STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 89-2651

)

DANIEL BRUCE CAUGHEY, )

)

Respondent. )

)

RECOMMENDED ORDER

This matter came on for hearing in Pensacola, Florida, before Robert T. Benton, II, Hearing Officer of the Division of Administrative Hearings, on December 12, 1989. The Division of Administrative Hearings received the hearing transcript on February 6, 1990, and the parties filed proposed recommended orders on March 7 and 12, 1990. The attached appendix addresses proposed findings of fact by number.

APPEARANCES

For Petitioner: Robert V. Elias, Esquire

412 Larson Building

Tallahassee, Florida 32399-0300

For Respondent: Bruce A. McDonald, Esquire

McDonald, Fleming & Moorehead

700 South Palafox Street, Suite 3-C Pensacola, Florida 32501

STATEMENT OF THE ISSUE

Whether petitioner should take disciplinary action against respondent for the reasons alleged in the administrative complaint?

PRELIMINARY STATEMENT

By administrative complaint dated April 24, 1989, petitioner alleged that respondent, a licensed insurance agent, "[a]t all times pertinent . . . an officer of Caughey Insurance Agency, Inc. . . . [and the agency's] general lines agent of record . . . [was on that account] personally and fully liable and accountable for any wrongful acts . . . [or code] violations committed by persons under . . . [his] direct supervision and control while acting on behalf of the corporation"; that "[o]n or about August 19, 1982 Caughey Insurance Agency, Inc. entered into a brokerage agreement with Jordan Roberts and Company, Inc. . . . requir[ing] Caughey Insurance Agency, Inc. to remit premiums, unearned commissions and additional premiums to Jordan Roberts and Company, Inc."; that respondent "personally guaranteed the [agency's] obligation

. . . under this agreement in" writing, but "failed to remit five thousand five

dollars and forty-four cents due under th[e] agreement" for which sum Jordan Roberts and Company, Inc. obtained judgment.

FINDINGS OF FACT

1. Daniel Bruce Caughey has been licensed by petitioner as an insurance agent at least since 1981. He began working for Caughey Insurance Agency, Inc. in 1971 as a file clerk. Once he was licensed, he worked as a salesman. In 1977, he assumed the executive vice-presidency of the agency, a position he still holds.

   
   

2. Until the middle of March, 1983, respondent'- father, William Edward Caughey, managed the agency. He continues to own all 1,000 shares the corporation has issued, although he has not written a policy since he turned management of the agency over to the respondent and his brother Randy in 1983.

   
   

3. In 1982 and thereafter until Jordan Roberts and Company, Inc. (JORO), a multi-line general agency, stopped underwriting automobile insurance, Caughey Insurance Agency, Inc. brokered automobile insurance through JORO.

   
   

4. When an account current bookkeeping dispute arose between Caughey Insurance Agency, Inc. and JORO, William Edward Caughey retained an accounting firm, Sizemore. On Sizemore's advice, he rejected JORO's claim for more than

   $20,900.

   
   

5. On October 21, 1983, a JORO representative told Daniel Bruce Caughey that JORO would no longer deal with Caughey Insurance Agency, Inc. unless he signed an "Individual Guarantee Agreement," personally guaranteeing the insurance agency's corporate indebtedness; and executed a promissory note in JORO's favor in the amount of $16,941. Respondent executed the documents.

   
   

6. On December 3, 1986, JORO brought suit against the corporation and respondent personally. No. 86-21454 (Fla. 13th Cir.). On August 13, 1987, the court entered judgment against both defendants in the amount of $6,595.94. Jordan Roberts & Co. v. Cauqhey, No. 86-21454 (Fla. 13th Cir.; Aug. 13, 1987). Neither respondent nor the agency has paid the judgment. With the possible exception of filing the complaint that eventuated in the present proceedings, JORO has made no effort to collect.

   
   

7. In Count I, JORO's complaint alleges the existence of a brokerage agreement between JORO and Caughey Insurance Agency, Inc., entered into "[o]n or about April 27, 1982"; execution and delivery of respondent's guarantee "[o]n or about October 21, 1983"; and the agency's indebtedness "for premiums on policies underwritten by [JORO] for the sum of $20,975.36." Petitioner's Exhibit No. 3.

   
   

8. In Count II, the complaint also alleges execution and delivery of a promissory note "[o]n or about October 21, 1983," without, however, explicitly indicating its relationship (if any) with the guarantee executed the same date. Petitioner's Exhibit No. 3. The final judgment does not specify which count(s) JORO recovered on. Petitioner's Exhibit No. 4.

   
   

9. Attached to the complaint are copies of the promissory note, executed by ?CAUGHEY INSURANCE AGENCY, INC., By: D B Caughey Vice President"; the guarantee, executed in the same way; and the brokerage agreement, executed on behalf of Caughey Insurance Agency by "William E. Caughey, President." Although

   the Individual Guarantee Agreement names respondent as guarantor in the opening paragraph, the corporation is shown as guarantor on the signature line.

   
   

10. At hearing, both Daniel Bruce Caughey and William Edward Caughey testified that neither had withheld premiums owed JORO, and this testimony was not controverted.

    
    

    CONCLUSIONS OF LAW

    
    

11. Because the Department of Insurance referred respondent's request for hearing to the Division of Administrative Hearings, "the division has jurisdiction over the formal proceding. "Section 120.57(1)(b)3. Florida Statutes (1989).

    
    

12. As grounds for revocation or other disciplinary action, petitioner alleges that respondent has violated Sections 626.611, 626.621, 626.681 and 626.691, Florida Statutes (1989). Section 626.611, Florida Statutes (1989) sets forth grounds for compulsory suspension or revocation of an insurance agent's license, including the following, which petitioner alleges that respondent has violated:

    
    

    (7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

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

    2. 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.

    
    

    Petitioner alleges that respondent violated the following provisions of Section 626.621, Florida Statutes (1989), which states grounds for discretionary suspension or revocation of an insurance agent's license:

    
    

    (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.

    (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.

    
    

    In addition, Section 626.734, Florida Statutes (1989), 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 by any person under his direct supervision and

    control while acting on behalf of the corporation.

    In order to prove the allegations of the administrative complaint, petitioner offered only documentary evidence of respondent's licensure, a copy of JORO's complaint and a copy of the final judgment for plaintiff in Case No. 86-21454 (Fla. 13th Cir.; August 13, 1990).

    
    

13. License revocation proceedings have been said to be "'penal' in nature." State ex rel. Vininq vs. Florida Real Estate Commission, 281 So.2d 487, 491 (Fla. 1973); Kozerowitz vs. Florida Real Estate Commission, 289 So.2d

    391 (Fla. 1974); Bach vs. Florida State Board of Dentistry, 378 So.2d 34 (Fla. 1st DCA 1979) (reh. den. 1980). Strict procedural protections apply in disciplinary cases, and the prosecuting agency's burden is to prove its case clearly and convincingly. Ferris vs. Turlington, 510 So.2d 292 (Fla. 1987).

    See Addinqton vs. Texas, 441 U.S. 426 (1979); Ferris vs. Austin, 487 So.2d 1163 (Fla. 5th DCA 1986); Anheuser-Busch, Inc. vs. Department of Business Regulation,

    393 So.2d 1177 (Fla. 1st DCA 1981); Walker vs. State Board of Optometry, 322 So.2d 612 (Fla. 3rd DCA 1975); Reid vs. Florida Real Estate Commission, 188 So.2d 846, 851 (Fla. 2nd DCA 1966). A licensee's breach of duty justifies revocation only if the duty has a "substantial basis," Bowling vs. Department of Insurance, 394 So.2d 165, 173 (Fla. 1st DCA 1981) in the evidence, unless applicable statutes and rules create a clear duty, which the evidence clearly shows has been breached.

    
    

14. The certified copy of the concededly unpaid judgment JORO obtained against him is clear and convincing proof of respondent's indebtedness to JORO (jointly with the insurance agency of which he is an officer.) This is so, even though JORO had only to prove the indebtedness by a preponderance of the evidence, in order to obtain the court judgment. Whether indebted to JORO before the court's judgment or not, respondent and the agency have both been indebted since its entry.

    
    

15. But ambiguities in the court papers do not clearly and convincingly rule out the possibility that the court's judgment rests on the dishonored promissory note, alleged in Count II of JORO's complaint. Executed on the same day as the guarantee, neither the note nor its nonpayment establishes that respondent has been guilty of fraudulent or dishonest practices in the conduct of business under his license, misappropriation, conversion, or unlawful withholding of monies belonging to others.

    
    

16. Petitioner has also alleged respondent's "[f]ailure or refusal, upon demand, to pay over to any insurer . . . money coming into his hands belonging to the insurer." Section 626.621(4), Florida Statutes (1989). To the extent it may be predicated on JORO's allegations in Count I, that the Caughey Agency owed JORO premiums on policies JORO underwrote, the court's judgment is evidence that the agency owed JORO monies "belonging to the insurer." But it is not clear that the court's judgment enforces the brokerage agreement (or the guarantee), as opposed to the promissory note respondent subsequently executed on behalf of the agency.

    
    

17. The evidence, including respondent's own testimony, shows that respondent and the agency failed to pay JORO money they owe. Because he is an officer of Caughey Insurance Agency, Inc., respondent bears, as a matter of law, full responsibility for the nonpayment, at least for present regulatory purposes. Section 626.734, Florida Statutes (1989). But simple failure to pay a debt does not authorize suspension, revocation, or other action against respondent. Only if a breach of respondent's fiduciary responsibilities, as alleged in the administrative complaint, is clearly and convincingly shown, is

petitioner authorized to take disciplinary action against respondent's license. The court papers relied on in the present case do not constitute such a showing.

RECOMMENDATION

It is accordingly, RECOMMENDED:

That petitioner dismiss the administrative complaint filed against respondent.

DONE and ENTERED this 2nd day of April, 1990, in Tallahassee, Florida.

ROBERT T. BENTON, II

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 2nd day of April, 1990.

APPENDIX

Petitioner's proposed findings of fact Nos. 1, 2, 4, 5, 6, 8 and 9 have been adopted, in substance, insofar as material.

With respect to petitioner's proposed finding of fact No. 3, respondent became an officer after the brokerage agreement had been executed.

With respect to petitioner's proposed finding of fact No. 7, the judgment could also be based on the promissory note.

With respect to petitioner's proposed finding of fact No. 6, respondent did not sign as an individual guarantor.

Respondent's proposed findings of fact Nos. 1 through 10 and 12 through 18 have been adopted, in substance, insofar as material.

With respect to respondent's proposed finding of fact No. 11, evidence respondent himself adduced showed that the judgment had not been satisfied.

COPIES FURNISHED:

Robert V. Elias, Esquire

412 Larson Building Tallahassee, FL 32399-0300

Bruce A. McDonald, Esquire McDonald, Fleming & Moorehead 700 South Palafox Street Suite 3-C

Pensacola, FL 32501

Tom Gallagher

State Treasurer and Insurance Commissioner The Capitol, Plaza Level

Tallahassee, FL 32399-0300

Don Dowdell, General Counsel Department of Insurance and Treasurer

131 Montgomery Building

2562 Executive Center Circle, East Tallahassee, FL 32399-0300

Docket for Case No: 89-002651

Orders for Case No: 89-002651