STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 94-2210

)

FRANKLIN LEFLER, JR., )

)

Respondent. )

)

RECOMMENDED ORDER

On July 21, 1994, a formal administrative hearing was held in this case in Tampa, Florida, before J. Lawrence Johnston, Hearing Officer, Division of Administrative Hearings.

APPEARANCES

For Petitioner: James B. Bossart, Esquire

Daniel T. Gross, Esquire

Department of Insurance and Treasurer 612 Larson Building

Tallahassee, Florida 32399-0333

For Respondent: Jonathan L. Alpert, Esquire

David Ferrentino, Esquire Alpert, Josey, & Hughes First Union Center

100 South Ashley Drive, Suite 2000 Tampa, Florida 33602

STATEMENT OF THE ISSUE

The issue in this case is whether the Department of Insurance should discipline the Respondent for alleged violations of provisions of the Insurance Code governing agents.

PRELIMINARY STATEMENT

On or about March 7, 1994, the Department of Insurance filed an Administrative Complaint filed against the Respondent, Franklin Lefler, Jr., in Department Case No. 94-L-302 JAB. The Respondent requested formal administrative proceedings under Section 120.57(1), Fla. Stat. (1993), and the Department referred the matter to the Division of Administrative Hearings (DOAH) for assignment of a hearing officer on April 22, 1994.

After receipt of responses to the initial orders, a prehearing conference was held in this and other cases involving MetLife agents on June 7, 1994. As a result of the prehearing conference, final hearing was scheduled for July 21, 1994, in Tampa, Florida.

At the final hearing, the Department called three witnesses and had Petitioner's Exhibits 1 through 10 admitted in evidence. The Respondent appeared only through counsel and called no witnesses but had Respondent's Exhibits 1 through 12 admitted in evidence.

At the end of the hearing, the Department ordered the preparation of a transcript of the final hearing and requested until September 1, 1994, in which to file proposed recommended orders. Explicit rulings on the proposed findings of fact contained in the parties' proposed recommended orders may be found in the Appendix to Recommended Order, Case No. 94-2210.

FINDINGS OF FACT

1. The Respondent, Frank Lefler, Jr., is licensed in the State of Florida as a life and variable annuity contracts salesman, as a life insurance agent, and as a general lines insurance agent. During 1991 and 1992, he was employed by Metropolitan Life Insurance Company (MetLife).

   
   

2. In the summer of 1991, a woman named Theresa Novovesky, a registered professional nurse living in New Orleans, Louisiana, received a telephone solicitation regarding a "Nurses Insured Retirement Plan." At the time, she was engaged to be married later in the summer to an Air Force pilot named David Russell. Not wanting to deal with the matter over the telephone, she asked the caller to mail her the information. She later received in the mail a brochure advertising for a "Nurses Insured Retirement Plan" being offered by "Metropolitan Life and Affiliated Companies." The Plan was advertised as "a convenient way for you to accumulate cash for the future you deserve." The plan's five "important benefits" included:

   
   

   1. CONTROL

      If you should leave your present nursing position, your retirement benefits can stay with you.

      
      

   2. FLEXIBILITY Accessibility of cash.

      
      

   3. TAX BENEFITS

      Tax deferred accumulation while providing a life insurance benefit.

      
      

   4. SECURITY

      Can be used to provide life time income.

      
      

   5. DISABILITY

      Your monthly contribution can continue

      to be deposited by Metropolitan should you become disabled.

      
      

3. Novovesky was interested in the program described in the brochure and telephoned the toll-free number on the brochure for more information. Her call was received at the Tampa, Florida, offices of MetLife, and she used the descriptions contained in the advertising brochure to attempt to describe the reason for her call and the area of her interest. She left her telephone number so that she could be contacted at her residence in New Orleans.

4. Not long afterwards, the Respondent telephoned Novovesky in New Orleans. She again used the descriptions contained in the advertising brochure to attempt to describe the reason for her call and the area of her interest. The Respondent made an appointment to visit Novovesky at her apartment complex in New Orleans to show her the MetLife products that were consistent with her

   area of interest. He mentioned at the time that he was new and in training with the company and that he would have his supervisor, Rick Urso, with him to assist.

   
   

5. Urso and the Respondent met with Novovesky on July 25, 1991. They discussed aspects of Novovesky's career, personal and financial goals and ascertained that she was interested in a retirement savings plan. The Respondent presented a MetLife product that actually was a whole life insurance policy. He described the tax-free accumulation of cash value from contributions of $100 a month, and he estimated the cash value at age 59 as in the neighborhood of $600,000.

   
   

6. It is unclear whether the Respondent orally explained to Novovesky in so many words during the July 25, 1991, meeting that the product being presented was in fact a whole life insurance policy. She testified that he did not, and the product could have been explained in terms that did not clarify to her that it was in fact a life insurance policy. But Novovesky also testified that she did not understand life insurance or investment terminology and knew little about either. It is conceivable that the Respondent explained the true nature of insurance product in terms that she should have been able to understand but that she did not understand what he was telling her. In his testimony, her husband (then fiance) confirmed that possibility.

   
   

7. In addition, by Novovesky's own testimony, the Respondent asked her to verify the accuracy of information the Respondent took from her during the meeting and wrote on a form entitled, "Application for Life Insurance." Among other things, the form included a section on "Medical Data" "TO BE COMPLETED FOR ALL PERSONS TO BE INSURED." Although Novovesky denies that she read or understood the form, she clearly signed it.

   
   

8. Although she testified that she did not recall, Novovesky also apparently was required to undergo a physical examination, including blood sampling and testing, to qualify for the insurance for which she had applied.

   
   

9. When applying for the insurance she ultimately bought, Novovesky post- dated the check for the initial premium until after her fiance's scheduled return to the United States in August, 1991, for a brief period of leave from active Air Force duty in England. She reasoned that, in addition to helping her make final arrangements for their imminent wedding, he could advise her on whether to go through with the application she had signed. During the hustle and bustle of the prenuptial arrangements, her fiance telephoned the Respondent to assure himself and his fiancee that she had made reasonable retirement plans. From what she had told him, he assumed that she had purchased an annuity-type of retirement investment. He previously had made it clear to her that he did not think it was smart for her to buy life insurance. For whatever reason--perhaps because she preoccupied with planning their imminent wedding, or perhaps because she was afraid to tell him that she had applied for life insurance against his advice, or perhaps because she truly did not comprehend that she had in fact applied for a life insurance policy--she apparently did not tell him that she had applied for life insurance. Working from the incorrect assumption that his fiancee had purchased annuity-type of retirement investment, he asked the Respondent certain questions regarding guaranteed and anticipated performance

   and was given certain answers that did not alert him that the Respondent was referring to a life insurance policy. Satisfied with the answers he had gotten, Novovesky's fiance told her that it looked "OK" to him, and they got on with their busy lives.

   
   

10. It appears that, on or about August 30, 1991, someone with MetLife delivered to Novovesky her whole life insurance policy, as well as a typical written illustration of predicted performance of the whole life insurance policy, given certain assumptions. The illustration included references to: life paid up at 95; total, initial annual, and initial semi-annual premium; annual dividend; a guaranteed death benefit; additional insurance purchased by dividends; illustrative death benefit; guaranteed cash value; cash value of additional insurance; illustrative cash value; life insurance surrender cost index; and life insurance net payment cost index. It is difficult to understand how, but Novovesky testified that, even after receipt of the policy and illustration, she still did not understand that she had applied for and purchased life insurance. She testified that she did not read the material when she received it and that, after the wedding, Novovesky (now Mrs. Russell) moved with her husband to England. The policy and other papers she relating to her dealings with the Respondent were packed away in boxes and were relatively inaccessible until after their return to the United States.

    
    

11. Notwithstanding her testimony at final hearing and her prior hearsay statements to Insurance Department regulators, not only were the words "life insurance" mentioned in written statements she received from MetLife, she herself wrote a letter to the Respondent on November 4, 1991, advising that, while she was living in England with her husband, she would be unable to utilize the "Check-O-Matic" payment plan the Respondent had set up for her and that personal checks would be "my only means of paying my life insurance monthly."

    
    

12. When the Mrs. Russell did not receive monthly or even quarterly statements from MetLife, and MetLife responded to inquiries by saying that only an annual statement was due her, Mr. Russell especially became concerned about exactly what his wife had purchased. Still, the policies and information was inaccessible, and they decided it could wait until after their return to the United States. When they returned and Mrs. Russell received her first Anniversary Statement in the mail, Mr. Russell could tell that his wife had not purchased an annuity-type investment, and he decided it was time to find the policy and related MetLife information to determine just what was going on.

When he located and inspected the documentation, an incredulous Mr. Russell realized for the first time that his wife had purchased a life insurance policy, which was precisely what he told her not to buy. His reaction was that he could not understand how she could have been so foolish, and he told her so. She blamed it on the Respondent and MetLife.

1. Approximately a year later, in summer of 1993, the Russells read a newspaper article indicating that many MetLife policyholders were registering similar complaints and that state insurance regulators were investigating. Mr. Russell became persuaded that, after all, perhaps MetLife, and not his wife, was to blame for the mistake. They successfully pursued their desire to rescind the life insurance policy, get a full refund from MetLife, and reinvest the refund in another investment vehicle. (Initially, they invested in an annuity; they later changed to a stock mutual fund.)

   CONCLUSIONS OF LAW

   
   

   Jurisdiction

   
   

2. Section 624.11, Fla. Stat. (1993), provides in pertinent part:

   
   

   1. No person shall transact insurance in this state, or relative to a subject of

      insurance resident, located, or to be performed in this state, without complying with the applicable provisions of this code.

      
      

      The Respondent argues that this provision limits the jurisdiction of the Department of Insurance, in all respects, to the examination of activities and conduct that occur within the boundaries of the State of Florida. It does not. Cf. Florida Real Estate Comm'n v. Jay Williams, 240 So. 2d 304 (Fla. 1970).

      
      

3. The Department of Insurance acquires jurisdiction over insurance agents through their application for licensure and subsequent licensure. Regulation of insurance agents through their licensure distinguishes this case from those cited by the Respondent in his jurisdictional arguments. Cf., e.g., State v. Saiez, 489 So. 2d 1125 (Fla. 1986) (involving a Florida statute criminalizing the possession of machinery designed to reproduce credit cards); Bigelow v. Virginia, 95 S.Ct. 2222 (1975) (involving a Virginia statute penalizing the printing of advertisements for abortions); Burns v. Rozen, 201 So. 2d 629, 631 (Fla. 1st DCA 1967) (involving a Florida statute prohibiting the taking of finfish by certain equipment).

   
   

4. In the field of license regulation, the scope of the agency's investigation into the activities and conduct of licensees is defined by the regulatory statutes. Clearly, some contemplate that conduct and activities occurring outside the boundaries of the State of Florida can be considered. Cf., e.g., Sections 626.611(7) and (14) and 626.621(8), Fla. Stat. (1993). On the other hand, other statutory violations clearly require activity or conduct within the State of Florida. See, e.g., Section 626.611(2)-(4), Fla. Stat. (1993). Others require activity or conduct under the Florida license or appointment, if not necessarily entirely with the State of Florida. Cf., e.g.,

   Section 626.611(8)-(10), Fla. Stat. (1993). Each alleged violation must be considered and compared to the evidence in the case to determine if the evidence against the Respondent is within the scope of the agency's investigatory and regulatory authority.

   
   

5. In this case, it is concluded that the Department had jurisdiction to investigate and take action. The sales were taking place out of the MetLife office in Tampa, and the Respondent was operating under his Florida license and appointment. In addition, some of the alleged violations clearly contemplate that conduct and activities occurring outside the boundaries of the State of Florida can be considered. Cf., e.g., Sections 626.611(7) and (14) and 626.621(8), Fla. Stat. (1993).

   
   

   Burden of Proof

   
   

6. In disciplinary proceedings such as this, the burden is on the agency to prove the allegations in the Administrative Complaint by clear and convincing evidence. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

   The Respondent's Identity

   
   

7. The Respondent argues that the Department's burden to prove the Respondent's identity was proof beyond a reasonable doubt, citing criminal law. The Respondent's contention that the criminal standard of proof applies to the issue of the Respondent's identity is rejected in favor of the clear and convincing standard.

   
   

8. The Respondent also argues there was not clear and convincing evidence that Theresa Russell (formerly Novovesky) was dealing with the Respondent. As reflected in the findings, the proof was sufficient. Put in other words, if the Respondent wished to contest the evidence as to his identity, it was incumbent upon him in this case to testify.

   
   

   The Charges

   
   

9. Section 626.611, Fla. Stat. (1993), sets out the 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:

   * * *

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

   2. Willful misrepresentation of any insurance policy or annuity contract or willful deception with regard to any such policy or contract, done either in person or by any form of dissemination of information or advertising.

   * * *

   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.

   * * *

   (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.

   
   

10. Section 626.621, Fla. Stat. (1993), sets out the following 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 or 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:

    * * *

    1. Violation of any provision of this code or of any other law applicable to the business of insur- ance in the course of dealing under the license or appointment.

    2. Violation of any lawful order or rule of the department.

    * * *

    (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.

    
    

11. Section 626.9521(1), Fla. Stat. (1993), sets out prohibited unfair methods of competition and unfair or deceptive acts or practices:

    
    

    No person shall engage in this state in any trade practice which is defined in this part as, or determined pursuant to s. 626.951 or

    s. 626.9561 to be, an unfair method of compet- ition or an unfair or deceptive act or practice involving the business of insurance.

    
    

12. Section 626.9541, Fla. Stat. (1993), provides in pertinent part:

    
    

    1. UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE ACTS.--The following are defined as unfair methods of competition and unfair or deceptive acts or practices:

       1. Misrepresentations and false advertising

          of insurance policies.--Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or compar- ison which:

          1. Misrepresents the benefits, advantages, conditions, or terms of any insurance policy.

          * * *

          5. Uses any name or title of any insurance policy or class of insurance policies misrepre- senting the true nature thereof.

          * * *

          (k) Misrepresentation in insurance applications.

          1. Knowingly making a false or fraudulent written or oral statement or representation

          on, or relative to, an application or negotiation for an insurance policy for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, agent, broker, or individual.

          
          

13. In addition, Part III of F.A.C. Rule Chapter 4-215, governing insurance agents, is entitled "Code of Ethics--Life Underwriters," and includes as F.A.C. Rule 4-215.230:

    
    

    1. Misrepresentations are declared to be unethical. No person shall make, issue, circulate, or cause to be made, issued, or circulated, any estimate, circular, or state- ment misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends

       or share of the surplus to be received thereon, or make any false or misleading statement as

       to the dividends or share of surplus previously paid on similar policies, or make any misleading representation or any misrepresentation as to the financial condition of any insurer, or as

       to the legal reserve system upon which any life insurer operates, or use any name or title of any policy or class of policies misrepresenting the true nature thereof.

    2. No person shall make, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, or other pub- lication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio or television station, or in any other way, any advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or misleading.

       
       

14. As reflected in the Findings of Fact, it was not proven that the Respondent violated any of the foregoing statutes and rules.

    
    

15. Section 626.99(5), Fla. Stat. (1993), provides in pertinent part:

    
    

    1. PURPOSE. The purpose of this section is to require insurers to deliver to purchasers

of life insurance information which will improve the buyer's ability to select the most appropriate

plan of life insurance for his needs, improve the buyer's understanding of the basic features of the policy which has been purchased or which is under consideration, and improve the ability of

the buyer to evaluate the relative costs of similar plans of life insurance. This section does not prohibit an insurer from using additional material which is not in violation of this chapter or any other statute or regulation.

* * *

(7) FAILURE TO COMPLY.--The failure of an insurer to provide or deliver a buyer's guide or a policy summary as provided in subsection (4) shall constitute an omission which misrepresents the benefits, advantages, conditions, or terms of an insurance policy within the meaning of this part.

(Emphasis added.) The Respondent is not an insurer, and he is not subject to discipline for violations by an insurer.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Insurance enter a final order dismissing the Administrative Complaint in this case.

RECOMMENDED this 11th day of October, 1994, in Tallahassee, Florida.

J. LAWRENCE JOHNSTON 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 11th day of October, 1994.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2210

To comply with the requirements of Section 120.59(2), Fla. Stat. (1993), the following rulings are made on the parties' proposed findings of fact:

Petitioner's Proposed Findings of Fact.

1.-6. Accepted and incorporated to the extent not subordinate or unnecessary.

7. The visit was on July 25, 1991; otherwise, first sentence, accepted and incorporated. Second sentence, rejected as not proven exactly what the Respondent said.

8.-9. Accepted and incorporated to the extent not subordinate or unnecessary.

1. Rejected as not proven that life insurance was not discussed. Otherwise, accepted and incorporated.

2. Rejected as not proven that she did not read any of the application. Otherwise, accepted and incorporated to the extent not subordinate or unnecessary.

12.-13. Accepted and incorporated to the extent not subordinate or unnecessary.

1. Rejected as not proven: (1) that Russell formed any opinion about what the Respondent "was soliciting" (he was concerned only about what his fiancee was buying); or (2) that life insurance was discussed. Otherwise, accepted and incorporated to the extent not subordinate or unnecessary.

2. Rejected as not proven that the documents were "numerous" or that she did not "review" them.

3. Accepted, but not proven that the Respondent knew about them or sent them, and unnecessary.

4. Rejected as not proven that she did not know she had purchased a life insurance policy. Otherwise, accepted and incorporated to the extent not subordinate or unnecessary.

5. Accepted, technically, but unnecessary.

6. First sentence, rejected as not proven; second sentence, accepted and incorporated to the extent not subordinate or unnecessary.

20.-21. Accepted and incorporated to the extent not subordinate or unnecessary. (However, implication that they were informed for the first time is rejected as not proven.)

1. First sentence, rejected as not proven; second sentence, accepted and incorporated.

2. "Unknowingly" is rejected as not proven. Otherwise, accepted but subordinate and unnecessary.

3. Second and third sentences, accepted but subordinate and unnecessary. The rest is rejected as not proven.

4. "Understandingly unhappy" is rejected as not proven. Otherwise, accepted and incorporated to the extent not subordinate or unnecessary.

5. Accepted and subordinate to facts found.

Respondent's Proposed Findings of Fact. 1.-2. Accepted and incorporated.

1. Rejected as being conclusion of law.

2. Accepted and incorporated.

3. The year 1990 is rejected as being contrary to facts found. (The meeting was in 1991.) Otherwise, accepted and incorporated to the extent not subordinate or unnecessary.

4. First sentence, not clear from the evidence. Otherwise, accepted but largely subordinate and unnecessary.

5. Last sentence, rejected as being argument. Otherwise, accepted but subordinate to facts found, and unnecessary.

6. Accepted but subordinate to facts found, and unnecessary. 9.-10. Accepted and incorporated.

11.-12. Accepted and incorporated to the extent not subordinate or unnecessary.

13.-14. Accepted but subordinate to facts found, and unnecessary. 15.-17. Accepted and incorporated to the extent not subordinate or

unnecessary.

1. Accepted but subordinate to facts found, and unnecessary.

2. Accepted and incorporated to the extent not subordinate or unnecessary.

3. Accepted but subordinate to facts found, and unnecessary.

4. Accepted and incorporated to the extent not subordinate or unnecessary.

5. Accepted but subordinate and unnecessary.

23.-24. Accepted but subordinate to facts found, and unnecessary.

1. Accepted but subordinate and unnecessary.

2. As to last sentence of the first paragraph, rejected as contrary to the evidence that "any misperception stemming from the brochure" "could not be due to" the Respondent (although not proven that it was). Otherwise, the first paragraph is accepted and incorporated. The second paragraph is argument and a transcript excerpt that is subordinate to facts found, and unnecessary.

27.-28. Accepted and incorporated to the extent not subordinate or unnecessary.

29. Accepted but argument, subordinate, and unnecessary. 30.-31. Cumulative. (Also, subordinate and argument.)

1. Rejected as contrary to facts found that Lefler was not identified. Otherwise, largely accepted but subordinate to facts contrary to those found.

2. Argument and subordinate.

34.-35. Accepted but subordinate and unnecessary.

1. Argument, subordinate and unnecessary.

2. Last sentence, rejected as being argument and as being subordinate to facts contrary to those found. Otherwise, accepted but subordinate to facts found, and unnecessary.

38.-40. Largely accepted but subordinate and unnecessary.

41. First sentence, accepted but subordinate to facts found, and unnecessary. Second sentence, rejected as argument, as subordinate and as unnecessary.

42.-44. Accepted and incorporated to the extent not subordinate or unnecessary.

1. Argument, subordinate and unnecessary.

2. Largely, accepted and incorporated to the extent not argument, subordinate or unnecessary.

3. Cumulative.

4. First sentence, accepted but subordinate to facts found. Second sentence, cumulative.

COPIES FURNISHED:

James B. Bossart, Esquire Daniel T. Gross, Esquire

Department of Insurance and Treasurer 612 Larson Building

Tallahassee, Florida 32399-0333

Jonathan L. Alpert, Esquire David Ferrentino, Esquire Alpert, Josey & Hughes First Union Center

100 S. Ashley Drive, Suite 2000 Tampa, Florida 33602

Tom Gallagher

State Treasurer and Insurance Commissioner

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

Bill O'Neil General Counsel

Department of Insurance The Capitol, PL-11

Tallahassee, Florida 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the Department of Insurance 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 consult with the Department of Insurance concerning its rules on the deadline for filing exceptions to this Recommended Order.

=================================================================

AGENCY FINAL ORDER

=================================================================

OFFICE OF THE TREASURER DEPARTMENT OF INSURANCE

IN THE MATTER OF CASE NO. 94-L-302JB

FRANKLIN LEFLER, JR. DOAH NO. 94-2210

/

FINAL ORDER

THIS CAUSE came on before the undersigned, Treasurer of the State of Florida, acting in his capacity as Insurance Commissioner, for consideration and final agency action. On March 7, 1994, the Florida Department of Insurance (hereinafter referred to as the (DEPARTMENT") filed a one (l) count Administrative Complaint charging FRANKLIN LEFLER, JR. (hereinafter referred to as the "RESPONDENT") with various violations of Chapter 626, Florida Statutes.

Respondent timely filed a request for a formal proceeding pursuant to section 120.57(1), Florida Statutes. Pursuant to notice, the allegations contained in the Administrative Complaint were heard before J. Lawrence Johnston, Hearing Officer, Division of Administrative Hearings, on July 21, 1994, in Tampa, Florida.

After consideration of the evidence, argument and testimony presented, the hearing officer issued his Recommended Order (attached hereto as Exhibit A).

The hearing officer recommended the Department enter a Final Order dismissing the Administrative Complaint against the Respondent. The Petitioner timely filed five (5) exceptions to the hearing officer's Findings of Fact, three (3) exceptions to the hearing officer's Conclusions of Law and an exception to the recommendation of dismissal. The Respondent filed one (l) exception to the hearing officer's Conclusions of Law.

RULINGS ON PETITIONER'S EXCEPTIONS

1. Petitioner excepts to the hearing officer's failure to find that Metropolitan Life (hereinafter "MetLife") does not sell or offer a product called the "Nurses Retirement Savings Plan." Infact, MetLife does not offer a product called the "Nurses Retirement Savings Plan." Based on the illustration of this program reflected in Petitioner's Exhibit 3, it would be inviolation of Rule 4-215.230, Florida Administrative Code. However, it is unclear what significance this has in this matter. Therefore, Petitioner's exception is rejected.

   
   

2. The Petitioner takes exception to the hearing officer's finding that it was unclear whether it was explained to Ms.Novovesky (now Mrs. Russell) that the product being offered waslife insurance. (Finding of Fact #6). Petitioner appears tobelieve that the hearing officer was obligated to accept Ms.Novovesky's testimony as clear and convincing in all respects inthe absence of rebuttal testimony. It is the hearing officer'sfunction to consider all the evidence presented, judge credibilityof witnesses, draw permissible inferences from the evidence andreach findings of fact based on competent substantial evidence.Heifetz v. Department of Business Regulation, 475 So.2d 1277 (Fla. 1st DCA 1985). The burden of proof in this matter was clear andconvincing evidence. It was apparently the belief of the hearingofficer that the explanation of the product being offered was lifeinsurance was "unclear." His finding is supported by competentsubstantial evidence without denigrating the credibility of Ms.Novovesky. Therefore, Petitioner's exception is rejected.

   
   

3. Petitioner takes exception to the hearing officer'sfinding that is was conceivable that Respondent explained the truenature of the insurance product, (also contained in Finding of Fact#6). It was clear that Ms. Novovesky did not understand insuranceor investment terminology, it was not so clear that life insurancewas not discussed at the sales presentation. By the same token,the hearing officer's finding that it was conceivable thatRespondent explained the true nature of the product is sheerspeculation and unsupported by competent substantial evidence. Nevertheless, the finding that what was explained to Ms. Novoveskywas not clear to the hearing officer is supported by competentsubstantial evidence. Therefore, Petitioner's exception isaccepted to the extent that the hearing officer's finding wasspeculative, otherwise rejected.

   
   

4. Petitioner excepts to the portion of Finding of Fact #10where the hearing officer finds that upon receipt of the insurancepolicy Ms. Novovesky testified that she still did not understandthe significance of what she had received. Petitioner is correctthat her understanding upon receipt was irrelevant and that she wasnot required to make further inquiry. Whether the hearing officer finds it "difficult to understand, how, ... she still did notunderstand that she had applied for and purchased life insurance"is also irrelevant. What is relevant is whether Ms. Novovesky didunderstand. But, what Ms. Novovesky understood and when sheunderstood it is not clear from the record. Therefore, to theextent that the hearing officer concluded that Ms. Novovesky had anaffirmative duty to read the policy upon receipt, Petitioner'sexception is accepted, otherwise rejected.

   
   

5. Petitioner takes exception to Finding of Fact #5 as toRespondent's alleged description of the benefits of the whole lifeproduct offered by MetLife. Petitioner's exception, once again,relates to the notion that Ms. Novovesky did not know what she waspurchasing because of the Respondent's misrepresentations.

   Thereis competent substantial evidence to support the finding of thehearing officer and Petitioner's exception is rejected.

   
   

6. Petitioner's exceptions to the hearing officer'sConclusions of Law, as well as the previously discussed Findings ofFact, taken as a whole take umbrage at the hearing officer'sfindings that no violations occurred in the solicitation and saleof insurance products by Respondent to Ms. Novovesky. This is madefairly explicit in Petitioner's exception to the hearing officer'sConclusions of Law in paragraph 3. It was represented to Ms.Novovesky, in a mail solicitation, that MetLife offered a "NursesRetirement Savings Plan," in which the words "life insurance" donot appear. This advertisement misrepresented the nature of theproduct offered. Further, Ms. Novovesky's interest was apparentlypiqued by this plan, not by an interest in life insurance.However, the facts contained in this record do not, at least by clear and convincing evidence, show that this Respondentmisrepresented the products offered by MetLife. Although if therecord contained a clearer linkage to the Respondent between thesolicitation by mail of this product, an apparent violation ofRules 4-215.230(l) and (2), Florida Administrative Code, and/or amisrepresentation in the in-person solicitation and/or subsequentdelivery of the product, this case would have a much differentoutcome. Furthermore, to the extent that the hearing officerimplies that a whole life policy may be lawfully solicited and sold as "retirement plan" with a life insurance component, this is rejected. Such a basic misrepresentation, if proven, will always constitute various violations of the Insurance Code.

   
   

   RULING ON RESPONDENT'S EXCEPTION

   
   

7. Respondent excepts to the hearing officer's Conclusion of Law that stated that had Respondent wished to contest the evidence regarding identity, he should have testified at final hearing. Respondent misunderstands the hearing officer's statement. Thehearing officer found, in this case, the proof to be clear and convincing as to identity. His invitation to testify was only, perhaps, to allow Respondent to change his mind. Therefore, the Respondent's exception is rejected.

   
   

8. While not excepted to by either party, the hearing officer's Conclusion of Law #25 is erroneous and cannot stand. The Administrative Complaint alleged a violation of section 626.99(5), Florida Statutes. This subsection is titled "General Rules Relating to Solicitation." The hearing officer cited subsections (1) and (7), however, did not address subsection (5) which was the statute alleged to have been violated. Section 626.99(5), Florida Statutes, is not exclusive to insurers and an agent may be held responsible for violations. Whether an agent may be held accountable, as an agent, for violations of subsections (1) and/or (7) was not at issue and therefore the hearing officer's Conclusionof Law #25 is not adopted in this Final Order.

After careful consideration of the entire record, thesubmissions of the parties and being otherwise fully advised in thepremised, it is ORDERED:

1. The Findings of Fact of the hearing officer are adopted in full as the Department's Findings of Fact, except as modified above.

   
   

2. The Conclusions of Law of the hearing officer are adopted in full as the Department's Conclusions of Law, except as modified above.

   
   

3. The hearing officer's recommendation that the Administrative Complaint be dismissed is accepted as theappropriate disposition of this matter.

ACCORDINGLY, the Administrative Complaint is hereby DISMISSED.

Any party to these proceedings adversely affected by thisOrder is entitled to seek review of this Order pursuant to Section120.68, Florida Statutes, and Rule 9.110, Florida Rules ofAppellate Procedure

Docket for Case No: 94-002210

Orders for Case No: 94-002210