Findings Of Fact The Respondent, Emory Daniel Jones, was not involved or engaged in the insurance business prior to August, 1977. (Tr. 177.) In approximately August of 1977, United Sun Life Insurance Company (USL) hired Respondent as an agent. (Tr. 176, 177.) Respondent passed the insurance test administered by the State of Florida in August, 1977, and was scheduled for a seminar given by USL. (Tr. 178.) In late August, 1977, Respondent attended a three-day seminar established by USL for all its new agents. (Tr. 178.) At this seminar, USL taught the agents about a policy known as T.O.P. This was the only policy taught to the agents even though USL had other policies available. (Tr. 128.) The T.O.P. contract is a life insurance policy. This policy has two primary benefits. (Tr. 230, 231.) The first is the death benefit provided by all life insurance policies. Under the death benefit provision, the owner of the T.O.P. pays a premium to USL. When the insured dies, USL will pay the death benefit (money) to the beneficiary listed on the policy. (Tr. 128, 251.) The second major benefit provided by the T.O.P. is the life benefit feature. (Tr. 251.) The T.O.P. is an insurance policy which provides for the payment of dividends to the owner of the policy. The T.O.P contract states that the owner will share in the divisible surplus earnings of USL as determined by the Board of Directors. (Tr. 120; contract page 5, Exhibit #3.) The dividends were to be paid after the second year. (Tr. 129, 130.) The owner would participate in the divisible surplus earnings of USL through the payment of a dividend. (Tr. 129, 188.) As long as the T.O.P. was in effect, the owner would receive these dividends. USL developed a presentation to be given by the agents to prospective customers. This presentation was taught in the training session by USL. (Tr. 183, 249, 260, 270.) The agents were to memorize the presentation and were not to vary from the wording when they were attempting to sell the T.O.P. to prospective customers. (Tr. 185, 249.) The presentation taught by USL stressed the life benefit feature of the T.O.P. contract. (Tr. 251, 271.) The death benefit was only minimally covered because of the relatively high cost for the life insurance portion of the contract. This presentation further explained several features which made the T.O.P. contract life benefit provisions attractive to future customers: The T.O.P. contract owner was to participate in the divisible surplus earnings of USL. The only other persons that would also participate in the divisible earned surplus were the shareholders. (Tr. 196.) The T.O.P. contract was to be sold only to a limited number of people. After an undisclosed number of T.O.P. contracts were sold, the T.O.P. contract was to be taken off the market. (Tr. 234, 261, 276.) USL was not going to sell or issue any other policies which would participate in the divisible earned surplus of USL. (Tr. 234, 255, 261, 276.) USL would grow (increase its divisible earned surplus) by selling policies other than the T.O.P. contract. The more policies that were sold, the greater the divisible surplus earnings that would be available to the T.O.P. contract owners for dividends. (Tr. 196, 276.) Since the T.O.P. owners were limited and no other participating policies were to be issued, the T.O.P. owners would share in any increases in the divisible surplus earnings of USL. The greater the number of policies sold, the greater the dividends. The T.O.P. owners were then solicited to help the agents sell insurance policies of USL to their friends. This help would reduce the cost of advertising and increase the sales of insurance. The lower expenses and greater volume would mean more divisible surplus earnings in USL and greater dividends available to the T.O.P. owners. (Tr. 201.) To illustrate these points, USL taught the agents to draw circles representing other insurance policy owners. Lines were then drawn from these circles to the T.O.P. owner's circle. The lines between the circles represented the premiums paid on the other policies, which would increase divisible surplus earnings that would increase the dividends of the T.O.P. owners. (Tr. 196, 232, 263, 270.) USL taught the agents to illustrate the features of the life benefit by dollar signs. As the agent would talk about the other policies increasing the dividends to the T.O.P. owners, he was to increase the size of the dollar sign. (Tr. 233.) The whole emphasis of this presentation was on the participating feature. Another feature emphasized in the USL presentation was that the T.O.P. owner would participate in the divisible surplus earnings of USL as long as he was alive. Therefore, the agents were to stress that the T.O.P. owner should be a younger person in the family. If that person lived 70 years, then USL would pay dividends for 69 of those 70 years. This feature of the policy was stressed in the memorized presentation. (Tr. 204, 205, 232, 233, 252, 264, 270.) In late August of 1977, Respondent attended the training session and memorized the presentation. (Tr. 181, 184, 185.) At the end of the training session, USL reviewed the Respondent's presentation and found nothing wrong. (Tr. 187.) In late August of 1977, Respondent went into the field to sell the T.O.P. contract to potential customers. (Tr. 187.) Count I On September 7, 1977, Respondent met with Louis Charles Morrison and made the USL presentation on the T.O.P. policy to Morrison. Respondent made the presentation in the way he had been taught. Morrison was aware that he was purchasing an insurance policy. He was led to believe through USL's sales presentation as given by Respondent that the participating feature of the T.O.P. policy made this policy a good investment. Morrison concluded it was not a good investment because the dividends were not as great as he had anticipated they would be. Respondent's representations to Morrison with regard to the T.O.P. policy were not false. Count II On September 12, 1977, Respondent met with Fred Menk and gave to him the USL presentation on the T.O.P. policy. Respondent gave the presentation as he had been taught. Menk was aware that he was purchasing insurance. (Tr. 51.) Respondent made no representation about future dividends. (Tr. 59.) The interest rate was represented to increase as USL grew, which it did. (Tr. 59.) Menk was dissatisfied and felt the policy was misrepresented because he did not get the rate of return he had anticipated. (Tr. 59.) According to Menk, Respondent's representations made with regard to interest rate increases were accurate, and Respondent made no representations regarding future dividends. Count III Respondent met with Paul Loudin in September of 1978, and gave him the USL presentation on the T.O.P. policy as Respondent had been taught. Loudin was aware he was purchasing insurance. (Tr. 21, 26, 27, 31.) His interest was in life insurance and retirement compensation. (Tr. 36.) In part, Loudin's dissatisfaction was the belief he had lost his money because he did not receive a dividend on his first year's premium. The policy reflects that no dividends are payable in the first year. (Respondent's Exhibit #7.) A copy of the policy was provided to Loudin by Respondent. (Tr. 45.) Loudin also anticipated a dividend of 12 to 18 percent on his premiums based upon Respondent's general comments. However, he did not remember the exact conversation with Respondent. (Tr. 31, 32, 38, 39.) Loudin received a letter from USL which reflects a dividend history based upon an 18-year-old insured with an annual premium of $1,000 as follows: End of 2nd year $100.35 End of 3rd year 130.66 End of 4th year 162.86 The rate of return in the fourth year would be 11.6 percent on the fourth year's premium. The representations made to Loudin by Respondent were substantially true, or the relevant information was made available to Loudin by the Respondent. Count IV On November 30, 1977, Respondent met with Gayle Mason and gave the USL presentation on the T.O.P. policy as he had been taught. Mason knew she was purchasing insurance. (Tr. 107.) Respondent represented that the number of participants in the T.O.P. policy would be limited. (Tr. 108.) The current rate of return was taken by Respondent to be 11 percent, and it was represented that the return could be more. (Tr. 109.) Dividends were to be paid from surplus earnings. (Tr. 114.) Mason called the Better Business Bureau and the State Insurance Commissioner's office, and she was aware that USL was an insurance company and she was engaged in an insurance transaction. (Tr. 115.) Respondent represented that as USL grew, the dividends would increase. (Tr. 118.) Mason received a dividend in the second year in accordance with the policy. The representations made to Mason by Respondent were true or thought by Respondent to be true.
Recommendation Having found the Respondent, Emory Daniel Jones, not guilty of violating any of the statutes or rules as alleged, it is recommended that the Administrative Complaint against Respondent be dismissed. DONE and RECOMMENDED this 17th day of January, 1983, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, 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 17th day of January, 1981. COPIES FURNISHED: David A. Yon, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 Paul H. Bowen, Esquire 600 Courtland Street, Suite 600 Post Office Box 7838 Orlando, Florida 32854 The Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32301
The Issue The issues are whether Respondent's licenses as an insurance agent should be disciplined, and if so, what penalty should be imposed.
Findings Of Fact At all times relevant to these proceedings, Respondent was eligible for licensure and licensed in Florida as a life insurance agent and a life and health insurance agent. Respondent has been licensed to sell insurance for 23 years. He has no history of a prior disciplinary action being filed against his licensure. Over the years, Respondent has won several awards in his profession. Counts I and II In March 1985, Respondent sold Joel and Kay Majors a whole life insurance policy, Sun Life Assurance Company of Canada (Sun Life) policy No. 9007333. This policy, with a specified face amount of $200,000, insured the life of Joel Majors. The monthly premium on this policy was $258.83. In June 1989, Respondent sold the Majors a last- survivor whole life insurance policy, Sun Life policy No. 5978802. The purpose of the second policy, with a face amount of $500,000, was to pay estate taxes after the death of the last survivor of Mr. and Mrs. Majors. The annual premium on this policy was $4,585.00. Respondent represented to the Majors that the policy premiums on the second Sun Life policy, policy No. 5978802, would be paid using accumulated cash and dividends from the first Sun Life policy, policy No. 9007333. Respondent explained to the Majors that they would never have to pay out-of-pocket premiums on the second policy. Based on Respondent's representations, the Major's believed that Sun Life policy No. 9007333 would generate sufficient cash and dividend values to pay the premiums on Sun Life policy No. 5978802. Respondent did not explain to the Majors what it would mean for them to use the cash value of one policy to pay the premiums on another policy. The cash value of a whole life insurance policy is essentially the amount the policy owner may borrow against that policy. Because the cash value is determined by the amount the policy owner has paid on the policy, use of the cash value is an interest-bearing loan to the policy owner. The loan does not have to be repaid at any particular time, but in the event of a claim or surrender of the policy, proceeds from the policy are reduced by the amount of the loan plus outstanding interest. In November 1991, Respondent sold the Majors a third whole life insurance policy, Sun Life policy No. 9247770. This policy insured the life of Joel Majors in the face amount of $200,000. The Majors never received a copy of this policy. The monthly premium on this policy was $404.83. Each year, when the annual premium for Sun Life policy No. 5978802 was due, Respondent presented Joel Majors with blank forms entitled Policy Service Request. Joel Majors signed the forms without realizing that they authorized interest-bearing loans to be taken out of the cash value of policy No. 9007333 and on one occasion out of policy No. 9247770. These loans were made without the knowledge or informed consent of the Majors. Respondent never mentioned the word "loan" to the Majors. The Majors would never have purchased the Sun Life policy No. 5978802 with the understanding that the premium would be paid with interest-bearing loans from their other policies. All annual premiums on Sun Life policy No. 5978802, except one annual premium, were paid from loans made against Sun Life policy No. 9007333. Page 6 of Sun Life policy No. 9007333 states as follows in relevant part: Interest on all policy loans will accrue from day to day at the rate of 8 percent per annum, and shall be due and payable on each policy anniversary. Any unpaid interest will be added to the principal amount of the policy loan and will bear interest at the same rate and in the same manner as the policy loan. We will accept repayment of any policy loan at any time before the maturity of this policy. When the policy proceeds become due, we will deduct the balance of any outstanding policy loans and accrued interest on such loans, from that amount. If your policy loan balance ever equals or exceeds the net cash value, this policy will terminate 31 days after we mail notice to your last known address . . . . One loan was made against Sun Life policy No. 9247770. According to page 6 of the Sun Life policy No. 9247770, the company sets the policy loan interest rate annually according to the provisions contained therein. The Majors were not aware that any funds from this policy would be used to pay premiums on any other policy. Sometime in 1997, the Majors learned about the loans on policy Nos. 9007333 and 9247770. They realized for the first time that loans were used to pay the premiums on Sun Life policy No. 5978802. The Majors never intended to authorize interest- bearing loans that would deplete the death benefit of one policy to pay policy premiums on another policy. Respondent testified at the hearing that loans from Sun Life policy Nos. 9007333 and 9247770 were used to pay the premiums on Sun Life policy No. 5978802. However, his testimony that the loans were made with the knowledge or informed consent of the Majors is not persuasive. The Majors were not knowledgeable about insurance policies. They placed their trust in Respondent to handle their insurance transactions. Often the Majors did not open mail from the insurance company containing statements about their policies. Count III In July 1990, Respondent sold the Majors a flexible premium deferred annuity, Financial Benefit Life Insurance Company (Financial Benefit) policy No. 818249, with a maturity date of July 13, 2010. The initial deposit for the annuity was $25,000. Later in the year, the Majors deposited an additional $10,000 in the annuity. Respondent promised the Majors that if the interest rate on the annuity dropped, he would "roll-over" the annuity to obtain a higher rate. Respondent also promised that he would pay any penalties associated with the transaction. Respondent did not explain the definition of a "roll-over" to the Majors. In February 1994, Respondent withdrew a portion of the funds (the $10,000 contribution plus accumulated interest) from the Majors' Financial Benefit annuity, policy No. 818249. He used the funds to purchase the Majors a second annuity, Financial Benefit policy No. 707450, with an initial contribution in the amount of $12,503.43. Although the second annuity had a higher interest rate, Respondent made this purchase without the Majors' knowledge or informed consent. Respondent received a commission on this unauthorized transaction. Financial Benefit issued the second annuity but a copy of the policy was never delivered to the Majors. Respondent never disclosed its purchase to the Majors. In 1996, the Majors complained to Respondent that the interest rate had dropped on what they believed was their one Financial Benefit annuity. At that time, the original annuity was worth the initial $25,000.00 contribution plus interest or approximately $33,000.00. Respondent requested the surrender of the remaining funds in the original annuity, Financial Benefit policy No. 818249, to purchase the Majors a third annuity, Financial Benefit policy No. 712937. Financial Benefit assessed a surrender charge in the amount of $2,250.00. Subsequently, on October 10, 1996, Financial Benefit issued policy No. 712937 to the Majors with an initial contribution of $33,477.60 and an October 10, 2016, maturity date. Respondent purchased the third annuity without the knowledge or informed consent of the Majors. The Majors did not receive a copy of the third annuity. Respondent received a commission on this unauthorized transaction. The Majors were not aware that Respondent had purchased the second and third annuities. They continued to believe that they had only one annuity, the one purchased in 1990, which had been "rolled over" to obtain a higher interest rate. However, they eventually became aware of the $2,250.00 surrender charge assessed by Financial Benefit. They complained to Respondent and reminded him of his promise to pay all penalties. Respondent then purchased two money orders from Capital City Bank in the total amount of $2,250.00. Respondent mailed the money order to Financial Benefit with instructions for the company to deposit the funds into the annuity. Knowing that the insurance company would not permit Respondent to make personal contributions to the Majors' annuity, Respondent signed the name of Joel Majors on the money orders. Joel Majors had no knowledge of the money orders and did not authorize Respondent to sign his name. If the Majors had known that Respondent was going to "roll-over" their original annuity by using its funds to purchase two new policies with different maturity dates, they would never have agreed to the transactions regardless of higher interest rates. Instead, they would have let their original policy mature and take their money out for placement in another investment vehicle. Counts IV and V In 1985, Respondent sold Joel and Kay Majors a $50,000.00 life insurance policy, Sun Life policy No. 9009995D. The policy insured the life of the Majors' son, Timothy Majors. About ten years later, Esther Majors, wife of Timothy Majors, was employed as a travel agent. As a full-time employee, Esther Majors was entitled to $110.00 per month from her employer's benefit plan. The money was available to Esther Majors for savings because she did not need to participate in her employer's health insurance plan. Esther Majors could use the money to purchase an Individual Retirement Account (IRA) or other comparable investment. Timothy and Esther Majors sought Respondent's assistance in setting up an appropriate investment for Esther Majors' funds. Respondent first met with Esther Majors' employer to discuss the retirement account. The employer and Respondent discussed using the money to fund a self-directed IRA or annuity that could be rolled over later if Esther Majors changed jobs. Respondent also met with Timothy and Esther Majors. They discussed setting up what Timothy and Esther Majors believed would be an IRA with a monthly contribution of $110.00 for as long as she worked full-time for the same employer. Respondent did not set up the IRA for Esther Majors. Instead, in January 1995, Respondent submitted an application to Time Insurance Company (Fortis) for an adaptable life insurance policy insuring the life of Esther Majors and naming Timothy Majors as the beneficiary. Respondent submitted the application without the knowledge or informed consent of Timothy and Esther Majors. Esther Majors either did not read the application when she signed it or did not understand that she was signing an application for life insurance as opposed to an IRA annuity. Respondent requested that Fortis issue the policy with a face amount of $69,533.00 and with a monthly premium in the amount of $110.000. Fortis issued the policy as policy No. 985698. Timothy and Esther Majors never intended to purchase a life insurance policy. Respondent did not discuss life insurance with Timothy and Esther Majors at any time. Esther Majors could have purchased life insurance through her employer. Thus, Respondent misrepresented the nature of the insurance product that he sold to Timothy and Esther Majors. On or about July 15, 1995, Timothy Majors informed Respondent that Esther Majors would temporarily cease making the $110.00 contribution to what he believed was Esther Majors' IRA because she was going to college and would no longer be working full-time as a travel agent. Timothy Majors assured Respondent that, upon graduation, Esther Majors intended to resume payments and roll her IRA over to a new employer. Respondent replied that Timothy and Esther Majors needed to continue saving for their future. He also told Timothy Majors that the company where Esther's money was invested required a minimum deposit per year in order not to lose the money already deposited. Respondent asked Timothy Majors for a check in the amount of $60.00. Timothy Majors gave Respondent the check. On or about October 25, 1995, Respondent requested a loan for $270.00 to be made from Timothy Majors' Sun Life insurance policy No. 9009995D. Respondent requested this loan without Timothy Majors' knowledge or informed consent. Sun Life mailed a check payable to Timothy Majors in the amount of $270.00 to Respondent's office. Respondent then obtained Timothy Majors' signature endorsement on the check without explaining that the funds would be used to pay the quarterly premium on Esther Majors' Fortis insurance policy. Timothy Majors signed the check unaware that it represented a loan on his Sun Life insurance policy. Respondent used the Sun Life check in the amount of $270.00 and, together with Timothy Majors' check for $60.00, paid another quarterly premium on Esther Majors' Fortis insurance policy in the amount of $330.00. Neither Timothy nor Esther Majors authorized Respondent to make this payment. No further premium payments were made for Esther Major's Fortis insurance policy. Respondent never told Timothy and Esther Majors that the policy would lapse if they stopped paying the premiums. The policy was too new to have any cash value. As a result, the life insurance policy eventually lapsed. Esther and Timothy Majors lost all of the funds used to pay premiums on a life insurance policy that they never knew they owned. Count VI In 1995, Kay Majors arranged for Respondent to sell an annuity to her mother, Bernice Langford. During the initial meeting between Ms. Langford and Respondent, he was informed that Ms. Langford was born on February 5, 1918, and that her age was 77. Respondent filled out an application for a Financial Benefit flexible premium deferred annuity for Ms. Langford. Because Ms. Langford's age made her ineligible to purchase the annuity, Respondent misrepresented her date of birth as February 5, 1928, and her age as 67 on the application. Financial Benefit issued a $60,000.00 annuity, policy No. 711110, to Ms. Langford. Respondent received a commission for selling the annuity to Ms. Langford. Thereafter, Kay Majors became aware of inaccuracies in her mother's age and informed Respondent about them. Respondent indicated that he would take care of the problem. Respondent later sent a letter to Ms. Langford representing that he had notified the company about her correct age and had the records corrected. Although Financial Benefit sells annuities to people up to 100 years old, it would not have issued the annuity in question to Ms. Langford had it known her correct age. The company is aware of the age discrepancy and has not rescinded the annuity. Count VII In 1993, Respondent sold a Sun Life modified benefit whole life insurance policy, policy No. 9292231, to Cheryle Hayes Wood Burch (n/k/a Cheryle Hicks.) This policy had an initial face amount of $91,443.00 and a monthly premium of $100.00. In 1995, Respondent advised Ms. Hicks that he had found her a better policy through Fortis, with identical coverage and premium. Respondent presented the replacement policy to Ms. Hicks as if he had already switched the policies and only needed her signature on some paperwork. Respondent indicated that Ms. Hicks' Sun Life policy had no cash value. Ms. Hicks had not requested that Respondent replace her Sun Life policy. However, she trusted him to act in her best interests. Respondent told Ms. Hicks he would take care of everything. At Respondent's request, Ms. Hicks signed an insurance application dated May 16, 1995. Ms. Hicks either did not read the application before signing it, did not understand what she read, or signed a blank application form presented to her by Respondent. Subsequently, Fortis issued an adaptable life insurance policy, policy No. 994725, to Ms. Hicks. The new policy had a face amount of only $50,000, even though the premium was identical to the Sun Life policy. Ms. Hicks was not aware that her new policy had a reduced face amount. Respondent received a commission on this transaction. Ms. Hicks believed her new Fortis policy had a $100,000 death benefit. She never intended to purchase a replacement policy with only a $50,000.00 death benefit. Respondent misrepresented the terms of the replacement policy for the purpose of receiving a commission. Counts VIII and IX Respondent sold a Sun Life permanent life insurance policy, policy No. 9216228, with a face value of $33,805.00 to Faye Thompson Hoover. Sun Life issued the policy in November 1990. Respondent also sold a Financial Benefit annuity, policy No. 819862, to Ms. Hoover. Financial Benefit issued the policy in November 1990. In December 1993, Respondent urged Ms. Hoover to cancel her Financial Benefit annuity, policy No. 819862, and purchase a new Financial Benefit annuity. Ms. Hoover did not understand why she should purchase the new annuity, but she trusted Respondent and followed his advice. The new annuity was purchased and issued as Financial Benefit policy No. 707176 in January 1994. In 1996, Respondent urged Ms. Hoover to let him cancel her Sun Life policy No. 9216228 and deposit the funds into her Financial Benefit annuity, policy No. 707176. She agreed. Respondent did not cancel Ms. Hoover's Sun Life policy. Instead, he requested Sun Life to issue a loan for the maximum amount allowable for a loan against the Sun Life policy No. 9216228. Sun Life subsequently issued Ms. Hoover a check in the amount of $4,800.00, which represented a loan against the cash value of the policy. Respondent requested the loan without Ms. Hoover's knowledge or informed consent. Sun Life mailed the $4,800.00 check to Ms. Hoover. Upon receipt of the check, Respondent told Ms. Hoover that the proceeds represented the cash value of her Sun Life policy. Based on Respondent's representations, Ms. Hoover incorrectly believed that her Sun Life policy had been cancelled and that the company had sent her the policy's cash value. Respondent's representations regarding Ms. Hoover's Sun Life policy were false. At no time did Respondent disclose that the check she received was a loan against the cash value of her policy and that the policy was still in effect. Next, Respondent requested Sun Life to stop the monthly draft on Ms. Hoover's bank account that paid the premium on her Sun Life policy. He did this by falsely advising Sun Life that Ms. Hoover had changed her bank account. Because the premium payments had ceased and a new bank authorization was never received by Sun Life, the policy lapsed, but only after exhaustion of the policy's remaining cash value. Ms. Hoover became aware that funds in her Sun Life policy had been exhausted when she received a letter dated August 26, 1996, from the company. When Ms. Hoover confronted Respondent about leaving money in her Sun Life account, he told her he would get her funds back. However, he never did secure a refund of the exhausted funds. In the meantime, Ms. Hoover deposited the $4,800.00 Sun Life check into her bank account. She then wrote a check to Respondent for $4,000.00, with instructions for him to deposit the money into her Financial Benefit annuity, policy No. 707176. Respondent accepted the check but did not follow Ms. Hoover's instructions. Rather, he submitted an application to Financial Benefit for an IRA annuity without Ms. Hoover's knowledge or informed consent. He also sent Financial Benefit Ms. Hoover's $4,000.00 check. Financial Benefit issued the IRA annuity, policy No. 712086, with Ms. Hoover as the annuitant. Ms. Hoover never received a copy of the annuity. Respondent received a commission on this transaction. Count X In 1992, Elizabeth R. Maxwell discussed her retirement needs with Respondent. She wanted to invest her funds so that a portion of it would be available to her in five years. She wanted the balance of her funds to be available in seven years. Ms. Maxwell told Respondent she wanted to be able to retire around age 59. Respondent suggested that Ms. Maxwell invest her money in annuities. He was aware that Ms. Maxwell knew very little, if anything, about annuities and that she was relying on his expertise and experience to assist her in making investment decisions. In April 1992, Respondent sold Ms. Maxwell a Financial Benefit IRA annuity, policy No. 823703, with a maturity date of 2012. Ms. Maxwell subsequently deposited $10,947.95 into this annuity as the original contribution. Respondent received a commission for the transaction. Respondent also sold Ms. Maxwell a Financial Benefit regular annuity, policy No. 823568, with a maturity date of 2012. Ms. Maxwell deposited $90,000.00 into this annuity as the original contribution. Respondent received a commission on the transaction. The maturity date of an annuity is the date on which annuity payments begin. In December 1992, Ms. Maxwell gave Respondent $30,000.00 for deposit into what she thought was one of her two existing annuities. Respondent used the money to purchase a USG Annuity and Life Company (USG) annuity, policy No. 128153, without Ms. Maxwell's knowledge or informed consent. This annuity matures in 2042. In January 1993, Ms. Maxwell gave Respondent $50,000.00 for deposit into what she thought was one of her two existing annuities. Respondent used the money to purchase a USG annuity, policy No. 132140, without Ms. Maxwell's knowledge or informed consent. This annuity matures in 2043. In April 1996, Ms. Maxwell gave Respondent $74,672.57 for deposit into what she thought was one of her two existing annuities. Respondent used the money to purchase an additional Financial Benefit annuity, policy No. 712410, without Ms. Maxwell's knowledge or informed consent. This annuity matures in 2016. Respondent received a commission on this transaction. In April 1996, Respondent, without Ms. Maxwell's knowledge or informed consent, cancelled her Financial Benefit annuity, policy No. 823703. He then transferred $18,927.30, representing the surrender value, into a new Financial Benefit annuity, policy No. 712497. The new annuity's maturity date was 2016. Respondent received a commission on this transaction. In May 1996, Respondent, without Ms. Maxwell's knowledge or informed consent, cancelled her Financial Benefit annuity, policy No. 823568. He then transferred $166,182.69, representing the surrender value, into a new Financial Benefit annuity, policy No. 712548. The new annuity matures in 2016. Respondent received a commission on this unauthorized transaction. In November 1996, Ms. Maxwell gave Respondent $25,000.00 for deposit into what she thought was one of her two existing annuities. Respondent used the funds to purchase an additional Financial Benefit annuity, policy No. 713242, without Ms. Maxwell's knowledge or informed consent. The new annuity matures in 2016. Respondent received another commission. Sometime in 1996, Ms. Maxwell became confused and concerned about her annuity investments. Ms. Maxwell asked her accountant for assistance in determining the status of her investments. She took her accountant boxes of documents containing insurance company statements and other insurance correspondence. Some of the documents were in unopened envelopes. The accountant's investigation, which took place over a six-month time period, revealed at least seven annuities. The accountant also determined that the insurance companies had assessed surrender fees on some of the transactions. Ms. Maxwell was shocked at the result of her accountant's investigation. She was unaware of any annuities other than what she understood to be her two Financial Benefit annuities. The accountant requested that Respondent provide copies of Ms. Maxwell's annuities. Respondent did not provide the copies. At the request of the accountant, Respondent signed a statement that he would personally pay any penalties if surrender charges were assessed. Respondent reimbursed Ms. Maxwell for some of the surrender charges. However, Respondent never provided Ms. Maxwell's accountant with documentation accounting for reimbursement of about $6,000.00 in surrender charges. After Ms. Maxwell's accountant became involved, Respondent asked the accountant to approve the "roll-over" of an annuity. The accountant requested information about the old policy and the new policy before making a decision. Respondent refused to provide the information. Respondent told the accountant that he knew more about insurance than the accountant. Respondent stated that the accountant needed to attend to his business and that Respondent would take care of the insurance side of it. The accountant and Respondent have had no subsequent conversations. As of the date of the final hearing, Respondent had not provided Ms. Maxwell or her accountant with sufficient documentation to account for all of her investments. Until November of 1996, Financial Benefit paid its agents commissions on the sale of annuities at the time of the original deposit and on each subsequent contribution. In November 1996, Financial Benefit notified its agents that no commission would be paid for additional contribution into annuities after the third policy year. After Ms. Maxwell learned that Respondent had invested her funds in more than two annuities and despite Respondent's failure to cooperate with the accountant, Ms. Maxwell continued to trust Respondent to invest her money in annuities. She did so with the understanding that each new transaction would increase the interest she would earn. Ms. Maxwell did not understand the effect the new transactions would have regarding penalties and maturity dates. In February 1997, Respondent, without the knowledge or informed consent of Ms. Maxwell, cancelled Ms. Maxwell's USG annuity, policy No. 132140. He then transferred $58,309.01, representing the surrender value, into a new Financial Benefit annuity, policy No. 713549. The new annuity, on which Respondent received a commission, has a maturity date in 2017. In July 1997, Ms. Maxwell gave Respondent $2,005.11 for deposit into an annuity. Respondent used the funds to purchase an additional Financial Benefit annuity, policy No. 714186, without Ms. Maxwell's informed consent. The new annuity matures in 2017. Respondent received another commission. In October 1997, Ms. Maxwell gave Respondent $15,189.66 for deposit into an annuity. Without Ms. Maxwell's informed consent, Respondent used the funds to purchase a USG annuity, policy No. 529581. This annuity matures in 2014. Respondent received a commission. In January 1998, Ms. Maxwell gave Respondent $2,000.00 for deposit into an annuity. Without Ms. Maxwell's informed consent, Respondent used the funds to purchase a Financial Benefit annuity, policy No. 714865. This annuity matures in 2013. Respondent received a commission. In January 1998, Respondent, without Ms. Maxwell's informed consent, cancelled her USG annuity, policy No. 128153. He then transferred $38,498.43, representing the surrender value, into a new Financial Benefit annuity, policy No. 714866. The new annuity, on which Respondent received a commission, has a maturity date in 2013. Ms. Maxwell received a copy of only one of the many policies that Respondent purchased on her behalf. In 1996 or 1997, Respondent took that policy from Ms. Maxwell, telling her the company was going to adjust it and give it back to her. He never gave the policy back to Ms Maxwell. Respondent obtained Ms. Maxwell's signature each time he purchased an annuity on her behalf. On some occasions Ms. Maxwell thought she was signing a form to deposit additional funds into her original two annuities with Financial Benefit. Sometimes Ms. Maxwell did not know what she was signing because she did not see the whole page or did not read the document first. Respondent would tell her he was in a hurry and she should just sign next to the "X." Respondent told her he would date it later. On other occasions, Respondent told Ms. Maxwell that he was "rolling over" an existing fund into a new fund. He told her the "roll-over" would give her a higher interest rate but that nothing else would change. He said that everything would mature at the same time, otherwise Ms. Maxwell would not have agreed to the "roll-over." Respondent told Ms. Maxwell that there would be no penalties and that he did not get paid commissions. At times Ms. Maxwell signed documents referencing the surrender of annuities and associated penalties. On those occasions, Ms. Maxwell thought she was surrendering the annuities so that they could be rolled over. She trusted Respondent's representation that the penalties were not true penalties. None of the annuities that Respondent sold to Ms. Maxwell or purchased in her name had maturity dates in five to seven years from the date of the original transactions. Respondent never disclosed that the annuities would mature between fifteen and forty years from the purchase date. Consequently, the annuities would not have reached maturity, making her funds available for retirement free of any surrender charge in time for her to retire at age 59. Count XI In 1991, Respondent met with Dr. Charles Moore to discuss the purchase of life insurance as a part of Dr. Moore's estate planning needs. Dr. Moore told Respondent that he wanted to be able to retire in about ten years with about $1,000,000.00 in life insurance. As a result of this discussion, Respondent sold Dr. Moore a Sun Life permanent life insurance policy, policy No. 9245964, with a face amount of $250,000.00 and a monthly premium of $788.28. Respondent also sold Dr. Moore a Sun Life permanent life insurance policy, policy No. 9241898, with a face amount of $250,000.00, and a monthly premium of $876.61. This policy had a renewable term rider with an additional benefit amount of $250,000.00, with a premium in the amount of $88.33 for the first year. The premium on the term rider would increase over time. Respondent told Dr. Moore that in approximately ten years, the policies would have sufficient cash value to pay the premiums from their dividends. Respondent stated that the policies would then be "paid-up" that Dr. Moore would no longer have to pay premiums. Respondent told Dr. Moore that at some point in time, the term rider on Sun Life policy No. 9241898 would have to be cancelled because the premium would become too expensive. Dr. Moore would not have purchased these policies but for Respondent's representations. In December 1994, Respondent sold Dr. Moore a Fortis life insurance policy, policy No. 985470, with a face amount of $500,000 and an annual premium in the amount of $13,000.00. Dr. Moore needed additional insurance to cover potential estate taxes on family-owned real estate in another state. Respondent represented that the policy premiums on the Fortis policy would be paid entirely from dividends from Dr. Moore's Sun Life policies without depleting the cash value of those policies. Dr. Moore would not have purchased this policy but for Respondent's representations. Contrary to Respondent's representations, the dividends on Dr. Moore's Sun Life policies, in and of themselves, were not sufficient to pay the premiums on his Fortis life insurance policy. Instead, without Dr. Moore's knowledge or consent, Respondent submitted loan requests for a series of loans on the cash value of Dr. Moore's Sun Life policies, policy Nos. 924564 and 9241898, from 1995 through 1998. The loans against the Sun Life policies, including principle and interest, total in excess of $52,000.00. When Dr. Moore received checks for the loan proceeds from Sun Life, he would endorse them and give them to Respondent. Dr. Moore thought he was endorsing dividend checks. Respondent used the proceeds from the loans to pay the annual premiums on Dr. Moore's Fortis policy. The loans do not have to be repaid at any certain date. However, the amount of the loans, principal and interest, will be subtracted from the death benefits of the policies in the event of a claim or from the value of the policies in the event of surrender. At the time of the hearing, Dr. Moore either had surrendered his Sun Life policies or was in the process of doing so. He was paying for his Fortis policy on a monthly basis. Count XII At all times pertinent herein, an agent's agreement was in effect between Canada Life Assurance Company (Canada Life) and Respondent. In 1994, Respondent sold Mack Wallace Womble a Canada Life whole life insurance policy. Respondent received commissions on the initial and subsequent premiums paid on this policy. Mr. Womble never received a copy of his policy from the insurance company. Eventually, Respondent complained to Petitioner on Mr. Womble's behalf. Petitioner then directed Canada Life to refund all of Mr. Womble's premiums plus interest. The company complied with this directive and rescinded the policy. There is no evidence that Respondent was responsible for Canada Life having to refund Mr. Womble's premiums. There is evidence that the lengthy dispute over the delivery of the policy involved the company, the company's regional representative, and Mr. Womble. The record contains no business record documenting Canada Life's demand that Respondent refund all commissions paid to him for Mr. Womble's policy. Canada Life's representative/record custodian testified that the company had made such a demand at some unknown point in time. Her testimony, in and of itself, is not competent evidence that the company made a formal demand and that Respondent received that demand. However, Respondent admitted in a deposition that he has not refunded the premiums because cancellation of the policy was the company's fault, causing him to lose a valuable client. Respondent's Producer's Contract with Canada Life states as follows in relevant part: PART I GENERAL CONDITIONS * * * 3. REPAYMENT OF INDEBTEDNESS - The company, at its discretion, may: (a) deduct any commissions or other obligations of any nature payable to the individual Producer or estate, or any of their assigns under this or any other Contract with the Company or; (b) require the Producer or estate to pay to the Company on demand any outstanding balances arising from chargebacks, deductions, adjustments and reversals under the terms of this or any other Contract with the Company regarding such income as, but not limited to, commissions. In the event that this Contract is terminated for whatever reason, all outstanding balances shall be immediately due and payable. * * * PART II CONDITIONS GOVERNING PAYMENT OF REMUNERATION * * * 1. In the event that the Company deems it necessary to refund a premium for a policy, the Producer, if called upon by the Company, shall repay on demand any remuneration received by him in connection with such policy. Canada Life's representative/records custodian testified that the subject Producer's Contract was terminated in 1996. There is no business record in evidence to support that testimony. According to Respondent's official licensure records, the contract between Canada Life and Respondent was "not renewed" in 1997.
Recommendation Based on the forgoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner enter a final order revoking Respondent's insurance licenses. DONE AND ENTERED this 25th day of August, 2000, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 25th day of August, 2000. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0333 William M. Furlow, Esquire Katz, Kutter, Haigler, Alderman, Marks Bryant & Yon, P.A. 106 East College Avenue, Suite 1200 Tallahassee, Florida 32302-1877 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307 Honorable Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300
Findings Of Fact During 1977, while licensed as an insurance agent, Mr. Yesnes engaged in a scheme to fraudulently obtain sales commissions from various insurance companies. He submitted applications for insurance coverage without the prior consent of the purported applicants. He obtained the data to fill in their application forms from information contained in previous policy records. This scheme was admitted by Mr. Yesnes when he appeared before a Department of Insurance investigator, Eugene Petree, III, to explain consumer complaints against him related to the bogus applications. On February 24, 1977 Mr. Yesnes, while registered with the Department as a non-resident agent, sold a $50,000 decreasing term life insurance policy to a 65 year old widow, Mrs. Inez Cameron. This sale was made in Pensacola, Florida, where both Mr. Yesnes and Mrs. Cameron were living at the time. The beneficiary of the policy was designated as "the estate of Inez Cameron." When that designation was made, Mr. Yesnes was the legatee of Mrs. Cameron's will. Mr. Yesnes later requested the company issuing the policy, United Presidential Life Insurance Company, to change the beneficiary of the policy to himself by name, but the company refused to make the change. Under the foregoing circumstances it is contrary to the standards of the insurance industry for an agent to sell a policy in which he is made the beneficiary. Mrs. Cameron was a widow and had no known living close relatives. She had established a personal "mother-son" relationship with Mr. Yesnes and for a period of time they lived together. For the last year and a half Mr. Yesnes has been a pizza wholesaler in the Pensacola area. He contracts for a supplier to manufacture the pizzas which Mr. Yesnes then sells to bars and small restaurants who cannot economically produce their own pizzas. According to his present supplier Mr. Yesnes sells a product of a much higher quality than the purchasers should expect to get for their cost. His present supplier, Mr. Meehan, has known Mr. Yesnes for eight to nine months. In his opinion Mr. Yesnes is trustworthy and reliable. He pays his bills on time and keeps his obligations. Mr. Secchiari, the owner of Genos Pizza in Pensacola, is Mr. Yesnes' former supplier. He too believes him to be trustworthy and reliable. In his opinion as an insurance consumer he believes that if licensed, Mr. Yesnes would be better than some life insurance agents and not as good as others. Mr. Yesnes has always been prompt in paying his bills with Mr. Secchiari. Mr. Yesnes was initially licensed as an insurance agent in Florida in February 1965. Three years later he moved to Atlanta, Georgia. He later moved to Pensacola in 1976 where he was employed by the Franklin Life Insurance Company. During that employment he was supervised by Michael Howard, an area manager. Mr. Howard had contact with Mr. Yesnes for a period of eighteen months. On the basis of that experience Mr. Howard is of the opinion that Petitioner is ethically unfit to be in the insurance business. Respondent offered testimony from Ms. Dorothy Dale Godwin and Ms. Sarah Dawson in the form of their opinion of Petitioner's character. This testimony is not accepted as credible. It lacks an adequate foundation because the witnesses contact with Mr. Yesnes was fleeting. Due to their relationship with Mrs. Cameron they are also found to be biased against Mr. Yesnes. On his pending application for licensure Mr. Yesnes gave 804 Royce Street, Pensacola, Florida 32503 as his address for the past five years. In fact, during that time he lived in Atlanta, Georgia; Mobile, Alabama; and at different addresses in Pensacola. He gave the 804 Royce Street address because that is where his father lives. At times Petitioner has lived there and he considers it his permanent address. At no time during these proceedings has Petitioner expressed regret for any past unprofessional actions. He has also not expressed any commitment not to engage in unprofessional behavior in the future, if licensed to sell insurance in the State of Florida.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Respondent, Department of Insurance and Treasurer, enter a final order denying the application of Ivan Yesnes for a license as a life agent in the State of Florida. DONE and RECOMMENDED this 14th day of July, 1981, in Tallahassee, Florida MICHAEL PEARCE DODSON 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 14th day of July, 1981.
The Issue The issue to be resolved in this proceeding concerns whether the Petitioner Donna Danzis is a retired state employee and is entitled to reinstatement of her policy of State Life Insurance Plan.
Findings Of Fact The Petitioner was an employee of the Florida Department of Children and Family Services (DCF) through October 28, 2005. On October 28, 2005, she voluntarily terminated her employment. At the time she terminated employment she had been covered under the Plan. The Plan is made available to state employees and retirees through the DSGI, in accordance with Section 110.123, Florida Statutes (2006). The terms and conditions of employee participation in the plan are provided for in Florida Administrative Code Rule Chapter 60P-3. The Petitioner was a cancer patient at times pertinent hereto and that may have played a role in her decision to terminate her employment. In any event, her employment termination was voluntary and occurred during a time apparently when she was undergoing chemical therapy concerning her cancer issues. Prior to the time she terminated her employment on October 28, 2005, the Petitioner did not discuss her plans to retire with DCF Human Resources Personnel. She had, however, apparently applied for disability retirement, although that disability retirement status had not yet been determined or granted at the time she terminated her employment. After termination of employment, on or about November 24, 2005, the Petitioner contacted DCF personnel office and spoke with Mr. Harvey Whitesides. During that conversation, Mr. Whitesides determined that the Petitioner had had deductions from her paycheck to cover premiums for three types of insurance coverage: state health insurance, a group life insurance plan, as well as state security insurance. The later type of insurance is an optional supplemental life insurance that is not a part of the Plan. In that November 24, 2005, conversation with Mr. Whitesides, the Petitioner told him that she had terminated her employment with the state but did not inform him that she had applied for disability retirement. During their conversation she told Mr. Whitesides that she wanted refunds that she was entitled to from the state health insurance and group life insurance plans. Mr. Whitesides was supervisor of payroll for DCF and its predecessor agency from 1993 through 2002. In that position his duties included management of the benefit section and retirement operations within the DCF. While her performed his duties as supervisor he would commonly assist employees in their preparation of the forms necessary to affect retirement. Mr. Whitesides retired in 2003, but returned to DCF as an employee in March 2004. Beginning in June 2004, he assumed the duties of DCF personnel services specialist. In July 2005, his position and duties were transferred to the Agency for Persons With Disabilities. Since returning to state employment in March 2004, Mr. Whitesides duties have been substantially the same as those he performed from 1993 through 2002. These included the processing of benefits and retirement requests submitted by employees. In the course of performing those operations he has always assisted employees in the completion of the form required to apply for retirement. Since 1993, Mr. Whitesides has used a "continuation/termination form," for retiring employees who upon retirement wished to continue their state group life insurance. Beginning in March 2004 when he returned to state employment, Mr. Whitesides had access to and used that same continuation/termination form. He did not offer the form to the Petitioner during their conversation on November 24, 2004, however, because the Petitioner did not then inform him that she had applied for retirement. Mr. Whitesides did not learn that the Petitioner had applied for retirement until he received a letter from the Division of Retirement (DMS) dated December 14, 2005, which asked that the DCF provide information and data necessary to calculate Ms. Danzis retirement benefits. Mr. Whitesides provided the date requested by DMS, including the "Florida Retirement System Pension Plan Salary Certification." Prior to the receipt of the letter dated December 14, 2005, the Petitioner had not informed anyone in the DCF personnel office that she had applied for disability retirement. Florida Administrative Code Rule 60P-3.014 requires that an employee who retires and is covered under the life insurance plan must elect one of the following options: (1) submit a request to continue coverage during retirement accompanied by a personal check or money order for one full month's premium, which must be received by the employee's former agency and forwarded with the original application no later than 31 calendar days after the last day of employment; or (2) that the retiring employee must submit a request to terminate coverage under the life insurance plan no later than 31 calendar days after the employee's last day of employment. That rule goes on to provide that an employee who applies for disability retirement and has not received approval of that prior to his last day of employment but who is covered under the life insurance plan on that last day of employment has the option to continue coverage in the life plan pending such retirement disability approval or rejection by submitting a request to continue coverage in accordance with Florida Administrative Code Rule 60P-3.014(1)(a) and by paying the full premium for each month's coverage by personal check or money order to his or her former personnel office. Concerning employees or retirees off the payroll, if it is determined that none of the required contribution by the end of the coverage month the coverage will be cancelled and the retirees coverage will be terminated effective the first day of that month. A retired employee whose coverage is terminated in accordance with subsection (1) or (2) of Rule 60P-3.010 may not re-enter the Plan. The Petitioner did not submit a continuation/termination form within 31 days of the date of her termination of employment stating that she wished to continue her participation in the plan, and provide the other information required by Florida Administrative Code Rule 60P-3.014(1)(a). The Petitioner did not submit a month's premium for life insurance within 31 days after the last date of her employment. The only notice that Ms. Danzis gave, or attempted to give, was notice that she was voluntarily terminating her employment and that her last date of work would be October 28, 2005. Because she did not elect to continue her participation in the life insurance plan through the proper procedure and filing, the Agency canceled her life insurance, thus generating the subject dispute.
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 Management Services, Division of State Group Insurance determining that the Petitioner failed to properly elect to remain a covered retiree of the State Life Insurance Plan, and that the Petition be dismissed. DONE AND ENTERED this 4th day of April, 2007, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF 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 Clerk of the Division of Administrative Hearings this 4th day of April, 2007. COPIES FURNISHED: Donna Danzis 7744 State Road 100 Keystone Heights, Florida 32656 Sonja P. Mathews, Esquire Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 260 Tallahassee, Florid 32399-0950 Sarabeth Snuggs, Director Division of Retirement Department of Management Services Post Office Box 9000 Tallahassee, Florida 32315-9000 John Brenneis, General Counsel Division of Retirement Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
Findings Of Fact The Respondent is, and at all times material to the allegations in the Administrative Complaint, was a licensed ordinary life insurance salesman in the State of Florida. He first became licensed in 1977, and went to work initially for Occidental Life Insurance Company in Orlando, Florida. After approximately three to four weeks with Occidental Life, he went to work for Lincoln National Life and was transferred to St. Petersburg, where he worked for about three or four months selling health insurance and some life insurance as a rider to the health insurance policies. After leaving Lincoln National Life, he left the insurance business and went to work for a sign company. He worked for no further insurance companies before he joined Coordinated Planning Associates (hereinafter referred to as COPA). He went to work for COPA in April of 1979. In July, 1980, Mr. Wheeler was terminated by COPA and he then became employed by United Companies Life, his present employer. In June or July of 1979, Mr. Wheeler contacted James and Ruby Clinton about purchasing insurance from him. He met with them in their home to discuss his product. At that time, Mr. and Mrs. Clinton had four policies in effect. (See Petitioner's Exhibits 8, 9, 10, and 11.) One policy covered Mr. Clinton and had a rider for his wife, and the other three policies were on each of their three children. When there was an initial contact made by Mr. Wheeler with the Clintons, Mr. Clinton informed Mr. Wheeler that they had more insurance than they could afford. Prior to purchasing insurance from Mr. Wheeler, the Clintons showed Mr. Wheeler their policies, and he went through the policies and explained to the Clintons that he could obtain the same or better coverage from his company for less premium. He also informed them that they could obtain coverage for the children by paying a set premium per year per child per thousand dollars of coverage. After the Clintons purchased their policy from Mr. Wheeler, Mrs. Clinton actually requested insurance on the children, and Mr. Wheeler came by their home once again to pick up the $4.00 payment or deposit for the additional coverage for the children. At the time that Mr. Wheeler sold the new insurance policy to Mr. and Mrs. Clinton, no replacement form was prepared or shown to the Clintons. The Clintons were not knowledgeable in insurance matters and relied upon Mr. Wheeler's representations as to the comparative coverages of his company's policy and their existing policies. The coverage under the policy sold by Mr. Wheeler to the Clintons was not the same or better coverage than those which existed under the policies which were replaced. The policies replaced were whole life policies and covered the entire family. The program being sold by Mr. Wheeler was a retirement savings plan with a term insurance rider and was intended to only supplement and not replace existing coverage. Mr. Wheeler was aware that the Clintons intended to cancel their existing policies and replace them with the policy which he was selling. Mr. Wheeler testified regarding the Clintons on direct examination as follows: Q. Did they mention anything about re- placing their insurance? A. No. They insinuated that yes, they were going to drop it because they needed the money. The original reason we were there was because they needed money, and that's why we were there. And if they could get a good deal on their insurance, or if they could buy a good program and they could turn the other in and get money for it, that's what they were interested in. In fact, Mr. Wheeler's wife actually picked up the existing policies and took care of mailing them to the company after their cancellation. In October of 1979, Mr. Wheeler met with Gary and Darlene Davis of Orlando, Florida, for the purpose of attempting to sell life insurance to them. At the time that they were approached by Mr. Wheeler, Mr. and Mrs. Davis had three life insurance policies issued by Prudential Life Insurance Company in effect. Mr. Wheeler was made aware of these three policies. During the course of the sales presentation, the Respondent went through the existing policies and compared some of the benefits with those of the ITT policy he was attempting to sell. He represented to the Davises that the ITT policy would provide them with better coverage for the entire family for less premium than they were paying for the existing policies. Mr. Wheeler was informed by the Davises that they intended to cancel their existing policies when they purchased the ITT coverage. When Mr. Wheeler met with Mrs. Davis, she showed him the insurance policies on her and her husband. The policy on Mr. Davis had a rider for the children and Mrs. Davis's policy contained an IRA. Mr. Wheeler represented to Mrs. Davis that the COPA program would give her family these same benefits plus a cancer policy for less money. He explained to Mrs. Davis that he could charge a lower premium because he was not an insurance man per se and that because of this his company did not have to pay high commissions like Prudential. He also explained that he worked more with helping people with their finances than with selling insurance and was salaried. In fact, Mr. Wheeler was an insurance salesman working on commissions. The COPA program did not contain an IRA and the cheaper insurance was a term rider not whole life. The basic COPA program which Mr. Wheeler sold to the Davises also did not contain coverage for the Davis children. The true reason the premium was lower was because of the different coverage and different type of insurance. The ITT policy sold to the Davises in fact did not provide the same coverage as that of the policies which were cancelled by the Davises at the time of purchasing the ITT policy. The ITT policy specifically did not provide coverage for the Davis' children, and as a result of this lack of coverage, Mr. and Mrs. Davis were unable to recover any insurance proceeds after their daughter's death during the coverage period of the ITT policy. The ITT policy was a retirement plan designed to supplement existing life insurance and was not intended as a complete life insurance program for a family. Mrs. Davis understood the ITS policy to contain an IRA as part of the policy. The evidence was unclear as to whether Mr. Wheeler actually represented that it contained an IRA or whether he represented that there was a tax benefit within the retirement savings program which the Davises interpreted to mean an IRA. It was clear, however, that Mr. and Mrs. Davis were not knowledgeable in matters of insurance and relied upon the expertise and representations of Mr. Wheeler in cancelling their existing policies and replacing them with the ITT policy. No replacement form comparing the coverage of the existing policies and the ITT policy was prepared or presented to the Davises at the time that they purchased the ITT policy. Mr. Wheeler admitted that he filled out the applications on behalf of the Davises and the Clintons. Question No. Nine on the application forms for ITT of both the Clintons and the Davises asked whether the proposed policies were being issued in a replacement situation. This question on both applications was answered "No" by Mr. Wheeler. Question No. One of the agent's report reads: "Will insurance on any proposed insured now applied for replace or change any life insurance or annuity?" This question was answered "No" on the agent's report for both the Davises and the Clintons. The signature block of the agent's report reflected that they were prepared by Mr. Richard Wheeler. The Respondent admitted that he customarily intentionally avoided information from prospects which might reveal to him the fact that insurance was being replaced and did so in this instance. When Mr. Wheeler began with COPA, he received two weeks' training. The training was designed to teach the "canned" presentation which COPA salesmen were required to use. This presentation was prepared by the more experienced and more knowledgeable officers and managers of COPA. This same presentation was utilized by Mr. Wheeler in the sales presentation to the Clintons and Davises. There was no training regarding replacement of other insurance. Sometime in 1980, after the sales to the Clintons and Davises, Mr. Wheeler was informed by another COPA employee, Greg Gustin, as to particular representations within the canned presentation Mr. Gustin considered to be false. Sometime after this, Mr. Wheeler discussed this with Mr. Larry Taylor of COPA and an official of ITT Life Insurance Company. When Mr. Wheeler tried to change the presentation to eliminate the misrepresentations, he was fired. This occurred July 17, 1980. Mr. Wheeler claimed ignorance of the misleading nature of the canned presentation prior to his discussions with Mr. Gustin. However, Mr. Wheeler admitted that he had intentionally avoided getting information from customers which indicated they were going to cancel their existing policies. The sales presentation also stated "Let me assure you I am not here to sell you anything. Mr. Wheeler's only purpose for visiting these people was to sell them insurance. Mr. Wheeler sold approximately 250 policies while with COPA and has continued to sell life insurance since leaving COPA in July, 1980. The two complaints which are the subject of this administrative proceeding were the only two complaints made against Mr. Wheeler. Since going to work for United Companies Life, Mr. Wheeler has been trained in using replacement forms and now uses those forms whenever his policy replaces existing insurance.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED: 1. That the Department of Insurance enter a final order suspending Respondent's license for a period of 30 days. This case is more appropriately a case for a civil fine or probation. However, a violation of Florida Statute Section 626.611 involves a mandatory suspension. There are strong mitigating factors which justify that the mandatory suspension be of short duration. At the tinge the sales were made to Mr. and Mrs. Clinton and Mrs. and Mrs. Davis, the Respondent was relatively new in the insurance business. Upon being employed by COPA, he was given a prepared sales presentation to memorize and use in each sales contact. This presentation was prepared by the officers and managers of COPA who were more experienced and more knowledgeable than Mr. Wheeler about insurance matters. Mr. Wheeler later tried to change the presentation and was fired as a result. These incidents occurred in 1979 and since that time Mr. Wheeler has continued to work as a licensed insurance salesman with no complaints or evidence of violations of the Florida Statutes or Rules of the Department of Insurance. The circumstances giving rise to the violations and the fact that the Respondent was advised by more experienced and knowledgeable individuals clearly bear upon the appropriateness of the particular penalty assigned. See, Drew v. Insurance Commissioner and Treasurer, 330 So.2d 794 (Fla. 1st DCA 1976). RECOMMENDED this 11 day of April, 1983, in Tallahassee, Florida. MARVIN E. CHAVIS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 12th day of April, 1983. COPIES FURNISHED: David A. Yon, Esquire Legal Division Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 Paul H. Bowen, Esquire Swann & Haddock, P.A. Post Office Box 7838 Orlando, Florida 32854 Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32301
The Issue The issue to be resolved in this proceeding concerns whether the Petitioner, as beneficiary of her deceased father's State of Florida life insurance policy, is entitled to a benefit of $10,000 or $2,500, and is related to how notice of a change in coverage amount and premium was provided to the decedent.
Findings Of Fact At the time of his death on November 29, 2008, Maurice Adkins was covered by the state life insurance plan, as a retired employee of the State of Florida. The Petitioner, Justina Mullennix, is the daughter of Mr. Adkins and is the beneficiary of any life insurance benefits paid or payable from the state life insurance plan on account of the death of her father. Effective January 1, 2000, the coverage for retirees was increased to $10,000.00. The premium for this coverage was $4.20 per month. The DSGI prepared a letter dated July 31, 2006, to notify the retirees that effective January 1, 2007, the life insurance benefit options provided to retirees would change. The changes allowed retirees to elect one of the following options: $2,500 benefit for a monthly premium of $ 4.20. $10,000 benefit for a monthly premium of $35.79. Termination of coverage. The letter dated July 31, 2006, informed retirees that their life insurance premium would remain the same, but that their coverage would be reduced to $2,500, unless they elected coverage in the amount of $10,000 and elected to pay the higher premium. The letter advised the retirees they could change their election up to and including January 19, 2007. Mike Waller, an employee of the DSGI, maintains benefits data for the People First/Division of State Group Insurance. In July 2006, Mr. Waller was asked to prepare a file containing the names and mailing addresses of all retirees who were covered by life insurance. Mr. Waller created the file, prepared in July 2006, to use in a "mail merge," to send all retirees a copy of the letter dated July 31, 2006. In preparing the file containing the mailing addresses of retirees covered by life insurance, Mr. Waller used the addresses of record that he maintained. In July 2006, the address of record for Mr. Adkins was 2877 Belair Road E., Jacksonville, Florida 32207, and was included in the file. Mr. Waller prepared the file and on July 3, 2006, delivered it to Dick Barnum and Thomas Lockeridge. Thomas Lockeridge delivered the file to Laura Cutchen, another employee of the DSGI. The DSGI contracted with Pitney Bowes to mail the letter of July 31, 2006, to all retirees. After obtaining copies of the letter from the print shop of the DSGI, Ms. Cutchen delivered the letters and the file containing names and addresses of retirees to Pitney Bowes to assemble. The letters dated July 31, 2006, in envelopes addressed to each retiree who carried life insurance at the time, were delivered to the U.S. Post Office, accompanied by Ms. Cutchen. The State of Florida first class mailing permit had been applied to each envelope. The letter dated July 31, 2006, was mailed to Mr. Adkins at the Belair address. The return address on the envelope containing the letter was the Division of State Group Insurance, 4050 Esplanade Way, Ste. 215, Tallahassee, Florida, 32399-0949. The letter was not returned to the Division. The letters that were returned to the DSGI were processed by Janice Lowe, an employee of the DSGI. Each letter that was returned to the Division of State Group Insurance was handled in one of two ways: a) if the envelope showed a different address on a yellow sticker applied by the US Postal Service (USPS), the letter was re-mailed to that address; b) if the returned envelope did not provide a different address, a manual search of the database of the Division of Retirement was made, a copy of the print screen showing the address in the Retirement database was made, if different from that on the database of the Division of State Group Insurance, and the original envelope and letter were placed in another envelope and mailed to the address from the Division of Retirement database. A copy of each Retirement screen that was accessed by Ms. Lowe was printed and inserted in alphabetical order in a binder. For every person whose letter was returned, and for which there was not another address, there would have been a Retirement print screen. The absence of a Retirement print screen indicates that the initial letter was not returned. There is no retirement print screen for Mr. Adkins, indicating that the letter to him dated July 31, 2006, was not returned to the DSGI. DMS has contracted with Convergys, Inc., to provide human resources management services, including assisting in the administration of employee benefits. Convergys primarily performs these tasks through an on-line system known as “People First.” Prior to Convergys assuming responsibility for the administration of benefits, DSGI maintained benefits information in the Cooperative Personnel Employment System (COPES). When Convergys assumed responsibility for the management of benefits, the benefits information from COPES was imported into the Convergys People First System. People First became the system of record for the DSGI beginning January 1, 2005. People First and the Division of Retirement do not share databases and each maintains its own database of names and addresses. Once a year the DSGI must hold Open Enrollment for the health program. § 110.123(3)(h)5, Fla. Stat.; Fla. Admin. Code R. 60P-1.003(16). Open Enrollment is the period designated by the DMS during which time eligible persons may enroll or change coverage in any state insurance program. Prior to Open Enrollment each year, the DSGI provides employees and retirees a package that explains the benefits and options that are available for the next plan year. The 2006 Open Enrollment period, for the 2007 Plan Year, ran from September 19, 2006, through October 18, 2006. During open enrollment for Plan Year 2007, the People First Service Center was charged with the responsibility of sending open enrollment packages to State of Florida retirees and other employees. People First mailed Mr. Adkins’s Open Enrollment Package to the 2877 Belair Road E., Jacksonville, Florida 32207 address, on September 3, 2006. The Open Enrollment Package for Plan Year 2007 was mailed by People First through the U.S. Post Office, first class postage paid. The Open Enrollment Package mailed to Mr. Adkins, for 2006 Open Enrollment, was not returned to People First. The Open Enrollment Package mailed to Mr. Adkins on September 3, 2006, contained Mr. Adkins’s 2007 Benefits Statement; a letter from John Mathews, former Director of the DSGI; "Information of Note"; a Privacy Notice; Notice Regarding Prescription Coverage; and a 2007 Benefits Guide. The Information of Note included the following statement: Retiree Life Insurance For Plan Year 2007, those currently enrolled with retiree life insurance may elect to retain the current $4.20 premium for a benefit of $2,500, retain the current benefit of $10,000 for a premium of $35.79, or cancel coverage. If no change is made during open enrollment, participation will continue at the $4.20 premium level. Neither Mr. Adkins nor anyone on his behalf affirmatively elected to continue $10,000.00 in life insurance coverage during the enrollment period in 2006 and 2007. Because the election was not made, at the death of Mr. Adkins, the benefit paid to the Petitioner was $2,500.00. Prior to January 1, 2007, the Life Insurance Trust Fund was used to augment the premiums paid by retirees for life insurance. The premium paid by the retirees did not support a $10,000 coverage level. In year 2006, the DSGI determined that the money in the life insurance trust fund, used to augment the retiree’s benefits from years 2000 through 2007, would not be available after 2007. Beginning January 1, 2007, the change in life insurance coverage was made because the funds in the Life Insurance Trust Fund were no longer available to augment the premium payment required to maintain a benefit level of $10,000.00, for a payment of $4.20 per month by the retirees. In 2006, the DSGI determined that the then-current life insurance premium of $4.20 would support a benefit of $2,500, and that the $10,000 benefits would cost $35.79. The notices provided by the July 31, 2006, letter and the 2006 Open Enrollment Package were sufficient notices of the increase in premium in that they provided a reasonable opportunity within which to make a selection of the level of coverage. On December 30, 1997, the Division of Retirement received a written notice of change of address for Mr. Adkins. The new address was 217 Skye Dr. W, Jacksonville, Florida 32221. Although Mr. Adkins had changed his address with the Division of Retirement, he did not notify the DSGI. A change of address with one division does not automatically change addresses in the other. The two divisions have different databases. During no time relevant to these proceedings have the two divisions shared databases. The DSGI, through People First, used the database of the Division of Retirement to send the 2004 Benefits Statement as an experiment to determine whether DSGI undeliverable returns would decrease. The same database was also used for the mailing of the letter dated September 2, 2003. However, neither DSGI nor People First changed its database after the 2004 Benefits Statement was sent and subsequent information was mailed to the DSGI address of record, based upon the COPES system. Therefore, the letter dated July 31, 2006, and the 2006 Open Enrollment Package for the Plan Year 2007, were mailed to the same Belair address, the address of record. A change of address for Mr. Adkins was not made in the database of the DSGI until December 1, 2008, when People First was provided a change of address. The only change of address that the Petitioner has alleged, was the one provided by Mr. Adkins to the Division of Retirement (only) in 1997.
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 of the parties, it is RECOMMENDED that a Final Order be entered by the Department of Management Services, Division of State Group Insurance, dismissing the petition in its entirety. DONE AND ENTERED this 22nd day of January, 2010, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of January, 2010. COPIES FURNISHED: Sonja P. Mathews, Esquire Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399 Justina Mullennix 1217 Skye Drive West Jacksonville, Florida 32221 John Brenneis, General Counsel Division of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
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, Barrett Chambers Miller, was licensed as an agent with Independent Life and Accident Insurance Company in the State of Florida. On March 11, 1981, Respondent signed a Combination Agent's Contract Form 1-7759 with the Independent Life and Accident Insurance Company. Part I, Article 2, of the contract requires the agent to "pay over all monies collected to the manager of the district" or to his representative and forbids the agent to retain any monies collected for any purpose. Part I, Article 1, of the contract requires the agent to "keep true records of the business on the books [and] to forward to the company on company forms a true account each week of his business. Among the "company forms" routinely used by agents in the conduct of their business are: (1) the Premium Receipt Book, (2) the Collection Book, (3) the Ordinary Remittance Report, (4) the Field Accounting Route List, and (5) the Balance Due Account Deficiency Sheet. The Premium Receipt Book is used to record the premium paid by the policyholder; is annotated whenever a premium is paid; and bears the premium paid, the date paid, and the signature or initials of the agent receiving the payment. The Collection Book page bears the name and address of the premium payer, the policy number(s), the type of plan, some statistics as to the insured, the death benefit, and the date on which the premium is paid each month. The Ordinary Remittance Report carries, as to each policy on the agent's debit (list of policyholders to be serviced), an account of the periodic premium collections recorded during the week covered by the report. The Field Accounting Route List is used by the agent to indicate weekly collections on weekly premium payments, and the Balance Due Account Deficiency Sheet is used to charge back deficiencies to the agent's account that are found in his collections turned in weekly. Count I: On May 26, 1981, Annie McKibben, owner of Policies A 39189 on the life of Carol L. Cox, A 39190 on the life of Ronny Cox, Jr., and A 39191 on the life of Stacey Cox, paid to the Respondent by check payable to Independent Life the amount of $13.96, total premium for the three policies listed. The premium card for that policy reflects an altered payment of $13.98 with the signature "B. C. Miller" for the May 1981 payment on the 26th of that month. The Collection Book page reflects collection on May 26, 1981. The Ordinary Remittance Report for the week of May 25, 1981, shows collection of $13.96. There is no Field Accounting Route List in evidence for this account, but the Balance Due Account Deficiency Sheet for the week of August 17, 1981, reflects deficiencies for money not turned in for all three policies for the collections made thereon on May 26, 1981. The check with which Mrs. McKibben paid the premiums in question was subsequently deposited to the account of Independent Life at the Florida First National Bank of Jacksonville. Respondent denies any wrongful withholding on this account. Count II: On some date in June, 1981, Wilma L. Robinson, owner of Policies B 03628 and A 67660, both in her name, wrote Check No. 348 on the Flagship Bank of Jacksonville in the amount of $48.68, payable to Independent Life Insurance and reflecting the notation "Ins. June." Someone, she is not sure who, gave that check to a representative of the company. Her payment book reflects a payment of $23.03 received by B. C. Miller on June 16, 1981. The Collection Book reflects collection on June 16, 1981. The Remittance Report reflects collection on June 16, 1981. The Deficiency Account Sheet, however, reflects a deficiency for money not turned in in the total amount of $23.03. Mrs. Robinson is not sure to whom her check was given. She was sick during that period, and it may be that her husband actually delivered the check; and in early 1981, she began mailing her payment checks in. However, to the best of her knowledge, she had never seen Respondent until he came to her home on January 4, 1983. Count III: In June, 1981, Mrs. Evelyn Reynolds had four policies with Independent Life: 017872 on Debbie Spivey, A0037496 on Angela Reynolds, A0010351 on Sherry D. Reynolds, and A14776 on Robert Reynolds. Though she cannot identify to whom she made her payment that month, her routine practice was to make the payment monthly, sometimes by check and sometimes by cash. On some occasions, Respondent and a Mr. McGroarty from the company both came to get her payment. On some occasions, she left the payment with her mother and does not know to whom it was made. Mrs. Reynolds' payment book shows a payment of $24.02 made on June 9, 1981, with the initials "BCM" reflected in the block for the signature of the agent. The Collection Book page shows collection on June 9, 1981; and the Remittance Report does as well, but the Deficiency Sheet shows a deficiency of $24.02 for monies not turned in but collected that date. Mr. Miller unequivocally denies the initials in the payment book were put there by him, nor was any entry on the Collection Book page relating to this account put there by him. Count IV: Mrs. Evie Bennett does not recognize the Respondent. She has only seen him once before in her life, on New Year's Day, 1983, when he came to her house. She did not meet with him on August 4, 1981, and did not make any payments to him. Her payment book for Policy No. B0000499 in her name reflects a premium payment in the amount of $9.51 made on August 4, 1981; and the entry in the block for the signature of the agent reads "Receipt Miller." The Collection Book page for this account reflects a collection on August 4, 1981, of $9.51. Other pertinent documents reflect a deficiency by reason of monies not turned in of $9.51 for this collection. Mr. Miller denies the entries in both the Payment Receipt Book and the Field Report were made by him. Mr. Edward Cooper owned Policies 05 18285A on Edward Thomas; and 0536115A and 0536115B, both on Mary Cooper. He normally paid his premiums by check once a month to whatever agent came to collect. He does not know to whom he made the payment on July 7, 1981, nor does he know whether he paid on that day by check or cash, notwithstanding his written statement on November 24, 1981, witnessed by Mr. Pat McGroarty, indicates he paid the payments on his Premium Receipt Book to the Respondent. The payment card for these policies reflects that on July 7, 1981, an individual who used the signature "B. C. Miller" received payment of $20.80, representing premiums of $4.16 for each of five weeks including June 29, 1981; July 6, 1981; July 13, 1981; July 20, 1981; and July 27, 1981. The Field Accounting Route List for this Respondent in the period in question reflects a remittance of $16.64 with a shortage of $4.61, which shortage is also reflected on the deficiency page. Mr. Miller admits the signature on the payment card is his, but contends the card was altered. Mr. Kerry Fossett is a field auditor for Independent Life Insurance Company and in November, 1981, was requested to conduct an audit of Respondent's agency. As a part of the audit, he checked policyholders' receipt books and compared them to the agent's account. His audit showed discrepancies on 19 premium receipt cards for a total shortage of $141.75, of which amount the sum of $100.98 occurred when Respondent had the agency. The remainder of the shortage occurred either before or after Mr. Miller was in the job. During the course of the audit, Mr. Fossett found at least one instance where Mr. McGroarty made a collection on Mr. Miller's account and failed to turn it in. In the opinion of the auditor, the shortages in the account of $30 before Mr. Miller took over, when it was handled by Mr. McGroarty, were theft. Mr. McGroarty was discharged from employment with Independent Life and Accident Insurance Company approximately one week after the audit was completed. Mr. Baucom, assistant vice president of the company and custodian of the personnel records, indicated the audit done on Respondent's records revealed a shortage of $361.50. This was subsequently adjusted to $126.18 as a result of the company withholding commissions due Respondent. On February 4, 1983, Mr. Baucom wrote to the Department of Insurance, State of Florida, requesting to withdraw a charge of deficiency against Respondent previously submitted on December 7, 1981, on the basis that the company was not satisfied with the documentation of the alleged deficiency. Thereafter, on April 5, 1982, he again wrote the Department of Insurance reinstating the charge based upon subsequent receipt of "satisfactory documentation" and Mr. Miller's "attitude." Gracie Williams, a policyholder with Independent Life, experienced somewhat of a problem with the company when she and her husband tore down a house on which they had been paying premiums. When the house was removed, they mentioned the fact to Mr. McGroarty, but he did nothing about it. As a result, they paid several months' premiums on property that did not exist. In fact, when Respondent complained about this to Mr. McGroarty, he was told to collect the money or McGroarty would take it from another policy. Jennie L. Wilder also had difficulties on her policy with Independent Life's agent named "Alligood" (sic). She had paid her premiums for six months in advance, but because the agent delayed remitting the premium, she got credit for only three months. On the other hand, Catherine C. DiPerna and her husband have been insured with Independent Life for quite a while. Part of that time, the Respondent was her agent/collector. On June 16, 1981, just about the time of the other alleged shortages in Respondent's remittances, she paid her premium payment to Mr. Miller by check. The check was cashed, she did not receive a notice of lapsed policy, nor did she have any problem with her policy, even though on the Ordinary Remittance Report for the same period used by the Petitioner in the allegations relating to Mrs. Robinson shows no money received from the DiPernas. On March 11, 1981, upon the recommendation of Mr. R. Brenner, an investigator with the Department of Insurance, Respondent went to work for Independent Life as a debit agent in Jacksonville, Florida, under the supervision of Mr. Pat McGroarty, who, also, had had the debit (account) before. After the basic company indoctrination course, Respondent underwent on-the-job training under McGroarty. He never, during the entire time he worked for the company, accepted total responsibility for the account because, in his opinion, there were large discrepancies between the premium receipt cards and the company records when he was assigned the account. Respondent discussed these difficulties with McGroarty and other officials of the company, such as Mr. Ivanoski, Mr. Tharpe, and Mr. Baucom. In April, 1981, Miller saw that his signature as agent was forged on a policy owned by the Petitioner's witness Cooper on the life of Cooper's nephew, Edward Thomas, who, at all times pertinent, was an inmate in the state penitentiary. When Respondent mentioned this to McGroarty, McGroarty told him that Cooper had forged the names and Respondent was with McGroarty when he delivered the policy to Cooper. This is one of the policies which form the allegation in Count V of the Complaint and about which there is an obvious alteration on the Premium Receipt Book showing an increase in the weekly premium of one cent because of a change from a health policy to a life policy. Other difficulties with this particular account were brought by Miller to the attention of the district manager who forced McGroarty to make up the shortage from his own pocket. During a part of the time Respondent worked with the company, he also handled fire policies on a temporary license. He found so many irregularities and such out-and-out corruption, he states, that he intentionally failed the state examination for an industrial fire license. Even after instructions came from the home office terminating Respondent's work in fire insurance, the district manager instructed him to continue to collect fire premiums and turn them over to McGroarty. As a result of all of this, deficiencies show up on his fire accounts for periods after the time he ceased fire business. In fact, documents show collections by Miller on his accounts, even after he left the employ of the company. Respondent unequivocally denies any wrongdoing with regard to his accounts.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law stated above, it is RECOMMENDED: That the Administrative Complaint against the Respondent dated August 27, 1982, and amended on September 24 and December 28, 1982, be DISMISSED. RECOMMENDED this 28th day of February, 1983, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings Department of Administration 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of February, 1983. COPIES FURNISHED: Rhoda Smith Kibler, Esquire David Yon, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 S. Perry Penland, Esquire Penland, McCranie & Shad, P.A. Suite 1103, Blackstone Building Jacksonville, Florida 32202 The Honorable Bill Gunter State Treasurer and Insurance Commissioner The Capitol Tallahassee, Florida 32301
The Issue Whether Respondent, Gregory Bruce Sample, should be disciplined for alleged statutory and rule violations for his role in several insurance transactions.
Findings Of Fact Count I – Jewel Frisani Jewel Frisani was born December 22, 1932. As of September 23, 2010, Ms. Frisani owned two annuities; one issued by MetLife and the other issued by ING Golden American (ING). Ms. Frisani was withdrawing $500 per month from each annuity for a total of $1,000 per month, or $12,000 per year. Death benefits were provided as a feature of each annuity. On September 23, 2010, Ms. Frisani attended a luncheon seminar hosted by Respondent. While at the seminar, Ms. Frisani completed a questionnaire wherein she provided her name, address, and phone number. The questionnaire directs that individuals completing the same should note thereon “Topics of Most Interest to Me.” The questionnaire lists some 25 topics and Ms. Frisani noted that she was only interested in having Respondent to “[r]eview[] [her] existing annuity(ies).” One of the listed topics is “[e]state [p]lanning.” Ms. Frisani did not indicate on the form that she was interested in discussing with Respondent matters related to planning her estate. Soon after the seminar, Respondent contacted Ms. Frisani and they agreed that they would personally meet on October 5 and October 11, 2010, to discuss matters related to her existing annuities. On October 5, 2010, Ms. Frisani met with Respondent to discuss her MetLife and ING annuities. During the meeting, Ms. Frisani showed Respondent a “Portfolio detail” for her ING annuity and a “snapshot” summary of her MetLife annuity. The “Portfolio detail” showed that as of September 30, 2010, the ING annuity had a market value of $65,604.77. The “snapshot” of Ms. Frisani’s MetLife annuity showed that at the beginning of the year, the opening value of her annuity was $50,638.98 and her closing value as of September 30, 2010, was $46,807.73. Neither the “Portfolio detail” nor the “snapshot” summary listed any charges associated with surrendering either annuity. During the meeting with Respondent on October 5, 2010, Ms. Frisani informed Respondent that her “annuities were going to be [the] inheritance for [her] granddaughter.” This explains why the words “Prisilla Frisani granddaughter” appear in Respondent’s handwriting on the bottom of the “Portfolio detail.” Although Ms. Frisani informed Respondent of her desire to leave an inheritance for her granddaughter, she did not impress upon Respondent that any new product(s) that she might purchase must offer death benefits in an amount not less than what she already had with MetLife and ING. Specifically, as to this issue, Ms. Frisani testified as follows: Q. What investment goals did you share with [Respondent] at that meeting? What did you tell him you wanted out of -- A. I wanted him to see if he could do better than what I was getting from my annuities. Q. Okay. And as you stated earlier, what you did like about your old annuities was that -- what was it that you stated earlier that you liked about your old annuities? A. Oh, that I was getting a thousand a month from my -- from my checking, and then they had death benefits for my granddaughter. Q. Did you also share with Mr. Sample that you wanted to continue those benefits? A. No, I didn’t mention that to him there. Q. You didn’t mention the death benefits? A. The death benefits, no. Q. Did you mention -- so you just mentioned that you wanted -- A. I wanted him to make sure that what he was doing would go in the trust, and that I would continue getting my thousand a month. Q. Okay. A. -- from the annuities -- Q. Okay. A. -- and that I wouldn’t lose no money by switching. Q. Okay. And you say he was aware that both annuities had death benefits? A. Well, I don’t know if he was aware of that or not, but Q. Okay. We didn’t discuss too much about the death benefits. Final Hearing Transcript, pp. 149-151. Respondent credibly testified that had Ms. Frisani explained to him that her objective was to maximize the death benefits payable to her granddaughter, then he would have recommended life insurance as a vehicle for her investments instead of annuities. Ms. Frisani also contends that during her meeting with Respondent on October 5, 2010, he assured her that she would not lose any money by surrendering the ING and MetLife annuities. When Ms. Frisani met with Respondent on October 5, 2010, she informed Respondent she was taking a $500 per month partial withdrawal from her ING annuity as well as a $500 per month partial withdrawal from her MetLife annuity. Ms. Frisani also had $200,000 in the bank, some of which may have been in a money market account. When asked if she shared information with Respondent concerning the $200,000, Ms. Frisani testified that “I might have mentioned it, yeah.” Ms. Frisani's ING annuity was characterized as a qualified retirement account. Due to her age, in order to avoid a tax penalty on this qualified account, Ms. Frisani was required to take a minimum distribution of four percent annually. Ms. Frisani's MetLife annuity was a non-qualified account. Therefore, she did not have to take from it any required minimum distributions (RMD). Respondent suggested to Ms. Frisani that as a means of paying less in taxes and obtaining growth on her investments, without losing any principal in the stock market, she should consider replacing the ING and MetLife variable annuities with National Western fixed annuities, and that for her $12,000 annual withdrawals she should take $3,000 a year in partial withdrawals from the National Western qualified annuity he was offering her and $9,000 a year from her money market account. The $3,000 per year in withdrawals from the qualified National Western annuity would satisfy her RMD without incurring any penalty. Since her money market account was paying very little interest, the $9,000 a year from this account would make up the balance of money she needed for her annual income. The non-qualified National Western annuity could then grow at a higher interest rate than the funds in Ms. Frisani's money market account. In order to assist Ms. Frisani with her efforts to learn more about the National Western annuity, Respondent, during the meeting of October 5, 2010, gave Ms. Frisani a copy of National Western's multi-page brochure. The brochure allowed Ms. Frisani to familiarize herself with the National Western annuity prior to their next meeting on October 11, 2010. On October 11, 2010, Ms. Frisani met with Respondent a second time. During this meeting, Ms. Frisani signed several forms related to the surrender of the ING and MetLife annuities, and the purchase of annuities from National Western. It is undisputed that each form was completed by Respondent and signed by Ms. Frisani. Ms. Frisani testified that she did not bother to read the documents that Respondent gave her to sign.3/ One of the forms signed by Ms. Frisani for each of the National Western annuities is the Annuity Suitability Questionnaire. The questionnaire asks two related questions. The first question asks “[w]ill the proposed annuity replace any product?” and the second asks “[i]f yes, will you pay a penalty or other charge to obtain these funds?” The answer noted on the form to the first question is “yes,” and the answer to the second question is “no.” During the October 11, 2010, meeting with Respondent, Ms. Frisani also signed, for both National Western annuity contracts, a “Disclosure and Comparison of Annuity Contracts” form (Comparison form). This form facilitates the side-by-side comparison of certain features of an existing annuity contract with those of a replacement annuity contract. Near the top of the Comparison form, there is a line where the contract number for the existing annuity is to be placed. On the Comparison form for the MetLife annuity, the contract number “3201353529” appears. This is the correct contract number for the MetLife annuity. On the Comparison form for the ING annuity, the contract number “I038301-0D” appears. This is the correct contract number for the ING annuity. Neither of these contract numbers appears on the “snapshot” or the “Portfolio detail” documents that Ms. Frisani presented to Respondent during their initial meeting on October 5, 2010. Ms. Frisani received quarterly statements from both ING and MetLife for the annuity contracts that she had with these companies. The ING and MetLife quarterly statements for the period ending September 30, 2010, each lists the annuity contract number, the contract date, and other pertinent information. The MetLife quarterly statement indicates that as of September 30, 2010, Ms. Frisani’s MetLife annuity had an account balance of $46,684.92 and a death benefit in the amount of $57,160.41. Ms. Frisani’s ING quarterly annuity statement for the period ending September 30, 2010, shows the following: Guaranteed Minimum Death Benefit $115,859.39 Accumulation Value $ 65,491.51 Surrender Charges $ 1,345.01 Cash Surrender Value $ 64,146.50 When Respondent met with Ms. Frisani on October 11, 2010, the evidence reasonably suggests that Ms. Frisani had her quarterly statements with her and presented the same to Respondent so as to assist him with completing the paperwork related to the surrender of Ms. Frisani’s existing annuities and the purchase of the new annuities from National Western. For Ms. Frisani’s MetLife annuity, Respondent wrote on the Comparison form that this annuity contract was issued in “Yr99.” The MetLife quarterly statement that Ms. Frisani presented to Respondent shows, however, that the actual date of issue for the MetLife annuity was April 22, 2005. The evidence does not sufficiently explain this discrepancy. For the MetLife annuity, Respondent also noted on the Comparison form that this annuity had a nine year surrender charge period and a first year surrender charge rate of nine percent that decreased by one percentage point each year that the annuitant maintained the policy. Although Respondent accurately noted the surrender period and related percentages on the Comparison form, it is not clear from the evidence where Respondent got this information, given that neither the MetLife quarterly statement for the period ending September 30, 2010, nor the “snapshot” make mention of surrender charges or related percentages. Respondent, nevertheless, obviously knew of the surrender period and related charges for Ms. Frisani’s MetLife annuity. The Comparison form also notes that the MetLife annuity provides for a “Waiver of Surrender Charge Benefit or Similar Benefit.” Again, however, there is nothing in the MetLife quarterly statement or “snapshot” that makes mention of the waiver of any surrender or similar charges. During the meeting with Respondent on October 11, 2010, Ms. Frisani also signed, for the MetLife annuity, a form titled “DISCLOSURE OF SURRENDER CHARGES IF EXISTING ANNUITY IS REPLACED OR EXCHANGED.” There is a section of the disclosure form where estimated surrender charges are noted. For this section, Respondent wrote in “0” as the amount of surrender charges associated with replacing the MetLife annuity with an annuity from National Western. Contrary to Respondent’s representations on the form, Ms. Frisani incurred $2,142.50 in surrender charges related to the surrender of the MetLife annuity contract. On October 11, 2010, when Respondent met with Ms. Frisani, he knew, or should have known, based on the information available to him, that Ms. Frisani would incur surrender charges related to the surrender of the MetLife annuity. The totality of the evidence as to this transaction indicates that Respondent willfully misled Ms. Frisani, thus causing her to be misinformed about the charges related to the surrender of her MetLife annuity. Petitioner also alleges that Ms. Frisani suffered financial harm as a result of Respondent deceiving her into believing that she would not incur charges related to the surrender of her ING annuity. According to Petitioner, Ms. Frisani incurred $1,345.01 in surrender charges related to this transaction. The evidence of record is insufficient to support this allegation. The “DISCLOSURE AND COMPARISON OF ANNUITY CONTRACTS” form that Respondent completed for Ms. Frisani’s ING annuity notes that nine years was the surrender charge period for this annuity. If this representation is true, the surrender charge would terminate in November 2009. Petitioner’s Exhibit 37 contains a summary of the terms of Ms. Frisani’s ING annuity and it shows seven years as the surrender charge period for this annuity. Whether it is seven years or nine years, neither of these yearly figures would result in a surrender charge, given that Ms. Frisani had held the ING annuity for nine years and eleven months at the time of actual surrender. To further complicate matters, Ms. Frisani’s ING quarterly statement for the period ending September 30, 2010, shows that if she were to surrender the annuity on September 30, 2010, she would incur $1,345.01 in surrender charges. As previously noted, Ms. Frisani’s ING annuity, as of September 30, 2010, had an accumulated value of $65,491.51. Subtracting the stated surrender charges would result in a cash surrender value of the ING annuity of $64,146.50. When this annuity was actually surrendered on or about October 25, 2010, ING issued a check in the amount of $65,172.33 to National Western for Ms. Frisani’s new annuity. The evidence does not explain with sufficient clarity why there is only a $319.18 difference between the accumulated value as of September 30, 2010, and the actual cash surrender value as of October 25, 2010. Also, on or about October 22, 2010, ING sent Ms. Frisani a “Confirmation Notice” regarding transactions related to her annuity account. The Confirmation Notice provides the name (Jeffrey A. Masters), phone number, and mailing address for Ms. Frisani’s ING financial advisor along with a notice advising that “The ING Variable Annuity Customer Contact Center is available Monday through Thursday 8:30 AM to 6:30 PM Eastern Time and Friday 8:30 AM to 5:30 PM Eastern Time at 1-800-366- 0066.” The Confirmation Notice also states the following: IMPORTANT NOTICE: Please carefully review all of the transactions detailed on this confirmation notice. You must inform us of any errors we may have made with respect to allocations of your investment dollars within30 days from the date of this notice. If you do not respond within 30 days, all allocations listed on this confirmation notice will be deemed final pursuant to your instructions. The Confirmation Notice lists two transactions with an effective date of October 22, 2010. The first transaction shows a “Total Cash Surrender” of $65,172.33, and the second transaction shows a “Total Surrender Charge” of $1,345.01. Independent of what Respondent may have told Ms. Frisani, she was given notice by ING that there was a $1,345.01 charge associated with surrendering her ING annuity and that she had 30 days from the date of the notice to inform ING about any irregularities associated with the transaction. There is no evidence that Ms. Frisani ever contacted ING or Jeffrey A. Masters about the $1,345.01 surrender charge. Also, Ms. Frisani had until November 21, 2010, to inquire about the surrender charges or any other matters, including death benefits, related to the surrender of her ING policy. There is no evidence suggesting that Ms. Frisani availed herself of this option. Petitioner failed to prove that Ms. Frisani suffered, as a consequence of Respondent’s conduct, financial harm in the amount of $1,345.01, as alleged. The Department also alleges that Respondent misrepresented to Ms. Frisani that she would receive a $9,000 bonus following her first year of ownership of the National Western annuities. Respondent denies this allegation. None of the documentary evidence references a $9,000 bonus and the only testimony regarding this alleged bonus is from Ms. Frisani. Ms. Frisani’s testimony, without more, is insufficient to satisfy Petitioner’s burden with respect to this allegation. In its Proposed Recommended Order, Petitioner contends that Respondent “stated on Ms. Frisani’s disclosure and comparison of annuity contracts that she would not incur any administrative fees or margins, but the National Western (annuity number 0101255052) contract clearly states otherwise.” It is correct that the disclosure and comparison form notes that the National Western annuity will have zero “Administrative fees or Margins.” The disclosure and comparison form in evidence does not define what constitutes an administrative fee or margin. Petitioner equates the “charge” that Ms. Frisani paid for the National Western annuity withdrawal benefit rider with an administrative fee, but the record does not support Petitioner’s conclusion. There is no indication that National Western considers the charge for the withdrawal benefit rider as an administrative fee. The National Western documents signed by Ms. Frisani advise that “[t]he Account Value of the policy is reduced each year by the Annual Rider Charge” and “[t]here is a charge for this rider, which is assessed annually.” (emphasis added). In looking at Ms. Frisani’s National Western statement for this annuity for the period November 4, 2010, through September 26, 2011, the only “fee” listed is an “Option A Asset Fee” that shows zero as the percentage associated with it. The annual rider charge is not listed as an “administrative” or any other type of fee. Without more, the undersigned is unable to conclude that the annual rider charge is the equivalent of an “administrative fee” as these terms are used in the disclosure and comparison form signed by Ms. Frisani on October 11, 2010. Respondent explained his rationale for recommending the National Western annuities to Ms. Frisani. He estimated that Ms. Frisani may have made $5,000 with her ING variable annuity in the ten years that she owned it and $5,000 with the MetLife variable annuity in the five years she owned that annuity, so her net return was a half percent and one percent, respectively. On the other hand, the National Western fixed annuities Respondent sold Ms. Frisani had a guaranteed five percent growth so she would be earning ten times the amount she had been making on her ING annuity and five times the amount for her MetLife annuity. The National Western annuities also included a five percent bonus, which approximated $6,000. Respondent summarized his comparison of the National Western annuities he sold Ms. Frisani with the ING and MetLife annuities she previously owned as follows: [S]o she had these old contracts with no safety, that had produced a half percent interest from the get-go for ten years. We moved her to National Western, which is an equity index annuity. The principal is fixed. It had a five percent income rider guarantee, which is what she wanted. And we were able to take the nonqualified account and just let it grow. The other is the qualified contract. She -- she has to take out four percent for her RMD. She's making five, which means she continues to actually make some money. Had she stayed with the variable, she was just depleting it every year by this four percent. So she was losing principal every year, so we stopped that. We stopped that. It's stopped cold. Final Hearing Transcript, pp. 1157-1158. Respondent further explained that Ms. Frisani's National Western annuities are structured so she can withdraw up to ten percent annually from the account, but if she does not take any withdrawals in the first year then she is allowed to take up to twenty percent in the second year, and if she elects not to take any withdrawals in the second year then she may withdraw up to thirty percent for the third year, and so on for the duration of the annuity period. Respondent had an objectively reasonable basis for recommending the National Western annuities to Ms. Frisani. Count II – Fred and Eileen Sarracino Fred Sarracino and Eileen Sarracino are married and reside in Lake Placid, Florida. Mr. Sarracino was born on September 20, 1934, and is a retired automobile mechanic. Mrs. Sarracino was born on February 1, 1935, and is retired from working for an insurance broker in Pennsylvania. In October 1993 Mr. Sarracino paid an initial premium of $2,000 towards the purchase of an Allmerica Financial Life Insurance and Annuity Company variable annuity contract (Commonwealth 46). Over the next 15 years, he added premium payments to Commonwealth 46 so that it had a surrender value of $46,435.53 on June 30, 2008, and an enhanced death benefit of approximately $54,000 on March 31, 2008. In October 1993 Mrs. Sarracino paid an initial premium of $2,000 towards the purchase of a separate Commonwealth variable annuity contract (Commonwealth 45). Over the next 15 years, she added premium payments to Commonwealth 45 so that it had a surrender value of $18,979.81 on June 30, 2008, and an enhanced death benefit of approximately $75,000 on March 31, 2008. In September 1997 Mrs. Sarracino paid an initial premium payment of $94,226.16 toward another Commonwealth variable annuity contract (Commonwealth 03). Over the next 11 years, she added premium payments to Commonwealth 03 so that it had a surrender value of $172,831.01 on June 30, 2008, and an enhanced death benefit of over $237,000 on March 31, 2008. During the initial months of 2008, Mr. and Mrs. Sarracino were losing money on their Commonwealth variable annuities and decided, in mid-2008, to attend a seminar presentation hosted by Respondent at a restaurant in Sebring, Florida. Mr. and Mrs. Sarracino met privately with Respondent on June 30, 2008. Acting on Respondent’s recommendations, Mr. Sarracino surrendered Commonwealth 46 and used the proceeds of $46,435.53 to purchase an Old Mutual Financial Life Insurance Company annuity (Old Mutual 67). Mrs. Sarracino surrendered Commonwealth 45 and applied the proceeds of $18,979.81 to purchase an Old Mutual annuity (Old Mutual 68). Mrs. Sarracino also surrendered Commonwealth 03 and applied the proceeds of $172,402.45 to purchase yet another Old Mutual annuity (Old Mutual 69). In total, Respondent earned $31,428.52 in commission from these transactions. When Respondent took the applications for each of the Old Mutual annuities, he misrepresented the financial profile of the Sarracinos on the annuity suitability forms. Respondent accomplished this in part by having the Sarracinos sign blank suitability forms which Respondent later filled in with false information.4/ Respondent falsely noted on the suitability form that Mrs. Sarracino’s monthly disposable income was $1,600. Mrs. Sarracino credibly testified that her monthly disposable income when she met with Respondent was more in the range of four to five hundred dollars. Respondent also falsely noted on the form that Mrs. Sarracino owned $60,000 worth of certificates of deposit (CDs), variable annuities amounting to $300,000, and had $60,000 in mutual funds. Respondent noted on the suitability form that Mr. Sarracino, like his wife, also had monthly disposable income in the amount of $1,600. This is false. Respondent also falsely noted on the form that Mr. Sarracino owned $60,000 worth of CDs, variable annuities totaling $300,000, and $60,000 in mutual funds. Finally, Respondent falsely stated that Mr. Sarracino owned a life insurance policy with a cash value of $10,000. The unrefuted evidence is that Mr. Sarracino has never owned a life insurance policy of any amount. Respondent willfully misrepresented the financial profile of the Sarracinos so that they could pass Old Mutual’s underwriting standards and he could receive a commission. Count III – Warren and Darlene Morgan Warren and Darlene Morgan are married and live in Port Charlotte, Florida. Mr. Morgan was born on May 24, 1947. Mrs. Morgan was born on April 21, 1948. In 2005, the Morgans decided they should consult a financial advisor closer to their home. In May and June 2005, the Morgans met with Respondent for the purpose of purchasing four Allianz annuities. On May 28, 2005, Mr. Morgan made an initial premium payment of $56,949.16 toward the purchase of the first Allianz annuity contract (Allianz 32). On May 28, 2005, Mr. Morgan made an initial premium payment of $16,701.27 toward the purchase of a second Allianz annuity contract (Allianz 22). On May 28, 2005, Mrs. Morgan purchased the third Allianz annuity contract (Allianz 02). The initial premium payment was $16,701.27. On June 15, 2005, Mrs. Morgan purchased the fourth Allianz annuity contract (Allianz 43). She made three premium payments on this policy between May 28, 2005, and June 15, 2005, totaling $68,040.34. Each of the Allianz annuities Respondent sold the Morgans was intended as a long-term investment as evidenced by the respective annuities’ multi-year surrender charge periods and high surrender charge penalties. After purchasing the Allianz annuities, the Morgans and Respondent met annually to review the Morgans' investments, but until 2010, they decided not to change anything. In early calendar year 2010, Respondent, consistent with the practice of conducting their annual review, called the Morgans and informed them of a new product that might appeal to them. Respondent and the Morgans met on January 7, 2010, and Mrs. Morgan testified that Respondent compared the new product with the Allianz annuities they owned. Mrs. Morgan stated in her testimony that “we asked a lot of questions” during the meeting with Respondent. Mrs. Morgan thoughtfully considered the merits of purchasing the new product and explained that initially she was opposed to replacing their Allianz annuities because she believed the surrender penalty that she and her husband would pay was too steep a price for the exchange. She testified, however, that her husband, Warren, wanted to make the change and so she agreed to do so. On January 7, 2010, when they met with Respondent, Darlene and Warren Morgan were 61 and 62 years of age, respectively, and their investment objective remained focused on growth. During the meeting, Respondent suggested that the Allianz annuities should be replaced with annuities issued by Forethought Life Insurance Company (Forethought) and Old Mutual Financial Life Insurance Company (OM). The Forethought annuities were offering a new feature known as an "income rider" that was not available when the Morgans purchased the Allianz annuities in 2005. Allianz 32 was exchanged for a Forethought annuity contract (Forethought 03). Mr. Morgan incurred a surrender penalty of $6,151.79 for exchanging this Allianz annuity, which at the time of the exchange was valued at approximately $58,000. Allianz 22 was exchanged for an OM annuity (OM 57). Mr. Morgan incurred a surrender penalty of $4,441.09 for exchanging this Allianz annuity, which at the time of the exchange was valued at approximately $16,000. Allianz 43 was exchanged for a Forethought annuity (Forethought 92). Mrs. Morgan incurred a surrender penalty of $21,469.82 for exchanging this Allianz annuity, which at the time of the exchange was valued at approximately $65,000. Allianz 02 was exchanged for an OM annuity (OM 58). Mrs. Morgan incurred a surrender penalty of $4,441.09 for exchanging this Allianz annuity, which at the time of the exchange was valued at approximately $16,000. Combined, the Morgans incurred $36,503.79 in surrender penalties associated with the exchange of their annuities. Respondent’s total commission for these transactions was $16,581.62. The Administrative Complaint alleges that Respondent “hurriedly pushed annuity application and suitability forms in front of Mr. and Mrs. M[organ] and had them sign them without allowing them any time to review them,” and that the “entire meeting on or about January 7, 2010, lasted approximately 20 minutes.” The Administrative Complaint also alleges that consistent with Respondent’s alleged conduct of rushing the Morgans, he had them sign blank forms related to the exchange of the Allianz annuities. According to Mrs. Morgan’s testimony, the meeting with Respondent on January 7, 2010, lasted approximately 45 minutes (more than twice as long as alleged), during which they “asked a lot of questions.” As for the issue of allegedly signing blank forms, Mrs. Morgan testified as follows: Q: Did you sign blank forms or were they partially filled out? A: I don’t know. Because he was at his desk writing very fast. Part of it could have been filled out. Final Hearing Transcript p. 645 Q: All right. But what I’m asking you is: As you sit here today, can you state with certainty that any of the forms that he had you sign were, in fact, blank? A: No, I cannot state with certainty that. Final Hearing Transcript p. 678 The evidence is insufficient to clearly and convincingly establish that the Respondent rushed the Morgans into exchanging their Allianz annuities or that Respondent had them to sign blank documents. Respondent, in filling out the transfer, application, and suitability forms for the purchase of the Forethought and OM annuities, listed therein information regarding the Morgans that was false. Respondent included a false statement that the Morgans had a net worth of $400,000, excluding the value of their home, that the Morgans’ liquid assets totaled $65,000, and that the Morgans owned CDs. Respondent willfully misrepresented the financial profile of the Morgans so that they could pass the Old Mutual and Forethought underwriting standards thereby allowing him to receive a commission. Petitioner, in its Proposed Recommended Order, offers several proposed factual findings that ultimately show, “[b]ased on all of the evidence, [that] there was no objectively reasonable basis to recommend the Morgans’ annuity exchanges. § 627.4554(4)(a), Fla. Stat. (2010).” Section 627.4554, by its express terms, only applies to “Senior consumers” that are “65 years of age or older.” Neither of the Morgans was within this age range when they met with Respondent in 2010 and, therefore, section 627.4554 cannot be relied upon by Petitioner as a basis for imposing disciplinary action against Respondent. Count IV Petitioner withdrew Count IV of its Administrative Complaint. Count V – Joel and Evelyn Langer Petitioner alleges that Respondent told Joel and Evelyn Langer that he was familiar with the “IRS 72t rule,” when in reality he was not, and because of his unfamiliarity with this rule, this meant that Respondent “knew that by selling the Langers’ annuities, they would incur substantial withdrawal penalties [pursuant to] the terms of the[ir] annuity contracts.” The essence of this allegation is that Respondent did something wrong in arranging for the issuance of the OM annuities that adversely affected the Langers’ 72(t) protections with the Internal Revenue Service (IRS) and also caused them to lose money. Joel and Evelyn Langer are married and reside in Port Charlotte, Florida. Mr. Langer was born on September 10, 1948. Mrs. Langer was born on August 31, 1949. During their employment, Mr. and Mrs. Langer put their savings in mutual funds managed by Royal Bank of Canada Wealth Management (RBC). Mr. and Mrs. Langer were forced into early retirement before reaching age 59 1/2. The mutual fund investments then became their only liquid assets and they depended on these funds for income. On February 21, 2008, Mr. and Mrs. Langer, who were 58 and 59 years of age respectively, attended a luncheon seminar Respondent hosted in Port Charlotte, Florida. The Langers were interested in obtaining more information about annuities, because they had their life savings invested in the stock market, which was rapidly declining, and they were looking to move their funds to another investment product. The Langers felt annuities would be “a safer investment.” The Langers met with Respondent and explained that they would need immediate income that would qualify for disbursement under the 72(t) provisions of the federal income tax code. Because the Langers had been forced into early retirement, they had elected to draw on their investments through the 72(t) provisions of the federal income tax code. The 72(t) provisions allow the investor, prior to age 59 1/2, to receive distributions from their retirement investment, in substantially equal periodic payments without paying a penalty for early withdrawal, provided the investor receives the distribution for a period of five years without interruption. Respondent placed all of Mr. and Mrs. Langer’s liquid assets into three Old Mutual annuity contracts, hereinafter “Old Mutual 02,” “Old Mutual 03” and “Old Mutual 04.” On March 7, 2008, Mrs. Langer purchased Old Mutual 02. The initial premium was paid with an RBC check in the amount of $237,563.23, made payable to Old Mutual Financial Life. Respondent earned a commission in the amount of $26,131.96 for this transaction. On March 7, 2008, Mr. Langer purchased Old Mutual 03. The initial premium was paid with an RBC check in the amount of $393,073.89, made payable to Old Mutual Financial Life. Respondent earned a commission in the amount of $43,238.13 for this transaction. On March 7, 2008, Mrs. Langer purchased Old Mutual 04. The initial premium was paid with an RBC check in the amount of $72,572.48, made payable to Old Mutual Financial Life. Respondent earned a commission in the amount of $7,982.97 for this transaction. As previously noted, Petitioner alleges that the Langers incurred “substantial withdrawal penalties” as a consequence of Respondent botching the paperwork related to the Langers maintaining the protections afforded by the IRS 72(t) rule. Although the evidence is not at all clear as to the amounts of the alleged penalties, it appears as though the Langers did not actually incur any penalties, as alleged, because OM, on or about April 8, 2008, issued refund checks to Mr. and Mrs. Langer in the amounts of $1,329 and $2,018, respectively. As for the alleged mishandling by Respondent of the Langers’ IRS 72(t) paperwork, Petitioner's expert witness, John Richard Brinkley, testified that he assumed Respondent failed to send the IRS the necessary paperwork to entitle the Langers to the IRS rule 72(t) privileges for the OM annuities sold to them by Respondent. Mr. Brinkley conceded, however, that he never verified whether the necessary forms were or were not delivered, or to whom such fault should be allocated. Similarly, both Mr. and Mrs. Langer conceded during their testimony that they could not say whether it was Respondent's supposed error in qualifying the OM annuities under the IRS rule 72(t) provisions, or whether the supposed error was the fault of OM itself. The unrefuted evidence is that Respondent faxed OM specific instructions to set up the annuities so that the annuities complied with the IRS rule 72(t) provisions and that OM subsequently confirmed, in letters sent to each of the Langers, that the annuities indeed were being set up to conform to the IRS rule 72(t) provisions. While there is evidence that Respondent initially may have completed the incorrect OM form for this transaction, the evidence is inconclusive as to the effect this had on how the OM annuities were originally structured by the company. Additionally, the Department's investigator, Juanita Midgett, wrote to OM inquiring as to whether Respondent bore any responsibility in ensuring that the annuities he sold the Langers did, in fact, conform to the IRS rule 72(t) provisions. OM's letter in response stated that Respondent bore no responsibility for any “premature penalty tax,” and reminded Ms. Midgett that the Langers were required “to consult their personal tax advisor before submitting a request should they elect to take early distributions from their retirement funds.” Petitioner has failed to meet its burden of proof with respect to this issue. The Administrative Complaint also alleges that “[d]ue to [Respondent’s] failure to take into account the L[angers’] necessity for a monthly income, the OM 02 and OM 03 contracts had to be reissued thereby altering the initial premiums” paid by the Langers. The only argument advanced by Petitioner in its Proposed Recommended Order as to this issue is found in paragraph 35 wherein Petitioner simply restates that Respondent “failed to properly account for the Langers’ need for a monthly income and, as a result, the Old Mutual 02 and Old Mutual 03 contracts had to be reissued thereby altering the initial premiums” paid by the Langers. It is unclear from the evidence why the referenced contracts had to be reissued. Petitioner’s allegations imply that the “altering [of] the initial premiums” resulted in the Langers incurring additional expense as a result of the error, but the evidence is inconclusive as to whether the premium amounts increased or decreased. Petitioner failed to meet its burden of proof with respect to this issue. Paragraph 71(c) of the Administrative Complaint alleges that Respondent “never explained to the [Langers] that all three annuities had huge surrender charge rates and periods, starting at 17.5% for the first year of ownership and diminishing thereafter until the penalty percentage reached 4.5% in the fourteenth year of ownership.” Remarkably, Petitioner’s Proposed Recommended Order as to this allegation simply restates, verbatim, the allegation from the Administrative Complaint and only cites to the annuity contracts themselves as record support for the allegation.5/ This allegation is not sufficiently supported by the evidence, given that Mrs. Langer testified that Respondent explained to them, with respect to the issue of surrender charges associated with the annuities, that they “had to remain in [the annuities] for a period of years.” Paragraph 71(d) of the Administrative Complaint alleges that Respondent “knew that the Langers wanted to be done with the risks associated with the stock market and yet [he] pegged all three Old Mutual annuities to S&P 500 indices in determining their income returns.” Once again, Petitioner merely restates in its Proposed Recommended Order the allegation from the Administrative Complaint and only cites to the annuity contracts themselves as record support for the allegation. Nevertheless, Mrs. Langer testified that “at the seminar, [Respondent] went over the benefits [of the] annuities and went into detailed explanations of his annuity plans being tied to the S&P 500, and he did quite a bit of explaining at the seminar.” The Langers knew that the annuity products that Respondent was selling were tied to the S&P 500 well in advance of purchasing the products. The evidence clearly establishes that the Langers knew what Respondent was selling and that they made a conscientious and informed decision when they ultimately decided to purchase the three Old Mutual annuities. Paragraph 71(e) of the Administrative Complaint alleges that Respondent “checked a box on the Old Mutual suitability forms indicating that Mr. and Mrs. Langer declined to answer the questions propounded on the form, which was false.” Respondent explained that he discussed with the Langers the nature of their assets, but because the totality of their assets consisted of the money in their brokerage account, there was no purpose in completing the "Customer Profile" section of the suitability forms, and so he checked the line on the OM forms indicating that the Langers were declining to answer the questions. Mr. Langer testified that they “explained to [Respondent] that [they] had no other assets to consider” besides their mutual funds. Given this, it is inconsequential that Respondent checked the box signifying that the Langers declined to answer the "Customer Profile" questions. Paragraph 71(g) of the Administrative Complaint alleges that Respondent “refused to respond to the Langers’ inquiries once they discovered the financial losses they suffered [due to] his recommendations.” Respondent generally denies this allegation but offers no specific defense in response thereto. Mrs. Langer credibly testified that Respondent “would not return her calls” after she and her husband realized that there was a problem with the application of IRS rule 72(t) to their Old Mutual annuities. The evidence does not quantify the number of calls or the length of the time period during which the Langers made calls to Respondent. Respondent’s failure to return Mrs. Langer’s phone calls is, under the facts present, inconsequential given that the evidence is not clear and convincing regarding any culpability on Respondent’s part with respect to Old Mutual’s processing of the Langer’s IRS rule 72(t) paperwork. Paragraph 71(h) of the Administrative Complaint alleges that Respondent “never explained the ‘free look’ provision of the three Old Mutual contracts.” As to this allegation, Petitioner, in its Proposed Recommended Order, offers as its only proposed finding of fact that Respondent “nullified the free look option by pre-dating the delivery receipt so as to eliminate the Langer’s option to cancel the contracts.” Alleged actions of “pre-dating” a delivery receipt are substantively different from actions related to the alleged “failure to explain” a contractual provision. Respondent had no pre-hearing notice of the allegation that Respondent “pre-dated” the delivery receipt and therefore this allegation, even if true, is irrelevant to the allegation that Respondent never explained the free look provision of the three Old Mutual annuities. Petitioner has failed to satisfy its burden of proof with respect to the allegation that Respondent “never explained the ‘free look’ provision of the three Old Mutual contracts.” Petitioner has failed to prove by clear and convincing evidence any violations by Respondent with respect to his dealings with the Langers. Count VI – Gail Shane On February 16, 2012, Gail Shane, who was 65 years old at the time (born June 17, 1946) and an unmarried woman, attended a luncheon seminar conducted by Respondent in Sebring, Florida. At the luncheon, Respondent shared with Ms. Shane information that convinced her that Respondent could place her in an investment product suitable for her needs. Ms. Shane met with Respondent in his Sebring office on March 6, 2012. During this meeting, Ms. Shane explained to Respondent that she was looking for an investment product where she could simply park $5,000 and let it “grow,” and that she was not looking for the investment product to provide her with income. In other words, Ms. Shane wanted an annuity product that would guarantee growth and not reduce her principal investment amount. Per Respondent’s recommendation, Ms. Shane purchased a $5,000 annuity issued by National Western Insurance Company (National Western). Respondent’s commission for this transaction was $500. During the meeting with Ms. Shane on March 6, 2012, Respondent did not explain to Ms. Shane that the National Western annuity contained a yearly withdrawal benefit rider that cost $40.95 per year. According to the annuity contract, the withdrawal benefit rider “provides guaranteed minimum withdrawal benefits . . . in an amount selected by [Ms. Shane on a] semi-annual, quarterly, or monthly payment” basis. At the time of purchase, Ms. Shane did not bother to read the terms and conditions of the annuity product and her omission, coupled with Respondent’s failure to explain to her the inclusion in the policy of the yearly withdrawal benefit rider, resulted in Ms. Shane not knowing that the annuity contained the rider. It was only after Ms. Shane received a statement from National Western that she realized that her annuity contained a rider that she did not need and that was otherwise inconsistent with her investment goals of “growth without principal reduction.” Ms. Shane, upon learning of the existence of the yearly withdrawal benefit rider, immediately notified National Western and directed the company to remove the rider from her annuity. Per Ms. Shane’s request, National Western removed the rider from her annuity policy. Respondent did not have an objectively reasonable basis for believing that Ms. Shane desired to have the yearly withdrawal benefit rider as part of her annuity contract. Paragraph 79(d) of the Administrative Complaint alleges that Respondent never explained to Ms. Shane that the National Western annuity “had huge surrender charge rates and periods, starting at 15% for the first year of ownership and diminishing thereafter until the penalty percentage reached 2% in the thirteenth year of ownership.” As previously mentioned, Ms. Shane’s investment objectives were such that she wanted to park her $5,000 initial investment and let it grow. It is true that Respondent did not explain the surrender charge rates to Ms. Shane. However, his failure to do so is not of legal significance given her stated investment strategy. Paragraph 79 of the Administrative Complaint also alleges that Respondent had Ms. Shane to sign suitability forms that were in many respects blank and that Respondent “completed the forms outside [Ms. Shane’s] presence . . . [and] failed to provide a copy to Ms. S[hane] for her review so that she could discover the falsehoods that were being forwarded to National Western [for] its underwriter’s review.” Specifically, paragraph 79(e) of the Administrative Complaint alleges that “after obtaining Ms. S[hane]’s signature on the annuity suitability form, [Respondent] completed the form outside her presence and indicated therein that she had a net worth of $1,000,000 knowing that [this representation] was completely, utterly, and absurdly false.” Ms. Shane credibly testified that when she met with Respondent on March 6, 2012, her net worth was somewhere in the neighborhood of $258,000; not anywhere near the $1,000,000 that Respondent noted on the suitability form. Petitioner’s Hearing Exhibit 261, p. 803, is the Accredited Investor Acknowledgment Form (Acknowledgment Form) signed by Ms. Shane on March 6, 2012. The first sentence of the Acknowledgment Form provides that “National Western Life Insurance Company is prohibited by Florida Law from selling the annuity for which you have applied to any senior consumer (a purchaser 65 years of age or older) unless that senior consumer is an “Accredited Investor.” The Acknowledgment Form also states the following: Florida law defines an “Accredited Investor” as any person who comes within any of the following categories at the time of the sale of an annuity to that person: The person’s net worth or joint net worth with his or her spouse, at the time of purchase, exceeds $1 million; or The person had an individual income in excess of $200,000 in each of the 2 most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year. The Acknowledgment Form then requires the proposed annuitant to check the appropriate box, sign, and date the form. Respondent checked the box after Ms. Shane signed the form and noted thereon that Ms. Shane’s net worth “exceeds $1 million.” Paragraph 79, subparts (f), (g) and (h), of the Administrative Complaint allege, collectively, that “after obtaining Ms. S[hane]’s signature on the annuity suitability form, [Respondent] completed the form outside her presence and indicated therein that she had an annual income of $50,000.00, . . . liquid assets amounting to $80,000.00, . . . [and] that she owned her own home and that she owned real estate worth $500,000.00, knowing that such information was false.” Ms. Shane credibly testified that in March 2012, her annual income was “closer to $30,000.00,” her liquid assets were “$8,000.00,” she rented and did not own a home, and that her undeveloped real estate was “worth about $50,000.00.” The Acknowledgement Form makes it abundantly clear that the only way that Respondent could sell the National Western annuity product to Ms. Shane was to qualify her as an “Accredited Investor.” In the absence of Ms. Shane being qualified as such, Respondent would not earn a commission. The evidence clearly and convincingly establishes that Respondent willfully misrepresented Ms. Shane’s annual income, net worth, liquid assets, residential status, and real estate holdings so that he could receive a commission for the sale of the National Western annuity.6/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Insurance Agents and Agency Services, enter a Final Order finding that Respondent violated sections 626.611(5), (7) and (9), 626.9541(1)(e)1., and 627.4554(4)(a), Florida Statutes. It is further recommended that the Department revoke his Florida licenses to act as an insurance agent in this state and impose against him a fine in the amount of $140,000. DONE AND ENTERED this 29th day of October, 2014, in Tallahassee, Leon County, Florida. S LINZIE F. BOGAN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of October, 2014.
Findings Of Fact Respondent Charles W. Crowell, a State Farm agent under the terms of an agency agreement declaring him an independent contractor, has never employed 15 or more employees at any one time. During the 20 weeks next before petitioner Donna Clark left his employ, he had no more than three full-time and two part- time employees. As a State Farm agent, Mr. Crowell is contractually bound not to represent other insurance companies. State Farm, which has employed more than 15 persons at all pertinent times, prescribes policy forms, premiums, fees and charges for insurance, and prescribes underwriting rules its agents (and so their employees) must follow. Most premiums reach State Farm in the form of checks drawn by insured persons. But, as required by state law and his agreement with State Farm alike, Mr. Crowell maintains a separate premium fund account, into which customers' cash premium payments are deposited. Moneys are disbursed directly from this account to State Farm, which has the right to audit the account. State Farm determines Crowell's compensation based on the amount of premiums it receives on policies he has written, and writes him checks accordingly. At year's end, State Farm reports these payments to the IRS on a form 1099, not on a W-2 form. Mr. Crowell receives no compensation directly from the premium fund account. When an agent retires and in certain other instances, State Farm allocates policies among remaining agents, while honoring preferences policyholders express for particular agents. But it does not restrict agents to a particular territory or otherwise dictate where its agents conduct business. State Farm reserves the right to approve any advertising by an agency using State Farm's name or logo. But certain business cards bearing the logo are "pre-approved," except for the name of the agent or other employee in the agent's office which is to appear on the card. Mr. Crowell sets his own hours and it was he who decided the office would open at nine and close at five. Some days he does not open his office for business, even though State Farm offices are open. If he closes his office on days State Farm is closed, it may well be because he cannot do business with State Farm. But he is free to keep office hours on such days if he chooses. His compensation does not depend directly on the amount of time his office is open, or on the amount of time he spends at work. Mr. Crowell, not State Farm, decides whom to employ in his office, and sets hours, salaries and benefits for these employees. He, not State Farm, personally pays wages and benefits (if any), along with employment taxes for which employers are liable on account of their employees. But, on unemployment compensation tax forms, gives as the employer's name "CHARLES W. CROWELL STATE FARM INSURANCE COS" and signs as Charles W. Crowell Agent." Respondent's Exhibit No. 2. Mr. Crowell drew salary checks in favor of Ms. Clark and other employees in his office on his own business checking account, which is not subject to audit by State Farm. These salary checks did not bear State Farm's name or logo. The parties have stipulated, as follows: "5. Crowell's office is located at 908 Michigan Avenue in Pensacola, Florida, and he personally owns the property and building where his office is located. State Farm has no interest or property rights in this facility. The only forms, manuals, and other documents located in Crowell's office which are the property of State Farm are insurance product information, including names of policyholders. The equipment, furniture and other supplies located at or used in Crowell's office are owned or leased by Crowell, and not State Farm. Crowell personally hired Donna M. Clark, and State Farm took no part in, exercised no control over, and had no input regarding Crowell's decision to hire Ms. Clark. Crowell sets the work hours, wages and benefits of his employees, including the number of employees employed by his business, without consultation with or the approval of State Farm. Crowell personally pays the salaries or wages and employment taxes, including Florida Workers' Compensation, Unemployment Compensation, Social Security (FICA) and federal tax withholding, on all of his employees, including Ms. Clark, and State Farm pays no salaries to or taxes on behalf of any of Crowell's employees. State Farm provides no benefits to the employees of its State Farm agents, and Crowell decides whether employment benefits such as health or life insurance are provided to Crowell's employees, including whether there is any cost to the employee. Such policies can be purchased by the State Farm Agent from State Farm, if he chooses to do so. Crowell, not State Farm, maintains all personnel records on his employees, including Ms. Clark. State Farm does not have any personnel records as to petitioner Donna Clark. Crowell's business is to sell State Farm policies and service State Farm policyholders. State Farm prescribes policy forms, premiums, fees and charges for insurance, and prescribes underwriting rules pertaining to writing State Farm insurance. Employees of State Farm Agents such as Mr. Crowell are not required to attend State Farm meetings or training sessions. State Farm offers training on topics selected by State Farm Agents, to which the State Farm Agents, such as Mr. Crowell, may choose to send their employees, for a fee payable to State Farm. State Farm requires Crowell to maintain a premium fund account, which is a trust account for the deposit of insurance premiums which are the property of State Farm. All cash premiums from policyholders are deposited to the premium fund account, and premium funds are promptly forwarded to State Farm. Premiums paid by check are sent directly to State Farm, and the large majority of premiums received by Crowell are by check. The premium fund account is subject to auditing by State Farm. As part of the audit of the premium fund account, State Farm develops a profit and loss statement which compares the claims experience of policies serviced by the Agent to the premiums generated by those policies and thus reflects the profit or loss to State Farm. Such profit and loss statement is for State Farm's own use in determining its own profitability and does not show or indicate the success of Mr. Crowell in his personal business as an insurance agent. Crowell maintains separate accounts for his personal and business funds which are not subject to any auditing by State Farm. Crowell is not paid for his sales activities out of the premium fund account, but is paid on a commission basis after all premium funds have been deposited with State Farm. Crowell personally directed Clark to attend certain training courses conducted by the local district manager of State Farm on underwriting insurance and product knowledge only. State farm does not require State Farm Agents to send their employees to training courses conducted by State Farm. State Farm does not allow employees of State Farm Agents to attend training courses concerning financial management or conduct of the agency, and Clark did not attend any such courses." Although not stipulated by the parties, evidence showed that, at one of the training courses Ms. Clark attended, a speaker told employees in attendance that they comprised State Farm's "front line." State Farm decides, with input from its agents, which courses and seminars to offer, but it is up to individual agents to decide who, if anybody, attends from their offices. State Farm employees known as agency managers coordinate operations of agents in their assigned area. When the agency manager decides another agent is needed, he recruits a trainee, who works for State Farm for two years or so (unless discharged earlier.) After this period of training, State Farm offers most trainees the opportunity to terminate employment and become agents. With State Farm's permission, an agent may incorporate. Even as independent contractors, agents receive contributions from State Farm toward personal insurance premiums, which are treated as part of the agents' income. The State Farm manager for the Pensacola area while Ms. Clark worked in Mr. Crowell's office offered bonuses to agents' employees who won contests, although this violated company policy. Ms. Clark did not, however, participate in any contest or receive a bonus. A number of unlicensed people in Mr. Crowell's office sign policies when he is unavailable. Because this practice is widespread, Insurance Commissioner Gallagher has insisted that insurance agents see that more office staff are licensed. Accordingly, State Farm's agency manager has asked State Farm agents to identify office personnel for licensure. Employees of a State Farm agency must be approved by State Farm, in order to obtain licenses. After an agent identifies an employee and the employee sits for an examination, State Farm does a background check and makes its decision about sponsorship. Ms. Clark did not seek licensure as an insurance agent, although she was among those who signed policies. In the course or her work, she spoke directly with underwriting personnel in Jacksonville, on Mr. Crowell's behalf or with his acquiescance.
Recommendation It is, accordingly, RECOMMENDED: That the Florida Commission on Human Relations enter a final order dismissing the petition. DONE and ENTERED this 3rd day of August, 1990, in Tallahassee, Florida. ROBERT T. BENTON, II 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 3rd day of August, 1990. COPIES FURNISHED: Donald A. Griffin, Executive Director Florida Commission on Human Relations 325 John Knox Road Building F, Suite 240 Tallahassee, FL 32399-1570 Dana Baird, General Counsel Florida Commission on Human Realtions 325 John Knox Road Building F, Suite 240 Tallahassee, FL 32399-1570 Karen Lessard, Esquire 15 West LaRua Street Pensacola, FL 32501 Kathryn Errington, Esquire HARRELL, WILTSHIRE, SWEARINGEN, WILSON & HARRELL, P.A. 201 East Government Street P.O. Drawer 1832 Pensacola, FL 32501 Mary Jarrett, Esquire 2065 Herschel Street P.O. Box 40089 Jacksonville, FL 32203
