Findings Of Fact The Respondent has been licensed by the Department of Insurance as an insurance agent since 1966. Prior to the initiation of this proceeding, he has not been the subject of any disciplinary action by the Department. The Respondent has had a successful career as an insurance agent, and has been an active member of his community. During 1977 the Respondent actively marketed membership in a program known as the National Business Conference Employee Benefit Association (NBCEBA). The program offered by NBCEBA constituted a health insurance plan, and as such was subject to regulation under the Florida Insurance Code. The NBCEBA program operated as if it were exempt from state regulation under the Federal Employee Retirement Income Security Act (ERISA), Chapter 18, United States Code, Sections 1001, et seq. Qualified plans under ERISA were not subject to regulation under state insurance codes. The plan offered by NBCEBA did not qualify as an ERISA plan. Such plans could only be offered by employee organizations. NBCEBA solicited members who were employed by diverse employers, and who participated in diverse occupations. Membership in NBCEBA thus lacked the commonality of employment status among members required of employee organizations under ERISA. Since the plan offered by NBCEBA did not qualify as an ERISA plan, it was subject to regulation by the State of Florida as a program of insurance. Indeed, the essence of the NBCEBA plan was to offer a program of insurance to its "members." NBCEBA has never held a certificate of authority to transact an insurance business in the State of Florida. The Department of Insurance became aware of the plan being offered by NBCEBA to Florida citizens. The Department came to the conclusion that the plan constituted Insurance program not subject to exemption from state regulation under ERISA. By letter dated September 26, 1977, the Department advised Florida agents who were selling memberships in the NBCEBA program of its opinion that the program did not qualify for exemption from state regulation under ERISA, and that NBCEBA was acting as an unauthorized insurer in Florida. The letter requested that the agents cease and desist from further solicitation of prospective members of the plan. This letter was sent to the Respondent. The Respondent received it in the ordinary course of the mail. Shortly after sending this letter, the Department requested an opinion from the United States Department of Labor as to whether the NBCEBA program was exempt from state regulation. During March, 1978, the Department received a response in which the United States Department of Labor advised that in its opinion, NBCEBA was not a qualified program under Chapter 18, United States Code, and that the NBCEBA plan was subject to regulation by the State of Florida. After receiving the letter from the Department advising him of its opinion that the NBCEBA plan was not a qualified insurance program, the Respondent discussed the letter with Mr. Robert Klein, the owner of Planned Marketing Systems. Planned Marketing Systems was the general agent for the NBCEBA program in Florida. Mr. Klein advised the Respondent that the plan would eventually be approved in Florida. The Respondent did not cease marketing the NBCEBA plan. On or about October 31, 1977, he completed an application and accepted a premium payment for membership in the plan on behalf of Mr. Rafael Sanchez. Sanchez had been a friend of the Respondent and had used the Respondent as his insurance agent. The premiums on Sanchez's health insurance policy had increased dramatically during 1977. Membership in the NBCEBA plan was considerably cheaper than premiums that Sanchez needed to pay for other health insurance programs. Sanchez did not appear as a witness at the hearing, and the evidence would not support a finding as to what, if any, representations were made by the Respondent to Sanchez respecting the failure of NBCEBA to qualify as an insurance plan under the laws of the State of Florida. The evidence would not support a finding as to whether Respondent advised Sanchez as to his correspondence from the Department relating to NBCEBA. During May, 1978, Sanchez made an application to NBCEBA for benefits. NBCEBA did not honor the claim, and has since filed for bankruptcy in the United States District Court for the District of Oregon. Sanchez has thus been left liable to pay medical expenses that should have been covered under the NBCEBA plan.
The Issue Has Petitioner, Unlimited Financial Services, LLC (Unlimited), conducted the unlicensed business of insurance in violation of section 626.112(7), Florida Statutes (2011)?1/ Has Unlimited engaged in an unfair or deceptive act or practice, false advertising, as prohibited by section 626.9541(1)(b)?
Findings Of Fact The Department is a state agency charged with administering chapters 624 and 626, Florida Statutes, governing the business of insurance. Unlimited is not a licensed Florida insurance agency. Matthew Dilday, its owner, is not a licensed Florida insurance agent. In the pre-hearing stipulation, Unlimited described itself as "an advertiser who obtains qualified leads for licensed Florida insurance agents." In its advertising materials directed at insurance agents, Unlimited describes itself as "the Nation's most sought after company for advisors in need of new marketing strategies" and "the Nation's No. 1 Annuity Leads and Preset Appointment Program." Unlimited promotes itself on its website as "No. 1 Annuity Lead Provider." Beneath that heading, Unlimited represents: When we talk with our annuity and investment lead prospects, our professionally trained call center staff is adamant about confirming that they have investment assets. When you purchase preset investment or annuity appointments from UFS Marketing [Unlimited], you also receive access to our highly recommended training programs that explain to you the best way to convert leads and appointments into sales. Unlimited's materials say: We provide annuity leads to financial professionals who sell deferred annuities, many who work for insurance companies. We also provide pre-qualified annuity leads programs to independent agents of the insurance companies who collect a commission from the insurance company when they sell an annuity. This commission is usually a a [sic] percentage of the total premium paid by the annuity investor. Unlimited's services facilitate contact between an agent and a potential client in several ways. According to the promotional materials, Unlimited's "Annuity Leads and Preset Appointment Programs are essential to insurance agents and financial advisors." Again, according to the materials, Unlimited sets "thousands of qualified appointments every month for agents nationwide." The program saves agents valuable time in prospecting for qualified prospective customers. Unlimited enters into marketing services agreements with Florida insurance agents and agencies designed to facilitate the marketing of life insurance products to Florida consumers. Unlimited is in the advertising and marketing business and operates a telemarketing call center. Although Mr. Dilday repeatedly testified that Unlimited was simply a "printing company," it is not. It is a direct mail and telemarketing marketing organization focused on developing customer leads for insurance agents.2/ In 2011, Unlimited entered into a contract with Florida Insurance Agent Andy Heygate titled, "Marketing Services Agreement" (Agreement). The "General Purpose" paragraph of the Agreement states: This Agreement will establish a business relationship among and between the aforementioned parties whereby UFS Marketing will supply fulfillment services on behalf of the Customer [Agent Heygate]. Marketing materials will be mailed to the general public on behalf of the Customer in accordance with the instructions received from the Customer and calls will be taken from the general public on behalf of the Customer in accordance with the Customer's instructions. The Agreement details marketing services and the parties' responsibilities. Among other things, it provides: Unlimited will send a mass mailing developed by the customer targeted at individuals who meet a demographic profile selected by the customer. The profile for the Agreement targeted homeowners aged 58-75 who had an annual income of over $30,000 and a home worth $150,000 or more. Unlimited will make a telephone bank available to accept responses from consumers following a script developed by the customer to screen the responses to make appointments or develop leads. Unlimited will make leads available and/or set appointments with consumers resulting from the inquiries generated from the marketing materials. The Agreement defines "Lead" as "a consumer who contacts an UFS Marketing representative in response to the Customer's marketing materials and agrees to be contacted by the Customer." The Agreement defines "Appointment" as "a consumer who contacts UFS Marketing in response to the Customer's marketing materials and schedules an appointment with the Customer for the purpose of discussing the Customer's products or services and is defined by [enumerated criteria]." The criteria include that the consumer has indicated "they are receiving regular statements for an investment or retirement plan," and the consumer has "indicated they will have their statements available at the time of the review." The Agreement requires the agent to pay Unlimited a fee. The "[f]ees are based upon the number of marketing pieces sent and resources required to take inbound calls, schedule appointments and develop leads on behalf of the [agent]." The fees are for the full range of services provided for in the Agreement, not just printing and mailing the postcards. The marketing materials and mass mailing the Agreement refers to are a postcard, which is an exhibit to the Agreement. The front address side of the postcard in very small print reads: Privacy Law Notice: This notice is provided in accordance with Federal Privacy Laws. The Policy of this agency is to protect the privacy rights of all consumers who respond to this notice. This agency DOES NOT POSSESS OR DISCLOSE NON-PUBLIC PERSONAL INFORMATION TO THIRD PARTIES IN ANY INSTANCE. If you choose to have an existing policy or contract reviewed by a licensed agent, that agent is also required to adhere to the state and federal consumer and privacy protection laws. Important information: This notice is being sent to you as a possible holder of an in-force annuity contract. This agency does not have a direct affiliation with the insurance carrier through which you are currently contracted. The agency is contracted with agents licensed to conduct insurance business in your state. This notice should be disregarded if you do not currently have an in-force annuity contract. The word "agency" evokes the concept of a government or insurance agency. Unlimited is not an agency. The description of Unlimited as an agency is false. The back side of the postcard in larger print states: This communication is to inform you that you may have an annuity that has reached the end of its surrender period. The end of a surrender period is a positive event that means an owner may cash in an annuity or make withdrawals without incurring a surrender charge. A surrender charges is a fee levied by an insurance company on an annuity contract for withdrawals before the end of the time set by the contract (the surrender period). Please contact the Annuity Department to discuss your options. (877) 836-2333 The first sentence on the back side of the postcard creates the impression that the sender has some knowledge of the financial circumstances and holdings of the addressee. The statement in the text box is an accurate statement. The overall import of the postcard, including the "Privacy Law Notice," the reference to Unlimited as an "agency," and references to the recipient having an annuity, create the impression that the sender has financial information about the recipient and some formal relationship with the recipient. This is so despite the disclaimers "may have" and "possible holder." It is also so despite the sentence stating the "agency" does not have a "direct" affiliation with the recipient's insurance carrier. Use of "direct" necessarily implies a relationship of some sort. The script is also an exhibit to the Agreement. The script calls for the operator to tell the caller: [I]f you've held an annuity for some time and you're due for a quick service review. This review will cover important contract features and make sure you are receiving all the benefits you are entitled to. The review will also cover information on how to stop paying taxes on your retirement investments. Have you been getting your statements on a regular basis? The script directs the operator to make sure the statement is a statement for an investment, not for social security. It also directs the operator to ensure that the amount of the last statement exceeded $20,000. The script calls for the operator to schedule an appointment with the agent and emphasize the importance of bringing the account statement. It does not provide for the recipient bringing the annuity contract, which is the document that would have terms such as the surrender period. After covering the annuity information and appointment conversation, the script goes on to lead the operator through similar questioning about an IRA or 401K and life insurance. The script is attached to this Recommended Order as Exhibit A. The Agreement requires Unlimited to provide the agent with recordings of every call resulting in an appointment or lead. The Agreement also contains several disclaimers. For instance it states: "UFS Marketing shall not participate in any sales activity or other business conducted by the Customer." It also states that "UFS Marketing shall not supervise or monitor the sales activity or other business activities of the Customer." The Agreement provides for the agent/customer to approve both the postcard and the script. The Agreement also includes several assertions by the agent/customer that they are properly qualified and licensed in the states where the appointments will be scheduled. In 2011, Unlimited mailed marketing postcards to Phyllis Sukut and Angie Perez Cabrera in Florida. The postcards were part of Unlimited's fulfillment of its Agreement with Mr. Heygate. Unlimited mailed approximately 240,000 of the postcards to Florida addresses. A copy of the postcard sent to Ms. Sukut pursuant to the Agreement is attached to this Recommended Order as Exhibit B. The postcard is identical to the Agreement's sample, except that it asks her to contact the "Scheduling Department," instead of the "Annuity Department" and includes the statement, "[w]ithdrawals may, however, still be subject to tax consequences." Before mailing the postcards, Unlimited did not know the insurance, investment, or financial circumstances of Ms. Sukut and Ms. Perez Cabrera. The postcard confused Ms. Sukut because it did not come from her insurance company, and she did not understand the references to "agency" and "surrender period." She called the number and spoke to a gentleman who wanted to schedule an appointment to discuss her "expiring" annuity. She declined. The gentleman gave her a number to call and Mr. Heygate's name, if she changed her mind. Ms. Sukut contacted her insurance agent, Ed Ludden, about it. Ms. Perez Cabrera also sent the card that she received to Mr. Ludden. Mr. Ludden forwarded the postcards to Prudential, who held the women's policies. He was concerned that somehow Prudential's confidential information about Ms. Sukut and Ms. Perez Cabera had been compromised. Even an experienced insurance agent like Mr. Ludden received the impression that the sender of the postcard had information about the recipients. Mr. Ludden also contacted the Department and provided the postcards to it.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final Cease and Desist Order: (1) finding that Unlimited Fulfillment Services, LLC, has engaged in the unlawful transaction of insurance; (2) finding that Unlimited Fulfillment Services, LLC, has engaged in a misleading or deceptive trade practice; and (3) ordering Unlimited Fulfillment Services, LLC, to cease and desist all written and oral insurance marketing or advertising efforts in Florida by means of direct mail, use of the internet, or telemarketing, unless and until it is properly licensed in the State of Florida. DONE AND ENTERED this 28th day of June, 2013, in Tallahassee, Leon County, Florida. JOHN D. C. NEWTON, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of June, 2013.
The Issue The issues in this case are whether Respondent, Leonard Louis Zanello, committed the offenses alleged in an Administrative Complaint issued by Petitioner, the Department of Financial Services on October 16, 2008, and, if so, what penalty should be imposed.
Findings Of Fact The Parties. Petitioner, the Department of Financial Services (hereinafter referred to as the "Department"), is the agency of the State of Florida charged with the responsibility for, among other things, the investigation and prosecution of complaints against individuals licensed to conduct insurance business in Florida. Ch. 626, Fla. Stat. Respondent Leonard Louis Zanello is currently and was at the times relevant, licensed in Florida as a health agent (02-40), and a life and health agent (02-18). Mr. Zanello’s license number is A293282. Count I: Failure to Submit Florida Office of Financial Regulation Order to the Department. On June 12, 2003, the Florida Office of Financial Regulation (hereinafter referred to as the “OFR”), f/k/a the Florida Office of Financial Institutions and Securities Regulation, entered a Final Order against Mr. Zanello in a case styled In Re Leonard Zanello, Administrative Proceeding No. 0663-I-3/02 (the OFR Order). The OFR Order related to alleged violations by Mr. Zanello of Florida securities laws. No copy of the OFR Order was submitted to the Department by Mr. Zanello within 30 days after it was entered as required by Section 626.536, Florida Statutes. Nor has a copy of the OFR Order ever been submitted by Mr. Zanello to the Department. Mr. Zanello’s claim that he provided a copy of the OFR Order to Carl Morstadt, Esquire, an attorney at the time with the OFR, was unconvincing and has not been credited. Some of the reasons for rejecting Mr. Zanello’s testimony on this issue have been more fully described in paragraphs 8(2) through (4) of the Department’s Proposed Recommended Order. Those proposed findings are incorporated into this Recommended Order by this reference. Count II: Failure to Submit Securities and Exchange Commission Order to the Department. On January 7, 2004, the United States Securities and Exchange Commission (hereinafter referred to as the “SEC”), entered an Order against Mr. Zanello in a case styled In the Matter of Louis L. Zanello, Sr., Admin. Proceeding File No. 3- 11370 (hereinafter referred to as the “SEC Order”). The SEC Order involves violations by Mr. Zanello of Federal securities laws. As admitted by Mr. Zanello, no copy of the SEC Order was submitted to the Department by him within 30 days after it was entered as required by Section 626.536, Florida Statutes. Nor has a copy of the SEC Order ever been submitted by Mr. Zanello to the Department. Mr. Zanello’s claim that he was unaware of the SEC Order was unconvincing and has not been credited. Some of the reasons for rejecting Mr. Zanello’s testimony on this issue have been more fully described in paragraph 15 of the Department’s Proposed Recommended Order. Those proposed findings are incorporated into this Recommended Order by this reference. Count III: Misstatement in the Sale of an Insurance Policy and Twisting. On January 3, 2004, Mr. Zanello met with Ms. Anne Paul of Coconut Creek, Florida. Ms. Paul was 80 years of age at the time she met with Mr. Zanello. At the January 3, 2004, meeting with Ms. Paul, Mr. Zanello sold her a long-term care insurance policy with AF&L Insurance Company (hereinafter referred to as “AF&L”). When she purchased the AF&L insurance policy (hereinafter referred to as the “AF&L Policy”), Ms. Paul already had a long-term care insurance policy. That policy was with Kanawha Insurance Company (hereinafter referred to as “Kanawha”)(the long-term care insurance policy from Kanawha will hereinafter be referred to as the “Kanawha Policy”). Shortly after her meeting with Mr. Zanello, Ms. Paul informed Rita Baskin, whom Ms. Paul then regarded as her “financial advisor,” of her purchase of the AF&L Policy. Ms. Baskin convinced Ms. Paul that the AF&L Policy was not as beneficial as her Kanawha Policy and that she should immediately cancel the AF&L Policy. Why Ms. Baskin, who is now deceased, told Ms. Paul that the Kanawha Policy was a better product and, more importantly, why Ms. Paul believed that the Kanawha Policy was a better long-term care insurance policy than the AF&L Policy were not proven at hearing. Regardless of the specific reasons why, in reliance on Ms. Baskin’s advice, Ms. Paul cancelled the AF&L Policy. Ms. Paul testified by telephone during the hearing of this matter. Ms. Paul testified that she had informed Mr. Zanello about her Kanawha Policy at the time she purchased the AF&L Policy. She also testified that she agreed to purchase the AF&L Policy in complete reliance upon Mr. Zanello’s representation to her that the AF&L Policy was a better product than the Kanawha Policy. Ms. Paul’s testimony came more than five years after she had purchased the AF&L Policy (she was more than 85 years of age at the time of the hearing), and she had suffered a broken wrist the Friday before the hearing. Her arm was in a cast, she was taking no pain medication, and she indicated that she was in distress from pain during her testimony. In light of these facts and others, Ms. Paul’s testimony concerning what she told Mr. Zanello and her reliance upon representations from him concerning which policy was better was not clear and convincing. Ms. Paul’s testimony in this regard has, therefore, been rejected. Based upon the totality of the evidence in this case, the evidence simply failed to prove clearly and convincingly what transpired on January 3, 2004, when Mr. Zanello sold Ms. Paul the AF&L Policy, other than the fact that Ms. Paul purchased the AF&L Policy. D. Count IV: Misstatement on Insurance Application. Question 2 of Part IV of the AF&L Policy application signed by Ms. Paul, asks the following: Do you now or within the last 12 months had [sic] another Long-term Care, Nursing Home, or Home Health Care Insurance policy in force (including health care service or health maintenance organization contracts)? Question 3 of Part IV of the AF&L Policy application asks the following: Will this policy replace any of your medical, health or long-term care insurance? Mr. Zanello completed Part IV of the application for the AF&L Policy, asking Ms. Paul the questions and recording her answers. The answer to Questions 2 and 3 of Part IV of the application recorded by Mr. Zanello is “No.” Because the evidence failed to prove clearly and convincingly that Ms. Paul informed Mr. Zanello of the Kanawha Policy, the evidence failed to prove that incorrect answers to Questions 2 and 3 of Part IV of the application for the AF&L Policy were knowingly filled in by Mr. Zanello. If Mr. Zanello had been aware that Ms. Paul was replacing her Kanawha Policy with the AF&L Policy, which the evidence failed to prove, he was required to provide her with a “Notice to Applicant Regarding Replacement.” See Fla. Admin. Code R. 69O-157.016(2). While Ms. Paul was not provided a copy of a Notice to Applicant Regarding Replacement by Mr. Zanello, the evidence failed to prove that Mr. Zanello knowingly failed to provide the Notice to her.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department finding that Leonard Louis Zanello violated the provisions of Chapter 626, Florida Statutes, as alleged in Counts I and II of the Administrative Complaint and described, supra; dismissing Counts III and IV of the Administrative Complaint; and suspending his licenses for a period of six months. DONE AND ENTERED this 1st day of December, 2009, in Tallahassee, Leon County, Florida. LARRY J. SARTIN 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 December, 2009. COPIES FURNISHED: Robert Alan Fox, Senior Attorney Division of Legal Services Department of Financial Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Leonard Louis Zanello, Sr. 1074 Northwest 121st Lane Coral Springs, Florida 33071-5005 Tracey Beal, Agency Clerk Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307
