The Issue Whether Respondents directly or indirectly represented or aided an unauthorized insurer, an insurance or annuity product; whether Respondents knew or reasonably should have known that the annuity contracts with the unauthorized insurer violated Section 626.901, Florida Statutes; whether Respondents knowingly placed before the public a statement, assertion, or representation with respect to the business of insurance that was untrue, deceptive, or misleading; whether Respondents knowingly caused to be made, published, disseminated, circulated, delivered, or placed before the public any false material statement; whether Respondents demonstrated a lack of fitness and trustworthiness to engage in the business of insurance; whether Respondents engaged in unfair or deceptive practices or otherwise showed themselves to be a source of injury or loss to the public; and whether Respondents otherwise acted in violation of the Florida Insurance Code provisions as specifically detailed in Petitioner’s Amended Administrative Complaint, and, if so, what penalty, if any, should be imposed on Richard P. Eberhardt’s insurance agent license and/or Nancy Eberhardt’s license.
Findings Of Fact General facts applicable to both Respondents Respondent, Richard Eberhardt (RE), is currently licensed in the State of Florida as a Life Including Variable Annuity & Health Life, Life & Health, and Health insurance agent. RE was initially licensed by Petitioner as a non- resident insurance agent on May 6, 2004. Previously, RE was a licensed insurance agent in Nebraska, Indiana, and Arizona. Respondent, Nancy Eberhardt (NE), is currently licensed in the State of Florida as a Life Including Variable Annuity, Life Including Variable Annuity & Health, Life, Life & Health, and Health insurance agent. NE was initially licensed by Petitioner as a non-resident insurance agent on January 2, 2003, and then as a resident agent on October 5, 2004. Previously, NE was a licensed insurance agent in Arizona. Petitioner has historically mailed, and subsequently made available on line, the Intercom, an insurance agent newsletter. The heading to the newsletter, reads in part: “Publication for Agents and Adjusters from the State of Florida Department of Financial Services.” These newsletters contained warnings regarding unauthorized sales of insurance products, and explanations as how an agent could verify whether or not an insurer was authorized to do business in Florida. Petitioner’s records evidence that the newsletters were distributed to insurance agents from the July – October 1996 through December 2006 editions. Respondents became licensed Florida agents in January 2003, and it is a reasonable assumption that they received or had computer access to those publications. Both Respondents are listed in Petitioner’s records as being the owners of LLQ Consulting, LLC. Respondent NE is listed as being the insurance agent-in-charge of LLQ Consulting, LLC. Pursuant to records on file with the Florida Secretary of State, LLQ Consulting, LLC, is an Arizona-limited liability company that is authorized to do business in Florida. Respondent RE was originally listed as manager; however, since April 22, 2005, Respondent NE has been listed as the manager. At all times pertinent to the dates and occurrences referred to herein, Respondents were licensed in Florida as insurance agents. Petitioner has jurisdiction over Respondents’ insurance agent licenses and appointments, pursuant to statute. National Foundation of America (NFOA) The NFOA is a registered Tennessee corporation that was formed on January 27, 2006, and headquartered in Franklin, Tennessee. Respondents assert that the difference between a charitable gift annuity and a charitable installment bargain sale is that a charitable gift annuity is under Internal Revenue Code (IRC) Section 501(m) and the payout to the investor is based on a mortality table of the donor’s expected life. Therefore, it is a tax free exchange of an asset by a donor at less than the asset’s fair market value to a charitable organization in exchange for an annuity issued by the charitable organization. On the other hand, Respondents argue that an installment bargain sale is under Section 453 of the IRC and 26 C.R.F. Sections 1.1011-2 of the IRC regulations. It is an exchange of an asset owned by the donor at less than fair market value to a charitable organization in exchange for an annuity. The IRS allows the donor to deduct the difference between the fair market value of the asset and the amount that the charitable organization pays for the asset. The payout of the annuity is for a specific term and not tied to a mortality table. Therefore, NCF did not consider the Charitable Installment Purchase to be an insurance transaction or the sale of an insurance product under state insurance laws. Nevertheless, an NFOA Corporate Resolution, dated April 16, 2006, provides for the corporate authority to “liquidate stocks, bonds, and annuities . . . in connection with charitable contributions or transactions. . . .” This same resolution also provides for the corporate ability to “enter into and execute planned giving or charitable contribution transactions with donors, including executing any and all documentation related to the acceptance or acquisition of a donation, . . . given in exchange for a charitable gift annuity. “ On September 18, 2006, the State of Washington Office of Insurance Commissioner issued an Order to Cease and Desist in the matter of National Foundation of America, Richard K. Olive, and Susan L. Olive, Order No. D06-245. The Order, among other things, was based on NFOA’s having not been granted a Certificate of Authority (COA) as an insurer in Washington and having not been granted tax exempt status under Section 501(c)(3) of the IRC. On April 13, 2007, the OIR issued an Immediate Final Order (IFO) in the matter of National Foundation of America, Richard K. Olive, Susan L. Olive, Breanna McIntyre, and Robert G. DeWald, Case No. 89911-07, finding that the activities of NFOA, et al., constituted an immediate danger to the public health, safety or welfare of Florida consumers. OIR further found that, in concert, NFOA, et al., were “soliciting, misleading, coercing and enticing elderly Florida consumers to transfer and convey legitimate income tax deferred annuities for the benefit of themselves and their heirs to NFOA in exchange for charitable term certain annuities”; and that NFOA, et al., had violated provisions of the FIC, including Sections 624.401 and 626.901, Florida Statutes. NFOA has never held a license or COA to transact insurance or annuity contracts in Florida, nor has NFOA ever been registered pursuant to Section 627.481, Florida Statutes, for purposes of donor annuity agreements. NFOA was never a registered corporation with the Florida Department of State, Division of Corporations. New Life Corporation of America (“NLCA”) d/b/a National Community Foundation (“NCF”) has been registered with OIR as a Section 627.481, Florida Statutes, donor annuity organization, since October 1997. NCLA subsequently changed its name to New Life International (“NLI”), which continued to use the d/b/a/ NCF. NLI is presently registered as a donor annuity organization with OIR. NFOA appealed OIR’s IFO to the First District Court of Appeal of Florida (1st DCA). The 1st DCA dismissed NFOA’s appeal on July 24, 2007. Therefore, NFOA operated as an unauthorized insurer in Florida. On May 17, 2007, the Internal Revenue Service (IRS) sent a letter to the Texas Department of Insurance stating that NFOA was not classified as an organization exempt from federal income tax as an organization described in Section 501(c)(3) of the IRC. On May 23, 2007, the Tennessee Department of Commerce and Insurance (DCI) filed a Verified Petition for Appointment of Receiver for Purposes of Liquidation of National Foundation of America; Immediate and Permanent Injunctive Relief; Request for Expedited Hearing, in the matter of Newman v. National Foundation of America, Richard K. Olive, Susan L. Olive, Breanna MyIntyre, Kenny M. Marks, and Hunter Daniel, Chancery Court of the State of Tennessee (“Chancery Court”), 20th Judicial District, Davidson County, Case No.: 07-1163-IV. The Verified Petition states at paragraph 30: NFOA’s contracts reflect an express written term that it is recognized by the IRS as a charitable non-profit organization under Section 501(c)(3) of the Internal Revenue Code (Prosser, attachment 4), and NFOA represents in multiple statements and materials that the contract will entitle the customers to potential generous tax deductions related to that status. The IRS states that it has granted NFOA no such designation. The deceptive underpinning related to NFOA’s supposed tax favored treatment of its contracts permeates it entire business model and sales pitch. This misrepresentation has materially and irreparably harmed and has the potential to harm financially all its customers and the intended beneficiaries of the contracts. These harms are as varied in nature and degree as the circumstances of all those individuals’ tax conditions, the assets turned in to NFOA, and the extent to which they have entrusted their money and keyed their tax status and consequences to reliance on such an organization. On August 2, 2007, the Commissioner for the Tennessee DCI, having determined that NFOA was insolvent with a financial deficiency of at least $4,300,000.00, filed a Verified Petition to Convert Rehabilitation by Entry of a Final Order of Liquidation, Finding of Insolvency, and Injunction, in the matter of Newman v. National Foundation of America, et al. On September 11, 2007, pursuant to a Final Order of Liquidation and Injunction entered in the matter of Newman v. National Foundation of America, et al., the Chancery Court placed NFOA into receivership after finding that the continued rehabilitation of NFOA would be hazardous, financially and otherwise, and would present increased risk of loss to the company’s creditors, policy holders, and the general public. On February 6, 2008, the IRS sent a letter to the court appointed Tennessee DCI Receiver (“Receiver”) for NFOA stating that NFOA does not qualify for exemption from federal income tax as an organization described in Section 501(c)(3) of the IRC. The IRS, in determining that NFOA did not qualify for tax exempt status, stated that the sale of NFOA annuity plans has a “distinctive commercial hue” and concluded that NFOA was primarily involved in the sale of annuity plans that “constitute a trade or business without a charitable program commensurate in scope with the business of selling these plans.” The IRS letter also provides that consumers may not take deductions on their income tax returns for contributions to NFOA. Insurance Agent’s Duties An insurance agent has a fiduciary duty to his or her clients to ensure that an insurer is authorized or otherwise approved by OIR as an insurer in Florida prior to the insurance agent selling the insurer’s product to his client. There are several methods by which an insurance agent could verify whether or not an insurer was authorized or otherwise approved (hereinafter “authorized”) as an insurer in Florida by OIR. It is insufficient for an insurance agent to depend on the assurances of the insurer itself or his or her insurance business peers as to whether an insurer needs to be authorized in Florida. Respondents asserted that, prior to selling NFOA annuities in 2006, they had performed due diligence in order to determine whether or not NFOA was authorized in Florida. Respondents testified that at the time they performed their due diligence, they viewed a State of Florida website that seemingly indicated that OIR does not regulate donor annuities. Respondents’ testimony lacks credibility as to the timing of Respondents’ claimed due diligence. The websites that seemingly indicate that OIR does not regulate donor annuities did not come into existence until September 12, 2008, for OIR and January 16, 2009, for Petitioner, which would have been several years after any due diligence that Respondents claim that they performed. As further noted below, the sale of the NFOA annuities to Mr. Bisch and Ms. Clark occurred in 2006, well in advance of the September 2008 and January 2009 creation of any websites that might seemingly indicate a lack of OIR regulation of donor annuity organizations. While the OIR 2008 and DFS 2009 websites may be somewhat confusing, at all times relevant to these matters, donor annuity organizations have been and continue to be regulated by OIR pursuant to Section 627.481, Florida Statutes, and Florida Administrative Code Rules 69O-202.001 and 69O-202.015. Due to the importance of income tax considerations in a consumer’s decision making process as to whether or not to purchase an insurance product, insurance agents have a fiduciary duty to their clients to verify the validity of any representations that an insurer’s product has an IRC Section 501(c)(3) tax exempt status, prior to the insurance agent’s selling the product to his or her clients. There are several methods by which insurance agents could verify whether or not an insurer has an IRS 501(c)(3) tax exempt status. Respondents admitted, in their testimony, that they had depended on the assurances of others and assumed that NFOA did not need to be authorized as an insurer in Florida. Respondents also admitted in their testimony that, but for the different names, the NFOA paperwork was the same as that of NCF. Respondent’s testimony is contradictory and lacks credibility in that NCF was qualified and registered with OIR as a donor annuity organization and NFOA was not. Nevertheless, Respondents claim NFOA was not and did not need to be regulated by OIR. Respondents testified that they had verified with the IRS that NFOA had applied for Section 501(c)(3) tax exempt status. However, Respondents were aware that the tax exempt status had not been granted to NFOA at any time relevant to this proceeding. Respondents knew income tax considerations were materially important to their clients. However, none of the NFOA materials nor any Florida consumer contracts signed or provided by Respondents to their clients contain any disclaimer language informing consumers that the Section 501(c)(3) tax exempt status had been applied for but had yet to be granted by the IRS. Respondents received commissions totaling $22,062.80 for selling NFOA annuities to Florida consumers. Respondents have failed to return any of these commissions to the Receiver for NFOA in the state of Tennessee. Count I: Consumer – Jacob Bisch On February 20, 2006, Respondents solicited and induced Jacob Bisch of Cape Coral, Florida, then aged 75, to transfer or otherwise surrender ownership of his existing annuity contract with Allianz Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into was signed by Respondent RE. Bisch credibly testified as to both Respondents’ involvement in the sale of the NFOA annuity. NE wrote a letter asking that the commission for this sale be issued in her name. The commission check was ultimately paid to LLQ Consulting, LLC, a company owned by both Respondents and which NE was registered as the insurance agent- in-charge. Respondents knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondents, by use of the NFOA donor annuity agreement, knowingly misrepresented to Bisch that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondents knew or should have known that NFOA did not hold tax exempt status with the IRS. Bisch’s testimony was credible that tax considerations were the prime consideration in the purchase of the NFOA annuity from Respondents. Based upon Respondents’ transaction of insurance, Bisch presently anticipates losing approximately $26,320.04. This amount includes a surrender penalty of $16,823.04 incurred for transferring his original Allianz annuity to NFOA, and after receiving partial refunds from the NFOA Receiver. Based upon Respondents’ transaction of insurance with Bisch, Respondents were paid a commission of $4,062.80 by NFOA. Count II: Consumer – Fay Ann Clark Culminating on May 8, 2006, Respondents solicitated and induced Fay Ann Clark of Ft. Myers, Florida, then aged 70, to write a check for $200,000.00 in return for an NFOA annuity. The NFOA agreement that Clark entered into, and which was signed by Respondent RE, was entered into less than three weeks after Clark requested rescission of two NCF annuities that Respondents had previously sold Clark. Proceeds from the rescission of the NCF annuities enabled Clark to purchase the NFOA annuity. Prior to the rescission of the NCF annuities, on or about October 21, 2005, Clark had surrendered two Allianz Life Insurance Company annuities. Proceeds from the surrender of the Allianz annuities were used to purchase the NCF annuities. Respondent NE signed the NCF annuities agreement and was the advisor. Respondent NE, by use of a check drawn on Respondents’ joint checking account, refunded Respondents’ commission for the NCF sales to Clark. Sales documentation and correspondence clearly and convincingly evidence both Respondents’ involvement in Clark’s Allianz to NCF and NCF to NFOA transactions. Respondents knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondents, by use of the NFOA donor annuity agreement, knowingly misrepresented to Clark that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondents knew NFOA was not tax exempt. Based upon Respondents’ transaction of insurance, Clark paid $200,000.00 for an NFOA annuity, paid $7,971.00 in penalties to the IRS (U.S. Treasury), and presently anticipates losing approximately $42,000.00. Clark has received a partial refund from the NFOA Receiver. Based upon Respondents’ transaction of insurance with Clark, Respondents were paid a commission of $18,000.00 by NFOA. Petitioner has proven by clear and convincing evidence that Respondents directly or indirectly represented or aided an unauthorized insurer to do business in Florida. Petitioner has proven by clear and convincing evidence that Respondents knew or reasonably should have known that the annuity contracts they contracted with clients were with an unauthorized insurer. Petitioner has proven by clear and convincing evidence that Respondents knowingly placed before the public a statement, assertion, or representation with respect to the business or insurance that was untrue, deceptive or misleading. Petitioner has proven by clear and convincing evidence that Respondents knowingly caused to be made, published, disseminated, circulated, delivered, or placed before the public a false material statement. Petitioner has proven by clear and convincing evidence that Respondents demonstrated a lack of fitness and trustworthiness to engage in the business of insurance. Petitioner has proven by clear and convincing evidence that Respondents engaged in unfair and deceptive practices or showed themselves to be a source of injury to the public. Neither Respondent has had prior disciplinary charges filed against them in Florida.
Recommendation Based upon the foregoing Finds of Facts and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services: Finding that Respondents violated Subsections 626.901(1), 626.901(2), 626.9541(1)(b)4., 626.9541(1)(e)1.e., 626.611(7), 626.621(2), and 626.621(6), Florida Statutes, as charged in Counts I and II of Petitioner’s Amended Administrative Complaints; Revoking Respondent Richard Eberhardt’s, licenses and appointments issued or granted under or pursuant to the Florida Insurance Code; Revoking Respondent Nancy Eberhardt’s, licenses and appointments issued or granted under or pursuant to the Florida Insurance Code; 4. Providing that if either of the Respondents, subsequent to revocation, makes an application to Petitioner for any licensure, a new license will not be granted if the applicant Respondent fails to prove that he or she has otherwise satisfied the financial losses of his or her NFOA clients or if the applicant Respondent otherwise fails to establish that he or she is eligible for licensure. DONE AND ENTERED this 27th day of April, 2010, 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 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of April, 2010.
Findings Of Fact Respondent, Roma Roberts Caffey, is currently licensed and eligible for licensure and appointment in this state as an insurance agent. She has been so licensed since 1988. On December 2, 1988, Respondent was employed as a debit agent for American General Life and Accident Insurance Company and Gulf Life Insurance Company. Pursuant to her employment, Respondent entered into a field representative employment agreement with American General Life and Accident Insurance Company/Gulf Life Insurance Company. The agreement required Respondent "to hold all monies collected or received on behalf of the company in a fiduciary capacity, and to pay over all said monies to the company at the times designated by its authorized officers and employees, or immediately upon request." Part of Respondent's responsibilities as a debit agent was to collect premium monies from insureds on a periodic basis. At the time she collected a premium from an insured, Respondent would indicate the payment in that insured's premium/receipt book. The premium receipt book is kept by the insured. Respondent was assigned to service the Perry district and proceeded to collect premiums from insureds in that district. During her tenure as a debit agent, Respondent would use one insured's premium to pay for another insured's insurance. Respondent utilized these funds without the knowledge or consent of the insured who had paid his or her premium for his or her policy. Respondent admitted her handling of the premiums she collected, but felt compelled to use those funds in such a manner in order to keep her lapse ratio down. The lapse ratio was important to the company. Additionally, Respondent did not keep any records of the premiums she used on another insured's account. This conduct demonstrated that Respondent did not understand the very fundamentals of her relationship and duty to the insured and her employer and was generally not fit to engage in the business of insurance for which she was licensed and lacked a reasonable level of knowledge and skill about the area of insurance for which she was licensed. Respondent's conduct also demonstrated she misappropriated several insureds' money and otherwise acted dishonestly in the debit insurance business. All of the above are very serious violations of Chapter 626, Florida Statutes. On May 7, 1990, Respondent's employment with American General Life and Accident Insurance Company/Gulf Life Insurance Company was terminated. After Respondent's termination, an audit of Respondent's debit accounts was conducted by American General Life and Accident Insurance Company/Gulf Life Insurance Company. The audit of Respondent's debit accounts consisted of a review of records submitted to the company by the agent and a comparison of those records with premium receipt books which were maintained by the individual policyholders. The audit of Respondent's activities confirmed that Respondent had improperly used premiums paid to her by numerous insureds and that she had failed to hold those monies in a fiduciary capacity and forward those premium monies to American General Life and Accident Insurance Company/Gulf Life Insurance Company as required. At that time the amount of money which Respondent was short was approximately $2,421.22. The shortage has since been reduced to $1,137.71 by application of Respondent's cash bond and final paychecks. Again, Respondent's failure to account for these premiums constituted very serious violations of Chapter 626, Florida Statutes. The amount due the company was not reimbursed by Respondent and on April 24, 1991, was reduced to a final judgment against Respondent in the County Court in and for Taylor County. As of the date of the hearing, Respondent had not paid the judgment primarily because she does not have the money.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that the Department enter a Final Order finding that Respondent's licenses and eligibility for licensure and appointment be revoked. DONE AND ENTERED this 20th day of September, 1991, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of September, 1991. APPENDIX TO RECOMMENDED ORDER The facts contained in paragraphs 1, 3, 4, 5, 6, 7 and 8 of Petitioner's Proposed Findings of Fact are adopted . The facts contained in paragraphs 2, 9 and 10 of Petitioner's Proposed Finding of Fact are subordinate. COPIES FURNISHED: David D. Hershel, Esquire Department of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Roma Roberts Caffey Route 3, Box 59 Perry, Florida 32347 Tom Gallagher State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil, Esquire General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, Florida 32399-0300
Findings Of Fact At all times material to this action, the Petitioner, Randall Petersen, was a duly-authorized life and health insurance agent. The Petitioner was employed by Gulf Life Insurance Company. Petitioner was one of Gulf Life's most productive agents during the time of his employment with the company. Petitioner resigned form his employment in 1989. Count I of the Administrative Complaint charged Petitioner with violating Section 626.561(1), Florida Statutes, by failing to properly handle money given him by Helen Hinson and her husband; violating Section 626.611(5), Florida Statutes, by willfully misrepresenting an insurance policy or annuity to the Hinsons; violating Section 626.611(7), Florida Statutes, by demonstrating a lack of fitness or trustworthiness to engage in the business of insurance; violating Section 626.611(8), Florida Statutes, by demonstrating a lack of reasonably adequate knowledge and technical competence to engage in the transaction he concluded with the Hinsons; violating Section 626.611(9), Florida Statutes, by committing fraud or dealing dishonestly regarding the Hinsons; violating Section 626.611(10), Florida Statutes, by misappropriating, converting or unlawfully withholding the Hinsons' monies; violating Section 626.611(13), Florida Statutes, by willfully violating a rule or order of the Department; violating Section 626.621(2), Florida Statutes, by violating any statutory provision related to the business of insurance; and violating Section 626.621(5), Florida Statutes, by committing an act of twisting, as defined in Section 626.9541(1)(6), Florida Statutes, in regards to Petitioner's dealings with the Hinsons. All of these alleged violations arose from one transaction involving Helen Hinson and her husband. Prior to 1986, Mr. and Mrs. Hinson had insurance coverage with Gulf Life. The Hinson's had purchased their earlier insurance coverage prior to Petitioner's employment with Gulf Life. Petitioner took over the Hinsons' account after he joined Gulf Life. The Hinsons also had an IRA with New England Life Insurance. In an effort to consolidate their insurance needs with one company, the Hinsons closed their IRA with New England Life. The Hinsons received two (2) checks from New England Life Insurance for their IRA. They wanted to do something with the money which would be beneficial to them, estate, investment and tax-wise. Their idea was to create something similar to an IRA. Mr. Petersen arranged a visit and consultation with Tom Saita, the Gulf Life Home Office Representative and the company's expert in the area of investment insurance planning. This area of insurance planning can be a very complicated area for lay persons and general agents, like Petitioner, not familiar with tax and planning strategies. A specialist like Mr. Saita is often required. Mr. Saita was to assist Mr. Petersen in going over the Hinson's insurance needs. Various insurance plans were discussed and Mr. Saita recommended a Universal Life Policy for the Hinsons. Mr. Saita made the sales presentation, along with Mr. Petersen and received a 16% sales commission. Mr. Saita testified that he was very comfortable with the Hinsons' understanding of the sales presentation. The Hinsons decided to go ahead with Mr. Saita's recommendations. An Application for Universal Life was taken and a required medical examination was obtained. The policies were issued and the premiums paid. Part of the premiums were paid with the two IRA checks from New England Life. Approximately two (2) years later, Mr. Petersen was contacted by Mrs. Hinson regarding information on their IRA. Mr. Petersen advised Mrs. Hinson that she did not have an IRA, but rather, had Universal Life Insurance. Mrs. Hinson testified that she thought they had purchased an IRA. She also knew that they had Universal Life. She thought the transaction they had completed two years earlier was a roll-over of their IRA into another IRA. Mrs. Hinson acknowledged that she either did not understand the sales presentation, or the agents (Petersen and Saita) did not understand what they wanted. The evidence established that the Hinsons' transaction and subsequent dissatisfaction was the result of miscommunication and misunderstandings between the Petitioner, Saita and the Hinsons. The transaction did not involve any misrepresentations on Petitioner's part. Neither did the Petitioner willfully try to cheat the Hinsons or mishandle their money. Both Mr. Petersen and Mr. Saita tried to resolve the problems the Hinsons were having. Eventually, Gulf Life refunded all of the cash value that was paid into the Universal Life Policy. Based on the foregoing, the Department has failed to sustain its burden of proof with regard to the allegations of Count I of the Administrative Complaint. Petitioner properly called in an expert in the area of investment insurance planning. The expert primarily handled the details of the Hinsons' insurance plan. As indicated earlier, the evidence demonstrated that the parties simply had a misunderstanding. Such a misunderstanding falls short of establishing any of the charges alleged in Count I of the Administrative Complaint. Therefore, Count I of the Administrative Complaint should be dismissed. Count II of the Administrative Complaint charged Petitioner with violating Section 626.561(1), Florida Statutes, by failing to properly handle money given him by Halen and Mary Stroud; violating Section 626.611(5), Florida Statutes, by willfully misrepresenting an insurance policy to the Strouds; violating Section 626.611(7), Florida Statutes, by demonstrating a lack of fitness or trustworthiness to engage in the business of insurance; violating Section 626.611(8), Florida Statutes, by demonstrating a lack of reasonably adequate knowledge and technical competence to engage in the transaction he concluded with the Strouds; violating Section 626.611(9), Florida Statutes, by committing fraud or dealing dishonestly regarding the Strouds; violating Section 626.611(10), Florida Statutes, by misappropriating, converting or unlawfully withholding the Strouds' monies; violating Section 626.611(13), Florida Statutes, by willfully violating a rule or order of the Department; violating Section 626.621(2), Florida Statutes, by violating any statutory provision related to the business of insurance; and violating Section 626.621(5), Florida Statutes, by committing an act of twisting, as defined in Section 626.9541(1)(6), Florida Statutes, in regards to Petitioner's dealings with the Strouds. All of these alleged violations arose from one transaction involving Halen Stroud and Mary Stroud. Halen Stroud is the father of Mary Stroud. Both Halen and Mary Stroud are sight-impaired individuals. Halen Stroud is an elderly gentleman. Mary Stroud appeared to be easily confused. Halen and Mary Stroud had existing insurance with Gulf Life. Mr. Petersen collected premiums from them on a monthly basis. An agent from Independent Life told Mr. Stroud that "he had money available in his Gulf Life policies and that he could put that money into Independent Life policies". Although it is uncertain what terminology this Independent Life agent used, it appears he was referring to the cash value of the Gulf Life life insurance policies the Strouds already had. Sometime around 1986 or 1987 and after being prompted by his earlier conversation with the Independent Life agent, Mr. Stroud contacted Petitioner regarding consolidation of his existing insurance, as well as purchasing additional insurance. Mr. Petersen explained that the Strouds could take out loans on the existing cash value of their Gulf Life policies and then purchase additional insurance with the loan proceeds. When the new policies were issued, the old ones could then be cancelled. Both the Strouds dispute that Mr. Petersen explained that the transaction involved a "lien" against the Strouds' policies. Neither Stroud indicated in their testimony whether "loans" of the cash surrender values had been discussed. The better evidence indicates that such loans were discussed since Mr. Stroud and his daughter signed a policy and loan application. When Mr. Stroud received notice of the loans and liens from Gulf Life, he did not know if he wanted to follow through on the transaction and wanted to think about it further. Mr. Petersen and his sales manager, Edward Agerton, met with the Strouds to re-explain the transaction. Mr. Stroud told Mr. Agerton that he did not sign any loan forms or buy any additional insurance. However, the signatures on the policy and loan applications were the Strouds' signatures. Mr. Stroud wanted to think about the transaction some more because he wasn't sure he wanted the policy. His concern centered on the new policies' expense and the lien. Approximately two (2) months later, Mr. Petersen delivered the policies to Mr. Stroud so that he could examine them. Mr. Stroud called Mr. Petersen and said he had decided he did not want the new coverage. Eventually, the entire transaction was rescinded by Gulf Life and the Strouds returned to the status quo. The evidence is unclear on exactly what Mr. Petersen explained to the Strouds about the consolidation of their insurance and the increase in the amount of their insurance. In this case, it does not appear that there was any misrepresentation by Mr. Petersen, but that either the Strouds did not understand the transaction or that a portion of the transaction was not explained to them by Mr. Petersen. The evidence supports the fact that Mr. Stroud and his daughter signed both the policy applications and policy loan forms and that this transaction was the standard method by which an insured can use the cash value in old policies to purchase more insurance. It appears from the evidence that Mr. Stroud had second thoughts and changed his mind regarding the transaction. None of these actions constitute a violation of Chapter 626, Florida Statutes, or constitute clear and convincing evidence of any of the alleged violations contained in the Administrative Complaint. Therefore, Count II of the Administrative Complaint should be dismissed. Count IV of the Administrative Complaint charged Petitioner with violating Section 626.561(1), Florida Statutes, by failing to properly handle money given him by Reba Hammontree or on behalf of Reba Hammontree; violating Section 626.611(5), Florida Statutes, by willfully misrepresenting a replacement health insurance policy that was purchased by Reba Hammontree; violating Section 626.611(7), Florida Statutes, by demonstrating a lack of fitness or trustworthiness to engage in the business of insurance; violating Section 626.611(8), Florida Statutes, by demonstrating a lack of reasonably adequate knowledge and technical competence to engage in the transaction involving Reba Hammontree; violating Section 626.611(9), Florida Statutes, by committing fraud or dealing dishonestly regarding Reba Hammontree; violating Section 626.611(10), Florida Statutes, by misappropriating, converting or unlawfully withholding the money given him either by Reba Hammontree or on behalf of Reba Hammontree; violating Section 626.611(13), Florida Statutes, by willfully violating a rule or order of the Department; violating Section 626.621(2), Florida Statutes, by violating any statutory provision related to the business of insurance; and violating Section 626.621(5), Florida Statutes, by committing an act of twisting, as defined in Section 626.9541(1)(6), Florida Statutes, in regards to Petitioner's dealings with Reba Hammontree. All of these alleged violations arose from one transaction involving Reba Hammontree and her father. In 1986, Reba Hammontree and her father, Steven Flores, maintained two policies of health insurance with Gulf Life. Mr. Flores paid the premiums for Reba Hammontree. Mr. Petersen collected these premiums from Mr. Flores on a monthly basis. At some point in time, the existing major medical coverage on Ms. Hammontree lapsed from non-payment of the premiums. This lapse was not shown to be due to any actions on Petitioner's part. Later, Mr. Petersen was advised by Mr. Flores that his daughter wanted to talk to him about purchasing health insurance coverage. Mr. Petersen left the policy with Mr. Flores so that Ms. Hammontree could examine it. He also left an application for such insurance. Mr. Petersen later picked up the application. The application had been completed and was signed with the name "Reba Hammontree". The signature turned out not to be the signature of Reba Hammontree. In fact, the appearance of the signature on the application was not even close to the appearance of Reba Hammontree's signature. However, the signature on the application was not shown to be the handwriting of the Petitioner, and it remains a mystery as to whose hand signed the name "Reba Hammontree". It did not appear from the evidence that either Mr. Petersen or Gulf Life had any way of knowing that the signature on the application was not Ms. Hammontree's signature. Based on the signed application, the policies were issued by Gulf Life. Premiums were paid for over one (1) year on the replacement policy by Ms. Hammontree's father. After that year, Ms. Hammontree's business was transferred out of Mr. Petersen's account. In submitting the application to Gulf Life, Respondent signed the application in the space titled "Witness (Agent)." Petitioner also signed a portion of the application titled "Agent's Report." The Agent's Report included the following boilerplate representation: I do warrant that I have personally seen the Proposed Insured on the date this application was signed and that I have properly asked the questions, recorded the answers, witnessed the signature, and where required by state law, delivered an outline of coverage. ... Clearly, Petitioner did not see Ms. Hammontree on the date the application was signed or witness the signing of the application. At best, the Department established that Petitioner did not follow the underwriting procedures of Gulf Life by allowing a customer to sign an application outside his presence. The evidence did not show that permitting a customer to sign an application in such a manner is indicative of a lack of knowledge, skill, or trustworthiness on the part of an agent. Likewise, given the fact that the application was left with Ms. Hammontree's father and that it was completed prior to Mr. Petersen's return to pick up the application from the policy payor, Ms. Hammontree's father, the evidence did not show that the Petitioner's failure to witness Ms. Hammontree's signature would have been material to Gulf Life in issuing the policy. Therefore it cannot be said that the Petitioner's misrepresentation in signing such boilerplate language that such events occurred was a misrepresentation of a material fact. Moreover, the fact that the referenced statement in the Agent's Report is boilerplate language, it may be inferred that the specifics of such language are quickly forgotten and Petitioner did not sign the Agent's Report intending to make the representations contained in it. Petitioner's actions only demonstrate a concern for the convenience of his customers. Given these facts and absent clear statutory authority, such violation of a private company's underwriting policies does not constitute a violation of any of the provisions of Chapter 626, Florida Statutes. Ms. Hammontree claims that Mr. Petersen took out policies on her without her authority. She denied signing the policy application. She also denied authorizing anyone else to sign her name to the application. She disavows any knowledge of the new coverage. Although Ms. Hammontree denies any knowledge of the replacement insurance coverage, the facts demonstrate otherwise. She denied holding any conversation with Mr. Petersen prior to 1987. However, she wrote a letter, dated March 3, 1989, to the Insurance Commissioner and referenced a meeting with Mr. Petersen in 1986. The referenced 1986 meeting regarded updating her insurance. In the letter, she referenced the new coverage. She also filed a claim on the new coverage and received a check from Gulf Life. Based upon the foregoing, the Department has failed to present clear and convincing evidence that Petitioner violated any provisions of Chapter 626, Florida Statutes. Therefore, Count IV of the Administrative Complaint should be dismissed. Count V of the Administrative Complaint charged Petitioner with violating Section 626.561(1), Florida Statutes, by failing to properly handle money given him by Gary Ard; violating Section 626.611(5), Florida Statutes, by willfully misrepresenting an insurance policy to Mr. Ard; violating Section 626.611(7), Florida Statutes, by demonstrating a lack of fitness or trustworthiness to engage in the business of insurance; violating Section 626.611(8), Florida Statutes, by demonstrating a lack of reasonably adequate knowledge and technical competence to engage in the transaction he concluded with Mr. Ard; violating Section 626.611(9), Florida Statutes, by committing fraud or dealing dishonestly regarding Mr. Ard; violating Section 626.611(10), Florida Statutes, by misappropriating, converting or unlawfully withholding Mr. Ard's money; violating Section 626.611(13), Florida Statutes, by willfully violating a rule or order of the Department; violating Section 626.621(2), Florida Statutes, by violating any statutory provision related to the business of insurance; and violating Section 626.621(5), Florida Statutes, by committing an act of twisting, as defined in Section 626.9541(1)(6), Florida Statutes, with regard to Petitioner's dealings with Mr. Ard. All of these alleged violations arose from one transaction involving Mr. Ard. Mr. Ard is a self-made businessman. He owns and operates his own paint and body shop business. The evidence showed that Mr. Ard does not read well and does not handle the details regarding his insurance coverage. Such details were left to Mr. Ard's wife, now x-wife. Mr. Ard is very talkative and does not listen very well. It can be inferred that Mr. Petersen had some difficulty in communicating with Mr. Ard. Mr. Petersen was the Gulf Life Insurance agent for Mr. Ard. Mr. Ard had existing insurance coverage with Gulf Life. Mr. Ard requested Mr. Petersen to review his existing life policy regarding an increase in coverage. Mr. Ard needed additional life insurance to use as collateral for a bank loan on his paint and body shop business and to replace a Provident Life insurance policy. A medical examination was arranged for Mr. Ard, and it was determined that he had high blood pressure. The policy was issued with a rated premium. A policy amendment was issued for $200,000.00. Mr. Petersen delivered the amendment to Mr. Ard's wife. He returned approximately four (4) days later and picked up the signed amendment. The signature on the amendment said "Gary Ard". However, the signature was not Mr. Ard's. The signature's appearance was very close to the appearance of Mr. Ard's true signature. Again, as with Ms. Hammontree, the fake signature was not shown to be Petitioner's handwriting. To say the least, Mr. Ard's testimony was very confusing and difficult to follow. He identified the $50,000.00 policy. He testified that the signature on the application looked like his, but he did not know for sure. He denied the signature on the policy amendment. He further stated that he was not familiar with the $200,000.00 additional coverage and did not authorize anyone to sign his name to the amendment. He then states that he signed the policy application, without the amendment, but goes on to say that he could not remember signing the application. Mr. Ard's confusion very likely is due to the fact that he left the details of such transactions to his wife, who is now Mr. Ard's ex-wife. Moreover, Mr. Ard's testimony, when compared to other evidence submitted to the Department in its investigation, substantially conflicts in material respects. Given Mr. Ard's nature and his very confusing and conflicting testimony, it is impossible to make any material findings regarding the allegations contained in Count V of the Administrative Complaint. Therefore, the Department has failed to establish clear and convincing evidence with regard to the allegations contained in Count V of the Administrative Complaint, which Count should be dismissed. Count VI of the Administrative Complaint charged the Petitioner with violating Section 626.561(1), Florida Statutes, by failing to properly handle money given him by Aubrey Johnson; violating Section 626.611(5), Florida Statutes, by willfully misrepresenting an insurance policy or annuity to Mr. Johnson; violating Section 626.611(7), Florida Statutes, by demonstrating a lack of fitness or trustworthiness to engage in the business of insurance; violating Section 626.611(8), Florida Statutes, by demonstrating a lack of reasonably adequate knowledge and technical competence to engage in the transaction he concluded with Mr. Johnson; violating Section 626.611(9), Florida Statutes, by committing fraud or dealing dishonestly regarding Mr. Johnson; violating Section 626.611(10), Florida Statutes, by misappropriating, converting or unlawfully withholding Mr. Johnson's money; violating Section 626.611(13), Florida Statutes, by willfully violating a rule or order of the Department; violating Section 626.621(2), Florida Statutes, by violating any statutory provision related to the business of insurance; and violating Section 626.621(5), Florida Statutes, by committing an act of twisting, as defined in Section 626.9541(1)(6), Florida Statutes, with regard to Petitioner's dealings with Mr. Johnson. All of these alleged violations arose from one transaction involving Mr. Johnson. Mr. Petersen was contacted by Mr. Johnson to review his life insurance and annuity coverage because he had $40,000.00 to invest. Mr. Petersen advised Mr. Johnson that he would arrange a meeting with Tom Saita, the Gulf Life Home Office Representative. A meeting was held with Mr. Johnson, his secretary, Mr. Petersen and Tom Saita. Mr. Saita made the sales presentation and discussed a universal life contract on Mr. Johnson. Mr. Saita testified that he was comfortable with Mr. Johnson's understanding of the sales presentation. A universal life policy was sold and issued by Gulf Life. Mr. Johnson testified that he had several meetings with Mr. Peterson and met twice with Mr. Saita, before he made his decision to invest with Gulf Life. His bookkeeper was also present during one (1) of the meetings with Mr. Saita. Mr. Johnson testified that he was told by Mr. Petersen that he could invest his money with Gulf Life and be able to withdraw the full amount at anytime, without a penalty. 1/ Mr. Petersen denied that he made this statement and testified that he told Mr. Johnson that the money could be withdrawn, within thirty (30) days, without a penalty. The thirty-day grace period for withdrawal was a true representation by Mr. Petersen. The evidence does not clearly and convincingly demonstrate that the Respondent willfully misrepresented this transaction to Mr. Johnson. Given the representations testified to by the Respondent and Mr. Johnson and the multiple meetings between the Respondent, Mr. Johnson and Mr. Saita, the more probable interpretation of the evidence is that Mr. Johnson misunderstood what Mr. Petersen said about the thirty-day grace period. Additionally, the facts and circumstances involved in Petitioner's transaction with Mr. Johnson were similar to the facts involved in Petitioner's dealings with the Hinsons. The same factual conclusions are reached in Petitioner's transaction with Mr. Johnson. Therefore, the Department has failed to sustain its burden of proof, as to the allegations contained in Count VI of the Administrative Complaint and Count VI of the Administrative Complaint should be dismissed. Count VII of the Administrative Complaint charged the Respondent with violating Section 626.561(1), Florida Statutes, by failing to properly handle money given him by Ms. Tugwell on behalf of her daughter, Janet Iturriaga; violating Section 626.611(5), Florida Statutes, by willfully misrepresenting an insurance policy to Ms. Tugwell; violating Section 626.611(7), Florida Statutes, by demonstrating a lack of fitness or trustworthiness to engage in the business of insurance; violating Section 626.611(8), Florida Statutes, by demonstrating a lack of reasonably adequate knowledge and technical competence to engage in the transaction he concluded with Ms. Tugwell; violating Section 626.611(9), Florida Statutes, by committing fraud or dealing dishonestly regarding Ms. Tugwell; violating Section 626.611(10), Florida Statutes, by misappropriating, converting or unlawfully withholding Ms. Tugwell's money; violating Section 626.611(13), Florida Statutes, by willfully violating a rule or order of the Department; violating Section 626.621(2), Florida Statutes, by violating any statutory provision related to the business of insurance; and violating Section 626.621(5), Florida Statutes, by committing an act of twisting, as defined in Section 626.9541(1)(6), Florida Statutes, with regard to Petitioner's dealings with Ms. Tugwell. All of these alleged violations arose from one transaction involving Ms. Tugwell. Ms. Tugwell manages the Hilburn Apartments and manages the financial affairs of her daughter, Janet Iturriaga. Ms. Iturriaga is slightly mentally retarded and has a heart condition. In 1987, Ms. Tugwell was shopping for health insurance for the apartment employees and her daughter. She contacted Gulf Life. Ms. Tugwell had existing health insurance coverage on her daughter with Prudential and was paying $471.00 per month in premiums. Mr. Petersen was given the lead on Ms. Tugwell's inquiry and went to see Ms. Tugwell. He explained the available health plans and left an outline of the various types of coverage with Mrs. Tugwell. Mrs. Tugwell called a few days later. Mr. Petersen again visited Mrs. Tugwell at the Hilburn Apartments and upon arrival, saw the daughter, Janet, sitting at the front desk. Mr. Petersen completed the policy applications, with information given to him by Mrs. Tugwell. Some of the information on Ms. Iturriaga's health was incorrect. Ms. Tugwell claims that she told Mr. Petersen the correct information. She states that she told Mr. Petersen that her daughter would be high risk. Mr. Petersen claims that he faithfully recorded the information given to him by Ms. Tugwell. She further states that she did not receive the original policies, despite the fact that she paid the premiums for three (3) years. Mrs. Tugwell took the application, left the room, and returned with the application signed "Janet I Tugwell". Mr. Petersen did not actually see the daughter sign the applications. The signature was not Ms. Iturriage's. However, he had no reason to believe that Ms. Iturriaga did not, in fact, sign the application for insurance. Again, Petitioner signed the Agent's Report portion of the application. The same findings are made in reference to that Agent's Report as were discussed in Ms. Hammontree's case. The policies were thereafter issued by Gulf Life and delivered to Mrs. Tugwell. As with Ms. Hammontree, the appearance of the signature on the application did not resemble Ms. Iturriaga's real signature. Likewise, the signature on the application was not shown to be in Petitioner's handwriting. Ms. Tugwell cancelled her daughter's health insurance with Prudential. She paid the premiums on the Gulf Life policies for approximately three (3) years and also filed a claim for an accidental injury to Janet. Mrs. Tugwell called about her daughter's claim. Mrs. Tugwell was advised that the home office had requested medical records from the hospital. Mrs. Tugwell stated, "Why is it taking so long? There is nothing wrong with my daughter." The claim was initially denied by Gulf Life because two (2) different names were given to the hospital. The name "Tugwell" was listed on the claim form. The claim was eventually paid by Gulf Life and the check was cashed. Ms. Tugwell testified that her daughter's name on the application, "Janet I. Tugwell", was wrong. Her daughter never called herself "Janet I. Tugwell". She always goes by the name of "Janet T. Iturriaga". Therefore, Ms. Tugwell believes that the signature on the application was not her daughter's signature. However, she did not know whether Janet had signed the application. Mrs. Tugwell testified that she had authority to take out insurance on her daughter. She also testified that her daughter did not know that she was taking out new insurance on her. Clearly, Janet did not sign the application if she did not know insurance was being taken out. Ms. Tugwell did occasionally refer to her daughter as "Janet Tugwell", as evidenced by a premium check dated September 1, 1987. The check contains the following legend: "For Janet Tugwell, Policy #8710030". The policy number was the number of the new policies Ms. Tugwell had taken out on her daughter. Clearly, within 8 months of the insurance being taken out, Ms. Tugwell knew her daughter's policy number and knew the policy was under the name of "Janet Tugwell". The only way Ms. Tugwell could have received such information is if she had possession of the new policies or had her daughter's signature placed on the insurance application. In February of 1989, Mrs. Tugwell requested duplicate policies from Gulf Life and to have the name on the policies changed to Janet T. Iturriaga. To change the name on the policies, a policy change form was required. On March 13, 1989, Janet signed the policy change form and ratified the earlier coverage. Janet testified, however, that she did not sign the policy change form. The better evidence establishes that Ms. Ituriaga did sign the policy change form and simply has forgotten that fact. It should be noted that when the duplicate policies came in, Mrs. Tugwell had an agent from another insurance company look them over. The agent allegedly told her that the Gulf Life policies were not worth anything. It was then that Mrs. Tugwell filed her complaint. Mrs. Tugwell had insurance with Gulf Life and paid premiums for approximately three (3) years. She filed claims on the coverage and accepted the benefits. It appears that the reason behind Mrs. Tugwell's complaint seems to be based on the fact that she became dissatisfied with the coverage on her daughter because she had been told that the coverage was worthless. Given the fact that the alleged misrepresentation in regards to Ms. Iturriaga's health, which was in the application, is based upon a swearing match between Mr. Petersen and Ms. Tugwell and the obvious discrepancies in Ms. Tugwell's testimony, there is simply no clear and convincing evidence to sustain a finding that Mr. Petersen made misrepresentations in the policy application or signed Janet Tugwell's name to the policy application. Finally, as with Ms. Hammontree's case, the fact that Petitioner signed the Agent's Report does not clearly and convincingly demonstrate that Petitioner knowingly made any material misrepresentations to Gulf Life, especially since Ms. Tugwell and Iturriaga ratified the coverage. Such ratification eliminates the materiality of the Agent's Report. Therefore, Count VII of the Administrative Complaint should be dismissed.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department enter a Final Order dismissing the Administrative Complaint against the Respondent. It is further RECOMMENDED that Petitioner's application to represent Reserve Life Insurance Company and Pan-American Life Insurance Company be GRANTED. DONE and ENTERED this 9th day of July, 1991, in Tallahassee, Florida. DIANE CLEAVINGER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of July, 1991.
Findings Of Fact Edward Berk, Respondent, was at all times here relevant licensed as an ordinary life, including disability, insurance agent to represent Founders Life Assurance Company, Standard Security Life Insurance Company of New York, American Variable Annuity Life Assurance Company, Wisconsin Life Insurance Company, Columbian Mutual Life Insurance Company, and Lone Star Life Insurance Company. He is licensed as a disability insurance (2-40) agent to represent American Family Life Assurance Company of Columbus and an ordinary life (2-16) agent to represent Estate Life Insurance Company of America. (Exhibit 1). On April 12, 1979 Respondent pleaded guilty in the U. S. District Court for the Southern District of New York of violation of 18 USC 1341 and 1342 to wit: unlawfully, willfully and knowingly devising and intending to devise a scheme and artifice to defraud and to obtain money from The Travelers Insurance Company by means of false and fraudulent pretenses, representations , and promises. He was found guilty and sentenced to two years imprisonment on each of five counts, the sentences to run concurrently. The execution of the sentence was suspended and Respondent was placed on probation for a period of two years (Exhibits 2)
