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DEPARTMENT OF INSURANCE AND TREASURER vs ROBERT PHILLIP WOLF, 93-006641 (1993)

Court: Division of Administrative Hearings, Florida Number: 93-006641 Visitors: 51
Petitioner: DEPARTMENT OF INSURANCE AND TREASURER
Respondent: ROBERT PHILLIP WOLF
Judges: JAMES E. BRADWELL
Agency: Department of Financial Services
Locations: Clearwater, Florida
Filed: Nov. 18, 1993
Status: Closed
Recommended Order on Thursday, June 2, 1994.

Latest Update: Jul. 19, 1994
Summary: Whether Respondent's insurance agent's license and eligibility of licensure should be disciplined for alleged violations, set forth hereinafter in detail, as contained in the Administrative Complaint.Respondent engaged in misconduct by converting insurance premiums to his personal use.
93-6641.PDF

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS


DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 93-6641

)

ROBERT PHILIP WOLF, )

)

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 March 24, 1994 in Clearwater, Florida.


APPEARANCES


For Petitioner: James A. Bossart, Esquire

Department of Insurance and Treasurer 612 Larson Building

Tallahassee, Florida 32399-0333


For Respondent: Elihu H. Berman, Esquire

Post Office Box 6801 Clearwater, Florida 34618-6801


STATEMENT OF THE ISSUES


Whether Respondent's insurance agent's license and eligibility of licensure should be disciplined for alleged violations, set forth hereinafter in detail, as contained in the Administrative Complaint.


PRELIMINARY STATEMENT


Petitioner, Department of Insurance and Treasurer, by its Administrative Complaint filed herein signed October 20, 1993, seeks to impose disciplinary sanctions against Respondent's license and eligibility for licensure.

Respondent disputed the allegations of the Administrative Complaint and filed a request for a formal administrative hearing pursuant to Section 120.57(1), Florida Statutes. As a result of this request, this hearing ensued.


At the formal hearing, Petitioner presented the testimony of David Jordan and Glen Rosendalh of Atlantic Mutual Insurance Company, George Lagos of North American Specialty Insurance Company (NAS), and Mary M. Vaughn, a Senior Vice President and Records Custodian of Am South Bank. Respondent testified on his own behalf and presented the testimony of his daughter-in-law, Teresa Wolf.

Petitioner offered 17 exhibits and Respondents offered 6 exhibits, all of which were received in evidence at the hearing. On April 15, the parties filed Proposed Recommended Orders which were considered in preparation of this Recommended Order. Proposed findings which are not incorporated herein are the subject of specific rulings in an appendix.


FINDINGS OF FACT


Based on my observation of the witnesses and their demeanor while testifying, documentary evidence received and the entire record compiled herein, I hereby make the following relevant factual findings:


  1. Respondent, Robert Phillip Wolf, is currently licensed and has been eligible for licensure in Florida as a life and health insurance agent and as a general lines insurance agent during times relevant to these proceedings.


  2. On or about January 17, 1989, Church Insurance Program (CIP), an incorporated general lines insurance agency, was organized under the laws of Florida. Respondent was vice president of CIP at all times relevant.


  3. During times material, an agency agreement was in effect between CIP (herein Respondent or CIP) and North Atlantic Speciality Insurance Company (NAS) whereby CIP agreed to solicit insurance products on behalf of NAS. Respondent executed the agency agreement on behalf of CIP.


  4. That agreement provides, in relevant part: SECTION I. AGENT'S AUTHORITY.

3. Agent shall have authority to collect and receive premiums on insurance contracts placed with the company by or through the agent and to retain out of the premiums so collected commissions as provided in Section III of this Agreement on all contracts of insurance, except those subject to procedures specified in Section IV of this Agreement.


SECTION II. PREMIUM COLLECTION AND

REMITTANCE.


2. Agency billed policies.

a. Agent assumes full responsibility for prompt payment to the company of all premiums, less commissions, on all contracts of insurance placed with the company, by or through the agent, whether or not such premiums are collected from the insured.

However, the agent shall be relieved of responsibility to pay premiums with respect to an insurance contract which is legally terminated and agent furnishes the company proper evidence of such termination along with a written statement that the agency cannot collect the premium. The evidence and statement must be received within 30 days following the original inception

date of the contract. Policies so termin- ated shall not be subject to commission.

Failure of the agent to give the company such written notice of his inability to collect such premium shall constitute acceptance by the agent of responsibility to pay such premiums.

c. The agent agrees to remit any premium balance to the company so as to reach the company's office no later than

45 days after the end of the month for which the account or statement is rendered.


  1. All premiums collected or received by the agent shall be held by him as a fiduciary in trust for the company until paid to the company, and the privilege of retaining commissions as authorized else- where in this agreement shall not be construed as changing such fiduciary relationship.


    III. COMMISSION


    1. The agent is authorized to retain commissions out of premiums collected

    on agency billed policies as full compen- sation on business placed with the company.


  2. Pursuant to the agency agreement, CIP and Respondent were due twenty percent (20 percent)of net written premiums (NWP) as commission.


  3. Respondent was agent of record for NAS at CIP during times material.


  4. During 1993, NAS became increasingly aware of and concerned about (1) Respondent's failure to notify the company of coverages it had solicited and bound and to timely remit premiums due NAS on policies issued, and (2) the subsequently increasing debt balances on the agency's account current. Demands by NAS for payment of premiums were unheeded by Respondent.


  5. On or about March 31, 1993, NAS terminated its agency agreement with CIP for, inter alia, CIP's failure to remit premiums. After several communications and two termination letters, CIP accepted NAS's termination as of April 30, 1993.


  6. Thereafter, NAS demanded that CIP provide an accounting which was done. As of April 30, 1993, Respondent owed NAS total premiums of $130,966.03. This sum represented premiums received by CIP and due NAS after retention of the 20 percent commission on approximately 140 policies previously issued but which premiums remained unremitted (by CIP).


  7. NAS demanded that CIP remit the premiums that were due. Respondent failed to remit the premium funds as demanded by NAS.


  8. In an attempt to recover the premium funds, NAS filed a civil suit in Pinellas County against Respondent.

  9. CIP admitted to NAS at the time that it was withholding at least

    $109,661.91 in premium funds but would not make any payment to NAS in light of a counter-claim that it filed.


  10. During the pendency of the civil suit and following settlement negotiations, a settlement was reached between Respondent and NAS. Pursuant to the settlement, Respondent agreed to pay to NAS $130,931.25. This amount constituted the total amount of premiums billed and collected by Respondent for NAS policies or binders of coverage less commissions which represented 20 percent of the premiums billed ($273,579.50) as per an accounting attached to the stipulation less any amount previously paid. In return, NAS agreed to pay Respondent $42,000 in consideration for Respondent withdrawing any counter-claim it may have had against NAS. The upshot of the settlement was that Respondent would pay, and in fact paid, an approximate amount of $88,431, to NAS.


  11. During times material, an agency agreement was in effect between Respondent and Atlantic Mutual Insurance Company (herein AMI) whereby Respondent agreed to solicit insurance products on behalf of AMI.


  12. That agency agreement provided in relevant part:


    1. The agency agrees:

      1. To render monthly accounts of money due to the company on business placed by the agent with the company, other than customer-billed business so as to reach the company's office no later than the 15th day of the following month and to pay to the company the balance therein shown to be due to the company not later than the 15th day of the second month following the month for which the account is rendered.

      2. To be responsible for any additional premiums developed by audit or by report of values, or any renewal premiums on non- cancelable bonds unless the agent notifies the company within sixty (60) days of company billing date of such additional premiums that such item has not been collected and cannot be collected by the agent.


    2. The company agrees:

      b. On commissions:

      The agent shall receive or retain commissions on net paid premiums at the rate set forth in the company's commission schedule.


    3. It is mutually agreed that:

      a. This agreement supersedes all previous agreements, whether oral or written, between the company and the agent, and shall continue until terminated by ninety (90) days written notice of cancellation by either party to the other.

  13. Pursuant to the agency agreement with AMI, Respondent was due, as commission, seventeen and one-half percent (17-1/2 percent) of net paid premiums.


  14. During times material, Respondent was agent of record for AMI.


  15. On August 1, 1992, the agency agreement between AMI and CIP was terminated by mutual agreement.


  16. After the termination of the agency agreement, AMI became aware of and became increasingly concerned about Respondent's failure to notify it of coverages Respondent had previously solicited and bound and to timely remit premiums due on policies issued by Respondent and the subsequently increasing debit balance on the company's account current. Demands by AMI for payment of premiums due were unheeded by Respondent.


  17. As of October, 1992, the amount owed to AMI totalled $92,781.61. This sum represented insurance premiums, after retention of commission, due on insurance policies previously issued by Respondent and for which it had received

    $120,486 in premiums, and not remitted to AMI.


  18. As noted, despite AMI's demand that Respondent remit the premiums, they were not remitted either in whole or in part. However, Respondent admitted to AMI that it had received, as of September 4, 1992, $103,421.33 in premium funds.


  19. After termination of the agreement with AMI, Respondent claimed that it was entitled to retain $86,111.86 from premium funds received from the AMI policies, as annualized commissions or as commissions received in advance on premiums that had not been paid by the insured. Prior to the termination, CIP had attempted to gain authorization from AMI to withhold commissions, on an annualized basis. AMI refused to authorize these deductions and was steadfast in keeping consistent with its policy of allowing deduction of commissions when premiums were actually received.


  20. AMI does not allow agents to retain annualized commissions or to take advance commissions on policies. Despite Respondent's contention to the contrary, this has always been AMI's policy and that policy was communicated to Respondent in writing when Respondent attempted to initiate the policy of annualizing or deducting commissions in advance. Additionally, the agency agreement clearly provides that commissions were to be retained from paid premiums.


  21. Countersignature fees, if required, were paid by the insurance company and were thereafter deducted from the agent's commission.


  22. Respondent expended a great deal of money and time in start-up costs on items such as office equipment, supplies, preparation of forms, institution of office policies and procedures, to commence writing insurance business on behalf of AMI.


  23. Respondent knew, or should have known, that certain start-up costs were expected in order to commence writing insurance on behalf of AMI.


  24. Respondent was not authorized to deduct up-front expenditures or related start-up costs from premiums which were not collected.

  25. As of the date of hearing, the funds which represented premiums due AMI remain unaccounted for and were not paid (to AMI) by Respondent. When Respondent collected premiums for companies, those funds were fiduciary funds.


  26. Respondent's policy of spending "operating expenses" as a set off or charge against uncollected premiums was not permissible pursuant to the agency agreement in effect between the parties.


  27. The Am South Bank account which Respondent utilized to maintain his banking account for AMI had a balance, as of August 30, 1992, of $74,894.58; as of March 31, 1993, of $12,702.05; and as of April 30, 1993, of $8,561.13. The account was closed on December 2, 1993.


    CONCLUSIONS OF LAW


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


  29. 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.

  30. 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 per- mit of any service representatives, super- vising 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.

    . . .

    1. Fraudulent or dishonest practices in the conduct of business under the license or permit.

    2. 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.

    . . .

    (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.

  31. Section 626.621, Florida Statutes, provides, in pertinent part: The department may, in its discretion,

    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 investi- gator, and it may 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 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 permit.

    . . .

    (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 permit, 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.


  32. Section 626.795 provides:


    Any life insurance agent who is an officer, director, stockholder, or employee of an incorporated life insurance agency shall remain personally and fully liable and accountable for any wrongful acts, mis- conduct, 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.

  33. Section 626.839 provides:


    Any health insurance agent who is an officer, director, stockholder, or employee of an incorporated health insurance agency shall remain personally and fully liable and accountable for any wrongful acts, misconduct, or violations of any pro- visions of this code committed by such licensee or by any person under his direct supervision and control while acting on behalf of the corporation.


  34. In this case, Respondent was an officer of the corporation and the agent of record on behalf of the corporation for Atlantic Mutual and North American Specialty. Respondent does not dispute that fiduciary funds received on behalf of the insurance companies were not remitted, only that he now has no legal responsibility to remit such funds and is, in fact, entitled to retain such trust funds for his own use and benefit.


  1. In this case, the Department has established by clear and convincing evidence, that the Respondent failed to remit premiums due to Atlantic Mutual Insurance and North American Specialty Insurance in violation of Sections 626.561; 626.611(10); and 626.621(4), Florida Statutes.


  2. The Respondent's contention that he was entitled to withhold the premiums as annualized or advance commission is without merit. Respondent was informed by Atlantic Mutual that at the time the agreement was entered into, countersignature fees would be paid by the insurance company and then deducted from the agent's commission and that annualized commissions were not permitted. Respondent offered no evidence that either insurance company had agreed or even acquiesced to the retention of annualized or advance commissions or that such commissions had ever actually been retained by Respondent prior to the termination date of the agency agreements. Respondent's agency contracts with both insurance companies clearly state that commissions are to be paid or retained from paid premiums or premiums as they are collected. This policy was communicated to Respondent in the agency contract and in later communications when Respondent attempted to change the policy.


  3. Pursuant to Section 626.795 and 626.839, Florida Statutes, the Respondent, as a corporate officer, is personally responsible for the acts and misconduct of the corporation. Furthermore, pursuant to Section 626.561, Florida Statutes, it is the licensee who must account to his principal for the fiduciary funds, not the corporation, as it is the individual agent who is licensed, not the legal entity. Respondent has failed to account for his principals' funds and the funds are no longer in his custody, in violation of Section 626.561, Florida Statutes. By violating this statute, the Respondent has derivatively violated Section 626.611(13), Florida Statutes. The Respondent failed to demonstrate that the funds were disposed of pursuant to his authority. See, Dresden v. Willock, 518 F.2d 281 (3rd Cir. 1975) at 290. His unauthorized exercise of dominion over his principals' funds was a conversion of property that did not belong to him. Filner v. Shapiro, 633 F.2d 139 (2nd Cir. 1980) at 141-142.

  4. The Department has clearly and convincingly established that the Respondent has committed a fraud and has engaged in dishonest practices in the conduct of business under his license in violation of Section 626.611(9), Florida Statutes.


  5. The Department has clearly and convincingly established that the Respondent demonstrated a lack of fitness and trustworthiness to engage in the business of insurance in violation of Section 626.611(7), Florida Statutes. Respondent has wrongfully withheld fiduciary funds, failed to remit the funds to the insurers, failed to account for the funds, and has utilized such funds for improper purposes.


  6. The Respondent, by his conduct found herein, has shown himself to be a detriment to the insurance buying public and the insurers of this state, in violation of Section 626.621(6), Florida Statutes.


RECOMMENDATION


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


Petitioner enter a final order finding that the Respondent, ROBERT PHILIP WOLF, be found guilty of violations set forth in the Conclusions of Law portion of this Order, and that his licenses and eligibility for licensure be SUSPENDED for a period of eighteen (18) months pursuant to Rule 4-231.080, Florida Administrative Code, and that, pursuant to Section 626.641(1), Florida Statutes, the Respondent be required to pay satisfactory restitution to Atlantic Mutual Insurance Company prior to the reinstatement of any insurance license.


DONE and ORDERED this 2nd day of June, 1994, 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 2nd day of June, 1994.

APPENDIX


Rulings on Petitioner's Proposed Findings of Fact: Paragraph 27 - rejected - argument and conclusions.

Rulings on Respondent's Proposed Findings of Fact:


Paragraph 1 - adopted as relevant, paragraph 5, recommended order. The remainder is rejected as contrary to the greater weight of evidence, paragraph 4, section III entitled commission is dispositive.

Paragraphs 2 and 3 - rejected as argument. Paragraph 4 - rejected, irrelevant and subordinate.

Paragraph 5 - rejected, contrary to the greater weight of evidence. Paragraph 6 - adopted as modified, paragraph 30 recommended order. Paragraph 7 - rejected, irrelevant.

Paragraphs 8-10 - rejected, argument. Paragraph 11 - rejected, irrelevant.


COPIES FURNISHED:


Commissioner Tom Gallagher Department of Insurance

and Treasurer

The Capitol, Plaza Level Tallahassee, Florida 32399-0300


Bill O'Neil General Counsel

Department of Insurance and Treasurer

The Capitol, PL-11

Tallahassee, Florida 32399-0300


James A. Bossart, Esquire Department of Insurance

and Treasurer

612 Larson Building

Tallahassee, Florida 32399-0333


Elihu H. Berman, Esquire Post Office Box 6801

Clearwater, Florida 32618-6801


NOTICE OF RIGHT TO SUBMIT EXCEPTIONS


All parties have the right to submit written exceptions to the 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 consult with the agency that will issue the Final Order in this case concerning their 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: 93-006641
Issue Date Proceedings
Jul. 19, 1994 Final Order filed.
Jun. 02, 1994 Recommended Order sent out. CASE CLOSED. Hearing held 03/24/94.
Apr. 18, 1994 (Respondent`s) Order (unsigned) filed.
Apr. 15, 1994 (Petitioner) Proposed Recommended Order filed.
Apr. 12, 1994 Transcript (Volumes 1&2) w/Petitioner`s Exhibits 1-17 & Respondent`s Exhibits 1-6 filed.
Mar. 24, 1994 CASE STATUS: Hearing Held.
Mar. 16, 1994 Petitioner`s First Set of Interrogatories filed.
Mar. 16, 1994 (Petitioner) Notice of Filing Interrogatories filed.
Jan. 10, 1994 Notice of Service of Answers to Interrogatories Served by Petitioner on November 30, 1993 filed.
Dec. 20, 1993 Notice of Hearing sent out. (hearing set for 3-24-94; 9:00am; Clearwater)
Dec. 09, 1993 Ltr. to JEB from James A. Bossart re: Reply to Initial Order filed.
Dec. 01, 1993 (Petitioner) Notice of Service of Interrogatories filed.
Nov. 24, 1993 Initial Order issued.
Nov. 18, 1993 Agency referral letter; Administrative Complaint; Election of Rights;Answer to Administrative Complaint filed.

Orders for Case No: 93-006641
Issue Date Document Summary
Jul. 14, 1994 Agency Final Order
Jun. 02, 1994 Recommended Order Respondent engaged in misconduct by converting insurance premiums to his personal use.
Source:  Florida - Division of Administrative Hearings

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