STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND ) TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 89-3809

)

RALPH TODD SCHLOSSER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on December 5, 1989, in St. Petersburg, Florida.

APPEARANCES

For Petitioner: Roy H. Schmidt, Esquire

412 Larson Building Tallahassee, Florida 32399-0300

For Respondent: Barry M. Steagall, Esquire

6500 Central Avenue

St. Petersburg, Florida 33707 STATEMENT OF THE ISSUES

The issue is whether respondent's license as a life and health insurance agent, health insurance agent and general lines agent should be disciplined for the reasons stated in the amended administrative complaint.

PRELIMINARY STATEMENT

In a two-count administrative complaint filed on June 21, 1989, petitioner, Department of Insurance and Treasurer, charged that respondent, Ralph Todd Schlosser, licensed as a life and health insurance agent, health insurance agent and general lines agent - property, casualty, surety, and miscellaneous lines, had violated Sections 626.561, 626.611, and 626.621, Florida Statutes (1987).

More specifically, the complaint alleged that respondent, while licensed as an agent for American Sun Life Insurance Company and Pioneer Life Insurance Company of Illinois, failed to promptly remit to American Sun Life Insurance Company until May 5, 1987 an application and insurance premium received on March 2, 1987, and failed to remit a premium payment received on July 28, 1987 to Pioneer Life Insurance Company of Illinois. The complaint alleged further that this conduct constituted a violation of Subsections 626.561(1), 626.611(4),(7),(8),(9),(10), and (13), and 626.621(2) and (6), Florida Statutes (1987). Respondent disputed the above allegations and requested a formal hearing pursuant to Subsection 120.57(1), Florida Statutes (1987). The matter

was referred by petitioner to the Division of Administrative Hearings on July 18, 1989, with a request that a hearing officer be assigned to conduct a formal hearing. By notice of hearing dated September 12, 1989, a final hearing was scheduled on October 18, 1989 in St. Petersburg, Florida. At the request of the parties, the matter was rescheduled to December 5, 1989, at the same location.

On December l, 1989, the case was transferred from Hearing Officer James D. Bradwell to the undersigned.

At final hearing petitioner presented the testimony of Joyce Lynch, H. Maxine Brucker, Ronald F. Bonner, and Paul Bridges. It also offered petitioner's exhibits 1 - 10. All exhibits were received in evidence.

Respondent testified on his own behalf and offered respondent's exhibits 1 - 3. All exhibits were received in evidence.

The transcript of hearing was filed on December 22, 1989. Proposed findings of fact and conclusion of law were filed by petitioner and respondent on January 5 and 11, 1990, respectively. A ruling on each proposed finding has been made in the Appendix attached to this Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of fact are determined:

1. At all times relevant hereto, respondent, Ralph Todd Schlosser, was licensed and eligible for licensure as a life and health insurance agent, health insurance agent and general lines agent - property, casualty, surety and miscellaneous lines by petitioner, Department of Insurance and Treasurer (Department). When the events herein occurred, respondent was licensed as a life and health insurance agent for American Sun Life Insurance Company (ASLIC) and Pioneer Life Insurance Company of Illinois (PLICI).

   
   

2. On March 2, 1987, respondent met with one Mildred H. Camp, then a resident of Clearwater, Florida, for the purpose of selling her an ASLIC long term care health insurance policy. After discussing the matter with respondent, Camp agreed to purchase a policy. She completed an application and gave respondent a check in the amount of $511.88. The check was deposited into respondent's business account at First Florida Bank in Clearwater the same day.

   
   

3. Camp did not testify at hearing. Therefore, the only first hand version of what was discussed by Schlosser and Camp and the nature of any further communications between the two was offered by respondent. That version was not contradicted, and it is accepted as being credible. Within a week after executing the application, Camp contacted respondent by telephone concerning the policy. Pursuant to that telephone conversation, respondent did not process the application or remit the check to the company, but attempted instead to arrange another meeting with Camp to answer further questions about the policy.

   Although he telephoned Camp "every single Monday", respondent was unable to arrange an appointment with her until April 30, 1987.

   
   

4. On April 30 Camp and respondent met for the purpose of him explaining in greater detail the benefits and coverage under the policy. Because two months had gone by since the application was first executed, it was necessary for respondent to update Camp's health information. Accordingly, Camp executed a new application the same date and Schlosser forwarded the check and application to ASLIC shortly thereafter.

5. On May 5, 1987 ASLIC received the April 30 application and premium check, less respondent's commission. The application was eventually denied by ASLIC on the ground of "excessive insurance" and a refund check was forwarded by ASLIC to Camp on June 11, 1987. There is no record of any complaint made by Camp against Schlosser in ASLIC's files nor did ASLIC contact respondent regarding this matter.

   
   

6. When Schlosser began representing ASLIC, he executed a general agent contract which contained the terms and conditions pertaining to his appointment as a general agent for the company. As is pertinent here, the contract provided that Schlosser had a responsibility "to promptly remit such funds" received by him to the company. According to a former second vice-president of ASLIC, Joyce Lynch, who worked for ASLIC when the Camp transaction occurred, the company expected in the regular course of business to have checks and applications remitted by agents to the home office within fifteen days after the application was written, and that the above provision in the general agent contract was interpreted in this manner. Lynch added that she knew of no reason why an agent would hold an application and check for sixty days before submitting it to the company, particularly since once an application is completed and signed, it is the "property" of the company and not the agent. She concluded that if a customer desired more information about a policy after an application had been signed, which is not unusual, the agent still had a responsibility to promptly forward the application and check to the company within fifteen days. At that point, the company, and not the agent, would cancel a policy and refund the premium if so requested by a customer. Therefore, Schlosser breached the general agent contract by failing to promptly remit such funds.

   
   

7. On July 28, 1987 Schlosser visited one Maxine Brucker, an elderly resident of Sarasota, for the purpose of selling her a PLICI health insurance policy. He had telephoned Brucker the same date to set up an appointment with her. After discussing the matter with respondent, Brucker agreed to purchase a policy, executed an application and gave respondent a check for $680.00. The check was deposited into respondent's bank account the following day.

   
   

8. After Schlosser departed, Brucker noted that Scholosser did not leave a business card and she immediately became "worried" about her money and the possibility of not getting the insurance she had paid for. She telephoned the Department the same day to check on his "reputation" and to verify that Schlosser was an insurance agent. On August 4, 1987 she wrote a letter to the PLICI home office in Rockford, Illinois to ascertain if her check and application had been received but she did not receive a reply. She wrote a second letter to PLICI on August 14, 1987 but again received no reply to her inquiry. After telephoning the home office a few days later, Brucker contacted the Department a second time in late August and requested that it assist her in obtaining a refund of her money. At no time, however, did Brucker attempt to contact respondent. In early September, Brucker received by mail a money order from respondent which represented a full refund of moneys previously paid.

   
   

9. Brucker acknowledged that she was happy with her policy when it was initially purchased. She also acknowledged that she had never contacted respondent personally to request a refund of her money. It was only after she received no reply from the home office that she made a request for a refund.

   
   

10. According to the agency agreement executed by Schlosser when he became a general agent for PLICI, respondent had the responsibility to "immediately remit to (PLICI) all premiums (collected)". Testimony by Ronald F. Bonner, a vice- president of PLICI, established that in the regular course of business an

    agent was required to forward the check and application to PLICI no more than twenty-five days after receiving them from the customer. Any application held more than twenty-five days was considered "stale", was presumably invalid and had to be returned to the customer. Even so, Bonner did not contradict respondent's assertion noted in finding of fact 11 that his failure to remit the application and check was based on instructions from the home office, and under those circumstances, was not improper.

    
    

11. Respondent readily admitted he did not remit the Brucker application and check because of instructions from the home office received after Brucker had telephoned the home office. After unsucessfully attempting to speak with Brucker by telephone daily for about two weeks, Schlosser voluntarily sent Brucker a money order via mail in early September.

    
    

12. A review of respondent's business bank account for the months of March and August 1987 revealed that after the checks from Camp and Brucker had been deposited, the balances in the account thereafter dropped below $511.88 and $680 during those respective months. This raises an inference that those moneys were used for other undisclosed purposes during that time.

    
    

13. According to respondent, he submitted applications and premiums checks to the home office approximately two or three times per month. It was also his practice to wait ten days or so after receiving a check from a customer to allow it sufficient time to clear. Schlosser denied having converted insurance moneys to his own personal use.

    
    

14. There was no evidence that Schlosser lacked reasonably adequate knowledge and technical competence to engage in insurance transactions authorized by his licenses, a matter requiring conventional factual proof. Similarly, there was no evidence to establish that Schlosser intended to willfully violate the law or that his conduct demonstrated a lack of fitness or trustworthiness to engage in the insurance business.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes (1987).

    
    

16. Since respondent's life insurance licenses are at risk, the Department is obliged to establish by clear and convincing evidence that the charges in the administrative complaint are true. See, e. g., Evans Packing Co. v. Department of Agriculture and Consumer Services, 550 So.2d 112 (Fla. 1st DCA 1989).

    
    

17. The administrative complaint alleges that respondent violated a multitude of statutes by his conduct in the Camp and Brucker transactions. First, he is charged with having violated Subsection 626.561(1), Florida Statutes (1987), which provides in relevant part as follows:

    
    

    1. All premiums . . . belonging to insurers or others received by an agent . . . 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

       Respondent is also charged with violating Section 626.611, Florida Statutes (1987) in six respects. Those violations, if true, would subject respondent to compulsory suspension or revocation of his license or eligibility to hold such licenses. The alleged violations are as follows:

       
       

       The department shall deny, suspend, revoke or refuse to renew or continue the license of any agent . . . and it shall suspend or revoke the eligibility to hold a license or permit of any such person, if it finds that as to the . . . licensee . . . any one or more of the following applicable grounds exist:

       * * *

       (4) If the licensee or permit is willfully used, or to be used, to circumvent any of the requirements or prohibitions of this code.

       * * *

       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.

       * * *

       (13) Willful failure to comply with, or willful violation of any provision of this code.

       * * *

       
       

       Finally, respondent is charged with violating two provisions within Section 626.626, Florida Statutes (1987). If those violations are established, it would give the Department the discretion to suspend or revoke respondent's licenses or eligibility to hold the same. Those provisions read in part as follows:

       
       

       The department may, in its discretion,. . . suspend, revoke . . . the license of any agent . . . , and it may suspend or revoke the eligibility to hold a license or permit of any such person, if it finds that as to the . . . licensee . . . any one or more of the applicable grounds exist under circumstances for which such denial, 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 of injury or loss to the public or detrimental to the public interest.

       * * *

       
       

18. Initially, the charges that respondent (a) twice violated subsection 626.561(1) by failing in the regular course of business to "account for and to pay (monies) to the insurer" and (b) "misappropriated", "converted", or "unlawfully withheld" the Camp and Brucker premium checks in violation of subsection 626.611(10) should be considered. Underpinning these two charges are established facts showing that Schlosser breached the ALSIC general agent contract by failing to timely remit a premium check and that his bank account balance fell below the amount of the two deposited premium checks. 1/ At hearing, the undersigned instructed counsel to offer authoritative support concerning these charges. In its post-hearing proposed order, the Department has cited the case of Bowling v. Department of Insurance, 394 So.2d 165 (Fla. 1st DCA 1981) to support its position. In that decision, the court accepted the agency's interpretation of the statutes as applying whenever "an agent willfully withholds payment of premium moneys belonging to the insurer or another when in the `applicable regular course of business' the money should have been paid." Id. at 170. The court added that "(w)illfulness is a necessary element of a Section 626.611(10) violation because the violation draws essential elements from Section 626.561, a criminal statute which punishes the proscribed conduct as `larceny by embezzlement"', and thus the two indispensable elements of the charges are that the agent was obliged in the regular course of business to forward to the company the premium and that the agent willfully withheld payment and willfully converted those moneys, temporarily or permanently, to his own use. Id. at 170-71.

    
    

19. The evidence fails to demonstrate, and the undersigned has specifically found lacking, 2/ the necessary intent to establish that Schlosser willfully intended to misappropriate, convert or withhold moneys from the company. Since willfulness is a necessary element to sustain a violation of either subsection 626.561(1) or 626.611(10), Bowling at 170, this portion of the complaint must fail.

    
    

20. In Count I, the Department has alleged the remaining statutes cited above were violated by Schlosser as a result of his conduct in the Camp transaction. Although the evidence establishes clearly and convincingly that Schlosser breached the general agent contract by failing to "promptly" remit Camp's application and premium to the company, there was no evidence to show that such conduct equates to a willful circumvention of the insurance code, a lack of fitness or trustworthiness to engage in the business, a lack of reasonably adequate knowledge and technical competence to engage in such transactions, a fraudulent or dishonest transaction, a willful violation of the code, or an unfair or deceptive act on the part of the licensee. In so concluding, the undersigned notes that neither Camp nor the insurance company

    suffered any harm or loss, respondent engaged in what he thought to be an acceptable norm of conduct for agents and thus had no intent to violate the law, and there was no evidence concerning Schlosser's fitness, competence or trustworthiness to engage in the insurance profession. Therefore, the remaining charges in Count I must fail.

    
    

21. As to the Brucker transaction, petitioner has failed to establish by clear and convincing evidence that respondent violated any of the remaining statutory proscriptions. In so concluding, the undersigned has considered the fact that Schlosser accepted a premium check and failed to remit the same to the company. Even so, there was no evidence to show that respondent acted improperly given his uncontradicted assertion that he acted pursuant to home office instructions, and there is no record foundation to establish that respondent is unfit or untrustworthy, lacks knowledge or competence in the profession, or had the requisite intent to violate the law. Therefore, the charge that respondent violated all of the above statutes must fail.

    
    

22. Since the evidential proof falls short of the necessary clear and convincing threshold, the administrative complaint should be dismissed with prejudice.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the administrative complaint filed against respondent be

dismissed with prejudice.

DONE AND ORDERED this 18th day of January, 1990, in Tallahassee, Leon County, Florida.

DONALD R. ALEXANDER

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 18th day of January, 1990.

ENDNOTES

1/ The allegation that Schlosser breached the PLICI agency agreement is unavailing since Schlosser's claim that he was acting pursuant to home office instructions was not contradicted and has been accepted.

2/ See, e.g. Morris v. Department of Professional Regulation, 474 So.2d 841, 843 (Fla. 3d DCA 1985)(the presence or absence of intent is a finding of fact, not a conclusion of law).

APPENDIX TO RECOMMENDED ORDER

Petitioner:

1-2. Substantially adopted in finding of fact 1.

1. Partially adopted in findings of fact 2, 6, 7 and 10.

2. Substantially adopted in finding of fact 2.

3. Partially adopted in findings of fact 2, 5, and 12.

4. Substantially adopted in finding of fact 7.

5. Partially adopted in findings of fact 7, 8 and 12.

Note - Where a finding has been partially adopted, the remainder has been rejected as being irrelevant, unnecessary, cumulative, subordinate, not supported by the evidence, or a conclusion of law.

Respondent:*

1-2. Partially adopted in findings of fact 5 and 6.

1. Partially adopted in findings of fact 3 - 5.

2. Partially adopted in finding of fact 12.

3. Partially adopted in findings of fact 7 and 8.

4. Partially adopted in findings of fact 8 and 9.

5. Partially adopted in finding of fact 10.

6. Partially adopted in finding of fact 11.

7. Partially adopted in finding of fact 13.

8. Partially adopted in finding of fact 12.

Note - Where a finding has been partially used, the remainder has been rejected as being irrelevant, cumulative, unnecessary, subordinate, not supported by the evidence or a conclusion of law.

* Respondent submitted ten unnumbered paragraphs. They have been ruled upon in that order.

COPIES FURNISHED:

Honorable Tom Gallagher Insurance Commissioner Plaza Level, The Capital Tallahassee, FL 32399-0300

Roy H. Schmidt, Esquire

412 Larson Building Tallahassee, FL 32399-0300

Barry M. Steagall, Esquire 6500 Central Avenue

St. Petersburg, FL 33707

Donald A. Dowdell, Esquire General Counsel

Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300

Docket for Case No: 89-003809

Orders for Case No: 89-003809