STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

STEPHEN TODD DAGGETT, )

)

Petitioner, )

)

vs. ) CASE NO. 90-5130F

)

DEPARTMENT OF INSURANCE, )

)

Respondent. )

)

FINAL ORDER

On January 14, 1991, a formal administrative hearing was held in this case in Tallahassee, Florida, before J. Lawrence Johnston, Hearing Officer, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Thomas W. Stahl, Esquire

Robin C. Nystrom, Esquire Newell & Stahl, P. A.

817 North Gadsden Street Tallahassee, Florida 32303

For Respondent: S. Marc Herskowitz, Esquire

Department of Insurance Division of Legal Services Room 412, Larson Building

Tallahassee, Florida 32399-0300 STATEMENT OF THE ISSUE

The issue for determination in this proceeding is whether the Respondent, the Department of Insurance, should pay the Petitioner, Stephen Todd Daggett, attorney fees and costs under Section 57.011, Fla. Stat. (1989), the Florida Equal Access to Justice Act. Since, as reflected in the Preliminary Statement, the parties stipulate that the Petitioner is a "prevailing small business party" and that the amount of the fees and costs the Petitioner seeks is reasonable, the only remaining issue under the statute is whether the Respondent was "substantially justified" in filing the Administrative Complaint in Case No. 89- 5712 against the Petitioner. 1/

PRELIMINARY STATEMENT

On or about September 21, 1989, the Respondent, the Department of Insurance, filed a one-count Administrative Complaint seeking to discipline the Petitioner, Stephen Todd Daggett, a licensed health and accident insurance agent for National States Insurance Company, for allegedly making false representations to Forrest and Viola DePeugh in order to induce them to drop an insurance policy and buy one from the Petitioner. After a formal administrative

proceeding, a Final Order was entered dismissing the Administrative Complaint. On or about August 14, 1990, the Petitioner filed a Petition for Costs and Fees Pursuant to the Florida Equal Access to Justice Act.

After two agreed continuances, final hearing was held on January 14, 1991.

The parties stipulated that the Petitioner is a "prevailing small business party" and that the amount of the fees and costs the Petitioner seeks is reasonable, and the only remaining issue under the statute was whether the Respondent was "substantially justified" in filing the Administrative Complaint in Case No. 89-5712. 2/ Because the Respondent had the burden to prove that its Administrative Complaint in Case No. 89-5712 was "substantially justified," 3/ the Respondent proceeded to present evidence on the issue and had admitted in evidence, as Department Exhibits 1 through 3, its investigative file on the matters leading to the Administrative Complaint in Case No. 89-5712, along with the transcripts of depositions of Forrest and Viola DePeugh taken during the pendency of Case No. 89-5712. The Petitioner had admitted in evidence, as Daggett Exhibit 1, the transcript of the deposition of the Department investigator who investigated the matters leading to the Administrative Complaint in Case No. 89-5712.

After the final hearing, on the Respondent's unopposed motion, the time for filing proposed final orders was extended to February 8, 1991. Explicit rulings on the proposed findings of fact in the parties' proposed final orders may be found in the attached Appendix to Final Order, Case No. 90-5130F.

FINDINGS OF FACT

1. On or about May 19, 1989, Viola DePeugh filed a complaint with the Department of Insurance, Bureau of Consumer Services, stating that the Petitioner, a licensed health and accident insurance agent for National States Insurance Company, visited the DePeugh home on or about May 4, 1989, and: tried to intimidate her and her husband; stated that the insurance agent who had sold them their Old Southern policy was "a crook and a liar" and not licensed by the Department; and stated that Old Southern had gone bankrupt and was about to go bankrupt again.

   
   

2. The Respondent investigated the DePeugh complaint to the extent of interviewing the DePeughs and obtaining sworn written statements from them. Viola DePeugh's sworn written statement reiterated her May 19, 1989, complaint to the Department. She stated that the Petitioner had reviewed the DePeughs' Old Southern insurance policy, had stated that Old Southern had been bankrupt once before and was going bankrupt again, and had stated that her Old Southern agent was a "crook." Her husband, Forrest DePeugh, gave a sworn written statement that he had been present at the time of the Petitioner's statements to his wife and that he could verify his wife's statements.

   
   

3. Besides the interviews with the DePeughs and their sworn written statements, the Department did not further investigate the DePeugh complaint.

   
   

4. On or about September 21, 1989, the Respondent filed an Administrative Complaint charging the Petitioner with violations of parts of Chapter 626, Florida Statutes, based on the DePeugh allegations. The Administrative Complaint charges essentially that, in order to induce the DePeughs to change from their Old Southern policy to a policy the Petitioner was selling, the Petitioner falsely represented to the DePeughs that Old Southern Insurance Company had been in bankruptcy and was about to go bankrupt again and that the DePeughs' insurance agent was "a crook."

5. The Administrative Complaint was referred to the Division of Administrative Hearings for a formal administrative proceeding and was assigned Case No. 89-5712. The Petitioner's defense to the Administrative Complaint was that he did not make the statements attributed to him, not that the statements were true. The Recommended Order in Case No. 89-5712 found that the Department did not prove by clear and convincing evidence that the DePeugh allegations were true. A Final Order dismissing the Administrative Complaint was entered on or about June 21, 1990.

   
   

6. At the time of its filing on or about September 21, 1989, the Administrative Complaint against the Petitioner had a reasonable basis in law and in fact. If the DePeughs testified in accordance with Viola DePeugh's written complaint and sworn written statement, their testimony would have been legally sufficient to sustain the charges in the Administrative Complaint notwithstanding the Petitioner's denial of the charges. It was simply a case of the DePeughs' word against the Petitioner's word. There were no other witnesses, and there was no reason for the Respondent to think that further investigation would have uncovered extrinsic evidence that would support the Petitioner's denial of the charges or impeach the credibility of the DePeughs. Under these circumstances, it was not unreasonable for the Respondent to file the Administrative Complaint against the Petitioner.

   
   

   CONCLUSIONS OF LAW

   
   

7. This proceeding commenced with the filing of a Petition for Costs and Fees Pursuant to the Florida Equal Access to Justice Act, Section 57.111, Fla. Stat. (1989). It has been stipulated in this case both that the Petitioner is a "prevailing small business party" and that the amount of the fees and costs the Petitioner seeks is reasonable. In pertinent part, Section 57.111 provides for the payment of attorney fees and costs incurred in a formal administrative proceeding to a "prevailing small business party," as defined in the statute, "unless the actions of the state agency were substantially justified "

   Section 57.111(4)(a). "A proceeding is substantially justified if it had a reasonable basis in law and in fact at the time it was initiated by the state agency." Section 57.111(3)(e).

   
   

8. The Respondent has the burden to prove that its Administrative Complaint against the Petitioner was "substantially justified." See Final Order, Dept. of Prof. Reg. v. Webster, 11 F.A.L.R. 3016 (DOAH 1988).

   
   

9. In this case, if the DePeughs testified in accordance with Viola DePeugh's written complaint and sworn written statement, their testimony would have been legally sufficient to sustain the charges in the Administrative Complaint notwithstanding the Petitioner's denial of the charges. It was simply a case of the DePeughs' word against the Petitioner's word. There were no other witnesses, and there was no reason for the Respondent to think that further investigation would have uncovered extrinsic evidence that would support the Petitioner's denial of the charges or impeach the credibility of the DePeughs. Under these circumstances, it was not unreasonable for the Respondent to file the Administrative Complaint against the Petitioner. Even though, in the face of the Petitioner's denial of the charges, the DePeughs' testimony was not accepted as clear and convincing evidence of the facts to which they testified, the Administrative Complaint "had a reasonable basis in law and in fact at the time it was initiated by the state agency" and was "substantially justified," under Section 57.111. See Gentele v. Dept. of Prof. Reg., 513 So. 2d 672, 673 (Fla. 1st DCA 1987).

10. Citing Fieber v. Dept. of Banking and Finance, 9 F.A.L.R. 5236 (DOAH 1987), the Petitioner contends that the Respondent's investigation of the Viola DePeugh complaint was not a "meaningful inquiry" into the Petitioner's culpability.

    
    

11. The Petitioner contends that the Respondent should have interviewed the Petitioner before initiating an Administrative Complaint. Without condoning the practice of not interviewing the subject of a complaint before initiating an administrative complaint, it must be concluded that failure to do so does not require the conclusion that the administrative complaint has no "reasonable basis in law and in fact." In this case, even if the Petitioner had denied the DePeughs' allegations during an investigative interview, the Respondent could have prosecuted the Administrative Complaint with "substantial justification."

    
    

12. The Petitioner also contends that the Respondent should have investigated whether Old Southern Insurance Company indeed had filed bankruptcy and was about to go bankrupt again and whether the DePeughs' insurance agent was indeed "a crook." As reflected in the Recommended Order in this case, the facts were that Old Southern had not filed bankruptcy, there was no evidence that Old Southern was about to file bankrupcty, and that the DePeughs' Old Southern insurance agent was not "a crook." The Petitioner's defense to the Administrative Complaint in Case No. 89-5712 was that he did not make the statements attributed to him, not that the statements were true.

DISPOSITION

Based on the foregoing Findings of Fact and Conclusions of Law, the Petition for Costs and Fees Pursuant to the Florida Equal Access to Justice Act is dismissed.

DONE AND ENTERED this 22nd day of February, 1991, in Tallahassee, Florida.

J. LAWRENCE JOHNSTON 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 22nd day of February, 1991.

ENDNOTES

1/ The Respondent does not contend that "special circumstances exist which would make the award unjust."

2/ See footnote 1.

3/ See Conclusion of Law, below.

APPENDIX TO FINAL ORDER, CASE NO. 90-5130F

To comply with the requirements of Section 120.59(2), Florida Statutes (1989), the following rulings are made on the parties' proposed findings of fact:

Petitioner's Proposed Findings of Fact.

1.-4. Accepted and incorporated to the extent not subordinate or unnecessary.

5. Rejected that Viola DePeugh complained about the statement that Old Southern "was having financial problems." (The complaint was that he said Old Southern had "gone bankrupt and was going to go bankrupt again.") Otherwise, accepted and incorporated.

6.-12. Accepted but subordinate and unnecessary.

13. Accepted, but the statement referred to the evidence of the Petitioner's conviction for aggravated battery, not to the DePeugh complaint. Subordinate to facts contrary to those found and unnecessary.

14.-17. Accepted but subordinate to facts contrary to those found and unnecessary.

18.-22. Accepted and incorporated. Respondent's Proposed Findings of Fact.

1. Accepted and incorporated.

2. Rejected as being conclusion of law. 3.-6. Accepted and incorporated.

1. Accepted but subordinate and unnecessary (covered by the Preliminary Statement.)

2. Accepted and incorporated.

COPIES FURNISHED:

S. Marc Herskowitz, Esquire Department of Insurance Division of Legal Services Room 412, Larson Building Tallahassee, FL 32399-0300

Thomas W. Stahl, Esquire Robin C. Nystrom, Esquire Newell & Stahl, P. A.

817 North Gadsden Street Tallahassee, FL 32303

Tom Gallagher

State Treasurer and Insurance Commissioner

The Capitol, Plaza Level Tallahassee, FL 32399-0300

Bill O'Neil, Esquire General Counsel

Department of Insurance and Treasurer

The Capitol, Plaza Level Tallahassee, FL 32399-0300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 90-005130F

Orders for Case No: 90-005130F