vs. ) CASE NO. 88-2587
Respondent. )
A hearing was held in this case in Tampa, Florida, on September 2, 1988, before Arnold H. Pollock, Hearing Officer. The issue for consideration was whether Respondent's license as an insurance agent in Florida should be disciplined because of the misconduct alleged in the Administrative Complaint filed herein.
For Petitioner: S. Marc Herskovitz, Esquire
For Respondent: Kennan G. Dandar, Esquire
On May 3, 1988, Ann Wainwright, Assistant Insurance Commissioner and Treasurer, on behalf of Bill Gunter, Insurance Commissioner and Treasurer, filed an Administrative Complaint against the Respondent alleging numerous violations of Chapter 626, Florida Statutes, in the course of his business as an insurance agent during the period April, 1986 through April, 1987. By letter dated May 24, 1988, Respondent's counsel requested a formal hearing on the allegations contained in the Complaint.
The matter was forwarded to the Director, Division of Administrative Hearings, who assigned the case to the undersigned. On June 10, 1988, the case was set for hearing on August 3, 1988. However, Respondent requested a continuance of that hearing, and on June 30, 1988, the undersigned reset the hearing for August 17, 1988. This date was not convenient to the Petitioner's counsel and on July 18, 1988, the hearing date was again changed to August 31, 1988. This date was changed, upon request of Respondent's counsel, to September 2, 1988 at which time the hearing was held.
At the hearing, Petitioner presented the testimony of Charles R. Safarik, a sales representative and engineering consultant; Sandra Mitchell, records custodian at the Sun Bank in Tampa; Clifford J. Rowley, an insurance underwriter; Susan R. Walker, policy typist; George E. Reed, owner of a trucking company; and Shirley Ann Sagorski, co-owner of an insurance agency. Petitioner also introduced Petitioner'S Exhibits 1 through 18. Respondent testified in his own behalf and introduced Respondent's Exhibits A through G.
A transcript of the proceedings was furnished and both parties submitted Proposed Findings of Fact. Petitioner moved to exclude Respondent's Proposed Findings of Fact on the basis they were not filed within 10 days of the filing of the transcript. That motion is denied. The Proposed Findings of Fact offered by both parties have been ruled upon in the Appendix to this Recommended Order.
At all times pertinent to the allegations herein, Respondent, Charles Edward Hinchey, was licensed by the State of Florida as:
a Life and Health (Debit Agent),
a Life agent,
a Life and Health Agent,
a General lines - Property, casualty, surety, and Miscellaneous Agent,
a Health Insurance Agent
At no time pertinent to the allegations herein was he either licensed or eligible for licensure as a Surplus lines - Property, Casualty and Surety Surplus lines Agent. The Petitioner, Department of Insurance and Treasurer, (Department), is the state agency charged with regulating the activities of licensed insurance agents in Florida.
At all times pertinent to the allegations herein, the Respondent, Hinchey, was President and a Director of C. Edward Hinchey & Company, Inc.
Sometime in September, 1986, Charles R. Safarik, a sales representative and energy consultant operating his own firm, contacted Respondent on the basis of a reference from his prior insurance agent, relative to securing completed products insurance for his business. As a result of these discussions, he and Respondent entered into an agreement for Mr. Safarik to purchase the desired coverage from Respondent at an acceptable yearly premium of $1,789.00. Mr. Safarik gave a check for this amount dated September 8, 1986, payable to C. Edward Hinchey & Co., and endorsed for deposit to that company's account. When the check was handed over, Respondent gave Mr. Safarik a binder which he signed which reflects Lloyds of London, (Lloyds) as the underwriter. Lloyds of London is authorized to insure for Surplus Lines in Florida. Mr. Safarik thought, as a result, that he was insured by Lloyds of London and though he never received a policy to that effect, in February, 1987, upon his request, he received from the Respondent a photo copy of a Lloyds policy reflecting Respondent as agent, which purports to insure Mr. Safarik's company as requested. When he received this document, Mr. Safarik called Lloyds directly to inquire, giving the policy number. In response, he was advised the company would not issue any policy with the stated number, and was referred to Lloyds' counsel in New York. When Mr. Safarik requested an original policy from Lloyds' American counsel, he was advised, after investigation, by letter in April, 1987, that he had no insurance
with Lloyds. The letter in question further indicated that the certificate of insurance issued by Respondent's company and signed By Respondent was issued without the authorization of Lloyds.
In March, 1987, after receiving the purported policy and bogus Certificate of Insurance from Respondent, Mr. Safarik advised the Department of Insurance personnel of the situation as it then appeared. Before he received an answer, however, in mid-March, 1987, Respondent gave Mr. Safarik a check for a full return of the premium paid, a letter to Hinchey for Safarik to sign requesting the policy be voided, and a proposed letter to the Department of Insurance indicating the matter had been resolved to his satisfaction. Mr. Safarik signed neither. Though Mr. Safarik cashed Respondent's check, he did not have the insurance coverage he thought he had when dealing with Respondent. Should anything go wrong with any of the equipment sold during that period, he may have liability for any loss occasioned.
Though Respondent never stated he was a representative of Lloyds, his actions in delivering a binder and certificate of insurance, both of which bore his agency as correspondent/agent, and the Lloyds name as insurer, implied an agency representation relationship. Respondent did nothing to discourage that conclusion.
The Florida authorized underwriter for Lloyds categorically denies having signed any of those documents. The documents appear to bear the signature of his policy typist, but they were not signed as they appear now. For example, the Florida Surplus Lines Number C-562-85, which appears on the photo copy of the policy given to Mr. Safarik, was actually the number on a
different company's policy issued to Tanner Trucking, Inc., in August, 1985. He also believed the tax stated thereon is incorrect for the premium charged, (Counsel for Respondent disputed this in a post-hearing letter to the undersigned), but that is irrelevant except as to indicate manipulation of the policy. It is clear, and the testimony of Mr. Rowley and Ms. Walker, the policy typist, confirms, that the policy which Respondent delivered to Mr. Safarik was fraudulent and invalid. It is an obvious cut and paste forgery.
George B. Reed owns and operates D&B Trucking in Brandon, Florida. His rolling stock includes three tractors and 16 trailers, some of which are financed under an agreement which requires him to carry liability and other insurance on them. When he bought 10 trailers in April, 1986, he purchased insurance for them through the Respondent. On April 14, 1986, he gave Respondent a check for $4,292.29, as partial premium, made payable to Real Insurers, (Real), with whom Respondent was affiliated at the time. Thereafter, he received a binder dated April 18, 1986, issued on American Trucking Insurance Company, signed by the Respondent. Since Mr. Reed had never heard of the company, he asked around about it but could get no information. Though he asked Respondent several times for a policy to support the binder, he never received one. Respondent repeatedly claimed it had something to do with his files.
Mr. Reed also made additional premium payments monthly in May, June, July, and August, 1986, but he did not receive a policy from either the Respondent or the company. The policy was in force for, he believed, one year during which Mr. Reed had some claims he thought were covered. When he notified Respondent of these claims, Respondent said he was covered and he, Respondent, would have to get into the files to process them. Mr. Reed received no reimbursement at all on these claims, however, and had to pay for the supposedly covered damage himself.
Mr. Reed ultimately determined there was no such company as American Trucking Insurance Company. Repeated inquiries to the Respondent were met with repeated stalling. Respondent told Mr. Reed he had placed the insurance through Day and Associates in St. Petersburg which had gone out of business when Mr. Day died. This information was communicated to Mr. Reed by the Respondent by letter dated January 14, 1987. In that letter Respondent also pointed out that he had returned the premium paid for the nonexistent coverage and attempted to lay the entire blame for the lack of coverage on Day.
When Mr. Reed found out he had no coverage, he nonetheless stayed with Respondent who purportedly got him coverage with AllState. It subsequently was determined that this latter coverage was only for one truck, however, and if the binder introduced by Respondent at the hearing is for the coverage referred to here, it must be noted that the binder reflects Lloyds of London rather than AllState as the underwriter. It also was determined that of the $4,292.29 paid by Reed in the initial check to Real, all but $1,962.00, which was reimbursed by Read to Hinchey, was for cargo and liability insurance with Occidental Insurance Company, not American Trucking Insurance Co. The terms of Hinchey's agreement with Real called for him to independently procure the truck insurance that Reed thought he was getting and against which the claims were filed. He placed the coverage, if placed at all, with a firm not licensed in this state, and, as will be seen, there is some question he did even that.
When Mr. Hinchey paid Mr. Reed back the $4,292.29, he enclosed a letter which, when signed by Reed, would have constituted a release of all claims Reed had against him. Reed had not solicited this though he signed it.
All of these dealings with Mr. Reed took place when Respondent was an agent working for Real Insurers. The co-owner of that agency had no idea Respondent was conducting his own incorporated business out of her agency until confronted with the Reed situation. She knew nothing of any dealing with American Trucking Insurance Company or of Day and Associates. While Day and Associates was at one point in business in Florida, the Department of Insurance certifies that American Trucking Insurance Company is not authorized to act as an insurer in any capacity in Florida. It is clear, therefore, that Respondent accepted $1,962.00 from Mr. Reed under false pretenses of providing coverage on
10 trailers; issued a binder on a company which did not exist; and then attempted to cover up his actions by paying Reed back after Reed complained to the Department.
Respondent denies any intentional wrongdoing. He stated that when Mr. Safarik first contacted him, he contacted several agents and brokers from a list of agents offering the desired coverage, which he had compiled over the years. Because of the dangerous nature of Safarik's business, he had a difficult time finding someone to issue the coverage. Day and Associates was on the list though Respondent had never dealt with them and knew nothing about them. He contacted Day by phone and transacted all their business that way, without ever meeting Mr. Day. He claims this is not unusual. According to Respondent, the placement of Safarik's coverage with Lloyds was accomplished by Day, and Respondent issued the binder on the basis of a price quoted him by Day. The policy number and company name were also given to him, he claims, by Day to whom he transmitted 85 percent of the premium paid by Mr. Safarik. Respondent has no evidence by way of cancelled checks, letters, or other written memoranda to back up this claim. It is patently false.
Mr. Hinchey relates that in 1975 he worked directly with a Lloyds underwriter and was, therefore, familiar with their policy form. The policy he
received for Mr. Safarik was not unusual, and bearing the Lloyds seal, it did not raise any suspicions. When Mr. Safarik told him that he had not received his policy, Respondent made a copy of his copy and sent it on without, he asserts, making any changes thereto or placing any entries thereon. His typed company name which appears thereon as correspondent, instead of Day and Associates who procured the policy must, therefore, have been placed there by Day or the company. This is unlikely.
Respondent claims he first found out the policy was not genuine in April, 1987, when he received a phone call from Lloyds' New York attorney about it. He corresponded with the Department's investigator in Tampa who was looking into the matter and heard no more about it. In his mind, he had no reason to doubt that Day and Associates had authority to write the policy.
As to the trucking company policy, Respondent indicates he placed the insurance with American Trucking Insurance Company, out of the Grand Cayman Islands through Day and Associates. The policy he wrote showed coverage from 4- 18-86 to 4-18-87 at a premium of $4,200.00 and an attached schedule reflects 10 trailers covered. The binder Respondent introduced in support of this coverage, however, reflects a coverage period of 8-27-87 to 9-24-87, less than one month, relates to only one vehicle, and shows no premium. This document in no way supports Respondent's position.
Again, Respondent contends that 85 percent of the premium he received from Real Insurers for the American Trucking Insurance Company policy was paid to Day and Associates. There is, again, no cancelled check for this payment as it was paid in cash to a "woman [who] came by and picked it up." There are no receipts or anything with the Day name on it to verify this. Anything of that nature would have been in a file, according to Respondent, which was not presented for consideration. Respondent does not know what is in there. Again, it is clear from the evidence that Respondent, working his own operation out of the Real Insurers office, accepted premiums from Mr. Reed and issued a policy on a company which, if it exists at all, is not licensed to do business in Florida. This resulted in the client not being covered. He thereafter attempted to cover his actions up by blaming the matter on Day and Associates, a defunct organization previously headed by an individual now deceased. His story is unworthy of belief.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this case. Section 120.57(1), Florida Statutes.
In the instant case, the Department seeks to discipline Respondent's licenses as an insurance agent for various alleged violations of Chapter 626, Florida Statute, (F.S.). To do so, Petitioner must satisfy its burden of proof which is to establish the Respondent's misconduct as alleged by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).
Petitioner has clearly established, and Respondent does not contest, that as alleged in the Administrative Complaint, Respondent sold insurance policies to both Mr. Safarik and Mr. Reed and collected premiums therefor, that the policies were not legitimate policies, and that they did not provide the coverage requested or represented.
Respondent contends that he acted as an agent for another broker who actually wrote the policies in question, that he did not know the policies were
ineffective, and that his return of the total premium collected when he received notice that coverage was nonexistent, exempts him from any disciplinary action because he did nothing wrong and made restitution. A closer examination of the facts does not support that position.
In subparagraph 17(a) of the Administrative Complaint, Respondent is alleged to have violated Section 626.112(2), F.S., which provides:
No agent or solicitor shall solicit or otherwise transact as agent or solicitor, or represent or hold himself out to be an agent or solicitor as to any kind or kinds of insurance as to which he is not then licensed by the department,
by holding himself out as an agent for and soliciting clients for insurance coverage he was not licensed to sell.
At subparagraph 17(b), Respondent is alleged to have violated Section 626.311(4), F.S., which provides:
No agent licensee shall transact or attempt to transact under his license any kind of insurance or class thereof for which he does not have current in force of record with the department an agency appointment by an authorized insurer,
by transacting under his license, insurance coverage of a class he is not licensed for with an agency he does not represent.
In subparagraph 17(c), Petitioner alleges Respondent violated Section 626.561(1), F.S., which provides:
All premiums, return premiums, or other funds belonging to insurers or others received by an agent, solicitor, or adjuster in transactions under his license shall be trust funds so received by the licensee in a fiduciary capacity; and the licensee in the applicable regular course of business shall account for and pay the same to the insurer, or other person entitled thereto,
by failing to properly account for premiums received by him.
In subparagraph 17(d), (e), (f), (g), (h), (i), and (j), Petitioner alleges violations of Section 626.611, F.S., which provides in pertinent part:
The department shall ... suspend, revoke
... [or otherwise discipline a licensee] if it finds that as to the
licensee.
(4) ... the license or permit is willfully used, ... to circumvent any of
the requirements or prohibitions of this code.
(5)... Willful misrepresentation of any insurance policy ... or willful deception with regard to any such policy ... done either in person or by any form
of dissemination of information or advertising.
Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.
Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or permit.
Fraudulent or dishonest practices in the conduct of business under the license or permit.
Misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insured or beneficiaries or to others and received in conduct of business under the license.
(13) Willful failure to comply with, or willful violation of, any proper order or rule of the department or willful violation of any provision of this code,
by, as to (4), using his license to circumvent requirements of prohibitions of the insurance code; as to (5), willful deceit in regard to an insurance contract; as to (7), demonstrating a lack of fitness or trustworthiness to engage in the business of insurance; as to (8), failing to show a reasonable knowledge or technical competence to engage in transactions authorized by his license; as to (9), engaging in fraud or dishonest practices in the conduct of business under his license; as to (10), misappropriation, conversion, or unlawful withholding of monies belonging to insurers or insured received in the conduct of business under the license; and as to (13), his willful failure to comply with, or his willful violation of orders and rules of the department and provisions of the insurance code.
At subparagraphs 17(k) and (l), Respondent is alleged to have violated Section 626.621, F.S., which reads, in pertinent part:
The department may [suspend or revoke] the license of any agent ... if it finds that as to the ... licensee ... any one or more of the following applicable grounds exist under circumstances for which such ... [suspension or revocation] is not mandatory under s. 626.611:
(2) Violation of any provision of this code or of any other law applicable to the business of insurance in the course of dealing under the license or permit.
(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 or injury or loss to the public or detrimental to the public interest
by, as to (2), violating a provision of the insurance code in the course of dealing under his license; and, as to (6), engaging in unfair methods of competition or in unfair or deceptive practices; or by having shown himself to be a source of loss to the public.
In subparagraph 17(m) , Petitioner charges Respondent with a violation of Section 626.734, F.S., which provides:
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 by any person under his direct supervision or control while acting on behalf of the corporation.
by, while acting as an officer of a general lines agency, failing to remain fully liable for wrongful acts committed by a licensee under his control.
In this case, the Respondent was the president of his own agency and he allegedly committed the acts alleged in the Complaint. If those acts are proven by clear and convincing evidence, this provision, while not itself constituting a prohibitory provision, would render Respondent liable for those prohibited acts committed by him or his employees and would prevent him from escaping discipline on the basis that the agency or those other employees were responsible.
At subparagraphs 17(n) and (o), Respondent is alleged to have violated Section 626.9541(1)(b) and (k), F.S., which define unfair methods of competition and unfair or deceptive acts or practices, such as:
Knowingly making, publishing, disseminating, circulating or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated or placed before the public:
In a newspaper, magazine, or other publication,
In the form of a notice, circular, pamphlet, letter, or poster,
Over any radio or television station, or
In any other way,
an advertisement, announcement, or statement containing any assertion, representation, or statement with regard to the business of insurance which is
untrue, deceptive, or misleading and
(k) Knowingly making false or fraudulent statements or representations on, or relative to, an application for an insurance policy for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, agent, broker, or individual,
by, as to (b), knowingly falsely advertising in respect to the business of insurance, and, as to (k) knowingly making false or fraudulent representations in an application for an insurance policy for the purpose of obtaining a commission therefor.
In this case, the evidence fails to show that Respondent advertised at all, much less that his advertisements were misleading. Consequently, Petitioner has failed to carry its burden of proof to establish that alleged violation. As to the alleged violation of 626.9541(1)(k), this provision of the statute relates to the agent falsifying an application for insurance by a client so as to render that client eligible when he might not otherwise be, or activity of a similar sort. It does not pertain to representations made to a client to induce that individual to purchase insurance or, as here, to generate a false policy. Consequently, again, Petitioner has not established this allegation.
As to the remaining allegations, a short synopsis of the facts herein would be helpful. The evidence reflects that Respondent sold to two separate clients policies of insurance which were not what they were purported to be. In the first case, he sold Mr. Safarik a policy purportedly issued by Lloyds of London, and received a premium therefor. Somewhat later, when Mr. Safarik checked into his coverage, he discovered that Lloyds had not issued such a policy and he was not covered. In fact, Respondent was not authorized to write policies on that company. When Safarik's inquiry came to the attention of the Respondent, without being asked, he refunded Mr. Safarik's premium paid and solicited from Mr. Safarik a release which Safarik properly did not give.
During the entire period of purported coverage, Mr. Safarik did not have the coverage he thought he had purchased through Respondent and he remains liable for potential loss occasioned during that period.
With regard to the second policy, Respondent sold to a trucker, Mr. Reed, a policy purporting to cover 10 trailers which reflected American Trucking Insurance Company as the insurer. There is no such insurance company authorized to do business in Florida, and when Mr. Reed made inquiry into his coverage, Respondent, again, refunded the premium paid and solicited a release. In this case, he was successful. This release, however, while possibly serving to preclude action by the insured against the Respondent, does not insulate Respondent from disciplinary action against his licenses if misconduct can be shown.
In both cases, Respondent attempts to lay the fault on Day and Associates, a defunct St. Petersburg insurance brokerage firm whose principal, Mr. Day, is conveniently deceased. Respondent weaves an incredible story of arms length dealings with Day and Associates by telephone; payments of premiums in cash to a messenger who came to his office; with absolutely no documentary or other supportive evidence to confirm his story. It is inconceivable that a competent insurance agent would conduct business in that fashion. If, however, as was found, his story is a fabric woven of deceit and misrepresentation, then
he should not hold a position of trust. In short, it is clear that Respondent accepted premiums for policies which he forged, which were invalid and not authorized by the companies on which they were written. When called on this scheme, Respondent attempted to create an alibi which could not be verified or disproved. His efforts have not been successful.
Consequently, based on the evidence of record, it is concluded that Respondent transacted business with Mr. Safarik and Mr. Reed regarding insurance of a kind he was not licensed to deal in, with companies which either did not exist or for which he was not authorized to write insurance, and collected, in each case, premiums for the policies. This is a violation of Sections 626.112(2); 626.311(4); 626.611(4), (5), (7), (8), (9), (10) and (13); and 626.621(2) and (6), Florida Statutes. His failure to remit the premiums paid in to him to a bona fide insurance company so as to cause valid insurance coverage to be thereafter provided to the clients, is a violation of Section 626.561(1), Florida Statutes. His representation that he paid 85 percent of the premiums received to a lady from Day and Associates, in cash, without getting a receipt, is unworthy of belief. His inability to produce any documentation in any form of his relationship with Day and Associates, does nothing to support his story.
Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore:
RECOMMENDED that all licenses to engage in the business of insurance currently held by the Respondent, CHARLES EDWARD HINCHEY, be revoked.
RECOMMENDED this 24th day of October, 1988, at Tallahassee, Florida.
ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building
Filed with the Clerk of the Division of Administrative Hearings this 24th day of October, 1988.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-2587
The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case.
1-3. Accepted and incorporated herein. 4-7. Accepted and incorporated herein. 8-12. Accepted and incorporated herein.
13-14. Accepted and incorporated herein. 15-16. Accepted and incorporated herein.
17-18. Accepted and incorporated herein.
19. Accepted and incorporated herein.
20-21. Accepted and incorporated herein. 22-24. Accepted and incorporated herein. 25-27. Accepted and incorporated herein.
28. Rejected as a summary of the Respondent's presentation from the Petitioner's point of view and not a proposed Finding of Fact.
1-3. Accepted and incorporated herein. 4-6. Accepted and incorporated herein. 7-9. Accepted and incorporated herein.
10-12. Accepted and incorporated herein.
13. Accepted and Incorporated herein.
14-15. Accepted and incorporated herein.
16. Accepted and incorporated herein.
17-18. Accepted and incorporated herein. 19-20. Accepted and incorporated herein.
21. Rejected as how Mr. Phillips testified. The testimony related was given by Mr. Charles Rowley who works for Gordon B. Phillips Co. Also while there is no direct evidence that Respondent forged Mr. Rowley's signature to the policy, the circumstantial evidence is great that he did and it was so found.
22-23: Accepted and incorporated herein. 24-26. Accepted and incorporated herein.
27. Accepted except for the statement that one of his associate agents referred Respondent to Day & Associates. There was no affirmative indication of that point. Cited reference to transcript is inferential only.
28-29. Rejected as unsupported by credible evidence of record.
30-32. Accepted and incorporated herein except for the proposed finding that Respondent procured valid substitute insurance for Mr. Reed which is not supported by credible evidence of record.
S. Marc Herskovitz, Esquire Office of Legal Services 413-B Larson Building
Kennan G. Dandar, Esquire The Ashley Tower, Suite 1360
