STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE ) AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 93-1473

)

SAMUEL BANNISTER LOVE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to written notice a formal hearing was held in this case before Larry J. Sartin, a duly designated Hearing Officer of the Division of Administrative Hearings, on July 26, 1993, in Ocala, Florida, and on September 24, 1993, by telephone.

APPEARANCES

For Petitioner: James E. Bossart, Esquire

Division of Legal Services Department of Insurance 612 Larson Building

Tallahassee, Florida 32399-0333

For Respondent: Samuel B. Love, pro se

10835 South East Sunset Harbor Road Summerfield, Florida 34491

STATEMENT OF THE ISSUES

Whether the Respondent's licenses as an insurance agent should be disciplined for violations alleged in an Administrative Complaint of February 12, 1993?

PRELIMINARY STATEMENT

On or about February 12, 1993, the Petitioner, the Office of the Treasurer and Department of Insurance, issued an Administrative Complaint against the Respondent, Samuel Bannister Love. On or about March 2, 1993, Mr. Love executed an Election of Rights form disputing the alleged facts of the Administrative Complaint and requesting a formal administrative hearing. By letter dated March 12, 1993, the matter was filed with the Division of Administrative Hearings.

The final hearing was scheduled for July 26, 1993, by a Notice of Hearing entered June 8, 1993. At the commencement of the final hearing, Mr. Love informed the undersigned that a witness he intended to call, Minnie Yarborough, would not be able to testify at the final hearing. Without objection from the parties, it was agreed that the hearing would proceed and that the record would

remain open to take the testimony of Ms. Yarborough at a later date. It was also agreed that Ms. Yarborough's testimony would be taken by telephone.

At the final hearing the Petitioner presented the testimony of David Cruikshank. Eleven exhibits were identified as "Petitioner" exhibits and were accepted into evidence. Petitioner's exhibit 8 was to be provided to the undersigned with the Petitioner's proposed recommended order. The Petitioner did not, however, file exhibit 8.

Mr. Love testified on his own behalf. Mr. Love offered no exhibits.

A Notice of Telephone Hearing was entered August 5, 1993, setting September 24, 1993, as the date upon which Mr. Love would be allowed to present the testimony of Ms. Yarborough. On September 24, 1993, Mr. Love presented the testimony of Ms. Yarborough. Counsel for the Petitioner, the court reporter and the undersigned participated in this portion of the hearing from a hearing room of the Division of Administrative Hearings. Ms. Yarborough and Mr. Love participated in the hearing from separate locations by telephone.

No transcript of the final hearing was ordered by the parties. The parties filed proposed recommended orders on October 11, 1993. The proposed recommended orders contain proposed findings of fact. A ruling on each proposed finding of fact has been made either directly or indirectly in this Recommended Order or the proposed finding of fact has been accepted or rejected in the Appendix which is attached hereto.

FINDINGS OF FACT

1. At all times relevant to this proceeding, the Respondent, Samuel Bannister Love, was licensed in the State of Florida by the Department of Insurance and Treasurer (hereinafter referred to as the "Department"), as a life and health insurance agent and as a general lines insurance agent.

   
   

2. On April 7, 1993, Florida Life Insurance Agency, Inc. (hereinafter referred to as "Florida Life"), was organized as a corporation in the State of Florida.

   
   

3. From the time of Florida Life's formation until at least 1992, Mr. Love was an officer and director of Florida Life. Mr. Love was also an authorized signatory on the premium bank account of Florida Life.

   
   

4. On August 15, 1994, Florida Life entered into an agency agreement (hereinafter referred to as the "Agency Agreement"), with Service Insurance Company (hereinafter referred to as "Service Insurance"). Pursuant to the Agency Agreement, Florida Life agreed to act as agent for Service Insurance and to receive and accept proposals for insurance on behalf of Service Insurance. For acting as agent, Florida Life was to receive a commission.

   
   

5. Among other things, the Agent Agreement provided:

   
   

   1. TRUST AGREEMENT

      The Agent has full power and authority to collect, receive and receipt for premiums on insurance tendered by the Agent [Florida Life] to and accepted by the Company [Service Insurance]. All moneys paid by the policyholders to the Agent, or to anyone

      representing him shall be held by and chargeable to the Agent as a fiduciary trust for and on behalf of the Company, and shall be paid over to the Company as herein provided.

   2. Accounts of money due the Company on the business placed by Agent with the Company shall be rendered by the Company monthly; the balance therein shown to be due to the Company shall be paid not later than 45 days after the end of the month for which the account is rendered. Accounts of money due the Agent on the business shall be payable monthly and shall be paid by the Company not later than 45 days after the end of the month in which the amount became due.

      
      

6. Mr. Love signed the Agency Agreement as an officer of Florida Life.

   
   

7. Mr. Love registered with the Department as agent for Service Insurance for the period April 1, 1987 to December 30, 1988. Mr. Love was the only officer or director of Florida Life to register with the Department as agent for Service Insurance.

   
   

8. In December, 1988, due to failure of Florida Life to remit premiums due to Service Life pursuant to the Agency Agreement, even after demand therefore, Service Life terminated the Agency Agreement.

   
   

9. The total amount of premiums owed by Florida Life to Service Life after termination of the Agency Agreement was $84,088.15.

   
   

10. Service Life and Florida Life eventually agreed that Service Life would be paid $47,000.00 as a settlement of Service Life's claims against Florida Life for unpaid premiums due under the Agency Agreement.

    
    

11. Florida Life subsequently paid $22,000.00 of the $47,000.00 settlement to Service Life and a promissory note (hereinafter referred to as the "Note") for the $25,000.00 balance was entered into by Florida Life. Mr. Love did not personally sign the Note.

    
    

12. In July, 1991, the Department entered an Administrative Complaint against Mr. Love as a result of the dispute between Service Life and Florida Life. This dispute was resolved by a Settlement Stipulation for Consent Order entered into by the Department and Mr. Love on January 14, 1991 (hereinafter referred to as the "Settlement").

    
    

13. Pursuant to the Settlement, Mr. Love was to pay an administrative fine and he was placed on probation subject to the following condition:

    
    

    1. That as a condition of probation Respondent shall use good faith and best efforts to facilitate payment by Florida Life Insurance Agency, Inc., to the Service Insurance Co. of Bradenton, Florida the sum of $25,000.00 together with interest at the rate of 9 percent per annum in accordance with the terms of the promissory note by

       Florida Life Insurance Agency, Inc., in favor of Service Insurance Company dated November 20, 1991 (copy attached).

       
       

       A copy of the Note was attached to the Settlement.

       
       

14. The Settlement Agreement further provided:

    
    

    1. Violation of the conditions of probation as set forth in this Settlement Stipulation for Consent Order, or failure to pay on the debt owed to Service Insurance Company pursuant to the terms of the previously mentioned promissory note, shall result in immediate agency action seeking revocation of Respondent's licenses, which may result in revocation or other censure commensurate with the violation. . . .

    
    

15. Pursuant to the conditions of Mr. Love's probation, he specifically agreed in paragraph (e) of the Settlement that his licenses with the Department could be revoked if he failed to adhere to the condition of paragraph (d) (to use his best efforts to see that Florida Life paid the Note) of the Settlement or if he failed to pay the debt owed to Service Insurance.

    
    

16. Paragraph (e) of the Settlement and the Consent Order provided, however, the following:

    
    

    Notwithstanding anything to the contrary contained herein, the Respondent reserves and does not waive the right to assert all of his defenses to the violations alleged in the Administrative Complaint filed herein.

    
    

17. The Settlement also provided:

    
    

    7. By execution of this Settlement Stipulation for Consent Order and by the entry of the subsequent Consent Order in this case, the Department and the Respondent intend to and do resolve all issues which pertain to this matter in Case No. 91-L- 324JB, excpt as otherwise stated herein.

    
    

18. Pursuant to the Settlement, a Consent Order was entered by the Department on February 6, 1991. The Consent Order specifically states that the Settlement "is hereby approved and fully incorporated herein by reference." In paragraphs (d) and (e) of the Consent Order the conditions of Mr. Love's probation set out in findings of fact 13, 14 and 16 are specifically included.

    
    

19. The Note provided that the principal of the Note was to be paid on November 11, 1992. Florida Life failed to make this agreed payment.

    
    

20. Demand for payment on the Note was made to Mr. Love. Mr. Love has not made any payment on the Note.

21. As of the date of the final hearing, the premiums due to Service Insurance as represented in the Note have not been paid by Florida Life, Mr. Love or any other person. Florida Life has ceased operating and apparently does not have funds to pay the Note.

    
    

22. In this proceeding, the Department has entered an Administrative Complaint containing two counts. Count I alleges several violations of Chapter 626, Florida Statutes, based essentially on the events which led up to the Settlement. Count II alleges that Mr. Love has violated the terms of the Settlement and Consent Order.

    
    

23. Pursuant to the Settlement, as quoted in finding of fact 17, the Department and Mr. Love expressly agreed that the Settlement was intended to resolve all issues related to this matter. Based upon the language of the Settlement quoted in findings of fact 14 and 16, however, it appears that the parties may have intended that the Department would be required to prove the underlying facts of this matter in order to take further action against Mr. Love. The Department apparently agrees with the later interpretation in light of the fact that the Department, through Count I of the instant Administrative Complaint, has alleged that Mr. Love has committed the violations which the parties had attempted to resolve by the Settlement and the Consent Order. No objection to Count I has been raised by Mr. Love. Therefore, Count I will be considered and the Settlement and Consent Order will be interpreted to require proof of the violations alleged in Count I in order to discipline Mr. Love's licenses.

    
    

24. Based upon the foregoing findings of fact, the Department has proved that Florida Life failed to keep premiums of Service Insurance in a separate account, and that Florida Life failed to pay Service Insurance those premiums. The Department also proved that Mr. Love, who registered on behalf of Florida Life with the Department as agent for Service Insurance, failed to keep premiums of Service Insurance in a separate account and failed to pay Service Insurance those premiums.

    
    

25. Based upon the foregoing findings of fact, the Department has also proved that Florida Life demonstrated a lack of fitness or trustworthiness to engage in the business of insurance.

    
    

26. The evidence failed to prove that Florida Life's actions were fraudulent or were the result of dishonest practices.

    
    

27. The evidence proved that Florida Life misappropriated, converted or withheld unlawfully moneys belonging to Service Insurance.

    
    

28. Although Mr. Love attempted to prove that he was not involved in the running of Florida Life, his legal authority and position with Florida Life does not absolve him from responsibility. Mr. Love was an officer and director of Florida Life and he had authority over the premiums account of Florida Life. Most importantly, Mr. Love, and only Mr. Love, held himself out as the insurance agent on behalf of Service Insurance.

    
    

29. Mr. Love is now retired and does not intend to become active in the insurance business.

    
    

30. Mr. Love has had no other charges brought against his insurance licenses, except those arising out of the Agency Agreement, during the more than twenty years that Mr. Love has held insurance licenses.

    CONCLUSIONS OF LAW

    
    

    1. Jurisdiction.

       
       

31. The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of this proceeding. Section 120.57(1), Florida Statutes (1992 Supp.).

    
    

    1. Burden of Proof.

       
       

32. The burden of proof, absent a statutory directive to the contrary, is on the party asserting the affirmative of the issue of the proceeding. Antel v. Department of Professional Regulation, 522 So.2d 1056 (Fla. 5th DCA 1988); Department of Transportation v. J.W.C. Co., Inc. 396 So.2d 778 (Fla. 1st DCA 1981); and Balino v. Department of Health and Rehabilitative Services, 348 So.2d

    249 (Fla. 1st DCA 1977).

    
    

33. In this proceeding it is the Department that is asserting the affirmative. Therefore, the burden of proving that Mr. Love committed the acts alleged in the Administrative Complaint is on the Department.

    
    

    1. Count I of the Administrative Complaint.

       
       

34. In Count I of the Administrative Complaint that is the subject of this proceeding, the Department has alleged that Mr. Love has violated Sections 626.561(1), 626.611(7), 626.611(9), 626.611(10), 626.611(13), 626.621(2) and 626.621(4), Florida Statutes.

    
    

35. The facts alleged by the Department in support of the statutory violations asserted are essentially the facts which gave rise to the Settlement and the Consent Order.

    
    

36. The Settlement and, by adopting the Settlement, the Consent Order, specifically provide that all issues related to the events which are the subject of Count I of the instant Administrative Complaint were resolved by the Settlement and the Consent Order. The Settlement and Consent Order also provided a remedy for a violation of the terms of the Settlement.

    
    

37. Based upon an interpretation of all of the terms of the Settlement, and, in particular, the terms of the Settlement quoted in findings of fact 14 and 16, it is concluded that the Department is required to prove the underlying violations committed by Mr. Love.

    
    

38. Section 626.561(1), Florida Statutes, provides:

    
    

    (1) All premiums, return premiums, or other funds belonging to insurers or others received by an agent, solicitor, or adjuste 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.

    
    

39. Section 626.611, Florida Statutes, authorizes the Department to take disciplinary action if, among other things, any applicant, licensee or permittee has committed the following acts:

    
    

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

    . . . .

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

    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 or appointment.

    . . . .

    (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.

    . . . .

    
    

40. Section 626.621, provides that the Department may take disciplinary action if, among other things, any applicant, licensee or permittee has committed the following acts:

    
    

    (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 appointment.

    . . . .

    (4) Failure or refusal, upon demand, to pay over to any insurer he represents or has represented any money coming into his hands belonging to the insurer.

    . . . .

    
    

41. Although the evidence proved that Florida life entered into the Agency Agreement with Service Insurance and that Florida Life failed to pay premiums owed to Service Insurance, Chapter 626, Florida Statutes, Mr. Love, as an officer and director of Florida Life is liable for the Florida Life's violations of Chapter 626, Florida Statutes:

    
    

    626.795 Corporations, liability of agent.--Any life insurance agent who is an officer, director, or stockholder of an incorporated life insurance agency shall remain personally and fully liable and accountable for any wrongful acts, misconduct, or violations of any provisions

    of this code committed by such licensee or by any person under his direct supervision and

    control while acting on behalf of the corporation. Nothing in this section shall be construed to render any person criminally liable or subject to any disciplinary proceedings for any act unless such person personally committed or knew or should have known of such act and of the facts constituting a violation of this chapter.

    
    

42. The evidence proved that Florida Life failed to keep premiums of Service Insurance in a separate account, and that Florida Life failed to pay Service Insurance those premiums. The evidence also proved that Mr. Love, who registered on behalf of Florida Life with the Department as agent for Service Insurance, failed to keep premiums of Service Insurance in a separate account and failed to pay Service Insurance those premiums. Mr. Love did, therefore, violate his fiduciary relationship with Service Insurance directly and through the actions of Florida Life. Mr. Love has, therefore, violated Section 626.561(1), Florida Statutes.

    
    

43. The evidence also proved that Florida Life demonstrated a lack of fitness or trustworthiness to engage in the business of insurance. Mr. Love is responsible, therefore, for Florida Life's violation of Section 626.611(7), Florida Statutes.

    
    

44. The evidence failed to prove that Florida Life's actions were fraudulent or were the result of dishonest practices. The evidence, therefore, failed to prove that Mr. Love violated Section 626.611(9), Florida Statutes.

    
    

45. The evidence proved that Florida Life misappropriated, converted or withheld unlawfully moneys belonging to Service Insurance. Mr. Love is responsible, therefore, for Florida Life's violation of Section 626.611(10), Florida Statutes.

    
    

46. The evidence also proved that Florida Life failed or refused to pay over to Service Insurance money coming into Florida Life's hands. Mr. Love is responsible, therefore, for Florida Life's violation of Section 626.621(4), Florida Statutes.

    
    

47. Finally, by violating provisions of Chapter 626, Florida Statutes, Mr. Love has violated Sections 626.611(13) and 626.621(2), Florida Statutes.

    
    

48. The Department has alleged in its proposed recommended order that Mr. Love also violated Section 626.621(6), Florida Statutes. No such charge was made by the Department, however, in the Administrative Complaint. Having failed to charge Mr. Love with this violation, the Department may not find that he has committed it.

    
    

    1. Count II of the Administrative Complaint.

    
    

49. Count II of the Administrative Complaint alleges that Mr. Love has violated the terms of the Settlement and the Consent Order by failing to pay the Note. The Department has alleged that Mr. Love's failure to comply with the Settlement constitutes a violation of Section 626.611(7) and (13), Florida Statutes.

50. It is true that Mr. Love did not sign the Note and was, therefore, not personally liable on the Note. Mr. Love did, however, agree as a condition of the Settlement that he would adhere to the conditions of paragraph (d) of the Settlement--to use his best efforts to facilitate the payment of the Note by Florida Life--and that his "failure to pay on the debt owed to Service Insurance Company pursuant to the terms of the previously mentioned promissory note, shall result in immediate agency action seeking revocation of Respondent's licenses .

    . . ."

    
    

51. Although the evidence failed to prove that Mr. Love could have done anything more to "facilitate" payment of the Note by Florida Life, the evidence did prove that he "failed to pay on the debt owed to Service Insurance Company pursuant to the terms of the . . . note "

    
    

52. Mr. Love's failure to adhere to all of the terms of the Settlement and the Consent Order constitutes a violation of Section 626.611(13), Florida Statutes, but not a violation of Section 626.611(7), Florida Statutes.

    
    

53. Pursuant to the terms of the Settlement and the Consent Order, the Department may revoke or otherwise discipline Mr. Love's insurance licenses for failing to adhere to all of the conditions contained therein.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of the Treasurer and Department of Insurance

enter a Final Order finding that Samuel Bannister Love has violated Sections 626.561(1), 626.611(7), 626.611(10), 626.611(13), 626.621(2) and 626.621(4),

Florida Statutes. It is further

RECOMMENDED that the allegation of Count I of the Administrative Complaint that Mr. Love violated Section 626.611(9), Florida Statutes, be DISMISSED. It is further

RECOMMENDED that the Final Order find that Mr. Love violated the terms and conditions of his probation as agreed in the Settlement in violation of Section 626.611(13), Florida Statutes. It is further

RECOMMENDED that the allegation of Count II of the Administrative Complaint that Mr. Love violated Section 626.611(7), Florida Statutes, be DISMISSED. It is further

RECOMMENDED that Mr. Love's insurance licenses be suspended for a period of three years or until the Note is paid, which ever occurs first. Should the Note not be paid in full within the period of the suspension of Mr. Love's licenses, Mr. Love's insurance licenses should be revoked after the period of the suspension.

DONE AND ENTERED this 3rd day of November, 1993, in Tallahassee, Florida.

LARRY J. SARTIN

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 November, 1993.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-1473

The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted.

The Department's Proposed Findings of Fact

1. Accepted in 1.

2. Accepted in 2-3.

3. Accepted in 4-5.

4. Accepted in 7.

5. Accepted in 3.

6. Accepted in 8 and hereby accepted.

7. Accepted in 8.

8. Accepted in 9.

9. Hereby accepted.

10. Accepted in 10.

11. Accepted in 11 and hereby accepted.

12. Accepted in 12-15 and 18.

13. Accepted in 19.

14. Accepted in 20-21.

15. Accepted in 21.

16. Accepted in 20 and hereby accepted.

17. Accepted in 24. See 25-26.

Mr. Love's Proposed Findings of Fact 1-2, First Page:

Argument or not supported by the weight of the evidence. Second and Third Pages:

1. Not relevant or not supported by the weight of the evidence.

2. Argument, not relevant or not supported by the weight of the evidence. See 28.

COPIES FURNISHED:

James A. Bossart, Esquire Division of Legal Services Department of Insurance and

Treasurer

612 Larson Building

Tallahassee, Florida 32399-0333

Samuel Bannister Love

10835 South East Sunset Harbor Road Summerfield, Florida 34491

Tom Gallagher, Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Bill O'Neil, Esquire

Department of Insurance and Treasurer 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 contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 93-001473

Orders for Case No: 93-001473