THE TREASURER OF THE STATE OF FLORIDA DEPARTMENT OF INSURANCE Lo Ve TREASURER AND INSURANCE COMMISSIONER Docketed by: eat ToM GALLAGHER IN THE MATTER OF: JOHN WILLIAM HAY CASE NO. 21239-97-A / Ol- 1VIPC ADMINISTRATIVE COMPLAINT TO: JOHN WILLIAM HAY 108 S. Cooper Place Tampa, Florida 33609-2604 JOHN WILLIAM HAY New England Financial Group 4830 W. Kennedy Blvd. Suite 550 Tampa, Florida 33609-2562 You, JOHN WILLIAM HAY, are hereby notified that the Insurance Commissioner of the State of Florida has caused to be made an investigation of your activities while licensed as an insurance agent in this state, as a result of which it is alleged: GENERAL ALLEGATIONS 1. You, JOHN WILLIAM HAY, are currently licensed in this state as a health agent, a life and health agent, a life and “Me variable annuity, and a life, health, and variable annuity insurance agent. 2. At all times pertinent to the dates and occurrences referred to herein, you, JOHN WILLIAM HAY, were licensed in this state as an insurance agent. 3. Pursuant to Chapter 626, Florida Statutes, the Florida Department of Insurance has jurisdiction over your insurance licenses and appointments. COUNT_I 4. The above general allegations are hereby realleged and fully incorporated herein by reference. 5. On or about January 14, 1987, you, JOHN WILLIAM HAY, met with Daniel M. Falvey (then 66 years old), of St. Petersburg, Florida, for the purpose of selling him a life insurance policy. You then completed an insurance application for an ordinary life policy having a death benefit of $75,000. The application providing for a single lump sum premium of $26,500.00 to be underwritten by New England Mutual Life Insurance Company was prepared and executed. 6. You, JOHN WILLIAM HAY, advised Mr. Falvey that the above-described life insurance policy would have the following features: (1) it would be an ordinary whole life policy with a “paid up for life” death benefit of no less than $75,000.00; (2) it would require a single premium payment of $26,500.00; and (3) all future premiums would be paid from the policy’s yearly dividends. This life insurance policy was supposed to have been designed to compliment an important retirement pension election then facing Mr. Falvey, regarding benefits payable and waiver of survivorship benefits by Mr. Falvey’s wife, Betty Falvey. 7. You, JOHN WILLIAM HAY, prepared a premium schedule illustration and gave that document to Mr. Falvey in order to convince him of the benefits of this proposed insurance policy. That document misrepresented the performance of this life insurance product, because the schedules presented only very favorable projections, and did not include any of the lower, but guaranteed minimum results. Also, this illustration schedule did not reveal the payment of an annual premium of $4,229.50 in policy years eleven (11) and beyond, that you knew or should have known would likely be required to keep the insurance coverage in force. 8. On January 16, 1987, you, JOHN WILLIAM HAY, prepared a premium offset election form and gave that document to Mr. Falvey for his perusal and signature. Accompanying that document was a letter from you designed to obscure and diminish the disclosure contained in the New England Mutual Life Insurance Company form, that speaks to policy performance and the likelihood that dividends may not be sufficient to pay future year premiums. This letter suggested that the reason for-the execution of the form was simply to advise the Company that Mr. Falvey did not intend to make future premium payments beyond the original $26,500.00 lump sum payment. 9. Shortly thereafter, New England Mutual Life Insurance Company did issue, on February 25, 1987, a Preferred Standard whole life policy (number 8249505) in the amount of $75,000.00 on Mr. Falvey's behalf. 10. %In March of 1987, you, JOHN WILLIAM HAY, again presented another similar premium schedule illustration and gave that document to Mr. Falvey. That document also misrepresented the performance of this life insurance product, because the schedules presented only very favorable projections and not the guaranteed minimum results. 11. For the next nine years, Mr. Falvey received no request for any additional annual premium payments on the policy. Then, during January of 1997, Mr. Falvey received an invoice from New England Mutual Life Insurance Company in the amount of $4,229.50, for an annual premium that was due and payable on or before February 25, 1997. 12. Shortly thereafter Mr. Falvey contacted New England Mutual Life Insurance Company and discovered that his policy called for continued premium payments to avoid complete dissipation of his premium already paid (totaling $26,500.00) to cover the future expense of the current death benefit. 13. Upon learning of these details from the company representatives of New England Mutual Life Insurance Company, Mr. Falvey, under protest, chose to surrender the policy and receive the cash value of $25,116.44, because he could not afford to make annual premium payments of $4,229.50. 14. As a consequence of your dishonest actions and deliberate misrepresentations to Mr. Falvey with respect to this life insurance policy, you, JOHN WILLIAM HAY, caused Mr. Falvey financial injury occasioned by the loss of funds consumed by the charges imposed upon his surrender of the policy and the loss of the valuable insurance death benefit that was critical to Mr. Falvey’s retirement and estate planning on behalf of Mr. Falvey’s wife, Betty Falvey. IT IS THEREFORE CHARGED that you, JOHN WILLIAM HAY, have violated or are accountable under the following provisions of the Florida Insurance Code and Rules of the Department of Insurance which constitute grounds for the suspension or revocation of your licenses and appointments as an insurance agent: (a) If the license or permit is willfully used, or to be used, to circumvent any of the requirements or prohibitions of this code. [Section 626.611(4), Florida Statutes]; (b) 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. [Section 626.611(5), Florida Statutes]; (c) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes] ; (ad) Fraudulent or dishonest practices in the conduct of business under the license or permit. [Section 626.611(9), Florida Statutes] ; (e) 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. [Section 626.611(13), Florida Statutes]; ‘(f) 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 permit. [Section 626.621(2), Florida Statutes] ; (g) 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 to be a source of "injury or loss to the public. [Section 626.621(6), Florida Statutes]; (h) Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison, which misrepresents the benefits, advantages, conditions, or terms of any insurance policy. [Section 626.9541(1) (a)1., Florida Statutes]; (i) 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. [Section 626.9541(1)(k), Florida Statutes]. COUNT IT 15. The above general allegations are hereby realleged and fully incorporated herein by reference. 16. On or about July 31, 1987, you, JOHN WILLIAM HAY, met with Mr. R. Wayne Stewart (then 62 years old), of St. Petersburg, Florida, for the purpose of selling him a life insurance policy. You prepared an insurance application for the issuance of an ordinary life policy having a $25,000 death benefit and a single lump sum premium of $7,000.00 to be underwritten by New England Mutual Life Insurance Company. This whole life policy was to replace Mr. Stewart’s existing term life insurance policy. 17. You, JOHN WILLIAM HAY, advised Mr. Stewart that the life insurance policy would have the following proposed features: (1) it would be an ordinary whole life policy with a “paid up for life” death benefit of no less than $25,000.00; (2) it would require only a single premium payment of $7,000.00; and (3) there would be no need for future premium payments because future premiums would be paid from yearly dividends earned by this new policy. 18. You, JOHN WILLIAM HAY, also prepared a premium schedule illustration and gave that document to Mr. Stewart to further convince him of the benefits of this policy. That document misrepresented the performance of this life insurance product because the schedule presented only very favorable projections and did not include any of the lower, but guaranteed minimum results. Also, this illustration schedule did not present the payment of annual premiums of $1,063.75 in policy years eleven (11) and beyond, that you knew or should have known would likely be required to keep the insurance coverage in force. 19. Shortly thereafter, New England Mutual Life Insurance Company did issue, on July 31, 1987, a Preferred Standard whole life policy (number 8099457) in the amount of $25,000.00 on Mr. Stewart's behalf. That policy made no mention of the large lump sum funding and no schedules of minimum guaranteed earnings on ,such funds. 20. For the next nine years, Mr. Stewart received no request for any additional annual premium payments. Then, during June, 1997, Mr. Stewart received an invoice from New England Mutual Life Insurance Company in the amount of $1,063.75, for annual premium that was due and payable on or before July 2, 1997, for his life insurance policy. 21. Mr. Stewart then contacted New England Mutual Life Insurance Company and discovered that his policy called for continued premium payments to avoid complete dissipation of his premium already paid (totaling $7,000.00) to cover the future expense of the current death benefit. Mr. Stewart was not able to pay any further premium payments. The New England Mutual Life Insurance Company eventually reached a settlement with Mr. Stewart so as to have his existing policy function as a paid up whole life policy with a death benefit of exactly $25,000.00. IT IS THEREFORE CHARGED that you, JOHN WILLIAM HAY, have violated or are accountable under the following provisions of the Florida Insurance Code and Rules of the Department of Insurance which constitute grounds for the suspension or revocation of your licenses and appointments as an insurance agent in this state: Sections 626.611(4), 626.611(5), 626.611(5), 626.611(9), 626.611(13), 626.621(2), 626.621(6), 626.9541(1) (a)1l., and 626.9541(1) (k), Florida Statutes, which are set forth specifically in Count I above and are hereby realleged and fully incorporated herein by reference. WHEREFORE, you, JOHN WILLIAM HAY, are hereby notified that the Treasurer and Insurance Commissioner intends to enter an Order suspending or revoking your licenses and appointments as an insurance agent or to impose such penalties as may be provided under the provisions of Sections 626.611, 626.621, 626.681, 626.691, and 626.9521, Florida Statutes, and under the other referenced sections of the Florida Statutes as set out in this Administrative Complaint. You are further notified that any order entered in this case revoking or suspending any license or eligibility for licensure held by you shall also apply to all other licenses and eligibility held by you under the Florida Insurance Code. 10 NOTICE OF RIGHTS Pursuant to Sections 120.569 and 120.57, Florida Statutes and Rule 28-106, Florida Administrative Code (F.A.C.), you have a right to request a proceeding to contest this action by the Department. You may elect a proceeding by completing the attached Election of Rights form|or filing a Petition. Your Petition or Election of a proceeding must be in writing and must be filed with the General Counsel acting as the Agency Clerk, Department of Insurance. If served by U.S. Mail the Petition or Election should be addressed to the Florida Department of Insurance at 612 Larson Building} Tallahassee, Florida 32399- 0333. If Express Mail or hand delivery is utilized, the Petition or Election should be delivered to 612 Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0300. The Petition or Election must be received by, and filed in the Department within twenty-one (21) days of the date|of your receipt of this notice. YOUR FAILURE TO RESPOND TO THIS ADMINISTRATIVE COMPLAINT WITHIN TWENTY-ONE (21) DAYS WILL CONSTITUTE A WAIVER OF YOUR RIGHT TO REQUEST A PROCEEDING ON THE MATTERS ALLEGED HEREIN AND AN ORDER OF REVOCATION WILL BE ENTERED AGAINST YOU. If a proceeding is requested and there is no dispute of fact the provisions of Section 120.57(2), Florida Statutes would apply. In this regard you may submit oral or written evidence in opposition to the action taken by this agency or a written statement challenging the grounds relied. of a dispute of fact, if you feel will be conducted in Tallahassee, conference call upon your request. ‘If you dispute material fact agency's action you may request a pursuant to Sections 120.569 and you request this type of proceedi all of the requirements of Rule 2 upon which the agency has While a hearing is normally not required in the absence that a hearing is necessary one Florida or by telephonic s which are the basis for this formal adversarial proceeding 120.57(1), Florida Statutes. If ng, the request must comply with 8-106, F.A.C. and contain a) A statement identifying with particularity the allegations of the Depa nature of the dispute; b) An explanation of what believe you are entitle rtment which you dispute and the relief you are seeking and d to; c) Any other information which you contend is material. These proceedings are held before judge of the Division of Administ majority of witnesses are located request that the hearing be condu If a hearing is requested, y represented by counsel, or other 12 a State administrative law rative Hearings. Unless the elsewhere the Department will cted in Tallahassee. ou have the right to be qualified representative, to take testimony, to call and to cross-examine witnesses, and to have subpoena and subpoena duces tecum issued on your behalf. You are hereby notified that 120.573, Florida Statutes, is not mediation under Section available. Pailure to follow the procedure outlined with regard to your response to this notice may result in the request being denied. All prior correspondence in this matter shall be considered freeform agency action, and no such correspondence shall operate as a valid request for an administrative proceeding. Any request for administrative proceeding received prior to the date of this notice shall be deemed abandoned unless timely renewed in compliance with the guidelines as set out above. DATED and SIGNED this 27th day of April , 2001. \ K EY SHIPLEY 13 Deputy Insurance Commissioner CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing ADMINISTRATIVE COMPLAINT has been furnished by U.S. Certified Mail to: JOHN WILLIAM HAY, 108 s. Cooper Place, Tampa, Florida 33609-2604; JOHN WILLIAM HAY, New England Financial Group, 4830 W. Kennedy Blvd. Suite 550, Tampa, Florida 33609-2562 this 27th day of April , 2001. Busch Division of Legal Services 612 Larson Building Tallahassee, FL 32399-0333 (850) 413-4146 14 STATE OF FLORIDA DEPARTMENT OF INSURANCE IN THE MATTER OF: JOHN WILLIAM HAY 21239-97-A ELECTION OF RIGHTS I have received and have read the Administrative Complaint filed against me including the Notice of Rights contained therein and I understand my options. I am requesting disposition (Choose one) 1. C ] I do not desire a proceeding. of this matter as indicated below. The Department may enter a final order revoking my license (s) . and I hereby elect an accordance with section 120.57(2), Florida Statutes. I do not dispute any of the Department's factual allegations informal proceeding to be conducted in In this regard I desire to (Choose one): { 1 submit a written or conference call, I do dispute the Depa statement and documentary evidence attend an informal hearing to be held in Tallahassee; attend an informal hearing by way of a telephone rtment's factual allegations. I have attached to this form a statement indicating the specific issues of fact whic information indicated| hare disputed and other required in the Notice of Rights. I hereby request a formal adversarial proceeding pursuant to Sections 120.569 and 120.57(2), Florida Statutes to be held before the Division of Administrative Hearings. DATE: TO PRESERVE YOUR RIGHT TO A Name: Signature of Petitioner PROCEEDING, YOU MUST RETURN THIS FORM WITHIN TWENTY-ONE (21) DAYS OF RECEIPT TO THE DEPARTMENT OF INSURANCE AT Address: -———_______ THE ADDRESS INDICATED IN THE NOTICE OF RIGHTS. Phone:

Docket for Case No: 01-001862PL