Willis, Steven Schnur, Harvey Moss, and Stacy Fischer. Respondent also presented the testimony of Harvey Moss. Additionally, the Department's Exhibits numbered 1-13 were admitted in evidence.
Both parties submitted post-hearing proposed findings of fact in the form of proposed recommended orders. A specific ruling on each proposed finding of fact can be found in the Appendix to this Recommended Order.
Respondent is a Florida corporation with its principal place of business at 8001 Southwest 36th Street, Davie, Florida. Respondent is certified by the Department as a premium finance company in the State of Florida.
Although Respondent was incorporated in 1988, it did not become actively engaged in the premium finance business until sometime during 1992.
On March 1, 1992, Respondent entered into a contract with Seminole Marketing Corporation located in Grand Rapids, Michigan. Pursuant to that contract, Seminole became responsible for marketing to Florida insurance brokers Respondent's premium finance program. In exchange for those services, Respondent agreed to pay Seminole:
. . . on a monthly basis a fee to be mutually agreed upon based on the results of your efforts. This fee will be paid no later than 30 days after the close of each month with full statement as to the details of the per contract earnings by broker. A fee for an open contract will be credited to you only upon the contract being in force with an initial payment to us by the insured.
Thereafter, Respondent began paying Seminole monthly pursuant to Seminole's invoices which read only "For Marketing Services Rendered," as follows:
June, 1992 | $ 1,417.00 |
July, 1992 | 4,616.00 |
August, 1992 | 5,120.00 |
September, 1992 | 9,716.25 |
October, 1992 | 16,158.00 |
November, 1992 | 16,087.00 |
December, 1992 | 13,324.00 |
February, 1993 | 20,785.17 |
March, 1993 | 23,009.67 |
April, 1993 | 18,020.67 |
May, 1993 | 12,632.17 |
June, 1993 | 14,503.17 |
July, 1993 | 16,009.17 |
| $171,398.27 |
No additional documentation was submitted by Seminole to Respondent with those one-line invoices although the contract required additional documentation.
Respondent does not know how Seminole Marketing Corporation computes its invoices submitted to Respondent. No objective criteria exist or are used in Respondent's determination of the reasonableness of the invoices received from Seminole. The reasonableness of the invoices is simply a subjective determination on the part of Respondent which assumes that all contracts it receives are a result of Seminole's efforts to secure agents.
Respondent does not know what services are provided by Seminole, which services form the basis for the invoices rendered to Respondent. Respondent does not know if Seminole visits agents to solicit business and does not know if Seminole has ever provided agent training in Florida on behalf of Respondent. Seminole has never provided any market analysis to Respondent, and Respondent does not know if Seminole has ever placed any advertisement in Florida on behalf of Respondent.
Respondent has never conducted an audit of Seminole and does not know what records Seminole maintains on behalf of Respondent or relating to Respondent's business.
Respondent has no knowledge of how Seminole obtains agents to place contracts with Respondent. Respondent has never gone with Seminole on a visit to an insurance agent to assure that Seminole's conduct of business on behalf of Respondent is done in compliance with law.
In approximately December of 1992, the Department conducted an examination of Respondent. As part of that examination, the Department requested certain documents relating to Respondent's premium finance activities with Seminole. Thereafter, the Department directed several letters to Respondent specifying the additional documentation it desired in order to complete the examination. It is uncontroverted that the first two letter requests were not received by Respondent.
Respondent did receive a faxed copy of an August 19, 1993, letter requesting the additional documents, and Respondent responded to that fax by letter dated August 20, 1993.
The additional documents sought by the Department to complete its examination of Respondent were as follows:
Management agreements, any and all in existence, detailing the responsibilities of the contracted management company(ies).
A listing of all payments made to said management company(ies), along with the invoices detailing the basis for such payments.
All payments issued by the management company(ies) for the period June 1, 1992 thru September 30, 1992. (Copies of front and back of cancelled checks as well as copies of the invoices or other documentation sufficient to support the liability and payment.)
Agreements by the management company(ies) with anyone else relative to the above management agreement (agents, sales reps, suppliers, etc.).
Financial statements of the management company(ies) for the years ended 12/31/91 and 12/31/92. [Emphasis in original.]
Respondent forwarded to the Department a copy of its March 1, 1992 agreement with Seminole and copies of the invoices submitted by Seminole to Respondent covering the months of June 1992 through July 1993. Respondent has supplied no documentation to the Department in response to requested items numbered 3, 4, and 5. Respondent instead took the position that the documents
requested in items numbered 3-5 were not in Respondent's custody nor under Respondent's control and Respondent was, therefore, not able to provide such information.
By letter dated August 24, 1993, the Department acknowledged receipt of Respondent's correspondence, reiterated its request for the documents that had not been provided, and requested details regarding the basis for payments made to Seminole. That letter further requested ". . . copies of the statements called for in the [March 1, 1992] agreement relating to fees due Seminole Marketing for open contracts and 'details of the per contract earnings by broker'. "
In its August 27, 1993 response, Respondent advised the Department that it had complied with the Department's request for information to the best of its ability and suggested that the Department contact Seminole if the Department wished further information concerning Seminole's activities.
The only attempt by Respondent to obtain Seminole's records of its activities on behalf of Respondent was a November 30, 1993 letter to Seminole from Respondent advising that the Department sought access to Seminole's records related to Respondent, specifying the documents the Department desired, and asking Seminole to cooperate. Respondent made no attempt to obtain those records from Seminole in order that Respondent could provide them to the Department.
The documents requested by the Department are records related to Respondent's business activities and the activities of Seminole on behalf of Respondent. Further, the March 1, 1992 agreement between Respondent and Seminole envisioned that Seminole would retain records belonging to Respondent by specifically providing that Seminole would return to Respondent all of Respondent's company records upon termination of services.
In September 1992, two men visited insurance agent Steven Schnur at his office. They said they were representing Respondent, asked if he would use Respondent for his premium financing, and said they would pay him $5.00 for each contract he financed with Respondent. From November 1992 through July 1993, Schnur financed insurance contracts with Respondent. He received a $5.00 fee from Seminole for every contract he financed with Respondent. Seminole sent him a check each month. When he stopped financing contracts with Respondent, Seminole sent him no further payments.
Seminole never provided Schnur with any training or assistance regarding financing his insurance contracts. Similarly, Schnur performed no services for Seminole.
In July of 1992, insurance agent Stacy Fischer financed two contracts with Respondent. In August of 1992, she received a check from Seminole payable to her in the amount of $10.00 with the notation "July 2 @ $5". Although she financed two additional contracts with Respondent thereafter, Seminole did not send her another check.
Respondent did not directly compensate agents for financing contracts with it. Seminole compensated agents for financing contracts with Respondent. Respondent's lack of direct knowledge of the payments Seminole made to agents resulted from Respondent's purposeful business arrangement with Seminole whereby
Respondent asked no questions regarding what services Seminole was performing and how those services were being performed and whereby Respondent simply paid Seminole whatever monies Seminole requested.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties hereto and the subject matter hereof. Section 120.57(1), Florida Statutes.
The Order To Show Cause filed herein contains three counts. Count I alleges that Respondent, through Seminole, has engaged in the practice of providing insurance agents, including Stacy Fischer, with valuable consideration in return for those insurance agents financing insurance premiums with Respondent, in violation of Section 627.837 and, therefore, Sections 627.832(1)(e), (g), and (h), Florida Statutes. Petitioner has met its burden of proof as to Count I.
Section 627.837, Florida Statutes, provides as follows: Rebates and inducements prohibited.--
No premium finance company, or employee thereof, shall offer to pay or allow in any manner to any person, either as an inducement to the financing of any insurance policy with the premium finance company or after any such policy has been financed, any rebate, or shall give or offer to give any valuable consideration or inducement of any kind directly or indirectly, other than an article of merchandise not exceeding $1 in value which has thereon the advertisement of the premium finance company.
The evidence in this cause reveals that Respondent allowed Seminole to pay to insurance agents a $5.00 rebate as an inducement to financing insurance policies with Respondent. Respondent's allowing Seminole to solicit and obtain business for Respondent with no accountability and no direction has enabled Respondent to do indirectly what Respondent could not do directly. Respondent knew that Seminole was somehow producing business for Respondent without any training of agents, without providing any known services to agents, and without advertising Respondent's business. According to Respondent, it made no inquiry as to how Seminole was obtaining business on Respondent's behalf.
The Department attempted to prove Respondent's direct knowledge through the testimony of Stacy Fischer. Although she testified as to being directly solicited for business and being directly offered a rebate by Respondent's president, the contradictory nature of her testimony produces little of probative value. Although the Department failed to prove Respondent's direct knowledge through Fischer's testimony, the only reasonable conclusion is that Respondent not only should have known but did know that the service Seminole was providing in exchange for the fees Respondent was paying was Seminole's sending rebates to insurance agents. In order to know to whom to send rebate checks, Seminole had to be getting the information from Respondent as to who had sent premium finance contracts to Respondent.
Section 627.832(1) provides, in pertinent part, as follows:
The department may deny, suspend, revoke, or refuse to renew any license, if it finds:
* * *
(e) That the license or permit is being willfully used, or is to be used, to circumvent any of the requirements or prohibitions of this code.
* * *
A demonstrated lack of fitness or trustworthiness.
Fraudulent or dishonest practices in the conduct of business.
It is clear that the establishment of a business relationship between Respondent and Seminole was for the purpose of soliciting business in whatever manner Seminole chose to do so. Seminole's choice was to engage in the practice of rebating which is prohibited by the Insurance Code. The only reasonable conclusion is that Respondent established its relationship with Seminole in order that Seminole would do those things which Respondent could not.
Petitioner has met its burden of proving by clear and convincing evidence that Respondent willfully circumvented the prohibitions of the Insurance Code thereby engaging in dishonest practices. Respondent has demonstrated a lack of fitness or trustworthiness in its conduct of the premium financing business.
Count II of the Order To Show Cause alleges that Respondent has violated Sections 627.836(1), 624.318(2), and 624.418(2)(b), Florida Statutes, by refusing to provide to the Department records relating to the conduct of Respondent's business. Section 627.836(1), Florida Statutes, requires Respondent to keep ". . . such books, accounts, and records as will enable the department to determine. . . ." whether Respondent is complying with the provisions of the Insurance Code. Similarly, Section 624.318(2), Florida Statutes, provides as follows:
Every person being examined or investigated, and its officers, attorneys, employees, agents, and representatives, shall make freely available to the department or its examiners or investigators the accounts, records, documents, files, information, assets, and matters in their possession or control relating to the subject of the examination or investigation.
Pursuant to Section 624.418(2)(b), Florida Statutes, the Department is authorized to suspend or revoke the certificate of authority of a licensee who has ". . . refused to be examined or to produce its accounts, records, and files for examination . . . when required by the department." The Department has met its burden of proving that Respondent is guilty of the allegations contained in Count II.
The Department repeatedly requested Respondent to provide records related to the services being performed by Seminole on Respondent's behalf. Respondent made no attempt to provide any detailed documents showing the basis for the monies Respondent was sending to Seminole on a monthly basis. It is expected that Seminole's cancelled checks would have revealed that Seminole was writing checks to insurance agents in violation of the anti-rebate statute.
Contracts entered into by Seminole on Respondent's behalf would have also been relevant to determine if Respondent's business was being conducted in compliance with the Insurance Code.
Respondent argues that it cannot be found guilty of failing to produce the proper books and records because there is no statute or rule that specifies what books and records must be kept. While it is true that the required books and records are not specified by statute or rule, there are minimum records that any business would have, such as records reflecting expenditures and the basis therefor. It is inconceivable that a business would pay an entity thousands of dollars each month simply because the entity sent a bill. The Department is not attempting to penalize Respondent for not setting up an accounting system in some unique way; the Department seeks to discipline Respondent for not having customary records to reflect the manner in which Respondent conducts its business.
Respondent also argues that it did not refuse to produce the books and records, it simply did not have access to them. That argument is specious. Respondent did not have those business records in its possession because it arranged for those records to be kept in Seminole's possession, and because Respondent made no serious attempt to obtain its records from Seminole pursuant to the Department's repeated requests. When Respondent and Seminole entered into their contract, Respondent specified that the records Seminole would be keeping would belong to Respondent. The contract specifically prohibited Seminole from releasing information from Seminole's records regarding Respondent's business, including the list of brokers financing contracts with Respondent, without first obtaining Respondent's written consent. The agreement further specifically provided that Seminole would return to Respondent all of Respondent's records upon termination of services, retaining no copies. The evidence is clear that Seminole's possession of Respondent's records and Respondent's failure to obtain them is purposeful on the part of Respondent, has been done to prevent the Department from determining whether Respondent is complying with the provisions of the Insurance Code, and constitutes a direct violation of the statutes alleged in Count II.
Count III alleges that Respondent through its payments to Seminole has violated Section 624.418(1)(b), Florida Statutes, which requires the Department to suspend or revoke a certificate of authority if the licensee is ". . . using such methods and practices in the conduct of its business as to render its further transaction of insurance in this state hazardous or injurious to its policy holders or to the public." Respondent entered into a contract with Seminole whereby Respondent agreed to pay Seminole ". . . a fee to be mutually agreed upon. . . ." on a monthly basis after receiving from Seminole a ". . . full statement as to the details of the per contract earnings by broker." According to Respondent, it does not require Seminole to comply with the contract but simply sends Seminole a check every month in the amount that Seminole requests. The only test applied to the bill is that Respondent looks at the one-line invoice and determines if it is "reasonable." The business arrangement whereby Respondent sends money to Seminole does not require Seminole to perform any particular services. Further, the contract appears to be tied to the details of earnings by brokers rather than services by Seminole. According to Respondent, it does not know if Seminole has ever advertised Respondent's business or done anything to actively promote Respondent's business. Yet, Respondent has sent Seminole the sum of $171,398.27 over a period of approximately one year. Respondent's payments to Seminole based only on "For Services Rendered" invoices do not comport with sound business practices.
In its proposed recommended order, the Department recommends that Respondent's certificate of authority be revoked. Although Sections 627.831(1) and 624.418(2) provide that the Department may suspend or revoke a certificate of authority for violations of those statutes, Section 624.418(1)(b), Florida Statutes, provides that the Department shall suspend or revoke a certificate of authority for a violation of that statute. Respondent offered no evidence in mitigation of its violations. Respondent's refusal to cooperate with the Department in the Department's exercise of its regulatory authority is apparent and unjustified. Respondent's unexplained payment of substantial monies to Seminole is suspect. Respondent's practice of inducing, through Seminole, insurance agents in the State of Florida to violate the Insurance Code by accepting illegal payments is detrimental to the insurance industry and to the public. The only penalty which would assuredly protect the public from Respondent's business practices is revocation.
