STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ABRAHAM G. MAIDA, )

)

Petitioner, )

)

vs. ) CASE NO. 90-6670

)

DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Respondent. )

) DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 90-7603

)

ABRAHAM G. MAIDA, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause came on for hearing before P. Michael Ruff, duly-designated Hearing Officer of the Division of Administrative Hearings, in Jacksonville, Florida.

APPEARANCES

For Petitioner/Respondent:

Abraham G. Maida Norman J. Abood, Esq.

1015 Blackstone Building

Jacksonville, Florida 32202

For Petitioner/Respondent: Willis F. Melvin, Jr., Esq. Department of Insurance Alan J. Leifer, Esq.

and Treasurer Department of Insurance and Treasurer

412 Larson Building Tallahassee, Florida 32399-0300

STATEMENT OF THE ISSUE

The issues to be resolved in this consolidated proceeding concern whether the Petitioner, Abraham Maida's applications to represent certain life insurance companies should be denied based upon his alleged unlawful failure to forward premium funds from insureds to the insurers during the applicable regular course of business. Also at issue are the charges in the Administrative Complaint in the related penal proceeding which concerns the same factual conduct involving the Respondent's alleged failure to forward premiums to the insurers involved in the policy contracts at issue.

PRELIMINARY STATEMENT

This cause arose on September 24, 1990, when the Department of Insurance and Treasurer ("Department") issued a letter of denial to the Petitioner, Abraham G. Maida, denying his applications for extensions of licensure so as to represent Boston Mutual Life Insurance Company, Federal Home Life Insurance Company, First Colony Life Insurance Company, Lincoln Benefit Life Insurance Company, and Surety Life Insurance Company. The denial was based upon the Petitioner's alleged failure to forward certain premium monies collected from insureds, under policy contracts which the Petitioner had transacted to the insurers involved, during the applicable regular course of business. Subsequent to receipt of the letter of denial, the Petitioner timely requested a formal proceeding pursuant to Section 120.57(1), Florida Statutes.

On or about November 6, 1990, the Department filed a three-count Administrative Complaint against Mr. Maida, alleging that he, as the Respondent, failed to forward those same premium monies of the insureds to the insurance companies involved during the applicable regular course of business. Subsequent to receipt of the Administrative Complaint, the Petitioner timely requested a formal proceeding pursuant to Section 120.57(1), Florida Statutes, as to the disputed issues raised by the Administrative Complaint, as well. In due course, both cases were referred to the Division of Administrative Hearings and the undersigned Hearing Officer for formal proceedings.

The cases came on for hearing as noticed By ore tenus motion, the cases were consolidated at the hearing in Jacksonville, Florida. The Department presented the testimony of seven witnesses: Richard Cohee; Daleen Young; Karen Richmond; Paulette Elaine Walker; William J. Savina; Steven Franklin Heinicke; and James E. Daniels. Abraham Maida testified on his own behalf. The Department offered thirteen (13) exhibits, all of which were received into evidence. The Petitioner offered one (1) exhibit, which was not received into evidence. At the conclusion of the proceeding, the parties ordered a transcript and availed themselves of the right to file proposed findings of fact and conclusions of law in the form of Proposed Recommended Orders. Only the Department ultimately filed a Proposed Recommended Order, on April 22, 1991.

That Proposed Recommended Order has been considered in the preparation of this Recommended Order, and the proposed findings of fact have been specifically ruled upon herein and in the Appendix attached hereto and incorporated by reference herein.

FINDINGS OF FACT

1. The Petitioner, Abraham George Maida, is licensed in Florida as a life insurance agent, a life and health insurance agent and a dental health care contract salesman.

   
   

2. The Department is an agency of the State of Florida charged with licensing life, health and other types of insurance agents, with regulating their licensure and practice and with enforcing the licensure and practice standards embodied in the statutes cited hereinbelow.

   
   

3. Abraham Maida engaged in the business of selling insurance coverage to various employees of the City of Jacksonville. The premium payments for this coverage were collected by payroll deduction from the employees, and lump sum premium checks were remitted over to the Petitioner/Respondent, Mr. Maida, by the appropriate personnel of the City of Jacksonville. Mr. Maida, in turn, was required by his contractual arrangements with the underwriting insurance companies involved and by the Florida Insurance Code, Chapter 626, Florida Statutes, with timely remitting those premium funds over to the insurers who underwrote the risk for the employees in question.

   
   

4. Mr. Maida failed to timely remit the premium funds which he collected from the City of Jacksonville to the relevant insurers for the months of February, March and April of 1990, in the case of policy contracts written on behalf of Loyal American Life Insurance Company. Additionally, Mr. Maida failed to timely remit the premium funds received from the City of Jacksonville, after it received them by payroll deduction from its employees, for the months of March, April and May of 1990, with regard to the premium funds due in contracts involving the ITT Life Insurance Company, in accordance with his contract with that company.

   
   

5. Mr. Maida failed to timely remit the insurance premiums of James E. Daniels to the ITT Life Insurance Company, as well. The Petitioner/Respondent's contracts with these insurance companies required him to remit premium funds which he received from insureds, within thirty (30) days of receipt, to the insurance company underwriting the risk involved. This the Petitioner/Respondent failed to do for the companies involved in the above Findings of Fact and for those months of 1990 delineated above. In the case of most of the delinquent premium funds due these companies, Mr. Maida authorized them to debit his commission and/or renewal accounts with those companies, which were monies due and owing to him from the companies, in order to make up the premiums which he had not remitted over to the companies involved at that point. That procedure did not defray all of the delinquent premium amounts, however.

   in the case of ITT Life Insurance Company and the monies owed that company by Mr. Maida, it was established that $10,554.21 of delinquent premium amounts were owing to that company and not timely paid by Mr. Maida. Although he paid the portion of that figure representing the March premium funds due the company for March of 1990, he did not directly pay the premium funds due for April and May of 1990 but, rather, suffered the company to charge those delinquencies, for those months, to his agent's commission account. This procedure still left

   $4,877.54 unpaid, as of the time of hearing. It was established by witness, Steven Heinicke of that company, that Mr. Maida is their most consistently delinquent agent, in terms of timely remission of premium funds due the company for insurance business which Mr. Maida has written.

6. It has also been established however, that Mr. Maida made a practice of always paying premium funds due the companies for which he wrote insurance in the precise amounts owing, regardless of whether the billing statements to him from those companies had inadvertently understated the amounts which they were due. It was also established that his failure to timely remit the insurance premium funds in question was not due to any intent to defraud those companies of the funds involved or to permanently convert the funds to his own use. Rather, it was established that Mr. Maida's difficulty in timely payment of the premium funds was due to misappropriation of the funds because of financial problems which he was suffering at tee times in question, due at least in part to federal income tax difficulties he was experiencing. There has been no shoring in this record that Mr. Maida is not a competent insurance agent in terms of his abilities and qualifications to fairly and effectively obtain and contract for insurance business with insureds on behalf of the insurance companies he represents. There was no showing that he lacks reasonably adequate knowledge and technical competence to engage in the transactions authorized by the licenses or permits which he presently holds or which he seeks in the licensure application involved in this proceeding.

   
   

   CONCLUSIONS OF LAW

   
   

7. The Division of Administrative Hearings has jurisdiction of the subject matter of and the parties to this proceeding. See Section 120.57(1), Florida Statutes (1987).

   
   

8. The letter of denial by which the Petitioner's application for licensure with the above-mentioned additional insurance companies was rejected alleges that the Petitioner has violated ten (10) provisions of the Insurance

   `Code, to wit: Sections 626.561(1); 626.611(4); 626.611(7); 626.611(8);

   626.611(9); 626.611(10); 626.611(13); 626.621(2); 626.621(6); and 626.734,

   Florida Statutes.

   
   

9. The Administrative Complaint involved in the penal portion of this proceeding alleges that the Petitioner has violated seven (7) different provisions of the Insurance Code, to wit: Sections 626.561(1); 626.611(4); 626.611(7); 626.611(10); 626.621(2); 626.621(6); and 626.9541(1)(o)1., Florida Statutes.

   
   

10. Those provisions provide:

    
    

    626.561 Reporting and Accounting for Funds.

    (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 persons entitled thereto. (emphasis supplied) ...

    626.611 Grounds for Compulsory Refusal, Suspension, or Revocation of Agents, Solicitors or Adjusters License or Service Representatives Supervising or Managing General Agents or Claims Investigators Permit.

    (4) If the license or permit is willfully used, or to be used, to circumvent any of the requirements of 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 transaction 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 monies belonging to insurers or insureds or beneficiaries or others and received in conduct of business under the license.

    (13) Willful failure to comply with, or willful violation of, any proper order or rule of the department or willful violation of any provision of this Code. ...

    26.621 Grounds for Discretionary Refusal, Suspension, or Revocation of Agents, Solicitors or Adjusters License or Service Representatives Supervisory or

    General Agents, or Claims Investigators Permit.

    (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

    interest. (emphasis supplied) ...

    626.734 Corporations, Liability of Agent.

    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

    626.9541 Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Defined.

    (1) Unfair methods of competition and unfair or deceptive acts. The following are defined as unfair methods of competition and unfair

    or deceptive acts or practices.

    1. Illegal dealings and premiums; excess or reduced charges for insurance.

       1. Knowingly collecting any sum as a premium or charge for insurance, which is not then provided, or is not in due course to be provided, subject to acceptance of the risk by the insurer, by an insurance policy issued by an insurer as permitted by this Code.

    
    

11. Pursuant to Section 626.561(1), Florida Statutes, all premiums, returned premiums, or other funds belonging to insurers or others received by the agent in transactions under his license constitute trust funds received by that licensee in a fiduciary capacity. The monies received by the Petitioner/Respondent in the instant consolidated proceeding, from the City of Jacksonville and from the Jacksonville Electric Authority, were given to the Petitioner in his fiduciary capacity. Thereafter, in the applicable regular course of business, these funds should have been accounted for and paid over to the insurer companies involved. The Petitioner's failure to do so clearly reflects a misappropriation and unlawful withholding of monies, at least temporarily, which belong to others. Therefore, this failure constitutes violations of Sections 626.561(1); 626.611(7), to the extent Mr. Maida demonstrated a lack of fitness or trustworthiness by delinquent payments (with the understanding that he ultimately sought to remit over all premium monies due). Sections 626.611(10); 626.611(13); 626.621(2); and 626.621(6) have been violated, since it has been proven that the acts or omissions of the Petitioner/Respondent are "detrimental to the public interest."

    
    

12. The manner in which the Petitioner accounted for the premium funds involved, belonging to insurers or others, does not, however, demonstrate a lack of reasonably adequate knowledge and technical competence to engage in the transactions which are authorized by the licenses held by the Petitioner/Respondent. There was, therefore, no proven violation of Section 626.611(8), Florida Statutes. The fraudulent or dishonest practices with which the Petitioner/Respondent was charged in these proceedings for purposes of Sections 626.611(9), Florida Statutes, have not been proven either. It was not demonstrated that the delinquency in premium payments, while it amounts to at least a misappropriation and unlawful withholding of monies belonging to insurers, involved any actual intent to defraud or dishonestly deprive those insurers of the funds on a permanent basis. Mr. Maida never sought to conceal the amount due and owing. He was merely temporarily, for a period of some months, unable to pay the amounts for which he was responsible to the insurers. While this might be reprehensible conduct on the part of an insurance agent, it does not constitute a fraudulent or dishonest practice, which is a violation requiring specific intent. See, Brod v. Jernigan, 188 So.2d 575 (Fla. 2d DCA 1966).

    
    

13. It, likewise, has not been proven that the Petitioner/Respondent committed a violation of Section 626.611(4), Florida Statutes, quoted above, because it was not shown that he acted with any intent to willfully use his license or permit to circumvent any of the requirements or prohibitions of the Insurance Code quoted herein. Here again, the Petitioner/Respondent had no specific intent. to willfully use his licenses to commit unlawful acts in violation of the Code. He has only been proven to have been guilty of poor

    judgment, leading to the specific violations found to have been committed herein, involving misappropriation and unlawful withholding of monies on a temporary basis. He harbored no specific intent to deceive, conceal or defraud the insurers involved. Section 626.611(4), Florida Statutes, has not been violated.

    
    

14. The remaining violations of the various above-quoted authority, which were proven, are all violations applicable to the business of insurance in the "course of dealing" under the Petitioner's licenses, in contravention of Sections 626.611(13); 626.621(2); and 626.621(6), Florida Statutes, in the sense, only, that they were willful violations and were detrimental to the public interest. It has not been proven that the Petitioner/Respondent, in the conduct of his insurance business, has engaged in any unfair methods of competition or any unfair or deceptive acts or practices, nor that he is actually a source of injury or loss to the public. Rather, his haphazard and dilatory methods of remitting premiums have proven him to be a potential source of injury or loss to the public and that he has conducted his insurance business under his licenses in a manner detrimental to the public interest.

    
    

15. In consideration of the above-proven violations, moreover, it has been established that the Petitioner/Respondent, in a limited fashion, has demonstrated a lack of fitness or trustworthiness to engage in the business of insurance, to the extent that he has demonstrated a repetitive pattern of delinquent remission of premiums to the insurers who are entitled to them in violation of the above statutory sections That is not to say, however, that the Petitioner/Respondent is an agent who is no longer entitled, because of lack of fitness or trustworthiness to engage in the business of insurance at all. Rather, a somewhat moderate penalty is warranted in order to convince the Petitioner/Respondent of the seriousness of his violations and of the need to correct his methods of doing business under his licenses in the future.

    
    

16. In summary, the foregoing enumerated violations which were proven demonstrate that the Petitioner is a potential source of loss to the public and has posed a detriment to the public interest in violation of the authority quoted and discussed above. The Petitioner's knowing conduct in failing to timely remit premiums to the insurers involved, during the applicable course of business, due to the fact that he had financial difficulties, shows that his actions were not done accidentally, but rather that the delays in remission of premiums were willful, because, at some point, he had to have become aware that he did not have the funds available to his business to pay the premiums due. He allowed months to elapse without making satisfactory arrangements to pay the debts owed to the insurers. This, as well as the other conclusions and discussion enumerated above, shows that a violation of Section 626.611(13), Florida Statutes, has occurred. Accordingly, in view of the above established violations of the Insurance Code, a significant penalty is warranted.

RECOMMENDATION

Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is, therefore

RECOMMENDED:

That the Petitioner be found guilty of the violations found to have been proven in the above Conclusions of Law portion of this Recommended Order and that his licenses and eligibility for licensure with the insurers for which license application was made be suspended for a period of three (3) months.

DONE and ENTERED this 5th day of June, 1991, in Tallahassee, Florida.

P. MICHAEL RUFF Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk the

Division of Administrative Hearings this 6th day of June, 1991.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-6670

Respondent/Department's Proposed Findings of Fact: 1-7. Accepted.

COPIES FURNISHED:

Tom Gallagher, State Treasurer and Insurance Commissioner

Department of Insurance and Treasurer

The Capitol, Plaza Level Tallahassee, FL 32399-0300

Bill O'Neil, Esq. General Counsel Department of Insurance

and Treasurer

The Capitol, Plaza Level Tallahassee, FL 32399-0300

Norman J. Abood, Esq. Willis F. Melvin, Jr., Esq. 1015 Blackstone Building Alan J. Leifer, Esq.

Jacksonville, FL 32202 Department of Insurance and Treasurer

412 Larson Building Tallahassee, FL 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

ALL PANTIES 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.

Docket for Case No: 90-006670

Orders for Case No: 90-006670