Findings Of Fact In 1975 the Florida Legislature passed the Medical Malpractice Reform Act, Chapter 75-9, Laws of Florida, now codified in Chapter 768, Florida Statutes. Part of this legislative package included the creation of the Fund. This legislation was passed in response to a medical malpractice insurance crisis which arose when the primary underwriter for the Florida Medical Association sought to stop issuing medical malpractice policies in Florida, thus making it difficult, if not impossible, for physicians or hospitals to obtain medical malpractice insurance coverage at reasonable rates. As a result of this problem, many physicians began to practice defensive medicine, curtail or abandon their practices or practice without coverage of any kind. The Fund is a private not-for-profit organization, participation in which is totally voluntary for its member-health care providers. Insofar as Petitioners are concerned, membership in the Fund is but one of several options available to provide legally required evidence of financial responsibility in order to obtain licensure as a hospital facility in Florida. Physicians, hospitals, health maintenance organizations and ambulatory surgical centers who become members of the Fund must maintain at least $100,000 in primary professional liability insurance. Membership in the Fund grants to each participant a limitation of liability above the $100,000 in primary coverage. To the extent that any settlement or judgment exceeds the primary coverage of the participant, it is paid by the Fund without limitation. The Fund is operated subject to the supervision and approval of a board of governors whose membership is required by law to consist of representatives of the insurance industry, the legal and medical professions, physicians' insurers, hospitals, hospitals' insurers and the general public. The Department is charged by statute with certain regulatory functions concerning the Fund. The base fee for Fund membership is set by statute at $500 for physicians, after an initial $1,000 enrollment fee for the first year of participation, and at $300 per bed for hospital members. The statute requires the Department to set additional fees based upon the classifications of health care providers contained in the statute. In the event that base fees are insufficient to pay all claims asserted against the Fund for a given fund year, the Department is empowered, upon request of the Board of Governors of the Fund, to order additional assessments against Fund participants to meet any such deficiency. Under the original legislation, all classes of health care providers could be assessed unlimited amounts to make up any deficiencies. As a result of legislative amendments which became effective July 1, 1976, the amount which participants, other than hospitals, could be assessed was limited to the amount each Fund member had paid to join the Fund for that particular coverage year. 1976 legislative amendments also required that each fiscal year of the Fund, which runs from July 1 through June 30, be operated independently of preceding fiscal years, and further required that occurrences giving rise to claims in a particular fund year be paid only from fees or investment income on those fees collected for that particular year. Thus, it is entirely possible for the Fund to experience deficits in a given year, and yet hold surplus funds for other years. On September 22, 1982, the Department of Insurance issued a "Notice of Assessment for 1976-77 Fiscal Fund Year" and a "Notice of Assessment for 1979-80 Fiscal Fund Year" (hereinafter called the "Notice of Assessment"). The Notice of Assessment for the 1976-77 fund year announced that the Insurance Commissioner intended to levy and authorized the Fund to collect an assessment in the amount of $2,395,092 from those health care providers that were members of the Fund in fund year 1976-77. The Notice of Assessment for the 1979-80 fund year announced that the Insurance Commissioner intended to levy and authorized the Fund to collect an assessment in the amount of $16,268,997 from health care providers that were members of the Fund in fund year 1979-80. Each of the hospitals named as Petitioners in the Petition for Administrative Proceedings in Case Nos. 82-3128 and 82-3130 were members of the Florida Patient's Compensation Fund during the fund year 1976-77. Each of the hospitals named as Petitioners in the Petition for Administrative Proceedings in Case Nos. 82-3129 and 82-3130 were members of the Florida Patient's Compensation Fund during the fund year 1979-80. Each of the hospital Petitioners who were members of the Florida Patient's Compensation Fund in the fund years 1976-77 and 1979-80 paid a base fee of $300.00 per bed for participation in the Fund. The Department has never promulgated any rules pursuant to Section 768.54 and Chapter 120, Florida Statutes, pertaining to its regulation of or duties in conjunction with the Fund. The chart below contains the following information concerning fund years 1976-77 and 1979-80: the amount of the total proposed assessment described in the Notices of Assessment (dated September 22, 1982); the amount of the losses experienced by doctors and hospitals, respectively; the amount of the fees paid by doctors and hospitals; the amount of the assessments for doctors and hospitals as described in the Notices of Assessment (dated September 22, 1982); and the amount of the additional assessments sought by the Fund at the final hearing on February 14, 1983. 1976-1977 Fund Year - Total Assessment $2,395,092 DOCTORS HOSPITALS Losses $8,235,261 Losses $2,358,457 Fees Paid 1,888,258 Fees Paid 4,449,442 Assessments 1,888,258 Assessments 496,479 Addt'l Assessments -0- Addt'l Assessments 1,581,541 1979-1980 Fund Year - Total Assessment $16,268,997 DOCTORS HOSPITALS Losses $16,565,196 Losses $ 8,171,883 Fees Paid 3,361,682 Fees Paid 5,995,934 Assessments 3,681,682 Assessments 12,413,616 Addt'l Assessments -0- Addt'l Assessments 3,655,809 The following chart shows the comparison, by dollar amount and percentage, of the fees paid by each class of health care provider, the losses incurred by each class of health care provider and the surplus or deficit created by each class of health care provider for the fund Year 1976-1977: FUND YEAR 1976-1977 SURPLUS/ FEES PAID LOSS INCURRED (DEFICIT) Class I Phy. $788,495 12.3* $1,925,000 18.2* ($1,136,505) Class II Phy. 74,887 1.2 200,000 1.9 (125,113) Class III Phy. 1,024,876 15.9 6,110,261 57.6 (5,085,385) Pro. Assoc. 87,436 1.4 10,000 0.1 77,436 Hospitals 4,449,442 69.1 2,358,457 22.2 2,090,985 Amb. Surg. 5,359 0.1 0 0 5,359 HMO's 0 0 0 0 0 TOTAL *percent $6,430,495 100.0* $10,603,718 100.0* $(4,173,223) The following chart shows the comparison, by dollar amount and percentage, of the fees paid by each class of health care provider, the losses incurred by each class of health care provider and the surplus or deficit created by each class of health care provider for the fund year 1979-1980: FUND YEAR 1979-1980 SURPLUS- FEES PAID LOSS INCURRED (DEFICIT) Class I Phy. $ 860,170 8.8* $3,223,194 13.0* ($ 2,363,024) Class II Phy. 876,207 8.9 994,475 4.0 (118,268) Class III Phy. 1,625,305 16.6 12,347,500 50.0 (10,722,195) Prof. Assoc. 403,947 4.1 0 0 403,947 Hospitals 5,995,934 61.1 8,171,883 33.0 (2,175,949) Amb. Surg. 28,151 0.3 0 0 0 HMO's 15,180 0.2 0 0 0 TOTAL $ 9,804,894 *percent 100.0* $24,737,052 100.0* $(14,975,489) The Department computed the portion of the assessment to be paid by the different classes of health care providers for the 1976-1977 and 1979-1980 fund years based upon an "indicated rate method". This method is represented by the following formula: The Department started with the actuarially indicated rate for each class of health care provider as described in the October, 1981 Actuarial Report prepared by Tillinghast, Nelson, et al. This is called the "indicated rate by class." The Department then applied the following formula for each class: Indicated Rate by Class x No. of Members in the Class Total = indicated fees by Class Total Indicated Fees by Class divided by Total Indicated Fees for ALL Classes = Percentage of Indicated Fee by Class Percentage of Indicated Fee by Class x Total Expected Loss for ALL Classes = Expected Loss by Class (Expected loss is ALL losses for the fund year including claims previously paid, reserves established on claims asserted and IBNR (incurred but not reported).) Expected Loss by Class - Actual Fees paid by Class = Potential Loss Assessment by Class. Potential Loss Assessment by Class divided by Potential Loss Assessment for ALL Classes = Percentage of Potential Loss Assessment by Class. Percentage of Potential Loss Assessment by Class x Total Assessment to be Ordered by the DOI = Amount of Assessment by Class. The "indicated rate method" for allocating assessments among the various classes of health care providers was selected by the Department as the method which most fairly reflected the classifications prescribed in Section 768.54(3)(c), Florida Statutes. The record in this proceeding establishes that this method is the most feasible mechanism for fairly reflecting classifications established by statute, and, at the same time, providing immediate funds necessary to meet all claims against the Fund. The Notices of Assessment issued by the Department of Insurance for fund years 1976-77 and 1979-80 allocated the "excess assessments" (which could not be applied to physician members based upon the Department's "statutory cap" interpretation) among the other classes of health care providers based upon their percentage of "expected losses". The charts below show the amount each class of health care provider would have been assessed under the "indicated rate method" absent the "statutory cap" for the fund years 1976-77 and 1979-80 and compares that amount to the assessment described in the 1976-77 and 1979-80 Notices of Assessment: 1976-1977 FUND YEAR INDICATED RATE ASSESSMENT ACTUAL ASSESSMENT a) Class I Physicians $ 106,792 $ 788,495 b) Class II Physicians 34,712 74,887 c) Class III Physicians 2,253,588 1,024,876 d) Hospitals -0- 496,479 e) HMO -0- -0- f) Surgical Centers -0- 597 g) Professional Association -0- 9,758 1979-1980 FUND YEAR INDICATED RATE ASSESSMENT ACTUAL ASSESSMENT a) Class I Physicians $1,388,234 $ 860,170 b) Class II Physicians 1,389,633 876,207 c) Class III Physicians 9,997,395 1,625,305 d) Hospitals 3,251,180 12,413,616 e) HMO 8,232 31,442 f) Surgical Centers 15,277 58,310 g) Professional Association 219,046 403,947 The difference between the results derived by the "indicated rate method" and the amounts reflected in the Notices of Assessment is due to the application of the statutory cap on assessments against physician members, as applied by the Department. As a result of the application of the statutory cap, physician members of the Fund will not be assessed for fund years 1976-1977 and 1979-1980 in any amounts greater than those in the Notices of Assessment dated September 22, 1982. The amounts of the assessments sought by the Fund, and described in the Notices of Assessment, were calculated by the Fund by using the following formula: Total fees paid during the Fund Year +Investment Income attributable to the Fund Year -Expenses allocated to that Fund Year -Amount paid on claims for that Fund Year -Amount reserved for all known claims for that Fund Year. The Department conducted no independent actuarial study regarding fees for fund years 1976-77 and 1979-80. The fees ordered by the Department and collected by the Fund plus the interest income generated by such fees for fund years 1976-77 and 1979-80 have proven to be inadequate to cover claims against the Fund for those years. For fund years 1976-77 and 1979-80, the Fund did not seek to have the Department of Insurance increase fees for any classes of health care providers. The only fees set for or collected from physician and hospital members for the fund year 1976-77 were the statutory base fees. For the 1979-1980 year the statutory base fee was charged to all hospital health care providers. The base fee was also charged physician health care providers; however this base fee was modified by the application of relativities according to each physician's class and territory. This application resulted in the following additional fee charges or credits which generated an additional $775,000 in fees: NO SURGERY CLASS 1 MINOR SURGERY CLASS 2 SURGERY CLASS 3 Territory 01 Dade and Broward 0 250 500 Counties Territory 02 Remainder of State 88cr 117 323 The Fund requires as part of its regular course of business that all health care providers sign a membership application whereby the health care provider agrees to pay all fees and assessments charged or levied against it. Notice describing the fees to be charged is included with the membership application. All members of the Fund, including Petitioners, for the 1976-1977 and the 1979-1980 fund years signed such agreements. In addition, all health care providers were sent notice of the fee changes made for the 1979-1980 fund year. Petitioners, for purposes of this proceeding, do not contest: (a) the method by which the Fund establishes reserves; (b) the amount of the reserves established for any individual claim file; or (c) the amount of the total deficit described in the Notices of Assessment dated September 22, 1982 for fund years 1976-77 and 1979-80. Nonetheless, Petitioners do not concede that the Fund needs all of the money described in the Notices of Assessment dated September 22, 1982 for fund years 1976-77 and 1979-80 at this time. At the final hearing, the Fund contended that it should be allowed to levy and collect assessments from the hospitals for amounts in excess of the assessments described in the Notices of Assessment. To support this contention, the Fund introduced a "Monthly Financial Report" dated December 31, 1982 prepared by the Fund's staff. The Monthly Financial Report purportedly shows the Fund's deficit for the 1976-1977 and 1979-1980 fund years as of December 31, 1982. However, the report itself contains an express disclaimer stating that the report was "Unaudited -- Prepared For Managerial Purposes Only." The Fund's Board of Governors has always in the past reviewed and approved any calculations concerning an alleged deficit before a deficit is certified to the Commissioner. The Fund then submits a written request to the Department for an assessment. In this case, the Board of Governors has not certified any amount to the Commissioner other than the amounts described in the Notices of Assessment dated September 22, 1982. The record in this cause establishes that as of September 22, 1982, there existed a deficiency in the Fund's account for the 1976-1977 fund year of $2,395,092 for the payment of settlements, final judgments and reserves on existing and known claims. The record in this cause establishes that as of September 22, 1982, there existed a deficiency in the Fund's account for the 1979-1980 fund year of $16,268,997 for the payment of settlements, final judgments and reserves on existing and known claims. In view of the statutory cap on the amounts that may be assessed against physician members of the Fund, the foregoing dollar amounts for assessments for the 1976-1977 and 1979-1980 fund years, and the manner in which they are proposed to be allocated among the remaining classes of health care providers are appropriate. Both Petitioners and Respondent have submitted proposed findings of fact for consideration by the Hearing Officer. To the extent that those proposed findings of fact are not included in this Recommended Order, they have been specifically rejected as being either irrelevant to the issues involved in this cause, or as not having been supported by evidence of record.
The Issue The issue in this case is whether Respondent, Eric Kachnycz, LLC d/b/a Done Right Irrigation and Lighting (“Done Right”), should have a penalty assessed against it by Petitioner, Department of Financial Services, Division of Workers’ Compensation (the “Department”), and, if so, the amount of such penalty or assessment.
Findings Of Fact The Department is the State agency responsible for, inter alia, ensuring that all businesses operating in this State have workers’ compensation insurance coverage. Done Right is a duly-formed and validly-existing limited liability company in the State of Florida. It was formed on July 27, 2004, for the purpose of conducting any and all lawful business. At the time of its formation, Eric Kachnycz was the only listed manager or managing member of the company. His address was listed as 9 Twin River Drive, Ormond Beach, Florida. The registered agent for the company was listed as Betty C. Kachnycz, at the same address. In 2011, Daniel Dupuis was added as a managing member of the company. His address was listed as a post office box in Ormond Beach, Florida. By way of a document filed with the Secretary of State, Division of Corporations, on March 1, 2016, Daniel Dupuis was withdrawn as a managing member of the company. On January 14, 2016, Kent Howe, a compliance investigator with the Department, conducted an investigation at 316 Ocean Dunes Road in Daytona Beach, Florida. Upon arrival at the site at around 11:00 a.m., Mr. Howe noted the presence of a large white truck and work trailer parked in front of the residence. The truck and trailer were imprinted with the name and contact information for Done Right. Mr. Howe saw a person (later identified as Daniel Dupuis) engaged in repair work on a sprinkler or irrigation system in the front yard of the residence. After about ten minutes observing Mr. Dupuis, Mr. Howe approached and asked him for whom he worked. Mr. Dupuis responded that he worked for Done Right and that Mr. Kachnycz owned and operated the business. There was another person at the job site who Mr. Dupuis identified as the owner of the residence. That person, with whom Mr. Howe did not converse, was observed walking into and out of the house and, just before Mr. Howe left the site at 1:00 p.m., was seen using a shovel to back-fill some of the irrigation ditches that had been dug.1/ Mr. Howe tracked down and called Mr. Kachnycz to inquire as to the existence of workers’ compensation insurance for his employees, including Mr. Dupuis. Mr. Kachnycz said that the only two persons associated with Done Right, he and Mr. Dupuis, had existing exemptions from workers’ compensation coverage. Further, Mr. Kachnycz said the he had personally applied for the exemptions himself. Mr. Howe checked the Department’s compliance and coverage automated system (CCAS) to verify the exemptions. He found that Mr. Kachnycz had a current exemption, but Mr. Dupuis’ exemption had expired on April 26, 2015, approximately nine months previous. Exemptions have a two-year term once granted, but may be renewed on-line prior to their expiration. Mr. Kachnycz obtained an exemption in 2004 and has renewed it every two years thereafter. Mr. Dupuis obtained his first exemption in February 2011, but did not timely renew it before it expired two years later. He then obtained an exemption in April 2013, but it expired in 2015. He did not have an exemption in place on January 14, 2016, while working at the job site. He did, however, apply for an exemption just two days later, i.e., on January 16, 2016. After verifying the corporate information for Done Right and checking CCAS to see if any other insurance coverage was in place, Mr. Howe determined that Done Right was not in compliance with workers’ compensation insurance requirements. The information gathered by Mr. Howe was presented to his area district manager, who approved the issuance of a stop work order. Mr. Howe prepared the SWO (along with a request for business records) and hand-delivered the documents to Mr. Dupuis at the job site. Mr. Howe attempted to serve the registered agent of Done Right, Betty C. Kachnycz, at her residence but Mr. Kachnycz said she was working out of town at her job as a registered nurse. So, instead of hand-delivery, Mr. Howe sent a copy of the SWO and request for business records to Mrs. Kachnycz via certified mail. The documents were delivered and signed as accepted by Mrs. Kachnycz on January 23, 2016. Subsequently, Mr. Howe had a conversation with Mr. Kachnycz concerning the possibility of Mr. Kachnycz signing a Conditional Agreed Release from the SWO. A blank copy of that agreement was provided for Mr. Kachnycz’ review, but he never signed the agreement. Mr. Howe later had another conversation with Mr. Kachnycz during which the latter inquired about the “criminal” charges against him related to the SWO. Mr. Howe knew nothing of any criminal charges and no evidence of such was offered at final hearing. Mr. Howe had no further contact with Mr. Kachnycz. Mr. Kachnycz ultimately asked for a formal administrative hearing to contest the SWO and penalty assessment, resulting in the instant case. During the preparation phase prior to final hearing, the Department continued to attempt to obtain the business records for Done Right. The Department served interlocking discovery on Done Right to obtain the business records along with other information. Mr. Kachnycz, however, steadfastly refused to provide the records unless, in his words, “[the records are] not used against me in a court of law.” During his deposition in this matter, Mr. Kachnycz reiterated his demand that his business records not be used against him in this proceeding, a clear indication of Mr. Kachnycz’ lack of understanding of the administrative process. There is no basis in law for such a demand by a party to an administrative proceeding. Mr. Kachnycz also invoked his Fifth Amendment rights and otherwise refused to answer questions posed to him during the deposition.2/ Review of an entity’s business records by the Department allows it to assess the amount of workers’ compensation insurance coverage for the business. A review also allows the Department to determine whether a penalty should be imposed at all. Had Done Right provided its business records in the instant case, it may have resolved the dispute without the necessity of a final administrative hearing. We shall never know. Based upon the absence of business records for Done Right, the Department used its existing rule constructs to formulate the amount of the penalty to be assessed. Anita Proano, an employee in the Department’s bureau of compliance, established a penalty using standard guidelines. Since Done Right did not provide business records for review, the imputed method was employed.3/ First, the payroll was calculated by using the average weekly wage in effect at the time of the issuance of the SWO and, per statute, multiplying by two. Class Code 5183-–under the construction umbrella, but specifically including irrigation and lawn sprinkler systems-– was assigned to the work being done by Done Right. The period of non-compliance was set at September 3, 2015, through December 31, 2015, and January 1, 2016, through January 14, 2016. Those are the dates within the Department’s two-year audit period that Done Right was deemed to be out of compliance. The imputed gross payroll amount was $29,571.77 for the first period of non-compliance and $3,450.04 for the second period. Those figures, divided by 100, resulted in the amounts of $295.72 and $34.50, respectively. The approved manual rate set for the two periods was $5.46 and $5.11, reflecting the rates for Class Code 5183. The premium owed by the employer for the first period was calculated at $1,614.62 and the premium it should have paid for the second period was $176.30. Those amounts, multiplied by two, resulted in assessed penalties of $3,229.24 and $352.60, for a total penalty of $3,581.84. Done Right presented no evidence to contest the amount of the penalty or the calculation thereof. Instead, Mr. Kachnycz inquired of the Department’s witnesses whether they had signed loyalty oaths and, if so, if they remembered what was in the oath. He expressed his displeasure at the process for penalizing small businesses and invoked his Constitutional rights (State and Federal), but provided no evidence germane to the issues of this case.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered assessing a penalty of $3,581.84 against Respondent, Eric Kachnycz, LLC, d/b/a Done Right Irrigation and Lighting. DONE AND ENTERED this 18th day of May, 2016, 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 18th day of May, 2016
Findings Of Fact In 1975 the Florida Legislature passed the Medical Malpractice Reform Act, Chapter 75-9, Laws of Florida, now codified in Chapter 768, Florida Statutes. Part of this legislative package included the creation of the Fund. This legislation was passed in response to a medical malpractice insurance crisis which arose when the primary underwriter for the Florida Medical Association sought to stop issuing medical malpractice policies in Florida, thus making it difficult, if not impossible, for physicians or hospitals to obtain medical malpractice insurance coverage at reasonable rates. As a result of this problem, many physicians began to practice defensive medicine, curtail or abandon their practices or practice without coverage of any kind. The Fund is a private not-for-profit organization, participation in which is totally voluntary for its member health care providers. Insofar as Petitioners are concerned, membership in the Fund is but one of several options available to provide legally required evidence of financial responsibility in order to obtain licensure as a hospital facility in Florida. In fact, of the approximately 260 hospitals in Florida, only 125 satisfy their financial responsibility requirement via membership in the Fund. Physicians, hospitals, health maintenance organizations and ambulatory surgical centers who become members of the Fund must maintain at least $100,000 in primary professional liability insurance. Membership in the Fund grants to each participant a limitation of liability above the $100,000 in primary coverage. To the extent that any settlement or judgment exceeds the primary coverage of the participant, it is paid by the Fund without limitation. The Fund is operated subject to the supervision and approval of a board of governors whose membership is required by law to consist of representatives of the insurance industry, the legal and medical professions, physicians' insurers, hospitals, hospitals' insurers and the general public. The Department is charged by statute with certain regulatory functions concerning the Fund. The base fee for Fund membership is set by statute at $500 for physicians, after an initial $1,000 enrollment fee for the first year of participation, and at $300 per bed for hospital members. The statute requires the Department to set additional fees based upon the classifications of health care providers contained in the statute. In the event that base fees are insufficient to pay all claims asserted against the Fund for a given Fund year, the Department is empowered, upon request of the Board of Governors of the Fund, to order additional assessments against Fund participants to meet any such deficiency. Under the original legislation, all classes of health care providers could be assessed unlimited amounts to make up any deficiencies. As a result of legislative amendments in 1976, however, the amount which participants, other than hospitals, could be assessed was limited to the amount each Fund member had paid to join the Fund for that particular coverage year. 1976 legislative amendments also required that each fiscal year of the Fund be operated independently of preceding fiscal years, and further required that occurrences giving rise to claims in a particular Fund year be paid only from fees or investment income on these fees collected for that particular year. Thus, it is entirely possible for the Fund to experience deficits in a given year, and yet hold surplus funds for other years. The dispute in these consolidated proceedings arises from assessments for deficits incurred for the Fund years 1977-1978 and 1978-1979. Each of the hospitals named as Petitioners in the Petition for Administrative Proceedings in Case No. 82-776 were members of the Fund during the Fund year 1977-1978. Each of the hospitals named in the style and listed on Exhibit "A" to the Amendment to Petition for Administrative Proceedings in Case Nos. 82-530 and 82-571 were members of the Fund during the Fund year 1978-1979. On October 31, 1981, the Fund certified to the Department a deficiency in the amount of $1,350,672 for the Fund year 1977-1978. On January 18, 1982, the Fund certified to the Department an additional deficiency for the Fund year 1977-1978 in the amount of $1,759,591. On January 18, 1982, the Fund certified to the Department a deficiency of $13,935,927 for the Fund year 1978-1979. On January 13, 1982, the Department issued an "order" assessing various classes of health care providers the deficiency originally certified by the Fund for the Fund year 1977-1978. The "order" of January 13, 1982, was amended by the "order" of February 1, 1982, for the Fund year 1977-1973. The amended order contained the same dollar amount of assessments, but altered the amount charged to various classes of Fund members. On February 17, 1982, the Department issued its "order" granting the second assessment for the Fund year 1977-1978. On January 22, 1982, the Department issued its "order" granting the assessment for the 1978-1979 Fund year. The Department has not promulgated any rules pursuant to Chapter 120, Florida Statutes, pertaining to its regulation of or duties in conjunction with the Fund under Section 768.54, Florida Statutes. As members of the Fund, each of the Petitioners' interests are substantially affected by the Orders of January 13, 1982; January 22, 1982; February 1, 1982; and February 17, 1982. For the Fund year 1977-1978 the total assessment ordered by the Department is $3,110,263. The total assessment for the Fund year 1978-1979 is $13,935,972. For the Fund year 1977-1978, physicians and professional association members are proposed to be assessed $1,730,207. During the Fund year 1977-1978, hospital members paid into the Fund, exclusive of interest earned on the fees, the amount of $5,292,498. For the Fund year 1977-1978, physicians and professional association members paid into the Fund the sum of $2,326,541. For the Fund year 1978-1979, hospital members paid into the Fund, exclusive of interest earned on their fees, the sum of $5,627,553. Interest earned through December 31, 1981, on these fees is $1,725,845. For the Fund year 1978-1979, physicians and professional association members paid into the Fund, exclusive of interest earned on their fees, the sum of $2,411,205. Interest earned through December 31, 1981, on the fees contributed by physicians and professional associations is $739,463. For the Fund year 1977-1978, the proposed assessments against hospital members of the Fund is $1,374,827. For the Fund year 1978-1979, the Fund retained the services of an independent actuarial firm to study and recommend appropriate additional fees to charge its members. The following table reflects the statutory base fees, the fees recommended by the actuary, the fees sought by the Fund and the fees ordered by the Department of Insurance for the 1977-1978 Fund year. Base Fees Actuary's Additional Additional Paid Recommended Fees Fees Pursuant Additional Requested Ordered to Stat. Fees by FPCF By DOI Class I Physicians $ $ $ $ Dade/Broward Co. 500.00 2,233.00 2,233.00 -0- Rest of State 500.00 l,749.00 1,749.00 -0- Class II Physicians Dade/Broward Co. 500.00 4,420.00 4,420.00 -0- Rest of State 500.00 3,549.00 3,549.00 -0- Class III Physicians Dade/Broward Co. 500.00 12,619.00 12,619.00 -0- Rest of State 500.00 10,297.00 10,297.00 -0- Hospitals (per occupied bed) 300.00 222.00 222.00 -0- Ambiatory Surgical Centers -0- 22.00 22.00 -0- (per 100 patients) Health Maintenance Organizations -0- 150.00 150.00 -0- (per 100 subscribers) Professional -0- 20 percent of additional (SAME) -0- fee to be paid by each individual member For the Fund year 1978-1979, the Department made no independent actuarial study of the recommended fees proposed by the independent actuary employed by the Fund, and no member of the Casualty Actuarial Society evaluated the Fund's recommendations on behalf of the Department. The independent actuary employed by the Fund was the only actuary who presented any evidence at the hearing conducted by the Department on the Fund's fee increase request for the Fund year 1978-1979. Each year since the Fund year 1977-1979 the Fund has employed the services of an actuary who, among other things, projected the expected losses above the claims previously paid and reserves established for known claims. These expected losses are reported as IBNR ("incurred but not reported") for each Fund year. The IBNR projected by the actuary employed by the Fund in the most recent report (October 1981) for the Fund year 1977-1978 is $6,306,036, and for the Fund year 1978-1979 is $15,965,324. The Department computed the portion of the assessment to be paid by the different classes of health care providers for the Fund year 1977-1978 based upon an approach known as the "indicated rate method." It is concluded from the record that this method is the most feasible of all suggested alternatives under existing law for reflecting the statutory classifications and, at the same time, providing immediate funds necessary to meet all claims against the Fund. This method is represented by the following formula: The Department started with rates which should have been charged each class in 1981-1982. This is called the "indicated rate by class." (The indicated rates were taken from the October, 1980 report by the Fund actuary.) The Department then applied the following formula for each class: Indicated Rate by Class x Number of Members in the Class = Total indicated fees by Class Total Indicated Fees by Class - Total Indicated Fees for ALL Classes Percentage of Indicated Fees by Class. Percentage of Indicated Fee by Class x Total Expected Loss for ALL Classes Expected Loss by Class. (Expected loss is all losses for the fund year included claims previously paid, reserves established on claims asserted and IBNR (incurred but not reported) Expected Loss by Class - Actual Fees paid by Class = Potential Loss Assessment by Class. Potential Loss Assessment by Class - Potential Loss Assessment for ALL Classes Percentage of Potential Loss Assessment by Class. Percentage of Potential Loss Assessment by Class x Total Assessment to be Ordered by the DOI = Amount of Assessment by Class. The following chart shows the amount each class would have paid under the "indicated rate method" for the Fund year 1977-1978, and the amount actually proposed to be assessed in the "orders" of the Indicated Rate Assessment Department: Actual Assessment a) Class I Physicians $ 146,487.00 $ 138,000.00 b) Class II Physicians 213,502.00 438,297.00 c) Class III Physicians 2,195,383.00 813,048.00 d) Hospitals 521,560.00 1,374,827.00 e) HMO 614.00 Surgical Centers 1,381.00 79,953.00 Professional Associations 28,336.00 Based upon the "indicated rate method" and based upon the application of Section 768.54, Florida Statutes, employed by the Department, assessments for the Fund year 1977-1978 which would otherwise be attributable to physician members of the Fund in the approximate amount of $1,500,000 were not charged to any class of physician. Based upon the "indicated rate method" and based upon the application of Section 768.54, Florida Statutes, employed by the Department, assessments for the Fund year 1978-1979 otherwise attributable to physician members of the Fund in the approximate amount of $9,000,000 were not charged to any class of physicians. The assessments described in the "orders" of the Department for the Fund year 1977-1978 which could not be applied to physician members, based upon the Department's interpretation of Section 768.54, Florida Statutes, were spread among the other classes of health care providers based upon their percentage of "expected losses." The Petitioners in this case, each of whom are members of the Fund, consist of 30 government hospitals, 43 private, nonprofit hospitals, and seven private, for-profit hospitals. During the Fund years 1977-1978 and 1978-1979, the Fund consisted of the following classes and numbers of members: 1977-1978 1978-1979 a) Class I Physicians 1392 1516 b) Class II Physicians 814 971 c) Class III Physicians 1584 1690 d) Hospitals 120 130 e) HMO 2 3 f) Surgical Centers 11 14 g) Professional Associations 572 855 The "orders" of the Department dated January 13, 1982; January 22, 1982; February 1, 1982; and February 17, 1982, were the first time any member of the Fund has been assessed under Section 768.54, Florida Statutes. The fees paid into the Fund; the investment income earned through December 31, 1981, on such fees; the expenses incurred through December 31, 1981; the amounts paid on claims through December 31, 1981; reserves established through and the IBNR for each Fund year for 1975-1976 through 1980-1981 are reflected on the table on page 10a. (IBNR figures are projections of future losses prepared by the Fund's actuary in October 1981.) The rates applicable to physicians and hospital members of the Fund for the years 1977-1978 and 1978-1979 were the base fees provided in Section 768.54, Florida Statutes. No additional fees were set for those Fund years. The rate order for the 1978-1979 year entered by the Department on June 9, 1978, was not appealed. The Fund in fact experienced deficits in both Fund years in controversy in this proceeding. The Fund certified to the Department the amount of its projected deficit for the years in question. The amount of money ultimately certified by the Fund to the Department accurately reflects the amounts derived from the following formula: FUND YEAR: 1975-1976 1976-1977 1977-1978 FEES PAID $2,928,672 $6,303,257 $7,467,605 INTEREST EARNED 1,475,41 3,000,118 2,592,179 ADMINISTRATIVE EXPENSES (54,846) (95,002) (148,113) NET FUNDS AVAILABLE 4,349,227 9,208,373 9,911,671 TO PAY LOSSES LOSSES PAID TO DATE (3,004,273) (6,869,395) (8,271,696) INDEMNITY EXPENSES (300,334) (343,433) (391,858) RESERVED LOSSES (971,733) (4,249,604) (3,663,348) RESERVED EXPENSES (57,584) (111,466) (172,869) PRESENT SURPLUS/DEFICIT (14,697) (2,365,525) (2,588,100) LOSSES INCURRED NOT YET REPORTED (IBNR) (AS OF 6/30/81) (1,189,136) (3,878,887) (7,970,235) FUND YEAR: 1978-1979 1979-1980 1980-1981 FEES PAID $8,060,374 $9,836,157 $11,225,275 INTEREST EARNED 2,543,698 2,589,547 1,882,319 ADMINISTRATIVE EXPENSES (128,556) (279,838) (406,641) NET FUNDS AVAILABLE 10,475,506 12,145,866 12,700,953 TO PAY LOSSES LOSSES PAID TO DATE (9,760,650) (3,410,358) (37,500) INDEMNITY EXPENSES (532,197) (206,616) (32,619) RESERVED LOSSES (13,782,271) (6,445,000) (3,750,000) RESERVED EXPENSES (267,932) (342,787) (114,417) PRESENT SURPLUS/DEFICIT (13,867,544) (1,741,105) (8,766,417) LOSSES INCURRED NOT YET (14,979,237) (28,295,428) (51,500,564) REPORTED (IBNR) (AS OF 6/30/81) FUND YEAR: TOTALS FEES PAID $45,821,340 INTEREST EARNED 14,083,262 ADMINISTRATIVE EXPENSES (1,113,006) NET FUNDS AVAILABLE 58,791,596 TO PAY LOSSES LOSSES PAID TO DATE (31,353,872) INDEMNITY EXPENSES (1,837,057) RESERVED LOSSES (32,861,956) RESERVED EXPENSES (1,067,055) PRESENT SURPLUS/DEFICIT (8,328,344) LOSSES INCURRED NOT YET (107,813,487) REPORTED (IBNR) (AS OF 6/30/81) Total fees paid during the Fund Year + Investment Income attributable to the Fund Year Expenses allocated to that Fund Year Amount paid on claims for that Fund Year Amount reserved for all known claims for that Fund Year. The Department entered orders levying the assessments on January 13, 1982; January 22, 1982; February 1, 1982; and February 17, 1982. The parties to this proceeding stipulated that the assessments entered by the Department for 1977-1978 and 1978-1979 are to be considered to be proposed agency action as to such parties. The Department limited the amount assessed against any physician member to an amount equal to the annual membership fee paid by the physician for the year giving use to the assessment. According to the "orders" of the Department for the Fund year 1977- 1978, Class III physicians' share of the assessment, based upon the assessment formula utilized, was in excess of the amount of membership fees paid by that group, and the balance was spread over the rest of the classes of health care providers. According to the "orders" of the Department for the Fund year 1978- 1979, Class I, II, and III physicians' share of the assessment, based upon the assessment formula utilized, was in excess of the amount of membership fees paid by those groups, and the balance was spread among those health care providers described in Section 768.54(1)(b)l.,5.,6., and 7., Florida Statutes. The Department, by order dated June 9, 1978, denied the Fund's request for additional fees for the year 1978-1979. In April 1981, at the request of the Department, the Fund filed a "Retrospective Rating Plan." This plan provided that at such time as the Fund dropped below 25 percent of the original fees paid in any fund year an assessment would be triggered. The plan further provided for the assessment to be based upon all settlements or final judgments entered but unpaid at the time of the assessment, and all reserves established by the Fund at the time of the assessment. This "Retrospective Rating Plan" was approved by the Department, but not adopted pursuant to Chapter 120, Florida Statutes. Although the Fund sought to amend the plan both before and after the assessments now at issue, the original plan remained in effect at all times material to this cause. Although Petitioners have not disputed the amount of the reserves set by the Fund, such reserves constitute a substantial portion of the assessment amounts requested by the Fund. The Department has not made any evaluation of the accuracy of the case reserves, nor has the Department made any analysis of the method employed by the Fund in setting case reserves. There was some evidence that the cash shortages experienced by the Fund for the Fund years 1977-1978 and 1978-1979 may have been caused in part by the manner in which the Fund has paid claims. In 1976 the Florida Legislature limited the amount which the Fund could payout on claims to $100,000 per person, per year. In addition, the law provides that reasonable attorneys' fees and costs shall be paid to a successful claimant within the first 90 days following a judgment or settlement. In most instances, the Fund does not inquire into the fee arrangement between plaintiffs and their attorneys. Moreover, no claim for attorneys' fees is required to be submitted to the Fund or the trial court to set a reasonable percent fee for such services. The Fund has indicated that for claims paid for the Fund years 1977-1978 and 1978-1979, the Fund simply assumed that attorneys' fees and costs equalled 40 percent of the amount of the settlement or judgment. In most cases, the Fund does not consider any portion of the attorneys' fees as having been paid by the primary insurance carrier. In some instances, it appears that payments made by the Fund may have disregarded the $100,000 per person, per year payout limitation, and in other instances the Fund has been ordered to pay amounts in excess of the statutory limit and has not pursued an appeal of such orders. In still other instances the Fund has purchased annuities to fund settlements or judgments, the cost of which annuities exceeded the $100,000 payout limitation. The Fund does not consider such payments to be subject to the payout limitation although no rights of ownership in the annuities are retained by the Fund. It is possible that the cumulative effect of these practices has been significant. Petitioners adduced evidence estimating "excess payments" by the Fund for 1977-1978 over the statutory limit could be as high as $2,684,737. For the Fund year 1978-1979 these "excess payments" could be as high as $4,827,690. Under the Department's application of Section 768.54, Florida Statutes, no physician member will again be assessed for the Fund years 1977- 1978 and 1978-1979. Yet, based upon the latest estimates by the Fund's consulting actuary, additional claims for those two years which have not yet been reported could reach as high as $22,949,472. Under the Department's construction of the statute, hospital members will have to pay all of these additional losses, if the actuary's projections prove correct.
The Issue The issue in this matter is whether Respondent has forfeited his rights and benefits under the City of Tampa General Employees Retirement Fund pursuant to section 112.3173, Florida Statutes (2015).1/
Findings Of Fact The Fund is a public retirement system as defined by Florida law. The Fund is charged with administering and managing a pension plan for employees of the City of Tampa (the “City”). Respondent was most recently employed by the City beginning on October 31, 2005. Respondent worked as a Fleet Mechanic Supervisor I for the City’s Logistics and Asset Management/Fleet Management department. The City terminated Respondent on January 21, 2015, based on theft of City property. By reason of his employment with the City, Respondent was enrolled in the pension plan administered by the Fund. After six years of employment, Respondent vested in the pension plan. According to the Notice of Disciplinary Action, dated January 21, 2015, the City terminated Respondent based on his admission to stealing certain property belonging to the City. On January 5, 2015, Respondent was interviewed by the Tampa Police Department (“TPD”) as part of an investigation into stolen property. During this interview, Respondent confessed to stealing a set of tires owned by the City and installing them on his personal vehicle. After the City learned of Respondent’s admission to the theft of City property, the City terminated Respondent’s employment. Kimberley Marple, an Employee Relations Specialist Supervisor for the City, testified on behalf of the City and explained that the City maintains a zero tolerance policy for removal of or taking City property for personal use. Consequently, when the City learned of Respondent’s admission to TPD, he was fired. Based on the evidence and testimony presented at the final hearing, the preponderance of the evidence establishes that the City terminated Respondent’s employment by reason of his admission to theft of City property. Therefore, the Fund met its burden of proving a legal basis under section 112.3173 for Respondent’s forfeiture of all rights and benefits to the Fund’s pension plan.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the City of Tampa General Employees Retirement Fund enter a final order finding that Respondent, Mario Perez, was a public employee who, by reason of his admitted commission of a “specified offense” under section 112.3173(2)(e), forfeited all rights and benefits in the pension plan administered by the Fund. DONE AND ENTERED this 23rd day of August, 2017, in Tallahassee, Leon County, Florida. S J. BRUCE CULPEPPER 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 23rd day of August, 2017.
The Issue Whether the Department's proposed amendment of Rule 38F- 7.020, Florida Administrative Code, constitutes an invalid exercise of its delegated legislative authority under Section 120.52(8), Florida Statutes, [1996 Supp.], or whether the authority specified in the proposed rule is sufficient for the Department to adopt the proposed rule?
Findings Of Fact The Florida Society of Anesthesiologists is a voluntary, nonprofit association comprised of individual members, each of whom is licensed in the State of Florida to practice medicine. Petitioner, Robert A. Guskiewicz, M.D., is a licensed medical doctor in the State of Florida specializing in anesthesia. Pursuant to Section 440.13(12), Florida Statutes, a three-member panel is charged with the responsibility of determining the schedules of maximum reimbursement for physician treatment of workers' compensation patients. In March 1996, the three-member panel convened and adopted a resource-based relative value scale ("RBRVS") reimbursement system, which, on or about January 3, 1997, the Department published notice of its intent to embody in proposed Rule 38F-7.020, in Vol. 23, No. 1 of the Florida Administrative Law Weekly. A copy is attached and incorporated herein by reference. The proposed Rule lists Sections 440.13(7), 440.13(8), 440.13(11), 440.13(12), 440.13(13), 440.13(14), and 440.591, Florida Statutes, as specific authority. The proposed Rule implements Sections 440.13(6), 440.13(7), 440.13(8), 440.13(11), 440.13(12), 440.13(13), and 440.13(14), Florida Statutes. There are no other facts necessary for determination of the matter.
The Issue The issue is whether Petitioner properly issued a Stop-Work Order and 3rd Amended Order of Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes.
Findings Of Fact The Division is a component of the Department of Financial Services. It is responsible for enforcing the workers' compensation coverage requirements pursuant to section 440.107. At all times relevant to this proceeding, USA was a corporation registered to do business in Florida. Respondent is a company engaged in the construction industry and was active during the two-year audit period from August 27, 2013, through August 26, 2015. On August 26, 2015, Julio Cabrera ("investigator" or Cabrera"), compliance investigator for the Division, conducted a random construction compliance check at the residential job site, 741 Harbor Drive in Key Biscayne ("residential home"). Cabrera observed two men on Respondent's scaffold plastering the exterior wall of the residential home. Cabrera interviewed the two men working on the scaffold. The workers told the investigator that they were employed by Respondent. They also identified Garcia as the Respondent's owner and provided Garcia's contact information to Cabrera. After interviewing the two workers, Cabrera checked the Department's Coverage and Compliance Automated System for proof of workers' compensation coverage and for exemptions associated with USA. Cabrera's search revealed Garcia had an active exemption, but Respondent did not have a workers' compensation insurance policy or an employee leasing policy for its employees. Cabrera also confirmed that Respondent did not have any type of workers' compensation coverage for its employees by examining the National Council on Compensation Insurance database. Next, Cabrera placed a telephone call to Garcia and interviewed him. Garcia informed Cabrera that the two workers were USA's employees and that Respondent did not have workers' compensation insurance coverage for the workers.1/ After interviewing Garcia, the investigator returned to the two USA employees and requested their identification. Silvano Antonio Delgado Reyes provided his identification and the other USA male employee fled from the job site. That same day Cabrera issued Respondent a Stop-Work Order on behalf of the Division for Respondent's failure to secure the required workers' compensation insurance coverage. Petitioner also served Respondent a Request of Business Records for Penalty Assessment Calculation ("Request") asking for documentation to enable the Division to determine payroll for the audit period of August 27, 2013, through August 26, 2015. USA responded to the Request for records and provided the Division with verification of its business records on several different occasions. Ultimately, Respondent provided bank statements and corresponding check images for most of the two- year audit period. Christopher Richardson ("auditor" or "Richardson"), penalty auditor for the Division, was assigned to USA's investigation. Richardson reviewed the business records produced by Respondent and determined those persons employed by USA during the audit period without workers' compensation insurance. Richardson properly recalculated the penalty amount each time new records were provided by Respondent. USA did not provide sufficient records to determine payroll for February 1, 2014, through December 31, 2014, and August 1, 2015, through 25, 2015, and Richardson properly utilized the computation formula to determine the payroll for the aforementioned audit period without adequate records. Richardson concluded his audit by properly calculating the workers' compensation amount USA owed in workers' compensation insurance for the audit period using the Class Code 5022 for masonry work. Richardson applied the approved manual rates and methodology specified in section 440.107(7)(d) and concluded USA owed a penalty amount of $52,489.24. On March 28, 2016, the Division served Respondent the 3rd Amended Order of Penalty Assessment in the amount of $52,489.24 naming those persons employed by USA during the audit period. On June 30, 2015, Respondent challenged the Stop-Work Order and penalty assessment and requested a formal hearing.
Recommendation Based on the forgoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, issue a final order affirming the Stop-Work Order and 3rd Amended Order of Penalty Assessment in the amount of $52,489.24. DONE AND ENTERED this 15th day of July, 2016, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY 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 15th day of July, 2016.
The Issue Whether Petitioners, as members of the Florida Patient's Compensation Fund, are liable for additional assessments for Fund Years 1980-81 and 1981-82, as set forth in the Notice of Assessment filed on April 22, 1985. This proceeding arose as a result of petitions filed by two groups of hospitals contesting a Notice of Assessment issued by the Department of Insurance on April 22, 1985, based upon the certification by the Board of Governors of the Florida Patient's Compensation Fund to the Insurance Commissioner of a deficiency in the amount of money available to pay claims for the 1980-81 and 1981-82 fiscal Fund years. The proposed assessment seeks payment of the alleged deficiency in the total amount of $40,480,556.00 from health care providers who were members of the Fund during the Fund years in question, pursuant to Section 768.54, Florida Statutes. By Order, dated June 11, 1985, the two cases were consolidated into one proceeding, and the Florida Patient's Compensation Fund was granted intervention. Petitioners originally consisted of Southeast Volusia Hospital District and 58 other hospitals (Case No. 85-1650), and Tallahassee Memorial Regional Medical Center and 39 other hospitals (Case No. 85-1664). However, prior to final hearing, a majority of the hospitals from both groups voluntarily dismissed or otherwise withdrew their claims for relief in the proceeding. By Notice of Joinder, dated July 30, 1985, American Hospital, Northridge General Hospital and Pan American Hospital abandoned their claims in Case No. 85- 1650 and adopted the Amended Petition in Case No. 85-1664. As a result, the only remaining party of record in Case No. 85-1650 was St. Petersburg Osteopathic Hospital, Inc. which by Order, dated August 13, 1985, was ordered to show cause why it should not be dismissed as a party for failing to advise the Hearing Officer as to its status pursuant to Order dated July 12, 1985. No response to the Order to Show Cause having been received, it will be recommended herein that St. Petersburg osteopathic Hospital Inc. be dismissed as a party in Case No. 85-1650. Further, inasmuch as there are no longer any parties to that case, it will also be recommended for dismissal herein. By Prehearing Conference Order, dated July 11, 1985, Case No. 85-1664 was restyled to reflect Petitioners as Duval County Hospital Authority, et al. The parties remaining in Case No. 85-1664 at time of hearing were American Hospital of Miami, Inc., Duval County Hospital Authority, Gateway Community Hospital, Hialeah Hospital, Northshore Medical Center, Inc., Northridge General Hospital, Inc., Pan American Hospital, and St. Joseph's Hospital. By Prehearing Orders, dated July 11 and July 29, 1985, it was determined that questions concerning the setting or adequacy of base fees or additional fees, the statutory "cap" on physician assessments! the statutory cumulative "cap" on maintenance of the Fund per fiscal year, and the effect of payment limitations placed on the Fund by statute, were not properly at issue in this proceeding. However, one issue presented in the Amended Petition in Case No. 85-1664 as to whether the Fund has statutory authority to estimate reserves as a basis for an assessment was deemed to be an issue within the scope of this proceeding. The parties entered into a Prehearing Stipulation (Joint Exhibit 1), which included certain factual matters, subject to relevance, and the unresolved question of law as to whether the Fund and Department may include reserves on known claims other than those resolved by settlement or verdict in calculating the amount needed for assessments. At the final hearing, the parties stipulated that the Fund certification includes full credit for all previously noticed assessments, whether collected or not. They further stipulated as to the expertise of Charles Portero in claims handling and reserving practices. The parties also stipulated that there was no issue of fact as to the reasonableness of any individual claim reserve existing as of January 31, 1985, or included in the certification, except as to the Von Stetina claim. Testimony of Charles Portero concerning the Von Stetina claim was made confidential and the transcript of such testimony was extracted and submitted under seal pursuant to order of* *NOTE: Page 4 of the Recommended Order is omitted from the document on file with DOAH and, therefore, is not included in this research database. amount of the projected excess or insufficiency to the Insurance Commissioner with a request that he levy an assessment against Fund participants for that fiscal year. Petitioner hospitals were members of the Fund during one or more of Fund years 1980-81 and 1981-82 Each month, the Administrative Manager of the Fund follows a prescribed procedure to determine if an assessment is required for a particular Fund year, utilizing what is termed a "retrospective rating plan." The plan provides that assessments will not be levied in any year until the cash available for paying claims in that membership year is down to 50 percent of the loss and expense reserves for all known losses. It further provides that the amount should be sufficient to create enough cash flow to pay known reserved claims for the year showing such deficit. In reviewing the Fund's monthly financial report of January 1, 1985, it was determined that a sufficient deficit existed to warrant the levy of an assessment. Thereafter, an outside audit of the Fund accounts was conducted and presented to the Fund Board for Certification. On March 25, 1985, the Florida Patient's Compensation Fund certified a deficiency to the Department in the following amounts: 1980-81 Membership Year $14,866,718.00 1981-82 Membership Year 25,613,838.00 TOTAL $40,480,556.00 This certification was authorized by the Board of Governors of the Florida Compensation Fund on March 19, 1985. An audit substantiating the need for the assessment was performed by Catledge, Sanders and Sanders, certified public accountants. On April 22, 1985, the Department of Insurance issued a Notice of Assessment for Fund years 1980-81 and 1981-82. Notice was published in Volume II, No. 8 at page 1907 of the Florida Administrative Weekly on May 3, 1985. The Notice of Assessment announced the Department's intent to levy and authorize the Fund to collect an assessment in the amount certified by the Fund ($40,480,556.00). The Notice of Assessment further provided that the assessment be divided among the various classes of health care providers for each year as follows: (i) Physicians and Surgeons 1980-81 1981-8 Class 1 0 0 Class 2 0 0 Class 3 0 0 (ii) Hospitals $14,754,672 $25,388,773 (iii) HMO 35,621 161,102 Ambulatory Surgical Centers 76,425 63,963 Professional Associations 0 0 The Department computed the portion of the assessments to be paid by the different classes of health care providers for all years in question based upon the "indicated rate method," modified to all5w for the statutory proscription against assessing certain health care providers more than "an amount equal to the fees originally paid by such health care provider." This is the same method utilized in five previous assessment proceedings and specifically approved by the Florida Supreme Court in Department of Insurance v. Southeast Volusia Hospital District, 438 So. 2d 815, 821 (Fla. 1983). The appropriateness of the procedure has not been placed at issue in this proceeding. The amounts of the assessments sought by the Fund, and described in the Notice of Assessment, were calculated by the Fund by using the following formula: Total fees paid for the Fund year + Investment Income attributable to the Fund year + Amounts previously noticed as assessments Expenses allocated to that Fund year Amount paid on claims for that Fund year Amount reserved for all known claims for that Fund year The Fund used the same procedure calculating the amount of this assessment as it used in the first five assessments. The Department used the same procedure and methodology (indicated rate method) in allocating the assessment among the various classes as it used in the first five assessments. The amount of the assessment is based on the amount needed to pay known claims. This amount needed to pay known claims includes the amount reserved as the estimated loss and expense payments. The Fund follows standard industry reserving practices, as modified in several respects by its particular needs and procedures. Each claim is assigned to a claims supervisor who obtains information concerning the claims incident from the primary insurance carrier. The initial reserve on a claim is based on a variety of factors, including the type of injury, potential damages, liability considerations, geographic location, and the particular attorney for the claimant. After a determination that a reserve is needed on the file, the claims supervisor makes an initial determination of the amount which is referred to the claims manager for approval. Final approval of the posted reserve lies in the hands of the Claims Committee of the Fund. The figure is usually fixed at a sum for which it is believed that the claim could be settled and the potential liability arising from a jury verdict. The necessity of obtaining approval of the Claims Committee for the initial reserve and any subsequent changes creates a certain amount of delay in obtaining such decisions. Changes may be effected in the reserve when injuries are found to be greater than anticipated, or because of the discovery of additional facts affecting potential liability. It is not unusual for a particular claim to be submitted three or four times to the Claims Committee before it is settled.
Findings Of Fact The following Findings of Fact are based on the evidence presented at the hearing: The parties stipulated to the reasonableness of all established claim reserves reflected in the current assessment sought by the Fund. However, Petitioners questioned the reasonableness of the Fund reserve on the Von Stetina claim which had been included in a previous assessment. Although it is questionable as to whether the adequacy of such a prior reserve should be addressed in a proceeding contesting a subsequent assessment, it is clear that the determination of a deficit necessarily involves deductions or credits for prior reserves in determining a current deficit. In any event, the Von Stetina reserve was established according to the standards practices of the Fund, and no evidence was presented by Petitioners to show that it was unreasonable or otherwise incorrect either on January 31, 1985, when it was determined that a sufficient deficit existed to warrant the levy of an assessment, or at the present time. The Von Stetina case is presently pending in the judicial process and, accordingly, there is no basis at the present time to reduce the previously established reserve. (Stipulation, Testimony of Portero) As heretofore found, the Fund includes a "claim" as a basis for an assessment as soon as a reserve for the claim is established. Petitioners presented the testimony of an accountant who expressed the opinion that the term "claim" as used in pertinent statutes should be restricted to final judgments or settlements against a health care provider in excess of the provider's primary coverage. This "cash basis" methodology would require the entry of a final judgment or settlement before the claim could be considered in determining whether a deficit exists for any particular Fund year. On the other hand, expert testimony from the Fund's Claims Manager shows that the definition of "claim" as used by the Fund is basically in accordance with the generally accepted meaning and usage of that term by the insurance industry. The reserving practices of the Fund are found to constitute a reasonable basis for arriving at the projected amounts required to meet the claims made against the Fund account for a particular fiscal year. (Testimony of Cherry,Portero) It is further found that the present assessment was prepared in accordance with standard procedures, that the amounts proposed to be levied as an assessment for each Fund year in question represent a deficiency in the Fund account for such years, and that the proposed allocations of such amounts among the specified health care providers are appropriate. (Respondent's Exhibits 1-7, Joint Exhibit 1- Stipulation, Testimony of Portero)
Recommendation In view of the foregoing, it is RECOMMENDED that a final order be issued by the Department of Insurance dismissing Case No. 85-1650, and levying assessments in accordance with the Notice of Assessment, dated April 22, 1985, for the Fund years specified therein. DONE and ENTERED this 15th day of October, 1985, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 1985. APPENDIX PETITIONERS' PROPOSED FINDINGS OF FACT Paragraphs 1-7: Adopted by Stipulation (Joint Exhibit 1) in Findings of Fact 1-3, 5, 8. Paragraphs 8-10: These are conclusions of law and are therefore rejected as not being Proposed Findings of Fact. See Conclusions of Law in Recommended Order. Paragraph 11: Rejected as unsupported by the evidence. See Finding of Fact 10. Paragraph 12: Adopted in Finding of Fact 8. Paragraph 13: First sentence rejected as unsupported by evidence. Remainder adopted in Finding of Fact 10. Paragraph 14: Rejected as unsupported by the Evidence. (Confidential Portion) Paragraphs 1-6: Irrelevant and unnecessary except as set forth in Findings of Fact 9. RESPONDENT'S PROPOSED FINDINGS OF FACT Paragraphs 1, 3-10: Adopted in Findings of Fact 1-8. Paragraph 2: Rejected as Conclusion of Law rather than Finding of Fact. Paragraphs 11 & 12: Substantially adopted in Findings of Fact 9 Copies furnished: Honorable William Gunter Insurance Commissioner The Capitol Tallahassee, Florida 32301 William C. Owen and W. Douglas Hall, Esquires Carlton, Fields, Ward, Emmanuel, Smith, and Cutler Post Office Drawer 190 Tallahassee, Florida 32301 David A. Yon, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 Clay McGonagill 241 East Virginia Street Tallahassee, Florida 32301 St. Petersburg Osteopathic Hospital, Inc. 401 15th Street, North St. Petersburg, Florida Information Copy to Neil H. Butler, Cathi C. O'Halloran and Ben Wilkinson, Esquires, Pennington, Wilkinson, Dunlap, Butler & Gautier Post Office Box 13527 Tallahassee, Florida 32317-3527
Findings Of Fact 1 In either April or May, 1983, HRS District III, Respondents in this case, advertised a request for proposals to operate a spouse abuse shelter in a subdistrict of HRS District III in accordance with the following schedule: The request for proposal (RFP) package was to be picked up by 5 p.m., May 20, 1983; the applicant was to notify HRS of its intent to submit a proposal by 5 p.m., May 20, 1983; and the proposal was to be filed with HRS no later than 5 p.m., June 3, 1983. The contract in question was for the period July 1, 1983 through June 30, 1984. Linda Tucker, President of the Petitioner's Board of Directors, found out about the solicitation from her Vice President, Alice Mulrooney, who had received word of it through an administrative letter sent to her in her capacity of an officer on the County Rape Council. Ms. Tucker and Ms. Mulrooney both telephonically spoke with Carol Laxton, the HRS official in Gainesville who was stewarding this solicitation. It was not clear which of the two spoke with her first. Ms. Tucker spoke with Ms. Laxton on May 20, 1983, and requested to be furnished with a copy of the RFP. Both Tucker and Mulrooney indicated they told Ms. Laxton that Petitioner was not yet incorporated. Both agree Ms. Laxton advised them the requirement for incorporation could be waived and that the proposal should be submitted anyway, including a letter from Petitioner's lawyer to the effect that the incorporation papers had been forwarded to the office of the Secretary of State. On May 25, 1983, Petitioner contacted representatives of the Hernando County Commission relative to county funding of at least a portion of that local source of matching funds required to make up at least 25 percent or the overall proposed operating budget as required by Florida Statutes and as set out in the proposal. At that time, Petitioner was advised that while the Commission supported the Petitioner's proposal in concept and fully hoped to lend its financial support, it could not officially do so until after the county's budget hearings were completed and it was determined that the requested funds were in fact available. A letter to this effect was submitted to Ms. Laxton by the Chairman of the Commission on June 7, 1983. In the interim, before the proposal was submitted, both Ms. Tucker and Ms. Mulrooney discussed this possible defect, as well, with Ms. Laxton. Again, both ladies contend Ms. Laxton advised them this criterion could be waived, as well. Petitioner submitted its proposal on time. However, at the time of submittal, the Petitioner was not in fact incorporated. The proposed corporate charter was forwarded to the Secretary of State on June 2, 1983 (a letter to this effect was sent the same day to Ms. Laxton by Petitioner's attorney), and approved on June 13, 1983. Also, at the time of submission, the proposal listed as budgeted resources donated land and two homes having a rental value of $4,800 per year as an in-kind resource, $182 as cash client contributions and $3,750 as a cash contribution by the Hernando County Commission. It is this last funding source that was committed in theory only and was not firm. Taken together, the three sources totaled $8,732, which would be slightly over 28 percent of the total yearly budget of $31,052. However, since the commitment from the County Commission was not firm and was contingent on funds being available, it could not be considered; and the remaining sum of $4,982 is only 16 percent of the budget. Ms. Laxton admits talking with both Tucker and Mulrooney on several occasions about the proposal and the difficulties they were having. They indicated to her they were having problems getting incorporated, but that their attorney was working on it. She admits telling them to send whatever they had, which included a status letter from their attorney. She also admits stating to them that some requirements of the RFP could be waived, but does not think incorporation was one and is sure she did not tell them the matching funds requirement could be waived. After hearing the evidence presented and considering it along with its relative probabilities and improbabilities, it is found that the Petitioner's representatives may have reasonably inferred the incorporation requirement could be waived. However, it is unlikely that Ms. Laxton would have even inferred anything as significant and sensitive as a matching fund requirement could be waived. If Ms. Tucker and Ms. Mulrooney inferred that from Ms. Laxton's comments, it was unfortunate, but in error. In fact, the County Commission did ultimately approve a commitment to Petitioner in the amount of $3,750. They have also received additional cash contributions of $2,300 and additional in-kind contributions of $5,000. None of these latter resources were in hand or firmly committed by the June 3, 1983 proposal submission deadline, however. At the present time, Petitioner is operating a shelter without Respondent's funds. They have requested assistance from the successful bidder, but have been turned down. There is, however, substantial but non-financial community support for Petitioner's operation.
Recommendation Based on the foregoing, it is RECOMMENDED: That Petitioner's protest be rejected. RECOMMENDED this 4th day of January, 1984, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings Department of Administration 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of January, 1984. COPIES FURNISHED: LINDA TREIMAN, ESQUIRE 11 NORTH MAIN STREET BROOKSVILLE, FLORIDA 33512 JAMES A. SAWYER, JR., ESQUIRE DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES 1000 N.E. 16TH AVENUE BUILDING H GAINESVILLE, FLORIDA 32601 MR. DAVID PINGREE SECRETARY DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES 1323 WINEWOOD BOULEVARD TALLAHASSEE, FLORIDA 32301
The Issue Whether certain payments received by the Petitioner, James Gomia, from the Leon County Clerk of Court subsequent to July 1, 1989, constitute creditable "compensation" within the meaning of Rule 22B-6.001(16), Florida Administrative Code, for purposes of determining Mr. Gomia's retirement benefits.
Findings Of Fact Mr. Gomia's Employment. The Petitioner, James Gomia, has been employed by the Clerk of Court in and for Leon County, Florida, for the past eleven years. At all times relevant to this proceeding, Mr. Gomia has been employed as an Assistant Finance Director and Deputy Clerk. By virtue of his employment with the Clerk's office Mr. Gomia is eligible to participate in the Florida Retirement System pursuant to Chapter 121, Florida Statutes. Mr. Gomia's Compensation. At all times relevant to this proceeding, Mr. Gomia received a monthly base salary from his employment with the Clerk's office. The Clerk's office operates for budget purposes on a fiscal year which begins October 1st and ends September 30th. In addition to his base salary, Mr. Gomia has been paid the following amounts (hereinafter referred to as "Additional Compensation"), during the following months: Month Amount September, 1989 $1,750.00 May, 1990 500.00 September, 1990 1,750.00 May, 1991 600.00 September, 1991 2,150.00 Mr. Gomia has been paid Additional Compensation twice a year since he was employed by the Clerk's office. The Clerk's Policy of Paying Additional Compensation. It has been the policy of Paul F. Hartsfield, Leon County Clerk of Court, to pay Additional Compensation to employees of the Clerk's office, with one exception not relevant to this proceeding, for at least the past twenty years. Additional Compensation has been paid to Clerk's office employees twice a year. One payment is made in May/June and the other payment is made in September/October/November. The amount of Additional Compensation paid to each employee is the same. For example, in May, 1991, all employees received $600.00 as Additional Compensation. The amount to be paid as Additional Compensation is included in the budget submitted by the Clerk's office each year for approval by the Board of County Commissioners. The amount requested is included as part of a lump-sum request for the amount of funds necessary to pay all salary, including employees' base salary. Although the amount of the payments to be made as Additional Compensation is broken out in the work papers to the budget each year, those figures are only seen by the financial personnel and not the Board of County Commissioners. Lack of Written Policy. The decision of whether Additional Compensation is paid is within the sound discretion of the Clerk to make. The Clerk of Court is under no legal obligation to make such payments even if included in an approved budget. The policy of paying Additional Compensation has not been reduced to writing. Nowhere has the Clerk stated in writing that the Clerk's office has a policy: That applies all employees will receive Additional Compensation equally; Additional Compensation will be paid no later than the eleventh year of employment; Additional Compensation will be paid for as long as an employee continues employment; and Additional Compensation will be paid at least annually. The only written indication that Additional Compensation will be paid to employees is the inclusion of the dollar amount necessary to make the payments in the work papers of the Clerk's office budget. Nowhere in the work papers to the budget or the budget itself are the conditions set out in finding of fact 13 included. Even if the work papers (or the budget) of the Clerk's office were sufficient to constitute a formal written policy, the policy evidenced in the work papers only applies to the fiscal year the work papers relate to. Therefore, if the work papers or budget constitute a written policy it is only a policy to pay Additional Compensation for the upcoming fiscal year and not on a recurring basis. Although a policy of paying Additional Compensation to Clerk's office employees exists, that policy has not formally been reduced to writing. Mr. Hartsfield, the Leon County Clerk of Court, admitted that there was no formal written policy during his deposition and in a letter dated November 12, 1991, attached as Respondent's exhibit 1 to Mr. Hartsfield's deposition.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of Retirement, enter a Final Order declaring that the Additional Compensation paid to James Gomia between September, 1989, and September, 1991, was not paid as "average final compensation" for purposes of Rule 22B-6.001(6), Florida Administrative Code, and dismissing Mr. Gomia's Amended Petition with prejudice. DONE and ENTERED this 2nd day of September, 1992, in Tallahassee, Florida. LARRY J. SARTIN 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 2nd day of September, 1992. APPENDIX Case Number 92-2504 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Mr. Gomia's Proposed Findings of Fact Findings of fact 1, 4 and 6-11. Hereby accepted. The Department's Proposed Findings of Fact Findings of fact 1-3. Findings of fact 4 and 6. Finding of fact 16. Conclusion of law. Findings of fact 4, 6 11 and 13. Finding of fact 4 and 6. Whether the payments come within the Department's rules is a conclusion of law. COPIES FURNISHED: Harry H. Mitchell, Esquire 103 North Gadsden Street Tallahassee, Florida 32301 Burton M. Michaels Assistant Division Attorney Division of Retirement Department of Administration Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1566 A. J. McMullian, III, Director Division of Retirement Cedars Executive Center, Building C 2639 N. Monroe Street Tallahassee, Florida 32399-1560 Larry Strong Acting Secretary Knight Building, Suite 307 Koger Executive Center 2737 Centerview Drive Tallahassee, Florida 32399-0950 Susan Kirkland General counsel Knight Building, Suite 307 Koger Executive Center 2737 Centerview Drive Tallahassee, Florida 32399-0950
The Issue The issues in this case are as follows: Whether a refund request submitted by Petitioner, FICURMA, Inc. (Petitioner or FICURMA), to Respondent, Department of Financial Services, Division of Workers' Compensation (Respondent or Department), on January 21, 2010, requesting a refund of assessments paid during 2005 and 2006, is barred pursuant to section 215.26(2), Florida Statutes (2009),1/ because the refund request was not submitted within three years after the assessment payments were made. Whether the doctrine of equitable estoppel can be raised to allow a refund that would otherwise be time-barred by section 215.26(2), and, if so, whether the facts show the sort of rare circumstances that would justify application of that doctrine against a state agency.
Findings Of Fact The Department is the agency that has been statutorily designated as the administrator of the SDTF (§ 440.49, Fla. Stat.) and as the administrator of the WCATF (§ 440.51). The Department's administration of these two funds includes making the requisite assessments to the entities required to pay the assessments and ensuring payment by the assessable entities for deposit into the state Treasury. §§ 440.49, 440.51. As the state agency with the responsibility for the collection of these assessments, the Department is charged with the authority to accept applications for refunds pursuant to section 215.26, for overpayments of assessments, for payment of assessments when none are due, or for payments of assessments made in error. The Department is responsible for making determinations on applications for refunds of SDTF and WCATF assessments. "FICURMA" stands for Florida Independent Colleges and Universities Risk Management Association. FICURMA, Inc., is an independent educational institution self-insurance fund that was established in December 2003, pursuant to the authority of section 624.4623, Florida Statutes (2003). FICURMA was approved as a Florida workers' compensation self-insurer meeting the requirements of section 624.4623, effective December 10, 2003. FICURMA's members self-insure their workers' compensation claims under chapter 440. On November 16, 2004, Evelyn Vlasak, the assessments coordinator for the SDTF and WCATF assessments, wrote to Ben Donatelli, FICURMA's executive director, to advise that the assessments unit of the Department's Division of Workers' Compensation (Division) received notice that FICURMA had been approved to write workers' compensation insurance in Florida, effective December 10, 2003. Therefore, Ms. Vlasak informed FICURMA that it was required to register with the Division; it was required to pay assessments to the WCATF and SDTF, calculated on the basis of premiums paid to FICURMA by its members; and it was required to submit quarterly premium reports to the Division. Ms. Vlasak enclosed quarterly report forms for FICURMA to catch up on its premium reports for the last quarter of 2003 and the first three quarters of 2004. Ms. Vlasak also enclosed Bulletin DFS-03-002, dated June 26, 2003, which attached two Orders Setting Assessment Rates, one for the WCATF for calendar year 2004, and the other for the SDTF for fiscal year 2003-2004. The two orders, issued by E. Tanner Holloman, then-director of the Division, included a Notice of Rights. This notice advised of the right to administrative review of the agency action pursuant to sections 120.569 and 120.57, Florida Statutes, by filing a petition for hearing within 21 days of receipt of the orders. In bold, the Notice of Rights concluded with the following warning: "FAILURE TO FILE A PETITION WITHIN THE TWENTY-ONE (21) DAYS CONSTITUTES A WAIVER OF YOUR RIGHT TO ADMINISTRATIVE REVIEW OF THIS ACTION." Mr. Donatelli testified that Ms. Vlasak's letter came as a surprise, because he and the others involved in lobbying for the passage of section 624.4623 and setting up FICURMA, pursuant to the new law, believed that FICURMA was not subject to SDTF and WCATF assessments. Mr. Donatelli said that he called Ms. Vlasak to ask why FICURMA had to pay when according to their interpretation of the statute authorizing FICURMA to be created, FICURMA was not subject to the assessment requirements. Mr. Donatelli said that in response to his question, Ms. Vlasak stated that it was her interpretation of the statute that FICURMA was required to pay assessments. She stated that she would have that confirmed by "Legal," but that FICURMA should be prepared to start paying in order to avoid penalties for late payment. Mr. Donatelli testified that "obviously with her response, then we started to think hard about reading [section 624.4623] again, and we did, and didn't see any reason that we needed to pay this." But he also testified that when Ms. Vlasak said she would confirm her interpretation with the legal department, he began calculating what the assessments might cost, because they had not been collecting funds to cover the assessments from its members, since they did not know they had to pay the assessments. The next communication received by FICURMA from Ms. Vlasak came by way of a December 20, 2004, memorandum to all carriers and self-insurance funds, providing information to assist with computation of premiums to be reported for the fourth quarter 2004 SDTF and WCATF assessments. At around the same time, FICURMA received Bulletin DFS 04-044B. This bulletin attached copies of the two Orders Setting Assessment Rates signed by Tom Gallagher, then-Chief Financial Officer. One order was for the WCATF for calendar year 2005 and the other order was for the SDTF for fiscal year 2004-2005. As with the previous bulletin attaching two orders for the prior year, this mailing included a Notice of Rights, which provided a clear point of entry to contest the action by filing a petition for administrative hearing within 21 days of receipt. Mr. Donatelli acknowledged that the two Holloman orders and the two Gallagher orders all ordered FICURMA to pay the SDTF and WCATF assessments. Mr. Donatelli testified that after reviewing the second set of orders received, FICURMA did not believe it had any alternative but to pay the assessments. However, because there was a reference to some "legal stuff," he "asked the legals" to take a second look, because this was not an insignificant payment. In fact, the calculation of assessments to catch up for the prior quarters of missed payments was more than $104,000. When asked why, if he believed FICURMA was not assessable, Mr. Donatelli did not direct "the legals" to file a petition for an administrative hearing on FICURMA's behalf to contest the assessment rate orders, Mr. Donatelli's response was: "Basically, it was our respect of the opinion of the Office Of Insurance Regulations [sic: Division of Workers' Compensation] that said that we had to pay that. I mean--we were basically trying to--being good citizens." Accordingly, FICURMA chose to not challenge the assessments, or otherwise object to paying the assessments. Instead, FICURMA transmitted payment on December 26, 2004, for SDTF and WCATF assessments calculated to be due for the fourth quarter of 2003 and the first three quarters of 2004, totaling $104,282.11. Neither this payment, nor subsequent FICURMA assessment payments were made "under protest." Mr. Donatelli's question to Ms. Vlasak sometime in late 2004--whether FICURMA was assessable under either section 440.49 (for the SDTF) or section 440.51 (for the WCATF)--was never put in writing. However, FICURMA's general counsel wrote to Ms. Vlasak on January 7, 2005, to raise a different assessment question: "whether [FICURMA] is assessed and therefore required to pay into the [SDTF] as it was established within the past year and as such none of the group's claims would be eligible for reimbursement from the Fund." This question, limited to the SDTF assessments, was not based on the status of FICURMA as an entity authorized by section 624.4623 but, rather, was based on the fact that the SDTF had been closed for certain new claims before FICURMA was established. After no response was received, FICURMA's general counsel wrote a second time on February 14, 2005, attaching another copy of the January 7, 2005, letter. Neither of these letters asked about Mr. Donatelli's prior telephonic inquiry regarding whether FICURMA was assessable at all because of its status as an entity formed under section 624.4623. Ms. Vlasak responded in writing after the second written inquiry by FICURMA's general counsel that addressed the propriety of the SDTF assessments. Ms. Vlasak stated the Department's position that assessments were to continue to all assessable entities, even though the SDTF was being prospectively abolished. Ms. Vlasak concluded, therefore, that FICURMA "is not exempt" from the SDTF assessments. Ms. Vlasak's letter dated February 16, 200[5],4/ responded only to the written inquiry in the January 7, 2005, letter and February 14, 2005, reminder letter and, thus, addressed only the limited question about SDTF assessments. Thereafter, until 2009, FICURMA had no further telephonic or written communications with the Division about FICURMA's assessability. Instead, FICURMA fell into the pattern of making quarterly premium reports and assessment payments, pursuant to notice by the Department. In total, FICURMA's payments received by the Department in 2005 and 2006 add up to $288,607.32 in SDTF assessments and $63,164.70 in WCATF assessments. The breakdown of assessment payments credited by quarter is as follows: 2003, Q 4 (received 1-11-05) SDTF: $7,652.36 WCATF: $2,962.75 2004, Q 1 (received 1-11-05) SDTF: $22,957.34 WCATF: $ 7,618.49 2004, Q 2 (received 1-11-05) SDTF: $23,685.39 WCATF: $ 7,860.20 2004, Q 3 (received 1-11-05) SDTF: $23,685.39 WCATF: $ 7,860.19 2004, Q 4 (received 2-10-05) SDTF: $25,543.10 WCATF: $ 8,476.00 2005, Q 1 (received 5-2-05) SDTF: $29,258.54 WCATF: $ 4,854.45 2005, Q 2 (received 7-29-05) SDTF: $29,258.54 WCATF: $ 4,854.45 2005, Q 3 (received 11-1-05) SDTF: $29,350.54 WCATF: $ 4,854.85 2005, Q 4 (received 2-2-06) SDTF: $27,193.93 WCATF: $ 4,527.53 2006, Q 1 (received 5-1-06) SDTF: $23,340.73 WCATF: $ 3,098.33 2006, Q 2 (received 7-26-06) SDTF: $23,340.73 WCATF: $ 3,098.33 2006, Q 3 (received 10-27-06) SDTF: $23,340.73 WCATF: $ 3,098.33 In 2007, 2008, and part of 2009, FICURMA continued these quarterly payments pursuant to notice by the Department, paying quarterly assessments to the SDTF totaling $363,441.86 and to the WCATF totaling $31,132.88. In the 2009 legislative session, the adoption of a new law authorizing another type of self-insurance fund contained language that caused Ms. Vlasak to question whether certain other self-insurance funds authorized under different statutes were assessable under sections 440.49 and 440.51. The 2009 law, codified in section 624.4626, Florida Statutes (2009), specifically provided that a "self-insurance fund that meets the requirements of this section is subject to the assessments set forth in ss. 440.49(9), 440.51(1), and 624.4621(7), but is not subject to any other provision of s. 624.4621 and is not required to file any report with the department under s. 440.38(2)(b) which is uniquely required of group self-insurer funds qualified under s. 624.4621." (Emphasis added). In contrast, section 624.4623, the statute under which FICURMA was formed, contained the following language: "An independent education institution self-insurance fund that meets the requirements of this section is not subject to s. 624.4621 and is not required to file any report with the department under s. 440.38(2)(b) which is uniquely required of group self-insurer funds qualified under s. 624.4621." (Emphasis added). Ms. Vlasak asked the Division's legal office to analyze the legal question and give advice. Meanwhile, Ms. Vlasak and her supervisor, Mr. Lloyd, agreed that the standard quarterly assessment notices would not be sent to FICURMA, so that the Department could consider the question of its assessability after receiving advice from its legal office. By not sending the notices, the clock would not start on the deadlines for FICURMA to pay the assessments without imposition of a statutory penalty for late payment. FICURMA, however, had been well-conditioned to expect those quarterly notices and became concerned when the expected notices did not arrive. Mr. Donatelli and his assistant, Joanne Hansen, called Ms. Vlasak several times to ask why nothing had been received yet. They ultimately spoke with Ms. Vlasak, who advised that the Department was reviewing whether FICURMA was assessable, and it did not have to worry about not receiving the notices because payments would not be due until after the notices were received. On October 1, 2009, the Department's legal staff issued a Memorandum of Opinion regarding independent education institution self-insurance funds (like FICURMA), authorized by section 624.4623. This opinion analyzed section 624.4623, as well as the statutory terms used to identify which entities are subject to assessments in section 440.49 (for the SDTF) and section 440.51 (for the WCATF). Based on that analysis, the opinion concluded that self-insurance funds qualifying under section 624.4623 (like FICURMA), are not subject to SDTF or WCATF assessments. Although the analysis was prompted by a different self-insurance fund statute adopted in 2009, the conclusion reached as to section 624.4623 entities would apply to the entire time period since the adoption of section 624.4623 in 2003. The Department witnesses testified unequivocally that the legal opinion was advisory only, and it was up to the administration to make the policy decision to follow the advice given. However, it is difficult to discern any "policy" choice to be made, since the plain import of the opinion was that the statutes were not susceptible to any different interpretation other than that section 624.4623 entities were not subject to SDTF or WCATF assessments. Nonetheless, the legal opinion was reviewed, and, ultimately, the Department agreed with the advice. On November 14, 2009, Ms. Vlasak and Mr. Lloyd called Mr. Donatelli to advise that FICURMA was not required to pay SDTF or WCATF assessments anymore. In addition, they discussed how FICURMA could go about requesting refunds of assessments previously paid. However, they alerted FICURMA to the fact that section could present a problem with respect to requests for refunds of payments made more than three years ago. At the time of this conversation, all of the assessments paid in 2005 and 2006 had been made more than three years ago, while the payments made in 2007-2009 were within the three-year window. On January 12, 2010, Ms. Vlasak wrote to FICURMA, sending the forms for applying for refunds. In the letter, she reiterated the potential problem for refund requests of payments made more than three years ago. Accordingly, she recommended that FICURMA submit separate requests for payments made within the last three years versus those made more than three years ago, as the former would be able to go through more easily. FICURMA completed four separate refund application forms: one for SDTF payments made in 2005 and 2006; one for WCATF payments made in 2005 and 2006; one for SDTF payments made in 2007-2009; and one for WCATF payments made in 2007-2009. The refund forms state that the refund requests are submitted pursuant to section 215.26; FICURMA did not fill in the blank that is required to be filled in if the refund requests were being submitted under any other statute besides section 215.26. The applications were dated January 20, 2010, and were received by the Department on January 21, 2010. The Department approved the refund applications for payments made in 2007-2009 and caused warrants to be issued to FICURMA to refund $363,441.86 for SDTF assessments and $31,132.88 for WCATF assessments. By authorizing refunds of assessments paid in 2007, 2008, and 2009, the Department has acknowledged that FICURMA should never have been assessed under sections 440.49 and 440.51 and should never have been served annually with the Orders Setting Assessment Rates or quarterly with assessment notices. The Department acknowledged FICURMA's entitlement to refunds despite FICURMA's failure to challenge the assessments in 2007, 2008, and 2009 pursuant to the Notice of Rights provided annually. However, as warned, on May 12, 2010, the Department issued a Notice of Intent to Deny Applications for refund of the 2005 and 2006 payments to the SDTF and the WCATF. The sole reason for the denial was that section 215.26(2) required that refund applications be filed within three years after the right to the refund accrued "or else the right is barred." The Department noted--as stated on the refund application form--that the three-year period normally commences when the payments are made. No evidence was presented regarding what are considered "normal" circumstances or what sort of not-normal circumstances would have to be shown to establish that the three-year period in section 215.26(2) would commence at some other point in time, rather than when payments are made.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that Respondent, Department of Financial Services, Division of Workers' Compensation, enter a final order denying the requests for refunds of SDTF and WCATF assessments paid by Petitioner, FICURMA, Inc., in 2005 and 2006, because Petitioner's requests are time-barred by section 215.26(2) and because Petitioner has not met its burden of proving that equitable estoppel should be applied against Respondent. DONE AND ENTERED this 8th day of July, 2011, in Tallahassee, Leon County, Florida. S ELIZABETH W. MCARTHUR 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 8th day of July, 2011.
