STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 91-6162

)

SHIRLEY ANN CRAMER, )

)

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 February 6, 1992, in Clearwater, Florida.

APPEARANCES

For Petitioner: David D. Hershel, Esquire

Department of Insurance and Treasurer

412 Larson Building Tallahassee, FL 32399-0300

For Respondent: Peter C. Clement, Esquire

2650 Tampa Road, Suite A Palm Harbor, FL 34684

STATEMENT OF THE ISSUES

Whether or not Respondent violated provisions of Chapter 626, Florida Statutes, as more specifically alleged in the Administrative Complaint dated August 9, 1991.

PRELIMINARY STATEMENT

By its one-count Administrative Complaint filed herein, Petitioner, Department of Insurance, seeks to impose penalties against Respondent, Shirley Ann Cramer, and her licenses as an insurance agent based on allegations that Respondent, during a period in which her licenses as an insurance agent were suspended by Petitioner as a result of prior administrative action, transacted insurance business in violation of the Florida Insurance Code, withheld fiduciary funds from a consumer and misappropriated and converted said funds, all in violations of the Florida Insurance Code.

On September 4, 1991, Respondent filed a request for a formal hearing pursuant to Section 120.57(1), Florida Statutes; and on November 8, 1990, a notice of hearing was entered scheduling this matter for hearing for February 6, 1992. On or about December 30, 1991, Respondent filed a motion for

continuance which was opposed by Petitioner; and on January 7, 1992, an order denying Respondent's motion for continuance was entered.

At the hearing, Petitioner presented the testimony of Kenneth Newsome, Lorraine Mileskey and Luis Rivera. Respondent testified on her behalf and presented the testimony of Horace Smith, Carol Nelson and Gary Bingham.

Following the conclusion of the hearing, Petitioner filed a motion to supplement the record which motion was granted by order dated April 8, 1992. The parties were afforded leave through April 28, 1992, to file proposed recommended orders. Proposed findings of fact which are not incorporated herein are the subject of specific rulings in an Appendix.

Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received and the entire record compiled herein, the following relevant facts are found.

FINDINGS OF FACT

1. Petitioner, the Department of Insurance and Treasurer, is the regulatory agency which is authorized to, and regulates the insurance industry in the State of Florida.

   
   

2. Respondent, Shirley Ann Cramer, during times material, was licensed by Petitioner as a Series 218 and 220 licensee (life and health and property and casualty insurance), respectively.

   
   

3. On September 28, 1990, Petitioner entered a final order imposing a disciplinary suspension for a period of one year effective September 28, 1990 (Case No. 89-L-413RCB) of all licenses issued to Respondent.

   
   

4. On October 13, 1990, Respondent's counsel, John Waller, advised Respondent that Petitioner had suspended her license and that he would appeal the matter if she desired, however he advised that to do so would require a substantial cash outlay. Waller suggested that they consider that option, and, to that end, Respondent scheduled an appointment to discuss whether or not an appeal would be feasible. Waller advised Respondent that she had until October 28, 1990, to file her appeal. Respondent received a copy of the final order on or about October 25, 1990. Respondent ordered a copy of that order from Petitioner, by Federal Express delivery. On the following day, October 26, 1990, Respondent filed a pro se notice of appeal and submitted the necessary filing fee of $250.

   
   

5. Subsequent thereto, Respondent contacted another attorney who had been formerly employed by the Department of Professional Regulation, Drucilla Bell, and the possibilities of an appeal was discussed with Ms. Bell. During late December, a fee arrangement was agreed upon, and Respondent paid Bell a down payment of $2500 to initially file a brief and a motion to stay the suspension pending the outcome of the appeal. Motions to stay the suspension were filed, both with Petitioner and with the Second District Court of Appeal. On February 6, 1990, Petitioner entered an order denying a stay of the final order, and on February 8, 1990, Respondent's counsel, Bell, filed a Petition For Supersedeas response to the Petition In Opposition To Stay Pending Appeal in the Second District Court of Appeal wherein she requested a grant of her motion. On February 14, 1991, the Second District Court of Appeal denied Respondent's Petition For Supersedeas.

6. On October 10, 1990, Respondent, based on a referral by an associate, Gary Bingham, contacted Kenneth Newsome, the owner of Apollo International Incorporated, d/b/a Alpha Metal Products, located in Clearwater, Florida (herein Apollo) for the purpose of obtaining workers' compensation insurance. To that end, on October 17, 1990, Respondent received a premium payment check from Apollo in the amount of $5547.22 for workers' compensation insurance.

   
   

7. Respondent initiated efforts to place coverage for Apollo by working up a rate quote based on the Form 940's which were submitted by Apollo's bookkeeper.

   
   

8. Apollo's check was returned for insufficient funds after being deposited in the account of Respondent's insurance agency, A.S.A.P.

   
   

9. On or about November 28, 1990, Apollo provided Respondent another check in the amount of $3000 as a premium payment for Apollo's workers' compensation insurance. That check was also deposited in A.S.A.P.'s account which was a premium trust account for customer funds.

   
   

10. On two occasions during December 1990, to wit, December 6 and December 27, the balance on that account went below $3000.

    
    

11. After receiving the $3000 check as payment toward Apollo's insurance, Respondent advised Apollo's owner, Newsome, that an additional premium was due based on an audit of the most recent Form 940's by the issuing carrier, the Florida assigned risk plan, and Newsome complained about the payment of any additional premium monies. During this period of time, Respondent received two telephone calls from entities who needed verification that Apollo had in fact obtained workers' compensation insurance. Respondent took those calls and advised the inquirers that a procedure was in place to obtain that coverage for Apollo.

    
    

12. On October 7, 1990, when Agent Bingham advised Respondent that Apollo needed assistance in obtaining workers' compensation insurance she was being visited by Horace Smith, an insurance producer who was making a routine call and trying to market new business. Mr. Smith is a marketing manager for Guardian Property and Casualty, TransFlorida Casualty Insurance Company. Mr. Smith is the holder of an 055 series administrative license. Smith has been licensed in Florida since 1946.

    
    

13. Smith has known Respondent approximately 18 years.

    
    

14. Smith visited with Respondent at the Apollo site to determine whether or not that risk would be a coverage that his company was interested in writing.

    
    

15. Smith inspected Apollo's premises and indicated a possibility of writing the commercial auto and commercial fire and general liability for Apollo when the existing coverage expired.

    
    

16. Throughout the course of events, Respondent was under the impression both from her counsels Waller and Bell, that she could continue writing business during the pendency of her appeal.

    
    

17. Respondent did not engage in any further acts of transacting insurance business other than the Apollo workers' compensation account.

18. Respondent's failure to place insurance for Apollo was based on Apollo's failure to pay the premiums due.

    
    

19. Respondent returned the unused premium to Apollo, although there was a slight delay in doing so. In this regard, Respondent had made repeated requests to Apollo to submit the additional premium monies, and within a month after the last demand was made and when the premiums were not remitted, Apollo received a return premium payment from Respondent within 30 days.

    
    

20. Respondent attempted to complete the application for the Apollo worker's compensation insurance coverage. To this end, she visited the site and used all the documentation necessary to prepare a quote which was based on the requisite payroll information supplied by Apollo. The Apollo transaction was initiated prior to Respondent's receipt of the Final Order suspending her licenses.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

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

    
    

23. The standard of proof applicable in this case is that of clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

24. The Administrative Complaint alleged that Respondent violated Sections 624.11; 626.041(2) (a) and (b); 626.561(1); 626.611(5); 626.611(7); 626.611(9); 626.611(10); 626.611(13); 626.621(2), (3) and (6); 626.641(4); 626.9521 and 626.9541(1)(o)1, Florida Statutes. The gravamen of the complaint is that Respondent made an insurance transaction while her licenses as an insurance agent were suspended, and Respondent withheld fiduciary funds from a consumer, thus misappropriating and converting said funds.

    
    

25. The facts in this case demonstrate that Respondent transacted insurance with Newsome of Apollo three days prior to the time that she received notice of her license suspension. In actuality, Respondent's licenses were suspended by Petitioner in a final order dated September 28, 1990. Respondent was allowed 30 days from the date of that final order to file an appeal, which appeal was timely filed on or about October 26, 1990. Respondent's counsel advised her of her appellate rights, and an appeal with two accompanying stays were filed, the last of which was denied during early 1991. Respondent did not initiate any new business during the period subsequent to her filing the pro se appeal, although she did conduct some business in connection with the completion of the workers' compensation application on behalf of Apollo which of course commenced prior to the time that she had actual notice of the suspension of her licenses by Petitioner. When it was clear that Apollo would not tender the required premium payments to obtain the insurance coverage which Respondent initiated on his behalf on October 10, 1990, Respondent thereafter returned the premium monies due him. Given these facts, Petitioner has failed to demonstrate, by clear and convincing evidence, that Respondent transacted insurance in a manner violative of Sections 624.11(1) and 626.01(2)(a), Florida Statutes.

26. Likewise, Petitioner failed to establish, by clear and convincing evidence, that Respondent misappropriated, mishandled or otherwise converted premium monies held in trust in violation of Sections 626.561(1), 626.611(10), 626.621(6), 626.9521 and 626.9541(1)(o)1, Florida Statutes. Additionally, there was no other credible evidence that Respondent otherwise mishandled fiduciary funds within the purview of Section 626.611(5), (9) and (13), Florida Statutes. Significantly, Respondent credibly and reasonably believed that she was eligible to continue an insurance transaction which was initiated prior to the time that she received notice that her license had been suspended. Although there was some evidence that Respondent's trust account balance on two occasions during December 1990, dropped below $3000, that fact, standing alone, does not clearly and convincingly establish that Respondent misappropriated, mishandled or otherwise converted trust funds in violation of the Insurance Code given all the circumstances of this case.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that:

Petitioner enter a final order dismissing the Administrative Complaint filed herein.

DONE AND ENTERED this 25th day of June, 1992, in Tallahassee, Leon County, Florida.

JAMES E. BRADWELL

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 25th day of June, 1992.

APPENDIX

Rulings on Petitioner's proposed findings:

Paragraph 1, adopted as modified, Paragraphs 1, 2, and

3, Recommended Order.

Paragraph 9, rejected, contrary to the weight of evidence, Paragraphs 7, 11 and 18, Recommended Order.

Paragraph 10, adopted as relevant, Paragraph 19, Recommended Order. Remainder rejected as contrary to the greater weight of evidence, Paragraphs 7, 11, 12, 14 and 18, Recommended Order.

Paragraph 11, rejected, unnecessary. Rulings on Respondent's proposed findings:

Respondent's proposed findings are accepted and are substantially incorporated in this Recommended Order. Proposed findings not found herein were deemed irrelevant and were unnecessary to resolve the issues posed.

COPIES FURNISHED:

David D. Hershel, Esquire Department of Insurance and Treasurer

412 Larson Building Tallahassee, FL 32399-0300

Peter C. Clement, Esquire 2650 Tampa Road, Suite A Palm Harbor, FL 34684

Tom Gallagher

State Treasurer and Insurance Commissioner The Capitol, Plaza Level

Tallahassee, FL 32399-0300

Bill O'Neil General Counsel

Department of Insurance The Capitol, PL-11 Tallahassee, FL 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 DEADLLINE 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:

CASE NO. 90-L-400DDH

SHIRLEY ANN CRAMER DOAH CASE NO. 91-6162

/

FINAL ORDER

THIS CAUSE came on before the undersigned Treasurer of the State of Florida, acting in his capacity as Insurance Commissioner, for consideration and final agency action. On August 9, 1991, an Administrative Complaint was filed charging Respondent, SHIRLEY ANN CRANER, with various violations of the Insurance Code. The Respondent timely filed a request for a formal proceeding pursuant to section 120.57(1), Florida Statutes. Pursuant to notice, the matter was heard before the Honorable James E. Bradwell, Hearing Officer, Division of Administrative Hearings, on February 6, 1992.

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 the Administrative Complaint be dismissed. The Petitioner timely filed five (5) exceptions to the Recommended Order which have been considered and addressed herein:

RULINGS ON PETITIONER'S EXCEPTIONS

1. As was stated by the hearing officer in his Recommended Order, the gravamen of the Administrative Complaint was that Respondent transacted insurance while her licenses were suspended and that Respondent withheld fiduciary funds and thereby misappropriated, unlawfully withheld, or converted said funds. Petitioner filed five (5) exceptions to the Recommended Order. Petitioner's exceptions one, two and three deal with the issue of Respondent transacting insurance while her licenses were suspended, exception four deals with the issue of misappropriation, unlawful withholding, or conversion of the fiduciary funds. Petitioner's exception five deals with the hearing officer's recommendation that the Administrative Complaint be dismissed. As Petitioner's exceptions one, two and three are interrelated, they will be taken up together.

   
   

2. On October 13, 1990, Respondent was notified by her attorney that her license had been suspended for a period of one year. (T. 41-42, Res. Ex. No. 1). On October 25, 1990, Respondent received a copy of the Final Order which suspended her license (T. 44, Pet. Ex. No. 2). On October 26, 1990, Respondent filed a Notice of Appeal of the one year suspension. (T. 44, Pet. Ex. No. 2). However, no papers were filed either with the Department or the Second District Court of Appeal to stay the imposition of the one year suspension until January 21, 1991 by Drucilla E. Bell, Esquire, who did not represent Respondent at her initial hearing. (T. 45-46, Pet. Ex. No. 2).

3. Petitioner's exceptions one, two and three all revolve around the status of the Respondent's licenses at the time insurance transactions between Respondent and Mr. Kenneth Newsome took place in November and December, 1990. While there are three (3) exceptions, the essence of the exceptions is Petitioner's belief that Respondent transacted insurance while her license was suspended and thereby was an unlicensed individual engaging in the business of insurance. The hearing officer appeared to find that since the Respondent was under the "impression" she could continue to transact insurance during the pendency of her appeal there were no violations of the Insurance Code. However, the existence of this "impression" does not have the legal significance to prevent the charged violations of the Insurance Code. According to the hearing officer's Findings of Fact 9 and 11 and Respondent's own admission she received funds from Mr. Newsome and discussed his insurance needs with him in November, 1990. (T. 56-58, 85-86). Therefore, Respondent clearly was transacting insurance, as that term is defined in section 624.10, Florida Statutes, after entry and actual notice of the Final Order suspending her licenses. In order to transact insurance for worker's compensation insurance, as in this case, a license was required pursuant to sections 626.041(2)(b) and 624.11(1), Florida Statutes. It is axiomatic that ignorance of the law is no excuse, and Respondent's "impression" that she could continue to transact insurance in face of the Final Order which suspended her license simply because she paid her filing fee to Second District Court of Appeal does not excuse her violation of the terms of the Final Order. Simply put, Respondent's failure to be properly licensed while transacting insurance in November and December, 1990 is, as a matter of law, a violation of sections 624.11(1), 626.041(2)(b), 626.621(2), 626.621(3), and 626.641(4), Florida Statutes. Therefore, Petitioner's exceptions one, two and three are ACCEPTED, except as modified above.

   
   

4. The Petitioner's fourth exception is to the hearing officer's conclusion of law that Respondent's handling of the $3000 premium did not violate Sections 626.561(1), 626.611(10), 626.621(6), 626.9521 and 626.9541(1)(o)1, Florida Statutes. First, relative to 626.561(1), the statute requires that all premiums received by an agent shall be trust funds so received by the licensee in a fiduciary capacity. Inasmuch as the Respondent was attempting to place coverage in the assigned risk market and not with an insurer with which Respondent was appointed, she was required to establish this trust in a separate accounT. A trustee cannot use trust property or exploit his relationship to it for his personal advantage. Jungbluth v. American Bank and Trust Co., 101 Fla. 289, 134 So. 618,619 (1931) (citation omitted). A trustee is under a duty to refrain from private use, application, or appropriation of trust property or funds. 76 Am Jur 2d, Trusts s. 317. A trustee owes a duty to keep the funds of his beneficiary separate from his own. Smith v. Reddish, 113 Fla 20, 151 So. 273, 275 (1933). The record reveals that funds were withdrawn from the trust account of Respondent's client on two occasions. Respondent was personally responsible for maintaining the trust account. Contrary to the conclusion of the hearing officer, withdrawing these funds instead of returning them promptly to the client does establish that Respondent failed to maintain trust funds in violation of the Insurance Code. Accordingly, Petitioner's exception as it relates to Section 626.561(1), Florida Statutes is ACCEPTED.

   The hearing officer found, as a finding of fact, that Respondent was under the impression that she could continue writing business during the pendency of her appeal. There is no evidence in the record to reject this finding.

   Respondent's actions did not constitute willful failure to comply with the order of suspension. Accordingly, Petitioner's exception relative to Section 626.611, Florida Statutes, is REJECTED. The violation of Section 626.561(1), however, constitutes violation of a provision of the code, thereby establishing the applicability of Section 626.621(2), Florida Statutes. Likewise, the

   transaction of insurance while suspended, as set forth in paragraph 3 is a violation of Section 626.641(4), and establishes the applicability of Section 626.621(3), Florida Statutes. Accordingly, the Petitioner's exception relative to Section 626.62l, Florida Statutes is ACCEPTED. Section 626.9541(1)(o)1. makes it an unfair trade practice, violative of Section 626.9521, if an agent collects a sum as premium for insurance where insurance is not in due course provided, subject to acceptance of the risk by the insurer. Unrebutted testimony at hearing showed that the insurer declined to issue coverage on this risk at the premium collected. Accordingly, Petitioner's exception, as it relates to Sections 626.9521 and 626.9541(1)(o)1 is REJECTED.

   
   

5. Petitioner's fifth exception is to the recommendation of the hearing officer that the Administrative Complaint be dismissed. Inasmuch as the above modifications to the hearing officer's conclusions of law have been made, and violations of various sections of the Insurance Code found, it is inappropriate to dismiss the Administrative ComplainT. Accordingly, Petitioner's exception is ACCEPTED.

Upon a complete and careful consideration of the entire record, the submissions of the parties and being otherwise fully advised in the premises, it is hereby determined that the Respondent, SHIRLEY ANN CRAMER, has violated Sections 624.11(1), 626.041(2)(b) , 626.621(2), 626.621(3) and 626.641(4),

Florida Statutes. In view of Respondent's violations, it would also be inappropriate to forego sanctions entirely. 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, as modified by this Order, are adopted as the Department's Conclusions of Law.

   
   

3. That the hearing officer's recommendation that the complaint be dismissed is rejected.

   
   

4. Respondent shall pay an administrative penalty in the amount of Five Hundred ($500.00) Dollars as authorized by Section 626.681(1), Florida Statutes within thirty (30) days of the entry of this Order. Failure to pay the administrative penalty in full within the specified time limit shall result in the immediate revocation of Respondent's licenses and eligibility for licensure in this State without further proceedings.

   
   

5. Respondent shall be placed on probation pursuant to Section 626.691, Florida Statutes, for a period of two (2) years. As a condition of probation, Respondent shall strictly adhere to all provisions of the Chapter 626, Florida Statutes and Rules of the Department of Insurance and Treasurer. If during the period of probation, the Department has good cause to believe that the Respondent had violated the terms or conditions of her probation, it shall suspend or revoke the license and eligibility for licensure of the Respondent.

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 32399-0300, 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 ORDERED this 20th day of August, 1992.

Tom Gallagher Treasurer and Insurance Commissioner

COPIES TO:

The Honorable James E. Bradwell Division of Administrative Hearings 1230 Apalachee Parkway

Tallahassee, FL 32399-1550

Shirley Ann Cramer

1460 Gulf Boulevard, Unit 105

Clearwater, FL 34630

Peter C. Clement, Esquire 2650 Tampa Road, Suite A Palm Harbor, FL 34684

David D. Hershel, Esquire Department of Insurance and Treasurer

412 Larson Building Tallahassee, FL 32399-0300

Docket for Case No: 91-006162

Orders for Case No: 91-006162