The Issue Whether Respondent, The Medical Escrow Society, Inc., violated Section 626.989(6), Florida Statutes, as alleged in the twenty-six counts of the Administrative Complaint issued by Petitioner, Department of Financial Services, on January 6, 2003; and If Respondent is found to have violated any of the twenty- six counts of the Administrative Complaint, whether any such violations were committed willfully or non-willfully.
Findings Of Fact Petitioner, the successor agency to the Department of Insurance, regulates the viatical industry operating in Florida pursuant to the section of the Insurance Code referred to as the Viatical Settlement Act, Part X, Chapter 626. Prior to enactment of the Viatical Settlement Act in 1996, Petitioner did not have jurisdiction to regulate viatical settlement transactions. Respondent is a Florida corporation which was and is licensed as a viatical settlement broker in Florida, as well as a number of other states. Respondent, on behalf of a viator and for a fee, commission, or other valuable consideration, offers or attempts to negotiate viatical settlement contracts between a viator resident, in this state or other states, and one or more viatical settlement providers, and did so at all times material hereto. Respondent is currently owned by Christopher Lane (Lane), who purchased the company from the prior owner in a transaction which was approved by Petitioner on November 6, 2001. Lane is the current president of Respondent. At all times material to the allegations of the Administrative Complaint, Lane neither owned nor controlled Respondent. At all times material to the allegations of the Administrative Complaint, Lane was an employee of Respondent, as a vice president who handled marketing and new client relations. Lane did not have any knowledge of the facts or circumstances giving rise to the allegations of the Administrative Complaint. Furthermore, under Lane's ownership and management, Respondent has adopted and filed with Petitioner an anti-fraud plan, pursuant to Section 626.99278, which was first enacted in 2000. In general, the business of viatical settlements involves the sale by a policyholder to an investor or group of investors of the policyholder's life insurance policy, prior to the policyholder's death, for an amount that is less than the face value of the policy. Viatical settlement transactions typically have been used by terminally ill individuals as a means to obtain cash prior to their death, which could be used for life-sustaining treatments or to relieve financial stress during their lifetime. Recently, viatical settlement transactions have also been marketed to elderly individuals who are healthy but may no longer need life insurance and who want to obtain money during their lifetime for any number of reasons, such as paying for health care. There are various categories of persons involved in a typical viatical settlement transaction. The policyholder who is selling a life insurance policy is referred to as a "viator." A viator is typically represented by a viatical settlement "broker" who represents the viator by obtaining quotes from potential purchasers of the viator's policy, called viatical settlement "providers." Viatical settlement providers, in turn, seek investors to fund the viatical settlement transactions. Viatical settlement brokers and providers are required to be licensed under the Viatical Settlement Act. As part of its duties under the Viatical Settlement Act, Petitioner issues licenses to viatical settlement brokers through its Bureau of Agents and Agencies. In each of the twenty-six counts of the Administrative Complaint, Petitioner has alleged that Respondent possessed a copy of an insurance policy application form, which when compared to information submitted on Respondent's forms, demonstrates evidence of a fraudulent insurance act committed by the particular viator. In that respect, paragraph 4 of the Administrative Complaint states as follows: Information available to the Department reflects that Medical Escrow has, from offices located in this state, offered or attempted to negotiate viatical settlement contracts between viators and one or more viatical settlement providers in the presence of circumstances whereby Medical Escrow knew, or in the exercise of reasonable diligence should have known or been caused to believe, that the underlying insurance policy had been procured through fraud, or dishonesty, or misrepresentations made by the viator on his application to the insurance company issuing the policy in question. Consequently, as a threshold matter Petitioner must prove that Respondent actually possessed the documents referenced in the Administrative Complaint. Petitioner's financial specialist, Janice S. Davis (Davis), testified that she obtained copies of the documents referenced in the twenty-six counts of the Administrative Complaint from a variety of sources as follows: (1) the documents referenced in Counts One and Eight were obtained by Petitioner in 1999 from an examination of a viatical settlement provider named Mutual Benefits Corporation; (2) The documents referenced in Counts Two, Three, Four, Five, Six, and Seven were obtained by Petitioner in 2000 in response to a document production request to a viatical settlement provider named Future First Financial Group; (3) the documents reference in Count Nine were obtained by Petitioner in 2002 from an examination of a viatical settlement provider named William Page & Associates; and (4) the documents referenced in Counts Ten, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, Seventeen, Eighteen, Nineteen, Twenty, Twenty-one, Twenty-two, Twenty- three, Twenty-four, Twenty-five, and Twenty-six were obtained by Petitioner in 2000 from files which had been obtained from Respondent by execution of a search warrant by the Offices of Statewide Prosecution and Petitioner's Division of Insurance Fraud. With respect to the documents obtained from the first three sources-Mutual Benefits Corporation, Future First Financial Group, and William Page & Associates-Petitioner has failed to offer proof that the referenced documents were ever actually in the possession of Respondent. Although it may be reasonable to presume that the actual forms of Respondent were in the possession of Respondent at some point in connection with the referenced viatical settlement transactions, Petitioner has offered no testimony regarding how those records were maintained by the three viatical settlement providers. Moreover, Petitioner failed to offer any evidence that the insurance policy applications were ever in the possession of Respondent. Petitioner has offered no evidence upon which to make a finding that Respondent actually possessed the particular insurance policy applications which were obtained from the three viatical settlement providers. While Petitioner offered testimony from former employees of Respondent to the effect that Respondent obtained insurance policy applications from viators in general, such testimony does not establish that the particular insurance policy applications in the possession of the three viatical settlement providers were actually obtained by Respondent. None of Respondent's application forms referenced by Petitioner in the Administrative Complaint required submission of an insurance application. Because Petitioner has failed to offer any evidence that the particular insurance policy applications referenced in Counts One, Two, Three, Four, Five, Six, Seven, Eight, and Nine were ever actually possessed by Respondent, there is no basis upon which to make a finding of fact that Respondent should have reported to Petitioner anything set forth in such insurance policy applications. Petitioner may not penalize Respondent based upon a mere assumption that Respondent possessed the insurance policies referenced in those nine counts of the Administrative Complaint. With respect to the documents referenced by Petitioner in Counts Ten through Twenty-six, Davis testified that copies of those documents were obtained from Respondent's files which had been obtained by the Office of Statewide Prosecution and the Division of Insurance Fraud through execution of a search warrant in 2000. Although Davis had no involvement in or personal knowledge concerning the circumstances surrounding the execution of that search warrant, this evidence is sufficient to substantiate its allegations that Respondent actually possessed the insurance applications referenced by Petitioner in Counts Ten through Twenty-six of the Administrative Complaint in its files. In Count Ten of the Administrative Complaint, Viator Eight submitted to Philadelphia Life Insurance Company an insurance policy application, dated March 21, 1996, which represented that Viator Eight had not been treated for or diagnosed with Acquired Immune Deficiency Syndrome (AIDS) within the last ten years. Viator Eight submitted to Respondent an application form, dated July 8, 1998, which represented that Viator Eight had first been diagnosed with AIDS in 1989. The question on Respondent's application asks for the date of first diagnosis of the "current medical condition" which is described in the preceding question. While Viator Eight's description of his "current medical condition" on Respondent's application includes "AIDS," it also includes a "history of Hodgekins Lymphoma" as well as other conditions. The information on Respondent's application does not specify whether the 1989 diagnosis was for AIDS or the other disorders listed as Viator Eight's "current medical condition"; however, this information is sufficient to alert Respondent's employees that a fraudulent insurance act is being or has been committed and trigger the reporting requirement of the statute. In Count Eleven of the Administrative Complaint, Viator Eight submitted to Manhattan Life Insurance Company an insurance policy application, dated July 3, 1996, which represented that Viator Eight had not consulted with or been treated by any licensed physician or medical practitioner within the last five years and was in excellent health. Viator Eight submitted to Respondent an application, dated July 8, 1998, which represented that Viator Eight had first been diagnosed with AIDS in 1989 and was being attended by Dr. Ronald Wiewora. The "current medical condition" described by Viator Eight in Respondent's application form states a diagnosis in 1989 of AIDS and Hodgekins Lymphoma, and "recent difficulties with protein inhibitors . . ." This is sufficient information to require the reporting of potential fraud under the statute. In Count Twelve of the Administrative Complaint, Viator Nine submitted to Time Insurance Company an insurance policy application, dated August 6, 1996, which represented that Viator Nine had not had a physical examination, diagnostic test, medical treatment, health impairment, or been advised to undergo any treatment within the past five years. However, the application also represented that he had not been diagnosed with AIDS or AIDS-related complex (ARC) or received treatment for it within the past ten years. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS and had first been diagnosed Human Immunodeficiency Virus (HIV) positive in February 1991. This was sufficient information to require the reporting of potential fraud under the statute. In Count Thirteen of the Administrative Complaint, Viator Nine submitted to Jackson National Life Insurance Company an insurance policy application, dated March 5, 1992, which represented that Viator Nine had not been treated by a physician or other medical practitioner, or been a patient in a clinic or medical facility, or been diagnosed or treated for AIDS or any other immunological disorder, within the past five years. Viator Nine submitted to Respondent an application, dated August 15, 1997, which represented that Viator Nine had first been diagnosed with AIDS in February 1991 and was not presently employed. This was sufficient information to require the reporting of potential fraud under the statute. In Count Fourteen of the Administrative Complaint, Viator Nine submitted to Interstate Assurance Company an insurance policy application, date March 21, 1993, which represented that within the last ten years Viator Nine had not been diagnosed or treated by a member of the medical profession for an immune system disorder and that within the last five years he had not been hospitalized or treated by a member of the medical profession or consulted a physician or been prescribed any medication. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS and had first been diagnosed HIV positive in February 1991. Although the insurance application did not specifically request disclosure of a diagnosis of HIV positive and did not define the term "immune system disorder" to include a diagnosis of HIV positive, Viator Nine's disclosure on Respondent's application of a diagnosis of HIV positive was sufficient to alert an employee of Respondent to report the potential for fraud under the statute and to require that this information be reported. In Count Fifteen of the Administrative Complaint, Viator Nine submitted to Interstate Assurance Company an insurance policy application, dated March 4, 1994, which represented that, within the last ten years, Viator Nine had not been diagnosed or treated by a member of the medical profession for an immune system disorder and that within the last five years he had not been hospitalized or treated by a member of the medical profession or consulted a physician or been prescribed any medication. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS and had first been diagnosed HIV positive in February 1991 and that Dr. Leslie Diaz represented on Respondent's "Physician's Questionnaire-HIV Disease" form, dated, September 4, 1997, that Viator Nine had the HIV disease and a life expectancy of five to ten years. Although the insurance application did not define the term "immune system disorder" to include a diagnosis of HIV positive, Viator Nine's disclosure on Respondent's application of a diagnosis of HIV positive was sufficient to alert an employee of Respondent of the need to report the potential for fraud under the statute. In Count Sixteen of the Administrative Complaint, Viator Nine submitted to Security Mutual Life Insurance Company an insurance policy application, dated November 4, 1997, which represented that Viator Nine had not been treated for or had any known indication of AIDS, ARC, or tested positive for HIV antibodies. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. This is sufficient to trigger the reporting requirement of the statute. In Count Seventeen of the Administrative Complaint, the evidence submitted indicated that Viator Nine submitted to Columbia Universal Life Insurance Company an insurance policy application for a face amount coverage of $70,000, dated August 28, 1998, which represented that Viator Nine had not been diagnosed with any immune deficiency disease. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive February 1991, and was being treated by Dr. Leslie Diaz. On Respondent's form submitted in 1997, Viator Nine indicated that he had a preexisting life insurance policy, in the face amount of $200,000, with Columbia Universal Life issued on December 28, 1985. There is no apparent connection between Respondent's application, dated August 15, 1997, and the Columbia Universal Life application, dated August 28, 1998, that would trigger the necessity of an employee of Respondent to make a report. In Count Eighteen of the Administrative Complaint, Viator Nine submitted to Philadelphia Life Insurance Company an insurance policy application, dated August 28, 1998, which represented that Viator Nine had not been told that he had tested positive for exposure to the HIV infection and that to the best of his knowledge, his health was not impaired in any way. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. Respondent's application relates to an individual life policy issued by the Columbus Mutual Insurance Company, in the face amount of $200,000, dated December 28, 1985. There is no apparent connection between Respondent's application, dated August 15, 1997, and the Philadelphia Life Insurance Company policy application, dated August 28, 1998. Therefore, there was no obligation to report. In Count Nineteen of the Administrative Complaint, Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. Viator Nine submitted to United Home Life Insurance Company an insurance policy application, dated April 23, 1999, which represented that within the last ten years Viator Nine had not tested positive for exposure to the HIV infection, had not tested positive for antibodies to the AIDS virus, and had not consulted a medical practitioner within the last five years. Respondent's application relates to an individual life policy issued by Columbus Mutual Insurance Company, in the face amount of $200,000, dated December 28, 1985. There is no apparent connection between Respondent's application, dated August 15, 1997, and the United Home policy application, dated April 23, 1999. Therefore, there was no obligation to report. In Count Twenty of the Administrative Complaint, Viator Ten submitted to Respondent an application form, dated August 15, 1997, which represented that Viator Ten had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. Viator Ten submitted to Federal Home Life Insurance Company an insurance policy application, dated October 20, 1997, which represented that within the last ten years Viator Ten had not tested positive for exposure to the AIDS virus, had not been treated for the AIDS virus, and had not consulted a medical practitioner within the last five years. Respondent withheld this insurance policy from sale for a period of time because Respondent knew that Viator Ten had not yet submitted the application for the policy to the life insurance company and that it contained false information. Respondent had an obligation to report these discrepancies. In Count Twenty-one of the Administrative Complaint, Viator Eleven submitted to Manhattan Life Insurance Company an insurance policy application, dated April 25, 1996, which represented that Viator Eleven had not consulted, been examined or treated by any licensed physician or medical practitioner within the last five years. Viator Eleven submitted to Respondent an application, dated April 14, 1998, in the attachments it stated that Viator Eleven had first been diagnosed HIV positive in September 1991, and as of November 1995 had been diagnosed with AIDS and had received treatment from a physician since that time. Although the insurance application does not request any information regarding any diagnosis or treatment for AIDS or HIV, Viator Eleven stated that he did not have a family physician, had not seen a physician in the past, and was not taking any medication. This was obviously false, and Respondent should have reported it. In Count Twenty-two of the Administrative Complaint, Viator Twelve submitted to Southern Farm Bureau Life Insurance Company an insurance policy application, dated July 1, 1996, which represented that Viator Twelve had not been told that he had or had been treated for an immune deficiency disorder, AIDS, ARC, or had test results indicating exposure to the HIV virus. Viator Twelve submitted to Respondent an application, dated December 3, 1996, which represented that Viator Twelve had "asymptomatic HIV" and had first been diagnosed in 1991. This was sufficient to trigger the reporting requirement. In Count Twenty-three of the Administrative Complaint, Viator Twelve submitted to Primerica Life Insurance Company an insurance policy application, dated July 30, 1996, which represented that Viator Twelve had not within the past ten years been diagnosed or treated for AIDS or any immune deficiency disorder or tested positive for exposure to the HIV virus. Viator Twelve submitted to Respondent and application, dated December 3, 1996, which represented that Viator Twelve had "asymptomatic HIV" and had first been diagnosed in 1991. This was sufficient to trigger the reporting requirement. In Count Twenty-four of the Administrative Complaint, Viator Thirteen submitted to Nationwide Life Insurance Company an insurance policy application, dated July 25, 1997, which represented that Viator Thirteen had not within the past five years been diagnosed or treated for AIDS, ARC, or any other immune deficiency syndrome and had not been examined or treated by any physician or medical practitioner, or by any hospital, clinic, or medical facility not previously mentioned on the application. Viator Thirteen submitted to Respondent an application, dated January 12, 1998, which represented that Viator Thirteen had been diagnosed HIV positive in 1992 and had been diagnosed with AIDS in 1994 and that information supplied by Viator Thirteen's physician on Respondent's "Physician's Questionnaire-HIV Disease" form confirmed those representations. Although Respondent withheld Viator Thirteen's policy from sale for a period of time, Respondent's personnel noted that Viator Thirteen had lied on the application. Respondent failed to report this fact to Petitioner. In Count Twenty-five of the Administrative Complaint, Viator Three submitted to Respondent an application, dated April 11, 1995, which represented that Viator Three had been diagnosed HIV positive in May 1986 and had been diagnosed with AIDS in March 1995. Viator Three submitted to Allstate Life Insurance Company an insurance policy application, dated July 31, 1995, which represented that Viator Three had never been diagnosed with or treated for AIDS, ARC, or an AIDS-related condition. Since the application for the life insurance policy and the application to Respondent were submitted prior to the enactment of the Viatical Settlement Act, Respondent had no duty to report possible fraud in this instance, since it occurred prior to July 1, 1996, the effective date for the statute. In Count Twenty-six of the Administrative Complaint, Viator Three submitted to Respondent an application, dated December 3, 1996, which represented that Viator Three had been diagnosed HIV positive in May 1986 and had been diagnosed with AIDS on September 4, 1996, and that on Respondent's "Physician's Questionnaire-HIV Disease" form, dated May 18, 1995, submitted by Dr. Carroll L. Cook, confirmed those representations. Viator Three submitted to Nationwide Life Insurance Company an insurance policy application, dated October 20, 1995, which represented that Viator Three had not, within the last five years, been diagnosed with or treated for AIDS, ARC, or any other immune deficiency disorder. This is sufficient to trigger the reporting requirement. The evidence is clear and convincing, as to Counts Ten, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, Twenty, Twenty-one, Twenty-two, Twenty-three, Twenty-four, and Twenty-six of the Administrative Complaint that Respondent, in the performance of its role as a viatical settlement broker, routinely received from viators and reviewed written information about their medical condition, particularly regarding the presence of an HIV/AIDS diagnosis, that directly and materially contradicted information supplied by that same viator on one or more written and corresponding insurance policy applications, also routinely received and reviewed by Respondent. The same viators who represented on the relevant life insurance policy applications that they did not have HIV or AIDS represented on viatical applications that they did have that condition during the same material times. This is especially true, wherein Viator Nine submitted eight applications to Respondent on the same date, August 15, 1997. In each instance, the contrast is so great that any reasonable person, especially an employee of Respondent in the viatical industry, would have to know or believe that the life insurance policy being offered for sale through Respondent had been obtained through misrepresentations made by the viator on or in support of the insurance policy application. Respondent not only failed to report those circumstances to Petitioner, but proceeded to offer many of those policies for sale to viatical settlement providers. The evidence is clear and convincing that Respondent, during the relevant time period, had no company policy requiring or even acknowledging an obligation to report such matters to Petitioner and that the usual and prevalent custom of Respondent was to send the applications to providers without comment. Only after 1999 did Respondent instruct its employees to direct such suspicious viatical applications to the attention of a company vice-president. Even then, no reports were filed with Petitioner. Thus, Respondent's admitted failure to report cannot be ascribed to the negligence or inattention of a company officer or employee to his or her duty to fulfill a company policy requiring such reports, since there was no such policy. It is clear that Respondent simply ignored the reporting requirements in the statute and, in most instances, offered the tainted viatical applications/insurance policies for sale to viatical settlement providers without comment. Accordingly, it is found that any and all admitted failures to report the circumstances alleged in Counts Ten through Sixteen, Twenty through Twenty-four, and Twenty-six in the Administrative Complaint were willful.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order as follows: Dismissing Counts One through Nine, Seventeen, Eighteen, Nineteen, and Twenty-five. Finding Respondent guilty of violating Section 626.989(6) in Counts Ten, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, Twenty, Twenty-one, Twenty-two, Twenty-three, Twenty-four, and Twenty-six of the Administrative Complaint; and In conformity with the Joint Pre-hearing Stipulation and the earlier, seven-page stipulation of the parties, finding the violations in question willful, and imposing an administrative fine in the amount of $30,000 and subjecting Respondent to two years of probation under the terms and conditions set forth in the seven-page stipulation, paragraph 5. DONE AND ENTERED this 7th day of November, 2003, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE 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 7th day of November, 2003. COPIES FURNISHED: Michael H. Davidson, Esquire Department of Financial Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Thomas J. Maida, Esquire N. Wes Strickland, Esquire Foley & Lardner 106 East College Avenue, Suite 900 Tallahassee, Florida 32301 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue Whether Michael McIntosh (Mr. McIntosh) and/or Phoenix Financial Solutions, Inc. (Phoenix Solutions) (collectively, Respondents) committed the offenses alleged in the Amended Notice of Intent to Issue Cease and Desist Order (Amended Notice) filed by the Department of Financial Services (Petitioner) and, if so, the penalties that should be imposed.
Findings Of Fact 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.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order finding Respondents guilty of the violations alleged in Count II of the Amended Notice and not guilty of the violations alleged in Counts III, IV, and VI. It is further recommended that the Final Order impose against Respondents an administrative fine in the total amount of $5,000.00 payable jointly and/or separately. DONE AND ENTERED this 3rd day of October, 2011, in Tallahassee, Leon County, Florida. S CLAUDE B. ARRINGTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of October, 2011.
The Issue The issues to be resolved in this consolidated proceeding concern whether the Petitioner, Abraham Maida's applications to represent certain life insurance companies should be denied based upon his alleged unlawful failure to forward premium funds from insureds to the insurers during the applicable regular course of business. Also at issue are the charges in the Administrative Complaint in the related penal proceeding which concerns the same factual conduct involving the Respondent's alleged failure to forward premiums to the insurers involved in the policy contracts at issue.
Findings Of Fact The Petitioner, Abraham George Maida, is licensed in Florida as a life insurance agent, a life and health insurance agent and a dental health care contract salesman. The Department is an agency of the State of Florida charged with licensing life, health and other types of insurance agents, with regulating their licensure and practice and with enforcing the licensure and practice standards embodied in the statutes cited hereinbelow. Abraham Maida engaged in the business of selling insurance coverage to various employees of the City of Jacksonville. The premium payments for this coverage were collected by payroll deduction from the employees, and lump sum premium checks were remitted over to the Petitioner/Respondent, Mr. Maida, by the appropriate personnel of the City of Jacksonville. Mr. Maida, in turn, was required by his contractual arrangements with the underwriting insurance companies involved and by the Florida Insurance Code, Chapter 626, Florida Statutes, with timely remitting those premium funds over to the insurers who underwrote the risk for the employees in question. Mr. Maida failed to timely remit the premium funds which he collected from the City of Jacksonville to the relevant insurers for the months of February, March and April of 1990, in the case of policy contracts written on behalf of Loyal American Life Insurance Company. Additionally, Mr. Maida failed to timely remit the premium funds received from the City of Jacksonville, after it received them by payroll deduction from its employees, for the months of March, April and May of 1990, with regard to the premium funds due in contracts involving the ITT Life Insurance Company, in accordance with his contract with that company. Mr. Maida failed to timely remit the insurance premiums of James E. Daniels to the ITT Life Insurance Company, as well. The Petitioner/Respondent's contracts with these insurance companies required him to remit premium funds which he received from insureds, within thirty (30) days of receipt, to the insurance company underwriting the risk involved. This the Petitioner/Respondent failed to do for the companies involved in the above Findings of Fact and for those months of 1990 delineated above. In the case of most of the delinquent premium funds due these companies, Mr. Maida authorized them to debit his commission and/or renewal accounts with those companies, which were monies due and owing to him from the companies, in order to make up the premiums which he had not remitted over to the companies involved at that point. That procedure did not defray all of the delinquent premium amounts, however. in the case of ITT Life Insurance Company and the monies owed that company by Mr. Maida, it was established that $10,554.21 of delinquent premium amounts were owing to that company and not timely paid by Mr. Maida. Although he paid the portion of that figure representing the March premium funds due the company for March of 1990, he did not directly pay the premium funds due for April and May of 1990 but, rather, suffered the company to charge those delinquencies, for those months, to his agent's commission account. This procedure still left $4,877.54 unpaid, as of the time of hearing. It was established by witness, Steven Heinicke of that company, that Mr. Maida is their most consistently delinquent agent, in terms of timely remission of premium funds due the company for insurance business which Mr. Maida has written. It has also been established however, that Mr. Maida made a practice of always paying premium funds due the companies for which he wrote insurance in the precise amounts owing, regardless of whether the billing statements to him from those companies had inadvertently understated the amounts which they were due. It was also established that his failure to timely remit the insurance premium funds in question was not due to any intent to defraud those companies of the funds involved or to permanently convert the funds to his own use. Rather, it was established that Mr. Maida's difficulty in timely payment of the premium funds was due to misappropriation of the funds because of financial problems which he was suffering at tee times in question, due at least in part to federal income tax difficulties he was experiencing. There has been no shoring in this record that Mr. Maida is not a competent insurance agent in terms of his abilities and qualifications to fairly and effectively obtain and contract for insurance business with insureds on behalf of the insurance companies he represents. There was no showing that he lacks reasonably adequate knowledge and technical competence to engage in the transactions authorized by the licenses or permits which he presently holds or which he seeks in the licensure application involved in this proceeding.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is, therefore RECOMMENDED: That the Petitioner be found guilty of the violations found to have been proven in the above Conclusions of Law portion of this Recommended Order and that his licenses and eligibility for licensure with the insurers for which license application was made be suspended for a period of three (3) months. DONE and ENTERED this 5th day of June, 1991, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk the Division of Administrative Hearings this 6th day of June, 1991. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-6670 Respondent/Department's Proposed Findings of Fact: 1-7. Accepted. COPIES FURNISHED: Tom Gallagher, State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, Esq. General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Norman J. Abood, Esq. Willis F. Melvin, Jr., Esq. 1015 Blackstone Building Alan J. Leifer, Esq. Jacksonville, FL 32202 Department of Insurance and Treasurer 412 Larson Building Tallahassee, FL 32399-0300
The Issue The issue for determination is what amount of attorney's fees and costs should be awarded to Petitioner for costs incurred in prosecuting the rule challenge case, Security Mutual Life Insurance Company of Lincoln, Nebraska vs. Department of Insurance and the Treasurer, DOAH Case No. 97-1132RU.
Findings Of Fact On March 11, 1997, Security Mutual Life Insurance Company, filed a Petition challenging three statements of Respondent, the Department of Insurance and the Treasurer, as unpromulgated rules. See Security Mutual Life Insurance of Lincoln, Nebraska vs. Department of Insurance and Treasurer, DOAH Case No. 97-1132RU. According to the Petition, the first statement concerned the Department's requiring that annuity contracts contain a table of guaranteed values. The second statement alleged to be an unpromulgated rule was that the Department disapproved contract forms labeled as "single premium annuity" contracts which permit additional contributions after the initial premium is made. The third statement challenged by Security Mutual as an unpromulgated rule involved a requirement of the Department that annuity contracts include a demonstration of compliance with Actuarial Guideline 33 to avoid form/rate denial. Throughout the proceeding below and in the Final Order issued pursuant thereto, the second and third challenged agency statements were referred to as the "Single Premium Statement" and the "Guideline 33 Statement." At the commencement of the final hearing in the proceeding below, pursuant to a stipulation, Security Mutual withdrew its challenge to the Department's alleged statement requiring that annuity contracts contain a table of guaranteed values. On May 19, 1997, the Final Order in the proceeding below, dismissed Security Mutual's petition as to the "Single Premium Statement," but determined that the "Guideline 33 Statement" should have been adopted by the rulemaking process. See Security Mutual Life Insurance of Lincoln, Nebraska vs. Department of Insurance and Treasurer, DOAH Case No. 97-1132RU. In the proceeding below, Security Mutual was represented by Sharon A. DiMuro, Esquire, of Ganger, Santry, Mitchell, and Heath, P.A. (law firm). The hourly rate of Ms. DiMuro and one other lawyer who worked on the rule challenge case was $175.00. The hourly rate of two other lawyers in the firm who worked on the case was $150.00. Ms. DiMuro expended a total of 180 hours in prosecuting the underlying rule challenge case; 172.2 of these hours were expended on issues on which Security Mutual prevailed. The remaining 7.8 hours were spent on matters related to the "Single Premium Statement" on which Security Mutual did not prevail. Thus, these 7.8 hours are deducted from Ms. DiMuro's total number of hours. The three other attorneys in the law firm expended a total of 12.7 hours on the underlying proceeding, all of which were attributable to work related to the "Guideline 33 Statement," the issue on which Security Mutual prevailed. The attorney, other than Ms. DiMuro, who earned $175.00 an hour worked on the rule challenge case 4.1 hours. The two attorneys, whose hourly rate was $150.00, worked a combined 8.6 hours on the case. With respect to its successful claim in the underlying case, the law firm expended a total of 184.9 hours. Of the total hours expended, 176.3 were billed at $175.00 an hour, and 8.6 were billed at $150.00 an hour. The $150.00 and $175.00 are reasonable hourly rates for the attorneys. Likewise, the time expended in prosecuting the underlying proceeding, 184.9, is reasonable. Based on the foregoing, Security Mutual incurred attorney's fees of $32,142.50 in maintaining and prosecuting the claim on which it succeeded. Security Mutual also incurred reasonable costs of $1,270.29 in connection with the underlying rule challenge proceeding. Moreover, in the instant proceeding, Security Mutual incurred taxable costs in the amount of $1,051.50 for the preparation and hearing time of its expert witness, Kenneth Oretel, of the law firm of Oretel, Hoffman, Fernandez and Cole, P.A. These costs were reasonable and necessary.
The Issue Whether Respondent's insurance agent's license and eligibility of licensure should be disciplined for alleged violations, set forth hereinafter in detail, as contained in the Administrative Complaint.
Findings Of Fact Based on my observation of the witnesses and their demeanor while testifying, documentary evidence received and the entire record compiled herein, I hereby make the following relevant factual findings: Respondent, Robert Phillip Wolf, is currently licensed and has been eligible for licensure in Florida as a life and health insurance agent and as a general lines insurance agent during times relevant to these proceedings. On or about January 17, 1989, Church Insurance Program (CIP), an incorporated general lines insurance agency, was organized under the laws of Florida. Respondent was vice president of CIP at all times relevant. During times material, an agency agreement was in effect between CIP (herein Respondent or CIP) and North Atlantic Speciality Insurance Company (NAS) whereby CIP agreed to solicit insurance products on behalf of NAS. Respondent executed the agency agreement on behalf of CIP. That agreement provides, in relevant part: SECTION I. AGENT'S AUTHORITY. 3. Agent shall have authority to collect and receive premiums on insurance contracts placed with the company by or through the agent and to retain out of the premiums so collected commissions as provided in Section III of this Agreement on all contracts of insurance, except those subject to procedures specified in Section IV of this Agreement. SECTION II. PREMIUM COLLECTION AND REMITTANCE. 2. Agency billed policies. a. Agent assumes full responsibility for prompt payment to the company of all premiums, less commissions, on all contracts of insurance placed with the company, by or through the agent, whether or not such premiums are collected from the insured. However, the agent shall be relieved of responsibility to pay premiums with respect to an insurance contract which is legally terminated and agent furnishes the company proper evidence of such termination along with a written statement that the agency cannot collect the premium. The evidence and statement must be received within 30 days following the original inception date of the contract. Policies so termin- ated shall not be subject to commission. Failure of the agent to give the company such written notice of his inability to collect such premium shall constitute acceptance by the agent of responsibility to pay such premiums. c. The agent agrees to remit any premium balance to the company so as to reach the company's office no later than 45 days after the end of the month for which the account or statement is rendered. All premiums collected or received by the agent shall be held by him as a fiduciary in trust for the company until paid to the company, and the privilege of retaining commissions as authorized else- where in this agreement shall not be construed as changing such fiduciary relationship. III. COMMISSION 1. The agent is authorized to retain commissions out of premiums collected on agency billed policies as full compen- sation on business placed with the company. Pursuant to the agency agreement, CIP and Respondent were due twenty percent (20 percent)of net written premiums (NWP) as commission. Respondent was agent of record for NAS at CIP during times material. During 1993, NAS became increasingly aware of and concerned about (1) Respondent's failure to notify the company of coverages it had solicited and bound and to timely remit premiums due NAS on policies issued, and (2) the subsequently increasing debt balances on the agency's account current. Demands by NAS for payment of premiums were unheeded by Respondent. On or about March 31, 1993, NAS terminated its agency agreement with CIP for, inter alia, CIP's failure to remit premiums. After several communications and two termination letters, CIP accepted NAS's termination as of April 30, 1993. Thereafter, NAS demanded that CIP provide an accounting which was done. As of April 30, 1993, Respondent owed NAS total premiums of $130,966.03. This sum represented premiums received by CIP and due NAS after retention of the 20 percent commission on approximately 140 policies previously issued but which premiums remained unremitted (by CIP). NAS demanded that CIP remit the premiums that were due. Respondent failed to remit the premium funds as demanded by NAS. In an attempt to recover the premium funds, NAS filed a civil suit in Pinellas County against Respondent. CIP admitted to NAS at the time that it was withholding at least $109,661.91 in premium funds but would not make any payment to NAS in light of a counter-claim that it filed. During the pendency of the civil suit and following settlement negotiations, a settlement was reached between Respondent and NAS. Pursuant to the settlement, Respondent agreed to pay to NAS $130,931.25. This amount constituted the total amount of premiums billed and collected by Respondent for NAS policies or binders of coverage less commissions which represented 20 percent of the premiums billed ($273,579.50) as per an accounting attached to the stipulation less any amount previously paid. In return, NAS agreed to pay Respondent $42,000 in consideration for Respondent withdrawing any counter-claim it may have had against NAS. The upshot of the settlement was that Respondent would pay, and in fact paid, an approximate amount of $88,431, to NAS. During times material, an agency agreement was in effect between Respondent and Atlantic Mutual Insurance Company (herein AMI) whereby Respondent agreed to solicit insurance products on behalf of AMI. That agency agreement provided in relevant part: The agency agrees: To render monthly accounts of money due to the company on business placed by the agent with the company, other than customer-billed business so as to reach the company's office no later than the 15th day of the following month and to pay to the company the balance therein shown to be due to the company not later than the 15th day of the second month following the month for which the account is rendered. To be responsible for any additional premiums developed by audit or by report of values, or any renewal premiums on non- cancelable bonds unless the agent notifies the company within sixty (60) days of company billing date of such additional premiums that such item has not been collected and cannot be collected by the agent. The company agrees: b. On commissions: The agent shall receive or retain commissions on net paid premiums at the rate set forth in the company's commission schedule. It is mutually agreed that: a. This agreement supersedes all previous agreements, whether oral or written, between the company and the agent, and shall continue until terminated by ninety (90) days written notice of cancellation by either party to the other. Pursuant to the agency agreement with AMI, Respondent was due, as commission, seventeen and one-half percent (17-1/2 percent) of net paid premiums. During times material, Respondent was agent of record for AMI. On August 1, 1992, the agency agreement between AMI and CIP was terminated by mutual agreement. After the termination of the agency agreement, AMI became aware of and became increasingly concerned about Respondent's failure to notify it of coverages Respondent had previously solicited and bound and to timely remit premiums due on policies issued by Respondent and the subsequently increasing debit balance on the company's account current. Demands by AMI for payment of premiums due were unheeded by Respondent. As of October, 1992, the amount owed to AMI totalled $92,781.61. This sum represented insurance premiums, after retention of commission, due on insurance policies previously issued by Respondent and for which it had received $120,486 in premiums, and not remitted to AMI. As noted, despite AMI's demand that Respondent remit the premiums, they were not remitted either in whole or in part. However, Respondent admitted to AMI that it had received, as of September 4, 1992, $103,421.33 in premium funds. After termination of the agreement with AMI, Respondent claimed that it was entitled to retain $86,111.86 from premium funds received from the AMI policies, as annualized commissions or as commissions received in advance on premiums that had not been paid by the insured. Prior to the termination, CIP had attempted to gain authorization from AMI to withhold commissions, on an annualized basis. AMI refused to authorize these deductions and was steadfast in keeping consistent with its policy of allowing deduction of commissions when premiums were actually received. AMI does not allow agents to retain annualized commissions or to take advance commissions on policies. Despite Respondent's contention to the contrary, this has always been AMI's policy and that policy was communicated to Respondent in writing when Respondent attempted to initiate the policy of annualizing or deducting commissions in advance. Additionally, the agency agreement clearly provides that commissions were to be retained from paid premiums. Countersignature fees, if required, were paid by the insurance company and were thereafter deducted from the agent's commission. Respondent expended a great deal of money and time in start-up costs on items such as office equipment, supplies, preparation of forms, institution of office policies and procedures, to commence writing insurance business on behalf of AMI. Respondent knew, or should have known, that certain start-up costs were expected in order to commence writing insurance on behalf of AMI. Respondent was not authorized to deduct up-front expenditures or related start-up costs from premiums which were not collected. As of the date of hearing, the funds which represented premiums due AMI remain unaccounted for and were not paid (to AMI) by Respondent. When Respondent collected premiums for companies, those funds were fiduciary funds. Respondent's policy of spending "operating expenses" as a set off or charge against uncollected premiums was not permissible pursuant to the agency agreement in effect between the parties. The Am South Bank account which Respondent utilized to maintain his banking account for AMI had a balance, as of August 30, 1992, of $74,894.58; as of March 31, 1993, of $12,702.05; and as of April 30, 1993, of $8,561.13. The account was closed on December 2, 1993.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law it is RECOMMENDED that: Petitioner enter a final order finding that the Respondent, ROBERT PHILIP WOLF, be found guilty of violations set forth in the Conclusions of Law portion of this Order, and that his licenses and eligibility for licensure be SUSPENDED for a period of eighteen (18) months pursuant to Rule 4-231.080, Florida Administrative Code, and that, pursuant to Section 626.641(1), Florida Statutes, the Respondent be required to pay satisfactory restitution to Atlantic Mutual Insurance Company prior to the reinstatement of any insurance license. DONE and ORDERED this 2nd day of June, 1994, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 2nd day of June, 1994. APPENDIX Rulings on Petitioner's Proposed Findings of Fact: Paragraph 27 - rejected - argument and conclusions. Rulings on Respondent's Proposed Findings of Fact: Paragraph 1 - adopted as relevant, paragraph 5, recommended order. The remainder is rejected as contrary to the greater weight of evidence, paragraph 4, section III entitled commission is dispositive. Paragraphs 2 and 3 - rejected as argument. Paragraph 4 - rejected, irrelevant and subordinate. Paragraph 5 - rejected, contrary to the greater weight of evidence. Paragraph 6 - adopted as modified, paragraph 30 recommended order. Paragraph 7 - rejected, irrelevant. Paragraphs 8-10 - rejected, argument. Paragraph 11 - rejected, irrelevant. COPIES FURNISHED: Commissioner Tom Gallagher Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, Florida 32399-0300 James A. Bossart, Esquire Department of Insurance and Treasurer 612 Larson Building Tallahassee, Florida 32399-0333 Elihu H. Berman, Esquire Post Office Box 6801 Clearwater, Florida 32618-6801
The Issue The issue to be resolved in this proceeding concerns whether the Respondent violated various provisions of the Florida Insurance Code, as alleged in the Amended Administrative Complaint, and if so, what penalty, if any, is warranted.
Findings Of Fact The Petitioner is an agency of the State of Florida charged with regulating and licensing the entry of insurance agents into the profession of insurance and with regulating the practice of agents and other insurance professionals already licensed by the State of Florida. The Respondent, at all times pertinent hereto, was and is licensed by the State of Florida as a non-resident life and health insurance agent. The Respondent procured applications for life insurance to be issued from Pacific to the 30 named individuals and entities set forth in the Amended Administrative Complaint in its 25 counts. Pacific was not authorized to transact insurance business in the State of Florida because the company was not yet licensed. However, it was in the process of becoming licensed and licensure was imminent. The company Regional Director, C. Manley Denton, and other company officials, when they recruited the Respondent to sell insurance policies in Florida, assured him that licensure was imminent, that there was no impediment to finalization of the licensure procedures in the very near future, and that the Respondent could legally obtain life insurance policy applications and sell policies in Florida if he took the applications and dated them in and from his Tulsa, Oklahoma, office. He was assured that this procedure would render his activities legal. In reliance on these representations by officials of Pacific, the Respondent undertook to and did obtain the applications for, and sell the insurance policies, referenced above and in the Amended Administrative Complaint. The Respondent, for many years, has transacted insurance business as a general agent of life and health insurance in Oklahoma and in Florida. He is a resident of both states, spending part of each year in each state. Many of the policyholders referenced above and in the Amended Administrative Complaint were clients of the Respondent, who had already had other insurance policies issued by him through companies he represents. In the particular instances involved in this proceeding, many of these clients had been policyholders of the First Capital Life Insurance Company, which had experienced financial difficulties and gone into receivership. Because of his policyholders' concern and his own concern about the possibility of the future inability to pay claims by the company in receivership, the affected clients and the Respondent were desirous of replacing those policies with policies in a different and sounder insurance company. This desire dovetailed neatly with the desire by the executives at Pacific to obtain a large block of insurance policy business in Florida and in other states in the mainland United States. This desire by Pacific executives was due to a recent merger of that company with the Hawaiian Life Insurance Company, a company which was owned by Meiji Mutual Life of Tokyo Japan (Meiji). The resulting merged company, Pacific, was owned by Meiji. The executives at Pacific, which had historically been headquartered in San Jose, California, desired to continue to maintain the company domicile and their own personal residences in California and avoid having to relocate to Hawaii. This was the reason they desired to secure a large block of insurance business very rapidly in order to enhance the sales record of the "stateside branch" of the company. They believed that this would insure that their relocation would not have to be accomplished. With this interest in the forefront of their plans, the executives of Pacific began to search for the best insurance agents in the nation who have a record of successfully writing large volumes of life insurance policy business. The Respondent is such an insurance agent. He had recently achieved a nationally-recognized ranking as one of the highest volume life insurance producer agents in the country. Because the Respondent was desirous of placing a high-dollar volume of life insurance policies for the clients referenced above, who had had policies in the financially-troubled First Capital Life Insurance Company, the Respondent agreed, at the behest of the officials of Pacific, to attempt to write a large block of life insurance business in the State of Florida. The Respondent is a well-respected general life insurance and health insurance agent. He is widely known throughout the insurance profession and industry, throughout the United States, as an ethical, competent and successful life insurance policy producer. He has no blemish on his licensure and practice record as an agent, throughout the approximate 40 years he has engaged in the profession. When the Respondent obtained the insurance policy applications and policies at issue in this proceeding, he engaged in one course of conduct. That is, he contacted the clients and obtained their applications and arranged for the sale of the insurance policy contracts to them, as either new policies and clients, or as replacement policies for his existing clients, as the case might be. He engaged in this essentially-identical transaction with all 30 of these policyholders, in the genuine, good-faith belief that he was legally writing insurance policy business in the State of Florida based upon the circumstances related to him by officials of Pacific, upon which he relied. He candidly acknowledges, through counsel, that, in so relying, he knew that the company was not actually licensed in the State of Florida, but that that eventuality was imminent in the very near future, and that based upon the method the company assured him of writing the policies through the Tulsa, Oklahoma, office, he would be obtaining and transacting this business in a legally acceptable way. He also candidly acknowledges that, in fact, he understands, from his contact with the Department since that time, this was not the case and that he was writing the business for a company not legally authorized to do business in the State of Florida. The Respondent has freely admitted these above-found facts and does not dispute that he was in violation of the portion of the charges that do not depend on intent. He has established, however, through the exhibits admitted as explanatory hearsay and the agreed-upon proffer of his counsel, that the transactions at issue, all of which were the result of one essentially-identical course of conduct, were accomplished with no intent to defraud the policyholders, the company, or the Florida Department of Insurance. There was no willful, dishonest or deceitful intent by the Respondent during the course of his engagement in these transactions. There was no such willful wrongful intent in the course of his contact and relations with the company, those policyholders, or the Department of Insurance since that time. No policyholder or company suffered any financial detriment as a result of the Respondent's conduct, nor did any insurance coverage lapse at any time. Although there were some 30 policyholders who were sold insurance by the Respondent, as the agent for a company not actually licensed in the State of Florida, that circumstance had no effect on the validity of the policy coverages involved and there were no actual "victims" of the Respondent's conduct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the Petitioner, Department of Insurance, finding the Respondent, Wayne Harland Creasy, guilty of a violation of Section 626.901(1), Florida Statutes, in the manner found and concluded above and that a penalty of $3,000.00 be imposed, together with the award of $500.00 in attorney's fees. DONE AND ENTERED this 1st day of April, 1996, in Tallahassee, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of April, 1996. APPENDIX TO RECOMMENDED ORDER Petitioner's Proposed Findings of Fact 1-32. Accepted. Rejected, as constituting a conclusion of law and not a finding of fact. Accepted, in part, but subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted, in a technical sense, but not in the sense that any overt, intentional effort to circumvent Florida law was committed by the Respondent. Rather, it was a negligent failure to act in a legal way due to being misled by Pacific Guardian Life Insurance Company, Ltd. or its officers or employees. Accepted, as to the factual allegations of the Administrative Complaint, but not as to their legal import, and subordinate to the Hearing Officer's findings of fact on this subject matter. Respondent's Proposed Findings of Fact The Respondent's proposed findings of fact are not ruled upon or considered because they were not timely filed, being approximately one month out of time with no motion for extension of time, during the originally-set time period, being filed. Consequently, the Petitioner's motion to strike the Respondent's proposed findings of fact and conclusions of law is granted. COPIES FURNISHED: Willis F. Melvin, Jr., Esquire Department of Insurance and Treasurer Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0333 C. Rabon Martin, Esquire Martin and Associates 403 South Cheyenne Avenue Tulsa, Oklahoma 74103 Bill Nelson, State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner, Acting General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, Florida 32399-0300
