vs. ) CASE NO. 89-3999
Respondent. )
The final hearing in this case was held on October 17, 1989, in Clearwater, Florida, before Donald D. Conn, Hearing Officer, Division of Administrative Hearings.
For Petitioner: John C. Jordan, Esquire
For Respondent: Terry M. Brocklehurst, Esquire
The issue in this case is whether the license of James Joseph Sines (Respondent) should be disciplined by the Department of Insurance and Treasurer (Petitioner) based upon actions he is alleged to have taken during July 1987, involving an insured, Eunice Chappell, which would constitute an unlawful misappropriation and conversion of her funds, as more particularly set forth in the Administrative Complaint issued herein on, or about June 22, 1989.
At the hearing, the Petitioner called Donald R. Sanders, district manager of Union National Life Insurance Company, and Ethel Small, daughter of Eunice Chappell. The Respondent testified on his own behalf, and also called a former co-worker, Michael John Pierazek. Five exhibits were received on behalf of the Petitioner.
The transcript of the final hearing was filed on November 16, 1989, and the parties requested, and were allowed fifteen days thereafter within which to file proposed recommended orders. A ruling on each timely filed proposed finding of fact included in the parties' proposed recommended orders is included in the Appendix to this Recommended Order.
At all times material hereto, Respondent has been licensed, and eligible for licensure, in the State of Florida as a life and health debit agent, life and health agent, general lines agent limited to industrial fire insurance, and health insurance agent.
From August 1, 1986, through August 28, 1987, Respondent was employed by Union National Life Insurance Company as a life and health debit agent.
All funds received by Respondent under his licenses representing premiums, returned premiums, and other funds belonging to insured persons or insurers were trust funds received in a fiduciary capacity.
It was Respondent's usual practice to cash checks for his debit policyholders when he visited them to collect their premiums, as many of his policyholders did not have checking or savings accounts, and thus, had some difficulty cashing checks. He did this as a service to policyholders, and as a way of making sure that insurance premiums were paid up to date, since when he cashed a check for a policyholder, he would deduct the amount of any outstanding overdue premiums, and return the balance of the check proceeds to the policyholder. The value of checks which Respondent cashed for policyholders ranged from $1 to $900, with the average check being around $300.
Eunice Chappell was a policyholder with Union National Life Insurance Company at all times material hereto. Respondent visited her in her home on a regular basis, usually weekly, to collect the premiums on her debit policies, and to assist with the filing of any claims on her policies. In fact, he assisted her with the filing of a claim under policies with Union National for income replacement and convalescent benefits for a period of hospitalization from June 24, 1987, to July 3, 1987.
On or about July 30, 1987, Respondent received Check Number 352955, dated July 28, 1987, issued by Union National Life Insurance Company and made payable to Eunice Chappell, in the amount of $729, representing benefits due her under policies with Union National for her period of hospital confinement in late June and early July 1987. Shortly after receiving this check, Respondent visited Chappell at her home. Since she was a number of weeks behind on her premiums, she asked him to cash this check for her, and to pay her overdue premiums out of the proceeds. However, Respondent did not have sufficient cash on hand. Therefore, he had her endorse the check, and took it to his bank to cash after he also endorsed the check and placed his account number under his endorsement. Due to her frail physical condition, Respondent had to help Chappell sign her name to the back of this check by placing his hand over hers and guiding it as she made her signature. The only person present during this visit in Chappell's home, other than Respondent and Chappell, was Michael Pierazek, a co-worker and fellow agent for Union National.
When Respondent presented this check at his bank, it could not be cashed since he did not have sufficient funds in his account to cover it. Therefore, he returned to Chappell's house, accompanied by Pierazek, and told her he was unable to cash the check for her. However, she insisted that Respondent assist her in any way possible in cashing the check because of her severely limited physical abilities. He told her that the only thing he knew to
do would be to return to the bank and deposit the check in his personal account, wait for the funds to clear in a few days, and then return with the proceeds.
Chappell agreed to this procedure.
It is strictly against the policy of Union National for agents to deposit into their own personal account any policyholder's check received in the course of their business. Respondent was aware of this policy, but sought no exemption from this policy. He did deposit Chappell's check in his account on or about August 3, 1987.
On August 14, 1987, Eunice Chappell's daughter, Ethel Small, called the district manager for Union National, Donald R. Sanders, to inquire about the status of her mother's insurance claim check. She indicated to Sanders that her mother had never received the check for $729, dated July 28, 1987. From the evidence received, as well as the demeanor of the witnesses who testified, it is found that Small was simply unaware of her mother's arrangement with Respondent, and the fact that Check Number 352955 had been presented to Chappell by Respondent and subsequently deposited into his personal account with the knowledge and agreement of Chappell. Small was not present during this transaction. An affidavit executed by Chappell on August 21, 1987, states that she received no proceeds from Check Number 352955, which is correct. It does not state that she never was presented with said check.
A second check was issued by Union National to Eunice Chappell dated August 19, 1987, which was delivered to her by Sanders and the Respondent on August 21, 1987. This second check was numbered 355819. Ethel Small endorsed this second check on behalf of her mother, under a purported power of attorney. However, the document which she claims gave her Eunice Chappell's power of attorney was signed by a notary public on August 6, 1987, at the place provided on the document for the signature of the person giving the power of attorney, and recites that Ethel Small, rather than Eunice Chappell, was known to, and appeared before said notary public acknowledging "the within power of attorney to be her (Ethel Small's) act and deed." Nowhere on this purported power of attorney does Eunice Chappell's signature or mark appear, nor is there any evidence that she even appeared before the notary public who signed this document.
Between August 3, 1987, when he deposited Chappell's first check into his personal account, until August 14, 1987, when Ethel Small contacted the district manager of Union National, Respondent was waiting for this check to clear, and therefore, did not give Chappell any proceeds from this check. While it is not clear from the evidence presented exactly when this first check did clear, and funds became available in Respondent's personal account, it was established that Respondent did not give Chappell any proceeds from this first check. He had been instructed by his district manager, Sanders, not to contact Chappell in any way after August 14, except in his presence. Respondent complied with this directive, and awaited the issuance of a second check to accompany Sanders to Chappell's house to deliver this check.
Respondent was terminated by Union National as a result of this transaction, and an amount equal to the proceeds from the first check was deducted by Union National from his personal savings account with the company, the balance of which he received at termination, in order to reimburse Union National for the issuance of the second check.
There is no evidence that Respondent used the proceeds of the first Chappell check for his own benefit, or that Union National expended funds beyond what they were obligated to pay to Chappell on her claim as a result of Respondent's actions in this transaction. He did violate company policy by depositing Chappell's first check in his personal account, but this was done with her full knowledge and consent, and was, in fact, done at her request.
At the time of hearing, Eunice Chappell was deceased, and therefore, the findings set forth herein concerning her arrangement with the Respondent are based upon the demeanor and credibility of witnesses who testified and who were present on July 30, 1987, when Respondent and Chappell met, as well as the demeanor of the one witness who disputes Respondent's account of this transaction, Ethel Small. It is specifically found that Small's testimony lacks credibility because it was conflicting and implausible, and because she had a personal motive to have a second check issued. She testified she was always present with her mother in the home and never left her side during the times in question, but then offered conflicting, vague and uncertain testimony about when she moved into her mother's house, times she had to leave her mother to go to the store, do laundry and cash checks, and about leaving her mother with her sister. She admitted that on two occasions each week she would take a taxi cab to the store and back, and this would take an hour or so, plus the time necessary to wait for the cab. Her testimony that she never left her mother's house when her husband periodically came to visit her from Deland is not credible. Small had a motive for wanting a second check to be issued by Union National after she found out that her mother had a private arrangement with Respondent concerning the first check. Under the purported power of attorney which she had executed only a few days after her mother gave the first check to Respondent, she endorsed and cashed the second check for $729.
Ethel Small filed a complaint with the Petitioner concerning this matter in May or June 1988. No evidence was presented in support of the Respondent's affirmative defense of laches, and it was not shown that Petitioner's actions between receipt of this complaint and the filing of the Administrative Complaint in this matter was dilatory or prejudicial to Respondent.
CONCLUSIONS OF LAW
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 the Petitioner is seeking to discipline the Respondent's license, and could thereby adversely affect his ability to continue to engage in the insurance business, 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).
As it relates to the evidence adduced at hearing, the Petitioner has charged Respondent with violating Sections 626.561(1), 626.611(7),(8),(9),(10), and 626.621(6), Florida Statutes, which provide in pertinent part, as follows:
Section 626.561 Reporting and accounting for funds
All premiums, return premiums, or other funds 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, insured, or other person entitled thereto.
* * *
Section 626.611 Grounds for compulsory refusal, suspension, or revocation of agent's, solicitor's or adjuster's license. The department shall deny, suspend, revoke, or refuse to renew or continue the license of any agent . . . if it finds that as to the applicant, licensee, or permittee any one or more of the applicable grounds exists:
Demonstrated lack of fitness or trust- worthiness 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 insureds or beneficiaries or to others and received in conduct of business under the license. Section 626.621 Grounds for discretionary refusal, suspension, or revocation of agent's, solicitor's or adjuster's license . . .
The department may, in its discretion, deny, suspend, revoke, or refuse to renew or continue the license
of any agent . . . if it finds that as to the applicant, licensee, or permittee any one or more of the following applicable grounds exists .
(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.
In all other respects, the Administrative Complaint cites statutory provisions which are irrelevant, otherwise inapplicable to the facts established in this matter, and which have been abandoned by the Petitioner in its argument contained in its proposed conclusions of law at paragraphs 3(a) through (f), and
5 through 9.
Petitioner has failed to prove, by clear and convincing evidence, that Respondent violated any of these above-cited provisions of the Insurance Code. He presented Check Number 352955 to Eunice Chappell shortly after it was issued by Union National. As such, he fulfilled his fiduciary responsibilities to the insured by accounting for and paying to the insured, in the regular course of business, the benefits to which she was entitled. It was Chappell who thereupon requested that Respondent cash the check for her, and when he informed her that his bank would not cash this check because he did not have sufficient funds in his account, she agreed to the only suggestion he could make, which was for him to deposit her check into his account and wait for it to clear. It was Respondent's usual practice to cash checks for his policyholders, and to collect overdue premiums from the proceeds, thereby keeping their policies in effect.
Chappell specifically asked Respondent to perform this service for her since she did not have a checking or bank account, and she could not leave her house to cash it at a store due to her frail physical condition.
Respondent did violate the policies of his employer, Union National, in handling the check issued to Chappell in this manner. He was terminated for this violation. This is a substantial penalty which Respondent has paid for his breach of company policy. However, no relevant statutory provision or rule of the Petitioner was cited which specifically prohibits an agent from cashing checks, including checks representing the proceeds from insurance policies, for policyholders. This conduct can form the basis of license disciplinary action only if it constitutes a violation of the Insurance Code under any one of the above-cited statutory provisions.
Respondent's conduct did not violate Section 626.561(1) since it was not shown to be inconsistent with his fiduciary responsibilities to Chappell; he did timely present her with the check issued to her by Union National on July 28, 1987, and thereafter acted only at her request and with her consent. While his actions did violate company policy, and were thus an example of poor judgement on his part, this does not demonstrate a lack of knowledge and technical competence in the business of insurance such that it should be found that he violated Section 626.611(8).
There is absolutely no evidence of fraud or dishonesty on Respondent's part in his dealings with Chappell. To the contrary, it appears that he was attempting to assist her in any way possible, and acted at her request, due to her frail condition. He did not receive any benefits from the check he deposited into his account for Chappell, and Union National did not expend any funds above what they were obligated to pay to Chappell since upon his termination, Union National deducted an amount from his personal savings account with the company which was sufficient to reimburse them for the issuance of the second check to Chappell. There was no injury or loss to the policyholder, the public or Union National in this matter. The only person to experience a loss or injury was the Respondent through his termination by Union National. Thus, Respondent's conduct did not violate Sections 626.611(9) or 626.621(6), Florida Statutes.
While it has been recognized that the Petitioner has broad discretion in defining and identifying what conduct by a licensee demonstrates a lack of fitness or trustworthiness to engage in the business of insurance, the cases which address this authority differ significantly in their facts from this case. In Natelson v. Department of Insurance, 454 So.2d 31 (Fla. 1st DCA 1984), rev. den. 461 So.2d 115, the licensee had plead guilty to conspiracy to distribute, and possession with intent to distribute, cannabis, and such conduct was held to be a proper basis for a finding of a violation of Section 626.611(7).
Similarly, in Paisley v. Department of Insurance, 526 So.2d 167 (Fla. 1st DCA 1988), the licensee had been convicted of conspiracy to commit mail fraud, and using a fictitious name and address to commit mail fraud, and this was found to be a proper basis for the Petitioner's conclusion that the licensee had violated Section 626.611(7). In this case, there is no basis upon which it should be found that Respondent's actions demonstrate a lack of fitness or trustworthiness to engage in the insurance business. His actions bear no similarity to the actions judicially sanctioned as establishing a basis upon which a violation of Section 626.611(7) can be found. The Petitioner has cited no rule or statute which define the terms used in Section 626.611(7), and since the facts of this case do not demonstrate a violation of the plain meaning of the words used in
this provision, it is concluded that Petitioner has not established, by the requisite degree of proof, that Respondent has violated Section 626.611(7), Florida Statutes.
The only remaining statutory provision with which Respondent has been charged is Section 626.611(10), which prohibits the misappropriation, conversion or unlawful withholding of moneys belonging to policyholders received in the conduct of business by a licensee. In Bowling v. Department of Insurance, 394 So.2d 165 (Fla. 1st DCA 1981), it was recognized that "willfulness" is a necessary implied element of this statutory prohibition. The evidence in this case clearly demonstrated that Respondent did not willfully misappropriate, convert or unlawfully withhold Chappell's moneys. To the contrary, he acted at her request and direction, and with her consent. While his actions violated the policies of his employer, they did not violate Section 626.611(10), Florida Statutes, or any cited rule of the Petitioner.
Respondent has raised the affirmative defense of laches based upon his claim that the Petitioner did not timely pursue this matter, and that its allegedly dilatory actions have caused him harm and prejudice. The facts do not support Respondent's claim since within approximately one year from its receipt of a complaint concerning Respondent in his dealings with Chappell, the Administrative Complaint in this case was filed. Additionally, as a matter of law, the principles of laches do not apply in an administrative proceeding. Farzad v. Department of Professional Regulation, 443 So.2d 373, 375 (Fla. 1st DCA 1983); Winkelman v. Department of Banking and Finance, 537 So.2d 591 (Fla. 3rd DCA 1988). The Respondent's reliance on the case of The Florida Bar v. McCain, 361 So.2d 700 (Fla. 1978), which found that the principles of laches could be applied in disciplinary proceedings taken against a member of The Florida Bar, is not well placed. The First District Court of Appeals, in the later case of. Farzad, supra, drew a clear distinction between disciplinary action taken against attorneys and such action against members of other regulated professions:
we are constrained to point out that there is a distinction between attorney disbarment
proceedings and disciplinary proceedings against a physician under Chapter 458. Disciplinary proceedings against an attorney are within the exclusive jurisdiction of the Florida Supreme Court. . . (and) the court has inherent power vested in it to control the conduct of its own affairs and to maintain its own dignity. .
On the other hand, disciplinary proceedings against physicians are governed by statute, and the rule
of a license to engage in the practice of a profession are invoked, the provisions of the statutes must be strictly construed and strictly followed. . .
443 So.2d at 376.
There has been no citation to any statutory provision which would apply the principles of laches to insurance license disciplinary cases, and in any event, the facts of this case do not warrant any such application.
Based upon the foregoing, it is recommended that Petitioner enter a Final Order dismissing all charges against Respondent contained in the Administrative Complaint filed in this matter.
DONE AND ENTERED this 18th of December, 1989 in Tallahassee, Florida.
DONALD D. CONN
Filed with the Clerk of the Division of Administrative Hearings this 18th day of December, 1989.
(DOAH CASE NO. 89-3999)
8-9. Adopted and Rejected in part in Findings 9, 10.
John C. Jordan, Esquire
Terry M. Brocklehurst, Esquire Countryside Place, Suite 110 2605 Enterprise Road East Clearwater, FL 34619
Don Dowdell, Esquire General Counsel Department of Insurance The Capitol, Plaza Level
Hon. Tom Gallagher
