STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND TREASURER, )

)

Petitioner, )

)

v. ) CASE NO. 93-3929

) THE HOME INDEMNITY COMPANY, THE HOME ) INSURANCE COMPANY, and CITY INSURANCE CO., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on August 27, 1993, in Tallahassee, Florida, before the Division of Administrative Hearings, by its designated Hearing Officer, Diane K. Kiesling.

APPEARANCES

For Petitioner: Elizabeth J. Gregovits

Nancy J. Aliff Attorneys at Law Department of Insurance

Division of Legal Services 612 Larson Building

Tallahassee, Florida 32399-0300

For Respondent: Paul R. Ezatoff

David A. Yon Attorneys at Law

106 East College Avenue, Suite 1200 Post Office Box 1877

Tallahassee, Florida 32302-1877 STATEMENT OF THE ISSUES

The ultimate issue is whether the moratorium established by Chapter 93-401, Laws of Florida, is applicable to the non-renewal of homeowner's insurance policies pursuant to a plan formulated and initiated in 1991 by the Home Indemnity Company, the Home Insurance Company, and City Insurance Company (collectively called the Home). A preliminary issue is whether the Division of Administrative Hearings has jurisdiction of the parties to and subject matter of this case in light of the parties' Agreed Order entered by the Department of Insurance (the Department) on July 30, 1993.

PRELIMINARY STATEMENT

This case was initiated by the Department on July 2, 1993, when it filed an Order to Show Cause against the Home, alleging that the Home was in violation of the moratorium on nonrenewal of personal lines insurance policies enacted as

Chapter 93-401, Laws of Florida (the moratorium). In that Order to Show Cause, Case No. 93-CA-046EJG, the Department sought to impose an administrative penalty against the Home for each notice of nonrenewal delivered after the effective date of the moratorium and to order the Home to cease and desist from further action to nonrenew said policies during the moratorium.

The Home requested a formal administrative hearing to contest the action proposed in the Order to Show Cause. The Order to Show Cause and the request for hearing were forwarded to the DOAH and were assigned DOAH Case No. 93-3929. Thereafter, on July 30, 1993, the Commissioner of Insurance and the Home entered into an Agreed Order in Case No. 93-CA-046EJG, and that Agreed Order was entered and docketed in the Department's official file on this case. That Agreed Order establishes that the Home agreed to stop nonrenewals until November 15, 1993, and to reinstate and extend coverage to January 1, 1994, for all policies nonrenewed between May 19 and July 6, 1993; and the Department agreed to seek no penalties against the Home pursuant to the Order to Show Cause. Further, the parties agreed that the Agreed Order resolved all issues arising from the Order to Show Cause, "except for the issue of determining the applicability of the moratorium contained in Chapter 93-401 to the Home's actions." [sic]

The parties informed the DOAH of the existence and entry of the Agreed Order only on August 27, 1993, after the commencement of the formal hearing.

At the hearing, the Department presented the testimony of Clyde W. Galloway, Jr. It had Petitioner's Exhibits 1-4 admitted in evidence.

The Home presented the testimony of John Hill, John Battles, and Barbara Cummings. The Homes' Exhibits 1-7 were admitted in evidence.

The transcript of the proceedings was filed on August 31, 1993. The parties timely filed their proposed findings of fact and conclusions of law on September 10, 1993. All proposed findings of fact and conclusions of law have been considered. A specific ruling on each proposed finding of fact is made in the Appendix attached hereto and made a part of this Recommended Order.

FINDINGS OF FACT

1. Home Insurance and Home Indemnity are corporations incorporated under the laws of the State of New Hampshire, and City Insurance is a corporation incorporated under the laws of the State of New Jersey. They are foreign insurers within the meaning of Section 624.06, Florida Statutes.

   
   

2. In its Order to Show Cause of July 2, 1993, the Department alleges that Chapter 93-401, Laws of Florida, prohibits the Home from cancelling or nonrenewing policies of insurance pursuant to a plan which was formulated and initiated in 1991, after notice to and without objection by the Department.

   
   

3. In 1991, Home Insurance was authorized and licensed to transact the following kinds and lines of insurance in Florida, pursuant to Sections 624.41 and 624.414, Florida Statutes: fire, industrial fire, automobile casualty, homeowners and commercial multi-peril, commercial automobile liability and physical damage, commercial fire, personal and commercial inland and ocean marine, personal and commercial general liability, PPA physical damage, other liability, mobile peril and physical damage, medical malpractice, glass, aircraft, fidelity and surety, commercial multi-peril special package (business owners) and commercial package policies, boiler and machinery, accident and death, livestock, burglary and theft, earthquake and allied lines insurance.

4. In 1991, Home Indemnity was licensed and authorized to transact the following kinds and lines of insurance in Florida pursuant to section 624.14 and 624.414, Florida Statutes: fire, industrial fire, automobile casualty, homeowners and commercial multi-peril, commercial automobile liability and physical damage, commercial fire, personal and commercial inland and ocean marine, personal and commercial general liability, PPA physical damage, other liability, mobile home peril and physical damage, medical malpractice, glass, aircraft, fidelity and surety, credit, commercial multi-peril special package (business owners) and commercial package policies, boiler and machinery, crop hail, accident and death, livestock, burglary and theft, earthquake, and allied lines insurance.

   
   

5. In 1991, City Insurance was licensed and authorized to transact the following kinds and lines of insurance in Florida pursuant to Section 624.14 and 624.414, Florida Statutes: fire, industrial fire, automobile casualty, homeowners and commercial multi-peril, commercial automobile liability and physical damage, commercial fire, personal and commercial inland and ocean marine, personal and commercial general liability, PPA physical damage, other liability, mobile home peril and physical damage, medical malpractice, glass, aircraft, fidelity and surety, credit, commercial multi-peril special package (business owners) and commercial package policies, boiler and machinery, crop hail, accident and death, livestock, burglary and theft, earthquake, and allied lines insurance.

   
   

6. On October 31, 1991, the Home notified the Department in writing of their complete withdrawal from all personal lines of insurance in all states, including Florida. The Department received the October 31, 1991, letter on November 5, 1991.

   
   

7. By means of the October 31, 1991, letter, the Home notified the Department that they would nonrenew personal lines insurance policies issued in Florida and written through a broker or producer, commencing on and after May 1, 1992, and would nonrenew personal insurance policies issued in Florida on and after May 1, 1993, if written through appointed agents.

   
   

8. The October 31, 1991, letter satisfied all requirements of Section 624.430, Florida Statutes, for notice to the Department of the Homes' intent to withdraw from personal lines coverage in the State of Florida. No Department approval of the October 31, 1991, letter was required in order for the Home to carry out the plan of withdrawal and begin issuing notices of nonrenewal in accordance with that plan.

   
   

9. The Department never objected to the Homes' notice of withdrawal. If the Department had believed that the Homes' plan of withdrawal was not appropriate or was not legal, then the Department would have initiated some legal action against the Home. The Department never instituted such an action with regard to the October 31, 1991, letter. Prior to the issuance of the Order to Show Cause on July 2, 1993, the Department never formally notified the Home that they could not begin or could not continue implementing the plan of withdrawal outlined in the October 31, 1991, letter.

   
   

10. From and after October 31, 1991, the Home has implemented the withdrawal from personal lines throughout the United States, including Florida, and has been engaged continually in the routine issuance of notices of non- renewal. They have kept the Department fully and completely apprised of their intent to carry out the withdrawal from personal lines in accordance with the

    October 31, 1991, letter. The Home has never sought an exemption from the moratorium, but instead has consistently asserted that the moratorium was inapplicable to nonrenewals done in furtherance of the plan of withdrawal.

    
    

11. The Home has never nonrenewed a personal lines policy "on the basis of risk of hurricane claims" within the meaning of Chapter 93-401, Laws of Florida. In fact, the Home has always had and followed a policy of not nonrenewing policies on the basis of claims resulting from acts of nature, which would include hurricanes.

    
    

12. The decision to withdraw from personal lines throughout the United States was based on the Homes' realization that profitability in the personal lines market would require significant capital expenditures (such as for computer hardware), but that the needed resources would be better allocated to those other lines of business that provided a greater opportunity for profit.

    
    

13. The Home implemented the withdrawal from personal lines outlined in its October 31, 1991, letter to the Department. Homes' nonrenewal of personal lines policies in Florida is and will be on the basis of withdrawal from all personal lines insurance in Florida and elsewhere.

    
    

14. For homeowner's insurance, underwriting is the process of determining whether to issue a policy based on specific characteristics (such as construction, location, value) of the property proposed to be insured. Because Homes' 1991 decision to withdraw from the personal lines market was based on business considerations not related to the individual risk posed by the properties insured, underwriting played no role in that decision or the subsequent nonrenewals undertaken and proposed to be undertaken pursuant to that decision. Because underwriting involves the assessment of individual risk, it is never a factor in nonrenewing an entire line of insurance.

    
    

15. If underwriting guidelines were required for the Homes' withdrawal from personal lines, the Homes' October 31, 1991, letter provided all of the information that would be required in such a guideline. That letter was tacitly "approved" by the Department, because it fulfilled all requirements of law for withdrawal from the market which were in existence at the time the letter was filed.

    
    

16. In its Order to Show Cause, the Department sought an order requiring that the Home "cease and desist from any further action to cancel or non-renew personal lines residential property insurance policies in this state during the moratorium" and that it "pay an administrative penalty of $20,000 for each notice of cancellation or nonrenewal effectuated after the effective date of the moratorium."

    
    

17. The parties entered into and "Agreed Order" which was entered by the Insurance Commissioner as an Order in this case on July 30, 1993, which was during the pendency of this matter before the Division of Administrative Hearings. By that Agreed Order, the Home agreed to "reinstate and extend coverage, at a prorated premium, until January 1, 1994," for all policies "which had expiration dates between May 19, 1993 and July 6, 1993 or for which nonrenewal notices were mailed between May 19, 1993 and July 6, 1993 "

    [sic] The Home also agreed to extend coverage to January 1, 1994, at a prorated premium, for all policies that would have been nonrenewed, but for the Order to Show Cause, between July 6, 1993, and November 14, 1993.

18. In consideration for the Homes' agreement, the Department agreed the Home was not restricted by the Agreed Order from beginning to renew policies on November 15, 1993, the date on which the moratorium expires. It further agreed that the Agreed Order constituted "the Department's sole administrative remedy against the Home and . . . [resolved] all issues arising from the Order to Show Cause, including any sanctions or penalties that might otherwise have been imposed."

    
    

19. The parties attempted to exclude from the agreement "the issue of determining the applicability of the moratorium contained in Chapter 93-401 to the Home's actions," so as to maintain DOAH's jurisdiction over that limited issue. However, the Agreed Order, which was a final order resolving the issues in the Department's case initiated by the Order to Show Cause, required the parties to carry out their agreed actions "regardless of the outcome of any administrative proceeding."

    
    

    CONCLUSIONS OF LAW

    
    

20. The first issue to be resolved is whether the Division of Administrative Hearings has jurisdiction over this matter in light of the Agreed Order entered by the Department. It is well-recognized that "[a]n administrative agency may not enlarge its jurisdiction, nor may it have jurisdiction conferred upon it by agreement or consent." Swebilius v. Florida Construction Industry Licensing Board, 365 So.2d 1069 (1978). Hence the parties cannot confer jurisdiction by their agreement in the Agreed Order. If jurisdiction exists, it must be pursuant to Chapter 120.

    
    

21. Section 120.57(1)(b)3 makes it clear that once the referring agency sends a case to DOAH for assignment of a hearing officer, that "referring agency shall take no further action with respect to the formal proceeding, except as a party litigant, as long as the division has jurisdiction over the formal proceeding." The entry of an consent order by the agency resolving all issues will ordinarily divest DOAH of jurisdiction. In fact, unless precluded by law, the parties can dispose of a proceeding by agreed settlement or consent order. Section 120.57(3). The question is whether the Agreed Order of the parties disposed of all issues relating to the charges in the Order to Show Cause.

    
    

22. Here, the Home has agreed to reinstate until January 1, 1994, the policies it nonrenewed or would nonrenew between May 19, 1993, and November 14, 1993, when the moratorium expires. The Department has agreed to seek no penalties against the Home based on its nonrenewals between May 19 and November 14, 1993. Both parties have agreed to be bound by the agreed resolution of these issues no matter what happens in this administrative case. Therefore, the determination of whether the moratorium applies to the Homes' proposed withdrawal from all personal lines business in the United States will not change the outcome of this enforcement case. Instead that determination will be advisory in nature and could affect the Home further only if a similar moratorium is enacted to be effective on November 15, 1993.

    
    

23. There are circumstances where a formal hearing is appropriate even when no disputed issues of material fact remain or when a moratorium has expired. See Village Saloon, Inc. v. Division of Alcoholic Beverages and Tobacco, Department of Business Regulation, 463 So.2d 278, 285, rehear. denied (Fla. 1st DCA 1985), and Balsam v. Department of Health and Rehabilitative Services, 452 So.2d 976 (Fla. 1st DCA 1984). In Balsam the agency which had enacted the moratorium argued that the issue in the case was moot because the moratorium had expired. That argument was rejected by the court. The doctrine

    of mootness may not control the question because of the possibility of the question arising again if the moratorium is extended or reenacted. Rea v. Sansbury, 504 So.2d 1315 (Fla. 4th DCA 1987). "An issue is moot when the controversy has been so fully resolved that a judicial determination can have no actual effect. . . A case is 'moot' when it presents no actual controversy or when the issues have ceased to exist." Godwin v. State, 593 So.2d 211 (Fla.

    1992). However, there are exceptions in which a moot case will not be dismissed. One of those exceptions exists "if collateral legal consequences that affect the rights of a party flow from the issue to be determined." Godwin, supra. Even if the issues raised are technically moot, the mootness doctrine will not apply when the challenged actions are "capable of repetition, yet evading review," and when there is a reasonable expectation that the same party "will be subjected to the same action again." Tribune Co. v. Cannella, 438 So.2d 516 (Fla. 2nd DCA 1983).

    
    

24. Accordingly, it is concluded that the parties' Agreed Order does not divest the Division of Administrative Hearings of jurisdiction. This is especially so because the Home did not agree to renew the policies it planned to nonrenew between May 19, 1993, and November 14, 1993. It simply agreed to reinstate those policies until January 1, 1994. If it is determined that the moratorium does not apply to the Home, then the Home can begin sending notices of nonrenewal on November 15, 1993, to all the policyholders who were conditionally reinstated and to those whose policies are up for renewal after November 15, 1993.

    
    

25. Based on the above-cited authority, the Division of Administrative Hearings has jurisdiction of the parties to and subject matter of these proceedings. Section 120.57(1), Florida Statutes.

    
    

26. The Department has the burden of proof by clear and convincing evidence because this is a disciplinary case brought by the Department against a licensee. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

27. Section 624.430, Florida Statutes, established the procedure which the Home had to follow to announce their withdrawal from the personal lines market in Florida.

    
    

    1. Any insurer desiring to surrender its certificate of authority, withdraw from

       this state, or discontinue the writing of any one or multiple kinds or lines of insurance in this state shall give 90 days' notice in writing to the department setting forth its

       reasons for such action. Any insurer who does not write any premiums in a kind or line of insurance within a calendar year shall have that kind or line of insurance removed from its certificate of authority; however, such line of insurance shall be restored to the insurer's certificate upon the insurer demonstrating that it has available the

       expertise necessary and meets other requirement of this code to write that line of insurance.

       
       

       It is undisputed that the Homes' October 31, 1991, notification to the Department satisfied the requirements of Section 624.430.

28. On or about June 8, 1993, Chapter 93-401, Laws of Florida, became law. That law provides in pertinent part:

    
    

    1. MORATORIUM IMPOSED.--Effective May 19, 1993, no insurer authorized to transact insurance in this state shall, until the expiration of this section pursuant to subsection (6), cancel or nonrenew any personal lines property insurance policy in this state, or issue any notice of cancellation or nonrenewal, on the basis of risk of hurricane claims. All cancellations or nonrenewals must be substantiated by underwriting rules filed with and accepted

       for use by the Department of Insurance, unless inconsistent with the provisions of this section. The Department of Insurance is hereby granted all necessary power to carry out the provisions of this section.

       
       

    2. EXCEPTION.--This section shall not apply if the insurer can affirmatively demonstrate to the department that the proposed cancellation or nonrenewal is necessary for the insurer to avoid an unreasonable risk of insolvency. In reaching this determination the department shall consider the insurer's size, its market concentration, its general financial condition, the degree to which personal lines residential property insurance comprises its insurance business in this state, and the way in which these factors impact on the risk to the insurer's solvency in relation to its probable maximum loss in the event of a hurricane. In no event shall any insurer be required to risk more than its total surplus to any objectively defined probable maximum loss resulting from one Florida hurricane loss event. In the event that the department determines that the moratorium does not apply in whole or in part and the department further determines that the exception affects more than 1 percent of any class of business within the personal lines residential property insurance market in this state the department shall in the order set forth a nonrenewal, cancellation, or withdrawal schedule that avoids unnecessary market disruption or exposure to the insureds statewide or in any locale. The department must respond to an application for a waiver under this subsection with a final decision within 90 days after it receives the application for a waiver.

    3. PENALTY--Any violation of this section constitutes a violation of the Insurance Code. Each cancellation or nonrenewal of a policy in violation of this section shall be considered a separate action.

       
       

    4. REPEAL--This section is repealed on November 14, 1993.

    
    

29. By its expressed terms, Chapter 93-401, Laws of Florida, only prohibits nonrenewal, or issuance of notices of nonrenewal, of personal lines policies during the moratorium period "on the basis of hurricane claims." Here, the evidence establishes unequivocally that the Homes' nonrenewal of personal lines policies in Florida was not based upon the risk of hurricane claims, but was instead part of a nationwide plan of withdrawal from the personal lines market based on business considerations unrelated to hurricane risk and announced almost two years prior to the enactment of Chapter 93-401. Because the Homes' nonrenewals to implement their plan of withdrawal from personal lines have not been the basis of the risk of hurricane claims, Chapter 93-401 is inapplicable to their withdrawal from the personal lines market in Florida.

    
    

30. "Agencies are afforded wide discretion in the interpretation of a statute it administers and will not be overturned on appeal unless clearly erroneous." Natelson v. Department of Insurnace, 454 So.2d 31, 32 (Fla. 1st DCA 1984). "The reviewing court will defer to any interpretation within the range of possible interpretations." Id.

    
    

31. The task of interpreting the statutory provisions found in the Insurance Code is initially one for the Department. Hartnett v. Department of Insurance, 406 So.2d 1180 (Fla. 1st DCA 1981). This wide range of discretion also extends to the Insurance Commissioner in discharging his duties and responsibilities. Liberty Mutual Insurance Co. v. Larson, 169 So.2d 866 (Fla. 1st DCA 1964).

    
    

32. The rule in Florida is that "where the administrative ruling or policy is contrary to the plain and unequivocal language being interpreted, the ruling or policy is clearly erroneous." Eager v. Florida Keys Aqueduct Authority, 580 So.2d 771 (Fla. 3d DCA 1991). The Department's claim that the Homes' non-renewals are prohibited during the moratorium regardless of whether such renewal is on the basis of the risk of hurricane claims is contrary to the plain language of Chapter 93-401.

    
    

33. The Department contends that even if the Homes' nonrenewals are not on the basis of the risk of hurricane claims, Chapter 93-401 still requires that the nonrenewals be pursuant to an underwriting rule approved by the Department. The Department relies on the following language in the law for that contention:

    
    

    All cancellations or nonrenewals must be substantiated by underwriting rules filed with and accepted for use by the Department of Insurance, unless inconsistent with the provisions of this section.

    
    

    The Department's argument is erroneous as a matter of fact and law.

34. First, as a matter of law, a statute must not be given a literal interpretation which leads to an absurd or ridiculous conclusion. Johnson v. Presbyterian Homes of Synod of Florida, Inc., 239 So.2d 256(Fla. 1970). The undisputed testimony was that underwriting guidelines are simply meaningless and unnecessary for withdrawal from an entire line of insurance, since such an across-the-board withdrawal is not based on the assessment or acceptability of an individual risk. The purpose of Chapter 93-401, when read as a whole, is to limit an insurer's right to cancel or nonrenew policies on the basis of the risk of hurricane claims, and not to limit an insurer's right to withdraw from the market for other reasons. To construe Chapter 93-401 to require underwriting guidelines for withdrawal from an entire line would be absurd, and so such a construction must be rejected.

    
    

35. Second, even if underwriting guidelines were needed, the Homes' October 31, 1991, letter was filed with the Department in 1991, and contains all of the information which would be required of an underwriting guideline to withdraw from a line of insurance. By never initiating any action challenging the plan of withdrawal, the Department has "approved" the plan within the meaning of Chapter 93-401, Florida Statutes. There is no requirement in Chapter 93-401 that the underwriting guidelines be filed prior to the enactment of the moratorium law, and so the Home's letter met the requirements of the law.

    
    

36. Legislative intent can be determined by examining the provision in para materia with the rest of the statute and in light of the overall legislative scheme. Fla. State Racing Comm. v. McLaughlin, 102 So.2d 574 (Fla. 1958). Further, the general presumption that later statutes are passed with the legislature's knowledge of prior existing laws has been repeatedly recognized and employed by the courts of this State in interpreting different statutes which in some manner relate to the same subject. See e.g., The City of Punta Gorda v. McSmith, 294 So.2d 27 (Fla. 2d DCA 1974). Furthermore, general law favors a construction of statutes that gives each statute its field of operation. State Deparment of Public Welfare v. Galilean Children's Home, 102 So.2d 388 (Fla. 2d DCA 1958). The most often stated rule of construction is that, when possible, courts must read separate statutes that involve that same subject so as to harmonize them and to preserve the force of both. State of Florida v. The Department of Education, 317 So.2d 68 (Fla. 1975); Mann v. Goodyear Tire and Rubber Company, 300 So.2d 666 (Fla. 1974). Moreover, Chapter 93-401 is a penal statute and must be strictly construed when giving effect to its terms when reading it in para materia with the other, preexisting provisions of the Insurance Code. Allure Shoe Corp. v. Lymberis, 173 So.2d 702 (Fla. 1965); Florida Industrial Commission v. Manpower, Inc. of Miami, 91 So.2d 197 (Fla. 1957) Chapter 93-401 does not by its language exclude the application of the provisions of the Insurance Code, and so all of the statutes must be read together in a way that gives each statute force and effect. Giving equal effect to the provisions of Chapter 93-401 and Section 624.430, Florida Statutes, reveals that, if each is to have its own range of operation, the Home must be permitted to continue their announced withdrawal from the personal lines market, as long as such withdrawal is not on the basis of the risk of hurricane claims.

    
    

37. Further, it is a well-established rule of statutory construction in Florida that laws are to be applied prospectively in the absence of legislative expression to the contrary. Walker & LaBerge, Inc. v. Halligan, 344 So.2d 239 (Fla. 1977). Acts of the legislature, including those creating new penalties, are presumed to operate prospectively unless there is a clear or expressed intent that they have a retroactive effect. Fleeman v. Case, 342 So.2d 815 (Fla. 1977); Larson v. Independent Life & Accident Ins. Co., 29 So.2d 449 (Fla. 1947). A statute is not to be given a retrospective effect unless there exits a

    showing on the face of the law that retroactive application is intended. Yamaha Parts Distributors, inc. v. Ehrman, 316 So.2d 557 (Fla. 1975); In re Seven Barrels of Wine, 479 Fla. 1, 83 So. 627 (1920). The effect of the

    Department's interpretation of Chapter 93-402 would be to make the provisions of the law apply retroactively to the nonrenewals announced by the Home in 1991, despite the lack of any language in the law that such retroactive application was intended. Because this interpretation impermissibly makes the law retroactive, it is rejected.

    
    

38. Because the Home never issued notices of nonrenewal or nonrenewed any policies on the basis of hurricane claims, and because their plan of withdrawal from the personal lines business was filed with and tacitly approved by the Department more than a year and a half prior to the enactment of Chapter 93-401, Laws of Florida, the Home committed no violation of the law by nonrenewing policies after the commencement of the moratorium, and the moratorium is not applicable to their plan of withdrawal from the personal lines market.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance enter a Final Order

determining that the Homes' withdrawal from the market does not constitute a violation of the moratorium and dismissing the Order to Show Cause.

DONE and ENTERED this 30th day of September, 1993, in Tallahassee, Florida.

DIANE K. KIESLING

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 30th day of September, 1993.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-3929

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case.

Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, Department of Insurance

1. Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1) and 2(3-5).

2. Proposed findings of fact 3-15 are subordinate to the facts actually found in this Recommended Order.

3. Proposed findings of fact 16 and 17 are irrelevant.

Specific Rulings on Proposed Findings of Fact Submitted by Respondents, the Home

1. Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1-15(1-15).

COPIES FURNISHED:

Elizabeth J. Gregovits Nancy J. Aliff Attorneys at Law Department of Insurance

Division of Legal Services 612 Larson Building

Tallahassee, Florida 32399-0300

Paul R. Ezatoff David A. Yon Attorneys at Law

106 East College Avenue, Suite 1200 Post Office Box 1877

Tallahassee, Florida 32302-1877

Bill O'Neil General Counsel

Department of Insurance The Capitol, PL-11

Tallahassee, Florida 32399-0300

Tom Gallagher

State Treasurer and Insurance Commissioner

The Capitol, Plaza Level 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.

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

AGENCY FINAL ORDER

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

OFFICE OF THE TREASURER DEPARTMENT OF INSURANCE

IN THE MATTER OF:

THE HOME INDEMNITY COMPANY

THE HOME INSURANCE COMPANY CASE NO. 93-CA-046EJG

CITY INSURANCE COMPANY DOAH CASE NO. 93-3929

/

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 2, 1993, an Order to Show Cause was filed charging Respondents with violation of the moratorium on cancellations and nonrenewals of personal lines insurance policies imposed by Chapter 93-401, Laws of Florida.

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 Diane Kiesling, Hearing Officer, Division of Administrative Hearings, on August 27, 1993.

After consideration of the evidence, argument and testimony presented at hearing, and subsequent written submissions by the parties the Hearing Officer issued her Recommended Order (attached as Exhibit A). The Hearing Officer recommended that the Department find that Respondents did not violate the moratorium and that the Department dismiss the Order to Show Cause. The Department party filed exceptions to the Recommended Order. Respondents filed a Response to the Department's Exceptions. Upon careful consideration of the record, the submissions of the parties, and being otherwise advised in the premises, I find the following:

Rulings on Department's Exceptions

1. Petitioner's exception to Findings of Fact, paragraph 9, is accepted. Section 624.430, Florida Statutes, does not require the Department to give notice at any particular time. Chapter 93-401, Laws of Florida, directly affected all insurers and ultimately required the Department to respond specifically to the October 31, 1991, notification from Respondents.

   
   

2. Petitioner's exception to Findings of Fact, paragraph 15, is accepted. The hearing officer misunderstands the nature and function of an underwriting guideline and inappropriately reads into Section 624.430, Florida Statutes, an approval requirement which is not there.

   
   

3. The Hearing Officer's conclusion in paragraph 26 that the burden of proof is "clear and convincing" evidence is accepted only as it relates to the Department's attempt to impose fines upon the respondents.

4. Petitioner's exception to Conclusions of Law, paragraph 29, is accepted. The plain language of Chapter 93-401, Laws of Florida, prohibits terminations or nonrenewals unless there are underwriting rules or guidelines filed and approved with the Department.

   
   

5. Petitioner's exception to Conclusions of Law, paragraph 32, is accepted. The moratorium's applicability to personal lines insurers is clear in Chapter 93-401, Laws of Florida.

   
   

6. Petitioner's exception to Conclusions of Law, paragraph 33, is accepted. The Department's interpretation that Chapter 93-401, Laws of Florida, has a two-part test is reasonable and permissible.

   
   

7. Petitioner's exception to Conclusions of Law, paragraph 34, is accepted. The hearing officer has apparently misunderstood the nature and importance of underwriting guidelines, both in the general context of withdrawals and in the unique situation resulting from the moratorium.

   
   

8. Petitioner's exception to Conclusions of Law, paragraph 35, is accepted, for the reasons stated in the exception.

   
   

9. Petitioner's exception to Conclusions of Law, paragraph 36, is accepted. The hearing officer correctly points out that two statutes should be read to preserve the force of both. Section 624.430, Florida Statutes, was not abrogated or nullified by Chapter 93-401, Laws of Florida. Section 624.430 was merely tolled until November 14, 1993 (the effect of subsequent legislation related to the moratorium is not addressed herein). In addition, Chapter 93-401 is a remedial statute, not a penal statute.

   
   

10. Petitioner's exception to Conclusions of Law, Paragraph 37, is accepted. The hearing officer's conclusion that the moratorium did not apply to Respondents is contradicted by the plain language in subsection (1) of Section

1. of Chapter 93-401, Laws of Florida, which refers to cancellations and nonrenewals "announced, proposed, or contemplated." As indicated earlier, Chapter 93-401, Laws of Florida, did not abrogate any vested right. It merely tolled the action of withdrawal until November 14, 1993.

   
   

   1. Petitioner's exception to Conclusions of Law, paragraph 38, is accepted, for the reasons stated above. The hearing officer's reading into

      624.430 of "tacit approval" is erroneous.

      
      

   2. Petitioner's exception to the hearing officer's recommendation for disposition is accepted.

Ruling on Respondents' Response to Department's Exceptions

I have not considered Respondents' responses to the Department's exceptions. There is no statutory provision for the filing of a response to any party's exceptions. Addressing Respondents' Response would raise the question of whether they were timely filed. That question is unanswerable since there is no provision for them in the first place. Addressing Respondents' Response would also raise the question of whether or not fairness would require that the Department be given an opportunity to respond to the Response.

Therefore, based on the foregoing, it is ORDERED:

1. The Findings of Fact of the Hearing Officer are adopted in full as the Department's Findings of Fact, with the exceptions noted above.

   
   

2. The Conclusions of Law of the Hearing Officer are adopted in full as the Department's Conclusions of Law, with the exceptions noted above.

   
   

3. That the Hearing Officer's recommendation that the Order to Show Cause be dismissed is rejected as the appropriate disposition of this matter, as of the date the Recommended Order was entered. As of that date, Respondents were in violation of the moratorium imposed by Chapter 93-401, Laws of Florida. However, by enactment of Section 627.7013(2)(a)4., Florida Statutes, effective November 10, 1993, the Legislature removed Respondents from the operation of the moratorium imposed by that Section, which Section supersedes the moratorium which was enacted in May and expired on November 14, 1993.

ACCORDINGLY, no administrative penalty will be imposed on Respondents pursuant to the Agreed Order entered in this matter on July 30, 1993, and pursuant to the requirements of Section 627.7013(2)(a)4., Florida Statutes.

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 petition or notice of appeal with the General Counsel, acting as the agency clerk, at 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 the rendition of this Order.

DONE and ORDERED this 10th day of May, 1994.

TOM GALLAGHER

Treasurer and Insurance Commissioner

COPIES FURNISHED TO:

Honorable Diane Kiesling Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Paul R. Ezatoff, Esquire David Yon, Esquire

Katz, Kutter, Haigler

106 East College Avenue Suite 1200

P.O. Box 1877

Tallahassee, Florida 32302-1877

Elizabeth J. Gregovits, Esquire Nancy J. Aliff, Esquire Department of Insurance Division of Legal Services

612 Larson Building

Tallahassee, Florida 32399-0333

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AMENDED AGENCY FINAL ORDER

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OFFICE OF THE TREASURER DEPARTMENT OF INSURANCE

IN THE MATTER OF:

THE HOME INDEMNITY COMPANY DOAH CASE NO. 93-3929 THE HOME INSURANCE COMPANY CASE NO. 93-CA-046EJG CITY INSURANCE COMPANY

/

AMENDED FINAL ORDER

THIS CAUSE initially 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 May 10, 1994, the date of the Final Order originally entered in this matter. This Amended Final Order is hereby substituted for and supersedes the May 10, 1994, Final Order.

On July 2, 1993, an Order to Show Cause was filed charging Respondents with violation of the moratorium on cancellations and nonrenewals of personal lines insurance policies imposed by Chapter 93-401, Laws of Florida. Respondent timely filed a request for a formal proceeding pursuant to Section 120.57(1), Florida Statutes. Prior to the final hearing, the parties entered into an Agreed Order on July 30, 1993, which resolved most of the issues raised by the Order to Show Cause.

Pursuant to notice, the matter was heard before the Honorable Diane Kiesling, Hearing Officer, Division of Administrative Hearings, on August 27, 1993. The Hearing Officer forwarded her Recommended Order on September 30, 1993. Subsequent to issuance of the Recommended Order and prior to the entry of the Final Order, section 627.7013(2)(a)4., Florida Statutes, was enacted with an effective date of November 10, 1993. By this provision, the Legislature clearly removed Respondents from the operation of the moratorium imposed by Chapter 93- 401, Laws of Florida.

Given the particular circumstances of this matter, the Agreed Order of July 30, 1993, and the Legislative enactment cited above, it was unnecessary to reach the issues decided by the Hearing Officer and the subsequent Final Order issued on May 10, 1994. Therefore, this Amended Final Order supersedes the Final Order entered on May 10, 1994. Also, the Department hereby rejects the Hearing Officer's Recommended Order in its entirety and finds that Respondents did not commit any violations of Chapter 93-401, Laws of Florida.

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 petition or notice of appeal with the General Counsel, acting as the agency clerk, at 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 the rendition of this Order.

DONE and ORDERED this 14th day of October, 1994.

TOM GALLAGHER

Treasurer and Insurance Commissioner

COPIES FURNISHED:

Honorable Diane Kiesling Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Paul R. Ezatoff, Esquire David Yon, Esquire

Katz, Kutter, Haigler

106 East College Avenue Suite 1200

Post Office Box 1877 Tallahassee, Florida 32302-1877

S. Marc Herskovitz, Esquire Division of Legal Services 612 Larson Building

Tallahassee, Florida 32399-0333

Docket for Case No: 93-003929

Orders for Case No: 93-003929