STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 90-8191

)

WAYNE CHARLES REDWOOD, )

)

Respondent. )

)

RECOMMENDED ORDER

On April 2, 1991, a formal administrative hearing was held in this case in Tampa, Florida, before J. Lawrence Johnston, Hearing Officer, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Thomas D. Valentine, Esquire

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

Tallahassee, Florida 32399-0300

For Respondent: Thomas A. Smith, Esquire

800 West Platt Street Suite 3

Tampa, Florida 33606 STATEMENT OF THE ISSUES

The issues for determination in these proceedings are whether the Petitioner, the Department of Insurance, should discipline the Respondent, Wayne Charles Redwood, for any of the violations charged in the Administrative Complaint filed in this case. The Administrative Complaint charges essentially that the Respondent took insurance premium money from a customer, represented that insurance coverage had been obtained when in fact it had not been, and converted the premium money to his own use, in violation of Sections 626.561(1), 626.611(7), 626.611(9), 626.611(10), 626.611(13), 626.621(2), 626.621(6),

626.112(2), 626.311(4), and 626.9541(1)(e)1., Florida Statutes (1989). 1/ PRELIMINARY STATEMENT

The violations charged in the Administrative Complaint arise out of both an automobile insurance policy and a homeowner insurance policy. Before the final hearing, the parties filed a Prehearing Stipulation. The Prehearing Stipulation indicated that all allegations as to the homeowner policy were being withdrawn. This was confirmed on the record at the final hearing.

The Prehearing Stipulation also set forth the parties' stipulation to certain facts and their stipulation that the only issue of fact in dispute was whether the Respondent "willfully attempted to misappropriate funds." Notwithstanding the latter stipulation, the record in this case, including the parties' proposed recommended orders, seems clear that the parties also intended to try the issue, as framed by the Administrative Complaint, whether the Respondent violated Sections 626.621(6) and 626.9541(1)(e), Fla. Stat. (1989), by preparing for his customer a false declaration page for a nonexistent automobile insurance policy. But the charges that the Respondent violated Sections 626.561(1), 626.112(2) and 626.311(4), Fla. Stat. (1989), were dropped.

At the final hearing, the Department had Petitioner's Exhibits 1 through 3 admitted in evidence and rested. The Respondent testified in his own behalf and had Respondent's Exhibit 1 admitted in evidence.

The Department ordered the preparation of a transcript of the final hearing, which was filed on April 17, 1991. Explicit rulings on the proposed findings of fact in the parties' proposed recommended orders may be found in the attached Appendix to Recommended Order, Case No. 90-8191.

FINDINGS OF FACT

1. The Respondent, Wayne Charles Redwood, is currently eligible for licensure and licensed in this state as a life agent, life and health agent, general lines agent, and as an independent adjuster for fire and allied lines, including marine, casualty, and motor vehicle physical damage and mechanical breakdown insurance.

   
   

2. At no time pertinent to the allegations of the Administrative Complaint in this case was the Respondent licensed as a general lines agent for American Risk Assurance Company (American Risk).

   
   

3. At all times pertinent to the allegations in the Administrative Complaint in this case, the Respondent was an officer and director of Redwood Becker and Associates, an incorporated general lines insurance agency located and doing business in Tampa, Florida.

   
   

4. On or about March 20, 1989, the Respondent sold an automobile insurance policy and a homeowner insurance policy to Jerry Burton. The Respondent quoted prices and accepted and cashed checks for the policy premiums.

   
   

5. The premium for the auto insurance was $601.50. The premium quote for the auto insurance came from a Clarendon National policy the Respondent thought he could obtain through Mobile Home Division, a broker for the product with whom the Respondent did business as an independent insurance agent.

   
   

6. A few days later, the Respondent received word from Mobile Home Division that Burton's application had been rejected. The Respondent's other potential sources of auto insurance for Burton would cost approximately three times the Respondent's quote to Burton. The Respondent wanted to increase his chances of keeping Burton as a customer for various insurance needs, including costly workmen's compensation insurance. Rather than tell Burton that he had been rejected, the Respondent consulted an individual named Herman Lambert.

7. The Respondent knew Lambert from prior business dealings. Lambert first called on the Respondent near the end of 1988 to discuss insurance. Lambert seemed knowledgable on the subject and gave the Respondent the impression that he was an insurance broker, like Mobile Home Division. The Respondent never asked Lambert for his credentials. He does not ordinarily ask insurance brokers for their credentials. Department of Insurance records indicate that Lambert is not now, and was not at the time of the Respondent's transactions with Burton, licensed with the Department as an insurance agent.

   
   

8. During the time the Respondent knew Lambert, Lambert occasionally was able to give the Respondent leads to obtain coverage for the Respondent's hard- to-place customers. On those occasions, coverage was obtained without any problems.

   
   

9. On or about March 27, 1989, Lambert told the Respondent that he (Lambert) thought he could obtain coverage for Burton for the Respondent. Lambert later confirmed to the Respondent that he would be able to get coverage for Burton. The Respondent was delighted and wrote Lambert a check for $582.50, which represented the anticipated premium, net the Respondent's commission.

   
   

10. Neither Burton nor the Respondent received any indication that Burton had auto coverage--no policy, no policy declaration, no binder, and no identification card. (Meanwhile, the Respondent and Burton already had received confirmation that the homeowner policy had been issued.) At first, the length of time that had passed was not outside the normal range, and the Respondent was not overly concerned. He tried to reassure Burton that there was no problem and that confirmation of coverage would arrive in due course.

    
    

11. In May, 1989, it came time for Burton to renew his auto registration on the vehicles supposedly covered by the auto insurance. Burton advised the Respondent, through his girl friend, Janet, that he needed an insurance identification card to get his vehicle registrations renewed. It was not proved that, by this time, the Respondent knew that no insurance had issued. The Respondent told Janet that he could not give her an identification card but that he could mail her a computer printout with some information on Burton's policy.

    
    

12. The Respondent entered information on his office computer system and produced a document labeled "Policy Declarations." The document stated that American Risk was the name of Burton's auto insurance carrier and that Burton's policy number was FPL20275. It listed a premium of $647. The place on the document for the signature of the "authorized representative" was left blank.

    
    

13. The Department did not prove that the Respondent did not telephone Lambert to get the name of the insurance carrier and the policy number, or that Lambert did not give the Respondent the information the Respondent put on the document, as the Respondent testified.

    
    

14. The Respondent mailed the completed printout to Janet for use in getting Burton's vehicle registrations renewed. The Respondent explained that the actual policy, or policy declarations, or binder, would be sent by the insurance carrier but that, hopefully, the document he was providing would be enough to get the registrations renewed. Apparently, it was, for the Respondent was not contacted again concerning the vehicle registration renewals.

15. The Department did not prove that the Respondent did not make clear to Janet that the document was not the actual policy or the actual policy declarations (notwithstanding the label on the document). However, the Respondent knew that his conduct would enable the customer to misrepresent to the auto vehicle registration agency that the document was an actual policy declaration page. The Department did not prove whether the customer intended to, or did, use the document to defraud or mislead the auto vehicle registration agency.

    
    

16. Time continued to pass, and nothing was received from an insurance carrier indicating that Burton had auto coverage--no policy, no policy declaration, no binder, and no identification card. By now even more concerned, Janet tried to contact the Respondent to discuss the matter of the auto insurance, but the Respondent either was out-of-town or was unable to speak to her, which increased Janet's anxieties.

    
    

17. On or about July 15, 1989, Burton contacted the Respondent about getting workmen's compensation insurance and about the auto insurance. Burton still had received nothing from an insurance carrier and nothing else from the Respondent indicating that Burton had coverage on his vehicles. Burton asked whether it was possible to get insurance from another insurance carrier to expedite the process. The Respondent explained that he could but that it would cost Burton about three times as much. It seemed to the Respondent that Burton was about ready to pay the extra premium cost to get assurance that he had coverage, but Burton made no final decision either on the auto insurance or on the expensive workmen's compensation insurance.

    
    

18. On July 17, 1989, both Burton and Janet visited the Respondent in his office to discuss the auto and workmen's compensation insurance. The Respondent had no more answers or suggestions. It was becoming apparent to the Respondent that Burton and Janet were losing faith in the Respondent and that Burton was hesitant to write the Respondent a check for the workmen's compensation insurance while the status of the auto insurance for which Burton had paid the Respondent remained in question.

    
    

19. The next morning, July 18, 1989, Burton and Janet again appeared at the Respondent's office, this time without an appointment, to discuss the auto insurance. They reported to the Respondent that they had been to the Insurance Commissioner's office on the afternoon of July 17 for advice on the problem. By this time, the Respondent felt it was time to ask if Burton wanted a refund of his premium. Burton indicated that he did, and the Respondent refunded him the entire premium for both the auto insurance and the homeowner insurance. (The Respondent took a loss on the homeowner refund because the policy had been in effect, and there were earned premiums that the Respondent did not get back from the insurer.)

    CONCLUSIONS OF LAW

    
    

20. The Administrative Complaint, as amended by the parties' Prehearing Stipulation, alleges that the Respondent violated one or more of the following sections of the Insurance Code: 626.611(7), 626.611(9), 626.611(10), 626.611(13), 626.621(2), 626.621(6), and 626.9541(1)(e)1., Florida Statutes (1989). These provisions provide as follows:

    
    

    626.611 Grounds for compulsory refusal, suspension, or revocation of agent's solicitor's, or adjuster's license or . . . permit.--The department shall deny, suspend, revoke, or refuse to renew or continue the license of any agent, solicitor, or adjuster

    . . . 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 applicant, licensee, or permittee any one of the following applicable grounds exist:

    * * *

    (7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

    * * *

    1. Fraudulent or dishonest practices in the conduct or business under the license or permit.

    2. 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 proper order or rule of the department or willful violation of any provision of this code.

    626.621 Grounds for discretionary refusal, suspension, or revocation of agent's, solicitor's, or adjuster's license or service representative's supervising or managing general agent's or claims investigator's permit.--The department may, in its discretion, deny, suspend, revoke, or refuse to renew or continue the license of any agent, solicitor, or adjuster . . . 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 applicant, licensee, or permittee any one or more of the following applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal 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 and 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. 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:

    * * *

    (e) False statement and entries.--

    1. Knowingly:

    1. Filing with any supervisory or other public official,

    2. Making, publishing, disseminating, circulating,

    3. Delivering to any person,

    4. Placing before the public,

    5. Causing, directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public,

    any false material statement.

    
    

21. The Petitioner, the Department of Insurance, has the burden of proof in these proceedings to prove the allegations in the Administrative Complaint by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987). The standard of clear and convincing evidence to be used in administrative licensing cases was outlined by the First District Court of Appeal in Evans Packing Company v. Department of Agriculture and Consumer Services, 550 So. 2d

    112 (Fla. 1st DCA 1989):

    
    

    [C]lear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the evidence must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact the firm belief of conviction, without hesitancy, as to be the truth of the allegations sought to be established. 550 So. 2d at 116, n.5

22. As reflected in the Findings of Fact, the evidence did not prove that the Respondent willfully misappropriated Burton's premium money for the auto insurance policy, in violation of Section 626.611(7), (9) or (10), Fla. Stat. (1989). But the Respondent's actions in preparing a false declaration page violated Sections 626.621(2) and (6), and 626.9541(1)(e), Fla. Stat. (1989). Although the Department did not prove that the Respondent prepared the "declaration page" in order to defraud or mislead his customer, the Respondent knew that his conduct would enable the customer to misrepresent to the auto vehicle registration agency that the document was an actual policy declaration page (whether or not the customer intended to, or did, use the document for that purpose.)

    
    

23. Section 626.681(1), Fla. Stat. (1989), provides in pertinent part:

Except as to insurance agencies, if the department finds that one or more grounds exist for the suspension, revocation, or refusal to renew or continue any license or permit issued under this chapter, the department may, in its discretion, in lieu of such suspension, revocation, or refusal, and except on a second offense or when such suspension, revocation, or refusal is mandatory, impose upon the licensee or permittee an administrative penalty in the amount of $500 or, if the department has found willful misconduct or willful violation on the part of the licensee or permittee,

$2,500.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Petitioner, the Department of Insurance, enter a final order: (1) finding the Respondent, Wayne Charles Redwood, guilty of preparing a false declaration page in violation of Sections 626.621(2) and (6), and 626.9541(1)(e), Fla. Stat. (1989); finding him not guilty of the other charges in the Administrative Complaint; and (3) imposing on the Respondent an administrative penalty in the amount of $500.

RECOMMENDED this 3rd day of May, 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 3rd day of May, 1991.

ENDNOTES

1/ The violations charged in the Administrative Complaint arise out of essentially the same alleged improprieties with respect to both an automobile insurance policy and a homeowner insurance policy, but all allegations as to the homeowner policy were withdrawn by the time of the final hearing. Also, as reflected in the Preliminary Statement, below, several of the charges as to the auto insurance policy were dropped as a result of the parties' Prehearing Stipulation.

APPENDIX TO RECOMMENDED ORDER

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.-10. Accepted and incorporated.

11.-12. Accepted, but subordinate to facts contrary to those found (i.e., the proposed fact that the Respondent fabricated the existence of a Herman Lambert in order to defend against charges that he attempted to steal premium money from Burton).

1. Accepted. There is no evidence to indicate how anything having to do with Diversified Financial Underwriters is material to this case; otherwise, incorporated.

2. Rejected as contrary to facts found. The carbonless copy of the check to Herman Lambert, dated March 27, 1989, appears in proper sequence with cancelled checks written by the Respondent on the same check register on March 24, 27 and 29, 1989. It is not believed that, between March 24 and 27, 1989, the Respondent embarked on a plan to steal the auto insurance premium money from Burton; nor is it believed that, either on March 27, 1989, or at some later date, the Respondent fabricated the existence of a Herman Lambert in order to defend against charges that he attempted to steal premium money from Burton.

3. Accepted and incorporated.

4. Rejected as contrary to facts found.

5. Accepted and incorporated that the Respondent created a fraudulent declarations page. Otherwise, rejected as contrary to facts found.

6. Rejected, as contrary to facts found, that the Respondent "misappropriated funds" or that the Respondent refunded the money simply to avoid prosecution by the Department (although accepted that the Respondent hoped that no prosecution would result.) Otherwise, accepted and incorporated.

Respondent's Proposed Findings of Fact.

1.-6. Accepted and incorporated.

1. Accepted but subordinate to facts found.

2. Rejected as contrary to the evidence. The fact that the check to Lambert never was cashed was evidence that the Respondent might have known that there was no coverage at the time the Respondent prepared the false declaration page. He also knew that he had no authority to bind coverage, and he had no documentary evidence from Lambert that Lambert had bound coverage. However, the evidence was not clear and convincing that the Respondent knew there was no coverage (although he should have known if he was monitoring the status of Burton's insurance properly and adequately.)

3. Accepted and incorporated.

4. Rejected as contrary to the evidence. However, as found, the Department did not prove that the Respondent "willfully attempted to misappropriate funds."

COPIES FURNISHED:

Thomas D. Valentine, Esquire Department of Insurance Division of Legal Services Room 412, Larson Building Tallahassee, FL 32399-0300

Thomas A. Smith, Esquire 800 West Platt Street Suite 3

Tampa, Florida 33606

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 SUBMIT EXCEPTIONS

ALL PARTIES HAVE THE RIGHT TO SUBMIT TO THE DEPARTMENT OF INSURANCE WRITTEN EXCEPTIONS TO THIS RECOMMENDED ORDER. ALL AGENCIES ALLOW EACH PARTY AT LEAST TEN DAYS IN WHICH TO SUBMIT WRITTEN EXCEPTIONS. SOME AGENCIES ALLOW A LARGER PERIOD WITHIN WHICH TO SUBMIT WRITTEN EXCEPTIONS. YOU SHOULD CONSULT WITH THE TO THE DEPARTMENT OF INSURANCE CONCERNING ITS RULES ON THE DEADLINE FOR FILING EXCEPTIONS TO THIS RECOMMENDED ORDER.

Docket for Case No: 90-008191

Orders for Case No: 90-008191