute the invalidated rules were designed to implement authorize appropriate action against any insurer misrepresenting its relationship to a governmental agency.

It is, accordingly, ORDERED:

1. Rules 4-6.012(2) and 4-46.003(1), Florida Administrative Code, are an invalid exercise of delegated legislative authority.

   
   

2. As to Rule 4-6.013(2), Florida Administrative Code, the petition seeking determination that rules are invalid is denied.

DONE AND ENTERED this 21st day of March, 1988 in Tallahassee, Florida.

ROBERT T. BENTON, II

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 21st day of March, 1988.

APPENDIX

subordinate matters.

Petitioner's proposed findings of fact Nos. 3, 12, 13, 18, 19, 2, 22,23 and

24 are proposed conclusions of law or recite witnesses' views on legal conclusions.

Petitioner's proposed findings of fact Nos. 10, 14, 15 and 16 are immaterial.

With respect to petitioner's proposed finding of fact No. 21, the agency's practice is immaterial in a rule challenge proceeding, when the language of the rule is clear.

With respect to petitioner's proposed finding of fact No. 26, respondent's administrative complaint evinces an intention to apply the rules in such a fashion.

Respondent's proposed findings of fact Nos. 1 through 15, having been stipulated by the parties, and having also been recited by petitioner in its proposed final order, have been adopted.

Respondent's proposed finding of fact No. 16 has been adopted, insofar as material, except as regards the date of filing.

Respondent's proposed findings of fact Nos. 17 and 18 are proposed conclusions of law, which are adopted.

Respondent's proposed findings of fact Nos. 19, 20 and 21 have been adopted, in substance, insofar as material.

COPIES FURNISHED:

Frank J. Santry, Esquire David P. Heath, Esquire GRANGER, SANTRY, MITCHELL

AND HEATH, P.A.

Post Office Box 14129 Tallahassee, Florida

Sharon N. Goldstein, Esquire Gabriel Mazzeo, Esquire

413-B Larson Building Tallahassee, Florida 32399-0300

Hon. William Gunter State Treasurer and

Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Liz Cloud, Chief

Bureau of Administrative Code Room 1802, The Capitol Tallahassee, Florida 32399-0250

Carroll Webb, Executive Director Administrative Procedures Committee

120 Holland Building Tallahassee, Florida 32399-1300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 87-005751RX

Orders for Case No: 87-005751RX