The Issue The issue for determination is what amount of attorney's fees and costs should be awarded to Petitioner for costs incurred in prosecuting the rule challenge case, Security Mutual Life Insurance Company of Lincoln, Nebraska vs. Department of Insurance and the Treasurer, DOAH Case No. 97-1132RU.
Findings Of Fact On March 11, 1997, Security Mutual Life Insurance Company, filed a Petition challenging three statements of Respondent, the Department of Insurance and the Treasurer, as unpromulgated rules. See Security Mutual Life Insurance of Lincoln, Nebraska vs. Department of Insurance and Treasurer, DOAH Case No. 97-1132RU. According to the Petition, the first statement concerned the Department's requiring that annuity contracts contain a table of guaranteed values. The second statement alleged to be an unpromulgated rule was that the Department disapproved contract forms labeled as "single premium annuity" contracts which permit additional contributions after the initial premium is made. The third statement challenged by Security Mutual as an unpromulgated rule involved a requirement of the Department that annuity contracts include a demonstration of compliance with Actuarial Guideline 33 to avoid form/rate denial. Throughout the proceeding below and in the Final Order issued pursuant thereto, the second and third challenged agency statements were referred to as the "Single Premium Statement" and the "Guideline 33 Statement." At the commencement of the final hearing in the proceeding below, pursuant to a stipulation, Security Mutual withdrew its challenge to the Department's alleged statement requiring that annuity contracts contain a table of guaranteed values. On May 19, 1997, the Final Order in the proceeding below, dismissed Security Mutual's petition as to the "Single Premium Statement," but determined that the "Guideline 33 Statement" should have been adopted by the rulemaking process. See Security Mutual Life Insurance of Lincoln, Nebraska vs. Department of Insurance and Treasurer, DOAH Case No. 97-1132RU. In the proceeding below, Security Mutual was represented by Sharon A. DiMuro, Esquire, of Ganger, Santry, Mitchell, and Heath, P.A. (law firm). The hourly rate of Ms. DiMuro and one other lawyer who worked on the rule challenge case was $175.00. The hourly rate of two other lawyers in the firm who worked on the case was $150.00. Ms. DiMuro expended a total of 180 hours in prosecuting the underlying rule challenge case; 172.2 of these hours were expended on issues on which Security Mutual prevailed. The remaining 7.8 hours were spent on matters related to the "Single Premium Statement" on which Security Mutual did not prevail. Thus, these 7.8 hours are deducted from Ms. DiMuro's total number of hours. The three other attorneys in the law firm expended a total of 12.7 hours on the underlying proceeding, all of which were attributable to work related to the "Guideline 33 Statement," the issue on which Security Mutual prevailed. The attorney, other than Ms. DiMuro, who earned $175.00 an hour worked on the rule challenge case 4.1 hours. The two attorneys, whose hourly rate was $150.00, worked a combined 8.6 hours on the case. With respect to its successful claim in the underlying case, the law firm expended a total of 184.9 hours. Of the total hours expended, 176.3 were billed at $175.00 an hour, and 8.6 were billed at $150.00 an hour. The $150.00 and $175.00 are reasonable hourly rates for the attorneys. Likewise, the time expended in prosecuting the underlying proceeding, 184.9, is reasonable. Based on the foregoing, Security Mutual incurred attorney's fees of $32,142.50 in maintaining and prosecuting the claim on which it succeeded. Security Mutual also incurred reasonable costs of $1,270.29 in connection with the underlying rule challenge proceeding. Moreover, in the instant proceeding, Security Mutual incurred taxable costs in the amount of $1,051.50 for the preparation and hearing time of its expert witness, Kenneth Oretel, of the law firm of Oretel, Hoffman, Fernandez and Cole, P.A. These costs were reasonable and necessary.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that all charges in Counts I and II against Respondent be DISMISSED. DONE AND ENTERED this 24th day of September, 1981, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 904/488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of September, 1981. COPIES FURNISHED: David A. Yon, Esquire 428-A Larson Building Tallahassee, Florida 32301 J. Charles Shores, Esquire 310 Southeast 13th Street Fort Lauderdale, Florida 33316 Mr. George Edison 2090 S.W. 29th Avenue Fort Lauderdale, Florida 33312
The Issue The issues to be resolved in this consolidated proceeding concern whether the Petitioner, Abraham Maida's applications to represent certain life insurance companies should be denied based upon his alleged unlawful failure to forward premium funds from insureds to the insurers during the applicable regular course of business. Also at issue are the charges in the Administrative Complaint in the related penal proceeding which concerns the same factual conduct involving the Respondent's alleged failure to forward premiums to the insurers involved in the policy contracts at issue.
Findings Of Fact The Petitioner, Abraham George Maida, is licensed in Florida as a life insurance agent, a life and health insurance agent and a dental health care contract salesman. The Department is an agency of the State of Florida charged with licensing life, health and other types of insurance agents, with regulating their licensure and practice and with enforcing the licensure and practice standards embodied in the statutes cited hereinbelow. Abraham Maida engaged in the business of selling insurance coverage to various employees of the City of Jacksonville. The premium payments for this coverage were collected by payroll deduction from the employees, and lump sum premium checks were remitted over to the Petitioner/Respondent, Mr. Maida, by the appropriate personnel of the City of Jacksonville. Mr. Maida, in turn, was required by his contractual arrangements with the underwriting insurance companies involved and by the Florida Insurance Code, Chapter 626, Florida Statutes, with timely remitting those premium funds over to the insurers who underwrote the risk for the employees in question. Mr. Maida failed to timely remit the premium funds which he collected from the City of Jacksonville to the relevant insurers for the months of February, March and April of 1990, in the case of policy contracts written on behalf of Loyal American Life Insurance Company. Additionally, Mr. Maida failed to timely remit the premium funds received from the City of Jacksonville, after it received them by payroll deduction from its employees, for the months of March, April and May of 1990, with regard to the premium funds due in contracts involving the ITT Life Insurance Company, in accordance with his contract with that company. Mr. Maida failed to timely remit the insurance premiums of James E. Daniels to the ITT Life Insurance Company, as well. The Petitioner/Respondent's contracts with these insurance companies required him to remit premium funds which he received from insureds, within thirty (30) days of receipt, to the insurance company underwriting the risk involved. This the Petitioner/Respondent failed to do for the companies involved in the above Findings of Fact and for those months of 1990 delineated above. In the case of most of the delinquent premium funds due these companies, Mr. Maida authorized them to debit his commission and/or renewal accounts with those companies, which were monies due and owing to him from the companies, in order to make up the premiums which he had not remitted over to the companies involved at that point. That procedure did not defray all of the delinquent premium amounts, however. in the case of ITT Life Insurance Company and the monies owed that company by Mr. Maida, it was established that $10,554.21 of delinquent premium amounts were owing to that company and not timely paid by Mr. Maida. Although he paid the portion of that figure representing the March premium funds due the company for March of 1990, he did not directly pay the premium funds due for April and May of 1990 but, rather, suffered the company to charge those delinquencies, for those months, to his agent's commission account. This procedure still left $4,877.54 unpaid, as of the time of hearing. It was established by witness, Steven Heinicke of that company, that Mr. Maida is their most consistently delinquent agent, in terms of timely remission of premium funds due the company for insurance business which Mr. Maida has written. It has also been established however, that Mr. Maida made a practice of always paying premium funds due the companies for which he wrote insurance in the precise amounts owing, regardless of whether the billing statements to him from those companies had inadvertently understated the amounts which they were due. It was also established that his failure to timely remit the insurance premium funds in question was not due to any intent to defraud those companies of the funds involved or to permanently convert the funds to his own use. Rather, it was established that Mr. Maida's difficulty in timely payment of the premium funds was due to misappropriation of the funds because of financial problems which he was suffering at tee times in question, due at least in part to federal income tax difficulties he was experiencing. There has been no shoring in this record that Mr. Maida is not a competent insurance agent in terms of his abilities and qualifications to fairly and effectively obtain and contract for insurance business with insureds on behalf of the insurance companies he represents. There was no showing that he lacks reasonably adequate knowledge and technical competence to engage in the transactions authorized by the licenses or permits which he presently holds or which he seeks in the licensure application involved in this proceeding.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is, therefore RECOMMENDED: That the Petitioner be found guilty of the violations found to have been proven in the above Conclusions of Law portion of this Recommended Order and that his licenses and eligibility for licensure with the insurers for which license application was made be suspended for a period of three (3) months. DONE and ENTERED this 5th day of June, 1991, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk the Division of Administrative Hearings this 6th day of June, 1991. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-6670 Respondent/Department's Proposed Findings of Fact: 1-7. Accepted. COPIES FURNISHED: Tom Gallagher, State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, Esq. General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Norman J. Abood, Esq. Willis F. Melvin, Jr., Esq. 1015 Blackstone Building Alan J. Leifer, Esq. Jacksonville, FL 32202 Department of Insurance and Treasurer 412 Larson Building Tallahassee, FL 32399-0300
The Issue Whether Respondent, The Medical Escrow Society, Inc., violated Section 626.989(6), Florida Statutes, as alleged in the twenty-six counts of the Administrative Complaint issued by Petitioner, Department of Financial Services, on January 6, 2003; and If Respondent is found to have violated any of the twenty- six counts of the Administrative Complaint, whether any such violations were committed willfully or non-willfully.
Findings Of Fact Petitioner, the successor agency to the Department of Insurance, regulates the viatical industry operating in Florida pursuant to the section of the Insurance Code referred to as the Viatical Settlement Act, Part X, Chapter 626. Prior to enactment of the Viatical Settlement Act in 1996, Petitioner did not have jurisdiction to regulate viatical settlement transactions. Respondent is a Florida corporation which was and is licensed as a viatical settlement broker in Florida, as well as a number of other states. Respondent, on behalf of a viator and for a fee, commission, or other valuable consideration, offers or attempts to negotiate viatical settlement contracts between a viator resident, in this state or other states, and one or more viatical settlement providers, and did so at all times material hereto. Respondent is currently owned by Christopher Lane (Lane), who purchased the company from the prior owner in a transaction which was approved by Petitioner on November 6, 2001. Lane is the current president of Respondent. At all times material to the allegations of the Administrative Complaint, Lane neither owned nor controlled Respondent. At all times material to the allegations of the Administrative Complaint, Lane was an employee of Respondent, as a vice president who handled marketing and new client relations. Lane did not have any knowledge of the facts or circumstances giving rise to the allegations of the Administrative Complaint. Furthermore, under Lane's ownership and management, Respondent has adopted and filed with Petitioner an anti-fraud plan, pursuant to Section 626.99278, which was first enacted in 2000. In general, the business of viatical settlements involves the sale by a policyholder to an investor or group of investors of the policyholder's life insurance policy, prior to the policyholder's death, for an amount that is less than the face value of the policy. Viatical settlement transactions typically have been used by terminally ill individuals as a means to obtain cash prior to their death, which could be used for life-sustaining treatments or to relieve financial stress during their lifetime. Recently, viatical settlement transactions have also been marketed to elderly individuals who are healthy but may no longer need life insurance and who want to obtain money during their lifetime for any number of reasons, such as paying for health care. There are various categories of persons involved in a typical viatical settlement transaction. The policyholder who is selling a life insurance policy is referred to as a "viator." A viator is typically represented by a viatical settlement "broker" who represents the viator by obtaining quotes from potential purchasers of the viator's policy, called viatical settlement "providers." Viatical settlement providers, in turn, seek investors to fund the viatical settlement transactions. Viatical settlement brokers and providers are required to be licensed under the Viatical Settlement Act. As part of its duties under the Viatical Settlement Act, Petitioner issues licenses to viatical settlement brokers through its Bureau of Agents and Agencies. In each of the twenty-six counts of the Administrative Complaint, Petitioner has alleged that Respondent possessed a copy of an insurance policy application form, which when compared to information submitted on Respondent's forms, demonstrates evidence of a fraudulent insurance act committed by the particular viator. In that respect, paragraph 4 of the Administrative Complaint states as follows: Information available to the Department reflects that Medical Escrow has, from offices located in this state, offered or attempted to negotiate viatical settlement contracts between viators and one or more viatical settlement providers in the presence of circumstances whereby Medical Escrow knew, or in the exercise of reasonable diligence should have known or been caused to believe, that the underlying insurance policy had been procured through fraud, or dishonesty, or misrepresentations made by the viator on his application to the insurance company issuing the policy in question. Consequently, as a threshold matter Petitioner must prove that Respondent actually possessed the documents referenced in the Administrative Complaint. Petitioner's financial specialist, Janice S. Davis (Davis), testified that she obtained copies of the documents referenced in the twenty-six counts of the Administrative Complaint from a variety of sources as follows: (1) the documents referenced in Counts One and Eight were obtained by Petitioner in 1999 from an examination of a viatical settlement provider named Mutual Benefits Corporation; (2) The documents referenced in Counts Two, Three, Four, Five, Six, and Seven were obtained by Petitioner in 2000 in response to a document production request to a viatical settlement provider named Future First Financial Group; (3) the documents reference in Count Nine were obtained by Petitioner in 2002 from an examination of a viatical settlement provider named William Page & Associates; and (4) the documents referenced in Counts Ten, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, Seventeen, Eighteen, Nineteen, Twenty, Twenty-one, Twenty-two, Twenty- three, Twenty-four, Twenty-five, and Twenty-six were obtained by Petitioner in 2000 from files which had been obtained from Respondent by execution of a search warrant by the Offices of Statewide Prosecution and Petitioner's Division of Insurance Fraud. With respect to the documents obtained from the first three sources-Mutual Benefits Corporation, Future First Financial Group, and William Page & Associates-Petitioner has failed to offer proof that the referenced documents were ever actually in the possession of Respondent. Although it may be reasonable to presume that the actual forms of Respondent were in the possession of Respondent at some point in connection with the referenced viatical settlement transactions, Petitioner has offered no testimony regarding how those records were maintained by the three viatical settlement providers. Moreover, Petitioner failed to offer any evidence that the insurance policy applications were ever in the possession of Respondent. Petitioner has offered no evidence upon which to make a finding that Respondent actually possessed the particular insurance policy applications which were obtained from the three viatical settlement providers. While Petitioner offered testimony from former employees of Respondent to the effect that Respondent obtained insurance policy applications from viators in general, such testimony does not establish that the particular insurance policy applications in the possession of the three viatical settlement providers were actually obtained by Respondent. None of Respondent's application forms referenced by Petitioner in the Administrative Complaint required submission of an insurance application. Because Petitioner has failed to offer any evidence that the particular insurance policy applications referenced in Counts One, Two, Three, Four, Five, Six, Seven, Eight, and Nine were ever actually possessed by Respondent, there is no basis upon which to make a finding of fact that Respondent should have reported to Petitioner anything set forth in such insurance policy applications. Petitioner may not penalize Respondent based upon a mere assumption that Respondent possessed the insurance policies referenced in those nine counts of the Administrative Complaint. With respect to the documents referenced by Petitioner in Counts Ten through Twenty-six, Davis testified that copies of those documents were obtained from Respondent's files which had been obtained by the Office of Statewide Prosecution and the Division of Insurance Fraud through execution of a search warrant in 2000. Although Davis had no involvement in or personal knowledge concerning the circumstances surrounding the execution of that search warrant, this evidence is sufficient to substantiate its allegations that Respondent actually possessed the insurance applications referenced by Petitioner in Counts Ten through Twenty-six of the Administrative Complaint in its files. In Count Ten of the Administrative Complaint, Viator Eight submitted to Philadelphia Life Insurance Company an insurance policy application, dated March 21, 1996, which represented that Viator Eight had not been treated for or diagnosed with Acquired Immune Deficiency Syndrome (AIDS) within the last ten years. Viator Eight submitted to Respondent an application form, dated July 8, 1998, which represented that Viator Eight had first been diagnosed with AIDS in 1989. The question on Respondent's application asks for the date of first diagnosis of the "current medical condition" which is described in the preceding question. While Viator Eight's description of his "current medical condition" on Respondent's application includes "AIDS," it also includes a "history of Hodgekins Lymphoma" as well as other conditions. The information on Respondent's application does not specify whether the 1989 diagnosis was for AIDS or the other disorders listed as Viator Eight's "current medical condition"; however, this information is sufficient to alert Respondent's employees that a fraudulent insurance act is being or has been committed and trigger the reporting requirement of the statute. In Count Eleven of the Administrative Complaint, Viator Eight submitted to Manhattan Life Insurance Company an insurance policy application, dated July 3, 1996, which represented that Viator Eight had not consulted with or been treated by any licensed physician or medical practitioner within the last five years and was in excellent health. Viator Eight submitted to Respondent an application, dated July 8, 1998, which represented that Viator Eight had first been diagnosed with AIDS in 1989 and was being attended by Dr. Ronald Wiewora. The "current medical condition" described by Viator Eight in Respondent's application form states a diagnosis in 1989 of AIDS and Hodgekins Lymphoma, and "recent difficulties with protein inhibitors . . ." This is sufficient information to require the reporting of potential fraud under the statute. In Count Twelve of the Administrative Complaint, Viator Nine submitted to Time Insurance Company an insurance policy application, dated August 6, 1996, which represented that Viator Nine had not had a physical examination, diagnostic test, medical treatment, health impairment, or been advised to undergo any treatment within the past five years. However, the application also represented that he had not been diagnosed with AIDS or AIDS-related complex (ARC) or received treatment for it within the past ten years. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS and had first been diagnosed Human Immunodeficiency Virus (HIV) positive in February 1991. This was sufficient information to require the reporting of potential fraud under the statute. In Count Thirteen of the Administrative Complaint, Viator Nine submitted to Jackson National Life Insurance Company an insurance policy application, dated March 5, 1992, which represented that Viator Nine had not been treated by a physician or other medical practitioner, or been a patient in a clinic or medical facility, or been diagnosed or treated for AIDS or any other immunological disorder, within the past five years. Viator Nine submitted to Respondent an application, dated August 15, 1997, which represented that Viator Nine had first been diagnosed with AIDS in February 1991 and was not presently employed. This was sufficient information to require the reporting of potential fraud under the statute. In Count Fourteen of the Administrative Complaint, Viator Nine submitted to Interstate Assurance Company an insurance policy application, date March 21, 1993, which represented that within the last ten years Viator Nine had not been diagnosed or treated by a member of the medical profession for an immune system disorder and that within the last five years he had not been hospitalized or treated by a member of the medical profession or consulted a physician or been prescribed any medication. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS and had first been diagnosed HIV positive in February 1991. Although the insurance application did not specifically request disclosure of a diagnosis of HIV positive and did not define the term "immune system disorder" to include a diagnosis of HIV positive, Viator Nine's disclosure on Respondent's application of a diagnosis of HIV positive was sufficient to alert an employee of Respondent to report the potential for fraud under the statute and to require that this information be reported. In Count Fifteen of the Administrative Complaint, Viator Nine submitted to Interstate Assurance Company an insurance policy application, dated March 4, 1994, which represented that, within the last ten years, Viator Nine had not been diagnosed or treated by a member of the medical profession for an immune system disorder and that within the last five years he had not been hospitalized or treated by a member of the medical profession or consulted a physician or been prescribed any medication. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS and had first been diagnosed HIV positive in February 1991 and that Dr. Leslie Diaz represented on Respondent's "Physician's Questionnaire-HIV Disease" form, dated, September 4, 1997, that Viator Nine had the HIV disease and a life expectancy of five to ten years. Although the insurance application did not define the term "immune system disorder" to include a diagnosis of HIV positive, Viator Nine's disclosure on Respondent's application of a diagnosis of HIV positive was sufficient to alert an employee of Respondent of the need to report the potential for fraud under the statute. In Count Sixteen of the Administrative Complaint, Viator Nine submitted to Security Mutual Life Insurance Company an insurance policy application, dated November 4, 1997, which represented that Viator Nine had not been treated for or had any known indication of AIDS, ARC, or tested positive for HIV antibodies. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. This is sufficient to trigger the reporting requirement of the statute. In Count Seventeen of the Administrative Complaint, the evidence submitted indicated that Viator Nine submitted to Columbia Universal Life Insurance Company an insurance policy application for a face amount coverage of $70,000, dated August 28, 1998, which represented that Viator Nine had not been diagnosed with any immune deficiency disease. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive February 1991, and was being treated by Dr. Leslie Diaz. On Respondent's form submitted in 1997, Viator Nine indicated that he had a preexisting life insurance policy, in the face amount of $200,000, with Columbia Universal Life issued on December 28, 1985. There is no apparent connection between Respondent's application, dated August 15, 1997, and the Columbia Universal Life application, dated August 28, 1998, that would trigger the necessity of an employee of Respondent to make a report. In Count Eighteen of the Administrative Complaint, Viator Nine submitted to Philadelphia Life Insurance Company an insurance policy application, dated August 28, 1998, which represented that Viator Nine had not been told that he had tested positive for exposure to the HIV infection and that to the best of his knowledge, his health was not impaired in any way. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. Respondent's application relates to an individual life policy issued by the Columbus Mutual Insurance Company, in the face amount of $200,000, dated December 28, 1985. There is no apparent connection between Respondent's application, dated August 15, 1997, and the Philadelphia Life Insurance Company policy application, dated August 28, 1998. Therefore, there was no obligation to report. In Count Nineteen of the Administrative Complaint, Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. Viator Nine submitted to United Home Life Insurance Company an insurance policy application, dated April 23, 1999, which represented that within the last ten years Viator Nine had not tested positive for exposure to the HIV infection, had not tested positive for antibodies to the AIDS virus, and had not consulted a medical practitioner within the last five years. Respondent's application relates to an individual life policy issued by Columbus Mutual Insurance Company, in the face amount of $200,000, dated December 28, 1985. There is no apparent connection between Respondent's application, dated August 15, 1997, and the United Home policy application, dated April 23, 1999. Therefore, there was no obligation to report. In Count Twenty of the Administrative Complaint, Viator Ten submitted to Respondent an application form, dated August 15, 1997, which represented that Viator Ten had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. Viator Ten submitted to Federal Home Life Insurance Company an insurance policy application, dated October 20, 1997, which represented that within the last ten years Viator Ten had not tested positive for exposure to the AIDS virus, had not been treated for the AIDS virus, and had not consulted a medical practitioner within the last five years. Respondent withheld this insurance policy from sale for a period of time because Respondent knew that Viator Ten had not yet submitted the application for the policy to the life insurance company and that it contained false information. Respondent had an obligation to report these discrepancies. In Count Twenty-one of the Administrative Complaint, Viator Eleven submitted to Manhattan Life Insurance Company an insurance policy application, dated April 25, 1996, which represented that Viator Eleven had not consulted, been examined or treated by any licensed physician or medical practitioner within the last five years. Viator Eleven submitted to Respondent an application, dated April 14, 1998, in the attachments it stated that Viator Eleven had first been diagnosed HIV positive in September 1991, and as of November 1995 had been diagnosed with AIDS and had received treatment from a physician since that time. Although the insurance application does not request any information regarding any diagnosis or treatment for AIDS or HIV, Viator Eleven stated that he did not have a family physician, had not seen a physician in the past, and was not taking any medication. This was obviously false, and Respondent should have reported it. In Count Twenty-two of the Administrative Complaint, Viator Twelve submitted to Southern Farm Bureau Life Insurance Company an insurance policy application, dated July 1, 1996, which represented that Viator Twelve had not been told that he had or had been treated for an immune deficiency disorder, AIDS, ARC, or had test results indicating exposure to the HIV virus. Viator Twelve submitted to Respondent an application, dated December 3, 1996, which represented that Viator Twelve had "asymptomatic HIV" and had first been diagnosed in 1991. This was sufficient to trigger the reporting requirement. In Count Twenty-three of the Administrative Complaint, Viator Twelve submitted to Primerica Life Insurance Company an insurance policy application, dated July 30, 1996, which represented that Viator Twelve had not within the past ten years been diagnosed or treated for AIDS or any immune deficiency disorder or tested positive for exposure to the HIV virus. Viator Twelve submitted to Respondent and application, dated December 3, 1996, which represented that Viator Twelve had "asymptomatic HIV" and had first been diagnosed in 1991. This was sufficient to trigger the reporting requirement. In Count Twenty-four of the Administrative Complaint, Viator Thirteen submitted to Nationwide Life Insurance Company an insurance policy application, dated July 25, 1997, which represented that Viator Thirteen had not within the past five years been diagnosed or treated for AIDS, ARC, or any other immune deficiency syndrome and had not been examined or treated by any physician or medical practitioner, or by any hospital, clinic, or medical facility not previously mentioned on the application. Viator Thirteen submitted to Respondent an application, dated January 12, 1998, which represented that Viator Thirteen had been diagnosed HIV positive in 1992 and had been diagnosed with AIDS in 1994 and that information supplied by Viator Thirteen's physician on Respondent's "Physician's Questionnaire-HIV Disease" form confirmed those representations. Although Respondent withheld Viator Thirteen's policy from sale for a period of time, Respondent's personnel noted that Viator Thirteen had lied on the application. Respondent failed to report this fact to Petitioner. In Count Twenty-five of the Administrative Complaint, Viator Three submitted to Respondent an application, dated April 11, 1995, which represented that Viator Three had been diagnosed HIV positive in May 1986 and had been diagnosed with AIDS in March 1995. Viator Three submitted to Allstate Life Insurance Company an insurance policy application, dated July 31, 1995, which represented that Viator Three had never been diagnosed with or treated for AIDS, ARC, or an AIDS-related condition. Since the application for the life insurance policy and the application to Respondent were submitted prior to the enactment of the Viatical Settlement Act, Respondent had no duty to report possible fraud in this instance, since it occurred prior to July 1, 1996, the effective date for the statute. In Count Twenty-six of the Administrative Complaint, Viator Three submitted to Respondent an application, dated December 3, 1996, which represented that Viator Three had been diagnosed HIV positive in May 1986 and had been diagnosed with AIDS on September 4, 1996, and that on Respondent's "Physician's Questionnaire-HIV Disease" form, dated May 18, 1995, submitted by Dr. Carroll L. Cook, confirmed those representations. Viator Three submitted to Nationwide Life Insurance Company an insurance policy application, dated October 20, 1995, which represented that Viator Three had not, within the last five years, been diagnosed with or treated for AIDS, ARC, or any other immune deficiency disorder. This is sufficient to trigger the reporting requirement. The evidence is clear and convincing, as to Counts Ten, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, Twenty, Twenty-one, Twenty-two, Twenty-three, Twenty-four, and Twenty-six of the Administrative Complaint that Respondent, in the performance of its role as a viatical settlement broker, routinely received from viators and reviewed written information about their medical condition, particularly regarding the presence of an HIV/AIDS diagnosis, that directly and materially contradicted information supplied by that same viator on one or more written and corresponding insurance policy applications, also routinely received and reviewed by Respondent. The same viators who represented on the relevant life insurance policy applications that they did not have HIV or AIDS represented on viatical applications that they did have that condition during the same material times. This is especially true, wherein Viator Nine submitted eight applications to Respondent on the same date, August 15, 1997. In each instance, the contrast is so great that any reasonable person, especially an employee of Respondent in the viatical industry, would have to know or believe that the life insurance policy being offered for sale through Respondent had been obtained through misrepresentations made by the viator on or in support of the insurance policy application. Respondent not only failed to report those circumstances to Petitioner, but proceeded to offer many of those policies for sale to viatical settlement providers. The evidence is clear and convincing that Respondent, during the relevant time period, had no company policy requiring or even acknowledging an obligation to report such matters to Petitioner and that the usual and prevalent custom of Respondent was to send the applications to providers without comment. Only after 1999 did Respondent instruct its employees to direct such suspicious viatical applications to the attention of a company vice-president. Even then, no reports were filed with Petitioner. Thus, Respondent's admitted failure to report cannot be ascribed to the negligence or inattention of a company officer or employee to his or her duty to fulfill a company policy requiring such reports, since there was no such policy. It is clear that Respondent simply ignored the reporting requirements in the statute and, in most instances, offered the tainted viatical applications/insurance policies for sale to viatical settlement providers without comment. Accordingly, it is found that any and all admitted failures to report the circumstances alleged in Counts Ten through Sixteen, Twenty through Twenty-four, and Twenty-six in the Administrative Complaint were willful.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order as follows: Dismissing Counts One through Nine, Seventeen, Eighteen, Nineteen, and Twenty-five. Finding Respondent guilty of violating Section 626.989(6) in Counts Ten, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, Twenty, Twenty-one, Twenty-two, Twenty-three, Twenty-four, and Twenty-six of the Administrative Complaint; and In conformity with the Joint Pre-hearing Stipulation and the earlier, seven-page stipulation of the parties, finding the violations in question willful, and imposing an administrative fine in the amount of $30,000 and subjecting Respondent to two years of probation under the terms and conditions set forth in the seven-page stipulation, paragraph 5. DONE AND ENTERED this 7th day of November, 2003, 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 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of November, 2003. COPIES FURNISHED: Michael H. Davidson, Esquire Department of Financial Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Thomas J. Maida, Esquire N. Wes Strickland, Esquire Foley & Lardner 106 East College Avenue, Suite 900 Tallahassee, Florida 32301 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
