STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND ) AND TREASURER, )

)

Petitioner, )

)

vs. ) Case No. 97-0352

)

JOHN MORRIS ALE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on June 23, 1997, at Fort Lauderdale, Florida, by video teleconference before Errol H. Powell, a duly designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Marc S. Nash, Esquire

John L. Brennan, III, Esquire1 Department of Insurance and

Treasurer

Division of Legal Services 612 Larson Building

Tallahassee, Florida 32399-0300 For Respondent: No Appearance

STATEMENT OF THE ISSUES

The issue for determination is whether Respondent committed the offenses set forth in the Administrative Complaint and, if so, what action should be taken.

PRELIMINARY STATEMENT

On June 20, 1996, the Department of Insurance and Treasurer, hereinafter the Department, filed a two-count administrative complaint against John Morris Ale, hereinafter Mr. Ale. The Department charged Mr. Ale with violating: Count I--Subsections 626.611(4), (7), (8), (9), and (13), 626.621(2), (3), (6), and

(12)2, and 626.9521(1),3 Florida Statutes; and Count II-- Subsections 626.561(1), 626.611(7), (8), (9), and (13),

626.621(2), (3), and (6), and 626.9521(1),4 Florida Statutes. By an Election of Rights dated July 3, 1996, Mr. Ale requested an informal hearing. During the informal hearing, Mr. Ale disputed material facts of the Administrative Complaint. On January 23, 1997, this matter was referred to the Division of Administrative Hearings.

At hearing, the Department presented the testimony of one witness and entered thirteen exhibits into evidence. On behalf of Mr. Ale, no testimony was presented and no exhibits were entered into evidence. Also, the Department was permitted to late-file five exhibits which were entered into evidence, with two of the exhibits being deposition testimony.

A transcript of the hearing was ordered. At the request of the Department, the time for filing post-hearing submissions was set for more than ten days following the filing of the transcript. The Department submitted a post-hearing submission which has been considered in this recommended order.

FINDINGS OF FACT

1. At all times material hereto, John Morris Ale, hereinafter Mr. Ale, was licensed as a general lines agent in the State of Florida.

2. On or about December 5, 1994, Mr. Ale telephoned

   
   

   Ms. Kristen Stryker informing her that he had started his own insurance business, Doctors Insurance Agency, and inquiring if she wanted to obtain her automobile insurance coverage from him. Mr. Ale was acquainted with Ms. Stryker due to his having obtained her present coverage for her. It was almost time for renewal of her present coverage. Ms. Stryker agreed to obtain her automobile coverage from Mr. Ale.

3. Further, Mr. Ale inquired if Ms. Stryker would allow his son, James Ale, to come to her home and write the coverage.

   Mr. Ale indicated that his son was learning the insurance business, but assured her that he, Mr. Ale, would review all documents prepared by his son. Relying on that assurance and believing that Mr. Ale's son was a licensed agent, Ms. Stryker agreed for Mr. Ale's son to write her automobile coverage.

4. On the evening of December 5, 1994, James Ale came to Ms. Stryker's home. He completed an automobile insurance application for coverage on her 1993 Jeep Cherokee and explained the coverage to her. Ms. Stryker presented to James Ale a check for $222, made payable to Doctors Insurance, as down payment for the insurance premium.

5. Additionally, James Ale presented to Ms. Stryker an

   
   

   E.T.I. Financial Corporation premium finance agreement to sign. She signed the premium finance agreement.

6. E.T.I. is a premium finance company.

   
   

7. The premium finance agreement is dated December 6, 1994. It is signed by Respondent and indicates, among other things, Ms. Stryker's down payment, the total premium, and coverage effective on December 6, 1994, by two insurance companies, Fortune and New Alliance.

8. Ms. Stryker's down payment check for $222 was endorsed and deposited by Doctors Insurance Agency.

9. At no time material hereto was James Ale licensed by the State of Florida to transact insurance.

10. At all times material hereto, Mr. Ale knew or should have known that his son, James Ale, was not licensed by the State of Florida to transact insurance.

11. Subsequently, James Ale forwarded to Ms. Stryker an undated letter, together with additional applications for insurance coverage with insurance companies other than Fortune and New Alliance. In the letter, James Ale requested, among other things, that Ms. Stryker sign the applications and return them to him so that he could forward the applications to the insurance companies.

12. Also, included with the undated letter was a copy of an automobile insurance binder, which indicated, among other things,

    that her vehicle coverage was with two insurance companies, Armor Insurance and Service Insurance, and that the binder period was from March 10, 1995 through March 10, 1996. The binder, according to the undated letter, could be used for proof of insurance.

13. E.T.I. Financial Corporation authorized Doctors Insurance Agency, by and through Mr. Ale, to finance insurance premiums through E.T.I. Mr. Ale was the licensed agent for Doctors Insurance Agency. As an authorized insurance premium finance agent for E.T.I., Doctors Insurance Agency had possession of blank bank drafts from E.T.I.

14. The process and procedure utilized in financing insurance premiums through an insurance company authorized by

    E.T.I. to represent it included forwarding blank bank drafts, bearing E.T.I.'s name, to the authorized insurance company. The bank draft is completed by the authorized insurance company, which includes making the drafts payable for the entire premium to the insurance company providing the coverage and is signed by the licensed agent of the authorized insurance company. The completed bank draft is forwarded, along with the premium finance agreement and any down payment, to E.T.I. which forwards the draft to the specified insurance company providing the coverage.

15. If a draft is not signed by the licensed agent, the draft is not honored by E.T.I. and, therefore, is not issued to the insurance company providing the coverage. Consequently, no

    coverage is provided for a vehicle.

    
    

16. No premium finance agreement from Doctors Insurance Agency was received by E.T.I. on behalf of Ms. Stryker.

17. No premium finance agreement was ever received by

    
    

    E.T.I. from Doctors Insurance Agency.

    
    

18. No down payment for the insurance premium on behalf of Ms. Stryker was received by E.T.I. from Doctors Insurance Agency.

19. No bank draft from Doctors Insurance Agency was received by E.T.I. on behalf of Ms. Stryker and payable to Fortune or New Alliance.

20. No bank draft from Doctors Insurance Agency was received by E.T.I. on behalf of Ms. Stryker and payable to Armor Insurance or Service Insurance.

21. No bank drafts were ever received by E.T.I. from Doctors Insurance Agency.

22. Due to the failure of Doctors Insurance Agency to submit the proper documents to E.T.I., including the bank drafts, no insurance company, which was to provide automobile insurance coverage to Ms. Stryker, received a premium from E.T.I. Therefore, none of the insurance companies provided Ms. Stryker with coverage for her vehicle.

23. Even though Ms. Stryker had a binder for insurance coverage, unbeknownst to her, she had no automobile insurance coverage in effect.

24. On or about May 24, 1995, Ms. Stryker was involved in

    an automobile accident. Believing that she had automobile insurance coverage in effect, Ms. Stryker contacted Mr. Ale regarding the accident. Mr. Ale informed her that she did not have insurance coverage with his insurance company and never did.

25. Shortly afterwards, Ms. Stryker spoke with James Ale who informed her that he would attempt to locate her documents. She was not contacted again by James Ale.

26. Because she had no automobile insurance coverage,

    
    

    Ms. Stryker was personally liable for the damages resulting from her accident, which exceeded $3,000. Also, she was exposed to potential personal liability for claims of injuries or damages suffered by the driver of the other vehicle involved in the accident.

27. Neither Doctors Insurance Agency nor Mr. Ale paid any monies to Ms. Stryker for the damages that she suffered.

28. On or about June 7, 1995, Ms. Stryker filed a consumer's assistance request with the Department of Insurance and Treasurer, hereinafter the Department.

29. On or about October 18, 1995, almost 5 months after her automobile accident, Doctors Insurance Company issued a refund to Ms. Stryker of her $222 down payment on the insurance premium. Ms. Stryker had paid the down payment more than 10 months earlier.

    CONCLUSIONS OF LAW

    
    

30. Pursuant to Section 120.569, Florida Statutes (Supp. 1996) and Subsection 120.57(1), Florida Statutes (Supp. 1996), the Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and the parties thereto.

31. License revocation proceedings are penal in nature. The burden of proof is on the Department to establish the truthfulness of the allegations of the Administrative Complaint by clear and convincing evidence. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987); Balino v. Department of Health and Rehabilitative Services, 348 So. 2d 349 (Fla. 1st DCA 1977).

32. Section 626.112, Florida Statutes (1993), provides in pertinent part:

    1. No person shall be, act as, or advertise or hold himself out to be an insurance agent, customer representative, solicitor, or adjuster unless he is currently licensed and appointed.

       
       

33. Section 626.561, Florida Statutes (1993), provides in pertinent part:

    1. All premiums, return premiums, or other funds belonging to insurers or others received by an agent, solicitor, or adjuster in transactions under his license shall be trust funds so received by the licensee in a fiduciary capacity. An agent shall keep the funds belonging to each insurer for which he is appointed . . . in a separate account so as to allow the department to properly audit such funds. 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.

34. Section 626.611, Florida Statutes (1993), provides, among other things, grounds for the compulsory suspension or revocation of a license or appointment by the Department and provides in pertinent part:

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

    
    

    * * *

    
    

    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.

    
    

35. Section 626.621, Florida Statutes (1993), provides, among other things, grounds for the discretionary suspension or revocation of a license or appointment by the Department and provides in pertinent part:

    1. 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.

       
       

    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.

    * * *

    
    

    (12) Knowingly aiding, assisting, procuring, advising, or abetting any person in the violation of or to violate a provision of the insurance code or any order or rule of the department.

    
    

36. Section 626.9521, Florida Statutes (1993) provides in pertinent part:

    1. 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 competition or an unfair or deceptive act or practice involving the business of insurance.

       
       

37. The Department has demonstrated that Mr. Ale, a licensee, knowingly aided and abetted an unlicensed person, his son, to transact insurance. Moreover, the Department has demonstrated that Mr. Ale failed to forward Ms. Stryker's down payment for the premium to the premium finance company and that Mr. Ale's insurance company, Doctors Insurance Agency, failed to provide automobile insurance coverage for Ms. Stryker, who had made the appropriate payment and completed the appropriate documents for coverage. Further, the Department has demonstrated that, due to Ms. Stryker's not having automobile insurance

    coverage, she suffered a personal monetary loss.

    
    

38. Consequently, the Department has demonstrated that Mr. Ale violated Subsections 626.561(1), 626.611(4), (7), (8), and (13), and 626.621(2) and (12), Florida Statutes (1993).

39. Regarding penalty, the highest stated penalty in Count I for the violations committed is a 6-month suspension and in Count II for the violations committed is a 9-month suspension. Rules 4-231.030(5) and (6), 4-231.040(1) and (2), 4-231.080, 4- 231.090, and 4-231.110(9), Florida Administrative Code. The total penalty for the violations committed is a 15-month suspension. Rules 4-231.030(8) and 4-231.040(2).

40. Mitigating and aggravating factors may be considered in the final penalty. Rules 4-231.030(5), 4-231.040(3), and 4- 231.160, Florida Administrative Code. Aggravating factors to be considered are these: Mr. Ale's conduct was willful in aiding and abetting an unlicensed person to transact insurance;

Ms. Stryker was personally liable for over $3,000 in damages, resulting from the accident; Ms. Stryker was potentially personally liable for damages suffered by the other driver of the vehicle involved in the accident; Mr. Ale failed to make timely restitution of Ms. Stryker's down payment for the insurance coverage; and secondary violations were present in the counts of the Administrative Complaint. A mitigating factor to be considered is that no previous disciplinary action has been taken against Mr. Ale by the Department.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that the Department of Insurance and Treasurer enter a final order:

1. Finding that John Morris Ale violated Subsections 626.611(4), (7), (8), and (13), and 626.621(2) and (12), Florida Statutes (1993), in Count I and violated Subsections 626.561(1), 626.611(7), (8), and (13), and 626.621(2), Florida Statutes (1993), in Count II.

2. Imposing a 21-month suspension of the license of John Morris Ale.

DONE AND ENTERED this 29th day of September, 1997, in Tallahassee, Leon County, Florida.

ERROL H. POWELL

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 29th day of September, 1997.

ENDNOTES

1/ John L. Brennan, Esquire, was substituted as counsel as record for the Department of Insurance and Treasurer after the hearing.

2/ The statutory provision allegedly violated is not cited in the Administrative Complaint; however, the Administrative Complaint states the language of the statutory provision.

Consequently, Mr. Ale is determined to have been sufficiently notified of the alleged violation committed.

3/ Ibid.

4/ Ibid.

COPIES FURNISHED:

John L. Brennan, III, Esquire Department of Insurance and Treasurer Division of Legal Services

612 Larson Building

Tallahassee, Florida 32399-0300

John Morris Ale, pro se 3672 Southwest 60th Terrace Davie, Florida 33314-2528

Daniel Y. Sumner, General Counsel Department of Insurance and Treasurer

325 John Knox Road, Building F Suite 240

Tallahassee, Florida 32303-4149

Bill Nelson

State Treasurer and Insurance Commissioner

Department of Insurance and Treasurer

325 John Knox Road, Building F Suite 240

Tallahassee, Florida 32303-4149

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 97-000352

Orders for Case No: 97-000352