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
The Issue Does Petitioner, Department of Financial Services (DFS), have authority to determine if Respondent, Alberto Luis Sotero (Mr. Sotero) and Respondent, FalconTrust Group, Inc. (FalconTrust), wrongfully took or witheld premium funds owed an insurance company while a civil action between the insurance company and Mr. Sotero and FalconTrust pends in Circuit Court presenting the same issues? Should the insurance agent license of Mr. Sotero be disciplined for alleged violations of Sections 626.561(1), 626.611(7), 626.611(10), 626.611(13), and 626.621(4), Florida Statutes (2007)?1. Should the insurance agency license of FalconTrust be disciplined for alleged violations of Section 626.561(1), 626.6215(5)(a), 626.6215(5)(d). 626.6215(5)(f), and 626.6215(5)(k), Florida Statutes?
Findings Of Fact Based on the testimony and other evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: Mr. Sotero is licensed by DFS as an insurance agent in Florida and has been at all times material to this matter. He holds license number A249545. FalconTrust is licensed by DFS as an insurance agency in this state and has been at all times material to this matter. It holds license number L014424. Mr. Sotero is an officer and director of FalconTrust and held these positions at all times material to this proceeding. Mr. Sotero also controlled and directed all actions of FalconTrust described in these Findings of Fact. Zurich American Insurance Company is a commercial property and casualty insurance company. FalconTrust Commercial Risk Specialists, Inc., and Zurich-American Insurance Group entered into an "Agency-Company Agreement" (Agency Agreement) that was effective January 1, 1999. The Agency Agreement bound the following Zurich entities, referred to collectively as Zurich: Zurich Insurance Company, U.S. Branch; Zurich American Insurance Company of Illinois; American Guarantee and Liability Insurance Company; American Zurich Insurance Company; and Steadfast Insurance Company. The Agreement specified that FalconTrust was an "independent Agent and not an employee of the Company [Zurich.]". . .. The Agency Agreement also stated: All premiums collected by you [Falcontrust] are our [Zurich's] property and are held by you as trust funds. You have no interest in such premiums and shall make no deduction therefrom before paying same to us [Zurich] except for the commission if any authorized by us in writing to be deducted by you and you shall not under any circumstances make personal use of such funds either in paying expense or otherwise. If the laws or regulations of the above state listed in your address require you to handle premiums in a fiduciary capacity or as trust funds you agree that all premiums of any kind received by or paid to you shall be segregated held apart by you in a premium trust fund account opened by you with a bank insured at all times by the Federal Deposit Insurance Corporation and chargeable to you in a fiduciary capacity as trustee for our benefit and on our behalf and you shall pay such premiums as provided in this agreement. (emphasis supplied. The Agency Agreement commits Zurich to pay FalconTrust commissions "on terms to be negotiated . . . ." It requires FalconTrust to pay "any sub agent or sub producer fees or commissions required." The Agency Agreement also provides: Suspension or termination of this Agreement does not relieve you of the duty to account for and pay us all premiums for which you are responsible in accordance with Section 2 and return commissions for which you are responsible in accordance with Section 3 [the Commission section.] The Agency Agreement was for Mr. Sotero and Falcontrust to submit insurance applications for the Zurich companies to underwrite property and casualty insurance, primarily for long- haul trucking. The Agency Agreement and all the parties contemplated that Mr. Sotero and FalconTrust would deduct agreed-upon commissions from premiums and remit the remaining funds to Zurich. On September 14, 2000, Zurich and Mr. Sotero amended the Agency Agreement to change the due date for premium payments and to replace FalconTrust Group, Inc. (FalconTrust) for FalconTrust Commercial Risk Specialists, Inc., and to replace Zurich-American Insurance Group and Zurich Insurance Company, U.S. Branch, with Zurich U.S. Mr. Sotero and Zurich's authorized agent, Account Executive Sue Marcello, negotiated the terms of the commission agreement as contemplated in the Agency Agreement. Mr. Sotero confirmed the terms in a July 20, 1999, letter to Ms. Marcello. The parties agreed on a two-part commission. One part was to be paid from the premiums upon collection of the premiums. The second part, contingent upon the program continuing for five years, was to be paid by Zurich to Mr. Sotero and FalconTrust. The total commission was 20 percent. FalconTrust and Mr. Sotero were authorized to deduct 13 percent of the commission from premiums before forwarding them to Zurich. The remaining seven percent Zurich was to pay to Mr. Sotero and FalconTrust at the end of the program or after the fifth year anniversary date. The letter spelled out clearly that Zurich would hold the money constituting the seven percent and was entitled to all investment income earned on the money. The passage describing the arrangement reads as follows: Our total commission is 20 percent however Zurich will hold and retain the first 7 percent commission where they are entitle [sic] to earn investment income. I understand that FalconTrust will not benefit from this compounded investment income. However you mentioned you would increase our initial commission that is set at 13 percent currently from time to time depending on FalconTrust reaching their goals, but it will never exceed a total commission of 20 percent. It is to our understanding that the difference will be paid at the end of the program or after the fifth year anniversary date being 12/31/2005, but not earlier than five years. I do understand that if Zurich and/or FalconTrust cancels the program on or before the fourth year being 12/31/2004 that we are not entitle [sic] to our remaining commission that you will be holding. If the program is cancelled after 12/31/2004 by FalconTrust and/or Zurich it is understood that all commission being held will be considered earned. (emphasis added.) Until the program ended, the parties conducted themselves under the Agency Agreement as described in the letter. At some point the parties agreed to decrease the percentage retained by Zurich to five percent and increase the percentage initially paid to and kept by FalconTrust to 15 percent. During the course of the relationship FalconTrust produced approximately $146,000,000 in premiums for Zurich. At all times relevant to this matter, all premium payments, except for the portion deducted by sub-agents and producers before forwarding the payments to Mr. Sotero and FalconTrust were deposited into a trust account. The various sub-agents of FalconTrust collected premiums and forwarded them to FalconTrust, after deducting their commissions, which were a subpart of the FalconTrust 13 percent commission. FalconTrust in turn forwarded the remaining premium funds after deducting the portion of its 13 percent left after the sub-agent deduction. This was consistent with the Agency Agreement and accepted as proper by Zurich at all times. All parties realized that the held-back seven percent, later five percent, was money that Zurich would owe and pay if the conditions for payment were met. The parties conducted themselves in keeping with that understanding. Mr. Sotero and FalconTrust described the practice this way in their Third Amended Complaint in a court proceeding about this dispute: "In accordance with the Commission Agreement, Zurich held the contingency/holdback commission and received investment income thereon." (Emphasis supplied.) In 2006 Zurich decided to end the program. In a letter dated December 8, 2006, Tim Anders, Vice President of Zurich, notified Mr. Sotero that Zurich was terminating the Agency-Company Agreement of January 1, 1999. The letter was specific. It said Zurich was providing "notification of termination of that certain Agency-Company Agreement between Zurich American Insurance Company, Zurich American Insurance Co. of Illinois, American Guarantee and Liability Insurance Co., American Zurich Insurance Company, Steadfast Insurance Company . . . and FalconTrust Grup, Inc. . . ., dated January 1, 1999, . . .." Mr. Sotero wrote asking Zurich to reconsider or at least extend the termination date past the March 15, 2007, date provided in the letter. Zurich agreed to extend the termination date to April 30, 2007. At the time of termination FalconTrust had fulfilled all of the requirements under the Agency-Agreement for receipt of the held-back portion of the commissions. Mr. Sotero asked Zurich to pay the held-back commission amounts. He calculated the amount to exceed $7,000,000. Zurich did not pay the held- back commission amounts. As the program was winding down and the termination date approached, FalconTrust continued to receive premiums. As the Agency Agreement and negotiated commission structure provided, FalconTrust deducted its initial commission from the premium payments. But, reacting to Zurich's failure to begin paying the held back commission amounts, Mr. Sotero engaged in "self help." He deducted at least $6,000,000 from the premium payments from customers, received and deposited in the trust account. He took the money as payment from Zurich of earned and held back commissions.3 Nothing in the Agency Agreement or negotiated commission agreement authorized this action. In March of 2007, Mr. Sotero and FalconTrust also brought suit against Zurich in the Circuit Court for the Eleventh Judicial Circuit, Miami, Florida. The issues in that proceeding include whether Mr. Sotero and FalconTrust wrongfully took premiums and how much Zurich owes them for commissions. As of the final hearing, that cause (Case Number 07-6199-CA-01) remained pending before the court and set for jury trial in August 2010. There is no evidence of a final disposition. But the court has entered a partial Summary Judgment determining that FalconTrust wrongfully took premium funds for the commissions that it maintained Zurich owed. The court's Order concludes that the issue is not whether Zurich owed money to FalconTrust, but whether FalconTrust was entitled to take the funds when it did. Like the undersigned, the court determines that it was not. Between December 8, 2006, the date of the cancelation letter, and April 30, 2007, the program termination date, Mr. Sotero and FalconTrust did not remit to Zurich any of the approximately $6,000,000 in premium payments received. Despite not receiving premiums, Zurich did not cancel or refuse to issue the policies for which the premiums taken by Mr. Sotero and FalconTrust were payment. The policies remained in effect.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services suspend the license of Adalberto L. Sotero for nine months and suspend the license of FalconTrust Group, Inc. for nine months. DONE AND ENTERED this 15th day of October, 2010, in Tallahassee, Leon County, Florida. S JOHN D. C. NEWTON, II 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 15th day of October, 2010.
The Issue Whether Respondent violated various provisions of the Insurance Code, specifically Sections 626.561(1), 626.611, 626.621 and 626.9521, Florida Statutes, which warrants that Respondent's licenses as an insurance agent should be disciplined.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: 1. Respondent was, at all times pertinent, licensed as a general lines agent and health agent in Florida 2 Respondent was the registered agent, sole director and officer of Sunshine State Insurance of Manatee, Inc. As a result of her corporate capacity, Sheryl Ann Satterfield is responsible for actions of employees working under her direct supervision and control. FINDINGS REGARDING COUNT I On or about April 5, 1991, Respondent's employee solicited an application for automobile insurance from Miguel A. Coronado of Bradenton, Florida. The automobile insurance was to be provided by the Nu-Main of Florida Agency. At this same time, the premium for the automobile insurance was quoted as $414.00 for a six month coverage. After being informed of the premium amount, Mr. Coronado paid Respondent's employee $146.00 in cash as a down payment on the premium. Receipt #6557 was issued which acknowledged receipt of said premium. On or about April 26, 1991, Mr. Coronado received a cancellation from Instant Auto Credit stating that his automobile was an unacceptable vehicle. After receiving this notice, Mr. Coronado went to the Sunshine State Insurance office to discuss the cancellation with Respondent. Respondent refused to refund the $146.00 premium to Mr. Coronado. Respondent never forwarded the $146.00 premium funds received from Mr. Coronado to Nu-Main of Florida. Further, Respondent failed, and refused to refund the premium to Mr. Coronado upon demand. Respondent misappropriated funds held in trust for her own use and benefit. FINDINGS REGARDING COUNT II On or about November 26, 1990, Jodi Spencer of Sarasota, Florida went to Respondent's agency for the purpose of obtaining automobile insurance. Ms. Spencer made a premium down payment of $197.00 on a quote of $697.00 annual premium. Respondent's employee issued receipt #7874 which acknowledged receipt of the $197.00 premium down payment. The auto insurance was to be provided by Nu-Main of Florida, Inc., and American Skyhawk Company. On February 11, 1991, American Skyhawk Insurance Company sent Ms. Spencer a cancellation notice. Respondent was to return $24.50 of unearned commission to Ms. Spencer which she failed to do. FINDINGS REGARDING COUNT III On or about December 31, 1990, Matthew Baker of Bradenton, Florida, went to Sunshine State Insurance Agency to obtain automobile insurance. At this time, Matthew Baker paid a down payment of $197.00 on an annual premium of $1,313.00. The insurance was to be provided by First Miami Insurance Company. Respondent's agency issued receipt #6851 upon receipt of the aforementioned premium down payment. On January 31, 1991, First Miami Insurance Company sent Mr. Baker a cancellation notice. At the time of cancellation Respondent was to return an unearned commission of $154.60. Respondent has failed to return $154.60 in unearned commission to Mr. Baker. FINDINGS REGARDING COUNT IV On or about January 11, 1991, Edwin Soto of Bradenton, Florida, was cancelled by First Miami Insurance Company with whom he had an existing automobile insurance policy. Edwin Soto had purchased this First Miami Insurance Company policy from Respondent. (Testimony of Edwin Soto). As a result of this cancellation Mr. Soto is owed $70.61 from Respondent which she has failed to return to him. FINDINGS REGARDING COUNT V In January 1991, William M. Woodyard of Bradenton, Florida, met with Respondent to renew his general liability and worker's compensation insurance. At this same time Mr. Woodyard gave Respondent his premium down payment. During the latter part of 1991, Mr. Woodyard went to Sunshine State Insurance of Manatee, Inc. to obtain a copy of his worker's compensation policy. Upon Mr. Woodyard's arrival, he met with Joe Money, President of Sunshine State Insurance Group, Inc. No record of insurance or coverage for Mr. Woodyard or his company existed. Previously, Capital Premium Finance Company had issued two return premium checks to Mr. Woodyard. Respondent deposited Mr. Woodyard's return premium checks into the Sunshine State Insurance Agency's checking account in the total amount of $440.80. Mr. Woodyard was entitled to receive a premium refund check and unearned commission check from Respondent. Mr. Woodyard did not receive any premium refund or unearned commission funds from Respondent.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that Respondent's licenses as an insurance agent in this state be REVOKED. DONE and RECOMMENDED this 20th day of October, 1992, at Tallahassee, Florida. DANIEL M. KILBRIDE 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 20th day of October, 1992. APPENDIX The following constitute specific rulings, pursuant to Section 120.59 (2), Florida Statutes, upon the parties respective proposed findings of fact (PFOF) Petitioner's PFOF: 1. - 27. Accepted in substance. Respondent's PFOF: Respondent did not file proposed findings of fact. COPIES FURNISHED: Willis F. Melvin, Jr., Esquire Daniel T. Gross, Esquire Department of Insurance and Treasurer 412 Larson Building Tallahassee, Florida 32399-0300 Ms. Sheryl Ann Satterfield P.O. Box 333 Polk City, Florida 33868 Tom Gallagher, Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil, Esquire General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, Florida 32399-0300
Findings Of Fact Findings regarding general matters The Respondent, Elnor Darlene Johnson, is currently licensed in the State of Florida as a life insurance agent and as a health insurance agent. At all times pertinent to the issues in this case, the Respondent was licensed in the State of Florida as a health insurance agent and was employed by National States Insurance Company and Transport Life. In order to become a licensed Florida Insurance agent, the Respondent was required to become familiar with the provisions of the Florida Insurance Code and pass an examination given by the Department of Insurance. Respondent is familiar with the provisions of the Florida Insurance Code applicable to health and life insurance agents. Findings regarding Count I (Anna Hajek) The Respondent visited Anna Hajek for the first time on December 6, 1988. Mrs. Hajek had sent in an advertising card to the Respondent's insurance agency requesting information on several health insurance programs. When the Respondent arrived at Mrs. Hajek's home, she asked Mrs. Hajek what other insurance coverage she had in addition to her Medicare coverage. Mrs. Hajek told the Respondent that she did not have any other existing health insurance coverage at that time. During the visit on December 6, 1988, Mrs. Hajek appeared to understand what she and the Respondent were talking about. They discussed the meals Mrs. Hajek was having, Mrs. Hajek's son, and some of Mrs. Hajek's activities. The Respondent was under the impression that Mrs. Hajek was handling her own affairs and that Mrs. Hajek's son was not involved in the management of her affairs. The Respondent and Mrs. Hajek discussed Mrs. Hajek's son and the fact that she wanted to protect her assets (money invested in certificates of deposit) for her son and that she did not want to spend it all on a nursing home. Mrs. Hajek invited the Respondent to return for another visit to have lunch. During the course of the December 6, 1988, visit, the Respondent sold Mrs. Hajek a Medicare Supplement insurance policy. Respondent explained the various benefits and coverages under the policy. Mrs. Hajek appeared to understand the policy. The Respondent did not fill out any "replacement forms" because Mrs. Hajek had told her that she did not have any existing Medicare Supplement insurance. Mrs. Hajek appeared to understand the Respondent's questions regarding whether Mrs. Hajek had any existing coverage. When she left Mrs. Hajek's house, the Respondent left identification, including her telephone number. The insurance policy sold too Mrs. Hajek on December 6, 1988, was a Medicare Supplement insurance policy to be issued by National States Insurance Company, with an intensive care benefit rider, a dental, vision, and hearing care expense rider, an extended care facility confinement rider, and a rider to increase benefits to Supplement Medicare Part B. The initial annual premium was $1,264.00. Mrs. Hajek paid the initial annual premium by delivering a check to the Respondent. National States Insurance Company issued the policy on December 28, 1988. On December 8, 1988, the Respondent made a second visit to Mrs. Hajek's home. At that time Mrs. Hajek told the Respondent she thought she needed nursing home coverage because she did not believe she could rely on her son to help her. The Respondent sold Mrs. Hajek three insurance policies during the course of the December 8, 1988, visit. The first of these policies was an Extended Care Confinement policy with an initial premium in the amount of $121.00 The second was a Limited Medical-Surgical Expense policy with an initial premium in the amount of $668.00. The third was a Nursing Home Policy with a home nurse benefit rider with an initial premium in the amount of $1,496.00. On December 8, 1988, Mrs. Hajek paid the initial premiums on all three policies by delivering a check to the Respondent. National States Insurance Company issued the three policies on December 28, 1988. The Respondent explained all of the coverages and benefits provided under the various policies prior to selling them to Mrs. Hajek, and Mrs. Hajek appeared to understand the policies she was purchasing. During the December 8, 1988, visit with Mrs. Hajek, the Respondent also discussed policies that would provide long-term custodial-type care, which is a different type of coverage than skilled nursing coverage. On December 20, 1988, the Respondent made a third visit to Mrs. Hajek's home. During the course of that visit, the Respondent sold Mrs. Hajek a Long- Term Care policy with an inflation rider to be issued by Transport Life Insurance Company. The initial premium for that policy was $2,380.88. On December 20, 1988, Mrs. Hajek delivered a check in the amount of $2,404.80 in payment of the initial premium and the application fee for the Long-Term Care policy. Transport Life Insurance Company issued a Long-Term Care policy to Mrs. Hajek with an effective date of December 20, 1988. Mrs. Hajek was enrolled in and covered under Humana Gold Plus HMO from at least June 1, 1987, until December 31, 1988. On December 16, 1988, a disenrollment form dated December 6, 1988, and apparently signed by Mrs. Hajek, was received at the offices of the Humana Gold Plus HMO. The disenrollment form was processed and Mrs. Hajek was disenrolled from the HMO effective December 31, 1988, or January 1, 1989. The annual premiums of all of the policies sold to Mrs. Hajek by the Respondent during December of 1988 total $5,869.88. At that time Anna Hajek had an annual income of approximately $7,500.00. 1/ During the time period when the Respondent sold the several insurance policies to Mrs. Hajek, Mrs. Hajek appeared to be mentally competent and in charge of her own affairs. At that time, Mrs. Hajek had her own checking account, was handling her own financial affairs, and was living on her own in a condominium. As of that time, Mrs. Hajek had never been diagnosed as suffering from dementia or any other type of mental disorder that would prevent her from handling her own affairs. 2/ When Mrs. Hajek's son, Frank Hajek, discovered that his mother had purchased several insurance policies, he attempted to contact the Respondent, but she did not return his calls. Ultimately, Frank Hajek wrote to the issuing insurance companies requesting that the policies be cancel led and that the premiums be refunded to his mother. In due course all the policies were cancelled and all of the premiums were refunded. The coverage provided by the policies the Respondent sold to Mrs. Hajek overlaps in several respects. However, all of the coverage appears to be cumulative in the sense that where a specific circumstance is covered by two policies, both policies will pay. 3/ Findings regarding Count II (Sadie & Joseph Grossman) No evidence was received regarding the allegations contained in Count II of the Second Amended Administrative Complaint. 4/ Findings regarding Count III (Paul and Mary Kline) The Respondent visited Paul and Mary Kline at their home in response to a "lead card" the Klines had sent requesting information on long-term nursing home insurance. The Respondent reviewed the Klines' existing coverage and left them information outlining the various benefits and coverages that were available from the companies the Respondent represented. The Klines indicated they were interested in long-term nursing coverage, but did not buy any insurance during the first visit. Mr. Kline later telephoned the Respondent and told her that he and his wife were interested in purchasing the nursing home insurance they had discussed during the first visit. In the meantime, National States had introduced a new policy, the LTC, and the Respondent returned to the Klines' home on January 26, 1989, and showed them the coverages provided by the new policy. The LTC policy provided for skilled, intermediate, and custodial care, and also provided money back to the policyholder if the coverage was not used. During the visit on January 26, 1989, the Respondent solicited, and Paul and Mary Kline signed, applications for long-term nursing care policies to be issued by National States Insurance Company. The premium due on the two policies totaled $2,596.00. On January 26, 1989, Mrs. Kline wrote a premium payment check in the amount of $2,357.60 payable to the order of National States Insurance Company and gave the check to the Respondent. At the time of receiving the check, the Respondent did not notice that the amount on the check was less than the total amount of the premium due on the two policies. On January 26, 1989, the Respondent left receipts and outlines of coverage with the Klines. The receipts were for the full amount of the premium, an amount $238.40 greater than the check received by the Respondent on January 26, 1989. The discrepancy between the receipts and the check were noticed when the Respondent submitted the applications to her agency. Thereupon, the Respondent called Mr. Kline and explained what had happened. The Respondent told Mr. Kline that the company would process the applications, but that the $238.40 shortage would be charged against her account and she hoped he would pay the shortage. Mr. Kline told the Respondent he would pay the difference. The Respondent then wrote a personal check to the insurance company and submitted the Klines' insurance applications for processing. Shortly thereafter Mrs. Kline signed a check payable to the Respondent in the amount of $238.40 and delivered it to the Respondent. At some time subsequent to the purchase of the policies, but before the policies were actually issued, the Klines saw a television show that caused them to believe they had purchased the wrong type of insurance. The Klines tried unsuccessfully to contact the Respondent by telephone. Towards the end of February, the Klines wrote a letter to National States Insurance Company requesting that the policies be cancel led and that their premiums be refunded. Mr. Kline also contacted the Department of Insurance service office about his inability to contact the Respondent. Shortly after that contact, the Respondent called Mr. Kline. The policies were canceled and the Klines received a full refund of the $2,596.00 they had paid in premiums. At the time of the purchase of the policies, the Respondent fully explained the policies to the Klines and the Klines voluntarily purchased same. Mr. Kline was satisfied with the policies on the day he purchased them. Mr. Kline's main complaint was that the Respondent failed to return his telephone calls. Mr. Kline did not believe that the Respondent had lied to him or misrepresented any of the coverages provided by the policies. Findings regarding Count IV (Charles Retty) In November of 1988, Charles Retty contacted the St. Petersburg offices of National States Insurance Company and Diversified Health Services with questions regarding the effect of changes in the Medicare program, and how those changes might affect the need for insurance coverage. At that time, Mr. Retty and his wife were insured under two nursing home policies he had purchased from National States Insurance Company. The Respondent had not sold him either of those policies. As a result of that contact, someone in the management of the insurance company asked the Respondent to call on Mr. Retty. Shortly thereafter, the Respondent visited Mr. Retty, discussed his concerns with him, told him she did not know the answers to all of his questions, and told him she would get back in touch with him with further information. Following the initial meeting between Mr. Retty and the Respondent, Mr. Retty made several unsuccessful efforts to get in touch with the Respondent. Mr. Retty then complained to the Department of Insurance service office regarding his concerns and the failure of the Respondent to get back in touch with him. Shortly after his complaint to the Department of Insurance, the Respondent again visited Mr. Retty, at which time they did not get along very well. Each thought the other somewhat rude and antagonistic. The Respondent was never Mr. Retty's insurance agent. She had never sold him any insurance prior to the visit in November of 1988 and she did not attempt to sell him any insurance during any of her communications with him. The Respondent did not attempt to have Mr. Retty cancel any of his existing insurance or allow any such insurance to lapse. Mr. Retty never gave the Respondent any money. Findings regarding Count V (Minnie Holden) The Respondent has been Minnie Holden's insurance agent since about 1976 or 1977, when the Respondent enrolled Mrs. Holden and her husband in a Medicare Supplement program. When Mr. Holden passed away, the Respondent continued to service Mrs. Holden's policies. In 1986, the Respondent sold Mrs. Holden a Medicare Supplement policy issued by United American. In February of 1987, the Respondent converted that policy to an updated United American Medicare Supplement policy. Mrs. Holden also had a long-term nursing home policy issued by Transport Life. On February 18, 1988, United American Insurance Company received a $990.00 renewal premium for the renewal of Mrs. Holden's Medicare Supplement insurance policy. United American Insurance Company renewed the policy for another year, and it remained in force, paid in full, until its lapse date of February 26, 1989. The Respondent was listed as the agent of record for the renewal of that policy. United American Insurance Company credited the Respondent's debit balance account with a commission in the amount of $138.60 for the February 1988 renewal of Mrs. Holden's Medicare Supplement insurance policy. United American Insurance Company also sent the Respondent a statement of account covering the month of February 1988. The statement of account included the information that Mrs. Holden had renewed her Medicare Supplement insurance policy and that the Respondent's account had been credited with a commission for that renewal. The statement of account also contained information about many other policy holders and contained information about many things other than commissions. 5/ The Respondent visited Mrs. Holden on August 25, 1988, at which time Mrs. Holden told the Respondent that she (Holden) had cancelled her Medicare Supplement policy because she could no longer afford it. Mrs. Holden told the Respondent that she (Holden) had kept her long-term nursing home policy in effect because her daughter was thinking of placing Mrs. Holden in a nursing home. 6/ Respondent advised Mrs. Holden that she really should have Medicare Supplement coverage, and during the August 25, 1988, visit the Respondent solicited and obtained from Mrs. Holden an application for a Medicare Supplement insurance policy to be issued by National States Insurance Company. In filling out the application for the policy, the Respondent answered "No" to Question 4, which inquired, "Is the insurance being applied for intended to replace any accident or sickness insurance, health service or health maintenance contract? " She also answered "No" to Question 5, indicating that no other existing policies were in force. The Respondent believed that her answers to Questions 4 and 5 on the application form were correct on the basis of what Mrs. Holden had said about the cancellation of the prior policy. On August 25, 1988, Mrs. Holden paid for only six months of coverage because she said that was all she could afford. The Respondent told Mrs. Holden that the National State policy was less expensive than the prior United American policy because it provided slightly less coverage. The Respondent did not fill out a "replacement form" when she filled out the application on August 25, 1988, because she thought the United American policy had expired and was no longer in effect. On September 8, 1988, National States Insurance Company issued a Medicare Supplement policy to Mrs. Holden. Mrs. Holden had two Medicare Supplement insurance policies in effect from September 8, 1988, until February 26, 1989. Findings regarding Count VI (Louella Riley) The Petitioner did not offer any evidence regarding the allegations contained in Count VI of the Second Amended Administrative Complaint. Findings regarding Count VII (Violation of probation) In 1986, the Florida Department of Insurance conducted an investigation Into the activities of the Respondent as an insurance agent in this state. As a result of that investigation, the Department filed Investigation Report No. 86- 158-IA-TP, alleging violation of the replacement laws relating to the solicitation and sale of Medicare Supplement insurance. On August 28, 1987, the Respondent entered into a Settlement Stipulation For Consent Order with the Department, Case No. 87-L-321DF, whereby she was placed on departmental probation for a period of one year, effective upon the date of signing of the Consent Order in that case. A condition of that probation was that the Respondent strictly adhere to all provisions of the Florida Insurance Code and of the rules of the Department of Insurance. The settlement stipulation also provided that the Department of Insurance would initiate proceedings to revoke all licensure and eligibility for licensure of the Respondent if she violated provisions of the Florida Insurance Code or rules of the Department of Insurance during her probationary period. On September 9, 1987, a Consent Order was issued by the Department of Insurance in Case No. 87-L-321DF, which incorporated all terms and conditions of the Settlement Stipulation For Consent Order. Accordingly, the Respondent was on departmental probation from September 9, 1987, through September 8, 1988.
Recommendation For all of the foregoing reasons, it is recommended that the Department of Insurance issue a Final Order in this case dismissing all charges against the Respondent in this case. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 5th day of November 1990. MICHAEL M. PARRISH 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 5th day of November 1990.
The Issue Whether Respondent committed the offense set forth in the Amended Administrative Complaint and, if so, what action should be taken.
Findings Of Fact At all times material hereto, Quetgles was licensed by the Department as a general lines property and casualty insurance agent and Florida Residential Property and Casualty Joint Underwriters Association (JUA) agent, being appointed by several insurance companies. The JUA appoints insurance agents and gives the agents the authority to "bind" insurance coverage. To "bind" indicates that the agent has obligated the JUA to provide the particular insurance coverage applied for and the insured leaves the agent's office under the impression that he or she has the insurance for which application has been made. An agent who is not appointed by the JUA cannot bind coverage. At all times material hereto, Quetgles was the president and sole director of AAAAA Sun Tropic Insurance Service, Inc. and Sun Tropic Insurance Service, Inc. (jointly referred to as Sun Tropic). Quetgles' agency is, therefore, considered to be Sun Tropic. At all times material hereto, Quetgles was shown as the sole signatory on Sun Tropic bank accounts at Washington Mutual Bank and Great Western Bank. Unearned premium is that part of the premium paid during days when no insurance is in force on the risk covered. Unearned commission is the commission paid to an agent that is due to be returned to the insured following a cancellation of coverage. Count I Vivian and Ernesto Rodriguez contacted Quetgles' agency, Sun Tropic, for homeowner's insurance through the JUA. Sun Tropic's employee, Yamilet Beltran, assisted them. Ms. Beltran was a licensed property and casualty agent, but was not an appointed JUA agent. An insurance application was signed by Mr. Rodriguez and Ms. Beltran on September 5, 1997. Ms. Beltran signed the application at Quetgles' direction. The Rodriguez's application was forwarded to Apex Managers, Inc. (Apex), a servicing carrier for the JUA, and received by Apex on October 10, 1997. The application was missing a binder effective date and the signature of an authorized JUA agent and, therefore, could not be processed. However, the application indicated that coverage was bound and that a total financed payment of $1,722.00 was received for the annual premium. A premium finance agreement was executed. The premium financing company was Grand Park Premium Finance, Inc. (Grand Park). The premium finance agreement indicated, among other things, a total premium of $1,722.00, a down payment of $521.00, and eight scheduled payments of $165.25 to Grand Park, with an included finance charge. A second application, signed by Quetgles, was submitted to Apex. Since this application was signed by Quetgles, an appointed JUA agent, it bound coverage. However, this application was missing pertinent and necessary information and was, therefore, rejected by Apex. Furthermore, since coverage was bound, Apex was required to cancel the policy, which was effective December 18, 1997, at 12:01 a.m. Apex returned unearned premium to Grand Park in the amount of $1,169.00. When a premium or part thereof is returned to the premium financing company, the standard operating procedure is for the premium financing company to return the premium amount to the insured via the JUA agent. Consequently, Grand Park would return the $1,169.00 to Sun Tropics for Sun Tropics to return the monies to the Rodriguezes. Grand Park credited the unearned premium to the account of Sun Tropics' agent, Quetgles. However, Quetgles never forwarded the monies to the insured, the Rodriguezes. Quetgles willfully kept the unearned premium. Typically, a premium financing company does not refund monies to the insured. However, at the behest of the Department, Grand Park returned the premium to Mr. Rodriguez in the amount of $1,155.06. Before Mr. Rodriguez cashed the check, Grand Park went out of business and closed its bank accounts. The former owner of the defunct Grand Park wrote a personal check to Mr. Rodriguez in the amount of $1,155.06. As a result of the situation involving the Rodriguezes, the JUA terminated Quetgles' appointment. Count II Mr. and Mrs. Sergio Bellow contacted Sun Tropic for homeowner's insurance through the JUA. They completed a homeowner's insurance application on November 9, 1998. The producing agent was Ms. Beltran. Mrs. Bellow wrote a check to Sun Tropic for the entire annual premium in the amount of $365.00. One month later, the JUA advised the Bellows that the insurance coverage that they had obtained from Sun Tropic was "null and void" because the producing agent, Ms. Beltran, for Sun Tropic was not licensed by the JUA. Ms. Beltran was not authorized by the JUA to write insurance coverage for it. The Bellows completed another application for homeowner's insurance with Sun Tropic on or about January 28, 1999. The premium was $963.00. According to Sun Tropic, Mr. Bellow owed an additional $767.00. Mr. Bellow refused to pay the additional monies. Furthermore, Mr. Bellow demanded a refund of the earlier premium that he had paid since no insurance coverage was provided. Only $169.00 was refunded to the Bellows.4 The Bellows eventually purchased insurance through another agency. Count III In February 1998, Fanny Hurtado and her husband, Fabio Hurtado, purchased a home, using a mortgage. Property insurance was required by the mortgage. On February 26, 1998, the Hurtados contacted Sun Tropic for property insurance and met with a woman named Christina in Quetgles' presence. The woman named Christina is deemed to be an employee of Quetgles. The premium for the property insurance was $1,083.00, of which $260.00 was for flood insurance and $823.00 was for the dwelling. The premium was added to the Hurtados' closing costs. Quetgles presented Mr. Hurtado with a copy of a purported policy issued by Fortune Insurance Company.5 The Hurtados believed that they had insurance coverage on their home. One year later, the Hurtados returned to Sun Tropic to renew their purported policy. The premium for the renewal was $1,248.00. Quetgles failed to place the risk with an insurance company. The Hurtados contacted Fortune Insurance Company and were informed that they did not have coverage with it. The Hurtados demanded the return of all of their premium payments. Quetgles did not comply with their demand. However, eventually, the Hurtados received a check in the amount of $1,083.00 from the title company but only after they complained to the Department. Quetgles blamed the insurance and mortgage companies for the lack of insurance coverage on the Hurtados' home. Count IV In June 1999, Eddy Sang purchased a seafood restaurant, Joe's Seafood, which was incorporated under the name of E.& S. of Miami, Inc. (E&S). Mr. Sang decided to maintain the existing coverage for the restaurant with the same insurance agency, Sun Tropics, used by the previous owner, with the premium financed through the same premium finance company, Amgro, Inc. (Amgro). In March 2000, Quetgles notified Mr. Sang that the time had come to renew the restaurant's property and casualty insurance. Quetgles presented a proposal. Mr. Sang decided to accept the proposal, completed an application for coverage, and decided to finance the premium. Mr. Sang paid the down payment in two checks. The declaration page of the insurance coverage indicated that the restaurant was insured by Lloyd's of London from March 2000 through March 30, 2001. Mr. Sang commenced making periodic finance payments to Amgro. In or around August 2000, Quetgles notified Mr. Sang that the cost of the insurance policy was increasing and requested an additional payment of $4,551.00. Mr. Sang made the additional payment. In or around August 2000, Sun Tropic received a cancellation notice from Firestone Agency of Florida (Firestone), notifying Ms. Beltran that the coverage on Mr. Sang's restaurant was being cancelled because the policy was obtained by "material misstatement." According to the notice, the material misstatement was that the premium basis was submitted at $130,000.00, when the actual basis was $720,000.00, due to the facility being a restaurant and a market, which was not revealed at the outset. The notice also called for a reinstatement of the policy for an additional premium of $5,129.00, plus $271.84 in taxes. Mr. Sang never received a copy of the cancellation notice or notification from Sun Tropic regarding the notice. Moreover, he never dealt with Ms. Beltran regarding coverage even though her name appears on the insurance application as the producer's agent. In October 2000, Mr. Sang's business suffered a loss, totaling $175,000.00, as a result of storm damage and a loss of business. Quetgles assured him that he was covered. However, Mr. Sang later discovered that he had no coverage. He did not receive any money from an insurance company and had to cover the entire loss out-of-pocket. Quetgles blamed the insurance and finance companies for the failure to pay Mr. Sang's claim. Additionally, she filed a complaint with the Department regarding Mr. Sang's loss. By letter dated September 28, 2000, Firestone notified the Department that it had received neither payment nor confirmation as to the operations of Mr. Sang's restaurant and that, therefore, the policy was cancelled on September 19, 2000. By letter dated March 9, 2001, Amgro advised the Department that Sun Tropic admitted that the insured had paid a down payment of $4,051.00, but that Amgro did not receive the down payment. Moreover, Amgro advised the Department that, if Sun Tropic had timely forwarded the down payment to Firestone, it (Amgro) strongly believes that the policy would not have been cancelled. A finance premium agreement with Amgro, dated March 30, 2000, contained the signature of Mr. Sang and Ms. Beltran, as the producer. Mr. Sang had no dealings with Ms. Beltran. On another finance premium agreement with Amgro for the additional premium, dated September 1, 2000, Ms. Beltran's signature also appears as the producer. Mr. Sang had no dealings with Ms. Beltran. Also, he had never seen the second finance agreement and was unable to verify that the signature on the second finance agreement was his. Ms. Beltran has not worked for Sun Tropic since 1997. She has not signed any documents at or for Sun Tropic since leaving its employ. Ms. Beltran has not authorized anyone at Sun Tropic to sign her name to any documents. Count V In March 2001, Reginald Rivera sought homeowner's insurance coverage on his home from Sun Tropic. A premium of $1,729.00 was quoted. No discussion of financing the premium occurred. Mr. Rivera paid the premium in full by check, which was deposited into the account of Sun Tropic. In October 2001, while searching for his insurance policy, Mr. Rivera discovered that he had never received a policy, only a binder. Mr. Rivera contacted Sun Tropic. He was given a policy number over the telephone by Sun Tropic. Mr. Rivera became suspicious and decided to personally visit Sun Tropic and obtain the policy. Quetgles gave him a policy which contained a policy number that was not the same number on his binder. When Mr. Rivera returned home, he contacted the company, Safeco, with which he purportedly had coverage. Safeco informed Mr. Safeco that had no coverage with it. Mr. Rivera confronted Quetgles and was informed that Sun Tropic's personnel had attempted to contact him, regarding his coverage, but were unsuccessful. Having no coverage, Mr. Rivera attempted to obtain coverage but was unable to do so because a hurricane was on the horizon. He suffered no loss from the hurricane. Mr. Rivera obtained a refund from Sun Tropic for the premium payment of $1,729.00. A document, entitled Evidence of Property Insurance, and dated March 29, 2000, indicated the insured as Mr. Rivera, the producer as Sun Tropic, and the insurer as American Equity Insurance Company. The document was also signed by Ms. Beltran. Again, Ms. Beltran has not worked for Sun Tropic since 1997; has not signed any documents at or for Sun Tropic since leaving its employ; and has not authorized anyone at Sun Tropic to sign her name to any document.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance enter a final order: Finding that Dayami Quetgles committed the following violations: Count I: Subsection 627.848(1)(e), Florida Statutes; Subsections 626.561(1) and (3), Florida Statutes; Subsections 626.611(7), (9), and (10), Florida Statutes; and Subsection 626.621(2), Florida Statutes. Count II: Subsections 626.0428(2) and (3), Florida Statutes. c. Count III: Subsections 626.611(5), (7), (9), and (13), Florida Statutes; and Subsections 626.621(2) and (6), Florida Statutes. Count IV: Subsections 626.0428(2) and (3), Florida Statutes. Count V: Subsections 626.561(1) and (3), Florida Statutes; Subsections 626.611(7), (9), and (10), Florida Statutes; and Subsection 626.621(2), Florida Statutes. Revoking Quetgles' license. DONE AND ENTERED this 13th day of November, 2002, in Tallahassee, Leon County, Florida. ERROL H. POWELL 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 13th day of November, 2002.
The Issue Whether the charges contained in the Administrative Complaint, which is the subject of Case Number 01-2295, reflect statements of agency policy which should have been adopted as rules pursuant to Chapter 120, Florida Statutes.
Findings Of Fact The Parties United is a foreign insurer, domiciled in the State of Wisconsin holding a certificate of authority from the Department to transact the business of insurance in this state. It is a wholly-owned subsidiary of American Medical Securities Group, Inc. The Department, through its agency head, the Treasurer and Insurance Commissioner, has regulatory jurisdiction over United in connection with certain matters set forth in the Complaint. The regulatory scheme for out-of-state health insurance companies Health insurance companies operating pursuant to in-state regulatory schemes are subject to oversight regulation of the corporate entity including financial solvency and market conduct. Rates are required to be filed and approved prior to being used in the state. The review process involves a review of the rates to determine if they are reasonable in relation to the benefits provided. In regard to this, the Department has rules which it has adopted pursuant to Chapter 120, Florida Statutes, which it uses to determine the standards and formulae for making that determination. Certain out-of-state health insurers, such as United, are not subject to such stringent regulation. No review of premium rates is conducted by the Department in the case of these insurers, but it would be incorrect to state that they are not subject to regulation by the Department at all. Approximately 40 percent of the health insurance market in Florida is written through out-of-state group arrangements that do not provide policyholders consumer protections afforded to policyholders holding in-state policies regulated by the Department. United is required by Florida law to provide certain types of coverage. United must also ensure that certificates of coverage provided to residents of Florida contain the following language: The benefits of the policy providing your coverage are governed primarily by the law of a state other than Florida. Indent Background At all times pertinent, American Medical Security, Inc. (AMS), was a Florida-licensed administrator authorized to market and administer United's out-of-state group health insurance plans in Florida. AMS, like United, is a wholly-owned subsidiary of American Medical Securities Group, Inc. In May 1993, United, through AMS, filed for approval with the Department pursuant to Section 627.5515(2), Florida Statutes (1993), as an out-of-state group health insurer who would provide policies to be offered through an Alabama entity called the Prescription For Good Health Trust, which was formed primarily for the purpose of providing group insurance. The Department approved this filing. On March 2, 1995, the Department participated by conference call in a Regulatory Task Force of the National Association of Insurance Commissioners. The mission of the task force was to attempt to address a number of problems facing the insurance market. One of the problems discussed was rate protection for consumers when faced with "tier rating" or "tier blocking." The two terms are synonymous and mean, as to group health insurance, reclassifying insureds subsequent to having been initially placed in a class. This practice will be discussed in more detail below. In 1996, United made a filing for the Prescription For Good Health Trust which proposed tier rating. Sometime during 1996, after the Department objected to the filing, United withdrew it. The Department had never seen such a filing previously. United is the only health insurer to assert before the Department that reclassification by movement between classes would be permissible under the Florida Insurance Code. Section 627.6515(1), Florida Statutes, provides that a group health insurance policy issued or delivered outside this state under which a resident of Florida is provided coverage, shall comply with the provisions of Part VII, of Chapter 627, Florida Statutes, in the same manner as health policies issued within the state. Part VII of Chapter 627, Florida Statutes, provides for a comprehensive regulatory scheme for group health insurance. Section 627.6515(2), Florida Statutes, however, sets forth a number of exemptions. Section 627.6515(2), Florida Statutes, provides an exemption for an insurer like United, which provides health insurance through an association formed for a purpose other than that of offering insurance, which provides the language referred to in paragraph 5, supra, on the face of the certificate, and which offers the bundle of coverages provided in Subsection (c). This exemption applied to the Prescription For Good Health Trust. The Department concedes that it has no authority to set premium rates for out-of-state insurers like United. In November 1996, United through AMS, filed with the Department, pursuant to Section 627.6515(2), Florida Statutes, a request for approval of an out-of-state group health insurance policy termed the "MedOne Choice" plan. This plan was to be offered through an Ohio association called the Taxpayers' Network, Inc. (TNI). The association was formed primarily for purposes other than providing insurance. In January, 1997, the filing was accepted by the Department as meeting the requirements of Section 627.6515(2), Florida Statutes. Chapter 96-223, Laws of Florida, created Section 627.6425, Florida Statutes, effective May 25, 1996. When created, the section only addressed the renewability of individual coverage. Chapter 97-179, Laws of Florida, substantially amended Section 627.6425, Florida Statutes, effective May 30, 1997. Subsequent to the amendment, the section addressed certificates of coverage offered to individuals in the state as part of a group policy. This statute, along with Sections 627.6571 and 627.6487, Florida Statutes, implemented the federal Health Insurance Portability and Accountability Act (HIPAA). The basic theory of the HIPAA legislation is that an insurance company cannot simply cancel a health insurance policy without providing other options. On or about September 25, 1998, United, through AMS, notified all Prescription For Good Health Trust certificate holders that the policy forms through which their coverage had been provided were being discontinued, effective as of each certificate holder's 1999 renewal date. Upon discontinuance of the Prescription For Good Health Trust Plans, the only United health insurance plans available in Florida were the MedOne Choice plans offered through TNI. Membership in TNI was available to anyone upon submitting an application form and paying the membership fee. Membership in TNI was a prerequisite to continuance of a persons' health insurance coverage under United's MedOne Choice plan. United guaranteed each certificate holder, upon joining TNI, that upon request, they would be issued coverage under the Classic Benefit Plan (one of the TNI MedOne Choice plans) without regard to their health status. However, there was no guarantee that premiums would not rise. Certificate holders were also advised that if they desired coverage under a MedOne Choice plan other than the guaranteed issue Classic Benefit plan, they could apply for any of the other TNI plans. Only if the applicant met the underwriting guidelines for the plan for which they applied, would they be issued coverage under another MedOne Choice plan. Between October 1998 and early January 1999, United responded to questions and concerns raised by the Department about the decision to discontinue the Prescription For Good Health Trust plan, and whether the plan of discontinuance was in compliance with Section 627.6425, Florida Statutes. Specifically, discussions were had concerning the movement of insureds from the class in which they were originally assigned to another class at the time of renewal. United entered an agreement with the Department on January 14, 1999, whereby United would offer to certificate holders an additional guaranteed issue TNI plan and would cap the rate for the guaranteed issue plans at no more than twice the premium then currently being paid for the discontinued Prescription For Good Health Trust plan. In accordance with this agreement, United notified certificate holders of the additional guaranteed issue option available to them. Later in 1999, United discontinued the trust plan in accordance with their agreement with the Department. During the process of discontinuance, no certificate holder requested conversion coverage under Section 627.6675, Florida Statutes. Section 627.6675, Florida Statutes, provides that an insured may assert his or her right to a "converted policy," which provides for certain health insurance continuation rights. The Department determined that United's rate for the conversion policy, pursuant to the agreement, was within 200 percent of the standard risk rate and that the notice of the conversion privilege was contained in the certificate of coverage issued to Florida residents. Thus, the Department concluded that United was in compliance with the agreement of January 14, 1999. On May 19, 1999, a Department letter informed a consumer that the discontinuance of her coverage by United did not mean she was being discriminated against because the policy had been terminated for all members. The letter further recited that the Department did not have the ability to regulate United because it was not domiciled in Florida and her insurance was being provided to a group, referring to TNI, that was not registered in Florida. On July 27, 1999, a Department letter informed a consumer that United had an obligation to offer a replacement policy but that United had the right to underwrite the policy and charge additional premium. This statement also referred to TNI. Section 627.6425(1), Florida Statutes, provides that "except as otherwise provided in this section, an insurer that provides individual health insurance coverage to an individual shall renew or continue in force such coverage at the option of the individual." For the purpose of the aforementioned Section, the term "individual health insurance" means health insurance coverage, as described in Section 627.6561(5)(a)2, Florida Statutes, offered to an individual in the state, "including certificates of coverage offered to individuals in the state as part of a group policy issued to an association outside this state. " As noted earlier, Section 627.6425, Florida Statutes, is one of the statutes enacted in Florida which implemented HIPAA. HIPAA provides for continuation of health insurance of an insureds health policy but does not limit the premiums which an insurer can charge for coverage. Although Section 627.6425, Florida Statutes, does not have the words "guaranteed renewable" contained within the statute, the gist of the statute is that if a person has a health policy, the person has the right to continued coverage. The Department contends that the statute also means that there can be no reclassification or movement between classes at the time of renewal. On March 30, 2000, the Department notified United that it believed the discontinuance of Prescription For Good Health Trust plan, in accordance with the January 1999 agreement, may have violated Section 627.6425, Florida Statutes. A Department publication dated January 4, 2001, entitled, "The Florida Health Insurance Market, Issues and Possible Market Reform Measures," noted that there are "an increasing number of carriers attempting to establish HIPAA eligible individuals as a separate rating class with premium charges ranging from 300 to 500 percent of standard rates. While the Department has found such a rating practice to be in violation of the Florida Insurance Code, many carriers have continued to protest this interpretation. Carriers contend the surcharge practice is both actuarially sound and interpreted as a HIPAA permissible practice by other states." In the 2001 legislative session, the Department sought additional regulatory authority concerning out-of-state group insurers, such as United, along with numerous other changes to the Florida Insurance Code which are unrelated to the issues addressed in this Order. The Florida Legislature failed to approve the requested legislation. Tier rating When a group health policy is underwritten, the members of the group may be divided into classes. The classes are based on risk, which is a function of the probability of claims and the cost of claims. Classes may be denominated, for example, as preferred, manual, and substandard. Very healthy persons are put in the preferred class and pay lower premiums relative to other classes. Average persons are put in the manual class because the likelihood and cost of claims may be average. Persons who for actuarial reasons are determined to have an above-average likelihood of claims and whose claims are apt to be costly, are placed in the substandard class. It, perhaps, goes without saying that the individuals in the substandard class must pay higher premiums for the same coverage as others in the group. If the group health policy is guaranteed renewable, certificate holders may continue their coverage. However, premiums within a class can be increased. It is general industry practice to increase the premiums by class when the time for renewal occurs, if the loss experience is such that there is a requirement to increase premiums. As earlier noted, the Department asserts that only by raising premiums for an entire class may premiums be raised. The Department insists that this requirement is part of the definition of "guaranteed renewable." It became United's practice to move insureds between classes. Therefore, for instance, if a person in the group who had been a member of the preferred class experienced the need for costly medical services, then that person might be moved to the manual or substandard class. This would inevitably result in that person paying an increased premium. On the other hand, a person in the substandard class, who was subsequently determined to be a good risk, might be moved to the preferred or manual class and experience reduced premiums as a result. When a substandard class becomes populated with persons who cause the payment of costly claims, premiums increase within that class. Premiums may increase to the point where persons egress the plan, which leaves the class with fewer and sicker members. Eventually, under such a plan, there will be no members, because the premiums will inflate to the point that the benefits, in relation to the amount of the premium, will render the plan uneconomical. This sequence of events is often referred to as the health insurance "death spiral." One of the asserted evils which the Department seeks to combat in the Complaint is the "death spiral." HIPAA eligibles In 1996, when HIPAA became law and Florida enacted laws to implement it, a practice sometimes referred to as "rating up" occurred among some carriers in the industry. As noted earlier, HIPAA and the state statutes implementing it, guarantee that an individual, who through no fault of his own, loses his or her group health insurance coverage has the opportunity to obtain substitute health insurance. A person in this category is referred to as HIPAA eligible. Companies providing insurance under these laws are cognizant of the fact that persons in good health generally decline to purchase this type of insurance but that persons who are in bad health, and who will, therefore, likely have costly claims, will purchase it if they can afford it. This results in a desire on the part of insurers, to charge higher premiums for HIPAA eligible persons than they might charge persons in a comparable, non-HIPAA plan. It is a permissible underwriting practice to take into consideration age, health, and a myriad of other actuarial considerations when developing premium rates for HIPAA eligibles. If an insurer factors in the knowledge that unhealthy persons are more likely than healthy persons to obtain a policy based on HIPAA and charge higher premiums as a result, then "rating up" occurs. The Department contends in its Complaint that "rating up" is discriminatory and, therefore, forbidden by the Unfair Insurance Trade Practices Act (UITPA), Section 626.951, et seq., Florida Statutes. United allegedly arrives at rates for HIPAA eligibles solely based on the fact that the individuals are HIPAA eligible which if true, would be "rating up." Immediately prior to April 30, 1998, the Department received a memorandum from the federal Health Care Financing Administration addressing three general problems with insurance practices regarding HIPAA eligibles. One of the three problems addressed in the memorandum was the practice of "rating up." In response, the Department issued Informational Memorandum 98-103M on April 30, 1998, addressing the three problems. The Department announced that it had concerns similar to that of the Health Care Financing Administration, and would address them in administrative rules implementing HIPAA and Chapter 97-179, Laws of Florida. However, no rules addressing these concerns have been adopted. Insurance carriers disagree with the Department as to whether "rating up" is unfairly discriminatory and therefore a violation of the UITPA. The Department is addressing these differences on a case-by-case basis in the course of market conduct examinations. The evidence adduced at the hearing did not elucidate exactly what "addressing these differences on a case-by-case basis in the course of market conduct examinations" means. Count Three in the Complaint represents the first time an administrative action has been brought against an insurer addressing this practice. The definition of guaranteed renewable Chapter 4-149, Florida Administrative Code, is entitled "Filing of Forms and Rates for Life and Health Insurance." Rule 4-149.006(4)(o)3, Florida Administrative Code, provides for a definition of "guaranteed renewable." However, Chapter 4-149, Florida Administrative Code, does not address out-of-state group health insurers, such as United, because the Department has no authority to require the filing of forms and rates in the case of out-of-state health insurers like United. A life and health insurance treatise written by Black and Skipper states that the definitions of the categories of renewable health insurance policies are not uniform among the states. It is the Department's position that Section 627.6425, Florida Statutes, applies to out-of-state trusts, such as United's Prescription For Good Health Trust, even though the word "trust" is not used in the statute. It is apparent that if there is no limit on the amount of premium a health insurer can charge at the time of renewal, a guarantee of renewal can be meaningless. This fact is ameliorated by rate-setting in the case of highly regulated health insurers such as domestic insurers. In the context of this case, it is not the renewability of a policy that is the gist of the problem. Rather, it is whether rates can be increased on persons through the movement of insureds from one class to another. The allegations of the Complaint In order to determine which statements are alleged to be unadopted rules, it is necessary to refer to Counts Two through Seven of the Complaint. These counts will be summarized, in seriatim. Count Two alleges that persons who continued their participation in TNI were unlawfully and unfairly discriminated against because some members were reclassified based on their health status present at that time (1999), rather than being retained in the class in which they resided when the policy was initially issued. The Petition alleges, inter alia, that this practice violated Section 626.9541(1)(g)2., Florida Statutes, which is a section in the UITPA. This statement is alleged in the Petition to be a statement of general applicability. Count Three alleges that all of those individuals formerly covered through the Prescription For Good Health Trust who were at the time of their discontinuance HIPAA eligible, were, arbitrarily and without regard to health status, assigned a premium rate of either three or five times the base rate for TNI as a whole. Count Three alleges that this assignment unfairly discriminated against the HIPAA eligible individuals who were of the same actuarially supportable class and essentially the same hazard. Count Three further alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes. This statement is alleged in the Petition to be a statement of general applicability. Count Four alleges that the enactment of Section 627.6425, Florida Statutes, in 1996, as amended in 1997, statutorily determined that the Prescription For Good Health Trust plan was "guaranteed renewable" as that term is used and understood in the insurance industry. It further alleged that the term "guaranteed renewable” means that once an insurer classifies an individual as a member of an actuarially supportable class for rate and premium applicable to the specified coverage, that individual may not thereafter be charged a premium which is different from any other member of the same class and cannot be moved to another class. The complaint states that United unlawfully moved insureds from one class to another. Count Four additionally alleged that when United discontinued the Prescription For Good Health Trust, the prerequisite for individuals to obtain renewed health insurance coverage was reclassification of some of those individuals to different actuarially supportable classes based on their health status then pertinent to those individuals. It was further alleged that higher premiums were charged to approximately 70 percent of those who renewed or continued, and that premium increases of 200 percent to 300 percent were experienced. Count Four asserted that Section 627.6425(3), Florida Statutes, prohibits such reclassification. Count Four also alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes, because such reclassification was discriminatory. This statement is alleged in the Petition to be a statement of general applicability. Count Five alleges that on the one year anniversary of renewal with TNI, United unlawfully reclassified additional individuals which resulted in a premium increases of up to 60 percent. Count Five alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes, because this action was discriminatory. This statement is alleged in the Petition to be a statement of general applicability. Count Six alleges that within the tier blocks described in Count Two, United unlawfully established numerous sub- classifications based on health related factors pertinent to each individual within that class. It is alleged in the Complaint that these sub-classifications resulted in individuals within the same class being charged a different premium than are other members of the class. Count Six alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes, because this action was discriminatory. This statement is alleged in the Petition to be a statement of general applicability. Count Seven alleges that United used a point debit system where an arithmetic number of points are assigned to a corresponding health hazard. The higher the cumulative debit score, the higher the premium. United will decline to insure at all if the cumulative debit score gets sufficiently high. Count Seven alleges that the assignment of points with no criteria for decision-making results in arbitrary and discriminatory point scores. Count Seven alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes. This statement is alleged in the Petition to be a statement of general applicability. In summary, the three statements alleged to be rules are: Practicing tier rating is discriminatory and violates the UITPA. Placing HIPAA-eligible individuals in a premium classification solely on the basis of their HIPAA eligible status is discriminatory and violates the UITPA. The term "guaranteed renewable" prohibits the classification of individuals in a health insurance group at a time other than at the inception of coverage.
Findings Of Fact The Petitioner, at all times pertinent hereto was an employee of the Department of Health and Rehabilitative Services. The Respondent is an agency of the State of Florida charged with administering the group self-insurance health insurance program and other insurance programs such as life insurance and is the agency charged with accepting or rejecting applications for coverage under those programs, such as the application at issue. On January 11, 1980 the Petitioner commenced employment with the State of Florida, Department of Health and Rehabilitative Services as a District Intake Counselor in District eleven of the Department. Shortly after commencing employment the Petitioner attended an orientation meeting during which all insurance benefits and other benefits available for state employees were explained. Ernestine Thurston, the HRS employee who conducted the orientation session on January 11, 1980 informed all employees present at that orientation meeting, including the Petitioner, of the available benefits and the means by which they were to avail themselves by proper application, of those benefits, including the fact that the Petitioner had thirty days to enroll in the State Group Health Insurance Program without the necessity of obtaining medical approval for insurability. A second orientation meeting was held during which insurance benefits were explained for a second time to the employees whose names were depicted on the recruitment log, which names include the Petitioner 's. The Petitioner was present at both orientation sessions. At the first orientation session on January 11, 1980 the Petitioner received an HRS Employee Handbook which included the following language concerning insurance benefits: "Employees may enroll within 30 days of date of employment without evidence of insurability. "Application at a later date requires proof of insurability. Consult your supervisor, personnel manager, or district/central personnel office for additional information." The Petitioner admitted that she signed a receipt on January 11, 1980 acknowledging receipt of a complete copy of that Employee Handbook and which receipt included the following language: "I understand that it is my responsibility to review the pamphlet in detail and request any clarification needed from my supervisor or personnel office." Petitioner conceded that she did not read the pamphlet or handbook, but instead put it in her desk drawer at her office. On January 14, 1980, knowing of the need to apply for insurance benefits within 30 or 31 days of her employment during the open enrollment period, the Petitioner applied for various insurance -overages and submitted the pertinent enrollment forms through her District 11 personnel office. She applied for and received State Supplemental Health Insurance coverage through the Gulf Life Insurance Company (then called the "20/20" plan). This supplemental health insurance coverage was designed to complement the overall state group health insurance program or plan. The Petitioner at that time was covered under the overall state group health insurance plan (The Plan) through her husband's family coverage since he was an employee covered under that plan at the time. The Petitioner also timely applied for and received coverage under the state life insurance program as well. The Petitioner did not submit a new enrollee form requesting to participate in the State of Florida Employee's Group Health Self Insurance Plan within 31 calendar days of January 11, 1980. The Hearing Officer has considered the Petitioner's testimony as well as that of Ms. Thurston and the other evidence surrounding the circumstances of her initial employment, the explanation of insurance coverage benefits, including the time limit for the open enrollment without medical approval which the Petitioner did not avail herself of insofar as the group health self-insurance plan is concerned. The Petitioner did not apply for the overall group health self-insurance plan because she was already covered under that plan through her husband's coverage and not because, as Petitioner maintains, that it was never explained that she had 30, or actually 31, calendar days from January 11, 1980 to apply for that plan. Indeed it was explained to her as Ms. Thurston established and Respondent admits receiving the handbook further explaining the time limit to apply for that coverage without medical approval. She signed a receipt acknowledging her responsibility to read that pamphlet or manual and ask for clarification, if needed, concerning coverage benefits and she admitted that she did not read it. Thus it is found that at the time of her initial employment all pertinent insurance benefits and entitlements were explained to the Petitioner both verbally and in writing and she failed to avail herself of the automatic coverage provision referenced above in a timely way, for the reason stated above. In any event, on July 28, 1980 the Petitioner elected to submit a new enrollee form which was submitted with a medical statement form requesting participation in the State Plan. After correspondence with the State Plan administrator requesting additional medical information, on October 22, 1980 the Department of Administration, by letter, advised the Petitioner that she had not been approved by the plan administrator and she was denied coverage for medical reasons. Accordingly, on October 24, 1980 the Petitioner enrolled in the South Florida Group Health, Inc. Plan which is a health maintenance organization plan (HMO) and she was allowed enrollment in that plan without regard to her current medical condition. The Petitioner remained enrolled in the HMO and requested and was granted leave of absence without pay from her employment position commencing May 29, 1981. Her employing agency advised her that it was her individual responsibility to forward premium payments for the HMO health insurance premiums as well as the state life insurance coverage herself. In other words, she was to pay by cash or her own personal check for this coverage during the time she was not being paid by the state, that is, the premiums for that coverage were not being payroll deducted because she was temporarily off the payroll. Her employment with the State did not lapse during this period commencing May 29, 1981, rather she remained employed, but was on leave without- pay status. The Petitioner knew of her responsibility to pay the premiums for the HMO coverage and the state life insurance coverage itself during the period she was on leave of absence without pay as evidenced by the check she and her husband submitted in June 1981 to pay the premiums on her state life insurance coverage. The Petitioner and her husband moved from Miami to Fort Myers during early June 1981 and the Petitioner remained on leave of absence without pay. When her husband changed employment and moved to the Fort Myers area in June 1981 the Petitioner was a covered dependent under the health insurance coverage available to her husband through his new employment. I n August 1981 the South Florida Group Health, Inc., the HMO in the Miami are of which Petitioner was a member, terminated the Petitioner's health insurance coverage effective August 1, 1981 due to the Petitioner's failure to pay the premiums for that coverage. Shortly thereafter the Petitioner interviewed with personnel officials of HRS in District 8 in Fort Myers and obtained an employment position as a district intake counselor for District 8. She became an active payroll employee of HRS in District 8 by transfer in August 1981. Before the effective date of her transfer the Petitioner was interviewed by Judy Graham, an HRS employee assigned to process her transfer from her former active employment in District 11 in Miami. The Petitioner failed to advise Judy Graham at the time of the interview of her HMO coverage, merely inquiring of Ms. Graham concerning the details of continuation of her state life insurance coverage and concerning her credit union membership. Thereafter, more than 31 calendar days after the effective date of her transfer, (August 24, 1981), indeed, in excess of two years later, the Petitioner completed a new enrollee form again and applied for the state employee's group self- insurance plan benefits. The Department of Administration denied the Petitioner participation upon the determination that she was not medically approvable for insurability by the Plan's claims administrator, Blue Cross and Blue Shield of Florida, Inc. In any event, the Petitioner's continuous employment with the state and with HRS had never lapsed since she was initially hired January 11, 1980. She was merely on inactive/leave-without-pay status as a state employee from May 29, 1981 until August 24, 1981, as that relates to any right to a second 31-day open enrollment period.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties it is, therefore, RECOMMENDED that a final order be entered by the Department of Administration denying the Petitioner's requested enrollment in the State Group Health Insurance Plan without medical approval. DONE AND ORDERED this 31st day of December, 1985, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of December, 1985. APPENDIX The following specific rulings are made on the Proposed Findings of Facts submitted by the parties: Petitioner's Proposed Findings of Fact Accepted. Accepted, but subordinate and not material to disposition of the issues at bar. Accepted, but subordinate and not material to disposition of the issues at bar. Accepted, but subordinate and not material to disposition of the material issues at bar. Rejected as not being in accordance with the competent, substantial, credible testimony and evidence adduced. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Rejected as not being in accordance with the competent, substantial, credible testimony and evidence adduced. Accepted, but this Proposed Finding of Fact in itself is not dispositive of the material issues of fact and law resolved herein. Accepted. Rejected as not in accordance with the competent, substantial, credible evidence and testimony adduced. Accepted. Accepted. Respondent's Proposed Findings of Facts The Respondent failed to number its Proposed Findings of. Fact, therefore its Proposed-Findings of Fact will be specifically ruled upon in the order the various paragraphs containing its Proposed Findings of Fact were presented. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. COPIES FURNISHED: Gilda Lambert Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32301 Curtright C. Truitt, Esq. Post Office Box 2706 Ft. Myers, Florida 33902 Richard L. Kopel, Esq. Department of Administration 435 Carlton Building Tallahassee, Florida 32301
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: At all times relevant to this proceeding, respondent William J. Hartnett, Sr. was licensed as an ordinary life including disability, general lines, surplus lines and disability insurance agent. He has been in the insurance business since 1942 and was first licensed in 1947. Respondent originally organized the Southern American Fire Insurance Company. For the first year or so, he was its sole employee on a nonsalary basis and was nonsalaried for the first ten years of the company's operation. From 1965 on, respondent did not hold a 220 lines license with Southern American, as he did with other insurance entities. Respondent did not sign policies as agent for Southern American. With Southern American, respondent acted as a general agent and was authorized by the board of directors to receive a five percent override commission on the total volume of business. On or about October 27, 1975, a seizure order was entered by the Circuit Court of Leon County which directed the Florida Department of Insurance to take over the business and financial affairs of Southern American. This company has since gone into liquidation pursuant to Chapter 631, Florida Statutes. The Southern American March 31 and June 30, 1975, quarterly statements were prepared by Mr. R.L. Huard, the then assistant treasurer of Southern American, were signed by the respondent, and were filed with the Department of Insurance. The work papers for those statements had been approved by the respondent. Mr. Huard had been instructed by respondent when he was first hired in 1972 not to show on the quarterly statements the over 90-day old balances because they would all be "cleaned up" at the end of the year. Such balances had, in fact, been paid at the end of each of the two years that Mr. Huard was with the company up until the time the Department took over in 1975. It was the respondent's testimony that had the seizure order not been entered, the agencies' lines of credit would still have been open and that all balances could have been collected through September of 1975. The March 31, 1975, and June 30, 1975, quarterly statements of Southern American filed with the Department of Insurance reflected a substantial amount of agents' balances that at the time of reporting were over 90 days old. The elimination of such balances from those two statements would have left Southern American impaired under usual insurance accounting practices as reflected in the Florida Statutes. The over-90 day old agents' balances were due from agencies in which respondent had an interest as an officer, director or stockholder. In 1969, various officials of the Department of Insurance had discussions with the respondent regarding agents' balances which were over ninety days old. On or about December 28, 1973, respondent did deposit the proceeds of certain reinsurance treaties in the amount of $13,218.98 into the account of Southern American. This findings is determined from the testimony of respondent and from a copy of the check and a deposit slip received into evidence as Exhibit M. The deposit slip illustrates that the $13,218.96 check was one of two checks comprising a total deposit of $30,857.12. As a result of information made available to the parties shortly before the hearing, it was stipulated that there never was a direct reinsurance treaty between Southern American and Cottonbelt Insurance Company. It was further stipulated that Southern American did submit single risk policies on a facultative basis through General Aviation Insurance Brokers for Southern American to D.O. Howell and Company, Ltd., in London, England, which in turn placed policies so submitted with Cottonbelt through other brokers. The Department offered no other evidence concerning the checks amounting to $16,600.00 referred to in Count V. As noted above, respondent was authorized by the board of directors to receive as general agent for Southern American a five percent override on all premiums. He was also authorized to receive an annual salary and certain bonuses. For the years 1974 and 1975, respondent did not receive his total annual salaries. The total premium written in Southern American through North Star Insurance Agency from 1968 through 1975 was approximately $700,000.00. Monies owed Southern American by North Star were paid by checks made payable to the respondent, as agent. In his capacity as general agent of Southern American, respondent did receive funds in the approximate amount of $45,000.00 from subagent North Star in payment of premiums due Southern American on policies of insurance issued by Southern American through North Star. Such funds were not deposited into the account of Southern American by respondent, but were instead retained by respondent as an offset against commissions end salary due him from Southern American. This occurred in 1975. When the seizure order was entered in October of 1975, the monies due Southern American from North Star were carried on the books of Southern American as accounts receivable.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is RECOMMENDED that the licenses of respondent to engage in the business of insurance be suspended for a period of six (6) months. Respectfully submitted and entered this 10th day of July, 1979, in Tallahassee, Florida. COPIES FURNISHED: Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol Tallahassee, Florida 32301 S. Strom Maxwell, Esquire Department of Insurance Suite 428-A, Larson Building Tallahassee, Florida 32301 Robert J. Kelly, Esquire Rogers, Towers, Bailey, Jones and Gay Post Office Box 1872 Tallahassee, Florida 32302 DIANE D. TREMOR 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 10th day of July, 1979.
