STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND ) TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 93-5398

) CORNELIUS HOWARD DILLINGHAM, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, final hearing in the above-styled case was held in Naples, Florida, on April 19, 1994, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

The parties were represented at the hearing as follows: For Petitioner: Attorney William W. Tharpe, Jr.

612-L Larson Building

Tallahassee, Florida 32399-0333

For Respondent: Attorney Donald T. Franke

1044 Castello Drive, #103

Naples, Florida 33940 STATEMENT OF THE ISSUE

The issue in this case is whether Respondent, through persons under his direct supervision and control, made false representations that customers had to purchase an automobile club membership when purchasing automobile insurance.

PRELIMINARY STATEMENT

By Administrative Complaint filed August 10, 1993, Petitioner alleged that, at all material times, Respondent was licensed as a life and health insurance agent and general lines insurance agent in Florida. The Administrative Complaint alleges that Respondent was an officer or director of A Abacus Mr.

Auto Insurance of Naples, Inc., which was an incorporated general lines insurance agency.

The Administrative Complaint alleges that Respondent falsely represented to six customers that they needed to purchase a membership in an automobile club in order to purchase basic automobile insurance.

The Administrative Complaint alleges that Respondent thereby violated Section 626.611(5) by the willful misrepresentation of an insurance policy, Section 626.611(7) by demonstrating lack of fitness or trustworthiness to engage in the business of insurance, Section 626.611(9) by engaging in fraudulent or dishonest practices in the conduct of business, Section 626.611(13) by the willful violation of any provision of Chapter 626, Section 626.621(2) by the violation of any law applicable to the business of insurance, Section 626.621(6) by engaging in unfair methods of competition or in unfair or deceptive acts or practices or showing himself to be a source of injury or loss to the public or detrimental to the public interest, Section 626.9521 by engaging in a trade practice that is an unfair method of competition or unfair or deceptive act or practice involving the business of insurance, Section 626.9541(1)(a)1 by knowingly making or causing to be made a statement or sales presentation that misrepresents the conditions of any insurance policy, Section 626.9541(1)(e)1 by knowingly making or causing to be made any false material statement, Section 626.9541(1)(k)1 by making a false or fraudulent statement or representation relative to an application for insurance, Section 626.9541(1)(o)2 by knowingly collecting as a premium or charge for insurance a sum different than the premium or charge applicable to such insurance, and Section 626.9541(1)(x)4 by refusing to insure an individual solely because of his refusal to purchase noninsurance services, including automobile services as defined in Section 624.124.

By Election of Rights filed August 31, 1993, Respondent demanded a formal hearing.

At the hearing, Petitioner called five witnesses and offered into evidence seven exhibits. Respondent called one witness and offered into evidence one exhibit. All exhibits were admitted.

The transcript was filed May 3, 1994. Petitioner filed a proposed recommended order, and its proposed findings are adopted except for paragraph 36, which is rejected as unnecessary and subordinate. Respondent's response has been reviewed.

FINDINGS OF FACT

1. At all material times, Respondent has been licensed in Florida as a life and health insurance agent and general lines agent, Respondent was an officer or director of A Abacus Mr. Auto Insurance of Naples, Inc. (Mr. Auto), and Mr. Auto was an incorporated general lines insurance agency doing business at 2283 E. Tamiami Tr. in Naples.

   
   

2. In late 1989 or early 1990, Respondent employed

   Maribelle Nunez to work at Mr. Auto. She was inexperienced in insurance.

   A supervisory employee trained Ms. Nunez in the manner that Respondent had approved.

   
   

3. Ms. Nunez was trained to respond to frequent requests for the least expensive motor vehicle insurance or minimal motor vehicle insurance required by law. When customers requested quotes for such coverage, Ms. Nunez was instructed to include a "premium" for accidental death and dismemberment coverage. This training was consistent with the policy of Respondent and the practice of the other employees working for Respondent at Mr. Auto.

4. In fact, the "premium" was a fee for joining the Colonial Touring Association, Inc., which was a motor club that provided its members accidental death and dismemberment coverage. The fee generally consisted of $30 or $45. Respondent's commission for the motor club memberships sold was 90 percent, but his commission on personal injury protection was only 17 percent.

   
   

5. Ms. Nunez was trained to switch a customer to a different insurer if he rejected the accidental death and dismemberment coverage. The premium charged by the other insurer would be higher than the rate first quoted plus the motor club fee.

   
   

6. After a customer agreed to purchase the insurance package presented to him, which consisted of minimal coverage plus accidental death and dismemberment, Ms. Nunez prepared the paperwork reflecting the customer's "choice" of the motor club

   membership. She then instructed the customer to sign where indicated.

   Well over 90 percent of Respondent's motor vehicle insurance sales included the motor club membership.

   
   

7. On February 1, 1992, Joseph Benedetto visited Mr. Auto to purchase personal injury protection. He asked for the minimum coverage for his 1983 Ford pickup truck and 1972 Porsche 914. Either Ms. Nunez or another employee handled the transaction in the manner described above. Mr. Benedetto purchased what he believed was the minimum coverage required by law, even though it included a $30 fee for the motor club membership. However, even with the $30 fee included, Mr. Auto's rate was the lowest of the two or three agencies Mr. Benedetto had called.

   
   

8. On December 10, 1991, Donna Erb visited Mr. Auto and asked for minimal insurance coverage plus collision because her 1990 Ford Probe was financed. Ms. Nunez handled the transaction in the manner described above. Ms. Erb purchased what she believed was the minimum coverage required by law, plus collision, even though it included a $30 fee for the motor club membership. However, even with the $30 fee included, Mr. Auto's rate was the cheapest that Ms. Erb could find.

   
   

9. Petitioner presented no evidence regarding Mark Lane or Christina Harle, who are the alleged customers described in Counts III and IV.

   
   

10. In December 1990, Gene Torsell visited Mr. Auto and asked for minimal insurance coverage for an automobile that he was using but did not own. Ms. Nunez handled the transaction in the manner described above. Mr. Torsell purchased what he believed was the minimum coverage required by law, even though it included a $45 fee for the motor club membership. However, even with the $45 fee included, Mr. Auto's rate was the cheapest of the two or three agencies that Mr. Torsell had checked.

    
    

11. On October 19, 1990, Paul Pemberton visited Mr. Auto and asked for minimal insurance coverage for an automobile. Either Ms. Nunez or another employee handled the transaction in the manner described above. Mr. Pemberton purchased what he believed was the minimum coverage required by law, even though it included a $45 fee for the motor club membership.

12. Consistent with the training that Respondent or his supervisory employees gave Ms. Nunez and other employees, Respondent's employees did not adequately disclose the optional nature of the motor club fee and wrongly refused to sell customers the cheapest insurance available if they declined the optional accidental death and dismemberment coverage. Respondent was aware of all such practices as they took place.

    
    

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes. All references to Rules are to the Florida Administrative Code.)

    
    

14. Section 626.9541(1)(x)4 provides that the following is an unfair method of competition and unfair or deceptive act or practice:

    
    

    In addition to other provisions of this code, the refusal to insure, or continue to insure, any individual or risk solely because of

    * * *

    4. The insured's or applicant's failure to purchase noninsurance services or commodities, including automobile services as defined in

    s. 624.124 . . ..

    
    

    Section 624.124 mentions accidental death and dismemberment among "automobile services."

    
    

15. Section 626.734 provides:

    
    

    Any general lines insurance agent who is an officer, director, or stockholder of an incorporated general lines 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.

    
    

16. Petitioner must prove the material allegations by clear and convincing evidence. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

    
    

17. Petitioner has proved by clear and convincing evidence that Respondent has violated Section 626.9541(1)(x)4 four times. Although Respondent's acts and omissions in connection with the four insurance transactions described above may violate various provisions of the insurance code, the statutory provision most applicable is Section 626.9541(1)(x)4 (as well as Section 626.9541(1)(z), which prohibits "sliding"; but Petitioner did not expressly charge Respondent with a

    violation of this subsection, nor, under the circumstances, would such an allegation have served any useful purpose). A single transaction that simultaneously violates several statutes does not permit discipline to be aggregated as though several unlawful transactions took place. Instead, the discipline should be derived from the statute that most particularly describes the unlawful transaction.

    
    

18. Rule 4-231.100(24) provides for a suspension of six months for a violation of Section 626.9541(1)(x).

    
    

19. Rule 4-231.160 sets forth aggravating and mitigating factors. Aggravating factors include Respondent's pecuniary motivation. Mitigating factors include the lack of injury to insureds or the public, as Mr. Auto's rates were the lowest or among the lowest in the area, even with the unlawful addition of the motor club memberships. There is evidence of widespread purchasing of the motor club membership, but inferences adverse to Respondent may not be drawn based on a sample size of four customers, especially given the rigorous standard of proof that governs a disciplinary case. Vicarious liability is another mitigating factor in the rule, but Respondent's responsibility is due in part to his personal acts and omissions and not exclusively due to the acts and omissions of his employees. The most important factor is the lack of public injury; in view of this factor, the penalty should be six months' suspension.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that the Department of Insurance and Treasurer enter a final order finding Respondent guilty of four violations of Section 626.9541(1)(x), Florida Statutes, and suspending his license for a total of six months.

ENTERED on May 25, 1994, in Tallahassee, Florida.

ROBERT E. MEALE

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 on May 25, 1994.

COPIES FURNISHED:

Hon. Tom Gallagher

State Treasurer and Insurance Commissioner The Capitol, Plaza Level

Tallahassee, FL 32399-0300

Bill O'Neil, General Counsel Department of Insurance

The Capitol, PL-11 Tallahassee, FL 32399-0300

Attorney William W. Tharpe, Jr. 612-L Larson Bldg.

Tallahassee, FL 32399-0333

Attorney Donald T. Franke 1044 Castello Dr., #103

Naples, FL 33940

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: 93-005398

Orders for Case No: 93-005398