STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) Case No. 99-3449

)

JACK STUART NEELY, )

)

Respondent. )

)

RECOMMENDED ORDER

A formal hearing was held in this case on March 27 through 28, 2000, and June 7, 2000, in Tallahassee, Florida, before the Division of Administrative Hearings, by its Administrative Law

Judge, Suzanne F. Hood.

APPEARANCES

For Petitioner: James A. Bossart, Esquire

William Tharpe, Esquire Department of Insurance 612 Larson Building

200 East Gaines Street Tallahassee, Florida 32399-0333

For Respondent: William M. Furlow, Esquire

Katz, Kutter, Haigler, Alderman, Bryant & Yon, P.A.

106 East College Avenue, Suite 1200 Tallahassee, Florida 32302-1877

STATEMENT OF THE ISSUES

The issues are whether Respondent's licenses as an insurance agent should be disciplined, and if so, what penalty should be imposed.

PRELIMINARY STATEMENT

Petitioner Department of Insurance (Petitioner) issued an Administrative Complaint against Respondent Jack Stuart Neely (Respondent) on March 24, 1999. Respondent requested a formal hearing on or about August 10, 1999. Petitioner referred the case to the Division of Administrative Hearings on August 11, 1999.

A Notice of Hearing dated August 30, 1999, scheduled the case for hearing on November 3 through 5, 1999.

On October 22, 1999, Respondent filed a Motion for Continuance. An order dated October 22, 1999, granted this motion.

A Second Notice of Hearing dated November 2, 1999, rescheduled the case for hearing on February 7 through 9, 2000.

On December 7, 1999, Petitioner filed a Motion for Leave to File Amended Administrative Complaint. An order dated December 10, 1999, granted this motion.

On January 19, 2000, Respondent filed a Motion for Continuance. Petitioner filed a response in opposition to this

motion on January 20, 2000. An Order Denying Continuance was entered on January 26, 2000.

Respondent requested reconsideration of the Order Denying Continuance. After a telephone conference, the undersigned entered an Order Granting Continuance and Rescheduling Hearing on January 27, 2000. The hearing was rescheduled to be heard on March 27 through 29, 2000.

The parties did not file prehearing statements as required by the Order of Prehearing Instructions dated August 30, 1999.

When the hearing commenced on March 27, 2000, the parties stipulated that insurance policies referenced in the Administrative Complaint were admissible into evidence without further authentication.

During the hearing on March 27 through 28, 2000, Petitioner presented the testimony of 13 witnesses and offered 33 exhibits which were accepted into evidence.

Before the hearing convened on March 28, 2000, the undersigned gave Respondent an opportunity to interview some of Petitioner's witnesses and to examine documents in their possession.

Before the hearing convened on March 29, 2000, Respondent's counsel experienced a medical emergency that prevented him from making an appearance. An order dated March 29, 2000, required the parties to file a status report on or before April 30, 2000,

advising the undersigned of mutually convenient dates to reschedule the final day of hearing.

On March 29, 2000, the undersigned issued an order clarifying a discrepancy in the number identification of Petitioner's exhibits.

The Transcript of the March 27 through 28, 2000, proceedings was filed on April 12, 2000.

On April 28, 2000, a Third Notice of Hearing scheduled the case for hearing on June 7, 2000.

During the hearing on June 7, 2000, Petitioner presented the testimony of one additional witness and one rebuttal witness. Petitioner offered 16 additional exhibits which were accepted into evidence.

Respondent testified on his own behalf. He offered three exhibits which were accepted into evidence.

The Transcript of the June 7, 2000, proceedings was filed on June 21, 2000.

On July 3, 2000, Respondent filed a Motion for Extension of Time to File Proposed Recommended Order. An order dated July 6, 2000, granted this motion.

The parties filed Proposed Findings of Fact and Conclusions of Law on July 10, 2000.

FINDINGS OF FACT

1. At all times relevant to these proceedings, Respondent was eligible for licensure and licensed in Florida as a life insurance agent and a life and health insurance agent. Respondent has been licensed to sell insurance for 23 years. He has no history of a prior disciplinary action being filed against his licensure. Over the years, Respondent has won several awards in his profession.

   Counts I and II

   
   

2. In March 1985, Respondent sold Joel and Kay Majors a whole life insurance policy, Sun Life Assurance Company of Canada (Sun Life) policy No. 9007333. This policy, with a specified face amount of $200,000, insured the life of Joel Majors. The monthly premium on this policy was $258.83.

3. In June 1989, Respondent sold the Majors a last- survivor whole life insurance policy, Sun Life policy No. 5978802. The purpose of the second policy, with a face amount of $500,000, was to pay estate taxes after the death of the last survivor of Mr. and Mrs. Majors. The annual premium on this policy was $4,585.00.

4. Respondent represented to the Majors that the policy premiums on the second Sun Life policy, policy No. 5978802, would be paid using accumulated cash and dividends from the first Sun Life policy, policy No. 9007333. Respondent explained

   to the Majors that they would never have to pay out-of-pocket premiums on the second policy. Based on Respondent's representations, the Major's believed that Sun Life policy No. 9007333 would generate sufficient cash and dividend values to pay the premiums on Sun Life policy No. 5978802. Respondent did not explain to the Majors what it would mean for them to use the cash value of one policy to pay the premiums on another policy.

5. The cash value of a whole life insurance policy is essentially the amount the policy owner may borrow against that policy. Because the cash value is determined by the amount the policy owner has paid on the policy, use of the cash value is an interest-bearing loan to the policy owner. The loan does not have to be repaid at any particular time, but in the event of a claim or surrender of the policy, proceeds from the policy are reduced by the amount of the loan plus outstanding interest.

6. In November 1991, Respondent sold the Majors a third whole life insurance policy, Sun Life policy No. 9247770. This policy insured the life of Joel Majors in the face amount of

   $200,000. The Majors never received a copy of this policy. The monthly premium on this policy was $404.83.

7. Each year, when the annual premium for Sun Life policy No. 5978802 was due, Respondent presented Joel Majors with blank forms entitled Policy Service Request. Joel Majors signed the forms without realizing that they authorized interest-bearing

   loans to be taken out of the cash value of policy No. 9007333 and on one occasion out of policy No. 9247770. These loans were made without the knowledge or informed consent of the Majors.

   Respondent never mentioned the word "loan" to the Majors. The Majors would never have purchased the Sun Life policy No.

   5978802 with the understanding that the premium would be paid with interest-bearing loans from their other policies.

8. All annual premiums on Sun Life policy No. 5978802, except one annual premium, were paid from loans made against Sun Life policy No. 9007333. Page 6 of Sun Life policy No. 9007333 states as follows in relevant part:

   Interest on all policy loans will accrue from day to day at the rate of 8 percent per annum, and shall be due and payable on each policy anniversary. Any unpaid interest will be added to the principal amount of the policy loan and will bear interest at the same rate and in the same manner as the policy loan.

   
   

   We will accept repayment of any policy loan at any time before the maturity of this policy. When the policy proceeds become due, we will deduct the balance of any outstanding policy loans and accrued interest on such loans, from that amount.

   If your policy loan balance ever equals or exceeds the net cash value, this policy will terminate 31 days after we mail notice to your last known address . . . .

   
   

9. One loan was made against Sun Life policy No. 9247770.

   
   

   According to page 6 of the Sun Life policy No. 9247770, the company sets the policy loan interest rate annually according to

   the provisions contained therein. The Majors were not aware that any funds from this policy would be used to pay premiums on any other policy.

10. Sometime in 1997, the Majors learned about the loans on policy Nos. 9007333 and 9247770. They realized for the first time that loans were used to pay the premiums on Sun Life policy No. 5978802. The Majors never intended to authorize interest- bearing loans that would deplete the death benefit of one policy to pay policy premiums on another policy.

11. Respondent testified at the hearing that loans from Sun Life policy Nos. 9007333 and 9247770 were used to pay the premiums on Sun Life policy No. 5978802. However, his testimony that the loans were made with the knowledge or informed consent of the Majors is not persuasive.

12. The Majors were not knowledgeable about insurance policies. They placed their trust in Respondent to handle their insurance transactions. Often the Majors did not open mail from the insurance company containing statements about their policies.

    Count III

    
    

13. In July 1990, Respondent sold the Majors a flexible premium deferred annuity, Financial Benefit Life Insurance Company (Financial Benefit) policy No. 818249, with a maturity date of July 13, 2010.

14. The initial deposit for the annuity was $25,000.

    
    

    Later in the year, the Majors deposited an additional $10,000 in the annuity.

15. Respondent promised the Majors that if the interest rate on the annuity dropped, he would "roll-over" the annuity to obtain a higher rate. Respondent also promised that he would pay any penalties associated with the transaction. Respondent did not explain the definition of a "roll-over" to the Majors.

16. In February 1994, Respondent withdrew a portion of the funds (the $10,000 contribution plus accumulated interest) from the Majors' Financial Benefit annuity, policy No. 818249. He used the funds to purchase the Majors a second annuity, Financial Benefit policy No. 707450, with an initial contribution in the amount of $12,503.43. Although the second annuity had a higher interest rate, Respondent made this purchase without the Majors' knowledge or informed consent. Respondent received a commission on this unauthorized transaction.

17. Financial Benefit issued the second annuity but a copy of the policy was never delivered to the Majors. Respondent never disclosed its purchase to the Majors.

18. In 1996, the Majors complained to Respondent that the interest rate had dropped on what they believed was their one Financial Benefit annuity. At that time, the original annuity

    was worth the initial $25,000.00 contribution plus interest or approximately $33,000.00.

19. Respondent requested the surrender of the remaining funds in the original annuity, Financial Benefit policy No. 818249, to purchase the Majors a third annuity, Financial Benefit policy No. 712937. Financial Benefit assessed a surrender charge in the amount of $2,250.00. Subsequently, on October 10, 1996, Financial Benefit issued policy No. 712937 to the Majors with an initial contribution of $33,477.60 and an October 10, 2016, maturity date.

20. Respondent purchased the third annuity without the knowledge or informed consent of the Majors. The Majors did not receive a copy of the third annuity. Respondent received a commission on this unauthorized transaction.

21. The Majors were not aware that Respondent had purchased the second and third annuities. They continued to believe that they had only one annuity, the one purchased in 1990, which had been "rolled over" to obtain a higher interest rate. However, they eventually became aware of the $2,250.00 surrender charge assessed by Financial Benefit. They complained to Respondent and reminded him of his promise to pay all penalties.

22. Respondent then purchased two money orders from Capital City Bank in the total amount of $2,250.00. Respondent

    mailed the money order to Financial Benefit with instructions for the company to deposit the funds into the annuity. Knowing that the insurance company would not permit Respondent to make personal contributions to the Majors' annuity, Respondent signed the name of Joel Majors on the money orders. Joel Majors had no knowledge of the money orders and did not authorize Respondent to sign his name.

23. If the Majors had known that Respondent was going to "roll-over" their original annuity by using its funds to purchase two new policies with different maturity dates, they would never have agreed to the transactions regardless of higher interest rates. Instead, they would have let their original policy mature and take their money out for placement in another investment vehicle.

    Counts IV and V

    
    

24. In 1985, Respondent sold Joel and Kay Majors a

    
    

    $50,000.00 life insurance policy, Sun Life policy No. 9009995D. The policy insured the life of the Majors' son, Timothy Majors.

25. About ten years later, Esther Majors, wife of Timothy Majors, was employed as a travel agent. As a full-time employee, Esther Majors was entitled to $110.00 per month from her employer's benefit plan. The money was available to Esther Majors for savings because she did not need to participate in her employer's health insurance plan. Esther Majors could use

    the money to purchase an Individual Retirement Account (IRA) or other comparable investment.

26. Timothy and Esther Majors sought Respondent's assistance in setting up an appropriate investment for Esther Majors' funds.

27. Respondent first met with Esther Majors' employer to discuss the retirement account. The employer and Respondent discussed using the money to fund a self-directed IRA or annuity that could be rolled over later if Esther Majors changed jobs.

28. Respondent also met with Timothy and Esther Majors.

    
    

    They discussed setting up what Timothy and Esther Majors believed would be an IRA with a monthly contribution of $110.00 for as long as she worked full-time for the same employer.

29. Respondent did not set up the IRA for Esther Majors.

    
    

    Instead, in January 1995, Respondent submitted an application to Time Insurance Company (Fortis) for an adaptable life insurance policy insuring the life of Esther Majors and naming Timothy Majors as the beneficiary. Respondent submitted the application without the knowledge or informed consent of Timothy and Esther Majors. Esther Majors either did not read the application when she signed it or did not understand that she was signing an application for life insurance as opposed to an IRA annuity.

30. Respondent requested that Fortis issue the policy with a face amount of $69,533.00 and with a monthly premium in the

    amount of $110.000. Fortis issued the policy as policy No. 985698.

31. Timothy and Esther Majors never intended to purchase a life insurance policy. Respondent did not discuss life insurance with Timothy and Esther Majors at any time. Esther Majors could have purchased life insurance through her employer. Thus, Respondent misrepresented the nature of the insurance product that he sold to Timothy and Esther Majors.

32. On or about July 15, 1995, Timothy Majors informed Respondent that Esther Majors would temporarily cease making the

    $110.00 contribution to what he believed was Esther Majors' IRA because she was going to college and would no longer be working full-time as a travel agent. Timothy Majors assured Respondent that, upon graduation, Esther Majors intended to resume payments and roll her IRA over to a new employer.

33. Respondent replied that Timothy and Esther Majors needed to continue saving for their future. He also told Timothy Majors that the company where Esther's money was invested required a minimum deposit per year in order not to lose the money already deposited. Respondent asked Timothy Majors for a check in the amount of $60.00. Timothy Majors gave Respondent the check.

34. On or about October 25, 1995, Respondent requested a loan for $270.00 to be made from Timothy Majors' Sun Life

    insurance policy No. 9009995D. Respondent requested this loan without Timothy Majors' knowledge or informed consent.

35. Sun Life mailed a check payable to Timothy Majors in the amount of $270.00 to Respondent's office. Respondent then obtained Timothy Majors' signature endorsement on the check without explaining that the funds would be used to pay the quarterly premium on Esther Majors' Fortis insurance policy. Timothy Majors signed the check unaware that it represented a loan on his Sun Life insurance policy.

36. Respondent used the Sun Life check in the amount of

    
    

    $270.00 and, together with Timothy Majors' check for $60.00, paid another quarterly premium on Esther Majors' Fortis insurance policy in the amount of $330.00. Neither Timothy nor Esther Majors authorized Respondent to make this payment.

37. No further premium payments were made for Esther Major's Fortis insurance policy. Respondent never told Timothy and Esther Majors that the policy would lapse if they stopped paying the premiums. The policy was too new to have any cash value. As a result, the life insurance policy eventually lapsed. Esther and Timothy Majors lost all of the funds used to pay premiums on a life insurance policy that they never knew they owned.

    Count VI

    
    

38. In 1995, Kay Majors arranged for Respondent to sell an annuity to her mother, Bernice Langford. During the initial meeting between Ms. Langford and Respondent, he was informed that Ms. Langford was born on February 5, 1918, and that her age was 77.

39. Respondent filled out an application for a Financial Benefit flexible premium deferred annuity for Ms. Langford. Because Ms. Langford's age made her ineligible to purchase the annuity, Respondent misrepresented her date of birth as February 5, 1928, and her age as 67 on the application.

40. Financial Benefit issued a $60,000.00 annuity, policy No. 711110, to Ms. Langford. Respondent received a commission for selling the annuity to Ms. Langford.

41. Thereafter, Kay Majors became aware of inaccuracies in her mother's age and informed Respondent about them. Respondent indicated that he would take care of the problem.

42. Respondent later sent a letter to Ms. Langford representing that he had notified the company about her correct age and had the records corrected.

43. Although Financial Benefit sells annuities to people up to 100 years old, it would not have issued the annuity in question to Ms. Langford had it known her correct age. The

    company is aware of the age discrepancy and has not rescinded

    
    

    the annuity.

    
    

    Count VII

    
    

44. In 1993, Respondent sold a Sun Life modified benefit whole life insurance policy, policy No. 9292231, to Cheryle Hayes Wood Burch (n/k/a Cheryle Hicks.) This policy had an initial face amount of $91,443.00 and a monthly premium of

    $100.00.

    
    

45. In 1995, Respondent advised Ms. Hicks that he had found her a better policy through Fortis, with identical coverage and premium. Respondent presented the replacement policy to Ms. Hicks as if he had already switched the policies and only needed her signature on some paperwork. Respondent indicated that Ms. Hicks' Sun Life policy had no cash value.

46. Ms. Hicks had not requested that Respondent replace her Sun Life policy. However, she trusted him to act in her best interests. Respondent told Ms. Hicks he would take care of everything. At Respondent's request, Ms. Hicks signed an insurance application dated May 16, 1995. Ms. Hicks either did not read the application before signing it, did not understand what she read, or signed a blank application form presented to her by Respondent.

47. Subsequently, Fortis issued an adaptable life insurance policy, policy No. 994725, to Ms. Hicks. The new policy had a face amount of only $50,000, even though the premium was identical to the Sun Life policy. Ms. Hicks was not aware that her new policy had a reduced face amount. Respondent received a commission on this transaction.

48. Ms. Hicks believed her new Fortis policy had a

    
    

    $100,000 death benefit. She never intended to purchase a replacement policy with only a $50,000.00 death benefit. Respondent misrepresented the terms of the replacement policy for the purpose of receiving a commission.

    Counts VIII and IX

    
    

49. Respondent sold a Sun Life permanent life insurance policy, policy No. 9216228, with a face value of $33,805.00 to Faye Thompson Hoover. Sun Life issued the policy in November 1990.

50. Respondent also sold a Financial Benefit annuity, policy No. 819862, to Ms. Hoover. Financial Benefit issued the policy in November 1990.

51. In December 1993, Respondent urged Ms. Hoover to cancel her Financial Benefit annuity, policy No. 819862, and purchase a new Financial Benefit annuity. Ms. Hoover did not understand why she should purchase the new annuity, but she trusted Respondent and followed his advice. The new annuity was

    purchased and issued as Financial Benefit policy No. 707176 in January 1994.

52. In 1996, Respondent urged Ms. Hoover to let him cancel her Sun Life policy No. 9216228 and deposit the funds into her Financial Benefit annuity, policy No. 707176. She agreed.

53. Respondent did not cancel Ms. Hoover's Sun Life policy. Instead, he requested Sun Life to issue a loan for the maximum amount allowable for a loan against the Sun Life policy No. 9216228. Sun Life subsequently issued Ms. Hoover a check in the amount of $4,800.00, which represented a loan against the cash value of the policy. Respondent requested the loan without Ms. Hoover's knowledge or informed consent.

54. Sun Life mailed the $4,800.00 check to Ms. Hoover.

    
    

    Upon receipt of the check, Respondent told Ms. Hoover that the proceeds represented the cash value of her Sun Life policy.

    Based on Respondent's representations, Ms. Hoover incorrectly believed that her Sun Life policy had been cancelled and that the company had sent her the policy's cash value.

55. Respondent's representations regarding Ms. Hoover's Sun Life policy were false. At no time did Respondent disclose that the check she received was a loan against the cash value of her policy and that the policy was still in effect.

56. Next, Respondent requested Sun Life to stop the monthly draft on Ms. Hoover's bank account that paid the premium

    on her Sun Life policy. He did this by falsely advising Sun Life that Ms. Hoover had changed her bank account.

57. Because the premium payments had ceased and a new bank authorization was never received by Sun Life, the policy lapsed, but only after exhaustion of the policy's remaining cash value.

58. Ms. Hoover became aware that funds in her Sun Life policy had been exhausted when she received a letter dated August 26, 1996, from the company. When Ms. Hoover confronted Respondent about leaving money in her Sun Life account, he told her he would get her funds back. However, he never did secure a refund of the exhausted funds.

59. In the meantime, Ms. Hoover deposited the $4,800.00 Sun Life check into her bank account. She then wrote a check to Respondent for $4,000.00, with instructions for him to deposit the money into her Financial Benefit annuity, policy No. 707176.

60. Respondent accepted the check but did not follow Ms.

    
    

    Hoover's instructions. Rather, he submitted an application to Financial Benefit for an IRA annuity without Ms. Hoover's knowledge or informed consent. He also sent Financial Benefit Ms. Hoover's $4,000.00 check.

61. Financial Benefit issued the IRA annuity, policy No.

    
    

    712086, with Ms. Hoover as the annuitant. Ms. Hoover never received a copy of the annuity. Respondent received a commission on this transaction.

    Count X

    
    

62. In 1992, Elizabeth R. Maxwell discussed her retirement needs with Respondent. She wanted to invest her funds so that a portion of it would be available to her in five years. She wanted the balance of her funds to be available in seven years. Ms. Maxwell told Respondent she wanted to be able to retire around age 59.

63. Respondent suggested that Ms. Maxwell invest her money in annuities. He was aware that Ms. Maxwell knew very little, if anything, about annuities and that she was relying on his expertise and experience to assist her in making investment decisions.

64. In April 1992, Respondent sold Ms. Maxwell a Financial Benefit IRA annuity, policy No. 823703, with a maturity date of 2012. Ms. Maxwell subsequently deposited $10,947.95 into this annuity as the original contribution. Respondent received a commission for the transaction.

65. Respondent also sold Ms. Maxwell a Financial Benefit regular annuity, policy No. 823568, with a maturity date of 2012. Ms. Maxwell deposited $90,000.00 into this annuity as the original contribution. Respondent received a commission on the transaction.

66. The maturity date of an annuity is the date on which annuity payments begin.

67. In December 1992, Ms. Maxwell gave Respondent

    
    

    $30,000.00 for deposit into what she thought was one of her two existing annuities. Respondent used the money to purchase a USG Annuity and Life Company (USG) annuity, policy No. 128153, without Ms. Maxwell's knowledge or informed consent. This annuity matures in 2042.

68. In January 1993, Ms. Maxwell gave Respondent

    
    

    $50,000.00 for deposit into what she thought was one of her two existing annuities. Respondent used the money to purchase a USG annuity, policy No. 132140, without Ms. Maxwell's knowledge or informed consent. This annuity matures in 2043.

69. In April 1996, Ms. Maxwell gave Respondent $74,672.57 for deposit into what she thought was one of her two existing annuities. Respondent used the money to purchase an additional Financial Benefit annuity, policy No. 712410, without Ms. Maxwell's knowledge or informed consent. This annuity matures in 2016. Respondent received a commission on this transaction.

70. In April 1996, Respondent, without Ms. Maxwell's knowledge or informed consent, cancelled her Financial Benefit annuity, policy No. 823703. He then transferred $18,927.30, representing the surrender value, into a new Financial Benefit annuity, policy No. 712497. The new annuity's maturity date was 2016. Respondent received a commission on this transaction.

71. In May 1996, Respondent, without Ms. Maxwell's knowledge or informed consent, cancelled her Financial Benefit annuity, policy No. 823568. He then transferred $166,182.69, representing the surrender value, into a new Financial Benefit annuity, policy No. 712548. The new annuity matures in 2016. Respondent received a commission on this unauthorized transaction.

72. In November 1996, Ms. Maxwell gave Respondent

    
    

    $25,000.00 for deposit into what she thought was one of her two existing annuities. Respondent used the funds to purchase an additional Financial Benefit annuity, policy No. 713242, without Ms. Maxwell's knowledge or informed consent. The new annuity matures in 2016. Respondent received another commission.

73. Sometime in 1996, Ms. Maxwell became confused and concerned about her annuity investments. Ms. Maxwell asked her accountant for assistance in determining the status of her investments. She took her accountant boxes of documents containing insurance company statements and other insurance correspondence. Some of the documents were in unopened envelopes.

74. The accountant's investigation, which took place over a six-month time period, revealed at least seven annuities. The accountant also determined that the insurance companies had assessed surrender fees on some of the transactions.

75. Ms. Maxwell was shocked at the result of her accountant's investigation. She was unaware of any annuities other than what she understood to be her two Financial Benefit annuities.

76. The accountant requested that Respondent provide copies of Ms. Maxwell's annuities. Respondent did not provide the copies.

77. At the request of the accountant, Respondent signed a statement that he would personally pay any penalties if surrender charges were assessed. Respondent reimbursed Ms. Maxwell for some of the surrender charges. However, Respondent never provided Ms. Maxwell's accountant with documentation accounting for reimbursement of about $6,000.00 in surrender charges.

78. After Ms. Maxwell's accountant became involved, Respondent asked the accountant to approve the "roll-over" of an annuity. The accountant requested information about the old policy and the new policy before making a decision. Respondent refused to provide the information. Respondent told the accountant that he knew more about insurance than the accountant. Respondent stated that the accountant needed to attend to his business and that Respondent would take care of the insurance side of it. The accountant and Respondent have had no subsequent conversations. As of the date of the final

    hearing, Respondent had not provided Ms. Maxwell or her accountant with sufficient documentation to account for all of her investments.

79. Until November of 1996, Financial Benefit paid its agents commissions on the sale of annuities at the time of the original deposit and on each subsequent contribution. In November 1996, Financial Benefit notified its agents that no commission would be paid for additional contribution into annuities after the third policy year.

80. After Ms. Maxwell learned that Respondent had invested her funds in more than two annuities and despite Respondent's failure to cooperate with the accountant, Ms. Maxwell continued to trust Respondent to invest her money in annuities. She did so with the understanding that each new transaction would increase the interest she would earn. Ms. Maxwell did not understand the effect the new transactions would have regarding penalties and maturity dates.

81. In February 1997, Respondent, without the knowledge or informed consent of Ms. Maxwell, cancelled Ms. Maxwell's USG annuity, policy No. 132140. He then transferred $58,309.01, representing the surrender value, into a new Financial Benefit annuity, policy No. 713549. The new annuity, on which Respondent received a commission, has a maturity date in 2017.

82. In July 1997, Ms. Maxwell gave Respondent $2,005.11 for deposit into an annuity. Respondent used the funds to purchase an additional Financial Benefit annuity, policy No. 714186, without Ms. Maxwell's informed consent. The new annuity matures in 2017. Respondent received another commission.

83. In October 1997, Ms. Maxwell gave Respondent

    
    

    $15,189.66 for deposit into an annuity. Without Ms. Maxwell's informed consent, Respondent used the funds to purchase a USG annuity, policy No. 529581. This annuity matures in 2014.

    Respondent received a commission.

    
    

84. In January 1998, Ms. Maxwell gave Respondent $2,000.00 for deposit into an annuity. Without Ms. Maxwell's informed consent, Respondent used the funds to purchase a Financial Benefit annuity, policy No. 714865. This annuity matures in 2013. Respondent received a commission.

85. In January 1998, Respondent, without Ms. Maxwell's informed consent, cancelled her USG annuity, policy No. 128153. He then transferred $38,498.43, representing the surrender value, into a new Financial Benefit annuity, policy No. 714866. The new annuity, on which Respondent received a commission, has a maturity date in 2013.

86. Ms. Maxwell received a copy of only one of the many policies that Respondent purchased on her behalf. In 1996 or 1997, Respondent took that policy from Ms. Maxwell, telling her

    the company was going to adjust it and give it back to her. He never gave the policy back to Ms Maxwell.

87. Respondent obtained Ms. Maxwell's signature each time he purchased an annuity on her behalf. On some occasions Ms. Maxwell thought she was signing a form to deposit additional funds into her original two annuities with Financial Benefit.

88. Sometimes Ms. Maxwell did not know what she was signing because she did not see the whole page or did not read the document first. Respondent would tell her he was in a hurry and she should just sign next to the "X." Respondent told her he would date it later.

89. On other occasions, Respondent told Ms. Maxwell that he was "rolling over" an existing fund into a new fund. He told her the "roll-over" would give her a higher interest rate but that nothing else would change. He said that everything would mature at the same time, otherwise Ms. Maxwell would not have agreed to the "roll-over." Respondent told Ms. Maxwell that there would be no penalties and that he did not get paid commissions.

90. At times Ms. Maxwell signed documents referencing the surrender of annuities and associated penalties. On those occasions, Ms. Maxwell thought she was surrendering the annuities so that they could be rolled over. She trusted

    Respondent's representation that the penalties were not true penalties.

91. None of the annuities that Respondent sold to Ms.

    
    

    Maxwell or purchased in her name had maturity dates in five to seven years from the date of the original transactions.

    Respondent never disclosed that the annuities would mature between fifteen and forty years from the purchase date.

    Consequently, the annuities would not have reached maturity, making her funds available for retirement free of any surrender charge in time for her to retire at age 59.

    Count XI

    
    

92. In 1991, Respondent met with Dr. Charles Moore to discuss the purchase of life insurance as a part of Dr. Moore's estate planning needs. Dr. Moore told Respondent that he wanted to be able to retire in about ten years with about $1,000,000.00 in life insurance.

93. As a result of this discussion, Respondent sold Dr.

    
    

    Moore a Sun Life permanent life insurance policy, policy No. 9245964, with a face amount of $250,000.00 and a monthly premium of $788.28.

94. Respondent also sold Dr. Moore a Sun Life permanent life insurance policy, policy No. 9241898, with a face amount of

    $250,000.00, and a monthly premium of $876.61. This policy had a renewable term rider with an additional benefit amount of

    $250,000.00, with a premium in the amount of $88.33 for the first year. The premium on the term rider would increase over time.

95. Respondent told Dr. Moore that in approximately ten years, the policies would have sufficient cash value to pay the premiums from their dividends. Respondent stated that the policies would then be "paid-up" that Dr. Moore would no longer have to pay premiums. Respondent told Dr. Moore that at some point in time, the term rider on Sun Life policy No. 9241898 would have to be cancelled because the premium would become too expensive. Dr. Moore would not have purchased these policies but for Respondent's representations.

96. In December 1994, Respondent sold Dr. Moore a Fortis life insurance policy, policy No. 985470, with a face amount of

    $500,000 and an annual premium in the amount of $13,000.00. Dr. Moore needed additional insurance to cover potential estate taxes on family-owned real estate in another state. Respondent represented that the policy premiums on the Fortis policy would be paid entirely from dividends from Dr. Moore's Sun Life policies without depleting the cash value of those policies.

    Dr. Moore would not have purchased this policy but for Respondent's representations.

97. Contrary to Respondent's representations, the dividends on Dr. Moore's Sun Life policies, in and of

    themselves, were not sufficient to pay the premiums on his Fortis life insurance policy. Instead, without Dr. Moore's knowledge or consent, Respondent submitted loan requests for a series of loans on the cash value of Dr. Moore's Sun Life policies, policy Nos. 924564 and 9241898, from 1995 through 1998. The loans against the Sun Life policies, including principle and interest, total in excess of $52,000.00.

98. When Dr. Moore received checks for the loan proceeds from Sun Life, he would endorse them and give them to Respondent. Dr. Moore thought he was endorsing dividend checks. Respondent used the proceeds from the loans to pay the annual premiums on Dr. Moore's Fortis policy.

99. The loans do not have to be repaid at any certain date. However, the amount of the loans, principal and interest, will be subtracted from the death benefits of the policies in the event of a claim or from the value of the policies in the event of surrender.

100. At the time of the hearing, Dr. Moore either had surrendered his Sun Life policies or was in the process of doing so. He was paying for his Fortis policy on a monthly basis.

     Count XII

     
     

101. At all times pertinent herein, an agent's agreement was in effect between Canada Life Assurance Company (Canada Life) and Respondent.

102. In 1994, Respondent sold Mack Wallace Womble a Canada Life whole life insurance policy. Respondent received commissions on the initial and subsequent premiums paid on this policy.

103. Mr. Womble never received a copy of his policy from the insurance company. Eventually, Respondent complained to Petitioner on Mr. Womble's behalf. Petitioner then directed Canada Life to refund all of Mr. Womble's premiums plus interest. The company complied with this directive and rescinded the policy.

104. There is no evidence that Respondent was responsible for Canada Life having to refund Mr. Womble's premiums. There is evidence that the lengthy dispute over the delivery of the policy involved the company, the company's regional representative, and Mr. Womble.

105. The record contains no business record documenting Canada Life's demand that Respondent refund all commissions paid to him for Mr. Womble's policy. Canada Life's representative/record custodian testified that the company had made such a demand at some unknown point in time. Her testimony, in and of itself, is not competent evidence that the company made a formal demand and that Respondent received that demand. However, Respondent admitted in a deposition that he

     has not refunded the premiums because cancellation of the policy was the company's fault, causing him to lose a valuable client.

106. Respondent's Producer's Contract with Canada Life states as follows in relevant part:

     PART I GENERAL CONDITIONS

     
     

     * * *

     
     

     3. REPAYMENT OF INDEBTEDNESS - The company, at its discretion, may: (a) deduct any commissions or other obligations of any nature payable to the individual Producer or estate, or any of their assigns under this or any other Contract with the Company or;

     (b) require the Producer or estate to pay to the Company on demand any outstanding balances arising from chargebacks, deductions, adjustments and reversals under the terms of this or any other Contract with the Company regarding such income as, but not limited to, commissions. In the event that this Contract is terminated for whatever reason, all outstanding balances shall be immediately due and payable.

     * * * PART II

     CONDITIONS GOVERNING PAYMENT OF REMUNERATION

     
     

     * * *

     
     

     1. In the event that the Company deems it necessary to refund a premium for a policy, the Producer, if called upon by the Company, shall repay on demand any remuneration received by him in connection with such policy.

     
     

107. Canada Life's representative/records custodian testified that the subject Producer's Contract was terminated in

     1996. There is no business record in evidence to support that testimony. According to Respondent's official licensure records, the contract between Canada Life and Respondent was "not renewed" in 1997.

     CONCLUSIONS OF LAW

     
     

108. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Sections 120.569 and 120.57(1), Florida Statutes.

109. Petitioner must prove that Respondent violated the provisions of Chapter 626, Florida Statutes, as charged by clear and convincing evidence. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

110. Section 626.561(1), Florida Statutes, states as follows in relevant part:

     All premiums, return premiums, or other funds belonging to insurers or others received by an agent, solicitor, or adjuster in transactions under his or her 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.

     
     

111. Section 626.611, Florida Statutes, states as follows in relevant part:

     626.611 Grounds for compulsory refusal, suspension, or revocation of agent's . . . license or appointment.--The department shall . . . suspend, revoke, or refuse to

     renew or continue the license or appointment of any . . . agent . . . and it shall suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the . . . licensee, or appointee any one of more of the following applicable grounds exist:

     
     

     * * *

     
     

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

     
     

     * * *

     
     

     (7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

     
     

     * * *

     
     

     1. Fraudulent or dishonest practices in the conduct of business under the license or permit.

     2. 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.

     
     

112. Section 626.621, Florida Statutes, states as follows in relevant part:

     626.621 Grounds for discretionary . . . suspension, or revocation of agent's . . .

     license or appointment.--The department may, in its discretion . . . suspend, revoke, or refuse to renew or continue the license or appointment of any . . . agent . . . and it may suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the . . . licensee, or appointee any one or more of the following applicable grounds exist under circumstances for which . . . suspension, revocation, or refusal is not mandatory under s. 626.611:

     
     

     * * *

     
     

     (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.

     
     

     * * *

     
     

     (4) Failure or refusal, upon demand, to pay over to any insurer he or she represents or has represented any money coming into his or her hands belonging to the insurer.

     
     

     * * *

     
     

     (6) In the conduct of business under the license or permit, 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 or herself to be a source of injury or loss to the public or detrimental to the public interest.

     
     

113. Section 626.9521(1), Florida Statutes, states as follows:

     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. 6526.9561 to be, an unfair method of competition or an unfair or

        deceptive act or practice involving the business of insurance.

        
        

114. Section 626.9541(1), Florida Statutes, states as follows in relevant part:

     (e) False Statement and 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.

        
        

        * * *

        
        

        (AA) Churning.--

        1. Churning is the practice whereby policy values in an existing life insurance policy or annuity contract, including, but not limited to, cash, loan values, or dividend values, and in any riders to that policy or contract, are utilized to purchase another insurance policy or annuity contract with that same insurer for the purpose of earning additional premiums, fees, commission, or other compensation:

           1. Without an objectively reasonable basis for believing that the replacement or extraction will result in an actual and demonstrable benefit of the policyholder;

           2. In a fashion that is fraudulent, deceptive, or otherwise misleading or that involves a deceptive omission;

           3. Effective October 1, 1995, when the applicant is not informed that the policy values including cash values, dividends, and other assets of the existing policy or contract will be reduced, forfeited, or utilized in the purchase of the replacing or

              additional policy or contract, if this is the case; or

           4. Effective October 1, 1995, without informing the applicant that the replacing or additional policy or contract will not be a paid-up policy or that additional premiums will be due, if this is the case. Churning by an insurer or agent is an unfair method of competition and an unfair or deceptive act or practice.

     
     

     Counts I and II

     
     

115. Respondent represented to Mr. and Mrs. Majors that they could purchase a second Sun Life insurance policy, using values from their first Sun Life policy to pay the premiums. Respondent failed to tell the Majors that this would be accomplished using interest-bearing loans on the first Sun Life insurance policy, and on one occasion, from a third Sun Life insurance policy. He also failed to tell them that, if the loans were not repaid, the value of the loans would be deducted from the first Sun Life policy's cash value in the event of a claim or the surrender of the policy.

116. Mr. and Ms. Majors did not discover the loans against their first and third Sun Life insurance policies until 1997. Consequently, at least one of the loans against Sun Life policy Nos. 9007333 or 9247770 was made in 1996 after the effective date of Section 626.9541(1)(aa)1., Florida Statutes (1995). Respondent made this 1996 loan for the purpose of receiving a commission without an objectively reasonable basis for believing

     that the extraction would result in an actual and demonstrable benefit to the Majors contrary to Section 626.9541(1)(aa)1.a., Florida Statutes, in a fashion that involved a misleading statement and/or deceptive omission contrary to Section 626.9541(1)(aa)1.b., Florida Statutes, and without informing the Majors that the loans would deplete the cash value of an existing policy contrary to Section 626.9541(1)(aa)1.c., Florida Statutes.

117. As to Count I, clear and convincing evidence indicates that Respondent violated Section 626.611(5), Florida Statutes, by willfully misrepresenting how the premiums would be paid on the Majors' Sun Life policy No. 5978802. As to Count II, Respondent violated Sections 626.621(6) and 626.9451(aa)1., Florida Statutes, as to at least one loan made against the Majors' Sun Life policy No. 9007333 or 9247770. As to Counts I and II, Respondent violated Sections 626.611(7) and 626.611(9), Florida Statutes, by demonstrating a lack of trustworthiness to engage in insurance business and by acting dishonestly under his license.

118. Pursuant to Rules 4-231.030, 4-231.040, 4-231.080,

and 4-231.090, Florida Administrative Code, the highest "penalty per count" for Count I and Count II is suspension of Respondent's licenses for nine months for each count.

Count III

1. Respondent represented to the Majors that he was "rolling over" the funds in their Financial Benefit annuity policy No. 818249 when he used the funds in that annuity to purchase Financial Benefit annuity policy Nos. 707450 and 712937. Financial Benefit annuity policy No. 712937 was purchased in 1996 after the effective date of Section 626.9541(1)(aa)1., Florida Statutes (1995). Although the new annuities temporarily may have had higher interest rates, Respondent failed to inform the Majors that he was using the funds to purchase new annuities or that the new annuities had different maturity dates.

2. Clear and convincing evidence indicates that Respondent violated Section 626.611(5), Florida Statutes, by willfully misrepresenting the use of the Majors' funds in Financial Benefit annuity policy No. 818249. As to Financial Benefit annuity policy No. 712937, Respondent violated Sections 626.621(6) and 626.9451(1)(aa)1.a. through 626.9541(1)(aa)1.c., Florida Statutes, for the following reasons: (a) He acted for the purpose of receiving a commission; (b) He acted without an objectively reasonable basis for believing that the extraction would result in an actual and demonstrable benefit to the Majors; (c) He acted in a fashion that involved a misleading statement and/or deceptive omission; and (d) He acted without

informing the Majors that their funds would be utilized in the purchase of an additional policy. Finally, Respondent violated Sections 626.611(7) and 626.611(9), Florida Statutes, by demonstrating a lack of trustworthiness to engage in insurance business and by acting dishonestly under his insurance license.

121. Pursuant to Rules 4-231.030, 4-231.040, 4-231.080,

and 4-231.090, Florida Administrative Code, the highest "penalty per count" for Count III is suspension of Respondent's licenses

for nine months.

Counts IV and V

1. Respondent represented to Timothy and Esther Majors that he was setting up an IRA for Esther Majors. Instead he sold Esther Majors a Fortis insurance policy, policy No. 985698. Respondent failed to tell Esther and Timothy Majors that the policy would lapse if she did not continue to pay premiums when she stopped working full-time for the travel agency. In time the policy lapsed, causing Esther Majors to lose the funds that her employer gave her to invest.

2. In October 1995, Respondent requested Sun Life to make a loan against Timothy Majors' Sun Life insurance policy No. 9009995D. Without the knowledge or informed consent of Timothy Majors, Respondent used the $270.00 loan, together with a $60.00 personal check from Timothy Majors, to pay a quarterly premium payment on Ester Majors' Fortis insurance policy.

3. As to Count IV, clear and convincing evidence shows that Respondent made the $270.00 loan against Timothy Majors' Sun Life policy in violation of Section 626.611(10), Florida Statutes, by misappropriating or converting the proceeds from Timothy Majors' Sun Life insurance policy.

4. As to Count V, clear and convincing evidence indicates that Respondent violated Section 626.611(5), Florida Statutes, by willfully misrepresenting the insurance policy he sold to Esther Majors as an IRA. Respondent made this misrepresentation knowing that it was a false material statement contrary to Sections 626.621(6) and 626.9541(1)(e)1., Florida Statutes.

5. As to Counts IV and V, clear and convincing evidence indicates that Respondent violated Section 626.611(7), Florida Statutes, by demonstrating a lack of trustworthiness to engage in the business of insurance and Section 626.611(9), Florida Statutes, by using dishonest practices in the conduct of insurance business.

127. Pursuant to Rules 4-231.030, 4-231.040, 4-231.080,

and 4-231.090, Florida Administrative Code, the highest "penalty per count" for Count IV and Count V is suspension of Respondent's licenses for nine months for each count.

Count VI

1. Respondent failed to disclose to Bernice Langford that she was not eligible to purchase the annuity that he sold her. He also misrepresented her age to the insurance company.

2. Clear and convincing evidence indicates that Respondent violated Sections 626.611(5), 626.621(6), and 626.9541(1)(e)1., Florida Statutes, by his willful misrepresentations and false material statement regarding the policy. He also violated Sections 626.611(7) and 626.611(9), Florida Statutes, demonstrating a lack of trustworthiness to engage in insurance business and using dishonest practices in the conduct of business under his license.

130. Pursuant to Rules 4-231.030, 4-231.040, 4-231.080,

and 4-231.090, Florida Administrative Code, the highest "penalty per count" for Count VI is suspension of Respondent's licenses

for nine months.

Count VII

1. Respondent represented to Ms. Hicks that a Fortis insurance policy was better than her existing Sun Life insurance policy. He incorrectly told Ms. Hicks that the new policy had identical coverage and premiums. He failed to tell her that the new policy would have a reduced face amount.

2. Clear and convincing evidence indicates that Respondent violated Sections 626.611(5), 626.621(6), and

626.9541(1)(e)1., Florida Statutes, when he willfully misrepresented and made knowing false statements about the coverage on the new Fortis insurance policy. Respondent also violated Sections 626.611(7) and 626.611(9), Florida Statutes, by demonstrating a lack of trustworthiness to engage in the insurance business and by using dishonest practices in the conduct of business under his license.

133. Pursuant to Rules 4-231.030, 4-231.040, 4-231.080,

and 4-231.090, Florida Administrative Code, the highest "penalty per count" for Count VII is suspension of Respondent's licenses for nine months.

Counts VIII and IX

1. On Respondent's advice, Ms. Hoover agreed to cancel her Sun Life policy, policy No. 9216228 and place the funds into her Financial Benefit annuity, policy No. 707176. Instead of canceling the Sun Life policy, Respondent requested an unauthorized loan on the Sun Life policy, leaving the Sun Life policy in effect. He also deliberately and incorrectly advised Sun Life to stop the drafts on Ms. Hoover's bank account to pay the premiums on Sun Life policy No. 9216228 because she was changing banks. He then used the proceeds from the loan to purchase a Financial Benefit annuity, policy No. 712086, without Ms. Hoover's knowledge or informed consent. Ms. Hoover's Sun Life policy lapsed after exhaustion of the remaining cash value.

2. On Respondent's advise, Ms. Hoover agreed to cancel her Financial Benefit policy No. 819862. Respondent used the funds to purchase a new Financial Benefit policy No. 707176. Even though Ms. Hoover did not completely understand why she should cancel Financial Benefit policy No. 819862 and purchase Financial Benefit policy No. 707176, there is no evidence that Respondent fraudulently affixed Ms. Hoover's name to the application for Financial Benefit policy No. 707176.

3. As to Count VIII, clear and convincing evidence indicates that Respondent violated Sections 626.611(5), 626.621(6), and 626.9541(1)(e)1., Florida Statutes, when he willfully made misrepresentations and knowingly false statements relative to Ms. Hoover's Sun Life policy No. 9216228 and Financial Benefit policy No. 707176. Respondent's actions regarding Ms. Hoover's policies also violated Sections 626.611(7) and 626.611(9), Florida Statutes, demonstrating his untrustworthiness to engage in the business of insurance and his dishonest practices in doing so.

4. As to Count IX, Petitioner has not proved by clear and convincing evidence that Respondent made misrepresentations or false statements relative to Ms. Hoover's Financial Benefit policy Nos. 819862 and 707176.

138. Pursuant to Rules 4-231.030, 4-231.040, 4-231.080,

and 4-231.090, Florida Administrative Code, the highest "penalty

per count" for Count VIII is suspension of Respondent's licenses

for nine months.

Count X

1. Respondent initially represented to Ms. Maxwell that she had purchased two Financial Benefit annuities, which would mature in five to seven years. Thereafter, Respondent used Ms. Maxwell's subsequent contributions to purchase seven additional USG or Financial Benefit annuities with later maturity dates. Respondent purchased two additional annuities after the October 1, 1995, effective date of Section 626.9541(1)(aa)1., Florida Statutes, by canceling existing

   Financial Benefit annuities, policy Nos. 823703 and 823568, and transferring the funds into new Financial Benefit annuities, policy Nos. 712497 and 712548, respectively. Respondent also cancelled USG annuities, policy Nos. 132140 and 128135, and purchased Financial Benefit annuities, policy Nos. 713549 and 714866, respectively.

2. Respondent sold Ms. Maxwell a total of thirteen annuities. At one point in time, Respondent told Ms. Maxwell that he would not receive a commission and that there were no penalties associated with "rolling over" an existing account. Later he told her the penalties were not true penalties.

3. After Ms. Maxwell became aware that she had more than two annuities in 1996, Respondent continued to purchase new

   annuities without advising about the effect of penalties and maturity dates. In fact, none of the annuities sold to Ms. Maxwell had maturity dates within five to seven years of their purchase dates or the dates of the original transactions.

4. Clear and convincing evidence indicates that Respondent violated Sections 626.611(5), 626.621(6), and 626.9541(1)(e)1., Florida Statutes, by willfully misrepresenting and making false statements about Ms. Maxwell's annuities. He violated Sections 626.621(6) and 626.9541(1)(aa)1.a. through 626.9541(1)(aa)1.c., Florida Statutes, for the following reasons: (a) He acted for the purpose of receiving a commission; (b) He acted without an objectively reasonable basis for believing that the extraction would result in an actual and demonstrable benefit to Ms. Maxwell; (c) He acted in a fashion that involved a misleading statement and/or deceptive omission; and (d) He acted without informing Ms. Maxwell that her funds would be utilized in the purchase of an additional policy. Respondent also violated Sections 626.611(7) and 626.611(9), Florida Statutes, by demonstrating his untrustworthiness to engage in the business of insurance and by using dishonest practices under his insurance license.

143. Pursuant to Rules 4-231.030, 4-231.040, 4-231.080,

and 4-231.090, Florida Administrative Code, the highest "penalty

per count" for Count X is suspension of Respondent's licenses

for nine months.

Count XI

1. Respondent represented to Dr. Moore that the dividends on his first two Sun Life insurance policies would pay the premiums on his third Sun Life insurance policy. Respondent did not inform Dr. Moore that this could be accomplished only by making interest-bearing loans against the cash value of the policies. Respondent did not tell Dr. Moore that the loans had to be repaid or they would deplete his policies at the time of a claim or a demand for surrender. Respondent did not inform

   Dr. Moore that the checks he was endorsing were loans instead of dividends.

2. Clear and convincing evidence indicates that Respondent violated Sections 626.611(5), 626.611(7), 626.611(9), 626.621(6) and 626.9541(1)(e)1., Florida Statutes, because he:

(a) willfully misrepresented Dr. Moore's policies; (b) demonstrated a lack of trustworthiness to engage in the insurance business; (c) acted dishonestly in the conduct of business under his license; and (d) knowingly made a false material statement.

146. Pursuant to Rules 4-231.030, 4-231.040, 4-231.080,

and 4-231.090, Florida Administrative Code, the highest "penalty

per count" for Count XI is suspension of Respondent's licenses

for nine months.

Count XII

1. Respondent admitted in a deposition that his Producer's Contract with Canada Life required him to refund unearned commissions when policies were cancelled. Respondent also admitted that he did not return the commissions paid on

   Mr. Womble's insurance policy because he was not responsible for rescission of the policy, causing him to lose a valuable client. The record supports Respondent's assertion. Respondent's deposition response is also tantamount to an admission that the company had requested a refund of commissions.

2. Respondent's contract with Canada Life was either terminated or not renewed. In any event, the contract is no longer in effect.

3. The Producer's Contract does not speak to unearned commissions. It simply states that if the company deems it necessary to refund a premium, the producer, if called upon by the company, shall repay on demand any commissions received in relation to such policy. Consequently, the commissions paid to Respondent on Mr. Womble's policy are now due and payable to the company.

4. Clear and convincing evidence indicates that Respondent violated Sections 626.561(1), 626.611(10), and

626.621(4), Florida Statutes, because he has not returned commissions, which are due and payable and which belong to Canada Life.

151. Pursuant to Rules 4-231.030, 4-231.040, 4-231.080,

and 4-231.090, Florida Administrative Code, the highest "penalty per count" for Count XII is suspension of Respondent's licenses for nine months.

152. In each of the above-referenced transactions, Respondent's conduct violated Sections 626.611(13) and/or 626.621(2), Florida Statutes.

153. Pursuant to Rules 4-231.030, 4-231.040, 4-231.080,

and 4-231.090, Florida Administrative Code, the "total penalty" for Respondent's actions, before consideration of the aggravating and mitigating factors set forth in Rule 4-231.160, Florida Administrative Code, is suspension of his licenses for

99 months.

1. Pursuant to Rule 4-231.160, there are no applicable mitigating factors. The following aggravating factors are applicable: willfulness of licensee's conduct; degree of actual injury to victim; age or capacity of victim; motivation of agent; financial gain to agent; and existence of secondary violations in counts. Rules 4-231.160(1)(a), 4-231.160(1)(b),

   4-231.160(1)(d), 4-231.160(1)(f), 4-231.160(1)(g), and 4-

   
   

   231.160(1)(k), Florida Administrative Code.

2. After consideration and application of the aggravating factors, Respondent's penalty should be increased; the appropriate "final penalty" is revocation of Respondent's licenses. Rule 4-231.160, Florida Administrative Code.

RECOMMENDATION

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

RECOMMENDED:

That Petitioner enter a final order revoking Respondent's insurance licenses.

DONE AND ENTERED this 25th day of August, 2000, in Tallahassee, Leon County, Florida.

SUZANNE F. HOOD

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 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 25th day of August, 2000.

COPIES FURNISHED:

James A. Bossart, Esquire Department of Insurance Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399-0333

William M. Furlow, Esquire

Katz, Kutter, Haigler, Alderman, Marks Bryant & Yon, P.A.

106 East College Avenue, Suite 1200 Tallahassee, Florida 32302-1877

Daniel Y. Sumner, General Counsel Department of Insurance

The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307

Honorable Bill Nelson State Treasurer and

Insurance Commissioner Department of Insurance

The Capitol, Plaza Level 02 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: 99-003449

Orders for Case No: 99-003449