vs. ) CASE NO. 93-7153
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Claude B. Arrington, held a formal hearing in the above-styled case on May 11, 1994, in Miami, Florida.
For Petitioner: Lisa S. Santucci, Esquire
For Respondent: William L. Rogers, Esquire
Whether Respondent, a licensed insurance agent, violated the Florida Insurance Code as alleged in the Administrative Complaint and the penalties, if any, that should be imposed.
Petitioner filed a two count administrative complaint against the Respondent. The first count contained certain factual allegations pertaining to Respondent's alleged failure to renew a casualty insurance policy after he had received the premium for the policy. The second count alleged that Respondent's acts alleged in the first count violated the terms of a prior order that had been entered by Petitioner against Respondent. Respondent filed an answer and affirmative defenses to the administrative complaint by which he admitted certain factual allegations and asserted certain affirmative defenses. This proceeding followed.
At the formal hearing, the Petitioner called two witnesses, Sonya Rouviere and Richard Friedburg. Ms. Rouviere is one of three co-owners of certain commercial property that was at issue in this proceeding. Mr. Friedburg is a representative of Granada Insurance Company. Petitioner also introduced two
exhibits, both of which was accepted into evidence. Petitioner's exhibit one contains certain affidavits which were part of the Petitioner's investigative file. The investigative file, including these affidavits, was offered by the Petitioner for the sole purpose of establishing that Petitioner had probable cause to file the administrative complaint against Respondent. Petitioner's post-hearing submittal does not base any proposed finding of fact on these affidavits.
Respondent presented the testimony of one witness, his father, Fred B. Hartnett, and introduced five exhibits, each of which was accepted into evidence.
A transcript of the proceedings has been filed. Rulings on the parties' proposed findings of fact may be found in the Appendix to this Recommended Order.
At the time of the formal hearing and at all other times pertinent to this proceeding, the Respondent was licensed in the State of Florida by Petitioner as a life and health insurance agent and a general lines insurance agent.
Shirley Maroon, Alexis Ehrenhaft, and Sonya Rouviere are sisters who, at the times pertinent hereto, owned a commercial building located at 1501 Southwest 8th Street, Miami (the subject property). Prior to August 1991, the subject property was insured for casualty loss through Granada Insurance Company.
The Granada insurance policy had been obtained through Hartnett, Inc., a general lines insurance agency. Fred B. Hartnett was, at the times pertinent hereto, the sole stockholder, director, and officer of Hartnett, Inc. At all times pertinent to this proceeding, Fred B. Hartnett, was the individual with Hartnett, Inc., who had been appointed as the agent of Granada Insurance Company. In 1991, Fred B. Hartnett was approximately 90 years of age, but he remained active in his business.
In 1991, Respondent was not an officer, director, or shareholder of Hartnett, Inc.
In August 1991, the co-owners of the subject property received a premium renewal notice for the Granada policy that was to be paid to the Hartnett Agency. The amount of the renewal premium was $4,485.
Granada initially informed Hartnett, Inc. that the renewal premium for the subject property would be in the amount of $5,008. Following that initial determination, the Respondent asked Richard Friedburg, one of Granada's underwriters, to determine whether the premium for the subject property could be reduced. As a result of that discussion, a revised quote of $4,485 for the renewal premium was made by Granada.
The billing to the co-owners for the renewal premium was from Hartnett, Inc. The transmittal letter, dated August 6, 1991, was on a Hartnett, Inc. form and was signed on behalf of Hartnett, Inc. by Maria Rienoso. The letter referenced the Granada policy and provided, in pertinent part, as follows:
Enclosed please find a bill and applications which we ask that you review and sign where indicated by a check mark so we may process renewal of the above captioned policy . . .
If you have any questions, do not hesitate to contact our office. We ask that you forward signed applications and renewal premium to our office no later than 9/3/91 to insure there is no lapse in coverage.
On August 21, 1991, a check representing the renewal premium for the Granada policy in the amount of $4,485 was made out and signed by two of the co- owners, Ms. Maroon and Ms. Ehrenhaft. Ms. Rouviere, the only one of the three co-owners who testified at the formal hearing, was not present when the renewal check was prepared or executed. Ms. Rouviere did not have firsthand knowledge as to how the renewal check was delivered to the Hartnett Agency. There was no evidence that any of the three co-owners had any direct conversations or direct contact with Respondent pertaining to the renewal of the policy.
On or about August 22, 1991, the Respondent received check #646 executed by Ms. Maroon and Ms. Ehrenhaft in the amount of $4,485 that was to be in payment of the Granada renewal premium. The check was deposited into a bank account of Hartnett, Inc. There was no evidence that Respondent had any control over this account.
Hartnett, Inc. had handled the insurance on the subject property for several years. The only agent with whom Ms. Rouviere dealt at the Hartnett agency was the Respondent. There was no evidence as to whether the other two co-owners dealt with other agents at Hartnett, Inc.
In August 1992, the subject property was damaged by Hurricane Andrew. In October 1992, the claim filed with Granada by the co-owners of the subject property was denied on the grounds that Granada had never received the renewal premium and had, consequently, cancelled the policy prior to the date of loss.
At all times pertinent to this proceeding, Hartnett, Inc. was on an "account current" basis with Granada Insurance Company, which meant that Granada billed Hartnett, Inc., for Granada policies that had been bound by Hartnett, Inc. Granada Insurance Company did not bill Hartnett, Inc., for the renewal policy for the subject property because it did not know that Hartnett, Inc., had bound the renewal coverage.
On August 3, 1990, an Amended Final Order was filed in a disciplinary proceeding that had been instituted against Respondent by the Petitioner. The style of that proceeding was "In the Matter of William John Hartnett" and Petitioner's case number was 86-L-595RET. The Amended Final Order placed the Respondent on probation pursuant to Section 626.691, Florida Statues, for a period of two years from August 3, 1990. Among the special conditions of probation was subsection (d), which provided in pertinent part, as follows:
(d) During the period of probation, Respondent shall take special care to ensure that his accounts with insurers and/or managing general agents are kept current and that insurance premiums are properly remitted to insurers and/or managing general agents in the applicable regular course of business.
. . .
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter of and the parties to this proceeding. Section 120.57(1), Florida Statutes.
Petitioner has the burden of proving by clear and convincing evidence the allegations against Respondent. See Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987); Evans Packing Co. v. Department of Agriculture and Consumer Services, 550 So.2d 112 (Fla. 1st DCA 1989). Evans Packing, supra, 550 So. 2d 112, 116, fn. 5, provides the following pertinent to the clear and convincing evidence standard:
That standard has been described as follows: [C]lear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the evidence must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact the firm belief of (sic) conviction, without hesitancy, as to the truth of the allegations sought to be established. Slomowitz v. Walker, 429 So.2d 797, 800 (Fla. 4th DCA 1983).
Count One of the Administrative Complaint charges Respondent with violating the following provisions of the Florida Insurance Code: Sections 626.561; 626.611(4), (7), (8), (9), (10), and (13); 626.621(2) and (6); and 626.734, Florida Statutes.
Section 626.561(1), Florida Statutes, provides as follows:
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. . . . 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.
Petitioner did not establish that Respondent failed to treat the renewal check he received from the co-owners of the subject property as trust funds. The evidence established that the funds were promptly deposited into an account of Hartnett, Inc. There was no evidence as to the inability of Respondent or Hartnett, Inc. to account for these funds.
Section 626.611, Florida Statutes, provides, in pertinent part, as follows:
The department shall deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, title agency, solicitor, adjuster, customer representative, 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:
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(4) If the license or appointment is willfully used, or to be used, to circumvent any of the requirements or prohibitions of this code.
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Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.
Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment.
Fraudulent or dishonest practices in the conduct of business under the license or appointment.
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.
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(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.
The provisions of Section 626.621, Florida Statutes, provide, in pertinent part, as follows:
The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, solicitor, adjuster, customer representative, 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:
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(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.
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(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.
Section 626.734, Florida Statutes, provides as follows:
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.
Petitioner established that the renewal of the policy of insurance for the subject property was mismanaged. This mismanagement does not establish, however, a violation of Section 626.611(4), (9), or (10), Florida Statutes. There was no evidence that Hartnett, Inc. or the Respondent willfully used a license or appointment to circumvent any of the requirements of the Florida Insurance Code that would establish a violation of Section 626.611(4), Florida
Statutes. There was no evidence of any fraud or dishonest dealings to establish a violation of Section 626.611(9), Florida Statutes. There was no evidence of any misappropriation, conversion, or unlawful withholding of funds to establish a violation of Section 626.611(10), Florida Statutes.
Section 626.621(2), Florida Statutes, is a catchall provision. There was no evidence of an independent violation of the provisions of Section 626.621(2), Florida Statutes, distinct from the other violations charged.
The mismanagement of the renewal of the Granada policy should be considered evidence of a violation of Section 626.611(7) and (8) and of Section 626.621(6), Florida Statutes. To hold Respondent responsible for these violations, it must be established that he was responsible for the renewal of the policy as an individual agent or that he bears such responsibility pursuant to Section 626.734, Florida Statutes, as a officer, director, or stockholder of Hartnett, Inc.
The evidence established that Respondent was not an officer, director, or stockholder of Hartnett, Inc. in 1991. Consequently, it is concluded that he is not responsible for violations of Section 626.611(7) and (8) and of Section 626.621(6), Florida Statutes, committed by Hartnett, Inc.
The evidence established that Respondent had direct involvement with the policy of insurance on the subject property on three occasions. First, the evidence established that he dealt with at least one of the three co-owners prior to 1991. Second, Respondent asked Granada's underwriter to determine whether the renewal premium could be reduced, which resulted in a reduction of the premium from $5,008 to $4,485. Third, Respondent received the renewal check and promptly deposited it in a bank account of Hartnett, Inc. There was no evidence that Respondent had any control over this bank account or that he had any further responsibility for the renewal of the policy. It is concluded that the responsibility for the renewal of the policy was that of Hartnett, Inc.
While there was evidence as to violations of the provisions of Section 626.611(7) and (8) and of Section 626.621(6), Florida Statutes, Petitioner failed to establish by clear and convincing evidence that Respondent is responsible for those violations.
The Amended Final Order entered August 3, 1990, requires Respondent to ". . . take special care to ensure that his accounts with insurers and/or managing general agents are kept current and that insurance premiums are properly remitted to insurers and/or managing general agents in the applicable regular course of business." Count Two of the Administrative Complaint charged Respondent with violating the terms of the Amended Final Order.
Petitioner failed to establish by clear and convincing evidence that the renewal of the policy for the subject property should be concluded to be one of Respondent's "accounts with an insurer" within the meaning of the Amended Final Order. The greater weight of the evidence established that the subject account with the insurer was an account of Hartnett, Inc.
While there were indications that the account may be one of Respondent's accounts with a general agent (Hartnett, Inc.) within the meaning of the Amended Final Order, that fact was not established by clear and convincing evidence. Even if the account was considered to be one of
Respondent's accounts with a general agent, it was established that the premium was promptly remitted to the general agent as required by the Amended Final Order.
Consequently, it is concluded that Petitioner failed to establish by clear and convincing evidence that Respondent violated the terms and conditions of the Amended Final Order entered August 3, 1990, as alleged in Count Two of the Administrative Complaint.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Petitioner enter a final order which dismisses the
administrative complaint filed against Respondent.
DONE AND ENTERED this 18th day of July, 1994, in Tallahassee, Leon County, Florida.
CLAUDE B. ARRINGTON
Filed with the Clerk of the Division of Administrative Hearings this 18th day of July, 1994.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-7153
The following rulings are made on the proposed findings of fact submitted by the Petitioner.
The proposed findings of fact in the last sentence of paragraph 9 are adopted in material part by the Recommended Order.
The following rulings are made as to the findings of fact submitted by the Respondent.
Lisa S. Santucci, Esquire Division of Legal Services 612 Larson Building
William L. Rogers, Esquire 2750 International Place
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.
