vs. ) Case No. 01-1326PL
LAWRENCE H. SUSSMAN, )
Respondent. )
Pursuant to notice, a formal hearing was held in this case on August 2, 2001, in Fort Pierce, Florida, before J. D. Parrish, a designated Administrative Law Judge of the Division of Administrative Hearings.
For Petitioner: David J. Busch, Esquire
For Respondent: Lawrence H. Sussman, pro se
Whether the Respondent committed the violations alleged in the Administrative Complaint and, if so, what penalty should be imposed.
On March 12, 2001, the Petitioner, the Department of Insurance (Department) entered an Administrative Complaint against the Respondent, Lawrence H. Sussman. The complaint alleged that the Respondent had violated provisions of Chapter 626, Florida Statutes, in the sale of a viatical product to Aurore Giroux and in the sale of annuities to the same individual. The Respondent filed a response to the Administrative Complaint that sought to dismiss it. Ruling on such motion was reserved as there were material issues of fact in dispute to be addressed at the time of the formal hearing.
Prior to hearing the Respondent's counsel was granted leave to withdraw from the case. The matter was rescheduled for hearing following an unopposed motion for continuance.
At the hearing on August 2, 2001, the Petitioner presented testimony from Randy Matzke, an assistant vice president employed with Amerison Annuity Group, and, by deposition, Aurore Giroux and Elaine O'Toole. The Petitioner's Exhibits numbered 1-12 were received in evidence. The Respondent testified in his
own behalf and offered Exhibits 1-5 which were also admitted into evidence.
The transcript of the proceeding was filed with Division of Administrative Hearings on September 4, 2001. Thereafter, both parties timely submitted proposals regarding the evidence presented in this cause. Such proposals were considered in the preparation of this Recommended Order.
The Department is the state agency charged with the responsibility of regulating the insurance industry within the State of Florida.
At all times material to the allegations of this case, the Respondent was licensed in Florida as a life and variable annuity agent; life, health and variable annuity agent; life insurance agent; life and health insurance agent; and health insurance agent. All such activities are regulated pursuant to Chapter 626, Florida Statutes.
Aurore Giroux is approximately 86 years of age. She currently lives in an assisted living facility in Waltham, Massachusetts.
At all times material to the allegations of this case, Mrs. Giroux resided at 12 Cozumel Lane, Port St. Lucie, Florida.
By way of her background, Mrs. Giroux attended grade school but did not complete high school. Although well spoken, she is not well-educated either by formal school or training.
She has limited retirement income, and is not particularly well versed in investment opportunities. At the time of her husband's death in 1989, Mrs. Giroux had a life savings of approximately $230,000. This was accomplished primarily due to her modest life style and careful spending habits.
At all times material to the allegations of this case, Mrs. Giroux's income was limited to social security and her husband's retirement. Her total monthly income does not exceed
$1,300. In order to afford the costs of her current residence, Mrs. Giroux must use portions of her savings every month.
Mrs. Giroux is an independent person and has never wanted to rely on others for her financial care. Although she maintains close relationships with her children, Mrs. Giroux has always written checks on her account to pay her own bills and has managed her own funds without the interference of the children.
Following her husband's death, Mrs. Giroux began spending two months in the summer with her daughter, Elaine O'Toole, in Massachusetts. Mrs. O'Toole also would visit her mother in Florida on occasion.
After Mr. Giroux passed away, the Respondent contacted Mrs. Giroux under the guise of offering her Medicare supplement insurance. Mrs. Giroux purchased a supplement from the Respondent. Thereafter, the Respondent would from time to time go by and visit Mrs. Giroux.
Over the course of time the Respondent developed a relationship with Mrs. Giroux and he offered her other insurance products for purchase. Among those known are the annuities and the viatical which are the subject of the instant case.
Additionally, the Respondent sold Mrs. Giroux a second Medicare supplement policy in 1998 that contained a life insurance benefit in the amount of $2500. The premium for that life insurance benefit was $50 per month.
Although she spent over $60,000 to purchase the viatical from the Respondent, Mrs. Giroux did not recall investing that amount and is unable to explain what the product is.
Although she signed a "Statement of Understanding of Viaticals" dated September 21, 1998, Mrs. Giroux was unaware of the illiquid nature of the viatical product.
Moreover, if the viator lives more than 12 months beyond his estimated date of demise, Mrs. Giroux was unaware that she would be required to remit the premiums to the
insurance company for the policy. Failing same, Mrs. Giroux will lose her entire investment.
To attempt to cover the questionable prudence of the viatical investment, the Respondent had Mrs. Giroux write and sign several documents, none of which were remembered by her.
Similarly, the Respondent sold Mrs. Giroux two annuities. She liquidated certificates of deposit to purchase the annuities based upon documents the Respondent brought her to sign. Again, Mrs. Giroux has no recollection of signing the authorization forms that were presented to the bank.
Prior to selling Mrs. Giroux the viatical and the annuities, the Respondent did not perform a written client financial analysis to determine if there were valid tax reasons for either type of investment. In fact, there are no tax advantages to Mrs. Giroux. Although the annuities were subsequently refunded to her, there is no credible evidence that they would have been preferable to the return earned by the certificates of deposit.
As to the viatical, unless the viator dies within 12 months of the estimate dated of death, Mrs. Giroux will have to remit the premium amounts to keep the policy in effect just to preserve her investment. Thus the unknown return and illiquid nature of the investment may prove a significant hardship for her.
Family concerns regarding Mrs. Giroux's investments arose after Mrs. O'Toole learned of the viatical purchase. During a visit to Florida Mrs. O'Toole met with the Respondent to attempt to gather information regarding her mother's investments.
Of particular concern was the fact that Mrs. Giroux's understanding of the terms of the annuities did not match the paperwork Mrs. O'Toole was able to locate. Mrs. Giroux's annuities did not allow for any annual withdrawal of principal despite the Respondent's assertions that Mrs. Giroux could draw down funds.
When challenged on that point, the Respondent maintained that the company issued the wrong policy. He did not take responsibility for the error until the administrative charges were filed with the Department by Mrs. O'Toole. He then assisted all parties in securing the refund of the annuity amounts. In fact, as of the date of hearing, such amounts had been refunded to Mrs. Giroux.
As to the viatical, Mrs. Giroux does not know who the viator is. Presumably the viator is alive. How her estate would benefit should Mrs. Giroux predecease the viator is unknown.
It is known, however, that Mrs. Giroux is not in a tax bracket mandating tax consideration of tax deferred income opportunities.
The total amount of funds invested by Mrs. Giroux in reliance on the Respondent's suggestions was $131,000, over one-half of her life savings.
The Respondent has had his insurance license previously disciplined for misrepresentation. Nevertheless, prior to allowing Mrs. Giroux, an elderly, uneducated, and unsophisticated investor to purchase the products described herein, he did nothing to encourage her to seek the independent advice that might be obtained from an accountant, a lawyer, a banker, or family member.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proceedings, Section 120.57(1), Florida Statutes.
The Petitioner bears the burden of proof in this cause to establish by clear and convincing evidence the allegations of the case. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987). It has met that burden.
Section 626.611, Florida Statutes provides in pertinent part:
The department shall deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, title agency, solicitor, adjuster, customer representative, service representative, managing general agent, or claims investigator, and it shall suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist:
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(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 of information or advertising.
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(7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.
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(9) Fraudulent or dishonest practices in the conduct of business under the license or appointments.
Section 626.621, Florida Statutes provides, in part:
The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, solicitor, adjuster, customer representative, service representative, managing general agent, or claims investigator, and it may suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds
that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal is not mandatory under s. 626.611:
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(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.
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(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 or herself to be a source of injury or loss to the public or detrimental to the public interest.
In this case the Department has established by clear and convincing evidence that the Respondent unfairly conducted business with Mrs. Giroux. He misrepresented the terms of the annuities to her and to her daughter. He failed to take reasonable steps to assure that Mrs. Giroux understood the terms of her investments and that the products sold were of financial benefit to her. The Respondent when confronted by Mrs. O'Toole falsely stated that the annuities had an annual draw down when they did not. The Respondent's explanations for why annuities would constitute a wise investment for a person of Mrs. Giroux's
age, potential financial need, and tax bracket was incomprehensible.
Additionally, with regard to the sale of the viatical, it is concluded the Respondent wrongly induced Mrs. Giroux to invest in the viatical. Mrs. Giroux did not and does not understand the conditions of this purchase. Having her execute documents attesting otherwise speaks more to the Respondent's ability to manipulate the client than it does to her understanding of the product. The Respondent failed to fully explain the terms of the purchase, failed to fully disclose the illiquid nature of the product, and failed to fully explain the ramifications should the viator's life exceed the expected term. Given Mrs. Giroux's age at the time of the viatical purchase, it is inconceivable that Mrs. Giroux would have independently determined this product to be an appropriate investment.
Because he would engage in the conduct demonstrated by this record, the Respondent has shown he lacks the fitness and trustworthiness to engage in the practice of insurance in Florida. The Respondent perpetrated a course of conduct that caused Mrs. Giroux to invest over half of her life's savings in insurance products that did not benefit an 84-year-old with limited tax exposure. That he argues otherwise further demonstrates his lack of fitness.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance enter a final order revoking the Respondent's license and eligibility for license.
DONE AND ENTERED this 26th day of October, 2001, in Tallahassee, Leon County, Florida.
J. D. PARRISH Administrative Law Judge
Filed with the Clerk of the Division of Administrative Hearings this 26th day of October, 2001.
David J. Busch, Esquire Department of Insurance 645A Larson Building
Lawrence H. Sussman
10 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.
