STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DALE J. DYER, )

)

Petitioner, )

)

vs. ) CASE NO. 92-5094

)

DEPARTMENT OF INSURANCE, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in this case in St. Petersburg, Florida on December 18, 1992 before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.

APPEARANCES

For the Petitioner: John L. Maloney, Esquire

5335 66th Street North, Suite 4 St. Petersburg, Florida 33709

For the Respondent: James A. Bossart, Esquire

Division of Legal Services Department of Insurance 612 Larson Building

Tallahassee, Florida 32399-0300 STATEMENT OF THE ISSUES

The issue for consideration in this hearing is whether Petitioner, Dale J. Dyer's application for reinstatement of his health insurance license should be granted or denied.

PRELIMINARY MATTERS

By letter dated July 21, 1992, Bob Stewart, Chief of the Bureau of Agent and Agency Licensing for the Florida Department of Insurance, (Department), advised the Petitioner that his application for reinstatement of his health insurance license had been denied because a check issued to his wife's agency in payment of premium for a health insurance policy sold by another agent, had been converted by the agency and neither used for the purchase of the policy nor returned to the maker. Through counsel Petitioner thereafter requested formal hearing on the denial and on August 21, 1992, the matter was forwarded to the Division of Administrative Hearings for the appointment of a Hearing Officer.

By Notice of Hearing dated October 15, 1992, entered after Respondent had replied to the Initial Order entered herein, Hearing Officer James E. Bradwell set the matter for hearing in St. Petersburg on December 18, 1992, at which time the hearing was held as scheduled.

At the hearing, Petitioner testified in his own behalf and presented the testimony of Paula Ann Dyer, his wife, and introduced Petitioner's Exhibit 1 and

2. Respondent presented the testimony of Warren W. Shellhase, senior analyst in the consumer affairs department of Transport Life Insurance Company and Catherine Payne, operations officer for Barnett Bank in Clearwater, Florida. Respondent also introduced Respondent's Exhibits A through L.

A transcript was provided and, subsequent to the hearing, both parties submitted Proposed Findings of Fact which have been ruled upon in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. At all times pertinent to the matters herein, the Respondent, Department of Insurance, was the state agency in Florida responsible for the regulation of the insurance profession and the licensing of insurance agents in this state. Petitioner, Dale J. Dyer, was licensed as a health insurance agent in this state but his license had been suspended by the Department as the result of a disciplinary action in November, 1991, and was, at the time of the alleged misconduct, in a suspended status.

   
   

2. The suspension period for Petitioner's license expired in May, 1992 and he thereafter applied for reinstatement of his license. The Department denied his application for reinstatement in July, 1992 because on or about June 19, 1991, a check for $13,971.00, made payable to Transport Life Insurance Company by Thiel Liukens, as payment for a nursing home policy to be issued, was deposited by Paula Dyer, Petitioner's wife and herself a general agent for Transport, to an agency bank account controlled by Ms. Dyer and upon which Petitioner was an authorized signatory. This check was neither transmitted to the insurance company nor returned to Mr. Liukens, nor was the coverage for which it was issued ever initiated.

   
   

3. Petitioner met Mr. Liukens in late 1990 when he tried to sell him a Medicare supplement policy. He was not the one who sold him the policy in issue in June, 1991, however, nor did he either solicit or receive a check from him. In fact, there is no evidence he knew he had taken out this policy or paid by check. He had nothing to do with this policy, check or payment.

   
   

4. Petitioner's wife, Paula, owns and operates the Paula A. Dyer & Associates agency. At the time in issue, he claims, he had nothing to do with the agency. He claims he did not help run it, didn't supervise any of the employees, and was neither an officer nor director. However, he was, with his wife, a signatory on the firm's checking account and several other accounts as well. He has drawn funds from the company account, as well as the others, for personal or business expenses and to facilitate the conduct of business in his wife's absence.

   
   

5. Mr. Dyer asserts that premium deposits from Dyer and Associates agents were not to be deposited to that account. He did not know if they were, however. In any case, he denies ever consciously disbursing funds belonging to any insurance company from that account. To his knowledge, he never disbursed or took any funds from the Liukens payment to Transport Life Insurance Company nor, during 1991, did he have any relationship with that company. This was verified by Mrs. Dyer.

6. Paula A. Dyer & Associates had netting authority with Transport which authorized it to deposit checks made payable to Transport to the agency account and thereafter remit to Transport the net premium portion due the company, retaining the balance as commission. There was no limitation on how the agency portion was to be used. The agency's checking account to which the Liukens check was deposited was with the Barnett Bank. As was stated above, both Dyers were cosignatories on the agency account because, though Petitioner was neither an officer, stockholder, director, nor employee of the agency, he had loaned his wife the money to open it and she wanted him to be able to get money if she were not available. The agency books were kept by a bookkeeper.

   
   

7. The policy in issue here was solicited by Pedro Rodrigues, an agency employee, who received the instant check as a premium payment. The check, dated July 2, 1992, was thereafter deposited in July, 1991 to the agency account. Of the total amount of this check, slightly over $7,000.00 was the agency commission which was available for unrestricted use, including the personal use of Ms. Dyer or the Petitioner. Clearly a check written in July, 1992 could not be deposited in July, 1991, a year before being written. Consequently, it is found that the check was dated in error by the drafter. This is not the only error in dates in this matter, however. Mr. Stewart's July 21, 1992 letter of denial to Petitioner reflects the Liukens check was written on or about June 19, 1991. This is clearly not so.

   
   

8. Records of the Barnett Bank for the time in issue reflect an account in the name of Paula A. Dyer & Associates, Inc., (Account No. 1263515600), on which the authorized signatories were Paula A. Dyer or Dale J. Dyer. Another account, in the name of Senior Trust of Florida, Inc., (Account No. 1263288130), showed David B. Judy as President, Paula A. Dyer as Secretary/Treasurer, and Dale J. Dyer as shareholder. All were signatories on this account. A third account, (Account No. 1264759744) was a joint account of Dale J. Dyer and Paula A. Dyer.

   
   

9. The Liukens check was deposited to the Paula A. Dyer & Associates account and, after endorsement by Mrs. Dyer, cleared. Thereafter, numerous checks were written on that account. During the period June 28, 1991 to July 28, 1991, 11 deposits, totalling almost $66,500.00 were made to it and at the end of the period, the account had a balance of slightly over $21,000.00. From July to August, 1991, 14 deposits to the account totalled in excess of $65,600.00 and the ending balance for the period was $15,561.07. From August 30 to September 30, 1991, ten deposits totalled $18,590.29 and the ending balance for the period was $2,206.97,

   
   

10. Among the checks written on the company account during the period were:

    
    

    1. $10,000 to Paula A. Dyer, deposited to the joint personal account.

    2. $8,000 to Senior Trust.

    3. $700 to Dale J. Dyer.

    4. $12,000 by Dale Dyer to Senior Trust.

    5. $945 by Dale Dyer to Willis Kelsey.

    6. $2,000 by Dale Dyer to Princess Casino (resort).

    7. $1,475 by Paula Dyer to Paula Dyer and deposited to the joint personal account.

    8. $600 by Paula Dyer to Senior Trust

    9. $2,000 by Paula Dyer to the joint personal account.

    10. $1,600 by Paula Dyer to Paula Dyer and deposited to joint personal account.

        
        

    11. In August, 1991, Transport Life Insurance Company was contacted by an attorney for Mr. Liukens about the check he had written to it for an insurance policy. When the company responded it had no knowledge of the check and had received no funds on his behalf, it was sent a copy of the check endorsed by Ms. Dyer and negotiated by her. A company representative then contacted Ms. Dyer about the check she had received. She acknowledged she had deposited it to her agency account and submitted a check for $971.00 in partial restitution. None of the balance has ever been repaid by Ms. Dyer, the agency, or anyone else, and in September, 1991, Transport Life terminated its agency agreement with Paula A. Dyer & Associates, Inc. It also repaid Mr. Liukens in full.

        
        

    12. According to Transport Life's representative, Mr. Shellhase, the company has no indication Petitioner had anything to do with this transaction nor any information he conspired with anyone to defraud Transport or Mr. Liukens.

        
        

    13. By Final Order dated May 3, 1990, the Florida Insurance Commissioner took disciplinary action against Petitioner's license as an insurance agent in Florida for several violations of Section 626.11, Florida Statutes, and several other violations of Section 626.9541, Florida Statutes. The specific violations found were not established at the instant hearing.

        
        

        CONCLUSIONS OF LAW

        
        

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

        
        

    15. In its letter denying Petitioner application for reinstatement of his license, the Department cites several sections of Florida Statutes which it alleges Petitioner has violated. Recognizing Section 626.561, which requires the holding of premiums and other funds belonging to insurers in a fiduciary capacity, the Department then relies on Sections 626.611(1),(7),(9),(10), and (13), Florida Statutes, which list those acts of misconduct upon proof of which the Department must deny issuance of a license, and on Sections 626.621(3) and (4), Florida Statutes, which list those acts of misconduct upon proof of which the Department may, in its discretion, deny issuance of a license.

        
        

    16. Here, there is no question that the failure of an agent in a fiduciary relationship with an insurer to pay over to that insurer such sums as are due it as premium for the issuance of a policy by the insurer constitutes conversion, and a fraudulent and dishonest business practice, and would demonstrate a serious lack of fitness or trustworthiness to engage in the business of insurance, all of which require the Department to deny issuance of a license to anyone proven guilty of such misconduct. That given, the failure of the receiving agent here to transmit the funds due Transport for issuance of the Liukens policy supports discipline of the guilty party under both the mandatory and discretionary action provisions.

        
        

    17. The issue here relates, however, not to what was done but who did it, and the evidence is quite clear that it was not Petitioner who is guilty of misconduct but his wife, Ms. Dyer, the general agent. All the evidence of

        record shows that the agency was Ms. Dyer's and that Petitioner had no operational control in its operation. To be sure, the fact that he could write checks on the agency account is open to question as to the propriety of that situation. It is also true that Petitioner wrote some checks on the agency account to which the premium check was deposited which may have contributed to the depletion of that account to, at some point, a level where insufficient funds remained in the account to cover the required $7,000.00 payment to Transport. However, the evidence also shows that during a majority of the time subsequent to the deposit of the Liukens check, there were ample funds in the account to make the premium payment to Transport and it was Ms. Dyer's responsibility to do so. Her failure as the general agent to pay over to the insurer the funds due it constitutes the misconduct here, not Petitioner's authorized withdrawal of funds from the account for a purpose not shown to be unlawful.

        
        

    18. There is also no issue that in 1990, Petitioner's insurance license was disciplined by the Department for proven misconduct. He now applies for reinstatement of his license and has the burden to establish his entitlement to that license. James Allen Reynolds v. Department of Insurance and Treasurer, 10 FALR 251 at 254. The evidence of record indicates that the denial was based not upon Petitioner's lack of credentials but on his alleged misconduct. Once Petitioner has established his technical qualification for licensure, and the Department denies based on alleged misconduct, the burden then shifts to the Department to prove that misconduct. Here, it has not done so.

        
        

    19. Though there was, in fact, a conversion, there is no showing that Petitioner was the individual who was responsible for the conversion of the Liukens funds. The Department urges that because he had access to the company account, though not licensed as an insurance professional, he had the responsibility to see that the funds deposited in that account were properly utilized and paid over to those entitled to them. While it is conceded that Petitioner had a duty not to deplete agency funds on unauthorized expenditures to the point where fiduciary funds of insurers or insured were jeopardized, examination of this account shows that through the three months subsequent to the receipt of the Liukens check, more than $150,000.00 was deposited to the account in which, at the end of that period, slightly over $2,200.00 remained. It cannot, therefore, reasonably be said that the failure to remit the $7,000.00 due to Transport was a conversion by Petitioner.

        
        

    20. Further, the Department urges that Petitioner was, during this period, a licensed insurance agent even though his license was suspended, and, as such, he received these funds in a transaction under his license. It further urges that as a licensee, even though under suspension, and as a signatory on his wife's company's fiduciary account, he was required to account for all fiduciary funds coming into the account and had the responsibility to pay the same to the person entitled to receive them. Petitioner was not engaged in the insurance business and was no more than an investor in an insurance agency. The Department's argument in this regard is without merit.

        
        

    21. The Department also implies that the loss here was occasioned by the Petitioner who, with his wife or with others, engaged in a conversion scheme to defraud Transport of funds due it. It alleges that the other accounts referred to herein, on which both Petitioner and his wife were signatories, were closed out and the funds therein transferred to the company account. The evidence shows that the other accounts were closed, but there was no evidence as to where the funds that were in them went. Further, there was no evidence that any other insurer or insured was deprived of any funds due it or them as a result of any

        conversion scheme or practice by Petitioner or Ms. Dyer. Here again, the Department tries but fails to impute liability to the Petitioner where none is seen by anyone else, including the officials at Transport.

        
        

    22. Taken together, the evidence of record fails to prove to any standard that Petitioner's involvement in this incident establishes either that he is unfit or not trustworthy to engage in the insurance business or that he committed a fraud or engaged in dishonest practices in the conduct of business under his license.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore, recommended that Petitioner's application for reinstatement of his health license be approved.

RECOMMENDED this 1st day of February, 1993, in Tallahassee, Florida.

ARNOLD H. POLLOCK

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 1st day of February, 1993.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-5094

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case.

FOR THE PETITIONER:

Petitioner's counsel's proposed findings of fact were not specifically numbered. However, for the purposes of this Recommended Order they will be considered as numbered starting with the third paragraph on page 2 of the Proposed Recommended Order and continuing through the fifth paragraph on page 4.

1. & 2. Accepted and incorporated herein.

3. & 4. Accepted and incorporated herein.

1. First sentence accepted and incorporated herein. Second sentence not proven.

2. & 7. Accepted and incorporated herein.

8. - 10. Accepted and incorporated herein.

1. Accepted and incorporated herein.

2. Accepted.

3. & 14. Accepted and incorporated herein.

15. & 16. Accepted and incorporated herein. However, evidence

was introduced that during the period in question, Petitioner wrote checks totalling $14,945.00, a sum exceeding the amount represented by the Liukens check.

FOR THE RESPONDENT:

1. - 5. Accepted and incorporated herein.

6. - 8. Accepted and incorporated herein.

9. - 11. Accepted and incorporated herein.

1. (misnumbered 11 in PFOF). Accepted and incorporated herein.

2. (misnumbered 12 in PFOF). Accepted and incorporated herein.

3. (misnumbered 13 in PFOF). Accepted that the accounts were closed as indicated, but there is no evidence as to what was done with the funds therein.

4. (misnumbered 14 in PFOF). Accepted and incorporated herein.

COPIES FURNISHED:

John L. Maloney, Esquire 5335 66th Street N., Suite 4

St. Petersburg, Florida 33709

James A. Bossart, Esquire Division of Legal Services Department of Insurance 612 Larson Building

Tallahassee, Florida 32399-0300

Tom Gallagher

State Treasurer and Insurance Commissioner

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

Bill O'Neill General Counsel

Department of Insurance The Capitol, PL-11

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 consult with the agency which will issue the Final Order in this case concerning its rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency which 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:

DALE J. DYER Case No. 93-L-131JB

DOAH No. 92-5094

/

FINAL ORDER

THIS CAUSE came on before the undersigned Treasurer of the State of Florida, acting in his capacity as Insurance Commissioner (hereinafter "Respondent") for consideration and final agency action. On July 21, 1992, DALE

1. DYER (hereinafter "Petitioner) was notified by letter that his application for reinstatement of his health insurance license had been denied by the Department. Through counsel, Petitioner filed a request for a formal proceeding pursuant to Section 120.57(1), Florida Statutes.

   
   

   The matter was referred to the Division of Administrative Hearings for assignment of a hearing officer on August 21, 1992. By Notice of Hearing dated October 15, 1992, Hearing Officer Bradwell set the matter for hearing on December 18, 1992. The proceedings were heard by Hearing Officer Arnold Pollock.

   
   

   After consideration of the evidence, argument and testimony presented at the hearing, and subsequent written submissions by the parties, the hearing officer, on February 1, 1993, recommended that the Petitioner's application be approved. Respondent filed exceptions to the hearing officer's Recommended Order on February 5, 1993. On this same day, Respondent filed a motion with Division of Administrative Hearings for a corrected recommended order. On February 15, 1933, this motion was granted to the extent that the Petitioner was licensed as of July 2, 1991.

   
   

   RULINGS ON RESPONDENT'S EXCEPTIONS

   
   

   1. Respondent excepts to the finding of the Hearing Officer that Petitioner was not an active licensed agent at the time of the offense. The original Final Order had been stayed by the First District Court of Appeal pending appeal. The Order amending the Final Order suspending Petitioner's license was not entered until November 12, 1991. Accordingly, Respondent's exception 41 to Findings of Fact is granted.

      
      

   2. Respondent next excepts to the Hearing Officer's failure to make a factual finding that Petitioner had notice of the deposit of Luiken's check. This is not relevant to the finding of the Hearing Officer and is, therefore, denied.

      
      

   3. Respondent next excepts to the Hearing Officer's assertion in Finding of Fact 47 that over $7,000.00 was the agency commission and available for

      unrestricted use. The agency could not be entitled to a commission on an application which it never submitted to the insurance company. Accordingly, Respondent's exception is granted.

      
      

   4. Respondent next excepts to the Hearing Officer's Conclusion of Law that Petitioner had no operational control over the agency. The record reflects that Petitioner was authorized to sign on the checking account and nothing more. Exception is, accordingly, denied.

      
      

   5. Respondent excepts to the Conclusion of Law of the Hearing Officer that Petitioner is not responsible for the conversion of Mrs. Luiken's fiduciary funds. The funds in question were not received by Petitioner "in transactions under his license," as required by Section 626.561(1), Florida Statutes. Exception is, therefore, denied.

      
      

   6. Respondent next excepts to the Hearing Officer's failure to find Petitioner in violation of 626.561, Florida Statutes. Petitioner was not licensed with the agency which failed to account for the funds. Exception is, therefore, denied.

Therefore, upon a complete review of the record, the submissions of the parties and otherwise being advised in the premises, it is therefore ORDERED that:

1. The Hearing Officer's Findings of Fact are adopted in full except for the exceptions described in paragraphs 1 and 3 of Rulings on Respondent's Exceptions above.

   
   

2. The Hearing Officer's Conclusions of Law are adopted except to the extent that paragraph 17 of the Recommended Order indicates that Respondent has the burden of proving that Petitioner is not entitled to a license and to that extent are rejected.

   
   

3. The Hearing Officer's recommendation that the application be approved is rejected because:

1. On February 26, 1992, the Department, by letter, issued a second denial letter of Petitioner's application for reinstatement of his insurance licenses;

   
   

2. The factual grounds forming the basis of the Department's denial letter of February 26, 1993 are separate and wholly unrelated to the factual allegations contained in the first denial letter of May 20, 1992 and were not known to the Department at that time;

   
   

3. The Department is precluded by statute from approving reinstatement of a suspended license if it finds that the circumstances for which the license was suspended are likely to recur. Section 626.641.

   
   

4. Respondent has filed a Motion to Hold Issuance of the Final Order in Abeyance. No authority is found to support this Motion which is hereby denied;

   
   

5. Approval of Petitioner's application for reinstatement is precluded by statute since the second denial letter has been issued, and entitles Petitioner to a hearing on factual allega tions raised in that letter which constitute grounds for denial under Section 626.641, Florida Statutes.

ACCORDINGLY, the Hearing Officer's recommendation that Petitioner's application be approved is rejected. Whether Petitioner's application will ultimately be approved or disapproved will be determined in any further proceeding arising from the February 26, 1993 denial letter.

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, Fla.R.App.P. Review proceedings must be instituted by filing a Notice of Appeal with the General Counsel, acting as agency clerk, at 612 Larson Building, Tallahassee, Florida 32399-0300, and a copy of same with the appropriate District Court of Appeal within thirty (30) days of rendition of this Order.

DONE and ORDERED this 19th day of April , 1993.

TOM GALLAGHER

Treasurer and Insurance Commissioner

COPIES FURNISHED:

Arnold Pollock Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

John L. Maloney, Esquire 5335 66th Street

St. Petersburg, Florida 33709

James A. Bossart, Esquire Department of Insurance and Treasurer

612 Larson Building

Tallahassee, Florida 32399-0300

Docket for Case No: 92-005094

Orders for Case No: 92-005094