The Issue The issues are whether Respondent has made unauthorized payments to Superior Insurance Group, its corporate parent, and whether Respondent has properly disclosed these payments on its financial reports filed with Petitioner.
Findings Of Fact Respondent is a domestic stock insurance company operating under a certificate of authority to transact in Florida the business of property and casualty insurance. As a nonstandard automobile insurer, Respondent primarily deals with policyholders whose driving records and accident histories preclude their coverage by standard automobile insurers. Superior Insurance Group, Inc. (formerly GGS Management, Inc. (GGS)) owns Respondent; Symons International Group, Inc. (Symons) owns Superior Insurance Group, Inc. (Superior Group); and Goran Capital, Inc. (Goran) owns 73 percent of Symons. Although publicly traded, Goran was founded, and probably is still controlled, by the Symons family. Superior Group serves as Respondent’s managing general agent. GGS changed its name to Superior Group in early 2000; where appropriate, this Recommended Order refers to this entity as GGS/Superior Group. Respondent owns Superior American Insurance Company (Superior American) and Superior Guaranty Insurance Company (Superior Guaranty), which are both domestic stock insurance companies authorized to conduct in Florida the business of property and casualty insurance. Also engaged in the nonstandard automobile insurance business, Superior American and Superior Guaranty transfer all of their premiums and losses to Respondent under a reinsurance agreement. All financial information concerning Superior American and Superior Guaranty, which, for the purpose of this case, are mere conduits to Respondent, are included in the financial information of Respondent. On or about April 30, 1996, GGS acquired the stock of Respondent, as well as other assets, from an unrelated corporation, Fortis, Inc. or one of its subsidiaries. From the regulatory perspective, the acquisition started when, as required by law, on or about February 5, 1996, GGS filed with Petitioner a Form A application for Petitioner’s approval of the acquisition of Respondent. This was an extensive document, consisting of more than 1000 pages. One of the purposes of the application process, as described in Section 628.461, Florida Statutes, is to assure the adequacy of the funds used by the entity acquiring the insurer. The proposed acquisition is described by the Statement Regarding the Acquisition of More Than Five Percent of the Outstanding Voting Securities of Superior Insurance Company . . . by GGS Management, Inc., dated February 5, 1996 (Acquisition Statement). The Acquisition Statement states that GGS Management Holdings, Inc. owned GGS. (The distinction between GGS and GGS Management Holdings, Inc. is irrelevant to this case, so “GGS,” as used in this Recommended Order, shall also refer to GGS Management Holdings, Inc.) According to the Acquisition Statement, Symons owned 52 percent of GGS; GS Capital Partners II, L.P., owned 30 percent of GGS; GS Capital Partners II Offshore, L.P., owned 12 percent of GGS; and three mutual funds (probably all affiliates of Goldman Sachs) owned the remaining 6 percent of GGS. GS Capital Partners II, L.P., was owned by 100 investors, including The Goldman Sachs Group, L.P. (16.54 percent), “wealthy individuals and trusts, corporate pension funds, foundations and endowments, family trusts/corporations and one state pension fund.” The ownership of GS Capital Partners II Offshore, L.P., resembled the ownership of GS Capital Partners II, L.P. The Acquisition Statement states that GGS “will be the manager of all insurance operations for [Respondent] and will act as the holding company for [Respondent] and [an Indiana nonstandard automobile insurer known as Pafco whose stock Symons was contributing to GGS].” The Acquisition Statement projects the stock-purchase price, which was expressed as a formula, to be about $60 million. Citing the $2 billion in capital of the two Goldman Sachs limited partnerships and the $50 million in capital of Goran, the Acquisition Statement assures that “GGS has tremendous wherewithal to fund the growth needs of [Respondent] . . ..” Alluding to Goran’s 20 years’ experience in managing nonstandard automobile insurance companies, the Acquisition Statement represents that the Goldman Sachs limited partnerships and Goran “possess the capital and leadership resources to support the proposed activities of [Respondent].” According to the Acquisition Statement, the Goldman Sachs limited partnerships and Goran “anticipate that the acquisition of [Respondent] is but the first step in an effort to build a significant non-standard auto insurance company.” The Acquisition Statement describes the respective contributions of the two owners of GGS: Symons will contribute Pafco, which then had a current GAAP book value of $14 million, and the Goldman Sachs limited partnerships will contribute $20 million in cash. With the backing of Symons and the Goldman Sachs limited partnerships and secured by all of the stock of Respondent and GGS, GGS will execute a six-year promissory note with The Chase Manhattan Bank (Chase) for $44 million. Drawing $40 million from this credit extension and using the $20 million cash contribution of the Goldman Sachs limited partnerships, GGS will fund the anticipated cash purchase price of $60 million. The Acquisition Statement represents that GGS will be able to service the debt. Due to the cash contribution of the Goldman Sachs limited partnerships, the Chase debt represents only two-thirds of the purchase price. Due to the cash contribution of the Goldman Sachs limited partnerships and the stock contribution by Symons, the Chase debt represents only about one-half of the initial capital of GGS. The Acquisition Statement states that GGS will service the Chase debt in part by “the combination of the management activities of both Pafco and [Respondent] within GGS, billing fees, other non-insurance company activities and anticipated insurance company operating economies which will result from the combination of these two operations [Pafco and Respondent].” The equity contributions of cash and stock “contribute significantly to the financial stability of GGS, allowing GGS to service the debt using operating cash flows only, including, if necessary, normal dividends from earned surplus as a secondary source of debt service funds. GGS does not anticipate using dividends from either Pafco or [Respondent] as a primary source of debt service funds.” The Chase Credit Agreement, which is dated April 30, 1996, requires GGS to use its best efforts to cause Respondent to pay "cash dividends or other distributions or payments in cash including . . . the payment of Billing Fees and Management Fees" in sufficient amounts to pay all principal and interest due under the financing instrument. The Chase Credit Agreement defines "Billing Fees" as: "fees with respect to the payment of premiums on an installment basis that are received by an Insurance Subsidiary from policyholders and in turn paid to [GGS] or received directly by [GGS] . . .." The Chase Credit Agreement defines "Management Fees" as: "all fees paid by an Insurance Subsidiary to [GGS] that are calculated on the basis of gross written premiums." With respect to the "Management Fees" described in the Chase Credit Agreement, the Acquisition Statement describes a five-year management agreement to be entered into by GGS with Pafco and Respondent (Management Agreement). The Management Agreement, which GGS and Respondent executed on April 30, 1996, provides that GGS “will provide management services to both Pafco and [Respondent] and will receive from [Respondent] as compensation 17% of [Respondent’s] gross written premium” and a slightly lower percentage of premiums from Pafco (Management Fee). Under the Management Agreement, Respondent “will continue to pay premium taxes, boards and bureaus costs, legal and audit fees and certain computer costs.” The Acquisition Statement states that Respondent’s “operating costs" were about 21%, so the 17% cap “will allow [Respondent] to see a significant and immediate improvement in its overall financial performance”-- over $1 million in 1994, which was the last year for which financial information was then available. The Management Agreement gives GGS the exclusive right and nondelegable and nonassignable obligation to perform a broad range of business actions on Respondent’s behalf. These actions include accepting contracts, issuing policies, appointing adjustors, and adjusting claims. The Management Agreement requires GGS to "pay [Respondent’s] office rent and occupancy operating expenses from the amounts that it receives pursuant to this Agreement.” In return, the Management Agreement requires Respondent to pay GGS “fees for the business placed with [Respondent as follows:] Agents commission plus 17% not to exceed 32% in total.” The scope of the services undertaken by GGS in the Management Agreement is similarly described in the Plan of Operation, which GGS filed with Petitioner as part of the application. The Plan of Operation provides that, in exchange for the 17 percent “management commission,” GGS assumes the responsibility for all aspects of the operating expenses of the book including underwriting, claims handling and administration. The only expenses which remain the responsibility of [Respondent] directly are those expenses directly related to the insurance book, such as premium taxes, boards and bureaus, license fees, guaranty fund assessments and miscellaneous expenses such as legal and audit expenses and certain computer costs associated directly with [Respondent]. In response to a request for additional information, Goran’s general counsel, by letter dated March 13, 1996, to Petitioner’s application coordinator, added another document, Document 26. The new document was a pro forma financial projection for 1996-2002 (Proforma) showing the sources of funds for GGS to service the Chase debt. The seven-year Proforma contains only two significant sources of income for GGS: “management fee income” and “finance & service fee income" (Finance and Service Fees). By year, starting with 1996, these respective figures are $28.6 million and $7.0 million, $34.2 million and $8.6 million, $38.1 million and $9.9 million, $42.6 million and $11.0 million, $47.5 million and $12.3 million, $53.0 million and $13.7 million, and $59.3 million and $15.3 million. Accounting for the principal and interest payments over the six-year repayment term of the Chase Credit Agreement, the Proforma shows ending cash balances, during each of the covered years, culminating in a final cash balance, in 2002, of $43.9 million. By letter dated March 29, 1996, Goran’s general counsel informed Petitioner that an increase in Respondent’s book value had triggered an increase in the purchase price from $60 million to $66 million. Also, the book value of Pafco had increased from $14 million to $15.3 million, and the cash required of the Goldman Sachs limited partnerships had increased from $20 million to $21.2 million. Additionally, the letter states that Chase had increased its commitment from $44 million to $48 million. A revised Document 26 accompanied the March 29 letter and showed the same income projections. Reflecting increased debt-service projections, the revised Proforma projected lower cash balances, culminating with $39.8 million in 2002. During a meeting in March 1996, Mr. Alan Symons, president and chief executive officer of Goran and a director of Superior Group and Respondent, met with three of Petitioner's representatives, including Mary Mostoller, Petitioner's employee primarily responsible for the substantive examination of the GGS application. During that meeting, Mr. Symons informed Petitioner that GGS would receive Finance and Service Fees from Respondent's policyholders who paid their premiums by installments. Ms. Mostoller did not testify, and the sole representative of Petitioner who attended the meeting and testified candidly admitted that he could not recall whether they discussed this matter. In response to another request for additional information, Respondent’s present counsel, by letter dated April 12, 1996, informed Petitioner that the “finance and service fee income” line of the Proforma “is composed primarily of billing fees assessed to policyholders that choose to make payments on a monthly basis,” using the same rate that Respondent had long used. The letter explains that the projected increase in these fees is attributable solely to a projected increase in business and not to a projected increase in the rate historically charged policyholders for this service. In an internal memorandum dated April 18, 1996, Ms. Mostoller noted that GGS would pay the Chase Credit Agreement through a “combination of the management fees and other billing fees of both Pafco and [Respondent].” Later in the April 18 memorandum, though, Ms. Mostoller suggested, among other things, that Petitioner condition its approval of the acquisition on the right of Petitioner to reevaluate annually the reasonableness of the “management fee and agent’s commission”--omitting any mention of the "other billing fees." On April 30, 1996, Petitioner entered a Consent Order Approving Acquisition of Stock Pursuant to Section 628.461, Florida Statutes (Consent Order). Incorporating all of Ms. Mostoller's recommendations, the Consent Order is signed by Respondent and GGS, which "agree to and consent to all of the above cited terms and conditions . . .." The Consent Order does not incorporate by reference the application and related documents, nor does the Consent Order contain an integration clause, which, if present, would merge all prior written and unwritten agreements into the Consent Order so as to preclude the implementation of such agreements in conjunction with the Consent Order. Among other things, the Consent Order mandates the following: [Respondent] shall give advance notice to [Petitioner] of any proposed changes in the [Management Agreement] and shall receive written approval from [Petitioner] prior to implementing those changes. In addition, for a period of three (3) years, [Petitioner] shall reevaluate at the end of each calendar year the reasonableness of the fees as reflected on Addendum A of the [Management] Agreement[.] Furthermore, [Petitioner] may at its sole discretion, and after consideration of the performance and operating percentages of [Respondent] and any other pertinent data, require [Respondent] to make adjustments in the [M]anagement [F]ee and agent's commission. GGS . . . shall file each year an audited financial statement with [Petitioner] . . .. In addition to the above, for a period of 4 years from the date of execution of this Consent Order . . .: [Respondent] shall not pay or authorize any stockholder dividends to shareholders without prior written approval of [Petitioner]. Any direct or indirect contracts, agreements or transactions of any type or nature including but not limited to the sale or exchange of assets among or between [Respondent] and any member of the Goran . . . holding company system shall receive prior written approval of [Petitioner]. That failure to adhere to one or more of the above terms and conditions shall result WITHOUT FURTHER PROCEEDINGS in the Treasurer and Insurance Commissioner DENYING the above acquisition, or the REVOCATION of the insurers' certification of authority if such failure to adhere occurs after the issuance of the Consent Order approving the above acquisition. The Consent Order addresses the Management Fees and the commissions payable to the independent agents who sell Respondent's insurance policies. However, the Consent Order omits any explicit mention of the Finance and Service Fees, even though GGS and Respondent had clearly and unambiguously disclosed these fees to Petitioner on several occasions prior to the issuance of the Consent Order. On its face, the Consent Order requires prior approval for the payment of Finance and Service Fees, which arise due to a contract or agreement between Respondent and GGS/Superior Group. The Consent Order prohibits "direct or indirect contracts, agreements or transactions of any type or nature including . . . the sale or exchange of assets among or between [Respondent] and any member of the Goran . . . holding company system," without Petitioner's prior written approval. The exact nature of these Finance and Service Fees facilitates the determination of their proper treatment under the Consent Order and the facts of this case. Ostensibly, the Finance and Service Fees pertain to items not covered by the Management Fees, which cover a wide range of items. In fact, the Finance and Service Fees arise only when a policyholder elects to pay his premium in installments; if no policyholder were to pay his premium by installments, no Finance and Service Fees would be due. The testimony in the record suggests that the Finance and Service Fees pertain to services that necessarily must be performed when policyholders pay their premiums by installments. This suggestion is true, as far as it goes. Installment payments require an insurer to incur administrative and information-management costs in billing and collecting installment payments. Other costs arise if late installment payments necessitate the cancellations and if reinstatements follow cancellations. Installment-payment transactions are undeniably more expensive to the insurer than single-payment transactions. The record as to these installment-payment costs, which are more in the nature of a service charge, is well- developed. However, the Finance and Service Fees also pertain to the cost of the loss of the use of money when policyholders pay their premiums by installments. Installment-payment transactions cause the insurer to lose the use of the deferred portion of the premium for the period of the deferral. The record as to these costs, which are more in the nature of a finance charge or interest, is relatively undeveloped. At the hearing, Mr. Symons testified that an insurer does not lose the use of the deferred portion of the premium for an established book of business. Mr. Symons illustrated his point by analyzing over a twelve-month period the development of a hypothetical book of business consisting of twelve insureds. If an insurer added its first insured in the first month, added a second in the third, and so forth, until it added its twelfth insured in the twelfth month, and each insured chose to pay a hypothetical $120 annual premium in twelve installments of $10 each, the cash flow in the twelfth and each succeeding month (assuming no changes in the number of insureds) would be $120-- the same that it would have been if each of the insureds chose to pay his premium in full, rather than by installment. Thus, Mr. Symons' point was that, after the first eleven months, installment payments do not result in the loss of the use of money by the insurer. Mr. Symons' illustration assumes a constant book of business after the twelfth month. However, while the insurer is adding installment-paying insureds, the insurer loses the use of the portion of the first-year premium that is deferred, as is evident in the first eleven months of Mr. Symons' illustration. Also, if the constant book of business is due to a constant replacement of nonrenewing insureds with new insureds--a distinct possibility in the nonstandard automobile market--then the insurer will again suffer the loss of the use of money over the first eleven months. Either way, Mr. Symons' illustration does not eliminate the insurer's loss of the use of money when its insureds pay by installments; the illustration only demonstrates that the extent of the loss of the use of the money may not be as great as one would casually assume. The Finance and Service Fee is sufficiently broad to encompass all of the terms used in this record to describe it: "installment fee," "billing fee," "service charge," "premium fee," and even "premium finance fee." However, only "installment fee" is sufficiently broad as to capture both types of costs covered by the Finance and Service Fee. The dual components of the Finance and Service Fee are suggested by the statute authorizing its imposition. Section 627.902, Florida Statutes, authorizes an insurer or affiliate of the insurer to "finance" premiums at the "service charge or rate of interest" specified in Section 627.901, Florida Statutes, without qualifying as a premium finance company under Chapter 627, Part XV, Florida Statutes. If the insurer or affiliate exceeds these maximum impositions, then it must qualify as a premium finance company. The "service charge or rate of interest" authorized in Section 627.901, Florida Statutes, is either $1 per installment (subject to limitations irrelevant to this case) or 18 percent simple interest on the unpaid balance. The charge per installment, which is imposed without regard to the amount deferred, suggests a service charge, and the interest charge, which is imposed without regard to the number of installments, suggests a finance charge. The determination of the proper treatment of the Finance and Service Fees under the Consent Order is also facilitated by consideration of the process by which these fees were transferred to GGS/Superior Group. As anticipated by the parties, after the acquisition of Respondent by GGS, Respondent retained no employees, and GGS/Superior Group employees performed all of the services required by Respondent. The process by which Respondent transferred the Finance and Service Fees to GGS/Superior Group began with Respondent issuing a single invoice to the policyholder showing the premium and the Finance and Service Fee, if the policyholder elected to pay by installments. As Mr. Symons testified, Respondent calculated the Finance and Service Fee on the basis of the 1.5 percent per month on the unpaid balance, rather than the specified fee per installment. The installment-paying policyholder then wrote a check for the invoiced amount, payable to Respondent, and mailed it to Respondent at the address shown on the invoice. Employees of GGS/Superior Group collected the checks and deposited them in Respondent's bank account. From these funds, the employees of GGS/Superior Group then paid the commissions to the independent agents, the Management Fee (calculated without regard to the Finance and Service Fee) to GGS/Superior Group, and the Finance and Service Fee to GGS/Superior Group. Respondent retained the remainder. Finance and Service Fees can be considerable in the nonstandard automobile insurance business. Many policyholders in this market lack the financial ability to pay premiums in total when due, so they commonly pay their premiums in installments. At the time of the 1996 acquisition, for instance, about 90 percent of Respondent's policyholders paid their premiums by installments. For 1996, on gross premiums of $156.4 million, Respondent earned net income (after taxes) of $1.978 million, as compared to gross premiums of $97.6 million and net income of $5.177 million in 1995. At the end of 1996, Respondent's surplus was $57.1 million, as compared to $49.3 million at the end of the prior year. "Surplus" or "policyholder surplus" for insurance companies is like net worth for other corporations. In 1996, Respondent received $2.154 million in Finance and Service Fees, as compared to $1.987 million in the prior year. However, Respondent did not pay any Finance and Service Fees to GGS in 1996. For related-party transactions in 1996, Respondent's financial statements disclose the payment of $155,500 to GGS and Fortis for "management fees," assumed reinsurance premiums and losses, and a capital contribution of $5.558 million from GGS, of which $4.8 million was in the form of a note. These related-party disclosures for 1996 were adequate. In August 1997, Symons bought out Goldman Sachs' interest in GGS for $61 million. Following the 1996 acquisition, Goldman Sachs had invested another $3-4 million, but, with a total investment of about $25 million, Goldman Sachs enjoyed a handsome return in a little over one year. Mr. Symons attributed the relatively high price to then-current valuations, which were 100 percent of annual gross premiums. More colorfully, Mr. Symons' brother, also a principal in the Goran family of corporations, attributed the purchase price to Goldman Sachs' "greed. " At the same time that Symons bought out Goldman Sachs, Symons enabled GGS to retire the Chase acquisition debt. The elimination of Goldman Sachs and Chase may be related by more than the need for $61 million to buy out Goldman Sachs. The 1996 Annual Statement that Respondent filed with Petitioner reports "total adjusted capital" of $57.1 million and "authorized control level risk-based capital" of $20.7 million, for a ratio of less than 3:1. Section 8.10 of the Chase Credit Agreement states that GGS "will not, on any date, permit the Risk Based Capital Ratio . . . of [Respondent] to be less than 3 to 1." Section 1 of the Chase Credit Agreement defines the ”Risk-Based Capital Ratio" as the ratio of Respondent's "Total Adjusted Capital" to its "Authorized Control Level Risk-Based Capital." In August 1997, Symons raised $135 million in a public offering of securities that probably more closely resemble debt than equity. After paying $61 million to Goldman Sachs and the $45-48 million then due Chase under the Credit Agreement (due to additional advances), Symons applied the remaining loan proceeds to various affiliates, as additional capital contributions, and possibly itself, for cash-flow purposes. The $135 million debt instrument, which remains in place, requires payments over a 30- year term, provides for no repayment of principal until the end of the term, and allows for the deferral of the semi-annual dividend/interest payments for up to five years. Symons exercised its right to defer dividend/interest payments for an undetermined period of time in 2000. The payments that are the subject of this case took place from 1997 through 1999. During this period, on a gross basis, Respondent paid GGS $35.2 million in Finance and Service Fees. In fact, $1.395 million paid in 1999 were not Finance and Service Fees, but were SR-22 policy fees, which presumably are charges attributable to the preparation and issuance by GGS of certificates of financial responsibility. Because Respondent's financial statements did not separate any SR-22 fees from Finance and Service Fees for 1997 or 1998, it is impossible to identify what, if any, portion of the Finance and Service Fees in those years were actually SR-22 fees. Even though SR-22 fees represent a service charge without an interest component, they are included in Finance and Service Fees for purposes of this Recommended Order. For 1997, on gross premiums of $188.3 million, Respondent earned net income of $379,000. For 1998, on gross premiums of $179.8 million, Respondent suffered a net loss of $8.122 million. For 1999, on gross premiums of $170.5 million, Respondent suffered a net loss of $19.232 million. Respondent's surplus decreased from $65.1 million at the end of 1997, to $57.6 million at the end of 1998, to $34.2 million at the end of 1999. In its Quarterly Statement filed as of September 30, 2000, Respondent disclosed, for the first nine months of 2000, a net loss of $5.89 million and a decline in surplus to $24.0 million. By the end of 2000, Respondent's surplus decreased to $21.6 million. However, at all times, Respondent's surplus exceeded the statutory minimum. For 1999, for example, Respondent's surplus of $34.2 million doubled the statutory minimum. Respondent also satisfied the statutory premium-to-surplus ratio, although possibly not the statutory risk-based capital ratio. As of the final hearing, Petitioner had required Respondent to file a risk-based capital plan, Respondent had done so, Petitioner had required amendments to the plan, Respondent had declined to adopt the amendments, and Petitioner had not yet taken further action. From 1997-1999, Respondent's annual statements, quarterly statements, and financial statements inadequately disclosed the payments that Respondent made to GGS. The annual statements disclose "Service Fee on Ceded Business," which is a write-in item described in language chosen by Respondent. Petitioner's contention that this item appears to be a reinsurance transaction in which Respondent is ceding risk and premiums to a third-party is rebutted by the fact that the Schedule F, Part 5, on each annual statement discloses relatively minor reinsurance transactions whose ceded premiums would not approach those reported as "Service Fee on Ceded Business." Notwithstanding the unconvincing nature of Petitioner's contention as to the precise confusion caused by Respondent's reporting of the payment of Finance and Service Fees, Respondent's reporting was clearly inadequate and even misleading. The real problem in the annual statements, quarterly statements, and financial statements is their failure to disclose Respondent's payments to a related party, GGS. Respondent unconvincingly attempts to explain this omission by an imaginative recharacterization of the Finance and Service Fee transactions as pass-through transactions. These were not pass-through transactions in 1996 when Respondent retained the Finance and Service Fees. These were not pass- through transactions in 1997-1999 when Respondent properly accounted for these payments from policyholders as income and payments to GGS as expenses. The proper characterization of these transactions involving the Finance and Service Fees does not depend on the form that Respondent and GGS/Superior Group selected for them-- in which policyholders pay Respondent and Respondent pays GGS/Superior Group--although this form does not serve particularly well Respondent's present contention. Even if Respondent had changed the form so that the policyholders paid the Finance and Service Fees directly to GGS/Superior Group, the economic reality of the transactions would remain the same. Even if policyholders paid their installments to Respondent, GGS/Superior Group, or any other party, the Finance and Service Fees would initially vest in Respondent, which, under an agreement, would then owe them to GGS/Superior Group. The inadequacy of the disclosure of the Finance and Service Fees is a relatively minor issue, in itself, in this case. In its proposed recommended order, Respondent invites direction as to how Petitioner would like Respondent to report these payments in the future. The major impact of Respondent's nondisclosure of these payments is that none of the statements filed after the 1996 acquisition notified Petitioner of the existence of these payments. It is thus impossible to infer an agreement or even acquiescence on the part of Petitioner regarding Respondent's payment of Finance and Service Fees to GGS/Superior Group. The major issue in this case is whether the Consent Order authorizes Respondent to pay $35 million in Finance and Service Fees after the 1996 acquisition or, if not, whether Petitioner has approved of such payments by any other means. As already noted, the Consent Order authorizes the payment of agents' commissions and Management Fees, but not Finance and Service Fees. To the contrary, the Consent Order prohibits the payment of Finance and Service Fees for four years, at least without Petitioner's approval, because of the provision otherwise prohibiting agreements, contracts, and the transfer of assets involving Respondent and its affiliates. As noted in the Conclusions of Law, the absence of an integration clause invites consideration of oral agreements that may have preceded the execution of the Consent Order. The Consent Order is somewhat of a hybrid: Petitioner orders and Respondent consents. However, the Consent Order is sufficiently an agreement to be subject to interpretation under normal principles governing the interpretation of contracts. Respondent contends that such agreements encompassed the payment of Finance and Service Fees because Respondent disclosed such payments several times to Petitioner prior to the issuance of the Consent Order. (Any testimonial assertion of an explicit agreement by Petitioner to the payment of the Finance and Service Fees is discredited.) Respondent repeated disclosures to Petitioner of the Finance and Service Fees began with the Acquisition Statement at the start of the application process. The parties discussed these fees in March 1996. The Proformas disclose two main revenue sources from which GGS/Superior Group could service its acquisition debt: Management Fees and Finance and Service Fees. And the Proformas project almost exactly the amount that Respondent paid GGS in Finance and Service Fees from 1997-99. Although the ratio of Management Fees to Finance and Service Fees was 4:1 in the Proformas, this ratio does not minimize the role of the Finance and Service Fees. Based on gross revenues, this ratio is no indication of the relative profitability of these two sources of revenue. In fact, in 1999, the expenses covered by the Management Agreement exceeded the Management Fees by $3 million. The Finance and Service Fees are thus an important component of the revenue on which GGS intended to rely in servicing the acquisition debt. However, neither the clear disclosure of the Finance and Service Fees nor Petitioner's recognition of the importance of these fees in servicing the acquisition debt necessarily means that Petitioner agreed to their payment. By a preponderance of, although less than clear and convincing, evidence, the record precludes the possibility that Petitioner agreed in preclosing discussions or the Consent Order to preapprove the Finance and Service Fees. In this respect, Petitioner treated the Finance and Service Fees differently from the Management Fees, which Petitioner agreed to preapprove, subject to annual reevaluation for the first three years. At the level of a preponderance of the evidence, it is possible to harmonize this construction of the Consent Order with Respondent's repeated disclosures of the Finance and Service Fees. The Acquisition Statement mentions dividends as a revenue source--although a "secondary" source--and the Consent Order clearly did not impliedly preapprove the payment of dividends. Aware of the reliance of GGS upon the Finance and Service Fees to service the Chase acquisition debt, Petitioner may have chosen, for the first four years, to consider Respondent's requests for approval of the Finance and Service Fees, based on the circumstances in existence at the time of the requests. This interpretation is consistent with the testimony of Petitioner's employee that he believed that Petitioner would be able to restrict Respondent's payment of Finance and Service Fees to GGS/Superior Group because Petitioner's approval was required for the payment of dividends. The payments are pursuant to a contract or agreement for services and, as such, are not dividends, but the Consent Order requires Petitioner's approval for all contracts and agreements during the first four years. The common point is that Petitioner understood that its approval would be required for Finance and Service Fees, which had not been preapproved like Management Fees. During the application process, GGS may not have been concerned by Petitioner's failure to preapprove the Finance and Service Fees. At the time of the 1996 acquisition, as contrasted to the period after the 1997 refinancing, GGS enjoyed a relatively light debt load due to Goldman Sachs' equity investment and the "tremendous wherewithal" of its 48 percent co-owner. Another practical distinction between the Finance and Service Fees and the Management Fees militates against finding that the Consent Order impliedly approves the Finance and Service Fees and militates in favor of a finding that GGS viewed these fees as more contingent and less likely to be needed than the Management Fees. At the start of the application process, GGS submitted to Petitioner a form Management Agreement. At no time did GGS ever submit to Petitioner a form Finance and Service Agreement. The contingent nature of the Finance and Service Fees, relative to the Management Fees, is reinforced by the fact that, in 1996, Respondent retained the Finance and Service Fees. Respondent's contention that the Finance and Service Fees were a component of the agreement between it and Petitioner is not without its appeal. The contention is sufficient to preclude a finding by clear and convincing evidence that the agreement between the parties did not include a preapproval of Finance and Service Fees. Unlike the Management Fees, the maximum amount of the Finance and Service Fees is set by statute. Two consequences follow. First, Petitioner might not have found it necessary to incorporate these fees in a written agreement, as long as the maximum amount were acceptable to Petitioner, because the law establishes a ceiling on the fees and identifies the services for which they are compensation. Second, Petitioner might not have found it necessary provide for annual reevaluation of the fees, again due to the applicable statutory maximum. In one respect, the relatively contingent quality of the Finance and Service Fees inures to Respondent's benefit, at least in theory. If no policyholder paid by installments, there would be no Finance and Service Fees; however, as a practical matter, the Finance and Service Fees are almost as pervasive as the Management Fees. More importantly, though, the Finance and Service Fees, especially when imposed as a percentage of the unpaid balance, contain a significant interest component. Paying these fees to GGS/Superior Group, Respondent denies itself the investment income attributable to this forbearance. Alternatively, to the extent that the Finance and Service Fees defray services, as they do to some unknown extent, the greater weight of the evidence, although not clear and convincing evidence, establishes that these services are among the services that GGS/Superior Group undertook in the Management Agreement. These factors militate strongly against treating the Finance and Service Fees as an implied exception to the provision of the Consent Order requiring approval of all contracts or agreements with affiliates during the first four years. For these reasons, Petitioner has proved by a preponderance of the evidence, although not clear and convincing evidence, that GGS/Superior Group and Respondent needed Petitioner's approval for all payments of Finance and Service Fees prior to April 30, 2000. To the extent that, as discussed in the Conclusions of Law, Petitioner withholds such approval, the next issue is to determine the amount of Finance and Service Fees that GGS/Superior Group must return to Respondent. The determination of the amount of the repayment is substantially affected by two facts. First, Petitioner's approval is not required for any Finance and Service Fees that Respondent paid GGS/Superior Group after April 30, 2000. The Consent Order did not require Petitioner's approval for such payments, which were not dividends, for which approval would always be required, if inadequate surplus existed. Second, GGS/Superior Group is entitled to a dollar-for-dollar credit, against any liability for improperly received Finance and Service Fees, for about $20 million that it directly or indirectly transferred to Respondent since the 1996 acquisition. Half of the $20 million credit arises from Management Fees that GGS did not collect from Respondent in 1996 and 1998. As Petitioner notes, there is little, if any, documentation concerning these uncollected fees. Mr. Symons persuasively testified that the proper characterization of these amounts is dependent upon the outcome of Petitioner's effort to disallow the Finance and Service Fees already paid by Respondent. Petitioner must credit to GGS/Superior Group these $10 million in fees as an offset to the $35.2 million (or such lesser amount remaining after any retroactive approvals from Petitioner) that Respondent improperly paid GGS/Superior Group in Finance and Service Fees. Also, in 1997, GGS contributed about $10 million to Respondent's capital. As was the case with the uncollected Management Fees in 1996 and 1998, the record contains little, if any, documentation concerning the transfer, including any conditions that may have attached to it. Petitioner should credit GGS/Superior Group with this sum as an offset against the $35.2 million (or such lesser amount remaining after any retroactive approvals from Petitioner) that Respondent improperly paid GGS/Superior Group in Finance and Service Fees. As for the remaining $15 million in Finance and Service Fees that Respondent improperly paid to GGS through 1999 and any additional amounts through April 30, 2000, the impropriety arises because Respondent failed first to obtain Petitioner's approval--not because any transaction was otherwise necessarily improper. Concerning the remaining $15 million, then, Petitioner should give Respondent and GGS/Superior Group an opportunity to request retroactive approval for the payment of all or part of this sum, without regard to the lateness of the request. Applying any and all factors that Petitioner would ordinarily apply in considering such requests, Petitioner can then reach an informed determination as to the propriety of this $15 million in Finance and Service Fees. If Petitioner determines that Respondent must obtain from GGS/Superior Group repayment of any Finance and Service Fees, then Petitioner may consider the issue of the timing of the repayment. As Petitioner mentions in its proposed recommended order, an evidentiary hearing might be useful for this purpose. Obvious sources would be setoffs against Management Fees and Finance and Service Fees that Respondent is presently paying Superior Group.
Recommendation It is RECOMMENDED that the Department of Insurance enter a final cease and desist order: Determining that, without the prior written consent of the Department, Superior Insurance Company paid Finance and Service Fees to GGS/Superior Group in the net amount of approximately $15 million, plus all such amounts paid after the period covered by this case through April 30, 2000. Requiring that Superior Insurance Company immediately file all necessary documentation with the Department to seek the retroactive approval of all or part of the sum set forth in the preceding paragraph. If any sum remains improperly paid after implementing the procedure set forth in the preceding paragraph, establishing a reasonable repayment schedule for Respondent to impose upon Superior Group--if necessary, in the form of setoffs of Management Fees and Finance and Service Fees due at the time of, and after, the Final Order. Determining that Superior Insurance Company inadequately disclosed related-party transactions and ordering that Superior Insurance Company comply with specific guidelines for the reporting of these transactions in the future. DONE AND ENTERED this 1st day of June, 2001, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 1st day of June, 2001. COPIES FURNISHED: Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307 S. Marc Herskovitz Luke S. Brown Division of Legal Services Department of Insurance 200 East Gaines Street, Sixth Floor Tallahassee, Florida 32399-0333 Clyde W. Galloway, Jr. Austin B. Neal Foley & Lardner 106 East College Avenue, Suite 900 Tallahassee, Florida 32301
The Issue The issue for determination is whether Respondent committed the offenses set forth in the Administrative Complaint and, if so, what action should be taken.
Findings Of Fact At all times material hereto, John Morris Ale, hereinafter Mr. Ale, was licensed as a general lines agent in the State of Florida. On or about December 5, 1994, Mr. Ale telephoned Ms. Kristen Stryker informing her that he had started his own insurance business, Doctors Insurance Agency, and inquiring if she wanted to obtain her automobile insurance coverage from him. Mr. Ale was acquainted with Ms. Stryker due to his having obtained her present coverage for her. It was almost time for renewal of her present coverage. Ms. Stryker agreed to obtain her automobile coverage from Mr. Ale. Further, Mr. Ale inquired if Ms. Stryker would allow his son, James Ale, to come to her home and write the coverage. Mr. Ale indicated that his son was learning the insurance business, but assured her that he, Mr. Ale, would review all documents prepared by his son. Relying on that assurance and believing that Mr. Ale's son was a licensed agent, Ms. Stryker agreed for Mr. Ale's son to write her automobile coverage. On the evening of December 5, 1994, James Ale came to Ms. Stryker's home. He completed an automobile insurance application for coverage on her 1993 Jeep Cherokee and explained the coverage to her. Ms. Stryker presented to James Ale a check for $222, made payable to Doctors Insurance, as down payment for the insurance premium. Additionally, James Ale presented to Ms. Stryker an E.T.I. Financial Corporation premium finance agreement to sign. She signed the premium finance agreement. E.T.I. is a premium finance company. The premium finance agreement is dated December 6, 1994. It is signed by Respondent and indicates, among other things, Ms. Stryker's down payment, the total premium, and coverage effective on December 6, 1994, by two insurance companies, Fortune and New Alliance. Ms. Stryker's down payment check for $222 was endorsed and deposited by Doctors Insurance Agency. At no time material hereto was James Ale licensed by the State of Florida to transact insurance. At all times material hereto, Mr. Ale knew or should have known that his son, James Ale, was not licensed by the State of Florida to transact insurance. Subsequently, James Ale forwarded to Ms. Stryker an undated letter, together with additional applications for insurance coverage with insurance companies other than Fortune and New Alliance. In the letter, James Ale requested, among other things, that Ms. Stryker sign the applications and return them to him so that he could forward the applications to the insurance companies. Also, included with the undated letter was a copy of an automobile insurance binder, which indicated, among other things, that her vehicle coverage was with two insurance companies, Armor Insurance and Service Insurance, and that the binder period was from March 10, 1995 through March 10, 1996. The binder, according to the undated letter, could be used for proof of insurance. E.T.I. Financial Corporation authorized Doctors Insurance Agency, by and through Mr. Ale, to finance insurance premiums through E.T.I. Mr. Ale was the licensed agent for Doctors Insurance Agency. As an authorized insurance premium finance agent for E.T.I., Doctors Insurance Agency had possession of blank bank drafts from E.T.I. The process and procedure utilized in financing insurance premiums through an insurance company authorized by E.T.I. to represent it included forwarding blank bank drafts, bearing E.T.I.'s name, to the authorized insurance company. The bank draft is completed by the authorized insurance company, which includes making the drafts payable for the entire premium to the insurance company providing the coverage and is signed by the licensed agent of the authorized insurance company. The completed bank draft is forwarded, along with the premium finance agreement and any down payment, to E.T.I. which forwards the draft to the specified insurance company providing the coverage. If a draft is not signed by the licensed agent, the draft is not honored by E.T.I. and, therefore, is not issued to the insurance company providing the coverage. Consequently, no coverage is provided for a vehicle. No premium finance agreement from Doctors Insurance Agency was received by E.T.I. on behalf of Ms. Stryker. No premium finance agreement was ever received by E.T.I. from Doctors Insurance Agency. No down payment for the insurance premium on behalf of Ms. Stryker was received by E.T.I. from Doctors Insurance Agency. No bank draft from Doctors Insurance Agency was received by E.T.I. on behalf of Ms. Stryker and payable to Fortune or New Alliance. No bank draft from Doctors Insurance Agency was received by E.T.I. on behalf of Ms. Stryker and payable to Armor Insurance or Service Insurance. No bank drafts were ever received by E.T.I. from Doctors Insurance Agency. Due to the failure of Doctors Insurance Agency to submit the proper documents to E.T.I., including the bank drafts, no insurance company, which was to provide automobile insurance coverage to Ms. Stryker, received a premium from E.T.I. Therefore, none of the insurance companies provided Ms. Stryker with coverage for her vehicle. Even though Ms. Stryker had a binder for insurance coverage, unbeknownst to her, she had no automobile insurance coverage in effect. On or about May 24, 1995, Ms. Stryker was involved in an automobile accident. Believing that she had automobile insurance coverage in effect, Ms. Stryker contacted Mr. Ale regarding the accident. Mr. Ale informed her that she did not have insurance coverage with his insurance company and never did. Shortly afterwards, Ms. Stryker spoke with James Ale who informed her that he would attempt to locate her documents. She was not contacted again by James Ale. Because she had no automobile insurance coverage, Ms. Stryker was personally liable for the damages resulting from her accident, which exceeded $3,000. Also, she was exposed to potential personal liability for claims of injuries or damages suffered by the driver of the other vehicle involved in the accident. Neither Doctors Insurance Agency nor Mr. Ale paid any monies to Ms. Stryker for the damages that she suffered. On or about June 7, 1995, Ms. Stryker filed a consumer's assistance request with the Department of Insurance and Treasurer, hereinafter the Department. On or about October 18, 1995, almost 5 months after her automobile accident, Doctors Insurance Company issued a refund to Ms. Stryker of her $222 down payment on the insurance premium. Ms. Stryker had paid the down payment more than 10 months earlier.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a final order: Finding that John Morris Ale violated Subsections 626.611(4), (7), (8), and (13), and 626.621(2) and (12), Florida Statutes (1993), in Count I and violated Subsections 626.561(1), 626.611(7), (8), and (13), and 626.621(2), Florida Statutes (1993), in Count II. Imposing a 21-month suspension of the license of John Morris Ale. DONE AND ENTERED this 29th day of September, 1997, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 29th day of September, 1997.
The Issue The issue is whether Respondent's license as an insurance agent should be disciplined.
Findings Of Fact Respondent has been a licensed insurance agent continuously since October 15, 1986. At all material times, Respondent has been designated as the primary agent for the Cash Register Auto Insurance agency located at 6251 U.S. Highway 19, Pinellas Park, Florida (Cash Register). Since April 10, 1998, Jennifer Lee Wilder has been a licensed customer representative, holding a 4-40 license. After graduating from high school in 1991, Ms. Wilder has attended a local junior college to prepare for a career in nursing. However, she has had to work fulltime to support herself while in school. Ms. Wilder began working at Cash Register in May 1995 and left in May 2000. At the time of the hearing, she was working fulltime five days a week at Cash Register as the office manager. Cash Register sells mostly nonstandard insurance. These insurers have lower underwriting standards to accommodate the needs of younger or high-risk drivers. Ann Benjamin was born on January 22, 1927. She worked as a licensed practical nurse for 15 years prior to her retirement. However, she continues to read medical journals. Ms. Benjamin took one year of nursing school after obtaining her high school diploma. She manages her own checking account and pays her bills. At the time of the hearing, she worked at a LaQuinta Inn. She and her husband needed insurance for their automobiles. Ms. Benjamin owned a 1991 Pontiac Grand Am, and her husband owned a 1989 Ford Econoline E-150 van. Ms. Benjamin telephoned three or four other agencies for quotes prior to calling Cash Register. A couple of days after speaking with a female employee at Cash Register, who quoted her a premium of $743, Ms. Benjamin visited the office to purchase the insurance. At no time during any of her transactions with Cash Register did Ms. Benjamin have any contact with Respondent. When she first went to Cash Register, on July 23, 1999, Ms. Benjamin completed an application for insurance, an agreement for services from Colonial Touring Association, Inc. (Colonial Touring), a financing contract with Equity Premium, Inc. (Equity Premium), and a form confirming coverage. She received copies of these forms to examine at the office and later at home. However, the transaction at the busy office took place quickly, taking about ten minutes. An important form in the marketing of insurance at Cash Register is the Three (3) Payment Options and Confirmation of Coverages. A Cash Register employee presents three options to the customer. The first option is the mandatory coverage of property damage liability and personal injury protection. Although other coverages exist on the form under the first option, they are optional, and Ms. Benjamin did not select them. The first option requires a cash payment of, in this case, $749. This figure is the quoted premium plus two motor vehicle reports totaling $6. The second option provides the same coverage as the first option, but requires, in this case, a cash down payment of $601 and three monthly payments of $57.72 for a total price of $774.16. The third option adds the Colonial Touring policy for an additional $50. The advantage of this option is the lowest down payment. In this case, Cash Register quoted $500 down and three monthly payments of $108.77 for a total of $826.31. There is no formula by which Cash Register calculates the higher downpayments that it requires to sell only the required coverage without the Colonial Touring policy. Ms. Benjamin chose the third option, which reduced her downpayment to $500 at the cost of adding $50 for the Colonial Touring coverage. Ms. Wilder completed the top section of the application for insurance from Accredited Surety & Casualty. This information contains Ms. Benjamin's name, home address, job address, and one-year coverage term. Someone else in the office completed the rest of the application. Under vehicles, the application listed only the Pontiac, although it showed Mr. and Ms. Benjamin as drivers. The application also showed under Vehicle #1 $181 for $10,000 of property damage liability and $101 for personal injury protection with a $2000 deductible. The total for Vehicle #1 was $743. The number "282" was written in across two rows under Vehicle #2. However, no combination of these numbers totals $743. On the second page of the application, Ms. Benjamin rejected uninsured motorist coverage and elected a $2000 deductible. At the bottom of the page, Ms. Wilder, as a "brokering agent," signed a statement binding coverage on that date. Under "Agent's Social Security Number," Ms. Wilder wrote in "A152865." Mr. Benjamin had given Cash Register a check in the amount of $500. On the check, he wrote that it was for "Liability Ford Pont." All checks written by customers in this case cleared their banks. Ms. Benjamin also signed a contract for automobile travel and accident benefits from Colonial Touring. The form provided $5000 in "amount of insurance" in return for a $50 payment. The travel benefits are largely insignificant, so the policy primarily provides limited accidental death and dismemberment coverage, but only if the insured is killed or suffers dismemberment by a private passenger automobile. The Equity Premium finance agreement shows a total premium of $743 with a down payment of $444, leaving an unpaid balance of $299. The finance agreement calls for three payments of $109.80, starting August 23, 1999. The finance agreement gives the borrower the right to pay off in advance the full amount due and obtain a refund of unearned finance charges, as computed by the Rule of 78, after deducting a flat fee of $20. Ms. Wilder signed on the line marked, "Agent's or Broker's Signature." Among the representations that she made in doing so was that she was an "authorized agent of the insurance company shown above." Ms. Benjamin testified that a female employee at Cash Register misinformed Ms. Benjamin that, if she returned with the full premium balance within 30 days, she would incur no finance charges. This would be an improbably long grace period, given that the term of the finance agreement was only 90 days. Ms. Benjamin testified that she told the female employee that she intended to return to pay off the balance in ten days, but the employee said that Ms. Benjamin should sign a finance agreement in case she was unable to pay the balance at that time. Most likely, someone told Ms. Benjamin that she could return and pay off the balance early to reduce her finance charge, but it is unlikely that anyone told her that 30 days were the same as cash on a 90-day obligation. The discrepancy between the $500 that Mr. Benjamin paid on July 23 and the $444 reflected as paid on the finance agreement is due to the $50 paid to Colonial Touring and $6 for two motor vehicle reports. On August 3, 1999, Ms. Benjamin cancelled the Colonial Touring policy. On the same date, Ms. Benjamin paid the balance of $269 due to Equity Premium on the finance agreement. This balance is derived by taking the original balance due of $299, reducing it by the $50 credit for the Colonial Touring policy cancellation, and increasing it by the $20 prepayment fee charged by Equity Premium. On September 13, 1999, Cash Register paid Equity Premium $319, which represents Ms. Benjamin's payment of $269 and the $50 credit for the refund on the Colonial Touring policy. Notwithstanding the delay in forwarding the funds to Equity Premium, Ms. Benjamin suffered no additional expenses. In fact, on August 2, 1999, Cash Register also credited Ms. Benjamin's account for the interest accrued under the finance agreement, the documentary stamp taxes, and a late charge. In October 1999, Mr. and Ms. Benjamin separated, and Ms. Benjamin did not want to continue carrying his Ford van on her insurance. When she made this request to Cash Register, the agency employees realized that they had failed to complete the paperwork properly on July 23. Although both vehicles were in fact covered, as reflected by separate declaration pages showing both vehicles, Cash Register had to add the Ford van on October 4, and then drop it one week later. Despite Cash Register's repeated requests, Accredited Casualty & Surety did not issue the refund of $131.04 until January 27, 2000. Because the policy had originally been financed, Accredited credited Equity Premium, which, on February 21, 2000, credited Cash Register $119.64--after reversing the earlier credit/write-off of $11.40 for documentary stamp taxes and a $10 late charge. Ms. Benjamin owed the documentary stamp taxes, but the late charge did not accrue until August 28, 1999--over three weeks after Ms. Benjamin had paid off the obligation. This late charge arose entirely due to Cash Register's failure to forward the funds to Equity Premium until September 13, 1999. Respondent Exhibit 26 is offered as evidence that Cash Register paid Ms. Benjamin $119.64 by check dated July 24, 2000. However, this exhibit is not a check and is inadequate documentation of the payment. It seems to be some sort of data printout of ledger information. Under the circumstances, including Cash Register's sloppy handling of money received and due in this account, Ms. Benjamin's testimony that she never received the refund is credited. Additionally, the refund should have been $10 more for the late fee that Cash Register's tardiness caused and greater by an undetermined amount for interest from the October 4, 1999, cancellation date to the claimed July 24, 2000, payment date (and actually to whatever date that Respondent or, if not he, Cash Register eventually pays this customer her money). Kelly Kuhnel Livingston, who earned her high school diploma in 1988, recently earned her associate of science degree in computer science from a local technical school. She graduated with an average of 3.4 grade points out of a maximum of 4. She reads technical computer literature. She manages her own checking account and pays her own bills. At the time of the transaction, she was an assistant branch manager at a local bank, where she worked from 1997-99; she is now employed part-time as a bartender. On September 29, 1998, Ms. Livingston visited Cash Register to purchase the minimum insurance on two vehicles that she owned. She had previously purchased insurance at Cash Register and had worked with Ms. Wilder. Her current insurance was expiring on the day that Ms. Livingston visited Cash Register. At no time during her transactions did Ms. Livingston have any contact with Respondent. Ms. Wilder presented Ms. Livingston with the Three (3) Payment Options and Confirmation of Coverages form. The first option was for a cash price of $806 for the mandatory coverage of personal injury protection and property damage liability. The second option was for the same coverage, but for a down payment of $363 and six monthly payments of $81.90 for a total of $854.40. The third option provided the mandatory coverage plus 12 months of $2000 coverage for accidental death and dismemberment from Colonial Touring for $20 and a driver's protection plan covering certain legal services for $80. The third option required a down payment of $171 and nine monthly payments of $91.57 for a total of $995.13. Ms. Livingston chose the third option. The Colonial Touring policy is the same one that Ms. Benjamin purchased, although the coverage is lower. The legal-services contract is from Peninsula State Legal Services Plan, Inc. (Peninsula), and is known as Sav-Cash Traffic Protectors. This contract provides that Peninsula, for one year, will "make available legal services at a reasonable cost to licensed drivers." Members are clearly entitled to a free consultation for driving under the influence, dissolution, and other general matters, but, due either to clever or poor draftsmanship, it is unclear whether the contract provides free legal services for traffic violations. In any event, Ms. Livingston signed the same type of paperwork that Ms. Benjamin did. The record does not establish that Ms. Wilder signed the insurance application of premium finance agreement. Ms. Livingston paid a downpayment of $171, of which $20 went to Colonial Touring. As reflected on the premium financing agreement with Equity Premium, Ms. Livingston was credited with a net downpayment of $151 against a automobile insurance premium of $806 and a legal-services payment due Peninsula of $80. With a finance charge of $86.33 and documentary stamp taxes of $2.80, her monthly payment was $91.57. Her total sales price was $975.13, which, with the $20 paid to Colonial Touring, was the total stated on the form that presented her with three options. The first payment was due October 29, 1998. According to the records of Equity Premium, which may be more favorable than Ms. Livingston's recollection, Ms. Livingston paid $91.57 in certified funds on October 28, 1998. This payment was timely, and she does not appear to have been assessed a late charge. On November 5, 1998, the insurer issued a notice of cancellation, effective November 28, 1998. It is unclear why the insurer did this because Ms. Livingston was current in her payments. In any event, by checks dated November 24, 1998, payable to Equity Premium, Ms. Livingston paid the November payment and the December payment. The checks were in the respective amounts of $101.57, which included an unearned $10 late fee, and $91.57. For some reason unknown to Ms. Livingston, the insurer cancelled her policy in late December 1998. According to the Equity Premium ledger, there would seem to have been a balance due Ms. Livingston, after a $44.26 credit for the Colonial Touring policy, of $22.79. However, it is unclear how this Colonial Touring credit, which is $24.26 greater than the original cost of the Colonial Touring product, arose, especially as Ms. Livingston did not finance this cost through Equity Premium. The only clear loss in this transaction is the $10 late fee that Ms. Livingston paid in November, even though her payment was not late. In January, Ms. Livingston returned to Cash Register and purchased new automobile insurance. Cash Register never refunded to her any money in connection with the transaction that is the subject of this case, but this transaction is difficult to reconstruct. It is possible that Ms. Livingston was not entitled to any credit besides the $10 late fee. It appears that Ms. Livingston did not pay for more than the three months' motor vehicle coverage that she received, plus, of course, the Colonial Touring and Peninsula services for which she never demanded a refund. If nothing else emerged from this record, it is a picture of a very busy office. It is inconceivable that Ms. Wilder signed the finance agreement or insurance application in the Benjamin case in an act that exceeded the authority that Respondent had delegated to her. If so, he should have testified to this effect. To the contrary, she appears only to have been doing her job in a very busy office and doing exactly what Respondent allowed her to do. By a Consent Order entered August 26, 1986, Petitioner placed Respondent's license on probation for six months due to a failure to disclose certain information on his application for licensure.
Recommendation It is RECOMMENDED that the Department of Insurance enter a final order finding Respondent guilty of one violation of Section 626.621(2), Florida Statutes, by reason of his failure to adequately supervise a customer representative, in violation of Section 626.592(2), Florida Statutes. It is further RECOMMENDED that the final order impose the penalty of a three-month suspension; provided, however, if Respondent personally pays the amounts found in this recommended order still to be due to Ms. Benjamin, including interest at the rate she was charged in the finance agreement through the date of payment, then the suspension be reduced to the later of the date on which Respondent makes the payment or 30 days after the effective date of the final order. DONE AND ENTERED this 18th day of September, 2001, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 18th day of September, 2001. COPIES FURNISHED: Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307 David J. Busch Department of Insurance and Treasurer 200 East Gaines Street Tallahassee, Florida 32399-0333 Jed Berman Infantino and Berman Post Office Drawer 30 Winter Park, Florida 32790
The Issue Whether Petitioner was initially enrolled in her current dental plan as a result of an error and, therefore, should be allowed to cancel the current enrollment and retroactively enroll in the desired plan.
Findings Of Fact As defined in Subsection 110.123(2), Florida Statutes (2009),1 the “state group insurance program” or “programs” offer a variety of insurance plans to state officers, employees, retirees, and dependents. The programs include regular benefits that are offered to employees as part of the regular benefits package and supplemental insurance benefits that are made available to all employees. Unless participants opt-out, all insurance premiums are paid through the state-sponsored pre-tax programs. Under federal law, taxable income is reduced by the insurance premiums paid through pre-tax programs. At all times relevant to this proceeding, Petitioner has been an active state employee, participating in the programs. Section 110.161, Florida Statutes, directs the Department of Management Services to establish and maintain pre- tax programs as authorized by the Internal Revenue Code (IRC) of 1986. These programs allow employers (including public employers) to establish plans whereby employees’ taxable income is reduced by the premium payments deducted from employees’ wages. The pre-tax programs are known as “Section 125 Plans” and “Cafeteria Plans” and are governed by 26 United States Code Section 125. Subsection 110.161(6)(a), Florida Statutes, states that Respondent shall allow employees’ contributions to premiums for the State Group Insurance Program administered under Section 110.123, Florida Statutes, to be paid on a pre-tax basis, unless an employee elects not to participate. Employers participating in the Section 125 pre-tax program must implement a written plan (Cafeteria Plan) and take deductions from an employee’s earned income for the purpose of paying medical and dependent care expenses and, as in this case, insurance premiums. To maintain the pre-tax benefit, the employer is required to administer the program in compliance with IRC Section 125; the applicable federal laws, rules, and regulations; and the employer’s written plan. Florida Administrative Code Chapter 60P is part of the State of Florida’s Cafeteria Plan. Supplemental insurance is governed by Florida Administrative Code Chapter 60P-10. Dental insurance is a supplemental insurance, which means it is not included in regular employee benefits, but is optional coverage provided through the pre-tax programs. Under Florida Administrative Code Rule 60P-10.005, for employees on payroll, premiums shall be payroll deducted, and enrollment in the pre-tax programs is automatic, unless declined by participants. Florida Administrative Code Rule 60P-10.003(1) provides that an employee may elect to change or cancel coverage upon the occurrence of a qualifying status change event or during open enrollment period. Through a contract with the State of Florida, NorthGate Arinzo (formerly Convergys, Inc.) provides personnel administrative services, including management of benefits. The processing of benefits is performed through an online system known as People First. Petitioner was hired on June 26, 2009. On July 2, 2009, Petitioner enrolled in the program as a new hire. Prior to July 2, 2009, Petitioner had been assigned a People First identification number and was, therefore, able to access the People First system. On July 2, 2009, Petitioner called People First to select benefits. Her call was routed to Customer Service Representative Janelle Vazquez at 11:00 a.m. on that date. The People First system includes notations that are manually input by the representative that is assisting the employee. This is known as the “e-case system.” The e-case system also notes written correspondence that is received from or provided to employees. When an employee calls into People First to enroll in benefits, the representative accesses the enrollment screen. Once the employee informs the representative that he or she wants to enroll in dental insurance, the representative accesses the dental tab. A screen comes up that identifies the insurer (e.g., CompBenefits) and plan code (e.g., 4004, 4054). The representative does not type in either the name of the insurer, nor the plan code, but makes the selections from the menu that is presented. The menu shows plan names and plan codes. No plan description of benefits are provided on the enrollment screen. The representative does not advise the employee based upon type of benefits. It is the responsibility of the employee to identify the type of plan desired and to provide the representative the plan code of the plan name. Once the representative has been directed to enter the plan name and plan code, the representative reads the selections to the employee and then pushes the “complete transaction” button. After the enrollment, the transaction is noted in the e-case notes system. The notation is made by copying the enrollment information as it appeared on the enrollment screen and pasting it into the e-case notes. On July 2, 2009, at 11:00 a.m., as instructed by Petitioner, Vazquez enrolled Petitioner in insurance benefits, including “CompBenefits Network Plus #4004 Employee Only.” The People First system also maintains a screen that shows when contacts are made with an employee and any related transaction. The “Logged Changes” shows that on July 2, 2009, at 10:58 a.m., Vazquez made changes to Petitioner’s account. After the enrollment, a computer confirmation notice was mailed on July 3, 2009, by first class mail to Petitioner. The confirmation notice was mailed to Petitioner’s address of record: 1311 Trail View, Tarpon Springs, Florida 34688. Had the confirmation notice been returned to People First, it would have been noted in the e-case notes. There is not a notation in Petitioner’s e-case notes that the confirmation notice was returned. The confirmation notice advises new enrollees of the coverage selected. As to dental, it identifies the plan by name of the provider and plan code, coverage level, and the monthly premium. The confirmation notice advises enrollees that, if the statement does not accurately reflect changes to coverage, the enrollee must contact the People First Service Center within days of the date of the notice to make any corrections. A toll-free telephone number is provided. Prior to July 2, 2009, Petitioner had access to the People First website, including the booklets that identified the providers, which described the various benefits, the levels of coverage available, and the plan codes. The booklets describing the benefits are available on the website or the employee can request copies to be sent by mail. Regarding the CompBenefits dental coverage, the booklet points out that there is a “Network Plus Prepaid” plan (code 4004) and a “Preferred Plus DPPO” plan (code 4054). The booklet provides a full description of the benefits available under each and the differences between the two plans. The CompBenefits booklet also provides an explanation of the payment of benefits and co-pays. On and prior to July 2, 2009, a publication identified as the “Benefits Guide for State of Florida Employees,” effective January 1, 2009, was available on the website of Respondent. The benefits guide provided a full description of the dental benefits available and also contained an explanation of the difference between the “Dental Prepaid Plans” and the “Dental Preferred Provider Organization” (DPPO) offered by CompBenefits. The benefits guide also offered a comparison of the premium payments and benefits offered under each of the plans. On page 10 of the benefits guide is an advertisement that compares the Network Plus Prepaid plan (includes code 4004) and Preferred Plus DPPO plan (includes code 4054). In each of the documents described in paragraphs 29 and 30, the information included the plan codes: “4004” for the Network Plus Prepaid plan and “4054” for the Preferred Plus DPPO plan. On July 2, 2009, available to Petitioner were the benefits guide included on the website of Respondent and the People First website that contained the booklets that outline the various dental plans available to state employees. On July 2, 2009, Petitioner directed the People First service representative to enroll Petitioner in the CompBenefits 4004 plan. Although it was unlikely that Ms. Vasquez entered the incorrect plan number, Petitioner failed to review the confirmation notice within the time allotted and, therefore, cannot make correction at this time.
Recommendation Based upon the forgoing Findings of fact and Conclusion of Law, it is RECOMMENDED that the Department of Management Services, Division of State Group Insurance, enter a final order, dismissing the claim of Petitioner. DONE AND ENTERED this 13th day of August, 2010, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of August, 2010.
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 Bradley Earl Wasserman was licensed as a disability insurance agent in the State of Florida. On or about July 1, 1981, respondent went to the home of Jose M. and Maida Maldonado for the purpose of discussing health insurance coverage. The Maldonados expressed their desires for the cheapest and best coverage for their money. The health insurance coverage purchased by the Maldonados from the respondent was to be issued through the Union Casualty Insurance Company and the Orange State Insurance Company. The dispute in this case involves the manner in which the premium payments were to be paid for the health insurance coverage. Respondent explained to the Maldonados that there were four methods of premium payment: annual, semiannual, quarterly and monthly payments. The only way monthly payments could be accepted was through an automatic bank draft plan. The Maldonados did not feel that they could afford to pay an annual, semiannual or quarterly payment and desired to pay for their coverage on a monthly basis. They gave respondent a check to cover the premiums for the first two months, and desired to pay on a monthly basis thereafter. Respondent explained that the automatic withdrawal from their checking account would result in a savings to them of about $3.55 per month. While the Maldonados each testified that they did not want their monthly premium payments to be automatically withdrawn from their checking account and did not authorize this form of payment, such testimony is inconsistent with the testimony of respondent and the documents received into evidence at the hearing. According to the respondent, it was against his company's policy to sell insurance with a monthly method of payment unless such payments were automatically withdrawn from the insured's bank account. The application for insurance bearing the signatures of both Jose and Maida Maldonado contains boxes for the type of billing and the mode of billing to be utilized. The "monthly" mode of billing was checked and the "ABC" type of billing was checked. (Respondent's Exhibit 1) "ABC" means "automatic bank check" plan or the automatic bank withdrawal method of payment. The application states that a Form 7139 must be completed for the "ABC" type of billing. The Maldonados both admitted that they signed this application for insurance. Form 7139 is entitled "Request for Automatic Bank Check Plan" and "Authorization to Honor Checks Drawn by Union Casualty Company of Omaha, Nebraska." These completed forms with a signature of Jose Maldonado were received into evidence (Respondent's Exhibit 2), as was a blank deposit ticket for the Maldonado's checking account. (Petitioner's Exhibit A). Neither of the Maldonados could recall giving respondent a blank deposit slip. Mr. Maldonado could not recall placing his signature on Form 7139, but he did recognize one of the two signatures as his own. Respondent recalled that at the time Mr. Maldonado was signing this document, a small child was sitting on his lap and respondent had to help him hold the form while he was signing it. A handwriting expert could not positively identify the two signatures as either being those of Jose Maldonado or as being forgeries. The original document was not available and the expert was working from a copy. For this reason, he was unable to positively reach a conclusion on the authenticity of the signatures of Jose Maldonado on respondent's Exhibit 2. Mr. Maldonado admitted that he had not read every document he signed for the respondent. The Maldonados became dissatisfied with their insurance coverage when they discovered that it would not pay for certain claims. On October 21, 1981, they instructed their bank to stop payment on the automatic drafts for their premiums. The Maldonados did not directly send a separate check to the insurance company for the September or October payments.
Recommendation Based upon the findings of fact and conclusions of law stated above, it is RECOMMENDED that the Administrative Complaint against the respondent dated December 29, 1981, be DISMISSED. Respectfully submitted and entered this 23rd day of July, 1982, in Tallahassee, Florida. DIANE D. TREMOR, 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 23rd day of July, 1982. COPIES FURNISHED: Daniel M. Sumner, Esquire 428A Larson Building Tallahassee, Florida 32301 Barry M. Steagall, Esquire 6500 Central Avenue St. Petersburg, Florida 33707 Honorable Bill Gunter Insurance Commissioner State of Florida The Capitol Tallahassee, Florida 32301
The Issue The issue for consideration in this case is whether Respondent's license as an all lines insurance adjuster in Florida should be disciplined because of the matters alleged in the Administrative Complaint filed herein.
Findings Of Fact At all times relevant to the issues herein, Petitioner, Department of Insurance, was the state agency in Florida responsible for the licensing of insurance agents and adjusters in this state and the regulation of the insurance profession therein. Respondent was licensed as an all lines insurance adjuster in Florida, and had been for approximately eight to ten years. On May 15, 1997, Respondent's home, located at 6617 North 23rd Street in Tampa, Florida, was damaged by fire, making it temporarily uninhabitable by Respondent and his two sons. As a result, Respondent arranged for his two sons to reside temporarily with a friend, Ms. Wanda McLendan. Though no formal written agreement was entered into between them, Respondent claims he verbally agreed to pay her $45.00 per day for the housing of his two sons. Respondent rented quarters for himself at the AmeriSuites Motel on North 30th Street in Tampa for the night of May 16, 1997, for which he was charged and paid $88.48. Commencing on May 17, 1997, Respondent moved into the DoubleTree Guest Suites Motel near Busch Gardens in Tampa, for which he paid $79.00 per night, plus tax. He remained at that facility until he checked out on June 9, 1997. Over the period he remained there, Respondent paid a total of $2,052.04 for room, taxes, and phone calls. All charges to both facilities were placed on Respondent's American Express card. Respondent submitted these charges to USAA, his insurance company, under that provision of his homeowner's policy which provided coverage for living expenses caused by property loss, up to $18,800 over a total of 12 months. These charges were reimbursed to him. On July 27, 1997, Respondent forwarded to USAA a claim for further additional living expenses which allegedly arose out of the loss of use of the property due to the fire. In the cover letter which constituted the claim, Respondent indicated that on June 9, 1997, he and his family moved into a townhouse located at 5231 Tennis Court Circle in Tampa, which was owned by a friend, Linda Akins. Accompanying the letter was an extract of the pertinent insurance policy and a statement dated June 9, 1997, allegedly signed by both Respondent and Ms. Akins, whereby Respondent agreed to rent the subject property for $220.00 per day, including furniture and utilities. There was to be no deposit or lease. Also accompanying the claim letter were photo copies of four checks drawn on the First Union National Bank of Florida, numbers 1750, 1758, 1759, and 1761, in the amount of $3,080, $3,080, $3,080, and $1,320 respectively, made payable to Ms. Davis, signed by the Respondent, and dated June 22, and July 8, 21, and 26, 1997, all of which indicate they were in payment of rent for the property located at 5231 Tennis Court Circle. On July 30, 1997, Respondent sent another letter to Mr. Price at USAA in which he claimed additional living expenses for his two sons at the residence of a friend, Ms. McLendon, at a rate of $45.00 per day for the period from May 16, 1997, to June 9, 1997. Accompanying that letter was a photocopy of check number 1752, dated June 15, 1997, in the amount of $945, drawn on the same bank as the others, and payable to Wanda McClendon. This check bore the additional notation that it was for lodging for the two boys as alleged. When these two claims were received by USAA, because the checks attached thereto did not appear to have been negotiated, the company initiated an investigation to be conducted by Mr. Green, one of its investigators. Mr. Green reviewed the entire claim file and then interviewed both Respondent and Ms. Akins. Based on Green's review of the claim file and his interview of the individuals, he concluded that the claim was false in that the expenses claimed had not been incurred. USAA requires that to be reimbursed to a policy holder, the expenses claimed have to have been actually incurred, but the policy does not define the term "incurred expenses." At the hearing, Ms. Akins indicated that she had been contacted by Respondent about renting her townhouse in question and she agreed to do so. They initially agreed upon a rental of $220.00 per day, she claims, but she also indicated Respondent agreed to pay to her in rent what he received from his insurance company. He gave her the checks which accompanied the claim, but asked her not to cash them because there was not enough money in the account to honor them, and she did not do so. She had rented the apartment to Respondent several years previously for a monthly rental of $400 to $475, but he contends, and she agrees, that this was only a part of the consideration paid for the rental. He also did some work around the property which, he contends, and she agrees, made up the balance of the consideration for the rental. No clear indication of what that work was, or its value, was presented, and it is found that the rental paid in the prior rental was considerably less that $220.00 per day and a claim for that amount is both unreasonable and unrealistic. Ms. Akins contends she ultimately received a cashier's check for $3,000 in rent from Respondent. Based on his conclusion that the claim was false, consistent with the requirements of the Department of Insurance, Theodore Hammer forwarded the claim to the Department for further action. Hammer, a fraud investigator for the Department, conducted additional inquiry into the claim, more specifically into the second claim regarding the payment to Ms. McClendon. During the interview with Ms. McClendon, she indicated she had agreed to Respondent's sons staying with her for a while, but they did not discuss any fee for this and he did not give her the check for $945.00. At hearing, Ms. McClendon also contended that the agreement with Respondent called for him to pay her whatever he received from the insurance company. Respondent ultimately gave her a total of $225.00. Respondent claims that when his home burned on May 15, 1997, he initially moved, with his sons, into a motel where they all stayed for several nights. He then made an arrangement with Ms. McClendon for his sons to stay with her for $45.00 per day. There was no written contract. Respondent remained in a motel until he had charged all his credit card would allow. However, the receipts offered into evidence reflect the credit card used was an American Express card, and there is usually no credit limit on a card from that company. This inconsistency was not explored by either party. He reached an agreement, he claims, with Ms. Akins whereby he would pay her $225.00 per day for rent of her two- bedroom house which is what he asserts two rooms in a motel would cost. Review of the receipts for Respondent's stay at the AmeriSuites and the DoubleTree reflects a maximum of $88.00 per night at the former and about the same at the latter; a figure which, when doubled, will still total far less that $225.00. However, if cost of food is included in the tabulation of motel living expense, Respondent's claim is not too far off. Respondent estimated his stay in the Akins property would only be for a few weeks, but the repair process took far longer than expected. Finally, even though his house was not finished, he moved back in. When, during the investigation, Mr. Green asked Respondent for the cancelled checks to support his claim, Respondent did not know what he was talking about. There were no cancelled checks. He admits he had written the checks in issue, but had given them, as appropriate, to Ms. Akins and Ms. McClendon and had asked them not to cash them. Respondent, an insurance adjuster for a significant period of time before this incident, claims he did not understand that he could not be reimbursed for money he had not actually spent. He claims he did not intend to misrepresent the situation to the insurance company or to make a profit from the deal. His difficulty, he claims, lay in his poor letter-writing skills which permitted him to indicate in the claim letter that the check copies he had enclosed were cancelled. Though he is not sure what the insurance company policy on payment of claims was, he contends he understood the company would pay for obligations he incurred, and he did not have to wait until he had satisfied these obligations before seeking reimbursement for them. Respondent asserts that when he submitted both claims letters, he did not mean to imply that he had paid the sums represented by the checks or than they had been cancelled. Respondent indicated he had agreed to pay his friends the same amount he was paying at the motel, but a review of the receipts reflects he paid for only one room each night at a rate far less than $225.00 per night. He claims, and his friends confirmed at hearing, that he had agreed to pay only what the insurance company would reimburse him, yet the agreement he submitted with the claim, purporting to bear the signature of Ms. Akins, is a blatant forgery. Further, his claim that his letter referring to the checks as cancelled was an ignorant and inartful use of words is disingenuous and unbelievable. Respondent's counsel contends that the policy in issue does not require the expenses claimed be actually paid before reimbursement, and that Mr. Green did not so indicate when he interviewed Respondent. However, at hearing Mr. Green unequivocally stated company policy that indicated they must be. In the balance, it is found that an insurance adjuster with the years of experience possessed by Respondent would know that. Further, Respondent's contention that the company's denial of the claim, and the resultant lack of loss to the company, when coupled with a lack of adjustment offer by the company, renders Respondent's conduct non-actionable is non-persuasive.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Insurance enter a final order in this matter suspending Respondent’s license as an all lines insurance adjuster for a period of twelve months. DONE AND ENTERED this 18th day of November, 1999, in Tallahassee, Leon County, Florida. ARNOLD H. POLLOCK 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) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 1999. COPIES FURNISHED: David W. Nam, Esquire David Busch, Esquire Department of Insurance 200 East Gaines Street 612 Larson Building Tallahassee, Florida 32399-0333 Christopher Clark, Esquire C. Laing Clark, P.A. 1958 West Dr. Martin Luther King Jr. Boulevard Tampa, Florida 33607 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300 Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issues presented concern the claims made by the several Petitioners related to requests for refunds from Respondent pertaining to the payment of application fees for the issuance of Certificates of Convenience and Necessity or Transportation Brokers' Licenses. See Chapter 323, Florida Statutes.
Findings Of Fact As alluded to initially, the facts in this matter are presented based upon a stipulation offered by the parties. Those facts were acknowledged as the factual basis for the Recommended Order by interlocutory order dated September 23, 1983. In keeping with that action and pursuant to the parties' Stipulation of Facts, the following facts are found: The application for either Certificate of Convenience and Necessity or Transportation Brokers' License (hereinafter referred to as application) was received by FPSC's fiscal office where the mail was opened. The check for the application fee was then deposited, and the application was transmitted to the Clerk's office. The Clerk's office assigned the application a docket number and sent copies of the application to the Legal Department, Transportation and Regulatory Planning Department, and occasionally to the Rate Department. A copy of the Applicant's "Brief Written Statement," containing a description of the authority sought, required by Commission Rule, was sent to the Florida Trucking Association and the Public Counsel. At the Legal Department, each application was assigned to an attorney who reviewed it to determine whether it was complete in accordance with statutory requirements and that all supporting documentation was attached. If an application was deficient for any of the above reasons, the attorney would either call or write the applicant to remedy the situation. After the attorney deemed the application complete, he would prepare a "Notice of Filing of Application." The application was then returned to the Clerk's Office. The amount of time spent on this initial review of the application varied. In the case of most applications, particularly those filed by established companies or attorneys with experience before the FPSC, an estimated two hours was involved in review and preparation of the Public Notice. First time applicants, whose applications were incompletely filed, could involve up to five hours' time. The Notice of Filing Application provides notice to the public of the authority sought as described by the applicant in its application and "Brief Written Statement" which was required to accompany each application. No written record was kept of the amount of time spent on a particular application. The Clerk's Office sent a copy of "Notice of Filing" to all persons on FPSC's current mailing list. A. No protest received. The Clerk's Office notified the Legal Department and requested that they issue a recommendation to the Commission as to what action should be taken on the application. The attorney initially assigned to review the application would evaluate the file, and if complete, prepare a memorandum advising that a grant of the application was in accord with past Commission policy and draft an order for the commissioners' signatures. The attorney at times might also seek a recommendation from the Transportation Department. B. Protest received. The Clerk's office would send the protest to the chief hearing officer and a hearing date and hearing examiner were assigned. The Transportation Section performed a field investigation on all passenger carrier applications. Field investigations on other applications would be performed upon request by the Legal Department or other FPSC personnel at any time within the application process. There was a standard form to evidence that a field investigation was performed. It should be noted that the last two or three months prior to deregulation there was no automatic field investigation of passenger applications, and field investigations for other types of applications were minimal during the last half of FPSC's regulation (January through June, 1980). The FPSC, prior to the sunsetting of Chapter 323, Florida Statutes, had, in certain instances, recommended refunds of application filing fees up and until an application was set and noticed for hearing. Based upon said recommendations, the Comptroller paid the refund requests. FACTS COMMON TO ALL Each Petitioner applied to the FPSC and each paid the statutory fee. The fee was deposited in the FPSC's Regulatory Trust Fund. The application for each Petitioner proceeded through the process outlined in 1-4 herein where, pursuant to Subsection 323.030(2), Florida Statutes, the FPSC issued Notice of Filing the Application. Each of the Petitioners herein has requested a refund of the application fee. Each Petitioner received a Notice of Intent to Deny Refund issued by the Comptroller of the State of Florida. All Petitioners filed a timely request for hearing. Said requests have been held in abeyance pending the conclusion of the administrative hearing and issuance of the Amended Final Order entered on dune 12, 1981, for a similarly situated group of motor carriers. At the time Petitioners filed their applications, a certificate or license from the FPSC was required, by law, as far a prerequisite for engaging in transportation activities each sought to perform in the State of Florida. Without a certificate or license, each applicant would have been subject to a fine or other legal sanction. On July 1, 1980, pursuant to Laws of Florida 1976, Chapter 76-168, Chapter 323, Florida Statutes, was repealed, thus eliminating the requirement of a Certificate of Convenience and Necessity and Transportation Brokers' License. Except for Commodity Brokerage Exchange and Florida Limousine Service, Inc. (d/b/a Florida Tour and Limo), which are specifically set forth below, Petitioners' applications fall within two categories. Each category set forth below represents a level of activity and each application falls within one of these categories: Application was set for hearing; processed through steps 1-6, inclusive; Docket Number 800095-CCT, Ryder Truck Lines, Inc. Application was not set for hearing, but a field investigation was performed; Docket Number 790647-CCT, Charles W. Lauramore. Commodity Brokerage Exchange filed two applications which were processed through steps 1-4, inclusive; Docket Numbers 800428-ATB and 800429- ATB. In accordance with Subsection 323.31 (4)(b), Florida Statutes, Commodity Brokerage Exchange received a refund of $400.00 for each application, since no license was issued. Florida Limousine Service, Inc., d/b/a Florida Tour and Limo, filed an application with the FPSC which was processed through steps 1-6, inclusive; Docket Number 800104-CCB. On June 19, 1980, an Amended Application was filed which was substantially different from the previously filed application. No additional filing fee was required and the hearing scheduled for the initial application was cancelled. The Amended Application was not renoticed. Based upon the foregoing, the Comptroller and Petitioners believe that the Hearing Officer can decide the underlying issues presented without an evidentiary hearing, and the parties concerned should be ordered to provide legal memoranda to the Hearing Officer within thirty (30) days of the Hearing Officer's acceptance of this stipulation.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That a final order be entered which denies all refund claims of the named Petitioners. DONE and ENTERED this 10th day of January, 1984. CHARLES C. ADAMS 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 10 day of January, 1984.
Findings Of Fact Petitioner was issued a permit to erect a sign on the site in question in 1971 and has renewed this permit annually since that time. At the time the initial permit was issued, the interchange to the 1-275 was not paved or opened to the public for access to the I-275. On October 19, 1971 Petitioner leased the property for this proposed sign at a minimum rental of $175 per month and has paid this rent since the execution of the lease (Exhibit 1). The boundary line between St. Petersburg and Pinellas County runs through the paved portion of the interchange in the vicinity of the site for the proposed sign. This site is outside St. Petersburg city limits. Petitioner now desires to erect the sign for which it holds a permit but, before spending the $40,000 estimated cost for this sign, reapplied for a permit to insure Respondent would not demand the sign be removed because it is within 500 feet of an interchange. The site of the proposed sign is located within 500 feet of the interchange to the I-275. The interchange is both within and without the corporate limits of St. Petersburg, and the site of the sign is outside the corporate limits of St. Petersburg in an unincorporated portion of Pinellas County. Since leasing the property, Petitioner has made lease payments in excess of $15,000 and has paid annual permit fees of $12 each to Respondent for the north and south facings of the permitted sign.
