STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE,

Petitioner,

vs.

JERRY LEE SURRATT,

Respondent.

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) Case No. 01-4842PL

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RECOMMENDED ORDER

Upon due notice, William R. Cave, an Administrative Law Judge for the Division of Administrative Hearings, held a formal hearing in this matter on February 14, 2002, in Lakeland, Florida.

APPEARANCES

For Petitioner: James A. Bossart, Esquire

Department of Insurance Division of Legal Services 612 Larson Building

200 East Gaines Street, Room 612 Tallahassee, Florida 32399-0300

For Respondent: Jerry Lee Surratt, pro se

926 Lake Deeson Pointe Lakeland, Florida 33805

STATEMENT OF THE ISSUE

Should Respondent's license as an insurance agent in the State of Florida be disciplined for the alleged violation of certain provisions of Chapter 626, Florida Statutes, as set

forth in the Administrative Complaint and, if so, what penalty

should be imposed?

PRELIMINARY STATEMENT

By an Administrative Complaint dated October 26, 2001, and filed with the Division of Administrative Hearings (Division) on December 17, 2001, the Department of Insurance (Department) is seeking to revoke, suspend, or otherwise discipline Respondent's license as a life insurance agent and life and health insurance agent in the State of Florida.

As grounds therefore, the Department alleges in the Administrative Complaint that Respondent violated Subsections 626.611(4),(5),(7),(8),(9), and (13), Florida Statutes, Subsections 626.621(2),(3), and (6), Florida Statutes, and Subsections 626.9541(1)(a)1. and (e)1., Florida Statutes. By an Election of Rights dated November 10, 2001, Respondent disputed the charges and requested an administrative hearing. By letter dated December 12, 2001, the Department referred this matter to the Division for the assignment of an Administrative Law Judge and for the conduct of an administrative hearing.

At the hearing, the Department presented the testimony of Cynthia L. Rogers and Patricia Inez Coburn. The Department's Exhibits 1-3 were admitted in evidence. Respondent testified in

his own behalf and presented the testimony of Robert Sumner. Respondent's Composite Exhibit 1 was admitted in evidence.

A Transcript of this proceeding was filed with the Division on February 21, 2002. The Department timely filed its Proposed Recommended Order. Respondent elected not to file a Proposed Recommended Order.

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made:

1. The Department is the agency of the State of Florida vested with the statutory authority to administer the disciplinary provisions of Chapter 626, Florida Statutes.

2. Respondent, at all times relevant to this proceeding, was licensed as an insurance agent in the State of Florida. Respondent is also currently licensed in the State of Florida as a life and life and health insurance agent.

3. Sometime around May 30, 2000, Patricia I. Coburn and her husband, Kevin L. Coburn received a postcard from Guarantee Reserve Life Insurance Company (Reserve Life) indicating that the Coburns may want to consider life insurance since Social Security only paid $250.00 in death benefits.

4. Kevin Coburn was no longer employed, and the life insurance coverage with his former employer was no longer in

   force. Therefore, the Coburns, in response to the postcard, made contact with Respondent by telephone. Patricia Coburn testified that Respondent came to the Coburn's home on May 30, 2000, in response to the telephone call. However, Respondent was in the Coburns' home on only one occasion and that was when the application was completed and signed, which was

   May 31, 2000.

   
   

5. The Coburns were looking for an insurance policy that would cover "final" expenses. The Coburns settled on a joint whole life policy with Reserve Life, which carried death benefits of $18,000.00, with an $18,000.00 accidental death coverage and a $5,000.00 child rider.

6. At all times relevant to this proceeding, Kevin Coburn suffered from impaired vision (due to diabetic retinopathy), heart problems (by-pass surgery and congestive heart failure), and kidney problems (in renal failure and currently receiving dialysis three times a week). However, Kevin Coburn's health condition was not readily apparent to Respondent at the time he was in the Coburns' home around May 31, 2000.

1. The application for the insurance policy required that Respondent ask both Kevin Coburn and Patricia Coburn a series of health questions, which required a yes or no answer. The application also required Respondent to mark each of the Coburn's responses in the appropriate place on the application.

2. Respondent asked both Kevin Coburn and Patricia Coburn the required health questions. Other than question number 7 and question number 12, which did not require an answer due to the Coburns' age, each answered the questions with a "no" answer, notwithstanding Patricia Coburn's testimony to the contrary, which lacks credibility in this regard.

3. Based on the Coburns' responses, Respondent marked "no" to the appropriate questions on application.

4. Questions 3(A) and (F), 6.(3), and 9. of the Application provide in pertinent part as follows:

   1. Have your ever been diagnosed or treated by a member of the medical profession as having, or have you ever taken medication for:

      
      

      1. (1) Chronic Kidney Disease; or (2) any kidney disorder for which you are currently receiving dialysis?

         
         

         * * *

         
         

         F. Congestive Heart Failure?

         
         

         * * *

         6. During the last 1 year, have you had a

         . . .(3) heart or by-pass surgery . . .?

         
         

         * * *

         
         

         9. During the last 5 years, have you had Heart-By-Pass surgery?

         
         

         Respondent marked the answer "no" to these questions for both Kevin Coburn and Patricia Coburn.

5. The application inquired as to whether either of the applicants was disabled. The Coburns responded that they were not disabled but employed, and Respondent so marked the application.

6. After Respondent completed the application, he handed the application to the Coburns for them to review and sign. While it may be questionable as to whether Kevin Coburn reviewed the application, including the answers to the health questions, due to his failing eyesight, Patricia Coburn certainly had the opportunity to review the application, including the answers to the health questions.

7. Neither Patricia Coburn nor Kevin Coburn discussed or revealed Kevin Coburn's current medical condition with Respondent prior to, or during the time, Respondent was filling out the application, including the responses to the health questions, notwithstanding Patricia Coburn's testimony to the contrary, which lacks credibility in this regard.

8. Had Respondent been made aware of Kevin Coburn's medical problems, he could have placed the Coburns' insurance with another insurance company (Cotton State Life Insurance Company or Americo Financial Life and Annuity Insurance Company), notwithstanding Kevin Coburn's medical problems. Admittedly, the policies would not have been at the standard issue rates and there would have been graded death benefits or

   limited death benefits. Furthermore, Respondent's commission on this type policy would be higher than on a regular death policy.

9. Reserve Life acted favorably on the Coburns' application and in June 2000, issued Policy No. OJ11976 to the Coburns with the Basic Death Coverage as set out in the Application.

10. Kevin Coburn died on September 19, 2000, from a staph infection as a result of his leg being amputated in August 2000, due to the diabetes.

11. Shortly thereafter, Patricia Coburn filed a death claim with Reserve Life.

12. Because Kevin Coburn died within two years of the issuance of the insurance policy, Reserve life, in accordance with company policy, requested Kevin Coburn's medical records so that it could review his health history in order to determine if the health questions had been answered correctly.

13. Upon review of Kevin Coburn's health records, Reserve Life discovered that Kevin Coburn, at the time of the application, was diabetic, underwent dialysis, had undergone heart by-pass surgery, had other health problems, and was disabled.

14. Because of his health problems and disability, Kevin Coburn was not eligible to purchase this particular insurance policy, and had Reserve Life been made aware of Kevin Coburn's

    health problems and disability, Reserve Life would not have issued this particular policy.

15. In response to Reserve Life's inquiry concerning Kevin Coburn's health history, Patricia Coburn wrote a letter to Reserve Life asserting that she and Kevin Coburn had advised Respondent of Kevin Coburn's health problems, and that Respondent had apparently marked the "no" block instead of the "yes" block concerning the health questions without their knowledge.

16. Without giving Respondent an opportunity to refute Patricia Coburn's allegations, Reserve Life offered Patricia Coburn $9,000.00 as a settlement, which she accepted. The reason for the offer of settlement by Reserve Life was that it would be Patricia Coburn's "word" against Respondent's "word."

17. There is insufficient evidence to show that Respondent knew, or should have known, of Kevin Coburn's medical condition at the time the Coburn's applied for the insurance with Reserve Life.

    CONCLUSIONS OF LAW

    
    

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

19. The burden of proof is on the party asserting the affirmative of an issue before an administrative tribunal,

Florida Department of Transportation v. J.W.C. Company, Inc.,

396 So. 2d 778 (Fla. 1st DCA 1981). To meet this burden, the Department must establish facts upon which its allegations are based by a clear and convincing evidence. Department of Banking and Finance, Division of Securities and Investor Protection v. Osborne Stern and Company, 670 So. 2d 932 (Fla. 1996) and Subsection 120.57(1)(j), Florida Statutes.

27. Subsections 626.611(4),(5),(7),(8),(9), and (13),

Florida Statutes, provide:

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

* * *

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

   
   

2. Willful misrepresentation of any insurance policy 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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1. Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

   
   

2. Demonstrated lack of reasonably adequate knowledge and technical competence to engage in transactions authorized by the license or appointment.

   
   

3. Fraudulent or dishonest practices in the conduct of business under the license or appointment.

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(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.

28. Subsections 626.621 (2),(3), and (6), Florida Statutes, provide:

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, 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:

* * *

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

2. Violation of any lawful order or rule of the department.

* * *

(6) In the conduct of business under the license or appointment, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part X of this chapter, or having otherwise shown himself or herself to be a source of injury or loss to the public or detrimental to the public interest.

29. Subsections 626.9541 (1)(a)1. and (e)1.a.b.c.d.e., Florida Statutes, provide:

1. UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE ACTS.--The following are defined as unfair methods of competition and unfair or deceptive acts or practices:

   1. Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison, which:

1. Misrepresents the benefits, advantages, conditions, or terms of any insurance policy.

* * *

(e) False statements 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.

30. While it may be difficult to believe that the Coburns intentionally mislead Respondent as to Kevin Coburn's health, it stretches the bounds of credulity to believe that Respondent would, for the commission he would earn on this one insurance policy, put his insurance license and livelihood on the line. Particularly, when Respondent could have earned a commission on other insurance policies that were available, which could have met the Coburns' need. Couple this, with the fact that the Coburns, at least Patricia Coburn, could have prevented this policy from being issued by simply reviewing the answers to the health questions in the application, the Department has failed to meet its burden to show by clear and convincing evidence that Respondent committed the acts as alleged in the Administrative Complaint.

RECOMMENDATION

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

RECOMMENDED that the Department enter a final order finding Respondent, Jerry Lee Surratt not guilty of violating Subsections 626.611(4),(5),(7),(8),(9), and (13), Subsections

626.621(2),(3), and (6), and Subsections 626.9541(1)(a)1., and

(e)1., Florida Statutes, and dismissing the Administrative Complaint filed against Jerry Lee Surratt.

DONE AND ENTERED this 15th of March, 2002, in Tallahassee, Leon County, Florida.

WILLIAM R. CAVE

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) 921-6947 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 15th day of March, 2002.

COPIES FURNISHED:

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

200 East Gaines Street, Room 612 Tallahassee, Florida 32399-0333

Jerry Lee Surratt

926 Lake Deeson Pointe Lakeland, Florida 33805

Honorable Tom Gallagher

State Treasurer/Insurance Commissioner Department of Insurance

The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300

Mark Casteel, General Counsel Department of Insurance

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

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit 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: 01-004842PL

Orders for Case No: 01-004842PL