STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CYPRESS INSURANCE COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 94-5104RP

)

DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Respondent. )

)

SUMMARY FINAL ORDER

Pursuant to the request of the parties, the instant case has been decided summarily, without an evidentiary hearing being held, inasmuch as there are no disputed issues of material fact.

APPEARANCES

For Petitioner: Milton J. Wallace, Esquire

Michael G. Shannon, Esquire

WALLACE, BAUMAN, FODIMAN & SHANNON, P.A.

2222 Ponce de Leon Boulevard, Suite 303 Coral Gables, Florida 33134

For Respondent: Ruth Goekel, Esquire

Office of Legal Affairs

Department of Insurance and Treasurer

200 East Gaines Street 645A Larson Building

Tallahassee, Florida 32399-0307 STATEMENT OF THE ISSUE

Whether the Department of Insurance and Treasurer's proposed amendment to Rule 4-121.066, Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority for the reasons asserted by Petitioner?

PRELIMINARY STATEMENT

On September 15, 1994, Petitioner filed a petition with the Division of Administrative Hearings (hereinafter referred to as the "Division") seeking an administrative determination that the proposed amendment to Rule 4-121.066, Florida Administrative Code, by the Department of Insurance and Treasurer (hereinafter referred to as the "Department") is an invalid exercise of delegated legislative authority on the grounds that: (1) the proposed rule deprives insurance companies of their right, under Section 624.319, Florida Statutes, to a "hearing" concerning the accuracy of examination reports of which they are the subject prior to the finalization and filing of these reports; and

1. the Department "has failed to comply with the required rule-making

   procedures of Section 120.54, Florida Statutes." By order issued September 19, 1994, the Division Director assigned the case to the undersigned Division Hearing Officer, who, on the following day, issued a Notice of Hearing scheduling the final hearing in this case for October 7, 1994.

   
   

   On September 28, 1994, Petitioner filed a motion requesting that the final hearing be continued. A hearing on the motion was held by telephone conference call on September 29, 1994. By order issued October 3, 1994, the final hearing was continued and rescheduled for October 19, 1994, which was still within the 30-day time frame prescribed in Section 120.54(4)(c), Florida Statutes, for holding the hearing. 1/

   
   

   On October 5, 1994, Petitioner filed a Motion for Summary Final Order in the instant case, arguing that the "issue to be decided by this Division is purely a question of statutory construction that does not require extrinsic evidence from the parties." Petitioner further stated in its motion that the "Department's evidence, for what it is worth, can be presented in the form of affidavits."

   
   

   The Department, on October 11, 1994, filed a response to Petitioner's Motion for Summary Final Order. Appended to the response were two affidavits, one from Donald Dowdell, the Director of the Department's Division of Legal Services, and the other from Wayne Johnson, Chief of the Department's Bureau of Property and Casualty Insurer Solvency, Market Conduct and Surplus Lines. In its response, the Department agreed that an evidentiary hearing in the instant case was not necessary, provided the affidavits appended to its response were considered by the Hearing Officer in resolving the instant controversy.

   
   

   A hearing on Petitioner's Motion for Summary Final Order was held by telephone conference call on October 17, 1994. During the conference call, counsel for Petitioner indicated that Petitioner had no objection to the Hearing Officer taking into consideration, in summarily deciding the instant case, the two affidavits appended to the Department's response to the Motion for Summary Final Order. Following the conference call, the Hearing Officer issued an order advising the parties of the following:

   
   

   1. There will be no evidentiary hearing held in the instant case.

   2. The evidentiary hearing scheduled to commence on October 19, 1994, is cancelled.

   3. In deciding the instant case the Hearing Officer will take into consideration the two affidavits appended to the Department's response to the Petitioner's Motion for Summary Final Order.

   4. Proposed Final Orders shall be filed no later than October 27, 1994.

   5. Oral argument in the instant case will be heard by telephone conference call on October 31, 1994, commencing at 10:30 a.m. Petitioner shall make the necessary arrangements to initiate the conference call.

   6. The Hearing Officer will issue his Final Order in this matter within 30 days of oral argument.

The parties timely filed their proposed final orders on October 27, 1994.

Through their proposed final orders, the parties have requested the Hearing Officer to take official recognition of the following: Petitioner- Section

624.324, Florida Statutes (1977); Section 624.324, Florida Statutes (1982); Chapter 624, Part II, Florida Statutes (1959); Chapter 624, Part II, Florida Statutes (1971); Chapter 120, Florida Statutes; 2/ and the Laws of Florida referenced in the history notes to the various statutory provisions in Chapter 120, Florida Statutes; and the Department- Section 624.0118, Florida Statutes (1959); Section 624.0118, Florida Statutes (1967); Section 624.319, Florida

Statutes (1975); Section 624.319, Florida Statutes; Sections 34 and 39 of Chapter 59-205, Laws of Florida; Sections 13 and 35 of Chapter 69-106, Laws of Florida; Section 1 of Chapter 71-46, Laws of Florida; Section 3 of Chapter 76- 168, Laws of Florida; Section 1 of Chapter 77-457, Laws of Florida; Sections 2 and 3 of Chapter 81-318, Laws of Florida; Sections 29, 34, 37 and 809(1) of Chapter 82-243, Laws of Florida; Section 1 of Chapter 86-126, Laws of Florida; Sections 187 and 188 of Chapter 91-108, Laws of Florida; Section 4 of Chapter 91-429, Laws of Florida; Section 5 of Chapter 93-78, Laws of Florida; Section 624.0123, Florida Statutes (1959); Section 624.324, Florida Statutes; Section

21 of Chapter 78-95, Laws of Florida; Section 119.07, Florida Statutes (1967); Section 119.07, Florida Statutes (1975); Section 119.07(3), Florida Statutes; Rule 4-121.052, Florida Administrative Code; and Rule 28-5.110, Florida Administrative Code. Official recognition has been taken of these materials as requested in accordance with Section 120.60, Florida Statutes.

Oral argument in this case was held by telephone conference call on October 31, 1994, as scheduled.

The Hearing Officer has carefully considered the parties' proposed final orders and the oral argument they have presented. The Department's proposed final order, unlike Petitioner's, contains, what are labelled as, "findings of fact." With the exception of paragraphs 6 and 7 of these proposed "findings of fact," which have been accepted as findings of fact and incorporated in that portion of this Summary Final Order devoted to such factual findings, Petitioner's proposed "findings of fact" have been rejected, at least as factual findings, because: even if true, they would have no effect on the outcome of the instant case and therefore are unnecessary (paragraph 1, first sentence, paragraph 2, paragraph 3, and paragraph 4, seventh sentence, of the Department's proposed findings); or they are more in the nature of argument, legal analysis and conclusions, or statements of the law, past and present, than actual findings of fact (remainder of the Department's proposed findings).

STATEMENT OF FACTS GLEANED FROM JOHNSON'S AND DOWDELL'S AFFIDAVITS

The following are the Hearing Officer's factual findings based upon the affidavits of Wayne Johnson, Chief of the Department's Bureau of Property and Casualty Insurer Solvency, Market Conduct and Surplus Lines, and Donald Dowdell, the Director of the Department's Division of Legal Services:

Financial Examinations of Insurers: Current Department Practice (Johnson's Affidavit)

1. Financial examinations of insurers are conducted on a schedule determined by Section 624.316, Florida Statutes, which is typically every three to five years for domestic insurers. Financial examinations are also conducted on a target basis as circumstances require.

   
   

2. The Department's examiner generally conducts the examination on the premises of the insurer, usually at the insurer's home office. The examination routinely takes between two and six months. During the course of the

   examination, the examiner is in constant contact with officials of the insurer and the insurer is generally kept informed as to the examiner's findings.

   
   

3. Upon completion of the examination and before the examiner returns to Tallahassee, the examiner normally has a meeting with officials of the insurer to inform the insurer of material adverse findings.

   
   

4. The examiner then returns to Tallahassee and prepares the draft examination report. This report is reviewed by the examiner's immediate supervisors up through the bureau chief level. The report is then either hand delivered or mailed to the insurer with a return receipt card attached. A form which tracks the requirements of Section 624.319(5), Florida Statutes, is normally included with the draft report. If the insurer agrees with the draft report, the insurer generally signs the form and returns it to the Department, whereupon the Department files the report as a public document. The Department then informs the insurer by letter that the report has been filed as a public document.

   
   

5. If the insurer desires to have a Section 624.319 "hearing" on the report, the Department requires the insurer to request the "hearing" within the 30-day period prescribed by Section 624.319(1), Florida Statutes. The Department considers this 30-day period to have begun on the date the insurer received the draft report, as reflected on the return receipt card completed by the insurer. Upon receipt of a request for "hearing:" a mutually agreeable "hearing" date is chosen; the insurer's officials then meet on the selected date with Department personnel, including the examiner; and, based upon the information provided by the insurer, the Department determines whether any changes should be made to the draft report. If the Department finds that a new draft is warranted, after it is prepared, the reworked draft is mailed to the insurer and thereafter the insurer is afforded another opportunity to respond. If the Department determines that no changes should be made, the Department informs the insurer that it intends to finalize the draft report as the final report.

   
   

6. If the draft report is finalized after the "hearing" has been held, the report is mailed to the insurer, accompanied by the form required under Section 624.319(5), Florida Statutes, with a return receipt card attached. At this point, the Department files the report and thereupon treats the report as a public document.

   
   

7. From July 1, 1992, to October 4, 1994, the Department completed 32 financial examinations of life and health insurers, seven of which involved a Section 624.319 "hearing." From March of 1992 to October 4, 1994, the Department had completed 87 financial examinations of property and casualty insurers, 24 of which involved a Section 624.319 "hearing." No request for a Section 624.319 "hearing" has ever been referred by the Department to the Division of Administrative Hearings.

   
   

   The Department's Interpretation of the "Hearing" Requirement of Section 624.319, Florida Statutes: A Historical Perspective (Dowdell's 3/ Affidavit)

   
   

8. It has been the consistent policy of the Department for at least the past 22 years to treat the "hearing" referred to in Section 624.319(1), Florida Statutes, as an informal meeting or conference at which Department personnel and insurance company officials discuss the draft of the examination report to determine if the Department should change any of the findings included in the report.

9. The Department has based its long-standing interpretation of the term "hearing" in Section 624.319(1), Florida Statutes, upon the fact that the Legislature has decreed in Section 119.07(3)(b), Florida Statutes, and Section 624.319(3)(a), Florida Statutes, that a draft examination report is confidential until it is filed with the Department and becomes subject to public disclosure. The Department has reasoned that, in light of these confidentiality provisions, it cannot legally furnish a draft examination report to a Division Hearing Officer for any kind of determination under Chapter 120, Florida Statutes, or otherwise conduct a public hearing until after the report is finalized and no longer is confidential.

   
   

10. In the late 1980's some Department personnel in what was then the Chief Examiner's Office began attaching to draft reports sent to insurers "a notice of rights under Chapter 120," Florida Statutes. The practice was discontinued at the direction of supervisory personnel once they became aware of it. There have been no other instances where Department employees, in carrying out their responsibilities, have afforded insurers a Section 624.319 "hearing" that was anything more than an informal meeting or conference.

    
    

    CONCLUSIONS OF LAW

    
    

11. The Department is proposing to amend Rule 4-121.066, Florida Administrative Code, to read as follows: 4/

    
    

    4-121.066 Informal Conferences

    1. Informal Conferences Authorized. The Department head or a hearing officer designated

       by the Department may order an informal conference prior to a formal or informal proceeding.

    2. Procedures for Conferences Held Pursuant to Section 624.319(1), F.S.

       1. Every insurer will receive a draft of a report of examination (draft report) resulting from an examination under Section 624.316, F.S. The insurer may review the draft report for a period of up to 30 days as determined from the date of the report's receipt by the insurer.

          If the insurer desires modifications to the draft report, the insurer shall request an informal conference, as permitted by Section 624.319(1), F.S., by writing to the Department no later than

          30 days from the date of the report's receipt by

          the insurer as shown on the return receipt requested card returned to the Department by the U.S. Postal Service. Requests for an informal conference must be directed to: Bureau Chief, (Name of appropriate solvency bureau), Florida Department of Insurance,

          Larson Building, 200 East Gaines Street, Tallahassee, Florida. The zip code for the Life and Health bureau is 32399-0327; the zip code for the Property and Casualty bureau is 32399-0329. Requests may be made by facsimile transmission.

       2. Although Section 624.319, F.S. uses the word "hearing" to refer to this meeting, the "hearing" is conducted pursuant to Section 624.324 and is not within the scope of Chapter 120, F.S. Instead it is

          an informal conference at which the insurer has an opportunity to resolve disputed provisions of the draft examination report prior to the Department filing the report as a public document. The Depart- ment has found that the following procedures are helpful in reaching an informed resolution in a fair and efficient manner. Therefore, an insurer request- ing the informal conference shall comply with the requirements of this subsection.

          1. The request for an informal conference must contain a specific listing for each point in the draft report for which the insurer requests a modification. The listing for each point must state all of the facts and provide documentation which support the position of the insurer relative to a modification of the report.

          2. Due to the varied nature of requests for modifications to a draft report, the informal conference does not have any specific agenda. During the informal conference the insurer may present any information or evidence relative to the facts which it believes will support its position that modification should be made to the draft report.

       3. After reviewing the information and documentation presented at the informal conference, the Department will either: provide a new draft to the company in accordance with the conditions of subsection (2) of Section 624.319, F.S.; perform additional field examination work; or notify the company that it intends to file the report as presented in the draft form.

       4. In the absence of a timely request, the Department shall file the draft report as a finalized report and make it a public document.

       5. If the disputed points are not settled in the conference, and the Department notifies the company that it intends to file the report and make

          it a public document as presented in the draft form, the insurer may request a formal hearing to resolve the disputed issues, as provided for under Chapter 120, F.S. and in accordance with the Notice of Rights which are a part of the Department's notification.

          
          

12. Petitioner is challenging the Department's proposed amendment of Rule 4-121.066, Florida Administrative Code, (hereinafter also referred to as the "Proposed Rule") pursuant to Section 120.54(4)(a), Florida Statutes, which provides that "[a]ny substantially affected person 5/ may seek an administrative determination of the invalidity of any proposed rule on the ground that the proposed rule is an invalid exercise of delegated legislative authority."

    
    

13. Petitioner bears the burden of proving by a preponderance of the evidence that this proposed rule amendment constitutes "an invalid exercise of delegated legislative authority," within the meaning of Section 120.54(4)(a), Florida Statutes. See Adam Smith Enterprises, Inc., v. Department of

    Environmental Regulation, 553 So.2d 1260, 1274 n.24 (Fla. 1st DCA 1989); Humana, Inc., v. Department of Health and Rehabilitative Services, 469 So.2d 889, 890 (Fla. 1st DCA 1985); Agrico Chemical Co. v. Department of Environmental Regulation, 365 So.2d 759, 763 (Fla. 1st DCA 1978), cert. denied,

    376 So.2d 74 (Fla. 1979).

    
    

14. "An invalid exercise of delegated legislative authority," as that phrase is used in Section 120.54(4)(a), Florida Statutes, is defined in Section 120.52(8), Florida Statutes, as follows:

    
    

    "Invalid exercise of delegated legislative authority" means action which goes beyond the powers, functions, and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one or more of the following apply:

    1. The agency has materially failed to follow the applicable rulemaking procedures set forth in s. 120.54;

    2. The agency has exceeded its grant of rule- making authority, citation to which is required by s. 120.54(7);

    3. The rule, enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(7);

    4. The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency; or

    5. The rule is arbitrary or capricious.

    
    

15. Among the "rulemaking procedures set forth in Section 120.54," Florida Statutes, which, if not followed, may result in a finding that there has been "an invalid exercise of delegated legislative authority," as contemplated by subsection (8)(a) of Section 120.52, Florida Statutes, are those found in subsection (2) of Section 120.54, Florida Statutes, relating to an agency's preparation of an economic impact statement.

    
    

16. Pursuant to subsection (2)(b) of Section 120.54, Florida Statutes, an agency must prepare an economic impact statement prior to the adoption, amendment or repeal of any rule if:

    
    

    1. The agency determines that the proposed action would result in a substantial increase

       in costs or prices paid by consumers, individual industries, or state or local government agencies, or would result in significant adverse effects on competition, employment, investment, productivity, innovation, or international trade, and alternate approaches to the regulatory objective exist and are not precluded by law; or

    2. Within 14 days after the date of publication of the notice provided pursuant to paragraph (1)(c) or, if no notice of rule development is provided,

    within 21 days after the notice required by paragraphs (1)(a) and (b), a statement is filed with the appropriate agency by the Governor, a body corporate and politic, at least 100 people signing a request,

    or an organization representing at least 100 persons, or any domestic nonprofit corporation or association.

    
    

    Subsection (2)(b) of Section 120.54, Florida Statutes, further provides that "[a]n agency's determination regarding preparation of an economic impact statement pursuant to subparagraph (2)(b)1. shall not be subject to challenge."

    
    

17. According to subsection (2)(c) of Section 120.54, Florida Statutes:

    
    

    No person shall have standing to challenge an

    agency rule, based upon an economic impact statement or lack thereof, unless that person requested preparation of an economic impact statement under subparagraph (2)(b)2. and provided the agency with information sufficient to make the agency aware of specific concerns regarding the economic impact of the proposed rule, by either participation in a public workshop, public hearing, or by submission

    of written comments, regarding the rule. The grounds for invalidation of a rule based upon a challenge to the economic impact statement for the rule are limited to an agency's failure to adhere to the procedure for preparation of an economic impact statement provided by this section, or an agency's failure to consider information submitted to the agency regarding specific concerns about the

    economic impact of a proposed rule when such failure substantially impairs the fairness of the rulemaking proceeding.

    
    

18. To the extent that it addresses a proposed or existing rule's lack of compliance with its enabling statute, the definition of "an invalid exercise of delegated legislative authority" found in Section 120.52(8), Florida Statutes, is a codification of the case law on the subject existing at the time of its enactment, an observation that was made in Florida League of Cities v. Department of Environmental Regulation, 603 So.2d 1363, 1367 (Fla. 1st DCA 1992), wherein it was stated:

    
    

    Although the only explicitly stated ground under section 120.54(4)(a) for challenging a proposed rule is that the proposed rule constitutes an

    invalid exercise of delegated legislative authority, case law, beginning notably with Agrico Chemical

    Co. v. Department of Environmental Regulation, 365 So.2d 759, 763 (Fla. 1st DCA 1978), cert. denied sub nom. Askew v. Agrico Chemical Co., 376 So.2d 74 (Fla. 1979), has engrafted specific criteria that must be applied in determining whether the rule or proposed rule complies with the enabling statute.

    The challenger, among other things, is required to show that the requirements of the rule are inappropriate to the ends specified in the legis- lative act, or that the requirements proposed are

    not reasonably related to the purpose of the enabling legislation, or that the proposed rule is arbitrary and capricious. [Citations omitted.] These criteria have since been codified by the 1987 legislature,

    amending section 120.52 by adding subsection (8) thereto, defining the term "invalid exercise of delegated legislative authority." See Ch. 87-385, Section 2, Laws of Fla. See also Sta[te] of Florida, House Committee on Governmental Operations, "Staff Analysis of Proposed Amendments to Chapter 120, F.S. for House Bill 710 and Senate Bill 608" (1987)(Florida State Archives), explaining that Section 120.52(8)(e), Florida Statutes (1987), relating to the term arbitrary or capricious, "codifies the long established principle that administrative rules cannot be arbitrary or capricious, i.e., unsupported by logic, despotic or irrational." In support of this statement the Staff Analysis refers to the Agrico Chemical Co. 6/ and

    the General Telephone Co. of Florida opinions.

    
    

19. In determining whether a proposed rule is noncompliant with its enabling statute, it must be kept in mind that the agency's interpretation of that statute need not be the sole possible interpretation, or even the most desirable one, but must only be within the range of possible interpretations. See Orange Park Kennel Club, Inc., v. Department of Business and Professional Regulation, 19 FLW D2234 (Fla. 1st DCA October 17, 1994); Florida League of Cities v. Department of Environmental Regulation, 603 So.2d at 1369; Escambia County v. Trans Pac, 584 So.2d 603, 605 (Fla. 1st DCA 1991); Department of Professional Regulation v. Durrani, 455 So.2d 515, 517 (Fla. 1st DCA 1984). Furthermore, the agency's interpretation must be viewed in light of the entire statutory framework. If there are other related statutory provisions in the same chapter or elsewhere in Florida Statutes, they should be examined. See State v. Rodriguez, 365 So.2d 157, 159 (Fla. 1978); Florida Jai Alai, Inc., v. Lake Howell Water and Reclamation District, 274 So.2d 522 (Fla. 1973); Cataract Surgery Center v. Health Care Cost Containment Board, 581 So.2d 1359, 1361 (Fla. 1st DCA 1991); Escambia County Council on Aging v. Goldsmith, 465 So.2d 655, 656 (Fla. 1st DCA 1985). In addition, it may be helpful to review the legislative history of the statute. See Asphalt Pavers, Inc., v. Department of Revenue, 584 So.2d 55, 57 (Fla. 1st DCA 1991). In doing so, however, it is important to recognize that "a mere change in the language of a statute does not necessarily indicate an intent to change the law, because the intent may be to clarify what was doubtful and to safeguard misapprehension as to existing law." Asphalt Pavers, Inc., v. Department of Revenue, 584 So.2d at 58. Of course, it is only necessary to resort to legislative history and other aids to statutory construction if the statute is ambiguous. "Where the language of the statute is clear and unambiguous on its face, it must be given its plain and ordinary meaning." Mayo Clinic Jacksonville v. Department of Professional Regulation, Board of Medicine, 625 So.2d 918, 919 (Fla. 1st DCA 1993).

    
    

20. Although Petitioner alleged in its petition that the Department "has failed to comply with the required rule-making procedures of Section 120.54, Florida Statutes," it has presented no evidence or further argument in support of this allegation.

    
    

21. Instead, it has concentrated its efforts on persuading the Hearing Officer that the Department's proposed amendment to Rule 4-121.066, Florida Administrative Code, "is an [i]nvalid] [e]xercise of [d]elegated [l]egislative [a]uthority because the [amended] Rule, as presently drafted, modifies and in fact totally abrogates the hearing requirement of Section 624.319(1), Florida Statues." It is Petitioner's position that "Section 624.319(1) entitles an insurer to a formal due process adversarial hearing with the right to present

    evidence, compel testimony, examine and cross-examine witnesses before a neutral hearing officer prior to the filing of the DEPARTMENT'S Examination Report on the insurer."

    
    

22. In evaluating Petitioner's claim, it is necessary to first examine the language of Section 624.319(1), Florida Statutes.

    
    

23. Section 624.319(1), Florida Statutes, provides as follows:

    
    

    The department or its examiner shall make a full and true written report of each examination. The examination report shall contain only information obtained from examination of the records, accounts, files, and documents of or relative to the insurer examined or from testimony of individuals under oath, together with relevant conclusions and recommendations of the examiner based thereon.

    The department shall furnish a copy of the exami- nation report to the insurer examined not less than

    30 days prior to filing the examination report in its office. If such insurer so requests in writing within such 30-day period, the department shall grant a hearing with respect to the examination report and shall not so file the examination

    report until after the hearing and after such modifications have been made therein as the depart- ment deems proper.

    
    

24. It is not entirely clear from a simple reading of Section 624.319(1), Florida Statutes, precisely what type of "hearing" the Legislature intended the Department to provide in order to comply with the statute. Whether, in order to effectuate the Legislature's intent, the Department must conduct a trial-type hearing, as Petitioner argues, or rather merely must afford the insurer an opportunity to be heard as part of its investigation of the insurer, as the Department contends, is a matter that cannot be resolved with certainty based solely upon a review of the language found in the statute. The language used by the Legislature is reasonably susceptible to both interpretations. 7/

    
    

25. An examination of the remaining provisions of Section 624.319, Florida Statutes, 8/ and other related statutory provisions, including Sections

    624.321 9/ and 624.324, 10/ Florida Statutes, as well as the legislative history of Section 624.319, Florida Statutes, and these related statutory provisions, does not compel the conclusion that the Department's interpretation of the "hearing" requirement of Section 624.319(1), Florida Statutes, as codified in the Proposed Rule, is clearly erroneous or unreasonable; nor does the use of any other established aid to statutory construction yield such a conclusion.

    
    

26. Because the Department's interpretation of the "hearing" requirement of Section 624.319(1), Florida Statutes, as codified in the Proposed Rule, is within the range of possible interpretations of the statute, it may not be rejected. See Florida League of Cities v. Department of Environmental Regulation, 603 So.2d at 1369; Escambia County v. Trans Pac, 584 So.2d at 605; Department of Professional Regulation v. Durrani, 455 So.2d at 517.

    
    

27. The Hearing Officer does not disagree with Petitioner that an insurer who challenges the accuracy of an unfavorable examination report of which it is

    the subject is entitled to "a formal due process adversarial hearing with the right to present evidence, compel testimony, examine and cross-examine witnesses before a neutral hearing officer [or the head of the Department] prior to the filing of the DEPARTMENT'S Examination Report on the insurer" [which renders the report subject to public disclosure]. The source of this entitlement, however, is Chapter 120, Florida Statutes, not Section 624.319(1), Florida Statutes. See Brown v. Department of Professional Regulation, Board of Psychological Examiners, 602 So.2d 1337, 1340 (Fla. 1st DCA 1992)(licensed psychologist entitled to a Section 120.57 hearing where probable cause panel had found probable cause and directed that letter of guidance be issued in lieu of a complaint and there existed disputed issues of material fact; "a letter of guidance affects the licensee's substantial interest as it can be assessed by members of the public as well as the Board and can be used against Dr. Brown in the event of future proceedings"); Florida League of Cities, Inc., v.

    Administration Commission, 586 So.2d 397, 413 (Fla. 1st DCA 1991)("[a]ny substantially affected person must be provided with a clear point of entry, within a specified period after some recognizable event in the investigatory or other free form proceedings, to formal or informal proceedings under section 120.57;" "[u]ntil proceedings are had satisfying section 120.57, or an opportunity for them is clearly offered and waived, there can be no agency action affecting the substantial interests of a person"); Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778, 786-87 (Fla. 1st DCA 1981)("a letter of intent to issue or deny a permit is 'proposed agency action;'" "request for hearing commenced a de novo proceeding . . . intended 'to formulate final agency action, not to review action taken earlier and preliminarily'"); Section 120.57, Fla. Stat.("[t]he provisions of this section apply in all proceedings in which the substantial interests of a party are determined by an agency . . . . Unless waived by all parties, subsection (1) applies whenever the proceeding involves a disputed issue of material fact;" "[a]ll parties [in a proceeding held pursuant to subsection (1)] shall have an opportunity to respond, to present evidence and argument on all issues involved, to conduct cross examination and submit rebuttal evidence, . . . and to be represented by counsel").

    
    

28. Furthermore, the Department is required to conduct such "a formal due process adversarial hearing" only after it has completed its investigation of the insurer, of which the Section 624.319(1) "hearing" is a part. See Friends of the Everglades v. South Florida Regional Planning Council, 456 So.2d 491, 492 (Fla. 3d DCA 1984)(petition for a formal Section 120.57(1) hearing to review "staff information-gathering . . . activities" was "premature" and therefore properly denied); Commission on Human Relations v. Bentley, 422 So.2d 964, 966 (Fla. 1st DCA 1988)("section 120.57 disciplines are not applicable . . . in the [Human Relations] Commission's redetermination proceedings" relating to the executive director's finding of no reasonable cause because such proceedings are merely investigatory in nature); Section 120.57(4), Fla. Stat.("[t]his section does not apply to agency investigations preliminary to agency action").

    
    

29. Moreover, it is clear from a reading of subsection (2)(e) of the Proposed Rule that the informal conference it prescribes is not intended to be a substitute for any Chapter 120 proceeding to which the insurer may be entitled following the informal conference and the completion of the Department's investigation. An insurer who is dissatisfied with the outcome of the informal conference still has the opportunity under the Proposed Rule "to request a formal hearing to resolve the disputed issues, as provided for under Chapter 120, F.S." The Proposed Rule therefore is consistent with and does not modify or contravene the "formal due process adversarial hearing" requirement of Chapter 120, Florida Statutes.

30. In view of the foregoing, the Hearing Officer concludes that Petitioner has not met its burden of establishing that the Proposed Rule is an "invalid exercise of delegated legislative authority," as defined in Section 120.52(8), Florida Statutes.

Accordingly, it is hereby ORDERED:

1. Petitioner's Motion for Summary Final Order is denied.

   
   

2. Petitioner's petition challenging the Proposed Rule pursuant to Section 120.54(4)(a), Florida Statutes, is dismissed.

DONE AND ENTERED in Tallahassee, Leon County, Florida, this 10th day of November, 1994.

STUART M. LERNER

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 10th day of November, 1994.

ENDNOTES

1/ Section 120.54(4)(c), Florida Statutes, requires that the Division Hearing Officer conduct a hearing within 30 days of the date of his or her assignment to the case.

2/ Unless expressly indicated otherwise, references to "Florida Statutes" in this Summary Final Order are to Florida Statutes (1993).

3/ Dowdell was first employed by the Department in 1972 as an attorney. Since that time he has been continuously employed by the Department, holding several positions, including General Counsel and Director of the Division of Insurer Services. As a result of his employment over this period of time, he is familiar with how the Department has historically construed provisions of the Insurance Code, including Section 624.319, Florida Statutes.

4/ Rule 4-121.066, Florida Administrative Code, presently reads as follows: 4-121.066 Conference- Authorized

The Department head or a hearing officer designated by the Department may order an informal conference prior to a formal or informal proceeding.

5/ Petitioner's standing to maintain the instant challenge as a "substantially affected person" is not in dispute and therefore will not be the subject of any further discussion. See Home Builders and Contractors Association of Brevard, Inc. v. Department of Community Affairs, 585 So.2d 965, 968 (Fla. 1st DCA 1991).

6/ In Agrico, a "capricious action" was described as "one which is taken without thought or reason or irrationally" and an "arbitrary decision" was described as "one not supported by facts or logic, or despotic." Id. at 763.

7/ For instance, in Webster's New Twentieth Century Dictionary (Second Edition), among the definitions given for the word "hearing" are: "a judicial investigation or trial, as before a court;" and "opportunity to be heard." Likewise, in Black's Law Dictionary (5th Edition), although it is stated that a "hearing" may be defined as a "[a] proceeding of relative formality (though generally less formal than a trial), generally public, with definite issues of fact or of law to be tried, in which witnesses are heard and parties proceeded against have right to be heard, and is much the same as a trial and may terminate in final order," it is also noted that a "hearing" can also be "merely investigatory."

8/ The following are among these remaining provisions: "[t]he examination report when so filed [with the Department] shall be admissible in evidence in any action or proceeding brought by the department against the person examined, or against its officers, employees, or agents;" "[e]xamination reports, until filed, are confidential and exempt from the provisions of s. 119.07(1);" and "[a]fter the examination report has been filed pursuant to subsection (1), the department may publish the results of any such examination in one or more newspapers published in this state whenever it deems it to be in the public interest."

9/ Section 624.321, Florida Statutes, provides as follows:

1. As to any examination, investigation, or hearing being conducted under this code, the Insurance Commissioner and Treasurer or his designee:

   1. May administer oaths, examine and cross-examine witnesses, receive oral and documentary evidence; and

   2. Shall have the power to subpoena witnesses, compel their attendance and testimony, and require by subpoena the production of books, papers, records, files, correspondence, documents, or other evidence which is relevant to the inquiry.

2. If any person refuses to comply with any such subpoena or to testify as to any matter concerning which he may be lawfully interrogated, the circuit court of Leon County or of the county wherein such examination, investigation, or hearing is being conducted, or of the county wherein such person resides, may, on the application of the department, issue an order requiring such person to comply with the subpoena to testify.

3. Subpoenas shall be served, and proof of such service made, in the same manner as if issued by a circuit court. Witness fees, costs, and reasonable travel expenses, if claimed, shall be allowed the same as for testimony in circuit court.

10/ Section 624.324, Florida Statutes, provides that "[t]he department may hold hearings for any purpose within the scope of this code deemed to be necessary."

COPIES FURNISHED:

Milton J. Wallace, Esquire Michael G. Shannon, Esquire WALLACE, BAUMAN, FODIMAN

& SHANNON, P.A.

2222 Ponce de Leon Boulevard, Suite 303 Coral Gables, Florida 33134

Ruth Goekel, Esquire Office of Legal Affairs Department of Insurance

and Treasurer

200 East Gaines Street 645A Larson Building

Tallahassee, Florida 32399-0307

Liz Cloud, Chief

Bureau of Administrative Code Department of State

The Elliott Building Tallahassee, Florida 32399-0250

Carroll Webb, Executive Director Administrative Procedures Committee Holland Building, Room 120 Tallahassee, Florida 32399-1300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Summary Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing one copy of a notice of appeal with the Agency Clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the appellate District where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 94-005104RP

Orders for Case No: 94-005104RP