STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND ) TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 93-5743

)

VERNAL C. ALDRIDGE, )

)

Respondent. )

)

RECOMMENDED ORDER

Upon due notice, this cause came on for formal hearing on May 13, 1994, in Bunnell, Florida, before Ella Jane P. Davis, a duly assigned hearing officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: John A. Dickson,

as Qualified Representative Department of Insurance

612 Larson Building

Tallahassee, Florida 32399-0333

For Respondent: Vernal C. Aldridge, pro se

Post Office Box 555002 Orlando, Florida 32844

STATEMENT OF THE ISSUES

Whether or not Respondent's insurance agent licenses should be disciplined for violating Sections 626.561(1), 626.611(4), 626.611(7), 626.611(8),

626.611(9), 626.611(10), 626.611(13), 626.621(2), 626.621(4), and/or 626.621(6)

F.S. [1990].

PRELIMINARY STATEMENT

On July 16, 1991, the Petitioner, Department of Insurance, filed a one count Administrative Complaint against Respondent which alleged that Respondent misappropriated or unlawfully withheld insurance premiums from Mutual Savings Life Insurance Company (Mutual Savings) which Respondent had collected on behalf of Mutual Savings in the regular course of business. Respondent denied the allegations of the Administrative Complaint and requested a formal administrative proceeding pursuant to Section 120.57(1) F.S.

At formal hearing, Petitioner withdrew its pending motions to impose sanctions. Respondent's oral motion to compel was denied. Respondent's oral motion for continuance was denied.

Petitioner presented the oral testimony of William Herring and of Respondent. Petitioner's Composite Exhibit(s) 1A-1K and the Respondent's Answers to Requests for Admissions were admitted in evidence. The Respondent testified on his own behalf and had no exhibits admitted.

No transcript was filed, but all proposed findings of fact have been ruled upon in this recommended order, pursuant to Section 120.59(2) F.S.

FINDINGS OF FACT

1. The Respondent is currently licensed in Florida as a life and health insurance agent, and was so licensed at all times material.

   
   

2. On or about November 13, 1985, Respondent entered into a contract with Mutual Savings Life Insurance Company. That contract required Respondent to remit to Mutual Savings all insurance premiums collected on behalf of that company and that Respondent would hold all monies collected on behalf of Mutual Savings in trust for it.

   
   

3. From November 13, 1985, to October 22, 1990, Respondent was employed by Mutual Savings as a debit agent.

   
   

4. Mutual Savings' company policy is that all monies collected are to be remitted to Mutual Savings on a weekly basis and that all collections in excess of $100.00 are to be converted to cashier's checks or money orders.

   
   

5. Respondent failed to remit any monies to Mutual Savings for the week of October 22, 1990.

   
   

6. Respondent told his superiors in October 1990, and testified at formal hearing, that his failure to remit premiums to Mutual Savings was a result of a burglary of his car whereby his bank bag containing cash in excess of $1,200.00 of his then-current debit collections was stolen. The police report completed in October 1990 stated that the Respondent had told the police that Respondent's vehicle was secured at the time of the burglary, but that the officer was unable to find any sign of forced entry to Respondent's vehicle. Respondent testified at formal hearing that he thought he had locked his car the night of the burglary, but was no longer certain.

   
   

7. Respondent's failure to remit premiums to Mutual Savings during the week of October 22, 1990 prompted William Herring, Respondent's immediate superior at Mutual Savings, to conduct an audit of Respondent's agent's account.

   
   

8. Initially, Mr. Herring did not go to every insured but relied in part on their payment patterns. Eventually, the audit was performed over a four week period, during which Mr. Herring personally checked the premium receipt books of the insureds on Respondent's account. During the course of this audit, Mr. Herring completed four sets of forms entitled "Manager's Report of Unreported Collections." These forms listed the shortage for each insured on Respondent's account and showed that Respondent had a total account shortage of $1,655.34, rather than a shortage of only $1,200.00.

   
   

9. When initially presented with Mr. Herring's accusations of a shortage in October 1990, Respondent acknowledged that he had a shortage on his account and signed the aforementioned reports. Respondent signed some of these reports after Mr. Herring had visited with the insureds and completed the forms, but Respondent also signed some of these reports in blank, prior to their being

   completed by Mr. Herring. Respondent signed the blank reports so that he could quit immediately on October 23, 1990 and would not have to return to the Mutual Savings office again.

   
   

10. At the conclusion of the aforementioned audit, Mr. Herring completed a final Audit Report on Respondent. That Audit Report stated that Respondent's bookkeeping was poor and that Respondent had a discrepancy on his account.

    
    

11. On or about January 16, 1991, Ken Jordan, an assistant Vice-President of Mutual Savings, notified Respondent that he had a deficiency on his agent's account. After applying a deposit on Respondent's bond account to the deficiency of $1,655.34, the company felt Respondent owed it $1,250.28. The letter constituted a demand for payment of that amount. Although in his answers to Requests for Admissions Respondent denied receiving the aforementioned demand letter, he admitted at formal hearing that he had, indeed, received the letter and asserted that he just had not remembered receiving it when he answered the Requests for Admissions.

    
    

12. On September 24, 1992, Respondent wrote to Jim Mott, an employee of Petitioner agency who was charged with investigating Respondent's activities as an insurance agent with Mutual Savings. In that letter, Respondent stated that he had offered to repay monies owed to Mutual Savings.

    
    

13. On January 26, 1993, John Parker, Vice President and Treasurer of Mutual Savings, executed an affidavit which stated that Respondent had a deficiency of $1,655.34 on his account and that after applying all credits due Respondent, Respondent owed Mutual Savings $1,250.28.

    
    

14. Respondent testified that on October 23 or 24, 1990 he had made an oral offer to Mr. Herring to repay the $1,250.28, but that he had not paid the money back because Mr. Herring demanded that the full amount be tendered by cash or cashier's check. Mr. Herring flatly denied there ever had been such a conversation, although he guessed Respondent may have offered to have his last check and bond applied against the amount that Respondent was short. Mr. Herring also testified that he did not know the full amount of the shortage as of October 23-24, 1990 so he could not have demanded any full amount then. Upon these issues, Mr. Herring is the more credible witness. As of the May 13, 1994 formal hearing, Respondent had made no effort to repay the money.

    
    

15. Respondent admitted that there was money short on his account, but maintained that he had not stolen the money himself. He also contended that Mr. Herring's audit showing that his accounts were short by $1,655.34 was inaccurate. However, Respondent could not demonstrate that the audit was inaccurate. Respondent speculated in retrospect, that the total shortage amount of $1,655.34 had been stolen from his car during the 1990 car burglary, because in 1990 he had only estimated that $1,200.00 was the amount stolen from his car. He admitted that he had not converted the cash he had collected to checks or money orders as required by his contract and further admitted that he had not counted how much money he had, in fact, collected during the week of October 22, 1990 from Thursday through the weekend until the night when his car burglary had occurred.

    
    

16. Respondent also conceded that he had always known that he was liable to Mutual Savings, under the terms of his contract, for the entire amount of the theft of cash, whatever that amount might have been, even if he was blameless in the burglary.

    CONCLUSIONS OF LAW

    
    

17. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of these proceedings.

    
    

18. The duty to go forward herein is upon the agency. The agency's burden of proof is that of clear and convincing evidence. See, Ferris v. Turlington, 510 So.2d 292 (Fla 1987).

    
    

19. Respondent is charged with violating Sections 626.561(1), 626.611(4), 626.611(7), 626.611(8), 626.611(9), 626.611(10), 626.611(13), 626.621(2), 626.621(4), and 626.621(6) F.S. [1990]

    
    

20. These provisions provide as follows:

    
    

    Section 626.561 Reporting and accounting for funds.--

    1. All premiums, return premiums, or other funds belonging to insurers or others received by an agent, solicitor, or adjuster in transactions under his license shall be trust funds so received by the licensee in a fiduciary capacity. An agent shall keep

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

       Section 626.611 Grounds for compulsory refusal, suspension, or revocation of agent's, solicitor's, adjuster's, service representative's, managing general agent's, or

       claims investigator's license or appointment.-- The department shall deny, suspend, revoke,

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

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

       * * *

       (4) If the license or appointment is willfully used, or to be used, to circumvent any of the requirements or prohibitions of this code.

       * * *

       1. Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

       2. Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment.

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

       4. 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.--

       
       

       Section 626.621 Grounds for discretionary refusal, suspension, or revocation of agent's solicitor's, adjuster's, service representative's, managing general agent's,

       or claims investigator's license appointment.- The department may, in its discretion,

       deny, suspend, revoke, or refuse to renew or continue the license or appointment of any agent, solicitor, adjuster, service representative, managing general agent, or claims investigator, and it may suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal is not mandatory under s. 626.611:

       (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.

       * * *

       (6) In the conduct of business under the license or appointment, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part X of this chapter, or having otherwise shown himself to be a source of injury or loss to the public or detrimental to the public interest.

21. The Respondent received premium funds from the insureds on his debit list during his regular course of business. These funds were trust funds received by him in a fiduciary capacity and for which he had a duty to account for, and to pay to, Mutual Savings or to other persons entitled thereto. Respondent failed to perform this duty.

    
    

22. Respondent inferred that the company and the Petitioner agency suspected he had staged the burglary of his car and had stolen the cash himself to cover up a shortage in his accounts that had spread over a long period of time. The evidence falls short of proving that Respondent did this, but it is not necessary to establish that scenario to conclude that Respondent violated many of his license requirements.

    
    

23. Mutual Savings' company policy has always been that debit collections in excess of $100.00 were to be converted to money orders. The Respondent admittedly failed to convert his collections, apparently because some occurred over a weekend. He admittedly has always known that he was personally liable to the company for at least $1,200.00 in unconverted cash collections which he did not turn in to the company during October 1990. He could not demonstrate that his "guesstimated" amount of the cash stolen was accurate. Instead, he chose to dispute the audited amount demanded by the company. It was Respondent's position that he was somehow justified in paying nothing to Mutual Savings for nearly four years because he disputed, without any proof, the exact amount he owed the company. His position has no validity at law or in logic. If the debt were in dispute, he could have tendered to Mutual Savings the $1200.00 in good faith and negotiated the remainder. He did not.

    
    

24. Respondent's position that it was Mutual Savings' duty to maintain records that conceivably could disprove their own audit is ludicrous, particularly in light of Respondent's admission that he never knew exactly how much cash was in the stolen bank bag. The fact that Respondent signed, in blank, some summary records pertaining to the audit does not undermine the underlying audit itself.

    
    

25. Regardless of whether the alleged burglary of Respondent's automobile actually occurred, Respondent was still personally responsible to pay to Mutual Savings all premiums collected from the insureds on his debit account. Respondent also maintained that, subsequent to the discovery of the shortage on his account, he offered to repay Mutual Savings what was demanded. Mr. Herring, on the other hand, contended that Respondent made no such an offer. It is an illogical and incredible assertion that an individual would offer to entirely repay a debt to a company and the company would refuse such an offer. Considering the evidence in the record and Respondent's prior inconsistent statements concerning his receipt of Mutual Savings' demand letter, Respondent's representations that he offered to repay Mutual Savings are not credible.

    
    

26. Even, assuming, arguendo, that Mutual Savings had turned down Respondent's offer to repay the entire amount except in full and by cash or cashier's check, over the intervening years, Respondent should have been able to save in increments in order to tender in full, by cash or cashier's check, the amount owed/demanded. He did not.

    
    

27. Respondent's failure over nearly four years to repay at least the amount he acknowledges he owes is not evidence of good faith. His continual "stonewalling" with regard to paying up is evidence of bad faith.

28. Respondent, by failing to account for the premiums, by failing to convert the premiums in his possession to money orders, and by failing for four years to repay Mutual Savings the amount demanded, (his shortage of $1,655.34 less a $405.06 credit, totalling $1,250.28) has violated Sections 626.561(1), 626.611(7), and (10), and 626.621(2) and (4) F.S. [1990].

    
    

29. Petitioner seeks a penalty consistent with Rules 4-231.010 et. seq., F.A.C. and argues that the Penalty Per Count is equal to the highest penalty provided by rule for any violation proven in each count; since this is a one count administrative complaint, the appropriate recommended penalty would be a nine month license suspension for violation of Section 626.561(1), F.S.; and this penalty may be adjusted in consideration of any aggravating or mitigating factors.

    
    

30. All testimony and documentary evidence has been considered in light of the requirement to apply aggravating and mitigating factors pursuant to Rule 4- 231.040, F.A.C. Respondent's failure to make timely restitution to Mutual Savings merits consideration as an aggravating factor, pursuant to Rule 4-

231.160 F.A.C., and should be reflected in the penalty. However, Respondent's failure to cooperate with the Petitioner at any stage of these Section 120.57(1)

1. proceedings can best be addressed by assessing costs related to discovery, rather than by increasing the penalty. The amount of such costs were not established in this proceeding.

   
   

   RECOMMENDATION

   
   

   Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Insurance enter a final order finding Respondent guilty of violating Sections 626.561(1), 626.611(7), and 626.611(10), and 626.621(2), and 626.621(4) F.S. [1990], and suspending Respondent's license as an insurance agent in this state for a period of twelve months.

   
   

   RECOMMENDED this 19th day of July, 1994, at Tallahassee, Florida.

   
   

   
   

   ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The De Soto Building

   1230 Apalachee Parkway

   Tallahassee, Florida 32399-1550

   (904) 488-9675

   
   

   Filed with the Clerk of the Division of Administrative Hearings this 19th day of July, 1994.

   APPENDIX TO RECOMMENDED ORDER 92-2060

   
   

   The following constitute specific rulings, pursuant to S120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF).

   
   

   Petitioner's PFOF:

   
   

   1. Accepted

   2. Accepted as a "given"; not used.

3-4 Accepted, except that the date on the contract has been substituted. 5-8 Accepted as modified to more accurately reflect the record as a

whole.

9-10 Accepted

11 Accepted as modified to more accurately reflect the record as a whole.

12-16 Accepted

17 Rejected as subordinate and immaterial. Covered in part in the conclusions of law on penalty.

Respondent's PFOF:

1 Covered in Finding of Fact 6 and 15.

2-5 Rejected as legal argument, not a proposed finding of fact. However, the general topics are covered in Findings of Fact 5, 11, 12, 14, and 15 and in the conclusions of law.

COPIES FURNISHED:

John A. Dickson

Department of Insurance and Treasurer 646-H Larson Building

Tallahassee, FL 32399-0300

Vernal C. Aldridge Post Office Box 555002 Orlando, FL 32855

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

Tallahassee, FL 32399-0300

Bill O'Neil, Esquire

Department of Insurance and Treasurer The Capitol, PL-11

Tallahassee, FL 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: 93-005743

Orders for Case No: 93-005743