Findings Of Fact Upon consideration of the oral testimony and documentary evidence adduced at the hearing, the following relevant facts are found: At all times pertinent to this proceeding, Petitioners were producers of agricultural products in the State of Florida as defined in Section 604.15(5), Florida Statutes (1983). At all times pertinent to this proceeding, Respondent GMS was a licensed dealer in agricultural products as defined by Section 604.15(1), Florida Statutes (1983), issued license no. 936 by the Department and bonded by Commercial Union Insurance Company (Commercial) in the sum of $50,000.00 - Bond No. CZ 7117346. At all times pertinent to this proceeding, Respondent Commercial was authorized to do business in the State of Florida. The complaint filed by Petitioner was timely filed in accordance with Section 604.21(1), Florida Statutes (1983). Prior to Petitioners selling or delivering any watermelons (melons) to Respondent GMS, Petitioners and Respondent GMS entered into a verbal contract whereby: (a) Petitioners would harvest and load their melons on trucks furnished by Respondent GMS at Petitioners' farm; (b) the loading, grading and inspection, if any, was to be supervised by, and the responsibility of Respondent GMS or its agent; (c) the melons were to be U.S. No. 1 grade; (d) the melons were purchased F.O.B. Petitioner's farm subject to acceptance by Respondent GMS, with title and risk of loss passing to Respondent GMS at point of shipment (See Transcript Page 95 lines 5-7); (e) the price was left open subject to Petitioners being paid the market price for the melons at place of shipment on the day of shipment as determined by Respondent GMS less one (1) or two (2) cent sales charge, depending on the price; and requiring Respondent GMS to notify Petitioners on a daily basis of that price and; (f) the settlement was to be made by Respondent GMS within a reasonable time after the sale of the melons by Respondent GMS. Respondent GMS was not acting as Petitioners agent in the sale of the melons for the account of the Petitioners on a net return basis nor was it acting as a negotiating broker between the Petitioners and the buyers. Respondent GMS did not make the type of accounting to Petitioners as required by Section 604.22, Florida Statutes had it been their agent. Although Respondent GMS purchased over twenty (20) loads of melons from the Petitioners, there are only ten (10) loads of melons in dispute and they are represented by track report numbers 536 dated April 29, 1985, 534 dated April 30, 1985, 2363 and 537, dated May 1, 1985, 2379, 2386 and 538 dated May 2, 1985, and 2385, 2412 and 2387 dated May 3, 1985. Jennings W. Starling (Starling) was the agent of Respondent GMS responsible for loading; grading- inspecting and accepting and approving the loads of melons for shipment that Respondent GMS was purchasing from Petitioners during the 1985 melon season. Petitioners and Starling were both aware that some of the melons had hollow hearth a conditions if known, would cause the melons to be rejected. Aware of this condition in the melons, Starling allowed Petitioners to load the melons on the truck furnished by Respondent GMS. Starling rejected from 20 percent to 40 percent of the melons harvested and brought in from Petitioners' fields before accepting and approving a load for shipment. Starling accepted and approved for shipment all ten (10) of the disputed loads of melons. On a daily basis, Robert E. McDaniel, Sr., one of the Petitioners, would contact the office of Respondent GMS in Lakeland Florida to obtain the price being paid that day by Respondent GMS to Petitioners but was not always successful, however, he would within a day or two obtain the price for a particular day. Robert E. McDaniel did obtain the price to be paid by Respondent GMS for the ten (10) disputed loads and informed his son Robert E. McDaniel, Jr. of those prices. The prices quoted to Robert E. McDaniel, Sr. by Respondent GMS on the ten (10) disputed loads were 12 cents, 10 cents, 8 cents, 8 cents, 8 cents, 8 cents, 8 cents, 7 cents, 7 cents, and 7 cents on tract reports number 536, 534, 2363, 537, 2379, 2386, 538, 2385, 2412 and 2387, respectively. No written record of their prices was produced at the hearing but the testimony of Robert E. McDaniel Sr. concerning these prices was the most credible evidence presented. After the melons were shipped, sometimes as much as one week after, a track report was given to Robert E. McDaniel Jr. by Starling for initialing. Sometimes a price would be indicated on the track report but this price was based on selling price at point of destination and not the market price at point of shipment. Also, the letters "H.H." would also appear on the track report which, according to the testimony of Starling, indicated hollow heart but the evidence was insufficient to prove that Starling had rejected these loads for shipment because of a hollow heart condition in the melons. The loads in question were paid for by Respondent GMS based on a price at point of destination under its drafts no. 831912 and 851311. The amount in dispute is as follows: DATE TRACK NET AMOUNT AMOUNT SHIPPED
Recommendation Based upon the Findings of Fact and Conclusions of Law recited herein, it is RECOMMENDED that Respondent GMS be ordered to pay to the Petitioners the sum of $11.212.31. It is further RECOMMENDED that if Respondent GMS fails to timely pay the Petitioners as ordered, then Respondent Commercial be ordered to pay the Department as required by Section 604.21, Florida Statutes (1983) and that the Department reimburse the Petitioners in accordance with Section 604.21, Florida Statutes (1983). Respectfully submitted and entered this 13th day of June, 1986, in Tallahassee, Leon County, Florida. Hearings Hearings WILLIAM R. CAVE Hearing Officer Division of Administrative The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 FILED with the Clerk of the Division of Administrative this 13th day of June, 1986.
The Issue Whether State Farm Fire and Casualty Company and State Farm General Insurance Company ("State Farm") made a material misrepresentation or material error in connection with the rate filing that is the subject of this proceeding. For the purpose of this proceeding, a misrepresentation or error would be material if it resulted in the Department approving "ex-wind" (meaning without windstorm coverage) homeowners insurance rates that are excessive for policyholders whose wind coverage is being non-renewed in Dade, Broward and Pinellas Counties.
Findings Of Fact The parties in this proceeding have stipulated to the following findings of fact. Based upon a review of the record in this case, these stipulated facts appear to be accurate and are adopted. In December 1995, State Farm submitted a homeowners insurance rate filing effective April 1, 1996, for new business, and May 1, 1996, for renewal business. With regard to the December 1995, homeowners rate filing, the Department of Insurance approved a 13.8 percent statewide rate increase on February 12, 1996. On February 18, 1996, State Farm formally announced that it would non- renew over three years the wind coverage for 62,000 policies in Dade, Broward, and Pinellas Counties in Florida Windstorm Underwriting Association eligible areas. On February 22, 1996, the Department issued a Notice of Withdrawal of Rate Approval ("Notice") to State Farm with regard to homeowner rates approved for Dade, Broward and Pinellas Counties. Subsequent to the issuance of the Notice, the Department requested that State Farm submit to the Department actuarial information giving further consideration to the proposed non-renewal of wind coverage to policyholders in Dade, Broward and Pinellas Counties. The evidence adduced in this matter consisted of an affidavit of Douglas S. Haseltine, a Department actuary, on behalf of the Department, and of pre-filed testimony of Mark Brannon, a State Farm actuary, and of the rate filing that is the subject of this litigation and of certain actuarial information that had been provided by State Farm to the Department pursuant to the request described in paragraph 5 above. The record in this matter otherwise includes the Request For Formal Proceedings filed in this matter by State Farm, with attachments, which include the Notice, and the stipulation filed by the parties on May 31, 1996. The Haseltine affidavit provides in pertinent part that: "For policyholder whose wind coverage is non-renewed, their remaining premium for coverage ex-wind is not excessive." The Brannon testimony and the attachments to it establish the methodology by which State Farm establishes rates for policyholders in different territories throughout Florida for homeowners insurance, including both homeowners insurance policies that included wind coverage and policies that excluded wind coverage (hereinafter "ex-wind policies"). The Brannon testimony also provided that the rate filing did not reflect the distributional changes that would result from the non-renewal plan that was subsequently announced on February 20, 1996. Mr. Brannon further testified that, in his expert opinion, the failure to point out this non-renewal program did not constitute a material error or material misrepresentation because when the filing was made the decision to initiate these non-renewals had not been made, and because: Even if the non-renewal program had been announced prior to December 15, 1995, it would not have changed the rate request. State Farm's original rate request was a 24 percent increase. The approved rate request included a 40 percent wind or hail exclusion discount. This discount applied to the FWUA eligible areas of Dade, Broward and Pinellas Counties. The amount of this discount was not changed by the non-renewal program. Thus, the non-renewal program would not have had a material effect on the filing, even if I had known of the program at the time the filing was made. Mr. Brannon further testified that the rates proposed in the filing are not excessive or unfairly discriminatory, stating: Q: Are the rates you have proposed in this filing excessive or unfairly discriminatory? A: It is my expert opinion that the proposed rates are reasonable and are not excessive or unfairly discriminatory. Specifically, the proposed rates for both those policies which exclude windstorm or hail coverage, and the rates for those policies which include wind- storm or hail coverage, meet the statutory requirements and are not excessive or unfairly discriminatory. It appears that there is no misrepresentation or error in the rate filing itself, because the decision that the Department contends should have been disclosed had, as a matter of fact, not yet been made at the time of the filing. Moreover, if State Farm had an obligation to disclose this decision to the Department prior to the Department's approval of the rate filing, any misrepresentation or error flowing from the failure to disclose would not be material to the filing because the data subsequently provided to the Department and other evidence in this matter show that: Policyholders whose wind coverage will be non-renewed will receive a discount that is actuarially sound and commensurate with the reduction in coverage: and hence, Policyholders whose coverage will be renewed "ex-wind" will not be charged rates that are excessive.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered: (1) finding that there was not a material misrepresentation or material error made by the insurer or contained in the rate filing; and (2) dismissing the Notice. DONE and ENTERED this 18th day of June, 1996, in Tallahassee, Florida. JAMES W. YORK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of June, 1996. COPIES FURNISHED: Vincent J. Rio, III, Esquire TAYLOR, DAY & RIO Suite 206 311 South Calhoun Street Tallahassee, Florida 32301-1807 Daniel Y. Sumner, Esquire General Counsel Department of Insurance The Larson Building 200 East Gaines Street Tallahassee, Florida 32399-1300 Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue The issue is whether, as provided by the relevant statutes, Respondents owe Petitioner money for the sale of agricultural products.
Findings Of Fact At all material times, Petitioner, which is located in Homestead, Florida, has been a producer of agricultural products. At all material times, Respondent Small Indian Corporation (Respondent) has been a dealer in agricultural products. Respondent Cumberland Casualty and Surety Company, as surety (Surety), issued a bond to Respondent, as principal, in the amount of $27,600 for the period, November 26, 1999, through November 25, 2000. Surety also issued a bond to Respondent in the same amount for the following bond year. During the periods covered by this case, Petitioner sold to Respondent numerous avocados, limes, and papayas. The shipments were timely and conformed in quality and quantity to the orders. Petitioner timely issued invoices to Respondent for the sales of these agricultural products, but Respondent never paid any portion of these invoices. On May 25, 2001, Petitioner filed a complaint with the Department of Agriculture and Consumer Services (Department) for the period from November 22, 2000, through February 5, 2001. The Department required Petitioner to file separate complaints by bond year. Thus, Petitioner filed an amended complaint for $1190 for the bond year ending November 25, 2000, and an amended complaint for $54,591.25 for the bond year ending November 25, 2001. The date of the lone invoice within the bond year ending November 25, 2000, was November 22, 2000. The amended complaint concerning the bond year ending November 25, 2000, commenced DOAH Case No. 01-3320, and the amended complaint concerning the bond year ending November 25, 2001, commenced DOAH Case No. 01-3321. The allegations as to dates and amounts of invoices are all correct.
Recommendation It is RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order dismissing the amended complaint in DOAH Case No. 01-3320 and finding Respondent liable to Petitioner in DOAH Case No. 01-3321 for the sum of $54,591.25. DONE AND ENTERED this 5th day of November, 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 5th day of November, 2001. COPIES FURNISHED: Honorable Charles H. Bronson Commissioner of Agriculture Department of Agriculture and Consumer Services The Capitol, Plaza Level 10 Tallahassee, Florida 32399-0810 Richard D. Tritschler General Counsel Department of Agriculture and Consumer Services The Capitol, Plaza Level 10 Tallahassee, Florida 32399-0810 Brenda D. Hyatt Bureau Chief Bureau of License and Bond Department of Agriculture 514 East Tennessee Street India Building Tallahassee, Florida 32308 Carolann Swanson General Counsel Brooks Tropical, Inc. Post Office Box 900160 Homestead, Florida 33090 W. Sam Holland Hinshaw and Culbertson 200 South Biscayne Boulevard Suite 800 First Union Financial Center Miami, Florida 33131 Deborah A. Meek Cumberland Casualty and Surety Company 4311 West Waters Avenue, Suite 401 Tampa, Florida 33614
The Issue The issue in this case is whether Petitioner, Greg Davenport Enterprises, Inc., d/b/a Container Grown, is entitled to payment from an Agricultural Bond issued to Respondent, A.W. Kelley’s Gardens, Inc., and, if so, the amount owed to Petitioner.
Findings Of Fact Petitioner is a licensed producer of an agricultural product: Nursery plants and flowers. Petitioner is duly incorporated by the State of Florida and is in good standing. Greg Davenport is listed as Director and President of the corporation in the Division of Corporations’ web-based records. Respondent is a duly incorporated Florida corporation. Its business address is 6901 Hendry Creek Drive, Ft. Myers, Florida. The directors of the corporation are listed as Dixie Kelley, Drew Kelley, and Kent Kelley. Respondent is a plant retail business. Respondent has been a customer of Petitioner for many years, going back as far as 2006 according to evidence submitted at final hearing. During that time, Respondent has purchased approximately $91,000.00 worth of goods from Petitioner. (In its PRO, Respondent says the relationship goes back 25 years or more, but there was no sworn testimony to that effect.) During the period March 22 through May 24, 2012, Respondent ordered numerous items from Petitioner for which he was billed in accordance with standard practices. The following invoices provide the invoice number, date of invoice, and amount of purchase: Invoice 1399 - March 22, 2012 - $1,570.00 Invoice 1818 – March 27, 2012 - $2,105.00 Invoice 1391 – April 10, 2012 - $1,130.00 Invoice 1303 – April 25, 2012 - $ 850.00 Invoice 1419 – May 16, 2012 - $1,145.00 Invoice 1431 – May 24, 2012 - $1,175.00 TOTAL - $7,975.00 Petitioner contacted Respondent on numerous occasions to request payment on the outstanding invoices. Those efforts were in vain. At first, Respondent would make empty promises to pay, but ultimately just refused to accept Petitioner’s calls. Meanwhile, Respondent’s owner relocated to North Carolina, causing Petitioner to fear that payment may never be forthcoming. Respondent made some promises to make payments “whenever he could” to satisfy the debt. He said, however, that even if he could not pay, Petitioner should not attach his agriculture bond. Respondent’s failure to make any promised payments was the basis for Petitioner seeking payment by way of the bond. Respondent does not deny his failure to pay the outstanding invoices. He does not dispute that the products he received were of acceptable quality. He does, in fact, admit his indebtedness to Petitioner. Respondent does not feel his bond should be attached for payment of this debt. He cites, as reasons, that: 1) his business suffered during the national financial crisis; 2) there was some embezzlement going on in his business that affected his ability to pay obligees; 3) there is a related civil lawsuit underway in circuit court relating to the embezzlement; and 4) Davenport and Kelley have been friends for a long time and thus he should be allowed more time to pay the invoices. Respondent’s PRO sets forth other bases for why he believes it would be improper to attach his agriculture bond. However, none of those bases was addressed by sworn witnesses at final hearing and are thus not evidence in this case. Further, Respondent contends that two witnesses he subpoenaed but failed to show up for final hearing prejudiced his case. He did not prove, however, that either of the supposed witnesses had been properly served. Respondent’s PRO also sets forth facts not elicited through testimony or documentary evidence during final hearing. Respondent relies in part on various documents exchanged between the parties during discovery, but none of those were offered into evidence and thus are not part of the record. Respondent acquired a bond through Suretec Insurance Company. The amount of the bond was not disclosed at final hearing but, per statute, must be at least $5,000.00. The surety company was not represented at final hearing. No defense was raised by the surety company concerning Petitioner’s attempt to attach the bond. Petitioner is entitled to payment in the amount of $7,975.00 for the products it provided to Respondent. Besides the amount set forth above, Petitioner claims the sum of $100.00 paid for the filing of his two claims against Respondent’s bond. The total sum owed to Petitioner by Respondent is $8,075.00.
Recommendation Based upon the findings of fact and conclusions of law set forth above, it is hereby RECOMMENDED that: Respondent shall pay to Petitioner, within 15 days of the entry of the Final Order, the sum of $8,075.00; If Respondent fails to timely make the aforementioned payment, the Department shall call upon Suretec Surety Company to pay over to the Department the full amount of Respondent’s bond; and The Department shall then turn the proceeds of the bond over to Petitioner to satisfy the debt that has been established. DONE AND ENTERED this 26th day of March, 2013, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN 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 26th day of March, 2013. COPIES FURNISHED: Christopher E. Green, Esquire Department of Agriculture and Consumer Services Office of Citrus License and Bond Mayo Building, M-38 Tallahassee, Florida 32399-0800 Michael Cronin SureTec Insurance Company Suite 320 9737 Great Hills Trail Austin, Texas 78759 Greg Davenport Greg Davenport Enterprises, Inc. d/b/a Container Grown 613 Corbel Drive Naples, Florida 34110-1106 Kent O. Kelley A. W. Kelley’s Gardens Inc. 6901 Hendry Creek Drive Fort Myers, Florida 33908 Lorena Holley, General Counsel Department of Agriculture and Consumer Services 407 South Calhoun Street, Suite 520 Tallahassee, Florida 32399-0800 Honorable Adam Putnam Commissioner of Agriculture Department of Agriculture and Consumer Services The Capitol, Plaza Level 10 Tallahassee, Florida 32399-0810
Findings Of Fact At all times pertinent to the issues herein, the Department of Insurance was the government agency in Florida responsible for the licensing of insurance agents and the regulation of the practice of the insurance profession in this state. Respondent, Alan Chappuis, was licensed in Florida as a life insurance agent, health insurance agent, general lines agent, and a life, health and variable annuity contracts salesman. Erna Swan, an 84 year old twice widowed lady, and the individual to whom Respondent sold the annuity policies in question, was unable, at the time of the hearing, to recall the names of either of her former husbands or when they passed away. She recalls that both husbands worked in insurance and that she has lived in the Pinellas County area for a long time, but cannot recall for how long. Mrs. Swan lives alone and can cook for herself and bathe and dress herself, but does not know how much her current income is or the source of that income. She was able to recognize Respondent as her insurance agent of several years standing, but cannot recall whether she ever purchased anything from him, and she does not know what Guarantee Trust Life Insurance Company is. She does not know what an annuity is or whether she ever wanted to buy one from the Respondent. By the same token, she cannot recall if he ever tried to sell her an annuity. Mrs. Swan has known Nadine Hopkins, a close friend, for about 10 years. She also recognizes Mr. Wells and Mr. Tipton, her attorney and stock broker respectively, but does not know what they do. Mrs. Swan maintains a room in her condominium apartment which she uses for an office where, before she was placed under the guardianship of Ms. Hopkins, she paid her bills and kept her business records, such as they were. She recalls that she had a brokerage account with Merrill Lynch but cannot remember what it was for or what type of securities were in it. She is familiar with Bayridge Baptist Church, of which she is a member, and she recognizes that she has given money to the church over the years. Mrs. Swan's driver's license was cancelled several years ago because, according to Ms. Hopkins, she felt she could not take the test required to renew it. Mrs. Swan does not recall this though she remembers she used to own a car. She cannot remember what kind it was. Mrs. Swan's apartment is paid for. There are no mortgage payments. She claims she still writes checks for her monthly bills by herself, but also notes that Ms. Hopkins does it. More likely it is the latter. She still answers her phone, answers her mail, and reads the newspaper. She is, however, obviously incompetent to testify to the nature of an annuity, and it is quite clear that at this time she would be unable to understand the provisions of an annuity contract and the difference between an annuity contract and an investment portfolio in another product. Mr. Tipton, formerly a stock broker with Merrill Lynch, first met Mrs. Swan in the early 1960's through a family member who worked at the family insurance agency. At that time Mrs. Swan and her husband had purchased the agency from his family, and in the years following the Swans stayed as friends of Mr. Tipton. Mr. Tipton became an investment advisor in 1981 to Mr. Swan who passed away sometime in either 1985 or 1986. He started buying U.S. Government bonds and thereafter moved to tax free investments. When Mr. Swan passed away, Mrs. Swan became the owner of the account. During 1992 and 1993, Mr. Tipton would see Mrs. Swan once or twice a month. At that time, toward the end of 1993, it was clear to him that her memory appeared to be slipping. She would not remember things they had talked about and was unable to participate fully in the decisions made on her investments. At the end of 1993, Mrs. Swan's portfolio with Merrill Lynch was valued at approximately $360,000, plus a money market balance of $18,000. The account statement for October, 1993 reflected she had 5 municipal bonds valued at $80,000, tax free bond funds valued at $273,620, and approximately $18,000 in money market funds. Her estimated annual income from the bonds was approximately $6,631, or approximately $520.00 per month. Her tax free bond funds income returned approximately $1,200 per month, and her Nuveen Fund, approximately $50.00 per month, giving her a grand total of approximately $1,800 per month investment income in addition to her Social Security monthly payment of somewhat in excess of $650. On December 20, 1993, Mr. Tipton, as a representative of Merrill Lynch, received a letter moving Mrs. Swan's account to another brokerage firm, located in Texas, but with a local representative. At that time, Mr. Tipton tried to stop the transfer by contacting his main office, but was advised that by the time he had received the letter, the transfer had been completed. Mr. Tipton wanted to stop the transfer because when he called Mrs. Swan to inquire about it, she indicated to him that she did not want her account moved. Several weeks later, Mrs. Swan called Mr. Tipton to find out where her Merrill Lynch monthly account statement was. She did not recall at that time that her Merrill Lynch account had been closed and the securities therein transferred to the Texas brokerage concern. Because of this call, sometime in early January, 1994, Mr. Tipton called Mr. Wells, Mrs. Swan's attorney, and set up a meeting for the three of them. There were approximately three meetings of the three of them between January and March, 1994. The substance of their discussions was the fact that the broker to whom the Merrill Lynch account had been transferred had liquidated her entire account and used the proceeds thereof to pay for the annuities sold to Mrs. Swan by Mr. Chappuis and his associate, Mr. Mednick. According to Mr. Tipton, up until this time, Mrs. Swan had never indicated any dissatisfaction with the interest and income she was earning on her Merrill Lynch brokerage account. Mr. Tipton absolutely denies there was any churning of her account to garner more commissions. The only transfer was a sale at a premium in February, 1993 of bonds of the Jacksonville Electric Authority to create more capital for investment to provide greater income. The brokerage account owned by Mrs. Swan was not insured against loss of principal though many of the particular funds in which much of the money was invested were, however, individually insured. In 1990, Mrs. Swan's account, which had been in her name individually, was transferred to a trust account of which she was the beneficiary for life, with the provision that at her death, the funds therein would be distributed to various religious organizations and a few friends. Mrs. Swan had no family heirs. No commission was earned by Mr. Tipton on the transfer, though he did receive a commission on both the above-mentioned sale of the Jacksonville Electric bonds and the purchase of a tax free bond fund with the proceeds. Her brokerage account permitted her to write checks on the funds in the money fund. Mr. Tipton claims he never engaged in a transaction regarding Mrs. Swan's account without first talking to her about it. In his opinion, whenever he did make a change she appeared alert and aware enough to participate effectively. The last major transaction was the 1990 bond sale, however. Mrs. Hopkins and Mrs. Swan attend the same church. In late 1993 or early 1994, Respondent's business card was always on Mrs. Swan's refrigerator. At no time did she ever speak disparagingly of him to Mrs. Hopkins, or complain about any insurance product he sold her. Mrs. Hopkins was not Mrs. Swan's guardian at that time and Mrs. Swan was paying her own bills, however not effectively. She was late getting them out and complained it was becoming difficult for her to type out the checks. According to Mrs. Hopking, Mrs. Swan was not extravagant in her spending. She did not take cruises, go to expensive restaurants or buy a lot of clothes. Mrs. Swan, in Ms. Hopkins' opinion, lived comfortably. She was generous in the terms of her charitable contributions. Since being appointed Mrs. Swan's guardian, Mrs. Hopkins had seen her financial records and she knows that Mrs. Swan donated a lot of money to various churches and religious organizations. Mrs. Swan received many requests for donations and indicated that as long as she had the money to give she would do so. In later years, however, as Mrs. Hopkins recalls, it became a physical and mental burden for Mrs. Swan to write the checks, and she frequently commented on this. Mr. Wells is Mrs. Swan's attorney, specializing in estate and trust planning. He met Mrs. Swan through a friend in 1990 and began to serve as her estate planner. In the spring of 1994 Mr. Wells met with Mr. Tipton and Mrs. Swan regarding the Respondent's sale of her security portfolio and the purchase of the two annuities in issue here with the proceeds. At that time Mrs. Swan seemed to have no knowledge of the transaction. As a result, he called Guarantee Trust Life Insurance Company to get some information on what needed to be done in order to bring about a recision of the policies, but before any action was taken, the entire matter was turned over to Mr. Keirnan, another attorney, who does trial work. As a result of Keirnan's efforts, approximately two weeks before the hearing, Mr. Wells, on behalf of Mrs. Swan, received a check in the amount of approximately $372,000 from Guarantee Trust and Life Insurance Company as full reimbursement of the premiums paid for the two annuities in issue. From the time the annuities were issued in December, 1993 and January, 1994, Mrs. Swan had only her Social Security check to live on. She also received a check from Guarantee for $5,000, at her request, at the time the policies were issued as the balance in her brokerage account over the amount required as premiums for the annuities. She received nothing from her annuities which, as set up, did not call for the payment of any monthly income. As a result, Mr. Wells felt it necessary to borrow between $15,000 and $20,000 at 8 percent for Mrs. Swan from other trusts he managed to provide funds for Mrs. Swan to live on. From the documents which Mr. Tipton and Mrs. Swan brought to him in March, 1994, Wells could determine that the two annuities were purchased for her but she, at that time, did not seem to know anything about them. Though the annuities offered several options to permit period withdrawal of principal and interest, none had been selected by Mrs. Swan and as they then existed, she would draw no income from them until she was 100 years of age. When Mr. Tipton and Mrs. Swan came to Mr. Wells' office and brought the paperwork showing she had sold her securities to buy the annuities, Mr. Wells called Respondent to find out what had happened to Mrs. Swan's money. About the same time, he drafted a letter to Respondent at Mrs. Swan's request in which she requested Respondent not contact her any more. This letter was written because Mrs. Swan had said Respondent had "pestered" her at home and upset her on some occasions before the letter was written. Guarantee's manager of Government Relations and Compliance, Mr. Krevitzky, identified the two policies issued to Mrs. Swan. According to Mr. Krevitzky, an annuity is a savings vehicle which holds funds over a period at interest with provision for single or periodic pay out. Interest on both annuities in issue here was guaranteed at a rate of 4.5 percent per year or higher. The first year, the policies earned only the guaranteed 4.5 percent interest, and the income was credited to the policy from January, 1994 until the policies were surrendered as a part of the litigation settlement on March 25, 1995. At that point, since it was considered that the policies were rescinded and therefore void ab initio, the interest earned was forfeited and not paid. Only the premiums paid in were refunded in total. The commission paid to the Respondent and his associate, Mr. Mednick, was paid out of company funds and not Mrs. Swan's funds. The annuity contracts sold by the Respondent to Mrs. Swan had options for five different pay-outs, some of which would have returned income to her during the pendency of the contract. However, none of these was selected by Mrs. Swan and there was no evidence to indicate that Respondent ever explained any of them to her. As they existed as of the date they were cancelled, and at all time up until then, Mrs. Swan would receive no income until the annuity matured at her age 100. This is an unreasonable situation for an individual of Mrs. Swan's age and situation. Mr. Krevitzky contends that the potential pay out options could have provided Mrs. Swan with a substantial income equal to or exceeding the income she was received from her securities portfolio. Most of these options would have included a partial return of principal, however, whereas the income from the prior held portfolio was interest only with her principal remaining intact. One option provided an income for a guaranteed period which, in some circumstances, could have resulted in her receiving more than the amount paid in for the contract. The ultimate fact remains, however, that at the time of sale, and at all times thereafter, notwithstanding the fact that Mr. Chappuis was directed to stay away from Mrs. Swan, he had failed to assist her in the selection of any income option and she was receiving no current income at all from the annuities. In each of the two years prior to the purchase, for 1992 and 1993, she had regular tax free investment income of between $26,000 and $27,000, in addition to the capital gains of approximately $23,000 from the sale of the bonds in 1992. It matters not that she needed little to live on or donated a great portion of her income to charity. This decision was hers to make. By the same token, it matters not that no request for income was made, during the pendency of the annuities, by or on behalf of Mrs. Swan. Annuities have several benefits over other types of investments, according to Mr. Krevitzky. One is the tax deferment provision for interest earned on the annuity. Another is the fact that, subject to local law, the principal of the annuity is not subject to garnishment. A third is the guaranteed return of principal at the end of the annuity which permits older annuitants to provide for their heirs while maintaining income during their lifetimes. Many senior citizens look to the safety of their investment rather than the taxability of the interest. Therefore, in selling annuities to seniors, the agents stress these factors and the no-probate consideration. David W. Johnson has been an independent contractor with Respondent's broker, Professional Systems Associates, since 1989 and is the annuity manager for the firm. Mr. Johnson indicates that there has been an increase in the annuity business with seniors in 1993 - 1994. Funds for the purchase of the annuities usually comes from bank certificates of deposit, but sometimes, like in the instant case, the funds come from a brokerage account. In his experience, seniors choose annuities over certificates of deposit and brokerage accounts. According to Mr. Johnson, if Mrs. Swan had wanted to stop the transfer from her account she could have done so up until the transaction was completed, even after the securities had been liquidated and the funds sent to Guarantee. This is so, he claims even though Mrs. Swan gave authority to make the transfer in the documentation accompanying her application for the annuities. Mr. Johnson indicated it takes about two weeks after the receipt of the premium before Guarantee issues the annuity contract and at any time before issue, the transaction could be cancelled and the money returned. Even after issue, there is a "free look" period during which the contract may be cancelled without penalty. Though the contract may be cancelled and the premium returned, the former securities are still liquidated and the brokerage account closed. According to Mr. Johnson, there was nothing in the paperwork regarding these annuities which he saw which would raise any flag for consideration. He did not feel it necessary to call Mrs. Swan to see if she really wanted the policy and he never received a call from her or anybody else regarding it. Mr. Chappuis' partner in this sale was Scott Mednick who has been a licensed insurance agent since 1984 and who is an independent contractor with the same agency. Mr. Mednick was solicited to accompany Mr. Chappuis to Mrs. Swan's home in December, 1994 because of his expertise in the annuity field. Respondent had described Mrs. Swan to him as a long time customer. Respondent claimed that Mrs. Swan had indicated she was concerned about her brokerage account and he wanted to show her some product, annuities, she might be interested in. Mr. Mednick has known Respondent for eleven years and knows him to be a top producer. Respondent's reputation is that he is cheap and close with the dollar. Nonetheless, Mr. Mednick claims he was not surprised that Respondent was willing to share the commission on this sale in order to be sure the client got the proper product. Mrs. Swan let Mr. Mednick examine her monthly statement from Merrill Lynch. It appeared to Mr. Mednick that the account had not grown over the years. This is not surprising in that the portfolio was made up solely of tax free bond funds, tax free municipal bonds and tax free money marts, the volatility of and fluctuation in price of which is minimal. Mr. Mednick cannot now recall if Mrs. Swan indicated she knew about her stocks. However, he relates that he and the Respondent suggested she look into annuities as an alternative which Respondent explained to her. In addition, he claims they provided her with a lot of written material. Based on Mrs. Swan's action, words and attitudes expressed, Mr. Mednick believed she completely understood what was explained to her and wanted to make the change. It was his belief she seemed to understand she would pay no commission on the purchase; that she would have a guaranteed income that she could not outlive; that the annuity avoided the volatility of the stock market; and it was not attachable by creditors. As structured and sold to Mrs. Swan, however, she was to get no income at all from this product until she reached the age of 100/. Mr. Mednick asserts that at no time did he feel that Respondent had less than the best interests of Mrs. Swan at heart and he can recall no time when Respondent lied to Mrs. Swan. All representations made by either Respondent or Mednick allegedly came from the brochures left with her. Mednick indicates that during their conversation, Mrs. Swan did not seem concerned about getting her principal out of the investment. She was most concerned about her desire to leave the principal to the church. Mednick claims that at the time of the sale, the two agents asked Mrs. Swan if she wanted her interest paid quarterly but she said to let it accrue. This representation, in light of the other evidence, is not credible. Taken together, Mednick's testimony does nothing to detract from Respondent's sale of this product, inappropriate as it was for this client, to Mrs. Swan. Mr. Mednick's credentials are somewhat suspect, and his credibility poor, however. By his own admission, he has been administratively fined by the Department on two occasions based on allegations of misconduct. He denies any misconduct, however, claiming he accepted punishment only as an alternative to a prolonged contest of the allegations. The allegations herein were referred to an investigator of the Department to look into. As is the custom of the Department, he did not interview the Respondent but merely sought to gather facts concerning each allegation to be sent to the Department offices in Tallahassee where the analysis and determination of misconduct is made. By the same token, he did not call or speak with Mrs. Swan, Mr. Mednick, or anyone at Professional Systems. He spoke with Mr. Tipton, Mr. Wells, Mrs. Hopkins and with Mr. Keirnan a couple of times.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the insurance licenses and the eligibility for licensure of the Respondent herein, Alan Chappuis, be suspended for nine months. RECOMMENDED this 22nd day of August, 1995, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of August, 1995. APPENDIX TO RECOMMENDED ORDER The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: 1. - 21. Accepted and incorporated herein. 22. & 23. Accepted and incorporated herein. 24. - 27 Accepted and incorporated herein. FOR THE RESPONDENT: Respondent's post hearing submittal was entitled "Respondent's Final Argument." However, because it makes specific Findings of Fact, the submittal will be treated as though it were Proposed Findings of Fact which will be ruled upon herein. First sentence accepted. Balance rejected as contra to the weight of the evidence. & 3. Accepted that Mr. Krevitzky testified and that there was nothing in the contract which would cause Respondent to misrepresent. The product may well be a worthy product for someone in a different financial position than Ms. Swan, and the issue is whether Respondent fully explained the implications and ramifications of the contracts to her. Rejected as a misconception of the nature of the witness' testimony. Rejected as contra to the weight of the evidence. First sentence accepted. Second sentence rejected. Irrelevant. Accepted as a summary of the witness' testimony. First and second sentences accepted. Balance rejected as an unwarranted conclusion drawn from the evidence. Accepted but irrelevant. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance 612 Larson Building Tallahassee, Florida 32399-0300 Alan Chappuis, Pro se P. O. Box 86126 Madiera Beach, Florida 33738 The Honorable Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner Acting General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300
