STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND ) TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 92-5149

)

JOHN JOSEPH DEVINS, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Michael M. Parrish, conducted a formal hearing in this case at West Palm Beach, Florida, on January 7, 1993. Appearances for the parties at the hearing were as follows:

APPEARANCES

For Petitioner: Joseph D. Mandt, Esquire

Department of Insurance and Treasurer Division of Legal Services

612 Larson Building

Tallahassee, Florida 32399-0330

For Respondent: Mr. John Joseph Devins, pro se

5573 Southeast Federal Highway Stuart, Florida 34997

STATEMENT OF THE ISSUES

This is a license discipline proceeding in which the Respondent has been charged in a one-count administrative complaint with violation of the following statutory provisions: Sections 626.561(1), 626.611(7), 626.611(9), 626.611(10),

626.611(13), 626.621(2), 626.621(6), 626.9521, and 626.9541(1)(o)1., Florida

Statutes.

STATEMENT OF THE ISSUES

At the formal hearing on January 7, 1993, the Petitioner presented the testimony of three witnesses; Louise Shellhammer, John Peterson, and Donna Ring. The Petitioner also offered four exhibits, all of which were received in evidence. The Respondent testified on his own behalf, but did not call any other witnesses. The Respondent offered three exhibits, all of which were received in evidence.

At the conclusion of the hearing, both parties decided not to order a transcript of the proceedings at hearing. The parties were granted an opportunity to file proposed recommended orders. On January 19, 1993, the

Petitioner filed a proposed recommended order containing proposed findings of fact and conclusions of law. The substance of all proposed findings of fact submitted by the Petitioner has been included in the findings of fact which follow. On January 20, 1993, the Respondent filed a one-page letter summarizing his position. The post-hearing submissions of both parties have been carefully considered during the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Respondent, John Joseph Devins, is currently licensed in the State of Florida as a life insurance agent, as a life and health insurance agent, as a general lines insurance agent, and as a health insurance agent.

   
   

2. The Respondent is currently, and was at all times relevant and material to this proceeding, a stockholder and officer of Devins-Varady Insurance Agency, Inc., of Stuart, Florida. Devins-Varady Insurance Agency, Inc., is an insurance agency incorporated under and existing by virtue of the laws of the State of Florida.

   
   

3. The complaining consumer in this case, Ms. Louise Shellhammer, had carried homeowner's insurance with American Professional Insurance Company (hereinafter referred to as "American Professional") from 1986 until 1990. The agency of record for Ms. Shellhammer's American Professional homeowner's policy was the Devins-Varady Agency, Inc.

   
   

4. Ms. Shellhammer's homeowner's insurance policy was scheduled to lapse on or about November 25, 1990. In September of 1990, the Respondent sent a letter to Ms. Shellhammer informing her that her homeowner's insurance policy was up for renewal and that the Respondent had a new carrier that he thought Ms. Shellhammer should switch to. The letter requested that Ms. Shellhammer come into the Devins-Varady Insurance Agency, Inc., and fill out a replacement application for her new insurance policy.

   
   

5. Ms. Shellhammer failed to respond to the Respondent's letter because at the time she received the letter, she intended to change her homeowner's insurance to State Farm. Ms. Shellhammer did not follow through on her intentions in that regard and did not obtain replacement homeowner's insurance from State Farm in 1990.

   
   

6. On or about November 15, 1990, the escrow department of Harbor Federal Savings and Loan (hereinafter referred to as "Harbor Federal"), the loss payee and holder of the mortgage on Ms.Shellhammer's home, sent a request to the Respondent for a bill for the renewal of Ms. Shellhammer's policy with American Professional. The premium for this policy was to be paid from escrowed funds held by Harbor Federal. The Respondent thereafter sent Ms. Shellhammer's renewal bill for her American Professional homeowner's policy to Harbor Federal. At the time of sending the bill to Harbor Federal, the Respondent did not attempt to bind renewal coverage with American Professional for Ms. Shellhammer.

   
   

7. On or about November 28, 1990, the escrow department of Harbor Federal mailed a premium payment check to the Respondent in the amount of $263.00. That amount represented the renewal premium for Ms. Shellhammer's homeowner's policy with American Professional. The check was mailed three days after the lapse of the insurance policy it was intended to renew. The Respondent received that check a few days later. Upon receipt of the check, the Respondent deposited the proceeds of the check into the premium trust account of the Devins-Varady Insurance Agency, Inc.

8. The Respondent failed to forward the renewal premium to American Professional or to any other insurer. The Respondent also failed to take any other action to obtain a renewal insurance policy for Ms. Shellhammer. These failures occurred primarily because of an oversight at the time the check from Harbor Federal was deposited for collection. At the time of depositing the check, there was an apparent failure to make a notation that follow-up action was necessary to procure an insurance policy for Ms. Shellhammer, and the follow-up action was simply overlooked.

   
   

9. The Respondent did not become aware of the fact that he had failed to obtain insurance for Ms. Shellhammer until on or about June 12, 1991, when Ms. Shellhammer contacted him to report a burglary loss. When the Respondent pulled Ms. Shellhammer's file to process the loss claim he first discovered that she did not have insurance. Upon looking into the matter and discovering what had happened, the Respondent admitted to Ms. Shellhammer that he had made a mistake and that it was his fault that she did not have insurance. The Respondent told Ms. Shellhammer to make a list of her losses and told her that he would reimburse her for her losses. The Respondent and Ms. Shellhammer have since had some differences of opinion about the extent of Ms. Shellhammer's losses.

   
   

10. Early in July of 1991, the Respondent repaid Harbor Federal the

    $263.00 that he had received from them for Ms. Shellhammer's insurance premium. The repayment was received by Harbor Federal on or about July 12, 1991.

    
    

11. Ms. Shellhammer did not make any inquiry of the Respondent as to the status of her homeowner's insurance policy at any time between the date of the Respondent's letter in September of 1990 and the date she reported the burglary loss in June of 1991. Harbor Federal did not make any inquiry of the Respondent as to the status of Ms. Shellhammer's homeowner's insurance policy between November 28, 1990, the date it mailed a premium check, and the date of the burglary loss report in June of 1991. American Professional did not make any inquiry of the Respondent as to the status of Ms. Shellhammer's homeowner's insurance policy between November 25, 1990, the date the policy lapsed without being renewed, and the date of the burglary loss report in June of 1991.

    
    

12. American Professional has done business with the Respondent and with the Respondent's agency for a number of years. With the exception of the incident that forms the basis for this proceeding, American Professional has never had any problems in its business relations with the Respondent or with the Respondent's agency.

    
    

    CONCLUSIONS OF LAW

    
    

13. The following are a few basic legal conclusions relevant to this proceeding which seem so clear as not to require the citation of authority. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. In a disciplinary proceeding in which the agency seeks the penalty of suspension or revocation of a professional license, the agency bears the burden of proving its charges by clear and convincing evidence. Statutes providing for revocation of licenses must be strictly construed and any ambiguities in such statutes must be resolved in favor of the licensee. Agencies cannot take disciplinary action against a licensee on the basis of facts not alleged in the Administrative Complaint on or the basis of legal theories not asserted in the Administrative Complaint. As explained in greater detail below, application of the basic legal conclusions summarized

    above to the facts in this case leads to the conclusion that the charges against the Respondent should be dismissed.

    
    

14. Turning now to the specific allegations of the Administrative Complaint, in Count I(a) it is alleged that the Respondent violated Section 626.561(1), Florida Statutes (1990 Supp.). It is quite apparent from a reading of the language of Section 626.561(1), Florida Statutes (1990 Supp.), that the Respondent, as the licensee, has the responsibility to account for and pay over funds received by himself or his agency that belong to insurers. However, neither the cited subsection nor any other part of Section 626.561, Florida Statutes (1990 Supp.), contains language authorizing the Petitioner to bring an independent charge for a violation of the cited provision. Section 626.561(1) imposes a duty on each licensee. Any charges of violation of that duty should be brought, if at all, under Sections 626.611 and/or 626.621, Florida Statutes (1990 Supp.), which the Petitioner has done. Consequently, the Respondent cannot be found guilty of any independent violation of Section 626.561(1), Florida Statutes (1990 Supp.).

    
    

15. In Count I(b) of the Administrative Complaint it is alleged that the Respondent violated Section 626.611(7), Florida Statutes (1990 Supp.). The evidence is insufficient to establish that the Respondent lacks fitness or trustworthiness to engage in the business of insurance. The most that has been proved is that the Respondent made one mistake in handling a policy renewal or that the Respondent was negligent in his handling of one policy renewal. A single error does not prove that the Respondent lacks fitness or trustworthiness; it more nearly proves that he is human and, like all humans, subject to making the occasional mistake. The proof being insufficient, the Respondent should not be found guilty of a violation of this Section 26.611(7), Florida Statutes (1990 Supp.).

    
    

16. In Count I(c) of the Administrative Complaint it is alleged that the Respondent violated Section 626.611(9), Florida Statutes (1990 Supp.). It is unclear why the Respondent has been charged with a violation of this Section. The factual allegations of the Administrative Complaint do not contain any allegation that the Respondent engaged in any "fraudulent or dishonest practices" in the course of the insurance business. Similarly, there is no proof in the record of any such practices by the Respondent. Because there is neither allegation nor proof of the conduct prohibited by Section 626.611(9), Florida Statutes, the Respondent should not be found guilty of a violation of this Section.

    
    

17. In Count I(d) of the Administrative Complaint it is alleged that the Respondent violated Section 626.611(10), Florida Statutes (1990 Supp.). The conduct prohibited by Section 626.611(10) is all conduct that involves some form of intentional or willful act. The evidence in this case is insufficient to establish that the Respondent engaged in any intentional or willful act that constituted "misappropriation, conversion, or unlawful withholding of moneys." To the contrary, the greater weight of the evidence is to the effect that the Respondent, as a result of simple oversight, failed to follow through on a transaction and failed to procure insurance he had been paid to obtain. Because the evidence is insufficient to establish that the Respondent engaged in misappropriation, conversion, or unlawful withholding of moneys, the Respondent should not be found guilty of a violation of Section 626.611(10), Florida Statutes (1990 Supp.).

    
    

18. In Count I(e) of the Administrative Complaint it is alleged that the Respondent violated Section 626.611(13), Florida Statutes (1990 Supp.). It is

    clear from the language of the cited statutory provision that allegation and proof of "willful" conduct are necessary prerequisites to establishing a violation of this subsection. The Administrative Complaint does not allege that the Respondent acted willfully, nor does the proof in this case establish that the Respondent acted willfully. To the contrary, the greater weight of the evidence is to the effect that the Respondent, as a result of simple oversight, failed to follow through on a transaction and failed to procure insurance he had been paid to obtain. Because there is neither allegation nor proof of willful conduct by the Respondent, the Respondent should not be found guilty of a violation of Section 626.611(13), Florida Statutes (1990 Supp.).

    
    

19. In Count I(f) of the Administrative Complaint, it is alleged that the Respondent violated Section 626.621(2), Florida Statutes (1990 Supp.), which authorizes disciplinary action in the event of: "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 appointment." In this regard, it appears to be the Petitioner's contention that the Respondent has violated Section 626.621(2), Florida Statutes, by reason of having violated Section 626.561(1), Florida Statutes (1990 Supp.), which provides:

    
    

    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. An agent shall keep the funds belonging to each insurer for which he is not appointed, other than a surplus lines insurer, in a separate account so as to allow the department to properly audit such funds. The licensee in the applicable regular course of business shall account for and pay the same to the insurer, insured, or other person entitled thereto.

       
       

20. The evidence in this case is simply insufficient to make out a violation of Section 626.561(1), Florida Statutes. What the record shows is that in the regular course of business, the Respondent made a mistake and deposited a premium check in the trust account where it belonged, but forgot to obtain the insurance for which the check was sent. In the regular course of business, his mistake was brought to his attention several months later. And promptly after the matter came to his attention, in the regular course of business the Respondent voluntarily accounted for and refunded the full amount of the premium payment. To view this case in context from a regular course of business point of view, it is helpful to also note that if, in the regular course of business, Ms. Shellhammer had been paying attention to details and had timely inquired about the fact that she never received a renewal policy, this entire matter might have been avoided. And if, in the regular course of business, Harbor Federal had been paying attention to details and had timely mailed payment for renewal insurance and had timely inquired as to whether renewal insurance had been procured, this entire matter might have been avoided. Similarly, if American Professional had been paying attention to details in the regular course of its business and had made timely inquiry as to why the subject policy was not renewed, this entire matter might have been avoided. It is clear from the evidence in this case that the failure to procure insurance for Ms. Shellhammer was a simple oversight. It is also clear that the Respondent took prompt action to attempt to correct the consequences of his oversight once it came to his attention. This is simply not the type of licensee conduct that warrants disciplinary action by the Department of Insurance.

21. In Count I(g) of the Administrative Complaint, it is alleged that the Respondent violated Section 626.621(6), Florida Statutes (1990 Supp.). An allegation of a violation of the initial portion of Section 626.621(6) must, of necessity, refer to some specific provision of the statutory language that defines "unfair methods of competition" and "unfair or deceptive acts or practices." The only such mention in the Administrative Complaint is a mention of the language of Section 626.9541(1)(o)1., Florida Statutes (1990 Supp.). The language of Section 626.9541(1)(o)1., Florida Statutes, is far from a model of clarity. Although the meaning of the subject statutory language is not entirely free from doubt, it appears to be the intent of the statutory language to apply to those situations where an insurance agent knowingly collects money for a policy which is never issued, or which is never intended to be issued. Such is not the case here because the evidence is insufficient to show that the Respondent knowingly failed to provide insurance coverage. Quite to the contrary, the greater weight of the evidence is to the effect that the Respondent inadvertently overlooked the need to procure a policy of insurance for Ms. Shellhammer. Consequently, the Respondent should not be found guilty of a violation of Section 626.621(6), Florida Statutes (1990 Supp.).

    
    

22. The Petitioner also argues that the Respondent is guilty of a violation of the portion of Section 626.621(6), Florida Statutes (1990 Supp.), that authorizes discipline for "having otherwise shown himself to be a source of injury or loss to the public or detrimental to the public interest." The evidence in this case is insufficient to establish that the Respondent's conduct has caused injury or loss to the public. To the contrary, upon discovering his mistake, the Respondent promptly repaid the premium amount to Harbor Federal and promptly agree to make Ms. Shellhammer whole for her burglary loss during the period when there was no insurance coverage on her home. The fact that the Respondent and Ms. Shellhammer are of different opinions as to the amount of her losses does not diminish the fact that the Respondent has voluntarily agreed to compensate Ms. Shellhammer for her actual losses.

    
    

23. In Count I(h) of the Administrative Complaint it is alleged that the Respondent violated Section 626.9521, Florida

    Statutes (1990 Supp.). This allegation is essentially identical to the allegation of a violation of the first portion of Section 626.621(6), Florida Statutes (1990 Supp.), discussed in Paragraph 21, above. For the reasons discussed in Paragraph 21, above, the Respondent should not be found guilty of a violation of Section 626.9521, Florida Statutes (1990 Supp.).

    
    

24. In Count I(i) of the Administrative Complaint it is alleged that the Respondent violated 626.9541(1)(o)1., Florida Statutes (1990 Supp.). For the reasons discussed in Paragraphs 21 and 23, above, the Respondent should not be found guilty of a violation of Section 626.9541(1)(o)1., Florida Statutes (1990 Supp.).

RECOMMENDATION

On the basis of all of the foregoing, it is RECOMMENDED that a Final Order be issued in this case dismissing all charges against the Respondent.

DONE AND ENTERED this 26th day of July, 1993, at Tallahassee, Leon County, Florida.

MICHAEL M. PARRISH, 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 26th day of July, 1993.

COPIES FURNISHED:

Joseph D. Mandt, Esquire

Department of Insurance and Treasurer Division of Legal Services

612 Larson Building

Tallahassee, Florida 32399-0330

Mr. John Joseph Devins, pro se 5573 Southeast Federal Highway Stuart, Florida 34997

Honorable Tom Gallagher

State Treasurer and Insurance Commissioner

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

Bill O'Neil, General Counsel Department of Insurance

The Capitol, Plaza Level II 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 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.

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AGENCY FINAL ORDER

=================================================================

OFFICE OF THE TREASURER DEPARTMENT OF INSURANCE

IN THE MATTER OF: DOI CASE NO. 92-L-171JDM DOAH CASE NO. 92-5149

JOHN JOSEPH DEVINS

/

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 July 15, 1992, the Department of Insurance (hereinafter referred to as "DEPARTMENT") filed an Administrative Complaint charging JOHN JOSEPH DEVINS (hereinafter referred to as "RESPONDENT") with numerous violations of Chapter 626, Florida Statutes. 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 Michael M. Parrish, Hearing Officer, Division of Administrative Hearing, on January 7, 1993, in West Palm Beach, Florida.

After consideration of the evidence, argument and testimony presented at hearing, and subsequent written submissions by DEPARTMENT and RESPONDENT the Hearing Officer issued his Recommended Order. (Attached as Exhibit A). The Hearing Officer recommended that the DEPARTMENT issue a Final Order dismissing all charges against RESPONDENT.

Neither party filed exceptions to the Recommended Order.

Upon consideration of the foregoing and the record and being otherwise fully advised in the premises, it is:

ORDERED:

1. The Findings of Fact of the Hearing Officer are adopted in full as the DEPARTMENT's Findings of Fact, unless otherwise supplemented and modified below:

1. Findings of Fact #4 is supplemented as follows:

   
   

   RESPONDENT's Exhibit #3 indicates that the RESPONDENT's insurance agency sent a letter dated November 14, 1990, to Ms. Shellhammer informing her, among other things, that her homeowner's policy was expiring on November 25, 1990. As such, based on the Recommended Order and without being able to further clarify the events by way of a hearing transcript, it would appear Ms. Shellhammer received two separate letters from the RESPONDENT's insurance agency advising her that her insurance policy was expiring on November 25, 1990.

2. Findings of Fact #7 is supplemented as follows:

No evidence was introduced that indicates whether or not a grace period existed for late payment of premium relative to the renewal of Ms. Shellhammer's insurance policy. As such, it is unknown whether intervention by the RESPONDENT subsequent to the receipt of the late payment would have resulted in the reinstatement of the insurance coverage. Furthermore, it is unknown whether the insurer actually sent to the insured writer notice of nonrenewal as required by Section 627.4133, Florida Statutes (1990 Supp.).

In making this interpretation and application of Florida Statutes, the DEPARTMENT has acted well within its statutory discretion. It is well-settled in Florida administrative jurisprudence that an agency determination regarding a statute's interpretation and applicability receives great deference in the absence of clear error or conflict with legislative intent. See, e.g. Little Munyon Island v. Department of Envtl. Reg'n., 492 So.2d 735, 737 (Fla. 1st DCA 1986) and Matter of Waldron, 540 So.2d 247, 249 (Fla. App. 4 Dist. 1989)

1. Conclusions of Law #19 and #20 are modified as follows:

   
   

   As outlined in the above Findings of Fact, failure on the part of the RESPONDENT to take action on the $263.00 for some 6.5 months constitutes more than mere "oversight". Furthermore, a period of some 6.5 months of inactivity cannot reasonably be considered the "regular course of business". While it is clear that the RESPONDENT did take prompt action to correct this oversight once it came to his attention, the fact remains the premium money sat in the trust account for some 6.5 months. Quite simply, the RESPONDENT failed to meet the duty imposed on him by Section 626.561(1), Florida Statutes (1990 Supp.), whereby he must, in the regular course of business, account for any pay premiums, return premiums, or other funds to the insurer, the insured or other parties entitled thereto. Because the RESPONDENT's violation of Section 626.561(1), Florida Statutes (1990 Supp.), does not appear to be willful, the RESPONDENT has violated Section 626.621(2), Florida Statutes (1990 Supp.).

   
   

2. Conclusion of Law #22 is modified for the reasons discussed above. Furthermore, it is probable that had the RESPONDENT, as a fiduciary, maintained reasonable diligence over the funds in the premium trust account in compliance with Section 626.561(1), Florida Statutes (1990 Supp.), Ms. Shellhammer would in all likelihood have been insured for all or a portion of this interim 6.5 month period. To the extent the premium money was not applied to insurance coverage or returned, injury or loss occurred. As such, by reason of violating Section 626.561(1), Florida Statutes (1990 Supp.), the RESPONDENT has violated Section 626.621(6), Florida Statutes (1990 Supp.), to the extent in the conduct of business under the license or appointment, he has otherwise shown himself to be a source of injury or loss to the public or detrimental to the public interest.

   
   

3. Conclusions of Law #24 and therefore #21 are modified for the reasons discussed above. While it is acknowledged that the language of Section 626.9541(1)(o)1., Florida Statutes (1990 Supp.), is far from a model of clarity, the evidence is quite clear and convincing that the RESPONDENT knowingly collected a $263.00 premium for an insurance policy that was not then provided or provided in due course. As such, by reason of violating Section 626.9541(1)(o)1., Florida Statutes (1990 Supp.), the RESPONDENT has violated Section 626.621(6), Florida Statutes (1990 Supp.).

ACCORDINGLY, it is determined that, based on the evidence, by reason of violating Sections 626.561(1) and 626.9541(1)(o)1., Florida Statutes (1990

Supp.), the RESPONDENT has violated Sections 626.621(2) and 626.621(6), Florida Statutes (1990 Supp.). However, based on the evidence, it is proper to impose a lesser penalty as is provided under the provisions of Section 626.691, Florida Statutes (1990 Supp.).

Therefore, pursuant to Section 626.691, Florida Statutes (1990 Supp.), it is ordered that RESPONDENT be placed on probation for a period of six (6) months, to run from the date of this Order.

Any party adversely affected by these proceedings is entitled to seek judicial 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 Petition or Notice of Appeal with the General Counsel, acting as the agency clerk, at 200 East Gaines Street, 612 Larson Building, Tallahassee, Florida 32399-0300, and a copy of the same with the appropriate district court of appeal within thirty (30) days of rendition of this Order.

DONE and ORDERED this 7th day of January 1994.

TOM GALLAGHER

Treasurer and Insurance Commissioner

Copies furnished to:

JOHN J. DEVINS

5573 Southeast Federal Highway Stuart, Florida 34997

JOSEPH D. MAADT, ESQUIRE

Division of Legal Services

200 East Gaines Street 612 Larson Building

Tallahassee, Florida 32399-0300

MICHAEL M. PARRISH, ESQUIRE

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Docket for Case No: 92-005149

Orders for Case No: 92-005149