The Issue Whether Respondent violated various provisions of the Insurance Code, specifically Sections 626.561(1), 626.611, 626.621 and 626.9521, Florida Statutes, which warrants that Respondent's licenses as an insurance agent should be disciplined.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: 1. Respondent was, at all times pertinent, licensed as a general lines agent and health agent in Florida 2 Respondent was the registered agent, sole director and officer of Sunshine State Insurance of Manatee, Inc. As a result of her corporate capacity, Sheryl Ann Satterfield is responsible for actions of employees working under her direct supervision and control. FINDINGS REGARDING COUNT I On or about April 5, 1991, Respondent's employee solicited an application for automobile insurance from Miguel A. Coronado of Bradenton, Florida. The automobile insurance was to be provided by the Nu-Main of Florida Agency. At this same time, the premium for the automobile insurance was quoted as $414.00 for a six month coverage. After being informed of the premium amount, Mr. Coronado paid Respondent's employee $146.00 in cash as a down payment on the premium. Receipt #6557 was issued which acknowledged receipt of said premium. On or about April 26, 1991, Mr. Coronado received a cancellation from Instant Auto Credit stating that his automobile was an unacceptable vehicle. After receiving this notice, Mr. Coronado went to the Sunshine State Insurance office to discuss the cancellation with Respondent. Respondent refused to refund the $146.00 premium to Mr. Coronado. Respondent never forwarded the $146.00 premium funds received from Mr. Coronado to Nu-Main of Florida. Further, Respondent failed, and refused to refund the premium to Mr. Coronado upon demand. Respondent misappropriated funds held in trust for her own use and benefit. FINDINGS REGARDING COUNT II On or about November 26, 1990, Jodi Spencer of Sarasota, Florida went to Respondent's agency for the purpose of obtaining automobile insurance. Ms. Spencer made a premium down payment of $197.00 on a quote of $697.00 annual premium. Respondent's employee issued receipt #7874 which acknowledged receipt of the $197.00 premium down payment. The auto insurance was to be provided by Nu-Main of Florida, Inc., and American Skyhawk Company. On February 11, 1991, American Skyhawk Insurance Company sent Ms. Spencer a cancellation notice. Respondent was to return $24.50 of unearned commission to Ms. Spencer which she failed to do. FINDINGS REGARDING COUNT III On or about December 31, 1990, Matthew Baker of Bradenton, Florida, went to Sunshine State Insurance Agency to obtain automobile insurance. At this time, Matthew Baker paid a down payment of $197.00 on an annual premium of $1,313.00. The insurance was to be provided by First Miami Insurance Company. Respondent's agency issued receipt #6851 upon receipt of the aforementioned premium down payment. On January 31, 1991, First Miami Insurance Company sent Mr. Baker a cancellation notice. At the time of cancellation Respondent was to return an unearned commission of $154.60. Respondent has failed to return $154.60 in unearned commission to Mr. Baker. FINDINGS REGARDING COUNT IV On or about January 11, 1991, Edwin Soto of Bradenton, Florida, was cancelled by First Miami Insurance Company with whom he had an existing automobile insurance policy. Edwin Soto had purchased this First Miami Insurance Company policy from Respondent. (Testimony of Edwin Soto). As a result of this cancellation Mr. Soto is owed $70.61 from Respondent which she has failed to return to him. FINDINGS REGARDING COUNT V In January 1991, William M. Woodyard of Bradenton, Florida, met with Respondent to renew his general liability and worker's compensation insurance. At this same time Mr. Woodyard gave Respondent his premium down payment. During the latter part of 1991, Mr. Woodyard went to Sunshine State Insurance of Manatee, Inc. to obtain a copy of his worker's compensation policy. Upon Mr. Woodyard's arrival, he met with Joe Money, President of Sunshine State Insurance Group, Inc. No record of insurance or coverage for Mr. Woodyard or his company existed. Previously, Capital Premium Finance Company had issued two return premium checks to Mr. Woodyard. Respondent deposited Mr. Woodyard's return premium checks into the Sunshine State Insurance Agency's checking account in the total amount of $440.80. Mr. Woodyard was entitled to receive a premium refund check and unearned commission check from Respondent. Mr. Woodyard did not receive any premium refund or unearned commission funds from Respondent.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that Respondent's licenses as an insurance agent in this state be REVOKED. DONE and RECOMMENDED this 20th day of October, 1992, at Tallahassee, Florida. DANIEL M. KILBRIDE 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 20th day of October, 1992. APPENDIX The following constitute specific rulings, pursuant to Section 120.59 (2), Florida Statutes, upon the parties respective proposed findings of fact (PFOF) Petitioner's PFOF: 1. - 27. Accepted in substance. Respondent's PFOF: Respondent did not file proposed findings of fact. COPIES FURNISHED: Willis F. Melvin, Jr., Esquire Daniel T. Gross, Esquire Department of Insurance and Treasurer 412 Larson Building Tallahassee, Florida 32399-0300 Ms. Sheryl Ann Satterfield P.O. Box 333 Polk City, Florida 33868 Tom Gallagher, Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil, Esquire General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, Florida 32399-0300
The Issue Whether Petitioner should be granted a license to engage in business as an insurance adjuster in the State of Florida.
Findings Of Fact Respondent Agency is charged by law with licensure of non-resident "all (insurance) lines" public adjusters. On or about July 21, 2005, Respondent denied Petitioner's application for such licensure as follows: You have never been licensed in this state to engage in business as an insurance adjuster. However, on or about October 1, 2004, you identified yourself as a licensed public adjuster to William H. Baker, of 329 Live Oak Road, Vero Beach, Florida, and solicited Mr. Baker to hire you to adjust a claim for hurricane damage with his insurer, Safeco Insurance Company. On or about November 4, 2005, Safeco received a Notice of Representation from you indicating that you were Mr. Baker's adjuster on his claim. On or about November 11, 2004, you met with a Safeco representative and attempted to settle Mr. Baker's claim. Legal Basis for Denial The denial is based upon the following Florida Statutes: Section 626.112(3), Florida Statutes states: (3) No person shall act as an adjuster as to any class of business for which he or she is not then licensed or appointed. Petitioner timely requested a disputed-fact hearing, and the cause was referred to the Division of Administrative Hearings on or about December 2, 2005. The case was scheduled for final hearing on February 21, 2006, in Tallahassee, Florida, by a Notice mailed December 27, 2006. An Order of Pre-hearing Instructions was entered the same date. Petitioner requested a continuance by a letter filed February 15, 2006. On February 21, 2006, an Order was entered granting a continuance until April 20, 2006. On April 17, 2006, Petitioner filed a letter requesting another continuance. On April 24, 2006, an Order was entered granting a continuance and requiring that the parties submit mutually agreeable dates for hearing by May 10, 2006. On May 10, 2006, a Consented Response was filed. On May 15, 2006, a Notice of Hearing for June 19, 2006, was entered and mailed. On June 19, 2006, when the final hearing was convened, Petitioner was not in attendance. Respondent's counsel and Respondent's agency representative were in attendance. Respondent's counsel represented that she had been unable to get any telephonic response from Petitioner for several weeks. The undersigned inquired if any Pre-hearing Stipulation, as required by the Order of Pre-hearing Instructions had been entered, and Respondent's counsel answered in the negative. The undersigned inquired if, due to the nature of the license denial, any agreement to shift the duty to go forward had been reached, and Respondent's counsel answered in the negative. The Division's file reflects no stipulations. The undersigned waited a half-hour for Petitioner to appear. He did not appear by the end of that half-hour. Inquiry within the Division revealed that Petitioner had neither come to the building housing the hearing room, nor had he telephoned the secretary to the undersigned with any excuse for his absence.
Recommendation Upon the foregoing Findings of Fact and Conclusion of Law, it is recommended that the Department of Financial Services enter a final order denying Petitioner's license application. DONE AND ENTERED this 29th day of June, 2006, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 2006. COPIES FURNISHED: Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carlos G. Mu?niz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Roxanne Rehm, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Christopher C. Karpells 857 Brownswitch Road Unit 154 Slidell, Louisiana 70458 Christopher C. Karpells 585 Old Jail Lane Barnstable, Maryland 02630
Findings Of Fact At all times relevant hereto, Respondent, Thomas S. Piller, was licensed by Petitioner, Department of Insurance, as an ordinary life, including disability insurance agent. His offices are located at 103 South Circle, Sebring, Florida. In June, 1980, Piller met one Elleta Y. Thomas, then 74 years old, who resided in Sebring, Florida, with her husband, William Filler sold Mr. and Mrs. Thomas two policies with American Sun Life Insurance Company effective June 10, 1980. The policies provided supplements for medicare. In January, 1981, William Thomas suffered a heart attack and was hospitalized. He died on March 3, 1981. During the period when Mr. Thomas was hospitalized, and continuing after his death, Elleta Thomas telephoned or visited Respondent's office a number of times to obtain assistance in filing insurance claims for her husband's medical bills and death. On or about May 11, 1981, Respondent received a telephone call from Elleta Thomas asking that he assist her in filling out various insurance forms. Piller went to her residence where he stayed for approximately three hours. During that time, he assisted her in filling out claim forms with three insurance companies. While there, Piller sold Thomas Policy Nos. MC 783 Florida and NS 775 with United General Life Insurance Company which provided Thomas additional medical coverage. The total annual premium was $512 which Thomas paid by check. On the application, question one asks whether the insurance is intended to replace any plan of insurance with another company. Respondent marked "no" in the blank. The policy also stated in paragraph two that "preexisting conditions are covered after this policy currently being applied for has been in effect for 6 months." Elleta Thomas signed a certification form acknowledging that she had read and understood the policy, and was being furnished a copy of that form. Although Thomas could not remember signing the form, she did admit that the signature on the form was her own. There were no representations by Piller that the new policy replaced an existing policy, or that American Sun Life Insurance Company had been consolidated into United General Life Insurance Company, or otherwise changed its name. Neither was there a representation that the American Sun policies had been cancelled. In fact, Thomas admitted that Piller had not told her to turn the American policies in, or to "disregard" them. On June 3, 1981, Thomas was injured in an accident at her home and sometime thereafter examined her General policy to see if a claim could be filed. Because the accident was apparently caused by a "preexisting condition", she did not file a claim. Even though Thomas had two current and effective policies with American Sun which provided accident coverage, she was under the impression that they had been replaced by the General policy purchased in May, 1981. With the assistance of her daughter, Thomas then filed a complaint with the Department of Insurance alleging misrepresentation on the part of Piller. Thomas later received a refund of her $512 premium and the General policy was cancelled. Her American Sun policies were never cancelled and are apparently still in force.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that all charges against Respondent, Thomas Stephen Piller, be DISMISSED. DONE and ENTERED this 16th day of March, 1982, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Department of Administration Oakland Office Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of March, 1982. COPIES FURNISHED: Julie St. John, Esquire Room 428-A, Larson Building Tallahassee, Florida 32301 David B. Higginbottom, Esquire Post Office Box 697 Frostproof, Florida 33843
The Issue Whether Respondent is guilty of failure to account for and deliver funds to the person entitled thereto and/or guilty of fraud, misrepresentation, breach of trust, or dishonest dealing in a business transaction.
Findings Of Fact At all times relevant hereto, Irving Halsey Brain, Jr., was licensed as a real estate broker, and, with his wife, owned the stock of Jay Hearin, Inc. On October 10, 1983, Respondent negotiated a lease of property between Emily R. Hammer, lessor, and Suncoast Heat Treatment, Inc., lessee, (Exhibit 1) for a period of three years, beginning November 1, 1983, at an initial rental of $2,225 per month plus sales tax with annual adjustments for changes in the consumer price index, and the option to renew the lease for an additional three years at the expiration of the initial lease period upon the same terms and conditions. This lease was renewed November 1, 1986, to expire October 31, 1989. On May 22, 1986, Respondent negotiated the lease agreement between Emily R. Hammer, lessor, and Whitaker Roofing, Inc., lessee, for a building for a period of one year from June 1, 1986 to May 31, 1987, at a monthly rental of $1,250 per month plus sales tax, with options to renew the lease in 1987 and 1988 on similar terms and conditions with adjustment to the rent based upon the consumer price index. Both of these leases provided in clause 21 that the lease was procured through the efforts of Jay Hearin, Inc., who was to collect all rentals coming due from which, as compensation for procuring the lease, the lessor authorized Jay Hearin, Inc., to deduct 8 percent on the Suncoast Lease and 7 percent on the Whitaker lease and remit balance to lessor. Jay Hearin, Inc., was also authorized to pay any invoices applicable to the leased premises which had been approved by the lessor and to deduct the amount so paid. In February and March, 1987, Whitaker roofing did not remit rent payments to Hearin Realty, and the monthly computer printout Owner's Statements to Mrs. Hammer show only rental payments from Suncoast. However, the monthly statement for April 1987 shows Whitaker made the February, March and April payments, and these payments were remitted to Mrs. Hammer. The May and June statements do not show payments from Whitaker and, due to an office error, the June payment from Suncoast was not remitted to Mrs. Hammer. The July statement shows receipt of rent from Whitaker for May and June and for Suncoast for July. No rental payments were received from either tenant in August, and the September statement reflects payments from Suncoast for August and September. During this period of sporadic collections, Mrs. Hammer became upset at not getting her full rental payments, and attempted several times to contact Respondent Brain without success. Brain testified he also tried to contact Mrs. Hammer without success. Mrs. Hammer telephoned the tenants about their rental payments, and they told her they had paid Respondent. In August 1987, Mrs. Hammer engaged another real estate agency to manage the property for her and unilaterally terminated her contract with Respondent contained in Exhibit 1. The new agent advised the tenants to submit rentals to him. On the September 1987 Owner's Statement, Respondent listed the Suncoast rental payments for August and September, deducted his commission, added the June payment which had not been remitted, deducted the rental commission for the balance of the lease for both Suncoast and Whitaker and submitted to Mrs. Hammer a check for the balance of $463.63. This was not accepted by Mrs. Hammer, and she engaged the services of an attorney who filed suit against respondent and Jay Hearin, Inc. The suit alleged failure to remit rents for the months of June, August and September 1987, from Suncoast in the total amount of $6,955.14 and converting these payments to his own use; and for converting rental payments from Whitaker Roofing for the months of July and August 1987, in the total amount of $2,486.06 to his own use. This complaint alleged these conversions of funds constituted civil theft and demanded triple damages (Exhibit 3). Instead of filing an answer to the complaint, Respondent submitted a letter (Exhibit 5) to Mrs. Hammer's attorney, Stephen Evans, on February 18, 1988, contending Mrs. Hammer had failed to comply with the terms of the lease agreement. The attorney for Mrs. Hammer obtained a default judgment against Respondent for triple the sums alleged to have been converted in the total amount of $28,353.60 plus costs of $105.00 and attorney's fee of $680.00 (Exhibit 2). Respondent then obtained the services of an attorney but was unable to get the judgment set aside (Exhibit 7). In 1989 Respondent submitted, through his attorney, $7,200.00 to Mrs. Hammer which apparently represents the figures shown on the September 1987 Owner's Statement without a deduction for future commissions plus interest and attorney's fees. Prior to the filing of this administrative complaint Jay Hearin, Inc., filed for bankruptcy and has been declared bankrupt. In his proposed recommended order, Respondent indicated he has also filed personal bankruptcy, but no evidence in this regard was presented at the hearing.
Recommendation It is recommended that the charges contained in the administrative complaint filed April 26, 1990 against Irving Halsey Brain, Jr. be dismissed. DONE and ENTERED this 17th day of December, 1990, in Tallahassee, Florida. K. N. AYERS Hearing Officer Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of December, 1990. Appendix Accepted Rejected. Respondent was licensed as a broker Accepted Accepted, however, the provision quoted from the lease is Rejected as not being an accurate quote. Rejected. See Exhibit 4. Accepted only insofar as included in HO's #6,7, and 8 Accepted Accepted Treatment accorded Respondent's proposed findings: 1, 2, 3, and 4 Rejected as unsupported by evidence presented at this hearing. Accepted Accepted but for last sentence which is a legal conclusion, not as a fact. Accepted Accepted Accepted only insofar as included in HO's #6,7, and 8 (?) Accepted Accepted Accepted to the extent Respondent submitted $7,200 to Mrs. Hammer. Rejected. Evidence was presented that Jay Hearin, Inc. filed for bankruptcy, but the record does not indicate Respondent filed personal bankruptcy. Rejected as legal argument. COPIES FURNISHED: Steven W. Johnson, Esquire Division of Real Estate 400 W. Robinson Street Post Office Box 1900 Orlando, FL 32802 Irving Halsey Brain, Jr. 334 State Street Commerce, GA 30529 Darlene F. Keller Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, FL 32801 Kenneth Easley General Counsel Department of Professional Regulation Northwood Centre 1940 North Monroe Street Suite 60 Tallahassee, FL 32399-0792
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: At all times relevant hereto, respondent, Ralph Todd Schlosser, was licensed and eligible for licensure as a life and health insurance agent, health insurance agent and general lines agent - property, casualty, surety and miscellaneous lines by petitioner, Department of Insurance and Treasurer (Department). When the events herein occurred, respondent was licensed as a life and health insurance agent for American Sun Life Insurance Company (ASLIC) and Pioneer Life Insurance Company of Illinois (PLICI). On March 2, 1987, respondent met with one Mildred H. Camp, then a resident of Clearwater, Florida, for the purpose of selling her an ASLIC long term care health insurance policy. After discussing the matter with respondent, Camp agreed to purchase a policy. She completed an application and gave respondent a check in the amount of $511.88. The check was deposited into respondent's business account at First Florida Bank in Clearwater the same day. Camp did not testify at hearing. Therefore, the only first hand version of what was discussed by Schlosser and Camp and the nature of any further communications between the two was offered by respondent. That version was not contradicted, and it is accepted as being credible. Within a week after executing the application, Camp contacted respondent by telephone concerning the policy. Pursuant to that telephone conversation, respondent did not process the application or remit the check to the company, but attempted instead to arrange another meeting with Camp to answer further questions about the policy. Although he telephoned Camp "every single Monday", respondent was unable to arrange an appointment with her until April 30, 1987. On April 30 Camp and respondent met for the purpose of him explaining in greater detail the benefits and coverage under the policy. Because two months had gone by since the application was first executed, it was necessary for respondent to update Camp's health information. Accordingly, Camp executed a new application the same date and Schlosser forwarded the check and application to ASLIC shortly thereafter. On May 5, 1987 ASLIC received the April 30 application and premium check, less respondent's commission. The application was eventually denied by ASLIC on the ground of "excessive insurance" and a refund check was forwarded by ASLIC to Camp on June 11, 1987. There is no record of any complaint made by Camp against Schlosser in ASLIC's files nor did ASLIC contact respondent regarding this matter. When Schlosser began representing ASLIC, he executed a general agent contract which contained the terms and conditions pertaining to his appointment as a general agent for the company. As is pertinent here, the contract provided that Schlosser had a responsibility "to promptly remit such funds" received by him to the company. According to a former second vice-president of ASLIC, Joyce Lynch, who worked for ASLIC when the Camp transaction occurred, the company expected in the regular course of business to have checks and applications remitted by agents to the home office within fifteen days after the application was written, and that the above provision in the general agent contract was interpreted in this manner. Lynch added that she knew of no reason why an agent would hold an application and check for sixty days before submitting it to the company, particularly since once an application is completed and signed, it is the "property" of the company and not the agent. She concluded that if a customer desired more information about a policy after an application had been signed, which is not unusual, the agent still had a responsibility to promptly forward the application and check to the company within fifteen days. At that point, the company, and not the agent, would cancel a policy and refund the premium if so requested by a customer. Therefore, Schlosser breached the general agent contract by failing to promptly remit such funds. On July 28, 1987 Schlosser visited one Maxine Brucker, an elderly resident of Sarasota, for the purpose of selling her a PLICI health insurance policy. He had telephoned Brucker the same date to set up an appointment with her. After discussing the matter with respondent, Brucker agreed to purchase a policy, executed an application and gave respondent a check for $680.00. The check was deposited into respondent's bank account the following day. After Schlosser departed, Brucker noted that Scholosser did not leave a business card and she immediately became "worried" about her money and the possibility of not getting the insurance she had paid for. She telephoned the Department the same day to check on his "reputation" and to verify that Schlosser was an insurance agent. On August 4, 1987 she wrote a letter to the PLICI home office in Rockford, Illinois to ascertain if her check and application had been received but she did not receive a reply. She wrote a second letter to PLICI on August 14, 1987 but again received no reply to her inquiry. After telephoning the home office a few days later, Brucker contacted the Department a second time in late August and requested that it assist her in obtaining a refund of her money. At no time, however, did Brucker attempt to contact respondent. In early September, Brucker received by mail a money order from respondent which represented a full refund of moneys previously paid. Brucker acknowledged that she was happy with her policy when it was initially purchased. She also acknowledged that she had never contacted respondent personally to request a refund of her money. It was only after she received no reply from the home office that she made a request for a refund. According to the agency agreement executed by Schlosser when he became a general agent for PLICI, respondent had the responsibility to "immediately remit to (PLICI) all premiums (collected)". Testimony by Ronald F. Bonner, a vice- president of PLICI, established that in the regular course of business an agent was required to forward the check and application to PLICI no more than twenty-five days after receiving them from the customer. Any application held more than twenty-five days was considered "stale", was presumably invalid and had to be returned to the customer. Even so, Bonner did not contradict respondent's assertion noted in finding of fact 11 that his failure to remit the application and check was based on instructions from the home office, and under those circumstances, was not improper. Respondent readily admitted he did not remit the Brucker application and check because of instructions from the home office received after Brucker had telephoned the home office. After unsucessfully attempting to speak with Brucker by telephone daily for about two weeks, Schlosser voluntarily sent Brucker a money order via mail in early September. A review of respondent's business bank account for the months of March and August 1987 revealed that after the checks from Camp and Brucker had been deposited, the balances in the account thereafter dropped below $511.88 and $680 during those respective months. This raises an inference that those moneys were used for other undisclosed purposes during that time. According to respondent, he submitted applications and premiums checks to the home office approximately two or three times per month. It was also his practice to wait ten days or so after receiving a check from a customer to allow it sufficient time to clear. Schlosser denied having converted insurance moneys to his own personal use. There was no evidence that Schlosser lacked reasonably adequate knowledge and technical competence to engage in insurance transactions authorized by his licenses, a matter requiring conventional factual proof. Similarly, there was no evidence to establish that Schlosser intended to willfully violate the law or that his conduct demonstrated a lack of fitness or trustworthiness to engage in the insurance business.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the administrative complaint filed against respondent be dismissed with prejudice. DONE AND ORDERED this 18th day of January, 1990, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of January, 1990.
The Issue In this disciplinary proceeding, the issues relate to whether Respondent, a licensed insurance agent, violated various provisions of the Insurance Code in connection with his handling of insurance business for three clients, as Petitioner charged in an Administrative Complaint issued in October 2001.
Findings Of Fact Mitchell is a Florida-licensed life, health, and general lines insurance agent subject to the regulatory jurisdiction of the Department. At all times relevant hereto, Mitchell was engaged in the business of insurance, which he transacted through his corporate agency, M.G.M. Insurance Agency II, Inc., also known as Mitchell’s Financial Group, Inc.1 Chiverton (Count I)2 In May 1996, in connection with the purchase of a house, David Chiverton (“Chiverton”) turned to Mitchell’s agency for assistance in obtaining homeowner’s insurance. Mitchell placed the risk with Lloyd’s London, a surplus lines carrier, which issued Policy No. HMO3 012935 (“Policy #1”).3 Policy #1 covered the period from June 29, 1996 to June 29, 1997. Policy #1, in its entirety, is not in evidence——only the declarations page. Thus, the policy provisions are not available for review, and neither are the numerous endorsements referenced in the declarations. While it is undisputed that the main body of Policy #1 was a standard “HO-3” form, that form is not in evidence either. Consequently, looking solely at the record evidence, the undersigned cannot be certain as to what perils, exactly, were covered, not covered, and excluded from coverage under Policy #1. The declarations page advises that Policy #1 afforded several coverages, including, relevantly, $75,000 worth of coverage for the “dwelling” and a separate coverage for “other structures” in the amount of $7,500. Each of these coverages was subject to a separate deductible of $500. The total annual premium for Policy #1 was $1,085.70. Chiverton made a claim under Policy #1 soon after it was issued, for a loss resulting from water damage caused by a ruptured pipe that was located in the ceiling of the dwelling.4 The insurer paid this claim, the amount of which the evidence fails to show. Thereafter, on June 29, 1997, Policy #1 expired according to its terms and was not renewed. The evidence fails to establish an orderly sequence of ensuing events. It is clear, however, that, pursuant to Florida’s surplus lines law, Underwriters at Lloyd’s issued Chiverton a homeowner’s policy, numbered 97HO1956 (“Policy #2”), effective for the period from September 15, 1997 to September 15, 1998. Policy #2 was an “HO-8” policy, which covers fewer risks than does the HO-3 form. Therefore, Policy #2 differed from Policy #1 in several material respects, although the two policies shared certain features as well. For example, the limit of liability for coverage on the dwelling remained the same——$75,000——but was reduced to $1,000 for the other structures. On the other hand, the coverage limit for personal property was increased by $5,000, to $30,000; so, too, was the personal liability coverage ceiling raised, substantially, from $25,000 to $100,000. The loss deductible was $500 (the same as Policy #1) except that losses caused by windstorm or hail were subject to a larger deductible of 10% of the applicable coverage limit.5 The total annual premium for Policy #2 was $731.75, which saved Chiverton about $354 as compared to Policy #1. The Department contends that Policy #2 was inferior to Policy #1, affording less coverage and a higher deductible. The record does not contain a complete copy of Policy #2; in evidence instead is a Certificate of Insurance that is equivalent to a declarations page. Thus, it is impossible to determine, from a review of the instant record, whether Policy #2 was substandard or of poor quality in relation to Policy #1. On the premise of Policy #2’s purported inferiority (which was not convincingly proved), the Department argues that Mitchell acted against Chiverton’s best interests by obtaining Policy #2 rather than a policy similar to Policy #1. Chiverton testified that he would not have agreed to purchase Policy #2 had he known that the deductible (for windstorm and hail) was much higher and the coverage (he and the Department argue) more limited. However, the Department’s and Chiverton’s contentions ignore the advantages of Policy #2 (e.g. higher coverage limits for some coverages, lower premium), which a reasonable person might well have found attractive at the time the policy was written. At bottom, the problem with the Department’s position——and Chiverton’s testimony about what he would or would not have done——is that it constitutes Monday morning quarterbacking made with knowledge of losses that occurred during the coverage period of Policy #2. Chiverton made two claims under Policy #2, and both were denied. The first claim was for damages to the dwelling and the other structures that were caused by a windstorm on February 2, 1998. The evidence is sketchy as to what, exactly, happened on that date, and there is no persuasive proof regarding the actual cost of the repairs (or even if any were made). The adjuster’s report states that the dwelling sustained damages in the amount of $283.42 from a leaking roof and that the other structures suffered roof damage that would cost an estimated $1,636.57 to repair. The adjuster concluded that the loss to the dwelling fell within the $500 deductible and hence could not be paid. He concluded similarly that the loss to the other structures was within the 10% windstorm deductible and thus not payable either. The Department contends that this entire loss would have been covered under Policy #1. It is impossible adequately to evaluate this contention because, as explained above, neither Policy #1 nor Policy #2 is in evidence in its entirety. However, based on the adjuster’s figures, it appears that much of this claim would not have been paid under Policy #1. The damages to the dwelling ($283.42) fell under Policy #1’s $500 deductible; therefore, Lloyd’s London presumably would not have paid that portion of the claim. The roof damage to the other structures might have been covered under Policy #1,6 but the carrier would have subtracted the $500 deductible applicable to the “other structures” coverage, resulting in a payable claim of $1,136.57. The second claim, which Chiverton made in March 1998, sought reimbursement for a loss resulting from water damage caused by a ruptured water heater. This claim was denied on the ground that the loss was not covered. The Department’s contention that this claim would have been covered under Policy #1 is not proved. Without the entire policy to review, it is impossible to find that Policy #1 would, in fact, have covered this type of loss. In sum, the Department has failed to prove, even by a preponderance of evidence, that Policy #2 was not in Chiverton’s best interests; that Policy #2 caused injury or loss to the public; or that in obtaining such coverage for Chiverton Mitchell manifested a lack of competence or knowledge. Indeed, based on the extremely limited evidence in the record, it is as likely as not that, at the inception of coverage, Policy #2 was a better deal for Chiverton, on the whole, than Policy #1 had been. There is also reason to believe that, given Chiverton’s claims experience, a standard HO-3 homeowner’s policy with a small, $500 deductible on the windstorm coverage simply could not have been obtained for him. Apart from the above, the Department has charged that Mitchell forged Chiverton’s signature on the application for Policy #2. The evidence on this point is at best inconclusive—— and not nearly clear and convincing. The proof consists primarily of Chiverton’s testimony that the signature on the application is not his.7 Chiverton also testified that he never authorized anyone to sign this application on his behalf. There is no persuasive, much less clear and convincing, evidence that Mitchell personally “forged” Chiverton’s signature on the application. Further, it is highly unlikely that the application was signed by someone who intended to defraud or otherwise injure Chiverton. The undersigned is not clearly convinced that the person who signed the application for Chiverton (assuming it was not Chiverton) did so without either express or implied authorization, for the following reasons. First, as mentioned, Chiverton made two claims under Policy #2, in February and March 1998, respectively. There is nothing in the record which suggests that for the first five or six months of this policy’s life, Chiverton was dissatisfied with the coverage afforded thereunder. He seems not to have had any problems with Policy #2 until his claims were denied. Granted, the denial of these claims might have been his first notice of any potential problems with the policy, but even so, there is no contemporaneous evidence that Chiverton believed he had been effectively defrauded by the submission of a sham application. Second, Chiverton acquiesced in the renewal of Policy #2. It is undisputed that Underwriters of Lloyd’s issued a renewal policy, numbered 98HO1956 (“Policy #3”), that was (as far as the record shows) identical to Policy #2 in terms of coverage and limitations. Policy #3 was in effect from September 15, 1998 to September 15, 1999. There can be no doubt that, by the time Policy #2 was renewed, Chiverton possessed actual knowledge that some provisions of this policy, e.g. the 10% windstorm deductible, were less desirable than some provisions of Policy #1 (and, conversely, that some aspects of Policy #2, e.g. the price, were more desirable). Yet, there is no persuasive evidence that Chiverton objected to the renewal of Policy #2, which undermines the contentions that Policy #2 was the product of a fraudulent application and that Chiverton would never knowingly have purchased such coverage. Finally, Chiverton made at least two claims under Policy #3. On the first of these, submitted in December 1998, the carrier paid Chiverton $526.55 for a burglary loss. The second claim, which stemmed from another broken pipe, was denied in or around January 1999. There is no persuasive evidence that Chiverton contemporaneously expressed any dissatisfaction with Policy #3.8 Because Chiverton made claims and accepted benefits under Policy #3——a policy that he knew was not identical to Policy #1 and was, in fact, the renewal of Policy #2——the undersigned has determined that Chiverton either authorized the submission of the application that he supposedly did not sign or, alternatively, ratified the submission of that application. In any event, the signature on the application was not shown, clearly and convincingly, to have been forged by Mitchell. Rodriguez (Counts II-IV) In mid-1998, Aramis Cabrera and Nelys Rodriguez (collectively “Rodriguez”) agreed to purchase a house. At the closing of this transaction on June 29, 1998, Universal American Mortgage Company (“UAMC”), which was Rodriguez’s mortgagee, tendered $454 to Mitchell, who was Rodriguez’s insurance agent, as payment in full for one year’s premium on a homeowner’s policy insuring the property against windstorm and other hazards. Mitchell’s office accepted the premium payment and produced an instrument entitled “Evidence of Property Insurance” as proof that FRPCJUA had issued Rodriguez a homeowner’s policy covering the property for the period from May 29, 1998 to May 29, 1999. Consequently, Rodriguez and UAMC reasonably believed that such coverage was in force. In fact, however, FRPCJUA had not issued a policy; Rodriguez was without homeowner’s insurance.9 A year later, when the time came to renew the non- existent homeowner’s policy, Mitchell’s office delivered an insurance binder to UAMC showing that for the period from May 29, 1999 to May 29, 2000, the Florida Windstorm Underwriting Association (“FWUA”) would carry Rodriguez’s windstorm insurance and that United Property and Casualty Company (“UPC”) would cover the other hazards. According to the binder, the premium for the windstorm coverage was $446 and for the other hazards, $585. On May 26, 1999, UAMC sent Mitchell’s agency two checks—— one for each premium——totaling $1,031. Thereafter, UAMC increased Rodriguez’s monthly mortgage payment to account for this steep increase in the cost of insurance. Rodriguez complained, both to UAMC and to Mitchell’s office, but to no avail. Meanwhile, unbeknownst to either Rodriguez or UAMC, Rodriguez’s property was still not insured. The binder notwithstanding, neither UPC nor FWUA had actually issued a policy.10 Months later, in October 1999, Mitchell’s office submitted an application to Fortune Insurance Company (“Fortune”) on Rodriguez’s behalf for dwelling fire insurance. In a letter to Rodriguez dated December 29, 1999, Fortune rejected the application, explaining that it had ceased writing new business in Dade County prior to the application date. At some point, too, Mitchell’s office applied to FWUA for windstorm insurance on Rodriguez’s property and tendered $416 in payment of the premium. Evidently there was some problem with this application, however, for FWUA returned the entire $416 payment, sending Mitchell’s agency a check in that amount dated December 20, 1999. Mitchell’s office then resubmitted Rodriguez’s application, together with $416, and this time FWUA accepted the risk, issuing a declarations page on March 1, 2000, that evidenced windstorm coverage on Rodriguez’s home from January 12, 2000 to January 12, 2001. At the same time, FWUA sent Mitchell’s agency a check for $122 because FWUA had been overpaid: the actual premium for the windstorm policy was only $294. When UAMC received FWUA’s declarations page in March 2000 showing that Rodriguez’s windstorm coverage had commenced on January 12, 2000, the lender became concerned, knowing that Mitchell’s office had been sent a check for $466 ten months earlier to pay for an FWUA policy that was supposed to have taken effect on May 29, 1999. UAMC immediately demanded that Mitchell provide verifiable evidence of continuous coverage on the Rodriguez property, from the date the loan closed in June 1998 to the present. Mitchell could not comply. Instead, he refunded the money that UAMC had paid his agency for Rodriguez’s insurance. To that end, Mitchell sent UAMC checks dated March 2, 2000, and March 15, 2000, in the amounts of $416 and $1,069, respectively, which equaled the total amount ($1,485) that UAMC had tendered to his agency.11 On March 16, 2000, Mitchell delivered yet another check, in the amount of $122, to UAMC. Thus, UAMC received from Mitchell $122 in excess of the amounts it had paid his agency for insurance——and Mitchell wound up paying, out of his own pocket, for Rodriguez’s windstorm policy for the one- year period beginning on January 12, 2000. Whether the product of incompetence, negligence, or intentional wrongdoing, serious acts of misconduct were carried out in Mitchell’s name and under Mitchell’s license. It is appalling that from May 28, 1998 until January 12, 2000, Rodriguez had no windstorm insurance and, until at least March 2000 (and probably later——the evidence is unclear) no insurance for other hazards either, despite having paid for such coverage and having been assured that it was in place. At hearing, Mitchell did not deny that problems had occurred in connection with Rodriguez’s insurance matters, and he accepted responsibility for them as the licensed agent in charge of his office. But, by way of exculpation, Mitchell blamed a former employee for having mishandled Rodriguez’s business, and he disclaimed personal knowledge of, or involvement in, the transgressions associated therewith. The evidence does not dispute or negate this hypothesis. Indeed, no persuasive direct evidence clearly shows that Mitchell himself specifically intended to violate any particular statutory or rule provision in connection with the Rodriguez account. Likewise, there is no persuasive direct evidence that Mitchell personally intended to defraud Rodriguez (or UAMC), or that he personally, willfully misappropriated funds belonging to another. In short, the evidence adduced at trial does not convince the undersigned that Mitchell personally committed, caused, condoned, or knew about the misconduct. Whether Mitchell should have known of these misdeeds is a closer question. Making the issue difficult is that the Department presented no evidence of (or argument concerning) the minimum standards of conduct that insurance agents must meet in the exercise of due care. Thus, there is no direct proof that Mitchell negligently supervised his employees, which breach of duty would make him personally culpable for their wrongdoing. Lacking direct evidence, the undersigned has carefully considered whether to infer, based on the nature of the violations or other circumstantial evidence in the record, that Mitchell should have known of the misconduct that occurred in his office. Such an inference would not be outlandish. After all, documents issued in Mitchell’s name falsely assured Rodriguez and UAMC that coverage was in place when in fact it was not. And, profiting from such misrepresentations, Mitchell’s office accepted payments from UAMC (made on Rodriguez’s behalf) for insurance that did not exist. One wonders: Wouldn’t Mitchell have discovered these problems if he had reasonably supervised his employees and made a reasonable review of the files? Before answering “yes,” consider that the Department made no attempt——and hence failed——to prove that the apparent misconduct of Mitchell’s employees was so flagrant, persistent, or practiced that a prudent person could not possibly have missed it. Similarly, there is no evidence concerning the volume of Mitchell’s insurance business, and thus the record does not permit a reliable conclusion to be drawn as to whether these were relatively isolated, easily overlooked lapses——or glaring problems that could not reasonably have been missed.12 Nor did the Department present persuasive evidence that Mitchell completely failed to supervise his employees.13 Absent such evidence, it is debatable whether an inference of constructive knowledge is legally permissible here. Even if an inference leading to the ultimate factual determination that Mitchell fostered, condoned, or negligently overlooked the misconduct of his employees were permissible, however, such an inference would be a relatively weak one. Ultimately, therefore, while it is tempting, given the gravity of the misconduct, simply to pronounce that Mitchell should have known of the problems that plagued Rodriguez, such a finding would rest too much on the undersigned’s personal opinion and not enough on either persuasive direct or compelling circumstantial evidence of negligent supervision. At bottom, the evidence does not clearly convince the undersigned that Mitchell should have known of the deceptive practices that occurred in his office in connection with the Rodriguez account. Mitchell, therefore, is not guilty of the charges brought in Counts II and III of the Administrative Complaint.14 As for the charge brought in Count IV, wherein the Department accused Mitchell of having submitted an application to Fortune after he had been informed by the insurer that risks in Dade County would no longer be accepted, the only proof of this alleged fact is a letter from Fortune to Rodriguez dated December 29, 1999, which is plainly hearsay and as such cannot be relied upon by the trier. Even if credited, this document would not constitute clear and convincing proof of the charge. Thus, Count IV fails for want of adequate evidence. Kidd (Count V) Jean Kidd (“Kidd”) was a client of Mitchell’s whose homeowner’s insurance had been placed with American Colonial Insurance Company (“American Colonial”) through Mitchell’s agency. Kidd’s initial policy covered the period from November 7, 1998 to November 7, 1999. Before Kidd’s policy was due to expire, American Colonial’s managing general agent, which is identified in the record only as “MHD,” sent a renewal offer to Kidd and to Mitchell. The renewal offer comprised two pages, but only the first page is in evidence. The second page——which, according to page 1, contained “important Coverage and Premium Information”—— is not in the record. Apparently, the insured’s acceptance of the renewal offer was to be manifested by paying the premium. For reasons that the evidence does not explain, Kidd failed to respond to the renewal offer, and her policy with American Colonial lapsed on November 7, 1999, for nonpayment. The evidence does not establish whether Mitchell knew that Kidd’s policy had lapsed. It is not clear, either, whether Mitchell should have known about Kidd’s failure to pay, because while her policy was in force, Kidd had been making payments to a premium finance company, not to Mitchell.15 Some time later——the evidence is unclear——Kidd contacted Mitchell to inquire about renewing or reinstating her policy. Mitchell informed Kidd that she needed to make a “down payment” of $282 to reinstate the policy, and on April 20, 2000, Mitchell personally collected Kidd’s check, payable to Mitchell’s insurance agency, in that amount. The evidence is in conflict as to Mitchell’s handling of this money. Mitchell testified that on April 21, 2000, he mailed $282 to American Colonial’s managing general agent on Kidd’s behalf, and there is a document in evidence corroborating this fact. The Department did not directly dispute or negate Mitchell’s testimony. On the other hand, it is clear that American Colonial did not receive these funds, which arguably casts some doubt on Mitchell’s account. Providing a plausible resolution of the conflict is that around this time, American Colonial was in the process of transferring its business from MHD to a new managing general agent, MacNeill Group. Although there is no direct evidence, the inference that MHD lost, misplaced, or mishandled Mitchell’s $282 check in the shuffle of the transition is sufficiently reasonable that the undersigned is unable to find, without hesitancy, that Mitchell willfully misappropriated Kidd’s money, as the Department has charged. It is not clear what, if anything, Mitchell did to follow up on the down payment and follow through with the reinstatement of Kidd’s policy. Since American Colonial did not issue a policy in or around April 2000, a reasonable observer might surmise that Mitchell dropped the ball. The obstacle to making a finding to that effect, however, is the complete absence of evidence in the record establishing the applicable minimum standards of conduct against which Mitchell’s performance can be judged. While the undersigned holds the personal view that a reasonably diligent insurance agent should at least keep track of the progress of his client’s insurance application and promptly inform his client of the insurer’s acceptance or rejection of the risk, the undersigned does not make the rules, set the standards, or decide cases based on his personal preferences. As for what happened next, the evidence is incomplete. In July 2000, Kidd suffered a loss from water damage caused by a leaky pipe under her kitchen sink. She contacted Mitchell’s office and, on July 24, 2000, was sent a two-page fax consisting of a cover sheet and page 1 of American Colonial’s renewal offer, which had lapsed in November 1999. According to Kidd, Mitchell’s “then secretary” sent this fax, at Kidd’s request, so that Kidd could file a claim.16 Kidd understood the renewal offer to be evidence of coverage. The Department contends that Mitchell fraudulently and dishonestly passed off American Colonial’s renewal offer as proof of insurance. Nothing in the July 24, 2000, fax, however, characterizes the renewal offer as such. More important, the evidence demonstrates that Sharon Montgomery——not Mitchell——sent the fax, and there is no persuasive direct or compelling circumstantial evidence that Mitchell knew or should have known that these pages were transmitted, much less the reason for the communication. In sum, the undersigned is not convinced that Mitchell personally misrepresented to Kidd the existence of an insurance policy; that he condoned such deception; or that he negligently permitted this to occur. In October 2000, Kidd’s roof was damaged in a storm, and she contacted Mitchell about making a claim. Mitchell was personally involved in this claim, although it is not clear that he or his agency submitted paperwork to American Colonial or otherwise put the carrier on notice. Rather, it appears that Mitchell advised Kidd to make a claim with the Federal Emergency Management Agency, and he may have assisted her in doing so. Dissatisfied with the service that Mitchell’s agency was providing, Kidd eventually filed her claims directly with American Colonial in late October or November 2000. Upon investigation, the carrier determined that Kidd’s original policy had lapsed in November 1999 for nonpayment of premium. However, in late December 2000, American Colonial decided to honor Kidd’s claims anyway, issuing her a policy effective retroactively, as of April 20, 2000 (the date she had tendered $282 to Mitchell for a down payment), on the condition that she promptly pay a balance of $1,418 in premium. By letter dated December 20, 2000, American Colonial rescinded Mitchell’s authority to act on its behalf and demanded that he pay $282 towards the premium for Kidd’s policy. On December 22, 2000, Mitchell sent American Colonial a check for that amount. Although the evidence is spotty, it is clear that as of October 2000, when he became personally involved in handling a claim for Kidd, Mitchell should have known that Kidd was without coverage, and he probably should have taken affirmative steps immediately to correct the problem. The Department, however, did not charge Mitchell with misconduct relating to his apparent failure to do something to protect Kidd at this late date, focusing instead on alleged violations (misappropriation of funds, misrepresentation of coverage) that were not clearly and convincingly proved. Moreover, the Department did not offer any evidence as to the minimum standards of conduct in these circumstances. Thus, while the undersigned believes that Mitchell should have done something, he can only speculate as to what Mitchell should have done. Similarly, Mitchell’s handling of Kidd’s second claim (for roof damage) seems to have been woefully inadequate, but, again, Mitchell was not charged with any violations relating to claims administration per se, and in any event there is no evidence concerning the applicable standards of conduct in this regard. Consequently, the undersigned is compelled to make the ultimate factual determination that the Department has failed to prove, clearly and convincingly, the truth of the charges brought against Mitchell in connection with Kidd.17
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order finding Mitchell not guilty of the charges brought against him in the Amended Complaint. DONE AND ENTERED this 18th day of November, 2002, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 2002.
The Issue The issue in this case is whether Respondent, Sunshine Rental of Citrus, LLC (“Sunshine”), 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. Sunshine is a validly-existing limited liability company in the State of Florida. It was formed on April 18, 2007, for the purpose of conducting any and all lawful business. The company is primarily engaged in the business described in its website as “a family-owned nursery, rock yard, stone yard and landscaping company.” The principal address of the company is listed in the Florida Division of Corporations’ records as 6658 West Sunripe Loop, Crystal River, Florida. On January 26, 2016, Dale Russell, a compliance investigator with the Department, conducted an investigation at 7045 North Walden Woods Drive, Homosassa, Florida. Upon arrival at the site, Mr. Russell observed two men installing driveway paver stones at a residence. Mr. Russell identified himself as an investigator for the Department and asked the men for whom they were working, i.e., by whom were they employed. The men allegedly advised Mr. Russell that they were employed by Sunshine. Mr. Russell asked their names and was told they were Mike Stevens and Carlos Esptri. Inexplicably, Mr. Russell did not obtain any further information from the men such as phone numbers, addresses, or driver’s license numbers. The men then gave Mr. Russell the telephone number for Sunshine. Mr. Russell checked the Department’s compliance and coverage automated system (CCAS) to verify workers’ compensation insurance coverage for the men under Sunshine’s name. According to CCAS, there was no coverage for the two men. Mr. Russell called the number the men had provided, but there was no answer even though he called during normal business hours. So, Mr. Russell drove from Homosassa to Crystal River and went to Sunshine’s business location, 6658 Gulf to Lake Highway. When he went inside the business premises, Mr. Russell spoke with Joseph and Margaret Melchiore, who identified themselves as the owners of Sunshine. The Melchiores initially told Mr. Russell that they did not have workers’ compensation insurance because they did not need it. According to Mr. Russell, Mrs. Melchiore told him that the two workers he had identified were actually subcontractors, ostensibly operating under their own insurance. Mr. Russell explained that since the two workers were not working under any particular company of their own but were installing pavers for Sunshine, they were deemed employees of Sunshine and needed to be covered by Sunshine’s insurance. Based upon this discussion, Mr. Russell issued a SWO and made a formal request for production of business records upon Sunshine. The SWO and records request were hand-delivered to the Melchiores at the business location on the same day Mr. Russell first talked with them. The day after Mr. Russell served the SWO on Sunshine, Mr. and Mrs. Melchiore went to the workers’ compensation compliance office in Tampa and applied for exemptions from workers’ compensation insurance coverage for themselves. In the applications for exemption, applicants were given the option of selecting construction industry or non-construction industry as their area of employment. The Melchiores both checked the construction industry boxes and identified themselves as members of a limited liability company. At final hearing, they could not explain why they made that selection when seeking an exemption. They indicated on the exemption request forms that the scope of work to be done as “nursery, stone, pavers” without further explanation. The Melchiores also entered into an Agreed Order for the purpose of lifting the SWO so they could continue to make a living. They made an initial payment of $1,000 with the agreement to enter into a “Payment Agreement Schedule for Periodic Payment of Penalty.” No such agreement was entered into between Sunshine and the Department and no further payments were made. At final hearing the Melchiores stated the company does not provide any physical labor or other construction work; they only sell materials. This testimony is contradicted by the pictures and statements in their website, including: “We deliver and install at a reasonable price,” and “[W]e can provide you with our installation services.” Likewise, the signage at their business location said at one point in time, “PAVERS INSTALLED.” The fact that the Melchiores applied for an exemption and entered into an Agreed Order is strongly suggestive that they were aware of their need for and failure to maintain workers’ compensation insurance. However, the Department could not prove by clear and convincing evidence that the Melchiores were engaged in physical labor in the construction industry. They were only observed (by Mr. Russell) performing clerical or retail sales-type work. The Department calculated the amount of the penalty based on the Melchiores apparent and seemingly admitted involvement in the construction industry. An Amended Order of Penalty Assessment – in the amount of $91,211.04 – was served on Sunshine. Sunshine did not timely provide the Department with complete business records, so the penalty amount had been established by way of imputing income for Sunshine’s employees. Sunshine eventually provided the Department with most, but not all, of the requested records. Inasmuch as the records were not complete, the Department auditors were not able to make an absolute determination of Sunshine’s payments to employees. For example, there were numerous checks missing from the records; the October 2014 records are missing in their entirety; and the 2016 records – from the period of time around the disputed construction in Homosassa – are missing a page. The Department had asked for the financial records immediately upon issuing the SWO, but Sunshine did not do so because they were “looking for an attorney.” As a result, the records were not timely received by the Department and were not complete when ultimately provided (and were never totally complete, even at final hearing). Mr. Russell never spoke to the two workers from the Homosassa site again and they did not appear at the final hearing in this matter. Their hearsay statements (i.e., that they were employed by Sunshine) were never completely confirmed by other competent and substantial evidence. However, Mrs. Melchiore’s claim that she did not know the two men was not entirely believable. Based on the fact that the men gave Sunshine’s number to Mr. Russell, and that Mrs. Melchiore initially admitted knowing them but stated they were subcontractors, it is more likely than not that the men were at least known to Sunshine. Mrs. Melchiore testified at final hearing that when she and Mr. Russell talked, she disavowed knowing of the two workers at all. Mr. Russell’s testimony was more credible, but there remains a legitimate question as to what was actually said. The one instance of paver installation addressed by the Department (other than the Homosassa site discussed above) allegedly occurred at a business known as First Fruit Markets, also located in Homosassa. It is undisputed that Mr. Melchiore installed pavers in front of that business establishment. He did so, however, reputedly as a gift to the young couple who had recently opened the business. Mr. Melchiore claimed that he was not paid for the work he performed, that it was done on a Sunday afternoon when he was not working for Sunshine, and it was a gift. The owners of the business were not called as witnesses to substantiate Mr. Melchiore’s claim. The evidence shows that there is a sign at the fruit market identifying the pavers as being from Sunshine. Whether that sign indicates the work was done by Sunshine or was just appreciation shown by the owners of the business was not established by the evidence. Sunshine introduced into evidence several 1099-MISC forms showing payments by the company to John Gray, the Melchiores son. The purpose of those 1099s was to show that Sunshine used independent contractors to do work for them. Further, the 1099s were meant to suggest that the Melchiores did not pay anyone, including their son, in cash. Again, Mr. Gray did not testify to substantiate that suggestion. The evidence established that Sunshine owned trucks used in the business. There was, unfortunately, no evidence presented as for what purpose the trucks were used by the business. One picture on the Sunshine website shows a front-end loader putting materials into the back of a truck with a Sunshine decal on the door, but whether the truck was used for delivery only (and whether such work required workers’ compensation coverage) was not established by evidence in the record. Sunshine’s failure to timely provide its business records resulted in the imputed method being employed to determine the amount of the penalty to be assessed. 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 5221 – under the construction umbrella – was assigned to the work being done by Sunshine. The period of non-compliance was set at January 27, 2014 through December 31, 2014; January 1, 2015 through December 31, 2015; and January 1, 2016 through January 26, 2016. Those are the dates within the Department’s two-year audit period that Sunshine was deemed to be out of compliance. The imputed gross payroll amount was $334,161.00 for the first period of non-compliance, $359,789.88 for the second period, and $12,814.44 for the third. By comparison, the gross payroll relating to the Melchiores only was: $167,080.05 for the first period; $89,947.47 for the second period; and $12,814.44 for the third period (the “Melchiore payroll”). The total payroll figures, divided by 100, resulted in the amounts of $3,341.61, $3,597.89 and $1,281.44, respectively. Comparatively, the Melchiore payroll figures, divided by 100, equals $1,670.80, $8,994.74, and $128.14, respectively. The approved manual rates set for the three periods were 6.38, 6.25, and 7.02, reflecting the rates for Class Code 5221. The premium owed by the employer on the total payroll for the first period was calculated at $21,315.58; $22,486.81 for the second; and $1,799.08 for the third. For the Melchiore payroll only, the calculated amounts would be $10,659.70, $5,621.68, and $899.54, respectively. The premium amounts, multiplied by two, resulted in assessed penalties for the total payroll of $42,631.16; $44,973.62 for the second; and $3,598.16 for the third, for a total penalty of $91,211.04. For the Melchiores-only payroll, the penalty amounts would be $21,319.40; $11,243.36; and $1,799.08, for a total penalty of $34,362.56. There was not sufficient evidence presented at final hearing to establish what the total penalty would have been had a non-construction Class Code been assigned to the Melchiores.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation enter a Final Order assessing a penalty against Respondent, Sunshine Rental of Citrus, LLC, based upon the imputed income amounts for Joseph and Margaret Melchiore and applying the appropriate Class Code. DONE AND ENTERED this 7th day of July, 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 7th day of July, 2016. COPIES FURNISHED: Kristian Eiler Dunn, Esquire Dunn and Miller, P.A. 215 East Tharpe Street Tallahassee, Florida 32303 (eServed) Thomas Nemecek, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street Tallahassee, Florida 32399 (eServed) Joaquin Alvarez, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Bennett M. Miller, Esquire Dunn and Miller, P.A. 215 East Tharpe Street Tallahassee, Florida 32303 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
