STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

)

KIMBERLY L. STRAYER, )

)

Petitioner, )

)

vs. ) CASE NO. 90-0582

)

DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a formal hearing in this case on August 23, 1990, in Winter Haven, Florida.

APPEARANCES

For Petitioner: Douglas A. Lockwood III, Esquire

PETERSON MYERS CRAIG CREWS BRANDON & MANN, P.A.

Lake Region Plaza-Suite 300

141 Fifth Street, N.W.

Winter Haven, Florida 33883-7608

For Respondent: Willis F. Melvin, Jr., Esquire

Office of Legal Services

412 Larson Building Tallahassee, Florida 32399-0300

STATEMENT OF THE ISSUE

Whether or not Petitioner's application for examination as a general lines agent should be approved.

PRELIMINARY STATEMENT

By letter dated December 28, 1989, Respondent, Department of Insurance and Treasurer, advised Petitioner that her application for examination as a general lines agent was denied because (a) from January 1988 through August 1988, Petitioner operated an insurance agency without a licensed general lines agent in the full-time active charge of that agency, (b) during January 1988, Petitioner accepted applications and premiums payments from several insureds and for each insured, Petitioner issued a binder and/or insurance identification card indicating that coverage was bound with a carrier while Petitioner had no authority to accept applications or premiums on behalf of that carrier and (c) Petitioner failed to forward such applications to the insurer and premiums until April 12, 1988. It was also alleged that during January 1988, Petitioner

accepted an application and premium payment in the amount of $274.00 for auto insurance from an insured and issued a binder indicating that coverage was bound with a carrier and that Petitioner failed to forward either the premium or application to the insurer and thereafter issued fictitious policy numbers to the insured. It is further alleged that after approximately four months, Petitioner submitted a money order to the carrier for the premiums that she received. Respondent advised Petitioner of her right to contest the administrative denial by requesting a formal hearing pursuant to Chapter 120, Florida Statutes within 21 days of receipt of the denial letter.

Petitioner timely requested a formal hearing and on January 29, 1990, this matter was transferred to the Division of Administrative Hearings for the assignment of a hearing officer to conduct a formal hearing. Following consultation with the parties, on May 7, 1990, the matter was set for hearing for June 21, 1990. On June 11, 1990, Respondent moved to continue the hearing based on an ongoing investigation of Petitioner which Respondent anticipated would lead to additional bases upon which to deny Petitioner's exam application. On June 12, 1990, the matter was again scheduled for hearing for August 23, 1990, and was heard as scheduled.

At hearing, Petitioner presented the testimony of Harriett Lynn King, Tom

1. McCrone (as an adverse witness) and Robert James Seese. Respondent presented the testimony of Tammy Delores Clay and Petitioner was recalled to provide rebuttal testimony. Petitioner's Exhibits 1-4 were offered and received into evidence and Respondent's Exhibits 1-14 were offered, all of which were received with the exception of Respondent's Exhibits 9 and 10.

   
   

   Pursuant to leave, Respondent filed a proposed recommended order on September 25, 1990, which was considered in preparation of this Recommended Order. Proposed findings not incorporated herein are the subject of specific rulings in an Appendix.

   
   

   FINDINGS OF FACT

   
   

   Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received, and the entire record compiled herein, I hereby make the following relevant factual findings:

   
   

   1. On or about September 2, 1989, Petitioner, Kimberly L. Strayer, formerly known as Kimberly Lindsay, filed an application for examination as a general lines agent with Respondent, Department of Insurance.

      
      

   2. Since January 1988, Petitioner has been the sole owner and president of Central Florida Insurance Agency (Central).

      
      

   3. On or about December 28, 1989, Respondent informed Petitioner, by letter, that her application for examination as a general lines agent was denied for the following reasons:

      
      

      1. Petitioner operated Central Florida Insurance Agency without a licensed general lines agent in the full-time active charge of that agency from January 1, 1988 through August 31, 1988.

      2. During January 1988 Petitioner accepted applications and down payments from the following insureds: Robert Smallwood, Annelle Jones, Mickey Lawson, Donald Johnson, Thomas Jones, Manning O'Callahan and Christopher Stevens. Petitioner issued a binder and an automobile identification card for each insured indicating that coverage was bound with State Farm Mutual Insurance Company, as servicing carrier for the Florida Joint Underwriting Association (FJUA). At the time Petitioner had no authority to accept either applications or premiums on behalf of State Farm. Petitioner failed to forward such applications and premiums to the insurer until April 12, 1988.

         
         

      3. During January 1988, Petitioner accepted an application and premium payment of $274.00 from Tammy Clay. Petitioner issued a binder indicating that coverage was bound with State Farm and Union American Insurance Companies. Petitioner failed to forward either the application or the premium payment to any insurer. Petitioner issued a fictitious policy number to Ms. Clay and after nearly four months, submitted a money order to State Farm payable to Tammy Clay, on or about May 1989.

         
         

      4. At the hearing, Petitioner admitted that she did not have a licensed general lines agent in full-time active charge of her agency; that she accepted applications and premium payments from the above-named insureds for auto insurance to be bound with State Farm Mutual Insurance Company and that she accepted an application for premium payment for automobile insurance from Tammy Clay in the amount of $274.00 for coverage to be bound by State Farm Mutual Insurance Company.

         
         

      5. Petitioner was first employed in the insurance sales industry during the summer of 1987. At the time, she was only seventeen years old and had completed the eleventh grade. Petitioner's first employment in the insurance industry was with Friendly Auto Insurance (Friendly) which had several offices throughout Polk County, Florida. Friendly was owned by Petitioner's now husband, Larry Lindsay when she was hired. Petitioner formed Central during late 1987 and began operating Central on or about January 1, 1988. Petitioner received her supervision and training while employed with Friendly, primarily through on the job experiences.

         
         

      6. During late 1987, Petitioner's husband encountered problems with one of his business partners which resulted in strained relations. The resultant strained relations prompted Petitioner to organize Central.

         
         

      7. Central purchased several of Friendly's agencies of which her now husband had an interest, with Petitioner paying a nominal amount for the "book of business" that Friendly had generated.

      8. When Central commenced operations during January of 1988, Bob Seese was the licensed insurance agent who was authorized under the rules of the FJUA to accept applications and bind coverage through one of the FJUA servicing carriers, State Farm.

         
         

      9. Friendly and its successor, Central, generated a substantial volume of so-called high risk auto insurance business for drivers who could not obtain insurance through the regular market.

         
         

      10. Bob Seese had been associated with and served as the licensed agent for the Friendly agency in Lakes Wales which Central purchased in January 1988.

          
          

      11. At the time Petitioner commenced operating Central, she hired Bob Seese as the licensed general lines agent. She considered that Central was authorized to accept applications and continue to bind FJUA insurance coverage through State Farm.

          
          

      12. Petitioner forwarded all of the FJUA insurance applications which were bound by Bob Seese to State Farm within a period ranging from one week to approximately one month.

          
          

      13. State Farm refused to accept the applications submitted by Petitioner based on its contention that initially, Bob Seese was not authorized to bind coverage through Central, as he had not transferred his license to Central and Seese could only operate out of the Friendly agency of Lake Wales. 1/

          
          

      14. Bob Seese was formally authorized by State Farm to conduct business through Central during February 1988. As a result of that authorization, all of the above-named insureds obtained insurance and none of the insureds suffered any monetary loss as a result of Seese's belated authorization. All of the premium payments that Petitioner received were, in time, forwarded to the respective carriers. Petitioner properly gave new insureds binder numbers which were serially dispensed in the order that premium payments were received.

          
          

      15. During January 1988, Petitioner accepted an application and premium payment for auto insurance from Tammy Clay for coverage to be bound by State Farm. Petitioner submitted Clay's application and premium payment to State Farm and it was returned on one occasion based on the fact that a facsimile stamp was used by the purported licensed agent (Seese). Petitioner resubmitted it and State Farm again returned it based on State Farm's contention that Seese was not authorized to conduct business through Central.

          
          

      16. Petitioner has now completed the required formal educational courses to demonstrate her eligibility to sit for the general lines agent's examination.

          
          

      17. Petitioner is now knowledgeable about insurance matters and is aware of the proper procedures for operating as a general lines agent.

          
          

      18. When Petitioner formed Central, she had less than one year's experience in the insurance business and was ineligible to sit for the general lines agent exam as she was not of majority age.

          
          

          CONCLUSIONS OF LAW

          
          

      19. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this action pursuant to Section 120.57(1), Florida Statutes.

      20. The parties were duly noticed pursuant to Chapter 120, Florida Statutes.

          
          

      21. The authority of the Respondent is derived from Chapter 626, Florida Statutes.

          
          

      22. Section 626.112, Florida Statutes, provides in pertinent part as follows:

          
          

          
          

          follows:

          
          

          follows:

          (1) No person shall be, act as, or advertise or hold himself out to be an insurance agent

          or solicitor or adjuster unless he is currently licensed by the department.

          
          

          Section 626.561, Florida Statutes, provides in pertinent part as

          
          

          (1) 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, insured, or other person entitled thereto.

          
          

          Section 626.611, Florida Statutes, provides in pertinent part as

          
          

          The department shall deny ... the license of any agent ... if it finds that as to the applicant ... any one or more of the following applicable grounds exist:

          
          

          1. Lack of one or more of the qualifications for the license or permit as specified in this code.

          2. Material misstatement, misrepresentation, or fraud in obtaining the license or permit or in attempting to obtain the license or permit.

          
          

          1. Willful misrepresentation of any insurance policy or annuity contract or willful deception with regard to any such policy or contract, done either in person or by any form of dissemination or information or advertising.

          2. If, as an adjuster or claims investigator or agent permitted to adjust claims under this code, he has materially misrepresented to an insured or other interested party the terms and coverage of an insurance contract with intent and for the purpose of effecting settlement of claim for loss or damage or benefit under such contract on less favorable terms than those provided in and contemplated by the contract.

          3. 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 belong 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 provision of this code.

          
          

      23. Respondent has failed to demonstrate that Petitioner, as applicant to sit for the general lines agent's examination, is lacking the qualifications for the license based on her operation of the Central Florida Insurance Agency. There was no showing herein that Petitioner engaged in any material misstatement, misrepresentation, or fraud in attempting to obtain her license. Likewise, respondent has not shown that Petitioner, during times material, engaged in any willful misrepresentation of any policy or contract, nor was there any showing of any deception by Petitioner. Respondent has failed to show that Petitioner has engaged in any fraudulent or dishonest practices while operating Central. Nor has there been any showing that Petitioner engaged in any acts of misappropriation, conversion, or unlawful withholding of monies that were received in the course of her operating Central. Finally, there has been no showing that Petitioner is not eligible to sit for the general lines agent's exam based on any willful failure to comply with any provision(s) of the Insurance Code. To the contrary, Petitioner has demonstrated that she is trustworthy, and has successfully completed the required educational training to sit for the general lines agent's examination. While there were some slight delays in remitting premium payments to one carrier, this delay was occasioned by the manner in which the licensed agent chose to do business. This, at best, technical violation was not attributable to Petitioner. Petitioner has now demonstrated her entitlement to sit for the general lines agent's examination.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that:

Respondent enter a Final Order granting Petitioner's application for examination as a general lines insurance agent.

DONE and ENTERED this 31st day of October, 1990, in Tallahassee, Leon County, Florida.

JAMES E. BRADWELL

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 31st day of October, 1990.

ENDNOTES

1/ As an aside, Seese related that his license has been suspended by the Department of Insurance for, inter alia, utilizing his license in an agency in which he had minimal supervisory contact. Likewise, Petitioner's husband's license has been disciplined by Respondent.

Copies furnished:

Douglas A. Lockwood III, Esquire PETERSON MYERS CRAIG CREWS

BRANDON & MANN, P.A.

Lake Region Plaza-Suite 300

141 Fifth Street, N.W.

Winter Haven, Florida 33883-7608

Willis F. Melvin, Jr., Esquire Office of Legal Services

412 Larson Building Tallahassee, Florida 32399-0300

Honorable Tom Gallagher State Treasurer and

Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Don Dowdell, Esquire General Counsel Department of Insurance The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

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AGENCY FINAL ORDER

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

OFFICE OF THE TREASURER DEPARTMENT OF INSURANCE

IN THE MATTER OF:

KIMBERLY L. STRAYER CASE NO.: 90-L-I7LSS DOAH Case No.: 90-0582

/

FINAL ORDER

THIS CAUSE came before the undersigned Treasurer of the State of Florida, acting in his capacity as Insurance Commissioner, for consideration and final agency action. On December 28, 1989, the Department issued a letter denying the Petitioner's application for licensure as a General Lines Agent alleging various violations of the Insurance Code. The Petitioner timely filed a request for a formal proceeding pursuant to section 120.57(1), Florida Statutes. Pursuant to Notice, the matter was heard before James D. Bradwell, Hearing Officer, Division of Administrative Hearings, on August 23, 1990in Winter Haven, Florida.

After consideration of the evidence, argument and testimony presented at hearing, and subsequent written submissions by the parties, the hearing officer issued his Recommended Order (Attached as Exhibit "A"). The hearing officer recommended that Respondent's application for licensure as a General Lines Agent be granted. On November 9, 1990, the Department timely filed Exceptions to the Recommended Order. Pursuant to Section 120.59(2), Florida Statutes, I make the following rulings on the exceptions filed by the Department.

RULINGS ON DEPARTMENT'S EXCEPTIONS

1. The Department has not filed exceptions to the Findings of Fact and accordingly no changes are made to the Findings of Fact.

2. The Department has excepted to the hearing officer's Conclusions of Law, paragraph 4, as not supported by the Findings of Fact. The hearing officer in paragraph 4 of the Findings of Fact found as follows:

At the hearing, Petitioner admitted that

she did not have a licensed general lines agent in full-time active charge of her agency;

that she accepted applications and premium payments from the above-named insureds for auto insurance to be bound with State Farm Mutual Insurance Company and that she accepted

an application for premium payment for automobile insurance from Tammy Clay in the amount of $274.00 for coverage to be bound by State Farm Mutual Insurance Company.

Also, the hearing officer in paragraph 15 of the Findings of Fact found as follows:

During January 1988, Petitioner accepted an application and premium payment for auto insurance from Tammy Clay for coverage to be bound by State Farm. Petitioner submitted Clay's application and premium payment to State Farm and it was returned on one occasion based on the fact that a facsimile stamp was used by the purported licensed agent (Seese). Petitioner resubmitted it and State Farm again returned it based on State Farm's contention that Seese was not authorized to conduct business through Central.

These Findings of Fact clearly demonstrate that the Petitioner has violated Section 626.112(1), Florida Statutes by accepting an application and premium payment from Tammy Clay and submitting the application with the facsimile signature to State Farm. The Petitioner has also admitted to a violation of Section 626.747(1), Florida Statutes by failing to have in charge of her insurance agency an active full-time insurance agent. The record fully reflects that Mr. Seese had "hung" his license at the agency and that he did not see every application that his name was on by facsimile or otherwise, and that he never had any direct relationship with a client of the agency except on one occasion. (TR. 40, 72-3) Mr. Seese's license was Suspended due to these practices. (TR. 70-I) The record also reflects that the Petitioner was the owner of the agency and ran the day to day activities. (TR. 27) These facts found by the hearing officer constitute clear undisputed evidence that the Petitioner has demonstrated a lack of fitness and trustworthiness to engage in the business of insurance.

Therefore based on the above-referenced violations of the Florida Insurance Code, as found by the Hearing Officer, it is mandatory, pursuant to Section 626.611(7), Florida Statutes, that the Petitioners application for a license as a general lines agent be denied. The Department is afforded wide discretion in the interpretation of a statute which it administers and will not be overturned on appeal unless clearly erroneous. Insurance is a business greatly affected by the public trust, and the holder of business greatly affected by the public trust, and the holder of an agent's license stands in a fiduciary relationship

to both the client and insurance company. Natelson v. Department of Insurance,

454 So2d 31 (Fla. 1st DCA, 1984). See also, National Federation of Retired Persons v. Department of Insurance, 553 So2d 1289 (Fla. 1st DCA 1989). IT IS THEREFORE ORDERED:

1. The Findings of Fact of the hearing officer are adopted in full as the Department's Findings of Fact.

   
   

2. The Conclusions of Law of the hearing officer are adopted, with the exception of paragraph 4, as the Department's Conclusions of Law.

   
   

3. That the hearing officer's recommendation that the Petitioner's application for a license as a general lines agent be granted is disapproved as being contrary to the law.

   
   

4. The denial of the Petitioner's application in December 1989 is upheld due to the nature of the conduct closely related in time to the Petitioner's application for licensure. However, the Petitioner may at this time reapply for licensure, and provided the Petitioner has not committed any subsequent violations of the insurance code and is otherwise qualified for licensure, the Petitioner's application for licensure shall be granted subject to a one (1) year period of probation pursuant to Section 626.691, Florida Statutes.

ACCORDINGLY, the application for a license as a general lines agent filed by KIMBERLY L. STRAYER is hereby DENIED.

Any party to these proceedings adversely affected by this Order is entitled to seek review of this Order pursuant to Section 120.68, Florida Statutes, and Rule 9.110, Florida Rules of appellate procedure. Review proceedings must be instituted by filing a Notice of Appeal with the General Counsel, acting as the agency clerk, at 412 Larson Building, Tallahassee, Florida 323 99- 0300, and a copy of the same and the filing fee with the appropriate District Court of Appeal within thirty (30) days of rendition of this Order.

DONE and ORDERED this 17th day of January, 1991.

TOM GALLAGHER

Treasurer and Insurance Commissioner

COPIES FURNISHED:

James D. Bradwell Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

Kimberly L. Strayer 1480 6th Street, N.W. Winter Haven, FL 33771

Douglas A. Lockwood, III, Esquire Peterson, Myers, Craig, Crews, Brandon and Mann, P.A.

Lake Region Plaza - Suite 300

141 Fifth Street, N.W. Winter Haven, FL 33883-7608

Willis Melvin, Esquire Lisa s Santucci, Esquire Division of Legal Services

412 Larson Building Tallahassee, FL 32399-0300

Docket for Case No: 90-000582

Orders for Case No: 90-000582