applied to Mr. McIntosh and Phoenix.2
Count II of the Amended Notice alleged that Respondents violated the following provisions of the Insurance Code by their unlicensed activities: sections 626.9571(1), 626.112(1)(a), 626.112(7)(a), 626.9581(1), 624.10, 626.112(1)(b), and
626.7845(2), Florida Statutes.
Count III alleged that Respondents charged a set-up fee for each eligible organization to join the Program (which will be described below) in the amount of $1,000.00 and a set-up fee in the amount of $20.00 for each prospective individual member (Member) to join the Program in violation of sections 626.9521(1) and 626.9541(1)(o).
Count VI alleged that the website formerly maintained by Respondents contained misleading or false information in violation of sections 626.9521(1), 626.9541(1)(b), and 626.9541(1)(e)1.
At the formal hearing, Petitioner presented the testimony of Mr. McIntosh, Roy Friedrich (an investigator employed by Petitioner), and Ray Wenger (a financial administrator employed by Petitioner). Petitioner offered the following pre-marked exhibits, each of which was admitted into evidence: 1, 3, 5-9, 13, 14, 17, 17a-17h, 18, 18a-18d, 20, 24a, 25a, 26-34, and 34a-
34b. Mr. McIntosh testified on behalf of Respondents. Respondents offered two exhibits, both of which were admitted into evidence.
The Transcript, consisting of one volume, was filed on September 1, 2011.
The parties timely filed their respective Proposed Recommended Orders, which have been duly considered by the undersigned in the preparation of this Recommended Order.
Mr. McIntosh is not currently licensed, and at all times relevant to this proceeding, was not licensed, as a life insurance agent in the State of Florida.
Mr. McIntosh is currently licensed, and at all times relevant to this proceeding, was licensed, as a title insurance agent in the State of Florida. Mr. McIntosh's title insurance agent license is E099115. Mr. McIntosh's title insurance agency, Phoenix Title & Escrow, Inc., has been licensed by Petitioner, but the license was not active as of June 2010.
Phoenix Solutions is not currently licensed, and at all times relevant to this proceeding, was not licensed, as an insurance agency in the State of Florida.
Bishop Jose Decena (Bishop Decena), an individual, is the owner of Bishop Decena Ministries, Inc. (Decena Ministries), a Florida corporation.
Mr. McIntosh was the president of Operations for Decena Ministries. Mr. McIntosh was also a signatory on bank accounts in the name of Decena Ministries.
Bishop and Decena Ministries created "The Benevolent Ministries Program" (Program).
The Program was a comprehensive insurance plan.
There was no evidence that the Program actually secured any insurance policy for any member of a church or other
organization. The following is a description of how the Program was designed and what Respondents agreed to do. The Program is no longer in existence.3 Respondents are no longer associated with the Program.
In late 2008, Respondents entered into an agreement with Bishop Decena and Decena Ministries to perform the services described below. Respondents and Decena Ministries created separate websites to describe and promote the Program. While there was no contract introduced into evidence, the information posted on Respondents' website detail Respondents' duties and responsibilities. Respondents were to be paid $375,000.00 per year for five years. Respondents terminated their agreement with Bishop Decena and Decena Ministries on September 21, 2010.
The Program was designed to put individual insurance plans in place for members of churches and other organizations.
The Program was designed to provide life insurance and funeral benefits at no cost to "Members" of the Program.
The Program contemplated the use of a "Trustee," whose duties will be discussed below. Bishop Decena was to serve as the Trustee. The website formerly maintained by Respondents to provide information as to the Benevolent Ministries Program to prospective members contained a letter from Bishop Decena that included the following:
The Trustee recognizes the amount of efforts [sic] made by church leaders to find identifying [sic] ways which can ease the pain of unfortunate situations when they arise. As a result, the Trustee offers all Pastors and their members an opportunity to leave an inheritance to break the bondage of poverty.
We know that countless ministries and other faith-based organizations provide vital services. Therefore, the Trustee has designed a finance system to develop funding for various projects to release the burden on the churches with respect to funeral expenses for its members. The churches also have a financial option with this program to help benefit the church. (example: [sic] build a church, help with the churches [sic] financial needs, [and] help its members)
The Trustee has initiated a special Comprehensive Insurance Plan for your members. The plan will include life insurance and funeral benefits at no cost to you. The policy will be owned by the Trustee, the church and/or organization is the primary beneficiary and you [,] the member [,] will designate your own beneficiary. The member and the church and/or organization will be required to sign an acknowledgment and hold harmless agreement agreeing to the terms and conditions under which the Trustee will be applying for life insurance on your life. [Emphasis is in the original.]
The Program contemplated that the church or other organization would become enrolled in the Program as an eligible organization. The members of an eligible organization would then be eligible to become Members of the Program after the church or organization: (1) submits a "Program Organization
Set-up Form;" (2) pays a $1,000.00 fee to Decena Ministries or to Bishop Decena; and (3) signs an "Acknowledgement and Hold Harmless Agreement."
To become a Member of the Program, a member of the eligible church or other organization were required to: (1) file a "Pre-Qualification Form for the Benevolent Ministries Program;"4; (2) pay a $20.00 processing fee to Decena Ministries or to Bishop Decena; and (3) sign an Acknowledgment and Hold Harmless Agreement, agreeing to the terms and conditions under which the Trustee will apply for life insurance on the Member's life.
Individuals seeking to become Members were also referred to as the "Proposed Insured."
All Pre-Qualification Forms for the Benevolent Ministries Program and all Program Organization Set-up Forms were to be sent directly to Phoenix Solutions.
The $1,000.00 fee associated with the Program Set-up Form and the $20.00 fee associated with the Pre-Qualification Form were to be sent directly to Phoenix Solutions. Phoenix Solutions was to collect these sums on behalf of Bishop Decena and/or Decena Ministries. Respondents were not to keep any portion of either fee.
Respondents were not to receive any commission for any insurance policy that was to be sold.
A prospective Member was required to complete a "General Client Information Form" that contained the letterhead of Phoenix Solutions and required the Member to designate the
type of life insurance wanted, other insurance on the Member's life, and the name and address of the writing insurance agent. The form requested detailed medical information and a list of the available insurance carriers.
Church or organizations members seeking to become a Member of the Program were to sign an "Authorization" form that authorized the release of the prospective Member's medical information and provide the following as to the use of otherwise confidential medical information:
. . . This protected health information is to be disclosed under this Authorization so that Phoenix Financial Solutions may: 1) underwrite my application for coverage, make eligibility, risk rating, policy issuance, enrollment determinations; 2) obtain reinsurance; 3) administer claims and determine or fulfill responsibility for coverage and provisions of benefits; 4) administer coverage; and 5) conduct other legally permissible activities that relate to any coverage I have or have applied for with Phoenix Financial Solutions.
The "Authorization" form also contained the following acknowledgment:
I further understand that if I refuse to sign this authorization to release my complete medical record, Phoenix Financial Solutions may not be able to process my pre- qualification.
Phoenix Solutions was to forward a Member's
information to an insurance carrier for processing.
There was conflicting information on Respondents' website as to the entity that would apply for the life
insurance. Some material reflected that the Trustee would be the entity applying for insurance on the Member's life. Other material reflected that the eligible church or other organization would be the entity to apply for insurance on the Member's life.
A licensed insurance agent was to fill out the insurance application for each Member.
Phoenix Solutions was to coordinate with the insurance carrier a physical examination for a Member.
Any life insurance policy issued on a Member's life was to be owned by the "Trust", which was owned by Bishop Decena, and was to be controlled by the "Trustee" (Bishop Decena).
Decena Ministries was to pay to the insurance company all premium payments related to a life insurance policy issued on a Member's life.
The eligible church or other organization was to be considered the primary beneficiary of the insurance policy on a Member's life.
The eligible church or other organization was to only receive $8,000.00 of a $250,000.00 policy; only $16,000.00 of a
$500,000.00 policy; and only $30,000.00 of a $1,000,000.00 policy.
A Member may also designate his or her own secondary beneficiary.
The eligible church or other organization was to instruct the Trustee to allocate to the secondary beneficiary only $100,000.00 of a $250,000.00 policy; only $250,000.00 of a
$500,000.00 policy; and only $400,000.00 of a $1,000,000.00 policy.
There was no guarantee that the Member's designated secondary beneficiary would obtain any benefits. The Acknowledgment and Hold Harmless Agreement that a prospective Member would be required to sign includes the following provision in paragraph 4:
4. Assuming you qualify for coverage medically and financially, neither you nor your heirs will have any control or stake in the policy insuring your life under the Program once it has been issued to the trust. . . . At your death, if the policy remains in force, The Insurance Company will not pay any of the policy proceeds to your heirs.
Paragraph 7 of the Acknowledgment and Hold Harmless Agreement includes the following:
7. The trust may require third party financing in order to pay some or all of the Premiums needed to keep the life insurance policy on you [sic] life in force. Thus, a substantial portion of proceeds payable upon you [sic] death may be used to retire the debt on funds borrowed from such lender.
Paragraph 9 of the Acknowledgment and Hold Harmless Agreement includes the following:
9. The Trust will upon you [sic] death, administer and be responsible for taking care of your final burial arrangements in accordance with you [sic] written wishes. The Trust will also assume responsibility for your named beneficiaries and do there [sic] utmost to take care of their needs whether it is completion of education, welfare or day to day care [sic].
Paragraph 11 of the Acknowledgment and Hold Harmless Agreement includes the following:
11. The Trust, as owner of the policy, is responsible for premium payments. Interest rates, morality [sic] charges, monthly deductions, and other administrative charges may very [sic] which can have a negative impact on policy performance and cause the policy to lapse unless additional premiums are paid.
Phoenix Solutions was to receive the proceeds of Members' life insurance policies from the Trustee and distribute those proceeds to various parties as directed by the Trustee.
Because there was no life insurance policy issued pursuant to the program described in this Recommended Order, Respondents did not actually do many of the tasks they agreed to do. For example, they never managed any of the insurance proceeds because there were none.
It is clear that Mr. McIntosh went to various churches to promote the Program, sometimes with an insurance agent and sometimes without an insurance agent. At least 31 individuals
submitted a "Pre-Application for Proposed Insured" form, which was required to be submitted with the $20.00 fee described above.
It is also clear that Respondents collected fees from churches and from prospective Members.
Mr. McIntosh testified, credibly, that when asked questions about an insurance policy, he would advise that he was not an insurance agent and would refer the person or persons to an insurance agent.
Bishop Decena, as Trustee of the Program, did not have an insurable interest in the lives of individual members of churches or other organizations. Information on Respondents' website that the Trustee would apply for life insurance on a Member's life was misleading. While the Trustee may submit such an application, the Trustee would not be able to lawfully obtain the life insurance.
CONCLUSIONS OF LAW
DOAH has jurisdiction over the subject matter of and the parties to this proceeding pursuant to sections 120.569 and 120.57(1).
This proceeding seeks to impose discipline against Respondents and is, consequently, penal in nature. State ex
rel. Vining v. Fla. Real Estate Comm'n, 281 So. 2d 487, 491 (Fla. 1973). Accordingly, to impose discipline, the Department must prove the charges against Respondents by clear and convincing evidence. Dep't of Banking & Fin., Div. of Sec. & Investor Prot. v. Osborne Stern & Co., 670 So. 2d 932, 933-34 (Fla. 1996)(citing Ferris v. Turlington, 510 So. 2d 292, 294-95 (Fla. 1987)); Nair v. Dep't of Bus. & Prof'l Reg., Bd. of Med., 654 So. 2d 205, 207 (Fla. 1st DCA 1995).
Regarding the standard of proof, in Slomowitz v.
Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983), the court developed a "workable definition of clear and convincing evidence" and found that of necessity such a definition would need to contain "both qualitative and quantitative standards." The court held that:
clear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of
such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.
Id. The Florida Supreme Court later adopted the Slomowitz court's description of clear and convincing evidence. See In re Davey, 645 So. 2d 398, 404 (Fla. 1994).
The provisions of the Insurance Code cited below have not changed at any time relevant to this proceeding.
Section 626.957(1) provides, in relevant part, as
follows:
Whenever the department . . . has reason to believe that any person has engaged, or is engaging, in this state in any unfair method of competition or any unfair or deceptive act or practice as defined in s. 626.9541 or s. 626.9551 or is engaging in the business of insurance without being properly licensed as required by this code and that a proceeding by it in respect thereto would be to the interest of the public, it shall conduct or cause to have conducted a hearing in accordance with chapter 120.
Section 626.9581(1) provides in relevant part:
After the hearing provided in s.626.9571, the department or office shall enter a final order in accordance with s. 120.569. If it is determined that the person charged has engaged in an unfair or deceptive act or practice or the unlawful transaction of insurance, the department . . . shall also issue an order requiring the violator to cease and desist from engaging in such method of competition, act, or practice or the unlawful transaction of insurance.
Further, if the act or practice is a violation of s.626.9541 or s. 626.9551, the department . . . may, at its discretion, order any one or more of the following:
Suspension or revocation of the perons's certificate of authority, license, or eligibility for any certificate of authority or license, if he or she knew, or reasonably should have known, he or she was in violation of this act.
Such other relief as may be provided in the insurance code.
part:
Subsections 626.9521(1) and (2) provide in relevant
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. 626.9561 to be, an unfair method of competition or an unfair or deceptive act or practice involving the business of insurance.
. . . any person who violates any provision of this part is subject to a fine in an amount not greater than $5,000 for each nonwillful violation and not greater than $40,000 for each willful violation. Fines under this subsection imposed against an insurer may not exceed an aggregate amount of $20,000 for all nonwillful violations arising out of the same action or an aggregate amount of $200,000 for all willful violations arising out of the same action. The fines may be imposed in addition to any other applicable penalty.
COUNT II
Count II of the Amended Notice alleged that Respondents violated the following provisions of the Insurance
Code by their unlicensed activities: sections 626.9571(1), 626.112(1)(a), 626.112(7)(a), 626.9581(1), 624.10,
626.112(1)(b), and 626.7845(2).
Section 624.10 defines the term "transacting insurance," in relevant part, as follows:
"Transact" with respect to insurance includes any of the following, in addition to other applicable provisions of this code:
Solicitation or inducement.
Preliminary negotiations.
Effectuation of a contract of insurance.
Transaction of matters subsequent to effectuation of a contract of insurance and arising out of it.
Section 626.112(1) provides in relevant part:
(1)(a) No person may be, act as, or advertise or hold himself or herself out to be an insurance agent, insurance adjuster, or customer representative unless he or she is currently licensed by the department and appointed by an appropriate appointing entity or person.
(b) . . . a license as an insurance agent, service representative, customer representative, or limited customer representative is required in order to engage in the solicitation of insurance. For purposes of this requirement, as applicable to any of the license types described in this section, the solicitation of insurance is the attempt to persuade any person to purchase an insurance product by:
Describing the benefits or terms of insurance coverage, including premiums or rates of return;
Distributing an invitation to contract to prospective purchasers;
* * *
Completing orders or applications for insurance products; [or]
Comparing insurance products, advising as to insurance matters, or interpreting policies or coverages;
Section 626.7845(2) provides in relevant part as follows:
. . . no individual shall, unless licensed as a life agent:
Solicit insurance or annuities or procure applications;
In this state, engage or hold himself or herself out as engaging in the business of analyzing or abstracting insurance policies or of counseling or advising or giving opinions to persons relative to insurance or insurance contracts . . .
Section 626.112(7)(a) provides in relevant part as
