STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Petitioner, )

)

vs. ) Case No. 97-1388

)

HOWARD IRVIN VOGEL, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on December 15, 1997, before Patricia Hart Malono, a duly designated Administrative Law Judge of the Division of Administrative Hearings. The hearing was conducted via video teleconference, with the Petitioner and the Respondent appearing at West Palm Beach, Florida.

APPEARANCES

For Petitioner: William W. Tharpe, Jr., Esquire

Department of Insurance and Treasurer

200 East Gaines Street Tallahassee, Florida 32399-0333

For Respondent: Orrin R. Beilly, Esquire

The Citizens Building, Suite 705

105 South Narcissus Avenue West Palm Beach, Florida 33401

STATEMENT OF THE ISSUE

Whether the Respondent committed the acts alleged in the Amended Administrative Complaint filed by the Petitioner on October 6, 1997, and, if so, the penalty which should be imposed.

PRELIMINARY STATEMENT

In a three-count Administrative Complaint dated October 6, 1997, the Department of Insurance and Treasurer ("Department") charged Howard Irvin Vogel with violations of various sections of Chapter 626, Florida Statutes. Mr. Vogel timely responded by filing with the Department an Answer to Administrative Complaint and Request for Formal Hearing. The Department transmitted the case to the Division of Administrative Hearings for assignment of an administrative law judge.

The Department was subsequently permitted to amend its Administrative Complaint in an order entered October 29, 1997, to which Mr. Vogel filed an Answer to Amended Administrative Complaint and Request for Formal Hearing. In the three-count Amended Administrative Complaint, the Department amended certain of the factual allegations contained in the original complaint and charged Mr. Vogel with having violated the following provisions of Chapter 626, Florida Statutes (1993): Section 626.561(1); Section 626.611(7), (8), (9), (10), and (13);

Section 626.621(2) and (6); Section 626.9541(1)(e)1., (1)(k)1.,

and (1)(o)2.; and, in Count III only, Section 626.9541(1)(z). Each of the three counts of the amended complaint deals with a transaction involving a different customer.

At the hearing, the Department presented the testimony of the following witnesses: Michael James Clark; Virginia Davidson; Bryan William Sanders; Cheryl Lee Andrews; George Wesley

Sheffield; Barbara Jacob Worden; Richard S. Friedberg; and Patricia Ann Commander. Petitioner's Exhibits 2, 3, 5 through 9,

11 through 17, 19, 20, 22, 23, 26 through 39, and 41 through 47 were offered and received into evidence. Petitioner's Exhibit 46 consists of the deposition transcript of Gregg Jay Kligler.

At the hearing, Mr. Vogel testified in his own behalf and presented the testimony of Lee Scott Vogel. Respondent's Exhibits 2 through 4, 7, 10 through 27, 29, 30 through 32, and 35 were offered and received into evidence.

The transcript of this proceeding was filed with the Division of Administrative Hearings, and the parties timely filed proposed findings of fact and conclusions of law, which have been duly considered.

FINDINGS OF FACT

Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made:

1. The Department of Insurance is the state agency responsible for regulating the business of insurance in the State of Florida. Section 624.307, Florida Statutes. This power extends to the licensing and discipline of insurance agents. Sections 626.291, .611, and .621, Florida Statutes.

2. Howard Irvin Vogel ("Respondent") is, and was at all times material to this action, licensed as a general lines agent (2-20) and a health insurance agent (2-40); Respondent is also

   currently licensed as a Florida Property and Casualty Joint Underwriting Association representative (0-17).

3. Respondent is, and was at the times material to this action, the president of Federal Auto Ins., Inc., 1/ ("Federal Insurance"), an incorporated general lines insurance agency located in Lake Worth, Florida. He is, and was at the times material to this action, the only officer of the corporation who is a licensed insurance agent. In 1993, 1994, 1995, and 1996, Respondent was a director of the corporation and its designated primary agent. Respondent is, and was at the times material to this action, also the only licensed insurance agent who has the authority to sign checks drawn on the Federal Insurance trust account.

4. At the times material to this action, Federal Insurance employed at least two licensed insurance agents in addition to the Respondent. The Respondent regularly worked full-time in the Federal Insurance office during 1993, 1994, and 1995, and he was aware of the way in which the agents he employed sold insurance. All monies received by the agents were turned over to the agency, and the Respondent approved all refunds and signed all refund checks. The Respondent ran the day-to-day operations of the insurance agency and supervised the agents who worked there.

5. At the times material to this action, it was the practice at Federal Insurance to impose a service charge for the preparation of certificates of insurance 2/ if a customer

   indicated he or she would need certificates prepared throughout the year. It was also the practice not to charge customers for the preparation of the first three certificates, but the agents employed there had the option, depending on the person and on the amount of the premium, of charging $5 for each certificate prepared in excess of the three free ones or of charging a flat fee of $100 per year. The charge was imposed to cover the costs of preparing the certificates. The agents employed by Federal Insurance were expected to explain the charge to the customer and to make it clear that the $100 was an additional charge and not part of the insurance premium. The fees received for the preparation of certificates of insurance were deposited in Federal Insurance's trust account.

6. Some insurance agencies do not charge for the preparation of certificates of insurance on behalf of their customers.

7. At the times material to this action, Federal Insurance sold automobile towing coverage provided by L.N.V., Inc., a Florida corporation whose directors since its incorporation in 1987 have been Howard and Alicia Vogel. L.N.V., Inc., reimburses its members for the expense of towing an insured vehicle if an accident occurs during the period the customer's automobile insurance policy is in effect. Federal Insurance had, at the times material to this action, a separate application for the towing coverage, which applicants for the coverage were required

   to sign. The agents employed by Federal Insurance were expected to explain the nature of the coverage and to make it clear to the customer that the charge for the towing coverage was separate from the premium charged for the underlying automobile insurance policy. The membership fees received for the towing coverage were deposited into a separate account for L.N.V., Inc. The Respondent is the only licensed insurance agent authorized to sign checks on this account.

   Michael Clark

   
   

8. On December 19, 1993, Michael J. Clark went to the office of Federal Insurance to purchase a commercial general liability insurance policy and to renew his commercial automobile insurance policy. He met with Lee Vogel, who was a licensed general lines agent employed by Federal Insurance.

9. Lee Vogel quoted Mr. Clark an annual premium of $776 for the renewal of his commercial automobile insurance policy for a vehicle used in his business, Eastern Electric. Mr. Clark applied for the policy, which was written by the Granada Insurance Company ("Granada"); $776 was the correct premium for the coverage Mr. Clark requested.

10. Mr. Clark paid Federal Insurance a down payment of $330 and signed a Premium Finance Agreement and Disclosure Statement in order to obtain financing for the balance of the premium. When Mr. Clark signed the premium finance agreement, the portion identified as the Federal Truth-in-Lending Disclosure Statement

    had not been completed by Lee Vogel, so the form did not reflect the amount of the down payment.

11. Mr. Clark and Lee Vogel used a worksheet when they were discussing the coverage and the cost of the policy. The worksheet Lee Vogel prepared during these discussions shows that he added $100 to the $776 premium for the commercial automobile insurance policy and stated a total of $876 on the worksheet.

    Mr. Clark signed the worksheet on which the $100 charge is shown, and he apparently did not question at that time the purpose of the additional $100 charge.

12. Several weeks after he purchased the commercial automobile insurance policy, Mr. Clark received the documents and payment book from the premium finance company. These documents reflected that he had been credited with a down payment of only

    $230 rather than the $330 down payment Mr. Clark thought he had made on the policy.

13. At the same time he purchased the commercial automobile insurance policy, Mr. Clark purchased a commercial general liability insurance policy. Lee Vogel quoted Mr. Clark a premium of $281 for a policy which would be written by the American Surety and Casualty Insurance Company ("American Surety").

    Mr. Clark applied for this policy and paid Federal Insurance $381 as payment in full for the general liability policy.

14. The worksheet prepared by Lee Vogel shows a $100 charge added to the $281 premium quoted to Mr. Clark. Although

    Mr. Clark claims that Lee Vogel did not explain the $100 charge to him, Mr. Clark did not question Lee Vogel about the additional

    $100	charge. He signed the worksheet and paid Federal	Insurance
    $381	for the general liability coverage even though he	was quoted
    $281	as the premium for the coverage.

    
    

15. Lee Vogel added the $100 charge to the $776 and $281 premiums for the automobile and general liability policies as a service charge to cover the costs of preparing any certificates of insurance Mr. Clark might request during the policy year.

16. According to Lee Vogel, customers are not charged for the preparation of certificates for commercial automobile insurance policies because certificates of insurance are not usually prepared for such policies. If they are, it is in conjunction with certificates of insurance prepared to confirm commercial general liability coverage.

17. At the time he purchased the policy, Mr. Clark requested that four certificates of insurance be prepared, and, on December 20, 1993, Howard Vogel signed four certificates of insurance verifying that Eastern Electric had general liability coverage with American Surety. During the 1993-94 policy year, Federal Insurance prepared a total of seventeen certificates of insurance on behalf of Eastern Electric, which certified that Eastern Electric had general liability coverage with American Surety. Five of the seventeen certificates of insurance confirmed both that Eastern Electric had general liability

    coverage with American Surety and that Eastern Electric had automobile insurance coverage with Granada Insurance Company. No separate certificates of insurance were prepared by Federal

    Insurance for the commercial automobile insurance policy written by Granada Insurance Company.

18. Mr. Clark testified that he was not informed of the

    
    

    $100 service charge added to the premiums for the commercial automobile insurance policy and the commercial general liability insurance policy. He was in a hurry when he purchased these policies, and, when Lee Vogel gave him two or three papers to sign, he signed the papers without really reading them.

19. Except for his signature appearing on several of the certificates of insurance prepared by Federal Insurance for Eastern Electric, the Respondent's only direct involvement with Mr. Clark's case was a letter the Respondent wrote to the Department, dated June 20, 1994, in which he complained about the way in which the investigation of Mr. Clark's complaint was being handled.

    Cheryl Lee Andrews

    
    

20. On February 23, 1994, Cheryl Andrews purchased a commercial general liability insurance policy for her husband's lawn care business, Tropic Green Lawn Care, through Federal Insurance. After having spoken with him on the telephone,

    Ms. Andrews met with Bryan Sanders, a licensed general lines insurance agent employed by Federal Insurance, who quoted

    Ms. Andrews a premium of $673 for a policy written by American Surety. The wholesale broker in this transaction, with whom Federal Insurance had a contract, was Amelia Underwriters, Inc.

21. Ms. Andrews made a down payment of $271 on the policy, and she was given a receipt which indicated that she had paid a

    $271 payment on a "GL" policy with "Amelia."

    
    

22. When she paid the down payment on the policy,

    
    

    Ms. Andrews also signed a Premium Finance Agreement to finance the remainder of the premium through Del Rio Discount Corp. When Ms. Andrews signed the premium finance agreement, the portion identified as the Federal Truth-in-Lending Disclosure Statement had not been completed by Mr. Sanders; the premium finance agreement contained only the number of payments, the amount of each payment, and the date the first payment was due.

23. Soon after, Ms. Andrews spoke with the Respondent on the telephone and requested a copy of the premium finance agreement with a completed disclosure statement. The Respondent sent her a copy of the agreement by facsimile transmittal, but it was not legible. Ms. Andrews telephoned the Respondent again and requested that he send her a copy by mail. When she did not receive another copy from Federal Insurance, she contacted American Surety, which contacted Amelia Underwriters, and the underwriters provided a completed copy of the Premium Finance Agreement. The down payment identified in the agreement was

    $171.

24. On the day she purchased the insurance policy,

    
    

    Mr. Sanders asked if she wanted any certificates of insurance. At that time, Ms. Andrews did not know what this was, and

    Mr. Sanders told her it was proof of insurance. She asked that he prepare one certificate of insurance for Tropic Green Lawn Care on February 23, 1994. A second certificate of insurance was prepared by Federal Insurance for Tropic Green Lawn Care on

    March 28, 1994. Mr. Sanders did not discuss with Ms. Andrews at any time a charge for preparation of certificates of insurance.

25. When she questioned the Respondent during a telephone conversation about the additional $100 she had paid Federal Insurance, he told her that it was a charge for certificates of insurance and other service charges and that, if she wanted any information, she should ask in writing. She then wrote a letter to the Respondent, dated June 10, 1994, requesting a breakdown of these charges, but she did not receive a response.

26. In a letter dated July 26, 1996, written to the Department, Mr. Sanders confirmed that Federal Insurance charged

    $100 Ms. Andrews for preparation of certificates of insurance. Tropic Green was reimbursed $100 by Federal Insurance by a check drawn on the Federal Insurance trust account and dated January 8, 1996.

    Virginia Davidson

    
    

27. On August 17, 1994, Virginia Davidson applied for personal automobile insurance through Federal Insurance. She

    dealt with a woman whose name she does not remember and who has not been identified in these proceedings. The policy was to cover a 1985 Chrysler, and she told the woman that she wanted insurance only for a short time because she intended to sell the car in the near future. At the time of this transaction, Ms.

    Davidson was in her late sixties.

    
    

28. Ms. Davidson was told she needed to buy a one-year policy, and she recalled being quoted a price of $386 for an automobile insurance policy written by Armor Insurance Company ("Armor"). She paid the $386 by check dated August 17, 1994, and made payable to Federal Insurance; she was given a receipt that indicated that she had paid in full the premium on the Armor automobile insurance policy for one year. In fact, the premium for this policy was initially computed as $281 on the Brokerage Auto Application form. Although Ms. Davidson signed the application form on which this quote appeared, her signature appeared only on the reverse of the application form, while the quote appeared on the front.

29. Ms. Davidson does not recall that anyone on August 17, 1994, explained that the $386 quoted to her included a separate

    $100 charge for towing coverage to be provided by L.N.V., Inc. At the time she purchased the insurance policy, Ms. Davidson was a member of AAA and would not have knowingly purchased towing coverage.

30. Ms. Davidson's signature appears on a separate application form which clearly displayed the terms "Towing Coverage" and "LNV Corp." The "membership fee" for this coverage was shown on the form as $100. Ms. Davidson was asked to sign a number of documents when she applied for the automobile insurance policy, and she does not recall signing the application form for towing coverage.

31. In a notice from Armor dated September 16, 1994,

    
    

    Ms. Davidson was notified that she owed an additional premium of

    
    

    $116 on her automobile insurance policy. The additional premium was due as a result of Armor's investigation of Ms. Davidson's driving history. In a letter to Armor dated October 11, 1994, Ms. Davidson requested that the policy be cancelled and that she receive a refund of unearned premium.

32. Armor sent Federal Insurance a check dated October 31, 1994, in the amount of $163.70, representing the unearned premium on Ms. Davidson's automobile insurance policy. Mr. Vogel signed a check to Ms. Davidson on the Federal Insurance trust account, dated November 11, 1994, for $163.70. Ms. Davidson did not receive this check, and a replacement check was prepared, dated December 5, 1994. Ms. Davidson does not recall receiving this check, and neither of these checks has cleared Federal Insurance's account. The Respondent refused to issue another replacement check unless Ms. Davidson waited six months for the

    checks to clear the bank or paid Federal Insurance the $25.00 fee charged by the bank to stop payment on the replacement check.

33. During December 1994, the Respondent recalculated the amount of the refund owing Ms. Davidson, including for the first time the agency's unearned commission and a pro rata refund of the $100 fee for the towing coverage. The Respondent issued a check to Ms. Davidson, drawn on the Federal Insurance trust account and dated December 26, 1994, in the amount of $117.20. The check specified that it was for "cancellation in full" of

    Ms. Davidson's automobile insurance policy. Ms. Davidson did not cash this check because she disputed that it was the full amount of the refund owed to her. Armor subsequently issued a check to Ms. Davidson in the amount of $184.80, which included the $163.70 and an additional amount of unearned premium which Armor had neglected to include in its calculations. Ms. Davidson does not recall receiving this check.

34. All of the checks were sent to Ms. Davidson at her correct address in West Palm Beach, Florida.

35. The Respondent was involved in the transaction involving Ms. Davidson only after she cancelled her automobile insurance policy. The Respondent signed the refund checks issued in her name, and, after Ms. Davidson filed a complaint with the Department, he responded to the Department's inquiry regarding the refund due to her.

36. After having reviewed the files of Mr. Clark,

    
    

    Ms. Andrews, and Ms. Davidson, the Respondent was satisfied with the way the agents employed by Federal Insurance transacted business with these individuals.

    Summary

    
    

37. The evidence is uncontroverted that the employees of Federal Insurance are supervised on a daily basis by and are under the direct control of the Respondent.

38. The evidence presented by the Department is not sufficient to establish with the requisite degree of certainty that Michael Clark was unaware that he was charged $100 in addition to the premiums quoted on the commercial automobile insurance policy and commercial general liability insurance policy he purchased through Federal Insurance. Although he may not have been told the purpose of the extra charge, Mr. Clark was quoted premiums of $776 and $281, respectively, for the insurance policies. The worksheet he signed clearly shows that $100 was added to each of these premiums; in fact, Mr. Clark paid $381 as payment in full for the commercial general liability insurance policy when he knew that the premium for the policy was $281. On the other hand, the evidence presented is sufficient to establish that Lee Vogel deducted a $100 service charge for certificates of insurance from Mr. Clark's down payment of $330 on the commercial automobile insurance policy even though this charge was not imposed on commercial automobile insurance policies because

    separate certificates of insurance are not prepared for such coverage.

39. The evidence presented by the Department is sufficient to establish that Bryan Sanders did not inform Cheryl Andrews of the $100 service charge added to the premium for the general liability insurance policy she purchased for Tropic Green Lawn Care and to establish that Ms. Andrews could reasonably believe that the entire down payment of $271 would be applied to the insurance premium. However, the evidence is uncontroverted that, when she spoke to the Respondent by telephone, he told her that the charge was for preparation of certificates of insurance and other services.

40. The evidence presented by the Department is sufficient to establish that, even though she signed an application form for towing coverage to be provided by L.N.V. Corp., Ms. Davidson was not told of the purpose of the application, the nature of the coverage, or the $100 fee for the coverage. In fact, the receipt for $386 that she received from Federal Insurance did not make any reference at all to the towing coverage or to L.N.V. Corp. The evidence presented by the Department is, however, not sufficient to establish that the Respondent refused to refund the monies owing to Ms. Davidson; under the circumstances presented, it was not unreasonable for Federal Insurance to refuse to issue a second replacement check.

41. The evidence presented by the Department is sufficient to establish that the Respondent instituted the practice of charging a $100 service fee for the preparation of certificates of insurance for commercial general liability insurance purchased through Federal Insurance. The evidence presented by the Department is not sufficient to establish that Federal Insurance was prohibited by agreement or contract from imposing a service charge for the preparation of certificates of insurance.

42. The evidence presented by the Department is not sufficient to establish that the Respondent instituted a policy at Federal Insurance requiring customers to purchase towing coverage from L.N.V., Inc., as a condition of purchasing an automobile insurance policy or that the Respondent developed a sales scheme whereby the application for and explanation of the towing coverage was hidden. The evidence is sufficient to establish only one instance in which an unidentified person employed at Federal Insurance failed to disclose the particulars of the towing coverage.

43. The evidence presented by the Department is not sufficient to establish a pattern at Federal Insurance of agents failing to disclose the $100 service charge for preparing certificates of insurance, of agents imposing the service charge to policies for which no certificates of insurance are prepared in the normal course of business, or of failing to inform

    customers of the nature of and charge for ancillary coverage such as towing coverage.

44. Finally, the evidence presented by the Department does not establish that the Respondent or the agents involved in the transactions at issue in this proceeding failed to remit any portion of the premiums owing to the insurance companies for the policies sold to Mr. Clark, Ms. Andrews, or Ms. Davidson. In the case of Mr. Clark and Ms. Andrews, the premiums quoted to them were correct and the premiums set forth on the premium finance agreements were correct; it is irrelevant in this respect that Mr. Clark and Ms. Andrews may have believed that their $330 and

    $271 down payments were to be applied solely to the premiums owed on the policies. Likewise, the full amount of the premium initially calculated for Ms. Davidson's automobile insurance policy was paid to the insurance company by Federal Insurance.

    CONCLUSIONS OF LAW

    
    

45. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and of the parties thereto pursuant to Section 120.57(1), Florida Statutes (1997).

46. Because the Department is seeking to suspend or revoke the Respondent's licenses as an insurance agent and/or to impose an administrative fine, the Department must prove the allegations in the Amended Administrative Complaint by clear and convincing evidence. See Department of Banking and Finance, Division of

    Securities and Investor Protection v. Osborne Stern and Co., 670 So. 2d 932, 933-34 (Fla. 1996); Ferris v. Turlington,

    510 So. 2d 292 (Fla. 1987).

    
    

47. "Clear and convincing" evidence has been described as follows:

    [C]lear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the evidence must be precise and explicit and the witnesses must be lacking confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact the firm belief of conviction, without hesitance, as to the truth of the allegations sought to be established.

    Slomowitz v. Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983).

    
    

48. "[S]tatutes authorizing the revocation of a license to practice a business or profession 'must be strictly construed, and such provisions must be strictly followed, because . . . penal in . . . nature.'" Werner v. State, Department of Insurance and Treasurer, 689 So. 2d 1211, 1214 (Fla. 1st DCA 1997), review den. 698 So. 2d 849 (Fla. 1997). See also Whitaker v. Department of Insurance, 680 So. 2d 528, 530 (Fla. 1st DCA 1996)("'Statutes providing for revocation or suspension of a license to practice are deemed penal in nature and must be strictly construed, with any ambiguity interpreted in favor of the licensee;'" quoting Elmariah v. Department of Professional Regulation, Board of Medicine, 574 So. 2d 164, 165 (Fla. 1st DCA 1990)).

49. The Department has charged the Respondent personally and in his capacity as a licensed insurance agent who is an officer and director of Federal Insurance with having violated numerous provisions of the Florida Insurance Code in the transactions involving Mr. Clark, Ms. Andrews, and Ms. Davidson. Specifically, the Department seeks to discipline the Respondent under Section 626.734, Florida Statutes (1993),3/ which provides:

    Corporations, liability of agent.--Any general lines insurance agent who is an officer, director, or stockholder of an incorporated general lines insurance agency shall remain personally and fully liable and accountable for any wrongful acts, misconduct, or violations of any provisions of this Code committed by such licensee or by any person under his direct supervision and control while acting on behalf of the corporation. Nothing in this section shall be construed to render any person criminally liable or subject to any disciplinary proceedings for any act unless such person personally committed or knew or should have known of such act and of the facts constituting a violation of this chapter.

50. First, the Department has charged the Respondent with several violations of Section 626.611, Florida Statutes (1993), which sets forth the grounds for compulsory revocation or suspension of an insurance agent's license, as follows:

    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.

    4. Misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insureds or beneficiaries or to others and received in conduct of business under the license or appointment.

       
       

       * * *

       
       

       (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.

       
       

51. On the basis of the facts found herein, the Department has failed to prove by clear and convincing evidence that the Respondent is guilty of having personally violated Sections 626.611(9). However, on the basis of the facts found herein, the Department has proven by clear and convincing evidence that Lee Vogel and Bryan Sanders each committed an act of dishonesty or fraud. In Lee Vogel's case, he imposed a $100 service charge on the commercial automobile insurance policy purchased by

    Mr. Clark; in Bryan Sanders' case, he failed to disclose to Ms. Andrews that a $100 service charge was imposed on the

    commercial general liability insurance policy she purchased from Federal Insurance. The Department has also proven by clear and convincing evidence that an unidentified agent employed by Federal Insurance committed an act of dishonesty or fraud by failing to disclose to Ms. Davidson that the $386 she paid to Federal Insurance included towing coverage as well as the premium for an automobile insurance policy.

52. Since there is no proof that the Respondent personally engaged in these three transactions, he can be found guilty of a

    violation of Section 626.611(9) only pursuant to Section 626.734 and then only if he knew or should have known that his agents had committed acts which constituted a violation of Section 626.611(9). 4/ A single act of fraud or dishonesty by a licensed insurance agent does not constitute a "fraudulent or dishonest practice," and is not, therefore, a violation of Section 626.611(9). Werner, 689 So. 2d at 1214. Because, the three agents did not individually violate Section 626.611(9), the Respondent is not subject to disciplinary action pursuant to Section 626.734, regardless of whether he knew or should have known of the three separate acts of dishonesty or fraudulent conduct. And, even assuming that one act of dishonesty or fraudulent conduct by an agent is a violation of Section 626.611(9), on the basis of the facts found herein, the Department has not established that the Respondent would be accountable for the actions of the agents employed by Federal Insurance because it has not proven by clear and convincing evidence that the Respondent knew or should have known of their actions related to these three transactions.

53. On the basis of the facts found herein, the Department has also failed to prove by clear and convincing evidence that the Respondent violated Section 626.611(10), which prohibits agents from misappropriating, converting, or unlawfully withholding money owed to insurers or others. The Department seeks to establish that the Respondent violated Section

    626.611(10) by instituting a policy at Federal Insurance of charging its customers, including Mr. Clark and Ms. Andrews, a

    $100 service charge for preparation of certificates of insurance. The Department has not cited any rule or statute which would prohibit the imposition of a service charge, nor has the Department proven that Federal Insurance was prohibited by any agreement or contract from imposing such a charge.

54. The Department also seeks to establish that the Respondent violated Section 626.611(10) by establishing a practice at Federal Insurance allowing the agents employed by the agency to sell towing coverage and to collect $100 fees from customers, including Ms. Davidson, for such coverage. The Department has not cited any rule or statute which would prohibit the sale of ancillary coverage such as towing coverage.

55. On the basis of the facts found herein, the Department has failed to prove by clear and convincing evidence that the Respondent personally committed acts which would establish the grounds for compulsory suspension or revocation of his licensee set forth in Section 626.611(7), (8), or (13). The Department has also failed to prove by clear and convincing evidence that the agents involved in the three transactions herein committed acts which would be grounds for compulsory suspension of their licenses under these statutory subsections, and, therefore, the Respondent cannot be held accountable for any violations pursuant to 626.734. 5/

56. Secondly, the Department has charged the Respondent with violations of Section 626.621, Florida Statutes (1993), which sets forth the grounds for discretionary revocation or suspension of an insurance agent's license, as follows:

    (2) Violation of any provision of this code or of any other law applicable to the business of insurance in the course of dealing under the license or appointment.

    
    

    * * *

    
    

    (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. 6/

57. The Respondent's alleged violations of Section 626.621(2) and (6) are both based upon violations of other provisions of the Florida Insurance Code. The only remaining substantive violations alleged by the Department are found in Part X of Chapter 626, specifically in Section 626.9541, which identifies "unfair methods of competition and unfair acts or practices."

58. The Department has charged the Respondent with several unfair or deceptive acts or practices set forth in Section 626.9541(1), Florida Statutes (1993), as follows:

    (e) False statement or entries.--

    1. Knowingly:

    1. Filing with any supervisory or other public official.

    2. Making, publishing, disseminating, circulating,

    3. Delivering to any person,

    4. Placing before the public,

    5. Causing, directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false material statement.

    
    

    * * *

    
    

    (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.

       * * *

       
       

       (o) Illegal dealings in premiums; excess or reduced charges for insurance.

       
       

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    2. Knowingly collecting as a premium or charge for insurance any sum in excess of or less than the premium or charge applicable to such insurance, in accordance with the applicable classifications and rates as filed with and approved by the Department, and as specified in the policy; . . .

    
    

    * * *

    
    

    (z) Sliding.--Sliding is the act or practice of:

    1. Representing to the applicant that a specific ancillary coverage or product is required by law in conjunction with the purchase of motor vehicle insurance when such coverage or product is not required;

    2. Representing to the applicant that a specific ancillary coverage or product is included in the motor vehicle policy applied for without an additional charge when such charge is required; or

    3. Charging an applicant for a specific ancillary coverage or product, in addition to

    the cost of the motor vehicle policy applied for, without the informed consent of the applicant.

    
    

59. On the basis of the facts found herein, the Department has failed to prove by clear and convincing evidence that the Respondent personally violated any of these subsections of Section 626.9541.

60. On the basis of the facts found herein, the Department has proven by clear and convincing evidence that a false material statement was delivered to Ms. Davidson when an agent employed by Federal Insurance presented her with a receipt specifically stating that the entire amount she had paid to Federal Insurance was payment for an automobile insurance policy with Armor Insurance Company, when $105 of the amount was designated as the fee for towing coverage to be provided by L.N.V., Inc. This constitutes a violation of section 626.9541(1)(e)1. on the part of the agent. On the basis of the facts found herein, however, the Department has not proven by clear and convincing evidence that the Respondent knew or should have known that the receipt was not accurate, and he is not, therefore, accountable for this action for disciplinary purposes pursuant to Section 626.734.

61. On the basis of the facts found herein, the Department has failed to prove by clear and convincing evidence that the Respondent or any agent employed by Federal Insurance violated Section 626.9541(1)(k)1.

62. On the basis of the facts found herein, the Department has failed to prove that the Respondent or any agent employed by Federal Insurance violated Section 626.9541(1)(o)2. Neither the service charge collected from Mr. Clark and Ms. Andrews for the preparation of certificates of insurance nor the "membership fee" collected from Ms. Davidson for towing coverage constitutes

    "a premium or charge for insurance." The definition of "premium" is contained in Section 627.041(2), Florida Statutes (1993): "'Premium' means the consideration paid or to be paid to an insurer for the preparation and delivery of any binder or policy of insurance."

63. On the basis of the facts found herein, the Department has proven by clear and convincing evidence that an agent employed by Federal Insurance charged Ms. Davidson for towing coverage at the time she purchased automobile insurance without obtaining Ms. Davidson's informed consent. This constitutes sliding and is a violation of section 626.9541(1)(z)3. on the part of the agent. On the basis of the facts found herein, however, the Department has not proven by clear and convincing evidence that the Respondent knew or should have known that towing coverage was sold to Ms. Davidson with out her informed consent, and he is not, therefore, accountable for this action for disciplinary purposes pursuant to Section 626.734.

64. Because the Department has failed to prove that Respondent has violated the provisions of Section 626.611 or

    626.9541 identified above, the Department has failed to prove that the Respondent has violated Section 626.211(2) or (6).

65. Finally, the Department has charged that the Respondent, as the only licensed insurance agent who is authorized to sign checks on the Federal Insurance trust account, violated Section 626.561(1), Florida Statutes (1993), which provides:

All premiums, return premiums, or other funds belonging to insurers or others received by an agent, solicitor, or adjuster in transactions under his license shall be trust funds so received by the licensee in a fiduciary capacity. . . . The licensee in the applicable regular course of business shall account for and pay the same to the insurer, insured, or other person entitled thereto.

On the basis of the facts found herein, the Department has failed to prove by clear and convincing evidence that the Respondent has violated this section of the Florida Insurance Code.

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 all three counts of the Amended Administrative Complaint filed against Howard Irvin Vogel.

DONE AND ENTERED this 16th day of September, 1998, in Tallahassee, Leon County, Florida.

PATRICIA HART MALONO

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 16th day of September, 1998.

ENDNOTES

1/ This is the corporation's name as shown on the Articles of Incorporation filed with the Secretary of State. The corporation is, however, identified on trust account checks and other documents as Federal Insurance, Inc.

2/ A certificate of insurance provides proof that a person or business has a specific type and amount of insurance coverage.

3/ The Department also seeks to hold the Respondent liable for the acts of the agents employed by Federal Insurance in his capacity as the agency's designated primary agent. This statute is, however, not applicable in this case, since it applies only to a primary agent "in an incorporated agency in which no officer, director, or stockholder is an agent." The Respondent is an officer and director of Federal Insurance.

4/ The Department's contention in its proposed recommended order that the Respondent should be charged with actual or constructive knowledge of the acts of the agents employed by Federal Insurance because he "is and has always been in charge of the agency" is specifically rejected. Section 626.734 does not impose strict liability. See Ganter v. Department of Insurance, 620 So. 2d 202 (Fla. 1st DCA 1993).

5/ Even had there been clear and convincing proof that an agent employed by Federal Insurance had committed acts which would subject the agent's license to compulsory suspension or

revocation pursuant to a provision of Section 626.611, the section itself seems to preclude basing the suspension or revocation of a license on the respondeat superior liability provision of Section 626.734. Section 626.611 provides that a license is subject to compulsory suspension or revocation if the Department "finds that as to the . . . licensee . . . any one or more of the following applicable grounds exist." See also Ganter, 620 So. 2d at 204(without discussion, court impliedly approved of the hearing officer's conclusion that "Respondent did not personally commit the misconduct alleged and he cannot, therefore, be disciplined under the provisions of section 626.611").

6/ In Whitaker v. Department of Insurance and Treasurer,

680 So. 2d 528 (Fla. 1st DCA 1996), the First District Court of Appeal held unconstitutional that the portion of Section 626.621(6) which makes it a violation to show oneself to be

"a detriment to the public interest."

COPIES FURNISHED:

William W. Tharpe, Jr., Esquire Department of Insurance and Treasurer

200 East Gaines Street Tallahassee, Florida 32399-0333

Orrin R. Beilly, Esquire

The Citizens Building, Suite 705

105 South Narcissus Avenue West Palm Beach, Florida 33401

Honorable Bill Nelson State Treasurer and

Insurance Commissioner The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

Daniel Y. Sumner, General Counsel Department of Insurance

The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300

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: 97-001388

Orders for Case No: 97-001388