STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES,

Petitioner,

vs.

PAULA EVELYN BECKETT,

Respondent.

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) Case No. 06-3262PL

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RECOMMENDED ORDER

Pursuant to notice, a final hearing was conducted in this case on November 7, 2006, in St. Petersburg, Florida, before Administrative Law Judge R. Bruce McKibben of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Greg S. Marr, Esquire

William Gautier Kitchen, Esquire Department of Financial Services

Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399-0333

For Respondent: L. Michael Billmeier, Jr., Esquire

Clyde W. Galloway, Jr., Esquire Galloway, Brennan & Billmeier

240 East Fifth Avenue Tallahassee, Florida 32303

STATEMENT OF THE ISSUES

The issues in this case are whether Respondent violated Subsections 624.11(1); 626.611(4), (7), (9), and (13);

626.21(2), (3), and (6); and 626.9541(1)(z), Florida Statutes (2005),1 and, if so, what discipline should be imposed.

PRELIMINARY STATEMENT

Petitioner filed an Administrative Complaint on or about August 3, 2006, alleging certain violations against Respondent, a licensed customer representative. Respondent filed a petition seeking a formal administrative hearing to contest the allegations set forth in the Administrative Complaint.

The Administrative Complaint contained four counts, alleging as follows:

Count I – Respondent sold Amber Battle an Accidental Medical Protection Plan without Battle’s informed consent.

Count II – Respondent sold Colleen Bailey an Accidental Medical Protection Plan without Bailey’s informed consent.

Count III – Respondent sold Noweta Sanchez an Accidental Medical Protection Plan without Sanchez’ informed consent.

Count IV – Respondent sold Noweta Sanchez a Travel Protection Plan without Sanchez’ informed consent.

At the final hearing held on November 7, 2006, the parties stipulated to seven pre-marked exhibits, all of which were accepted into evidence as joint exhibits. Petitioner presented the testimony of three witnesses in its case in chief, recalling one of those witnesses and one new witness in rebuttal.

Respondent called one witness at final hearing.

At the close of the evidentiary portion of the final hearing, the parties requested and were allowed 10 days from the filing of the hearing transcript within which to file their respective proposed recommended orders. The one-volume Transcript of the hearing was filed on November 22, 2006. Both parties filed Proposed Recommended Orders containing proposed findings of fact and conclusions of law on December 14, 2006.

The parties' proposals have been carefully considered during the preparation of this Recommended Order.

FINDINGS OF FACT

1. Petitioner is the state agency responsible for investigating possible violations of the Florida Insurance Code.

2. Respondent, at all times relevant to this case, was licensed as a customer representative (license number A306050) by the Department of Financial Services. Respondent has been employed by Direct General Insurance Agency, Inc. (hereinafter "Direct"), a Tennessee corporation doing business in Florida as Florida No Fault Insurance, for over 20 years.

3. Respondent's duties include meeting with potential customers, writing policies, taking payments, doing renewals, changing policies, and endorsements, etc. She generally meets with between six and eight customers each day, on average. Most customers presenting themselves to Respondent want only the

   basic coverage necessary to lawfully operate their vehicles. In the industry, this is commonly called "tag insurance."

4. The normal pattern followed by Respondent when meeting with customers is to obtain general information from the customer, put that information into her computer, ask the person what kind of coverage they want, and then print out a quote and the insurance documents.

5. Whether the customer asks for it or not, Respondent generally provides a quote for tag insurance plus some other ancillary coverage, e.g., Travel Protection Plan (which is called "rental insurance"), Accident Medical Protection Plan (called "hospital insurance"), and others. She also generally provides customers an opportunity to obtain a pre-paid Visa card through the agency.

6. After printing out the insurance documents, Respondent would normally go over the documents with the customer. The review would be somewhat superficial, and she would not explain each section unless the customer asked her questions. She admits that sometimes insurance forms are confusing and that most customers would not have the necessary background or knowledge to formulate questions about the coverage.

7. Respondent is under pressure from her employer to offer and sell as many ancillary insurance products as possible. She does not receive a commission on various products she sells, but

   failure to sell such products is deemed unacceptable by her employer. While she has no direct financial incentive to sell additional coverages to customers, she knows her employer expects her to offer those coverages.

8. In February 2005 Respondent sold insurance to Noweta Sanchez. Sanchez had previously purchased insurance from Direct. Sanchez told Respondent she wanted the minimal insurance necessary to legally operate her newly purchased automobile. Respondent, in turn, provided a quote for tag insurance, but also included hospital and rental insurance in the quote.

9. Sanchez looked at the insurance forms, but did not read them; she was in a hurry and relied on Respondent to provide only what she asked for. Respondent did not prevent Sanchez from reading the forms, but did not offer any unsolicited explanations about them either. Sanchez signed or initialed the documents in 26 separate places. Respondent says she then went over a handwritten summary of the coverage (the "pen sheet") with Sanchez. Sanchez has no recollection of seeing the pen sheet even though her signature appears at the bottom of the page.

10. At the time she met with Respondent, Sanchez was unable to afford anything but tag insurance. That is all Sanchez believed she had purchased until she was contacted by an

    agent of Petitioner. Sanchez then attempted to have her policy cancelled and her money refunded, but was told that her window of opportunity for cancellation had closed. Sanchez’ testimony was credible as to her interaction with Respondent.

11. In December 2004, Respondent sold insurance to Amber Battle. Battle was approximately 19 years old at the time, and had chosen Respondent after making inquiries from several agencies and getting the best quote from Respondent’s agency via telephone. Battle told Respondent’s agency that she wanted tag insurance only.

12. When Battle met personally with Respondent, the written insurance quote she received was higher than what she had been quoted on the telephone. She did not read (and probably would not have understood) the insurance documents that she signed. She simply signed and initialed each page where Respondent indicated. Battle signed or initialed the documents in 29 separate places. Battle trusted Respondent to provide only the insurance she requested.

13. After printing the insurance documents, Respondent went over the pen sheet with Battle. However, Battle has no recollection of seeing the pen sheet even though she signed it at the bottom. The Battle pen sheet includes a phrase which has an asterisk, and is circled and underlined. It says "FLA. TAG

    INS. ONLY." Also, under her signature there is another asterisk and the phrase "NO Bodily Injury."

14. At the time she obtained insurance coverage from Respondent, Battle was employed and had health insurance coverage. Battle had no need for hospital coverage along with her tag insurance. Battle's testimony was credible as to her interaction with Respondent.

15. In January 2005, Respondent sold insurance to Colleen Bailey, a married woman. Bailey came to Respondent seeking insurance on two cars, a Durango and a Grand Am. The Durango was used primarily by her husband as a work vehicle. She sought full coverage on the Durango and tag insurance on the Grand Am.

16. The Baileys self-insure themselves for medical care.

    
    

    They opt not to purchase health insurance, but rather pay cash whenever health care is necessary. It was not Bailey's intention to purchase hospital coverage along with her auto insurance.

17. After providing background information to Respondent, Bailey was presented the insurance documents for signing. Bailey was not prevented from reviewing them, but did not understand "this insurance stuff" so reading them wouldn't have helped her. Bailey signed or initialed the documents in 25 separate places. Bailey simply relied on Respondent to provide only what she asked for.

18. Respondent prepared a pen sheet for Bailey which summarizes the purchased insurance. Bailey has no recollection of seeing the pen sheet even though her signature appears on it. Her testimony was credible as to her interaction with Respondent.

19. Respondent has a general routine she goes through with each client, but she deviates from the routine at times. Part and parcel to the routine is the offering of ancillary insurance products. Such products are generally included in every quote she gives a customer even when the customer specifically requests only the minimum coverage.

20. Respondent is aware that most of her customers do not fully understand insurance matters. She knows that most customers do not fully review the written insurance documents. She is cognizant that the purchase of insurance is confusing to many of her customers. Thus, she is at an advantage when dealing with her customers.

21. The documents relating to Optional Travel Protection and Accident Medical Protection plans are clearly labeled. A person of normal intelligence would be able to read the labels and probably ascertain that such plans were optional coverages. However, such person would need to be able to distinguish and differentiate between the minimal insurance coverage documentation and the documents addressing additional coverage.

    Moreover, such person would probably need to anticipate the inclusion of ancillary products in order to parse them out of the confusing and overwhelming insurance documents.

22. While she never prohibits the customer from fully reviewing the written documents, she does not encourage them to do so either. Likewise, while she will respond to all questions asked by a customer, she does not offer unsolicited information that might help the customer understand better what they are receiving.

23. It is unlikely the three customers who appeared in this matter took the time or made the effort to read all the documents they signed in order to determine exactly what coverage to which they were agreeing. Rather, they seemed to rely on Respondent to give them what they asked for. Respondent, however, intentionally provided them more than they asked for, leaving it to them to distinguish the coverages.

    CONCLUSIONS OF LAW

    
    

24. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding pursuant to Section 120.569 and Subsection 120.57(1), Florida Statutes (2006).

25. This is a disciplinary case, therefore Petitioner has the burden to prove allegations in the Administrative Complaint by clear and convincing evidence. See Department of Banking and

    Finance, Division of Investor Protection v. Osborne Stern and Company, 670 So. 2d 932 (Fla. 1996); Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987); and Pou v. Department of Insurance and Treasurer, 707 So. 2d 941 (Fla. 3d DCA 1998).

26. The following provisions of the Florida Statutes are relevant to this matter:

    Subsection 624.11(1) -- No person shall transact insurance in this state, or relative to a subject of insurance resident, located, or to be performed in this state, without complying with the applicable provisions of this code.

    
    

    Subsection 626.611 -- 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, 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 that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist:

    
    

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

    
    

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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 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.

    
    

    Subsection 626.21 -- 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, adjuster, customer representative, service representative, or 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:

    
    

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    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, commission, or office.

    
    

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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 IX of this chapter, or having otherwise shown himself or herself to be a source of injury or loss to the public.

    Subsection 626.9541(1) -- The following are defined as unfair methods of competition and unfair or deceptive acts or practices:

    
    

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

    
    

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

       
       

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

       
       

    3. Charging an applicant for a specific ancillary coverage or product, in addition to the cost of the insurance coverage applied for, without the informed consent of the applicant.

    
    

27. The evidence is less than clear and convincing that Respondent violated the provisions of Subsection 626.611, Florida Statutes, and there is no basis for a compulsory suspension or revocation of Respondent's license.

28. The question is whether Respondent added ancillary products to the three aggrieved customers' orders without their informed consent. Clearly each customer had the opportunity to review the insurance documents, but none of them professed the ability to understand what they would have read.

29. Thomas v. State of Florida, Department of Insurance and Treasurer, 559 So. 2d 419 (Fla. 2d DCA), rev. denied, 570 So. 2d 1307 (Fla. 1990), is cited by both parties. The case stands for the general proposition that an insurance agent’s failure to orally explain that additional products were optional was a violation of the insurance code. In the instant case, the issue is whether the oral explanation provided by Respondent was sufficient. That is, was Respondent’s explanation of coverage enough to constitute informed consent by her customers?

30. Respondent had a fiduciary responsibility to her customers. Natelson v. Department of Insurance, 454 So. 2d 31 (Fla. 1st DCA 1984). She should have honored their request for a quote containing tag insurance only. Failing that, she should have clearly explained that ancillary products had been included in the quote. Her actions are somewhat mitigated by the fact that her employer encouraged and expected her to offer additional products to each and every customer. She was a long- time employee and felt pressure to comply with her employer's directives.

31. Based upon the evidence presented and the credibility of the witnesses, it is clear none of the customers in this case were fully made aware of the additional products they purchased. Although Respondent did not fraudulently misrepresent the quotes she provided to each customer, she did not effectively inform

    them as to ancillary products contained in the insurance documents. There is clear and convincing evidence to support the charge of sliding.

32. Petitioner met its burden of proving the allegations in the Administrative Complaint concerning unfair or deceptive acts performed by Respondent.

33. The fact that each of the customers failed to recognize the pen sheet containing their signatures even though each of them verified the signatures contained thereon, raises some question concerning the validity of the pen sheets. However, there was no clear and convincing evidence presented to support a finding that the pen sheets were fraudulent or otherwise improper.

RECOMMENDATION

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

RECOMMENDED that a final order be entered by the Department of Financial Services suspending the license of Respondent for a period of 60 days.

DONE AND ENTERED this 28th day of December, 2006, in Tallahassee, Leon County, Florida.

S

R. BRUCE MCKIBBEN 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 28th day of December, 2006.

ENDNOTE

1/ All references to Florida Statutes are to Florida Statutes (2005), unless otherwise indicated.

COPIES FURNISHED:

Greg S. Marr, Esquire

William Gautier Kitchen, Esquire Department of Financial Services

Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399-0333

L. Michael Billmeier, Esquire Clyde W. Galloway, Jr., Esquire Galloway, Brennan & Billmeier

240 East Fifth Avenue Tallahassee, Florida 32303

Honorable Tom Gallagher Chief Financial Officer

Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

Carlos G. Muñiz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 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: 06-003262PL

Orders for Case No: 06-003262PL