STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE ) AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 88-2919

) DENT-ALL OF FLORIDA, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

The final hearing in this case was held on November 2, 1988, in Tampa, Florida, before Donald D. Conn, Division of Administrative Hearings. The parties were represented as follows:

APPEARANCES

For Petitioner: Rainell Y. McDonald, Esquire

413-B Larson Building Tallahassee, Florida 32399-0300

For Respondent: Michael P. Horan, Esquire

Barnett Plaza - Suite 2400

101 East Kennedy Boulevard Post Office Box 500

Tampa, Florida 33601-0500

The issue in this case is whether the Department of Insurance and Treasurer (Petitioner) should take disciplinary action against the dental service plan license of Dent-All, Inc. (Respondent) based upon its alleged violation of the terms of a prior Final Order of suspension issued by the Petitioner on December 2, 1986. At the hearing, the Petitioner called two witnesses and introduced four exhibits. The Respondent called two witnesses, and introduced five exhibits.

Prior to the commencement of the hearing, a ruling was placed on the record concerning a Motion for Protective Order which had been filed by the Petitioner on October 31, 1988, two days prior to the hearing, and which had been the subject of a telephone conference call on the same day. The Motion was addressed to six depositions which Respondent sought to take on October 31 and November 1, 1988, and for which Petitioner had been given only one day's notice. Several of the potential witnesses to be deposed are employees of the Petitioner. The Motion for Protective Order was granted, since it would constitute an undue burden on the Petitioner to allow depositions to be taken on the day prior to hearing with only one day's notice.

Additionally, on November 1, 1988, the day prior to hearing, the Respondent filed a Motion to Enforce Joint Settlement Stipulation, or in the alternative a

Motion for Continuance. After having heard argument of counsel prior to the commencement of the final hearing, the Respondent's Motion to Enforce was denied, since it does not appear that the parties have entered into a joint settlement stipulation, and in any event, no authority was cited which would authorize this Hearing Officer to enforce such a stipulation. The role of the Hearing Officer, assigned by the Division of Administrative Hearings, is set forth in Section 120.57(1), Florida Statutes, and Chapter 221-6, Florida Administrative Code, and these provisions do not authorize the Hearing Officer to enforce settlement stipulations, particularly when a party reasonably disputes that a joint stipulation was reached. The Respondent's Motion for Continuance was also denied, since good cause had not been shown that would warrant the further continuation of these proceedings which had already been continued on one occasion, at the request of Respondent, to allow the completion of discovery and the pursuit of possible settlement.

The transcript of the final hearing was filed on November 28, 1988, and the parties were given ten days thereafter to file proposed recommended orders, including proposed findings of fact and memoranda. The Appendix to this Recommended Order contains a ruling on each timely filed proposed finding of fact.

FINDINGS OF FACT

1. At all times material hereto, the Respondent has been licensed by the Petitioner to engage in business in this state as a dental service plan pursuant to Chapter 637, Part III, Florida Statutes, although that license was suspended for a period of time, as set forth below.

   
   

2. On December 2, 1986, Respondent's license was suspended by a Final Order of the Petitioner for a period not to exceed nine months. This period of suspension expired on September 2, 1987.

   
   

3. According to Robert A. Willis, Assistant Bureau Chief of Allied Lines, and a representative of the Petitioner, the Petitioner has an established policy by which a provider whose license has been suspended can continue to service existing customers and policyholders, but cannot accept new enrollees, new subscriber contracts, or renewals during the period of suspension. This policy is confirmed by a letter which was sent to the President of the Respondent, Logan D. Browning, on December 10, 1986, by R. B. Johnson, Chief of the Bureau of Allied Lines. The testimony of the former lawyer for Respondent, David C. Park, who was called by the Respondent, is also consistent with, and confirms the policy of the Petitioner by which new enrollees and contracts cannot be accepted during a period of suspension. Park testified that Browning was not at all confused by the terms of the suspension, and understood that Respondent could not accept contracts from new individuals or groups during this period of suspension.

   
   

4. It was stipulated that the term "new" individual or group contract means that the individual or group had never been covered by Respondent's dental service plan before. This term is to be distinguished from a "renewal" contract which covers subscribers and members of a plan that lapsed, but was then immediately reactivated, or a "conversion" contract under which an individual, whose eligibility in a group ends, is then allowed to buy new individual coverage.

   
   

5. The parties have further stipulated that during the period of suspension which began on December 2, 1986, the Respondent accepted new

   individual member contracts from December 7, 1986, and new group contracts from December 17, 1986, and continued to do so until the end of the nine month suspension on September 2, 1987. By stipulation, it is established that approximately 200 new individual members, and 11 new groups with a total of 161 individuals in these 11 new groups, were accepted for coverage during the period of suspension.

   
   

6. Logan D. Browning, Respondent's President, testified that new individual and group contracts were accepted during the suspension period because he incorrectly believed that the Final Order of suspension had been stayed by the filing of an appeal with the First District Court of Appeal on December 30, 1986. In fact, the Court specifically denied the Respondent's motion for supersedes and stay of suspension on January 23, 1987. A former Executive Vice President with Respondent, Ann Hoffman, testified that Browning told her to continue all operations during the suspension just as they had before the suspension, and thus they continued to write new business.

   
   

7. Respondent's license was suspended for failure to comply with the working capital requirements of Section 637.407(4), Florida Statutes. During the period of suspension, the Respondent failed to demonstrate to the Petitioner that it had working capital in a minimum amount of $100,000 in cash or United States Government Securities, or had obtained reinsurance from a Florida licensed insurance company. If the Respondent had demonstrated it had sufficient working capital at any time during the period of suspension, the Petitioner may have ended the suspension and reinstated its license. However, such action to reinstate Respondent's license was not required by the terms of the Final Order of December 2, 1986, and was entirely discretionary on the part of the Petitioner. In any event, Respondent did not establish that it made such a demonstration during the period of suspension.

   
   

8. It is the position of the Respondent in this proceeding, that upon the expiration of the nine month suspension, Respondent did demonstrate sufficient working capital to comply with the requirements of Section 637.407(4), Florida Statutes, and therefore, its license should have been reinstated by the Petitioner.

   
   

9. In order to determine if Respondent met the working capital requirement, it is necessary to define the term. The term "working capital" is not defined by statute or rule. The Petitioner has used two different methods to compute working capital. First, a cash test by which licensees must have

   $100,000 in available cash, and second, a test based upon generally accepted accounting principles (GAAP) which deducts current liabilities from current assets to determine if assets exceed liabilities by at least $100,000. The GAAP test is now preferred and is currently used by the Petitioner. However, from June, 1987 until October, 1987, the cash test was used by Petitioner. Thus at the time suspension expired and Respondent was required to demonstrate compliance with the working capital requirements, the cash test was being used by the Petitioner. Therefore, Respondent's compliance with the working capital requirement at the expiration of the suspension must be determined using the cash test.

   
   

10. On September 2, 1987, Respondent prepared a listing of available sources of funds totaling $101,541.18. This listing was signed by officers of the Respondent and representatives of the Petitioner as "total sources of funds found to be in existence and allowable for meeting the working capital requirements pursuant to Section 637.407(4), F.S., and a Department of Insurance Final Order dated December 2, 1986." Critical to Respondent's demonstration of

    meeting the working capital requirement through this listing, however, are two certificates of deposit and certain government security certificates which are included on the listing and which total almost $50,000. Without these certificates, Respondent clearly falls far below the working capital requirement.

    
    

11. It is the position of the Petitioner that these certificates cannot be counted by Respondent in meeting the working capital requirements. Two certificates of deposit in the total face amount of $21,000 from Planter's National Bank, Kitty Hawk, North Carolina, are owned by W. Carson and Lou Anne Browning. The Brownings executed an agreement with Respondent on May 7, 1987, by which they agreed to purchase certificates of deposit in the amount of

    $25,000 and place said certificates in the name of the Respondent with the Commissioner of Insurance by assignment, for the benefit of Respondent's members. They did not purchase these certificates in the name of Respondent, but in their own name, and retained all rights to interest earned thereon. The assignment of these certificates to the Commissioner of Insurance was made on May 27, 1987, but there is no evidence from Planter's National Bank or the owners of the certificates that this assignment was for the benefit of Respondent or its members. The government security certificates were purportedly purchased by Joseph A. and Julia M. Winoker in May, 1987, but the evidence in the record of this case does not include any confirmation of the purchase of such securities, or that any such purchase was for the benefit of Respondent. There is evidence of an agreement between Respondent and the Winokers for their purchase of $25,000 of marketable securities through E. F. Hutton, but the record does not contain a copy of such certificates or any other competent substantial evidence to confirm this purchase on behalf of Respondent and assignment to the Commissioner of Insurance.

    
    

12. The quarterly financial report of the Respondent which was filed with the Petitioner for the quarter ending September 30, 1987, does not specifically identify these two certificates of deposit and government security certificates upon which the Respondent seeks to rely to demonstrate compliance with the working capital requirements under the cash test.

    
    

13. Based upon a review of all the evidence in the record, it is found that the Respondent did not meet the working capital requirement using the cash test applicable at the time of the expiration of Respondent's suspension.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the parties, and the subject matter in this cause. Section 120.57(1), Florida Statutes. Since this is a case in which Petitioner is seeking to discipline the Respondent's license, and could thereby adversely affect the Respondent's ability to continue to conduct business in the State of Florida, Petitioner has the burden of establishing the basis for license disciplinary action by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

15. The Petitioner has met its burden of proof in this case. Not only was it shown that Respondent consistently and repeatedly violated, without good cause, the clear and reasonable terms of the previous Final Order of suspension under which it operated from December 2, 1986 until September 2, 1987, but it was also established that Respondent did not meet the working capital requirements of Section 637.407(4), Florida Statutes, during the period of suspension using the cash test which was then applicable. Therefore, there was no basis to reinstate Respondent's license during, or at the expiration of, the

    prior period of suspension, and further, there is a clear and convincing basis for Petitioner to take further disciplinary action due to Respondent's continuing failure to demonstrate sufficient working capital, and repeated violations of the terms of the suspension by accepting substantial numbers of new individual and group contracts during the period of suspension.

    
    

16. The Petitioner is authorized to take license disciplinary action against any dental service plan which has violated the provisions of Chapter 637, Part III, Florida Statutes, or has engaged in fraudulent activities. Section 637.423, Florida Statutes. It is a violation of Section 637.407(4) for any such plan to fail to maintain adequate working capital in a minimum amount of $100,000 in cash or United States Government securities, and it is also a violation of Section 637.415(1), Florida Statutes, for any person to solicit or procure applications for dental services, or to receive money on account for such services without a currently valid license. The evidence clearly shows that the Respondent was in violation of these two statutory provisions during, and at the termination of, its prior period of suspension, and is therefore subject to disciplinary action by the Petitioner.

RECOMMENDATION

Based upon the foregoing, it is recommended that Respondent's license as a dental service plan in the State of Florida be revoked.

DONE AND ENTERED in Tallahassee, Leon County, Florida, this 12th day of December, 1988.

DONALD D. CONN

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 12th day of December, 1988.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-2919

Rulings on Petitioner's Proposed Findings of Fact:

1 Adopted in Finding of Fact 1.

2-3 Adopted in Findings of Fact 2, 7. 4-5 Adopted in Finding of Fact 3.

1. Rejected as not based on competent substantial evidence in the record.

2. Adopted in Finding of Fact 4.

3. Adopted in Finding of Fact 5.

4. Adopted in Finding of Fact 9.

10-12 Adopted in Findings of Fact 10-12.

13 Adopted in Finding of Fact 13.

14-15 Adopted in Finding of Fact 6.

16 Adopted in Finding of Fact 3.

Rulings on the Respondent's Proposed Findings of Fact:

1. Adopted in Finding of Fact 2.

2. Adopted in Finding of Fact 3.

3. Rejected in Finding of Fact 3.

4. Adopted and Rejected in part in Finding of Fact 6.

5. Rejected in Findings of Fact 7, 9-13.

6. Adopted in Finding of Fact 9.

7-9 Rejected in Findings of Fact 7, 9-13.

10 Rejected in Findings of Fact 3 and 6.

COPIES FURNISHED:

Rainell Y. McDonald, Esquire 413-B Larson Building Tallahassee, Florida 32399-0300

Michael P. Horan, Esquire Barnett Plaza - Suite 2400

101 East Kennedy Boulevard Post Office Box 500

Tampa, Florida 33601-0500

Honorable Bill Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Don Dowdell, Esquire General Counsel

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

================================================================= NOTIFICATION OF AGENCY FINAL ORDER STATUS

=================================================================

OFFICE OF THE TREASURER TOM GALLAGHER

DEPARTMENT OF INSURANCE TREASURER

The Capitol, Insurance Commissioner Tallahassee, Florida Fire Marshall 32399-0300

April 18, 1989

Honorable Donald D. Conn Hearing Officer

Division of Administrative Hearings The Desoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

RE: Department of Insurance and Treasurer vs. Dent-All of Florida, Inc., Case No. 88-2919

Dear Mr. Conn:

The Department of Insurance and Treasurer hereby informs you that the above-referenced matter is now closed. On or about March 9, 1989, the Respondent surrendered its license as a Dental Service Plan to the Department. Accordingly, the Department will not be issuing a Final order as a result of this action. Thank you for your attention to this matter.

Very truly yours,

SCF/eu

Stephen C. Fredrickson, Esquire Office of Legal Services

412 Larson Building

Tallahassee, Florida 32399-0300

(904) 488-4540

Docket for Case No: 88-002919

Orders for Case No: 88-002919