STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND )

TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 93-4228

)

MAHMOOUD HASSAN SALAME, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a formal hearing in this case on October 13, 1993, in Clearwater, Florida.

APPEARANCES

For Petitioner: James A. Bossart, Esquire

Department of Insurance 612 Larson Building

Tallahassee, Florida 32399-0333

For Respondent: Mahmooud Hassan Salame, pro se

2056 Diane Avenue

Palm Harbor, Florida 34683 STATEMENT OF THE ISSUE

Whether Respondent's insurance agent license and eligibility for licensure should be disciplined based on allegations, set forth hereinafter in detail, as noted in the Administrative Complaint filed herein signed July 15, 1993.

PRELIMINARY STATEMENT

Petitioner seeks to discipline Respondent, Mahmooud Hassan Salame, based on allegations that he failed to remit funds that he received as a fiduciary of the insured or to refund same upon demand; retained the funds for his personal use and benefit for over a year and based thereon, demonstrated a lack of fitness and trustworthiness to engage in the insurance business. Respondent denied the allegations of the Complaint and requested a formal hearing.

At the final hearing, Petitioner presented the testimony of Michael Wallin and Richard Rosseau and the deposition testimony of Ross Miller, Esquire in lieu of his live testimony. Respondent cross-examined Petitioner's witnesses and testified on his own behalf.

Petitioner introduced exhibits 1 through 8 and Respondent introduced exhibits 1 through 9 which were received in evidence at the hearing. Respondent also introduced exhibits 10 and 11 which were rejected as being irrelevant. A transcript of Ross Miller's deposition was received by the Division on November 1, 1993, and was considered.

Petitioner presented a proposed recommended order which was considered and is substantially adopted in this Recommended Order. Respondent presented a letter commenting on the evidence and advancing reasons why he felt that the allegations against him were untrue. Respondent's letter was considered in preparation of the Recommended Order, however no specific rulings were made on Respondent's comments.

FINDINGS OF FACT

1. Respondent, Mahmooud Hassan Salame, is currently eligible for licensure and is licensed as a life and variable annuity contract salesman; life, health and variable annuity contract salesman; and life and health insurance agent during times relevant herein.

   
   

2. During times material, Respondent was an officer and a director of Florida Health Insurance Services, Inc., an incorporated insurance agency doing business in Largo, Florida. During times material, Respondent was a duly appointed agent representing Life and Health Insurance Company of America.

   
   

3. On October 1, 1991, Respondent solicited and sold to Francis Bluhm of Punta Gorda, Florida, a health insurance policy. At the time, Respondent received a check from Bluhm in the amount of $1,613.00 in payment of the premium. The check was endorsed by Respondent and deposited in his business bank account at Sun Bank.

   
   

4. At the time, Respondent used a general agent, CFA, for processing the Bluhm application and the premium payment was submitted to CFA. For some unexplained reason, the check from Respondent, which represented the premium payment, was not cashed by CFA and the policy was never issued. The funds received by Respondent from Bluhm remained in his possession for more than one

   (1) year.

   
   

5. At no time pertinent herein did Life and Health Insurance Company receive Mrs. Bluhm's premium payment or an application for health insurance from either Respondent or CFA, nor was a policy issued to Mrs. Bluhm.

   
   

6. Several months later, in February 1992, Respondent's accountant, Richard Rosseau, prepared Respondent's monthly financial statements for the months of October, November and December 1991. Those financial statements disclosed that the checks sent to CFA by Respondent, which were intended for the Bluhm premium payment, were outstanding. The financial statements were provided to Respondent by Rosseau. During times material, Life and Health Insurance Company of America had a policy whereby upon issuance of a policy, the issued policy was sent to the agent for delivery to the insured. Conversely, if the policy application was rejected and the policy was not issued, it was their practice to notify the agent who would inform the insured so that the agent could adjust his accounts concerning premiums and commissions. During the spring of 1992, Respondent received inquiries from Mrs. Bluhm's daughter regarding the policy which she (Bluhm) had applied for. Mrs. Bluhm advised Respondent that based on conversations with her daughter, she no longer wanted the policy that she applied for and requested a refund of the premiums she

   tendered. Respondent knew, or should have known, that the insurer did not receive the premium funds and that the Bluhm policy had not been issued as his own financial statements showed that the check in question had not been negotiated and he neither received the policy for delivery to Mrs. Bluhm nor did he notify her that the policy would not to be issued. Additionally, a review of Respondent's monthly agent's statement (received from the company) detailed all monthly transactions which would have divulged that no policy was issued for Mrs. Bluhm.

   
   

7. During the summer of 1992, Petitioner made inquiries of Respondent concerning the Bluhm policy and the premium that he received. Respondent responded to the inquiry but did not account for Mrs. Bluhm's money or ascertain whether the policy which she applied for, had been issued.

   
   

8. It was not until December 1992 that Respondent finally refunded Mrs. Bluhm's premium payment. Although Respondent maintained that the Bluhm mistake came about based on a snafu with the general agent, CFA's accounting procedures, Respondent's own records indicate that the Bluhm policy was never issued; that the company did not receive the application, and that Mrs. Bluhm should have been allowed to cancel her policy based on the company's 30 day "free look" policy wherein an insured is free to cancel a policy once issued within 30 days. In such instances, the applicant receives a full refund of monies tendered without payment of any commission to the agent.

   
   

   CONCLUSIONS OF LAW

   
   

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

   
   

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

    
    

11. The authority of the Petitioner is derived from Chapter 626, Florida Statutes. During times material, Respondent was a licensed agent subject to the disciplinary guides of Chapter 626, Florida Statutes.

    
    

12. Section 626.561, Florida Statutes, provides in pertinent part:

    
    

    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; and 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.

13. Section 626.611, Florida Statutes, provides in pertinent part: The Department shall deny, suspend, revoke,

    or refuse to renew or continue the license of any agent, solicitor, or adjuster or the permit of any service representative, supervising or managing general agent, or claims investigator, and it shall suspend or

    revoke the eligibility to hold a license or permit of any such person, if it finds that as to the applicant, licensee or permittee, any one or more of the following applicable grounds exist:

    * * *

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

    * * *

    (10) Misappropriation, conversion, or unlawful withholding of monies 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.

    
    

14. Respondent, an officer and director of the corporation and the agent of record on behalf of the corporation, Life and Health Insurance Company of America, was legally responsible for funds he received from insureds such as Francis Bluhm when such was remitted to him and which he retained in his possession in excess of one year.

    
    

15. Petitioner demonstrated, by clear and convincing evidence, that Florida Health Insurance Services, Inc., through Respondent's actions, failed to remit premiums due to Life and Health Insurance Company of America and wrongfully withheld such funds by neither remitting them to the insurer or refunding them to Mrs. Bluhm upon demand within the purview of Sections 626.561; 626.611(10); and 626.621(4), Florida Statutes. Additionally, pursuant to Sections 626.795 and 626.839, Florida Statutes, Respondent is personally liable for acts and conduct of the corporation. In this case, armed with the financial statements from his accountant and the monthly reconciliation statements from the insurance company, Respondent had adequate detailed information to know that the Bluhm policy was not applied for, nor were the checks submitted for the policy and premium negotiated by the company.

    
    

16. Respondent retained Mrs. Bluhm's funds for his own use and benefit for more than one year. During this time, Mrs. Bluhm did not have the insurance coverage she applied and paid for. Respondent thereby engaged in conduct proscribed by Section 626.561, Florida Statutes, and derivative violations of Sections 626.611(13) and 626.621(2), Florida Statutes.

    
    

17. Petitioner demonstrated, by clear and convincing evidence, that Respondent suffered a lack of fitness and trustworthiness to engage in the business of insurance as relates to the Bluhm transaction within the purview of Section 626.611(7), Florida Statutes.

    
    

18. Respondent, by his conduct in failing to ensure that Mrs. Bluhm's policy was issued, wrongfully withheld her money for one year and has thereby shown himself to be a detriment to the insurance buying public and insured's of Florida within the purview of Subsection 626.621(6), Florida Statutes.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that:

Respondent's licenses and eligibility for licensure issued by Petitioner be suspended for a period of six (6) months.

DONE AND ENTERED this 24th day of November, 1993, in Tallahassee, Leon County, Florida.

JAMES E. BRADWELL

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 24th day of November, 1993.

COPIES FURNISHED:

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

Tallahassee, Florida 32399-0333

Mahmooud Hassan Salame 2056 Diane Avenue

Palm Harbor, Florida 34683

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, 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 ten 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: 93-004228

Orders for Case No: 93-004228