The Issue Whether the Petitioner's application of January 11, 1991, for examination as a general lines agent should be granted.
Findings Of Fact Petitioner Paul L. Kornya was licensed in 1974 as a general lines insurance agent in the State of Florida. Prior to 1984, Respondent Department of Insurance had taken no formal disciplinary action against the Petitioner. In 1983, while licensed as an insurance agent and employed in the capacity of office manager for the Milton Carpenter Insurance Agency, Petitioner established a demand deposit account in the name of "Atlantic Association Insurance" and listed himself as the sole signatory and beneficiary on the account. Petitioner thereafter wrote four unauthorized checks on the Milton Carpenter Agency Account totaling $47,132.14 made payable to Atlantic Association Insurance and deposited them into his demand deposit account. In order to conceal his activity, the Petitioner altered the payee of the checks. In a prior administrative case (Case No. 84-L-4085F), Petitioner admitted misappropriating and converting the funds. In 1983, while licensed as an insurance agent and employed in the capacity of office manager for the Milton Carpenter Insurance Agency, Petitioner wrote two unauthorized checks on the Milton Carpenter Agency Account totaling $3,455 made payable to Blinder, Robinson and Co., Inc., Investment Bankers. In order to conceal his activity, the Petitioner listed an agency account code designated for miscellaneous companies on said checks. In a prior administrative case (Case No. 84-L- 4085F), Petitioner admitted misappropriating and converting the funds which were used for Petitioner's personal stock purchases. In 1984, a judgement in the amount of $52,013.35 was entered against Petitioner in the case styled Milton Carpenter Insurance, Inc., a Florida Corporation, and Cincinnati Insurance Company vs. Paul L. Kornya, Case No. 84-3235 CA(L)A, Fifteenth Judicial Circuit Court, Palm Beach County, Florida. On October 31, 1985, the Department entered a Final Order revoking Petitioner's license qualifications and eligibility for licensure for a period of two years, based upon the misappropriation and conversion of said funds. By application signed December 16, 1987 and filed December 28, 1987, Petitioner submitted an application for examination as a general lines insurance agent. By Insurance Commissioner Bill Gunter's letter to the Petitioner of February 29, 1988, the Department requested that the Petitioner submit certain certificates of employment to verify his prior experience. The letter stated that, "[t]o qualify for this examination through experience you must have completed within the past 4 years, at least 1 year of substantially full-time responsible duties as the bona fide employee of an agent or insurer. Your duties during this time must have been in all lines of property, casualty, surety, health and marine insurance. ... One certificate should be completed by you and the other by your employer." The Petitioner claims to have submitted said employment certificates shortly following the Department's request. However, the Department's files do not contain the documents or any other response to the letter, and there is no evidence beyond Petitioner's testimony to support the claim. By letter of March 17, 1988, Department representative Franklin Thompson again requested the experience information cited in the February 29 letter or in the alternative, that Petitioner submit proof that a course of education had been completed. The letter further stated that "we will need a statement from Milton Carpenter Insurance Inc. Agency of Belle Glade, Florida stating that any and all indebtedness you may have had relative to their firm has been satisfied". Both the February 29 and March 17 letters provided that failure to file the information within 30 days from the date of each letter is grounds for denial of the application. Three months passed following the March 17 letter to the Petitioner. According to the records of the Department, no response to either letter was received. On June 17, 1988, the Petitioner's December 1987 application was closed by the Department based upon the failure of Petitioner to submit the previously requested information. By letter of June 23, 1988, the Petitioner advised the Department that the indebtedness was not to the Milton Carpenter Insurance Agency, but was to Cincinnati Insurance Company, which had insured the Carpenter agency against such losses. The letter further stated that approximately $5,000 had been repaid to the Cincinnati Insurance Company. By letter of August 3, 1988, Department representative Thompson wrote, "[t]he information you have furnished has been thoroughly reviewed. It appears that your indebtedness with Milton Carpenter Insurance has been assigned to Cincinnati Insurance Company. Please request that Cincinnati Insurance Company furnish us with a statement indicating that all of your indebtedness to their company has been satisfied". The letter stated that failure to respond within 30 days from the date of the letter was grounds for denial of the application. The evidence does not explain the reason for Mr. Thompson's letter of August 3, 1988. Given the June 17 closure of the pending application based upon the Petitioner's failure to supply additional information, the information furnished apparently consisted of the Petitioner's untimely filed letter of June 23. As of August 3, no pending application existed. In any event, the Petitioner did not respond to the August 3 request. By second application signed October 31, 1989, and filed November 3, 1989, Petitioner submitted an application for examination as a general lines insurance agent. By undated letter, Department representative Thompson again requested Petitioner to submit either certificates of employment to verify his prior experience or proof of completion of certain educational requirements, and further requested a reply to the letter of August 3, 1988 seeking statement from Cincinnati Insurance Company indicating that "all of your indebtedness to their company has been satisfied". Again the letter provides that failure to furnish the requested information within 30 days would result in the file being closed. 1/ The Petitioner, subsequent to the undated letter and prior to February 2, 1990, submitted said certificates of employment. Early in 1990, the Petitioner's application file was assigned to Department representative, Patricia Lehman. On February 2, 1990, Ms. Lehman informed that Petitioner that his certificates of employment were not acceptable, and that he would be required to complete a 240 hour educational requirement. Further, Ms. Lehman's letter provided that, "[i]n addition, you will need to furnish us with a certified letter from Cincinnati Insurance Company that you have made full restitution or a certified copy of the written agreement between you and the party(s) involved that you are making restitution satisfactory to all parties concerned. The information you sent to us is not certified and reflects no signatures". Beginning February 26, 1990, Mr. Kornya took and completed the 240 hour insurance course as identified in the Department's previous communications. The $595 course met for six weeks, five days each week, from 8:00 a.m. to 5:00 p.m. On September 17, 1990, the pending application was closed by the Respondent based upon the failure of Petitioner to submit the previously requested information. There is no evidence that Petitioner submitted evidence of completing the educational requirement. On or about January 8, 1991, Petitioner entered into an restitution agreement with Cincinnati Insurance Company setting forth a payment schedule which requires that Petitioner make a payment of $300 each month to the Cincinnati Insurance Company in order to eventually satisfy the entire $52,013.35 judgement against him. By application signed January 11, 1991, and filed January 16, 1991, Petitioner submitted an application for examination as a general lines agent. By memorandum of February 18, 1991, to her superior, Bob Stewart, Ms. Lehman recommended that the Petitioner's application be denied. Specifically, her memo provides as follows: Mr. Kornya's license qualification and eligibility for licensure were revoked by the Department in 1985 for the mishandling of funds in a fiduciary capacity. It does not appear Mr. Kornya attempted to make restitution until the signed Agreement in 1991. He has demonstrated lack of fitness and trustworthiness to engage in the business of insurance. Therefore pursuant to Sections 626.611(1) (7) , [sic] 626.641(2) and 626.731(1), I recommend his application be denied. Although Ms. Lehman's memo states that "[i]t does not appear Mr. Kornya attempted to make restitution until the signed Agreement in 1991", prior to the January 8, 1991 execution of the restitution agreement, the Petitioner had paid $12,237.94 to Cincinnati Insurance Company realized from the sale of vehicles and real estate. The executed copy of the restitution agreement reflects that such funds were paid, although the agreement fails to indicate when the payment was made. The payment was applied towards interest which had accumulated on the judgement, not towards the $52,013.35 principle judgement amount. At the time of the hearing, the restitution payments were current (although Petitioner did not make the $300 payment due in April, but paid $600 in May.) As of the date of hearing, approximately $49,913 remained to be paid to Cincinnati Insurance Company to satisfy the judgement. Although at the time of the hearing, a letter allegedly from Cincinnati Insurance Company indicated that they had not received documentation of Petitioner's compliance with paragraph five of the restitution agreement (a requirement that Petitioner purchase a life insurance policy naming the insurer as irrevocable beneficiary), said policy was purchased on January 9, 1991. By letter of March 1, 1991, the Department denied the application, based on an application of the statutory sections cited in Ms. Lehman's memo. On June 21, 1991, the Department issued an amended letter of denial. 2/ In the amended letter of denial, the Department cites the prior misappropriation of funds, the unsatisfied judgement, and the 1985 revocation of licensure and eligibility for licensure, which "circumstances surrounding that revocation still exist". The letter cites Sections 626.611(1), (4), (7), (9), (10) and (13), section 626.641(2), and section 626.731(1) Florida Statutes, as the statutory basis for the denial. The evidence fails to establish that any representative of the Department of Insurance, at any time, informed or assured the Petitioner that, upon his completion of the course of education and upon the execution of the restitution agreement between Cincinnati Insurance Company and the Petitioner, his application for examination for licensure as a general lines insurance agent would be approved. The Petitioner has been acquainted with his current employer, Samuel Jokich, for approximately six years. Mr. Jokich employs the Petitioner as a "Colorado Prime" freezer beef salesman. According to Mr. Jokich, the Petitioner is "extremely trustworthy" and of good character. The Petitioner had not disclosed to Mr. Jokich, and Mr. Jokich was not otherwise aware, that the Petitioner had taken approximately $52,000 from the Milton Carpenter Insurance Agency. Mr. Jeffrey Hooker, an independent insurance agent in Belle Glade and childhood friend of the Petitioner's, is aware of the Petitioner's misappropriation and conversion of approximately $52,000 from the Milton Carpenter Insurance Agency. However, Mr. Hooker stated that he would trust the Petitioner and "try to help him any way I could". Mr. Hooker desires to become partners with the Petitioner in a proposed insurance agency in Ft. Myers. Mr. Kenneth Snyder, a field representative for CNA Insurance Company, has known the Petitioner for approximately eight years. He believes the Petitioner to be of "good character" with "solid morals". Although Mr. Snyder was aware that the Petitioner had taken some funds from the Milton Carpenter Insurance Agency, he was unaware of the amount of said funds. Mr. Snyder stated that he would be willing to enter into a business relationship were the Petitioner to become licensed as a general lines agent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Insurance enter a Final Order denying the application of Paul L. Kornya to sit for examination for licensure as a general lines insurance agent. DONE and RECOMMENDED this 23rd day of January, 1992, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM 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 23rd day of January, 1992.
The Issue The issue for consideration in this case is whether Respondent's license as an all lines insurance adjuster in Florida should be disciplined because of the matters alleged in the Administrative Complaint filed herein.
Findings Of Fact At all times relevant to the issues herein, Petitioner, Department of Insurance, was the state agency in Florida responsible for the licensing of insurance agents and adjusters in this state and the regulation of the insurance profession therein. Respondent was licensed as an all lines insurance adjuster in Florida, and had been for approximately eight to ten years. On May 15, 1997, Respondent's home, located at 6617 North 23rd Street in Tampa, Florida, was damaged by fire, making it temporarily uninhabitable by Respondent and his two sons. As a result, Respondent arranged for his two sons to reside temporarily with a friend, Ms. Wanda McLendan. Though no formal written agreement was entered into between them, Respondent claims he verbally agreed to pay her $45.00 per day for the housing of his two sons. Respondent rented quarters for himself at the AmeriSuites Motel on North 30th Street in Tampa for the night of May 16, 1997, for which he was charged and paid $88.48. Commencing on May 17, 1997, Respondent moved into the DoubleTree Guest Suites Motel near Busch Gardens in Tampa, for which he paid $79.00 per night, plus tax. He remained at that facility until he checked out on June 9, 1997. Over the period he remained there, Respondent paid a total of $2,052.04 for room, taxes, and phone calls. All charges to both facilities were placed on Respondent's American Express card. Respondent submitted these charges to USAA, his insurance company, under that provision of his homeowner's policy which provided coverage for living expenses caused by property loss, up to $18,800 over a total of 12 months. These charges were reimbursed to him. On July 27, 1997, Respondent forwarded to USAA a claim for further additional living expenses which allegedly arose out of the loss of use of the property due to the fire. In the cover letter which constituted the claim, Respondent indicated that on June 9, 1997, he and his family moved into a townhouse located at 5231 Tennis Court Circle in Tampa, which was owned by a friend, Linda Akins. Accompanying the letter was an extract of the pertinent insurance policy and a statement dated June 9, 1997, allegedly signed by both Respondent and Ms. Akins, whereby Respondent agreed to rent the subject property for $220.00 per day, including furniture and utilities. There was to be no deposit or lease. Also accompanying the claim letter were photo copies of four checks drawn on the First Union National Bank of Florida, numbers 1750, 1758, 1759, and 1761, in the amount of $3,080, $3,080, $3,080, and $1,320 respectively, made payable to Ms. Davis, signed by the Respondent, and dated June 22, and July 8, 21, and 26, 1997, all of which indicate they were in payment of rent for the property located at 5231 Tennis Court Circle. On July 30, 1997, Respondent sent another letter to Mr. Price at USAA in which he claimed additional living expenses for his two sons at the residence of a friend, Ms. McLendon, at a rate of $45.00 per day for the period from May 16, 1997, to June 9, 1997. Accompanying that letter was a photocopy of check number 1752, dated June 15, 1997, in the amount of $945, drawn on the same bank as the others, and payable to Wanda McClendon. This check bore the additional notation that it was for lodging for the two boys as alleged. When these two claims were received by USAA, because the checks attached thereto did not appear to have been negotiated, the company initiated an investigation to be conducted by Mr. Green, one of its investigators. Mr. Green reviewed the entire claim file and then interviewed both Respondent and Ms. Akins. Based on Green's review of the claim file and his interview of the individuals, he concluded that the claim was false in that the expenses claimed had not been incurred. USAA requires that to be reimbursed to a policy holder, the expenses claimed have to have been actually incurred, but the policy does not define the term "incurred expenses." At the hearing, Ms. Akins indicated that she had been contacted by Respondent about renting her townhouse in question and she agreed to do so. They initially agreed upon a rental of $220.00 per day, she claims, but she also indicated Respondent agreed to pay to her in rent what he received from his insurance company. He gave her the checks which accompanied the claim, but asked her not to cash them because there was not enough money in the account to honor them, and she did not do so. She had rented the apartment to Respondent several years previously for a monthly rental of $400 to $475, but he contends, and she agrees, that this was only a part of the consideration paid for the rental. He also did some work around the property which, he contends, and she agrees, made up the balance of the consideration for the rental. No clear indication of what that work was, or its value, was presented, and it is found that the rental paid in the prior rental was considerably less that $220.00 per day and a claim for that amount is both unreasonable and unrealistic. Ms. Akins contends she ultimately received a cashier's check for $3,000 in rent from Respondent. Based on his conclusion that the claim was false, consistent with the requirements of the Department of Insurance, Theodore Hammer forwarded the claim to the Department for further action. Hammer, a fraud investigator for the Department, conducted additional inquiry into the claim, more specifically into the second claim regarding the payment to Ms. McClendon. During the interview with Ms. McClendon, she indicated she had agreed to Respondent's sons staying with her for a while, but they did not discuss any fee for this and he did not give her the check for $945.00. At hearing, Ms. McClendon also contended that the agreement with Respondent called for him to pay her whatever he received from the insurance company. Respondent ultimately gave her a total of $225.00. Respondent claims that when his home burned on May 15, 1997, he initially moved, with his sons, into a motel where they all stayed for several nights. He then made an arrangement with Ms. McClendon for his sons to stay with her for $45.00 per day. There was no written contract. Respondent remained in a motel until he had charged all his credit card would allow. However, the receipts offered into evidence reflect the credit card used was an American Express card, and there is usually no credit limit on a card from that company. This inconsistency was not explored by either party. He reached an agreement, he claims, with Ms. Akins whereby he would pay her $225.00 per day for rent of her two- bedroom house which is what he asserts two rooms in a motel would cost. Review of the receipts for Respondent's stay at the AmeriSuites and the DoubleTree reflects a maximum of $88.00 per night at the former and about the same at the latter; a figure which, when doubled, will still total far less that $225.00. However, if cost of food is included in the tabulation of motel living expense, Respondent's claim is not too far off. Respondent estimated his stay in the Akins property would only be for a few weeks, but the repair process took far longer than expected. Finally, even though his house was not finished, he moved back in. When, during the investigation, Mr. Green asked Respondent for the cancelled checks to support his claim, Respondent did not know what he was talking about. There were no cancelled checks. He admits he had written the checks in issue, but had given them, as appropriate, to Ms. Akins and Ms. McClendon and had asked them not to cash them. Respondent, an insurance adjuster for a significant period of time before this incident, claims he did not understand that he could not be reimbursed for money he had not actually spent. He claims he did not intend to misrepresent the situation to the insurance company or to make a profit from the deal. His difficulty, he claims, lay in his poor letter-writing skills which permitted him to indicate in the claim letter that the check copies he had enclosed were cancelled. Though he is not sure what the insurance company policy on payment of claims was, he contends he understood the company would pay for obligations he incurred, and he did not have to wait until he had satisfied these obligations before seeking reimbursement for them. Respondent asserts that when he submitted both claims letters, he did not mean to imply that he had paid the sums represented by the checks or than they had been cancelled. Respondent indicated he had agreed to pay his friends the same amount he was paying at the motel, but a review of the receipts reflects he paid for only one room each night at a rate far less than $225.00 per night. He claims, and his friends confirmed at hearing, that he had agreed to pay only what the insurance company would reimburse him, yet the agreement he submitted with the claim, purporting to bear the signature of Ms. Akins, is a blatant forgery. Further, his claim that his letter referring to the checks as cancelled was an ignorant and inartful use of words is disingenuous and unbelievable. Respondent's counsel contends that the policy in issue does not require the expenses claimed be actually paid before reimbursement, and that Mr. Green did not so indicate when he interviewed Respondent. However, at hearing Mr. Green unequivocally stated company policy that indicated they must be. In the balance, it is found that an insurance adjuster with the years of experience possessed by Respondent would know that. Further, Respondent's contention that the company's denial of the claim, and the resultant lack of loss to the company, when coupled with a lack of adjustment offer by the company, renders Respondent's conduct non-actionable is non-persuasive.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Insurance enter a final order in this matter suspending Respondent’s license as an all lines insurance adjuster for a period of twelve months. DONE AND ENTERED this 18th day of November, 1999, in Tallahassee, Leon County, Florida. ARNOLD H. POLLOCK 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) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 1999. COPIES FURNISHED: David W. Nam, Esquire David Busch, Esquire Department of Insurance 200 East Gaines Street 612 Larson Building Tallahassee, Florida 32399-0333 Christopher Clark, Esquire C. Laing Clark, P.A. 1958 West Dr. Martin Luther King Jr. Boulevard Tampa, Florida 33607 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300 Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact Introduction At all times relevant hereto, respondent, Charles Lee Anderson, was licensed as a general lines insurance agent by petitioner, Department of Insurance and Treasurer. Respondent presently resides at 2291 Northwest 12th Court, Pompano Beach, Florida. He has been licensed by petitioner since 1968, and, prior to this proceeding, had no blemishes on his record. When the events herein occurred, Anderson was the president and director of Payless and Save Insurance Underwriters Corporation (Payless), an insurance agency located and doing business at 2401 Northwest 21st Avenue, Fort Lauderdale, Florida. Anderson was also the general lines agent of record for the corporation. Count I In early January, 1984 Anderson was working from midnight until 8:00 a.m. as a security guard. Because of this, he hired one Mamie Baugh as an independent contractor to operate his insurance agency. Anderson authorized Baugh to sell policies and sign his name on insurance applications and other documents. Anderson would drop by his office two or three times a week to "check on (Baugh)" and "look at the paperwork." On or about January 3, 1984 Blanche Jones went to Payless to purchase an automobile insurance policy. She chose Payless because it was located just around the corner from her home in Fort Lauderdale, and was more convenient than her former insurance agent in Hallandale. Because Anderson was not present, Jones met with Baugh and discussed her insurance needs. Baugh filled out an application on behalf of Jones for automobile insurance with Industrial Fire and Casualty Insurance Company (Industrial) in Hollywood, Florida. Anderson was a licensed agent with Industrial, and authorized to act as a brokering agent for that company. Baugh signed Anderson's name on the application as brokering agent. Jones then gave Baugh a check for $456 as payment for the policy and was given a receipt. In February Jones had not received her policy or any evidence that she was insured. Her husband decided to visit the Payless office and obtain an insurance identification card in the event they had an accident. He met with Anderson who promised to give him a card. The following day, Anderson went to Jones' house and dropped off a business card. 1/ While there, Jones told Anderson she had paid for a policy but had never received anything. Anderson promised to "check into the particulars." After not hearing from Anderson for two months, Jones' husband went to Payless' office and found it closed. Jones thereafter went to her old insurance agent in Hallandale, and then to Public Insurance Agency (Public) in Hollywood. Public was the managing general agent for Industrial, the insurance company with whom Jones thought she had a policy. Public had no record of having received Jones' application or the $456 premium paid to Anderson. It also had no record of Anderson having telephoned Public on its "application telephone", a procedure that Anderson should have followed in order to have a binder issued on the policy. Consequently, Public never issued a policy insuring Jones. In late 1985 Jones was reading a copy of the Hollywood Sun Tattler, a local newspaper, and noticed an article about Anderson, who was then running for chief of police in Dania. She contacted the reporter who wrote the story who in turn contacted Anderson. Respondent telephoned Jones the next day and promised to return her money. A week later (January 10, 1986) Jones received a $456 money order from Anderson. A representative of Public established that Anderson was given a copy of an underwriting guide which contained explicit instructions on how to bind coverage and fill out applications. Among other things, the guide required that Anderson, and not his surrogate, sign all applications. Therefore, he was not authorized to allow Baugh to sign in his stead. Count II On or about December 20, 1983 Joseph V. Baxter visited Payless for the purpose of purchasing insurance coverage on various rental properties he owned. Baxter met with Anderson who prepared six "Homeowners Application for Quotation Only" with International Bankers Insurance Company (IBIC). Baxter gave Anderson a check for $818 as payment for the coverage. Anderson later endorsed the check. On January 11, 1984 Baxter returned to Payless and made application for a seventh insurance policy on another rental property. He gave Anderson a $318 check which Anderson subsequently endorsed. At that time Baxter was given a certificate of insurance indicating coverage with Great Southwest Fire Insurance Company (GSFIC). Several months later Baxter received a telephone call from a representative of the lending institution which held the mortgages on his property. Baxter then instructed Anderson to contact the institution and certify that Baxter had coverage on his properties. Anderson telephoned the institution in Baxter's presence and told the representative that Baxter was insured. Sometime later Baxter was again contacted by the mortgagee concerning his insurance coverage. Baxter attempted to visit Anderson but found Payless had closed its offices and gone out of business. Baxter then filed a complaint with petitioner. He never received insurance policies from IBIC or GSFIC. On January 10, 1986 Anderson repaid Baxter $1,136, the amount received by Anderson some two years earlier. A representative of IBIC established that Anderson never remitted the premiums or mailed the six quotation forms to the home office. It was further established that although GSFIC quoted a rate for Anderson on Baxter's seventh piece of property, it never received the follow-up application or premium. Respondent's Case Respondent blamed the Jones mishap on Baugh, who he claimed may have misplaced the application and taken the money. According to Anderson, she now lives in California and was unable to attend the hearing. However, he had no explanation for failing to follow up on Baxter's applications. Anderson said he closed his business in February, 1984 after a series of break- ins at his office, and left a note on the door giving a telephone number where he could be reached. However, he made no effort to personally contact those persons who held policies. Anderson further stated that he was unaware of the Jones and Baxter complaints until contacted by the newspaper reporter and petitioner, and then promptly repaid all monies due.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of the violations set forth in the Conclusions of Law portion of this order, and that his license and eligibility for licensure be REVOKED. DONE and ORDERED this 10th day of September, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of September, 1986.
Findings Of Fact Petitioner is the state agency in Florida responsible for the regulation and licensing of general lines insurance agents. Its responsibility includes the duty to sanction those licensed under the insurance code for violations of the code. At all times relevant, Respondent was a licensed general lines insurance agent and possessed license #265736194 issued by the Petitioner on December 21, 1990. Respondent's license is presently active. On June 5, 1992, an order of liquidation, injunction and notice of automatic stay was entered in Case No. 92-1766, Circuit Court, Leon County, Florida, In Re: The Receivership of First Miami Insurance Company, a Florida corporation. On December 14, 1992, Salma Zacur, the operations manager for the receiver for First Miami Insurance Company, mailed a letter to Respondent. On June 7, 1993, a summary order directing immediate delivery of funds was entered in Case No. 92-1766, Circuit Court, Leon County, Florida, In Re: The Receivership of First Miami Insurance Company, a Florida corporation. On June 8, 1994, an order on receiver's motion for entry of final judgment was entered in Case No. 92-1766, Circuit Court, Leon County, Florida, In Re: The Receivership of First Miami Insurance Company, a Florida corporation. Petitioner failed to produce evidence of the contents of the December 14, 1992 letter which was non-hearsay and, therefore, failed to establish the relevance of the court orders of June 7, 1993 and June 8, 1994 in this matter. The Petitioner failed to present clear and convincing evidence that Respondent violated Section 631.155, or Chapter 626, Florida Statutes.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department enter a final order dismissing the Administrative Complaint filed against Respondent. DONE and ENTERED this 23rd day of August, 1995, in 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 23rd day of August, 1995. APPENDIX The following constitutes my specific rulings, in accordance with Section 120.57(1)(b)9., Florida Statutes. Proposed findings of fact submitted by Petitioner. Accepted in substance: paragraphs 1, 2, 3, 4, 5, 7 (in part), 12 (in part). Rejected as not proven by clear and convincing evidence: paragraphs 6, 7 (in part), 8, 9, 10, 11, 12 (in part) 13. Proposed findings of fact submitted by Respondent. Accepted in substance: paragraphs 1, 2, 3, 4, 5, 6, and 7. COPIES FURNISHED: Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner Acting General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300 Michael K. McCormick, Esquire Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0300 Jed Berman, Esquire Infantino and Berman O. Drawer 30 Winter Park, Florida 32790
The Issue Whether proposed rules promulgated by the Florida Department of Insurance related to sale of insurance products by agents affiliated with financial institutions are an invalid exercise of delegated legislative authority.
Findings Of Fact The Florida Department of Insurance is responsible for regulation of insurance transactions in the State of Florida. On January 29, 1997, the Department of Insurance issued a notice to interested parties of a rules workshop to address "parity" of insurance regulation. The workshop was conducted on February 21, 1997. The Department of Insurance published the final rule proposal on May 23, 1997. A public hearing was conducted on June 19, 1997. The record of the public hearing remained open until June 25, 1997, for submission of written comments. A Notice of Change was published on July 18, 1997. A Second Notice of Change was published on August 8, 1997. The Petitioners timely filed petitions challenging the proposed rules. All parties have standing to participate in this proceeding. As set forth in the rule proposal, the purpose and effect of the proposed rules is as follows: Section 626.5715, Florida Statutes, requires the Department to adopt rules to assure parity of regulation in this state of insurance transactions as between an insurance agency owned by or an agent associated with a federally chartered financial institution, an insurance agency owned by or an agent associated with a state- chartered financial institution, and an insurance agency owned by or an agent associated with an entity that is not a financial institution. (Emphasis supplied.) The summary portion of the published rule proposal states that the "proposed rules implement standards to provide parity pursuant to Section 626.5715, Florida Statutes." Section 626.5715, Florida Statutes, the "parity statute," provides as follows: The department shall adopt rules to assure the parity of regulation in this state of insurance transactions as between an insurance agency owned by or an agent associated with a federally chartered financial institution, an insurance agency owned by or an agent associated with a state-chartered financial institution, and an insurance agency owned by or an agent associated with an entity that is not a financial institution. Such rules shall be limited to assuring that no insurance agency or agent is subject to more stringent or less stringent regulation than another insurance agency or agent on the basis of the regulatory status of the entity that owns the agency or is associated with the agent. For the purposes of this section, a person is "associated with" another entity if the person is employed by, retained by, under contract to, or owned or controlled by the entity directly or indirectly. This section does not apply with respect to a financial institution that is prohibited from owning an insurance agency or that is prohibited from being associated with an insurance agent under state or federal law. (Emphasis supplied.) The word "parity" is not defined in the statute. Webster's Dictionary defines "parity" as "[t]he quality or state of being equal or equivalent." Pursuant to the specific statute requiring the Department to adopt rules, the Department's authority to adopt rules related to this issue is limited to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. Rule 4-224.002 (Settings and Circumstances) Proposed Rule 4-224.002 provides as follows: 4-224.002 Setting and Circumstances of Insurance Transactions. The setting and circumstances in which insurance transactions occur shall be structured so as to avoid deception as to, and to assist the consumer in understanding, the nature of the product sold, the identity of the insurer, and the identity and representative capacity of the insurance agent. When an agent is transacting insurance, any business cards and stationery used shall reflect his status as an insurance agent. Other materials used in insurance transactions which address the representative capacity of the agent shall identify the individual as an insurance agent. The published rule proposal indicates that Proposed Rule 4-224.002, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.307, 626.5715, 626.951, 626.9521, 626.9541, 626.9561 and 626.9611, Florida Statutes. Section 624.308, Florida Statutes, provides the Department with the general authority to adopt "reasonable rules necessary to effect any of the statutory duties of the department...." and states that willful violation of Department rules may result in a range of penalties including revocation of licensure. Section 624.307, Florida Statutes, generally sets forth the powers and duties of the Department. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.951, Florida Statutes, is the "declaration of purpose" for the Unfair Insurance Trade Practices Act, and in part states as follows: The purpose of this part is to regulate trade practices relating to the business of insurance in accordance with the intent of Congress as expressed in the Act of Congress of March 9, 1945 (Pub. L. No. 15, 79th Congress), by defining, or providing for the determination of, all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined. Section 626.9521, Florida Statutes, prohibits and penalizes unfair methods of competition and unfair or deceptive acts or practices and provides penalties. Section 626.9541, Florida Statutes, addresses "unfair methods of competition and unfair or deceptive acts" and provides as follows: UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE ACTS.--The following are defined as unfair methods of competition and unfair or deceptive acts or practices: Misrepresentations and false advertising of insurance policies.--Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which: Misrepresents the benefits, advantages, conditions, or terms of any insurance policy. Misrepresents the dividends or share of the surplus to be received on any insurance policy. Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy. Is misleading, or is a misrepresentation, as to the financial condition of any person or as to the legal reserve system upon which any life insurer operates. Uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof. Is a misrepresentation for the purpose of inducing, or tending to induce, the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy. Is a misrepresentation for the purpose of effecting a pledge or assignment of, or effecting a loan against, any insurance policy. Misrepresents any insurance policy as being shares of stock or misrepresents ownership interest in the company. False information and advertising generally.--Knowingly making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public: In a newspaper, magazine, or other publication, In the form of a notice, circular, pamphlet, letter, or poster, Over any radio or television station, or In any other way, an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance, which is untrue, deceptive, or misleading. Defamation.--Knowingly making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting, or encouraging the making, publishing, disseminating, or circulating of, any oral or written statement, or any pamphlet, circular, article, or literature, which is false or maliciously critical of, or derogatory to, any person and which is calculated to injure such person. Boycott, coercion, and intimidation.-- Entering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion, or intimidation resulting in, or tending to result in, unreasonable restraint of, or monopoly in, the business of insurance. False statements and entries.-- Knowingly: Filing with any supervisory or other public official, Making, publishing, disseminating, circulating, Delivering to any person, Placing before the public, Causing, directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false material statement. Knowingly making any false entry of a material fact in any book, report, or statement of any person, or knowingly omitting to make a true entry of any material fact pertaining to the business of such person in any book, report, or statement of such person. Stock operations and advisory board contracts.--Issuing or delivering, promising to issue or deliver, or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, benefit certificates or shares in any common- law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns or profits as an inducement to insurance. Section 626.9561, Florida Statutes, authorizes the Department to "investigate the affairs of every person involved in the business of insurance in this state in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice. " Section 626.9611, Florida Statutes, provides for the adoption of Department rules as follows: 626.9611 Rules.--The department may, in accordance with chapter 120, promulgate reasonable rules as are necessary or proper to identify specific methods of competition or acts or practices which are prohibited by s. 626.9541 or s. 626.9551, but the rules shall not enlarge upon or extend the provisions of ss. 626.9541 and 626.9551. (Emphasis supplied.) Proposed Rule 4-224.002 is an invalid delegation of legislative authority. The proposed rule exceeds the Department specific grant of rulemaking authority which is limited in this case to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. The rule does not provide parity of regulation. Proposed Rule 4-224.002 is an invalid exercise of delegated legislative authority because it is vague, fails to establish adequate standards for agency decisions and vests unbridled discretion in the agency. The proposed rule provides no information as to how an insurance transaction may be "structured" so as to "avoid deception" of the purchaser. The determination of whether an insurance transaction has been "structured" to "avoid deception" is at the discretion of the Department. The proposed rule provides no standards for Department decisions which will be made under the rule. The proposed rule provides no assistance or information to regulated parties as to what types of transaction structures are prohibited or acceptable, other than to require that the agent be identified as such during the insurance transaction. Proposed Rule 4-224.002 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. Neither the testimony of the Department's witnesses, nor the research information offered by the Department in support of the proposed rule, are sufficient to support validation of this rule. The evidence fails to establish the existence of substantial consumer confusion regarding marketing of insurance products by financial institutions. The Department cites a previous administrative action related to the sale of insurance products in a financial institution as evidence that consumer confusion exists. The Department also cites another administrative action where the agency prosecuted an insurer for the misleading sale of insurance products. The evidence establishes that the cited cases were prosecuted under currently existing rules and regulations and does not establish the validity of the proposed rules at issue in this proceeding. The existence of other rules relating to manner and means of insurance product sales is insufficient to establish the validity of the proposed rules at issue in this case. Rule 4-224.004 (Underwriting of Insurance- Authorization Required) Proposed Rule 4-224.004 provides: No entity which is not licensed as an insurer by the Department shall directly or indirectly assume the obligation to provide the benefits of an insurance contract, or otherwise transact insurance as an insurer in this state. As identified in the published rule proposal, Proposed Rule 4-224.004, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.11, 624.401, 626.5715, 626.051 and 628.151(1), Florida Statutes. Section 624.308, Florida Statutes, provides general rulemaking authority to the Department. Section 624.11, Florida Statutes, prohibits any person from transacting insurance in Florida without complying with the provisions of the Insurance Code, and provides for operation of "risk retention groups" pursuant to law. Section 624.401, Florida Statutes, requires each insurer to obtain a certificate of authority from the Department in order to conduct business either directly or indirectly, and provides that failure to obtain a certificate is a third degree felony. The section also provides for preemption by the state of the field of regulating insurers and their agents and representatives from local regulation. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.051, Florida Statutes, provides a definition of "life agent." Section 628.151(1), Florida Statutes, provides as follows: No domestic insurer shall engage directly or indirectly in any business other than the insurance business and business activities reasonably and necessarily incidental to such insurance business. At the hearing, the Department's witness testified that the proposed rule was in response to comments offered by participants in the rulemaking proceeding suggesting that recent court decisions would permit financial institutions to act as insurers and to assume the obligations of insurance contracts. Proposed Rule 4-224.004 is an invalid exercise of delegated legislative authority because it exceeds the specific grant of rulemaking authority which is limited in this case to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. The proposed rule does not implement, interpret or make specific any provision of Florida law. Proposed Rule 4-224.004 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. Anecdotal recollections of comments made by unidentified persons during rulemaking workshops do not constitute competent substantial evidence. Rule 4-224.007 (Primary Agent) Proposed Rule 4-224.007 provides: Each agency location where a licensed and appointed insurance agent is engaged in transactions with respect to insurance products shall be considered an insurance agency for purposes of Section 626.592, Florida Statutes. In those instances where an agent legally conducts insurance transactions at two or more agency locations, a separate primary agent need not be designated at each location, provided that no insurance transactions shall occur at any location when the agent is not present, and no unlicensed employee at the location has engaged in insurance activities requiring licensure. In those instances the agent shall be responsible for insurance transactions occurring at each location and one location shall be designated as the primary location. As identified in the published rule proposal, Proposed Rule 4-224.007, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 626.5715, 626.031, 626.041, 626.0428, 626.051, 626.062, 626.094, 626.112, 626.592, Florida Statutes. Section 624.308, Florida Statutes, sets forth the general rulemaking authority of the Department. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.031, Florida Statutes, provides a definition of "agent." Section 626.041, Florida Statutes, provides a definition of "general lines agent." Section 626.0428, Florida Statutes, provides limitations on the activities of agency personnel as follows: 626.0428 Agency personnel powers, duties, and limitations.-- An individual employed by an agent or agency on salary who devotes full time to clerical work, with incidental taking of insurance applications or quoting or receiving premiums on incoming inquiries in the office of the agent or agency, is not deemed to be an agent, customer representative, or solicitor if his or her compensation does not include in whole or in part any commissions on such business and is not related to the production of applications, insurance, or premiums. No employee of an agent or agency may bind insurance coverage unless licensed and appointed as a general lines agent or customer representative. No employee of an agent or agency may initiate contact with any person for the purpose of soliciting insurance unless licensed and appointed as a general lines agent, customer representative, or solicitor. Section 626.051, Florida Statutes, provides a definition of "life agent." Section 626.062, Florida Statutes, provides a definition of "health agent." Section 626.094, Florida Statutes, provides a definition of "insurance agency" as follows: 626.094 "Insurance agency" defined.--An "insurance agency" is a business location at which an individual, firm, partnership, corporation, association, or other entity, except for an employee of the individual, firm, partnership, corporation, association, or other entity, and other than an insurer as defined by s. 624.03 or an adjuster as defined by s. 626.101, engages in any activity or employs individuals to engage in any activity which by law may be performed only by a licensed insurance agent or solicitor. (Emphasis supplied.) Section 626.112, Florida Statutes, requires licensure of agents, agencies and related personnel. Section 626.592, requires the designation of "primary agents" as follows: 626.592 Primary agents.-- On or before January 1, 1990, and annually thereafter, each person operating an insurance agency and each location of a multiple location agency shall designate a primary agent for each insurance agency location and shall file the name of the person so designated, and the address of the insurance agency location where he or she is primary agent, with the Department of Insurance, on a form approved by the department. The designation of the primary agent may be changed at the option of the agency and any change shall be effective upon notification to the department. For the purpose of this section, a "primary agent" is the licensed agent who is responsible for the hiring and supervision of all individuals within an insurance agency location who deal with the public in the solicitation or negotiation of insurance contracts or in the collection or accounting of moneys from the general public. An agent may be designated as primary agent for only one insurance agency location. For the purpose of this section, an "insurance agency" is a location where any agent is engaged in the business of insurance. The department may suspend or revoke the license of the primary agent if an insurance agency employs any person who has had a license denied or any person whose license is currently suspended or revoked. However, when a person has been denied a license for failure to pass a required examination, he or she may be employed to perform clerical or administrative functions for which licensure is not required. The primary agent in an unincorporated agency, or the primary agent in an incorporated agency in which no officer, director, or stockholder is an agent, shall be responsible and accountable for the acts of salaried employees under his or her direct supervision and control, while acting on behalf of the agency. Nothing in this section shall be construed to render any person criminally liable or subject to any disciplinary proceedings for any act unless such person personally committed or knew or should have known of such act and of the facts constituting a violation of this chapter. The department may suspend or revoke the license of any agent who is employed by a person whose license is currently suspended or revoked. No insurance agency location shall conduct the business of insurance unless a primary agent is designated at all times. Failure to designate a primary agent as required under this section shall constitute grounds for requiring that the agency obtain a license in accordance with ss. 626.112 and 626.172. Any insurance agency may request, on a form prescribed by the department, verification from the department of any person's current licensure status. If a request is mailed to the department within 5 working days after the date an agent is hired, and the department subsequently notifies the agency that an employee's license is currently suspended, revoked, or has been denied, the license of the primary agent shall not be revoked or suspended if the unlicensed person is immediately dismissed from employment as an insurance agent with the agency. (emphasis supplied) Proposed Rule 4-224.007 is an invalid exercise of delegated legislative authority because it exceeds the grant of rulemaking authority provided in Section 626.5715, Florida Statutes. The proposed rule does not provide parity of regulation. The proposed rule is not limited to assuring that no insurance agency or agent is subject to more stringent or less stringent regulation than another insurance agency or agent on the basis of the regulatory status of the entity that owns the agency or is associated with the agent. Proposed Rule 4-224.007 is an invalid exercise of delegated legislative authority because it enlarges, modifies and contravenes the specific provisions of law implemented. The proposed rule specifically states that "where an agent legally conducts insurance transactions at two or more agency locations, a separate primary agent need not be designated at each location. " Section 626.592, Florida Statutes, requires the designation of a primary agent for each insurance agency location. An insurance agency is defined as a location where any agent is engaged in the business of insurance. No insurance agency location can conduct the business of insurance unless a primary agent is designated at all times. A primary agent may be so designated for only one insurance agency location. The Department has no authority to waive the requirements of Section 626.592, Florida Statutes. Further, the proposed rule permits an agent to designate one location of several as a "primary location." There is no statutory authorization for designation of a "primary location." Proposed Rule 4-224.007 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. The only testimony regarding this proposed rule relates to the alleged expense involved in requiring separate primary agent designation for some banks which may choose to offer insurance products. The testimony is not persuasive and does not constitute competent substantial evidence supporting the rule. Rule 4-224-012 (Coercion) Proposed Rule 4-224.012 provides: 4-224.012 Coercion No person shall by words, actions, or distribution of written materials require or imply that the purchase of insurance by a borrower or prospective borrower from a particular agent, agency, insurer or other entity is required as a condition of, or will influence the terms or conditions of, the lending of money or the extension of credit. To the extent that insurance may permissibly be marketed in connection with or in conjunction with any activities described in this section; The agent shall disclose at or before the initial discussion or in response concerning insurance coverage required or offered in connection with a loan or credit application, that: the purchase of insurance from any particular source is not a condition to the provision of, and will not affect the terms of, any loan of money or extension of credit; Insurance is available through agent not associated with a lender or creditor; and The choice of another insurance provider will not affect decisions relating to or terms of any loan or credit extension. 1. A written disclosure which addresses the elements of paragraph (a) above shall be provided to the consumer in a separate documents on Form DI4- (rev /97) or Form DI4- (rev /97) [sic] which are adopted and incorporated herein by reference, or on another form approved in advance by the Department that provides equivalent disclosure, at or before the time the consumer completes an application or enrollment form or otherwise applies for coverage. 2. One copy of the form signed by the consumer shall be retained by the agent. The requirements of this rule 4-224.012 are inapplicable to credit insurance for which disclosures provided satisfy the disclosure requirements for excluding the premium of charge for insurance from the finance charge pursuant to Federal Truth in Lending Regulation Z, Section 12 CFR 226.4(d)(1) and (2), which is adopted incorporated herein by reference. As identified in the published rule proposal, Proposed Rule 4-224.012, Florida Administrative Code, is specifically authorized by Sections 624.308 and 626.9611, Florida Statutes, and implements Sections 626.5715, 626.051, 626.9541, 626.9551, and 626.9641, Florida Statutes. Section 624.308, Florida Statutes, provides the Department's general rulemaking authority. Section 626.9611, Florida Statutes, provides the Department's authority to adopt rules pursuant to Section 120, Florida Statutes, which specifically identify prohibited methods of competition, but limits such rules to those acts prohibited under Sections 626.9541 and 626.9551. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.051, Florida Statutes, defines "life agent." Section 626.9541, Florida Statutes, addresses "unfair methods of competition and unfair or deceptive acts" and is set forth herein. Section 626.9551, Florida Statutes, addresses the issue of coercion or "favoritism" and provides as follows: 626.9551 Favored agent or insurer; coercion of debtors.-- No person may: Require, as a condition precedent or condition subsequent to the lending of money or extension of credit or any renewal thereof, that the person to whom such money or credit is extended, or whose obligation the creditor is to acquire or finance, negotiate any policy or contract of insurance through a particular insurer or group of insurers or agent or broker or group of agents or brokers. Unreasonably disapprove the insurance policy provided by a borrower for the protection of the property securing the credit or lien. For purposes of this paragraph, such disapproval shall be deemed unreasonable if it is not based solely on reasonable standards, uniformly applied, relating to the extent of coverage required by such lender or person extending credit and the financial soundness and the services of an insurer. Such standards shall not discriminate against any particular type of insurer, nor shall such standards call for the disapproval of an insurance policy because such policy contains coverage in addition to that required. Require, directly or indirectly, that any borrower, mortgagor, purchaser, insurer, broker, or agent pay a separate charge in connection with the handling of any insurance policy required as security for a loan on real estate or pay a separate charge to substitute the insurance policy of one insurer for that of another. This paragraph does not include the interest which may be charged on premium loans or premium advances in accordance with the security instrument. Use or disclose information resulting from a requirement that a borrower, mortgagor, or purchaser furnish insurance of any kind on real property being conveyed or used as collateral security to a loan, when such information is to the advantage of the mortgagee, vendor, or lender, or is to the detriment of the borrower, mortgagor, purchaser, or insurer, or the agent or broker, complying with such a requirement. The department may investigate the affairs of any person to whom this section applies to determine whether such person has violated this section. If a violation of this section is found to have been committed knowingly, the person in violation shall be subject to the same procedures and penalties as provided in ss. 626.9571, 626.9581, 626.9591, and 626.9601. Section 626.9641, Florida Statutes, sets forth a series of standards known as Policyholder's Bill of Rights and provides as follows: 626.9641 Policyholders, bill of rights.-- The principles expressed in the following statements shall serve as standards to be followed by the department in exercising its powers and duties, in exercising administrative discretion, in dispensing administrative interpretations of the law, and in promulgating rules: Policyholders shall have the right to competitive pricing practices and marketing methods that enable them to determine the best value among comparable policies. Policyholders shall have the right to obtain comprehensive coverage. Policyholders shall have the right to insurance advertising and other selling approaches that provide accurate and balanced information on the benefits and limitations of a policy. Policyholders shall have a right to an insurance company that is financially stable. Policyholders shall have the right to be serviced by a competent, honest insurance agent or broker. Policyholders shall have the right to a readable policy. Policyholders shall have the right to an insurance company that provides an economic delivery of coverage and that tries to prevent losses. Policyholders shall have the right to a balanced and positive regulation by the department. This section shall not be construed as creating a civil cause of action by any individual policyholder against any individual insurer. Proposed Rule 4-224.012 is an invalid exercise of delegated legislative authority because it exceeds the Department's grant of rulemaking authority. Such authority is limited to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. The evidence fails to establish that this rule provides for parity of insurance regulation. Proposed Rule 4-224.012 is an invalid exercise of delegated legislative authority because it enlarges the specific provisions of law being implemented. The rule mandates a statement of disclosure for which there is no statutory requirement. The statutes cited as being implemented by this proposed rule clearly prohibit coercive activities, but do not impose any disclosure requirement as would be required by the rule. Proposed Rule 4-224.012 is an invalid exercise of delegated legislative authority because there is no competent substantial evidence supporting the rule. The Department asserts that research indicates consumers can be, and are, coerced into purchasing insurance products by lenders during credit transactions. The Department also cites a previous administrative action prosecuted under existing statutes as evidence that coercion occurs. The evidence offered by the Department, including the testimony of the Department's witnesses, fails to support the assertion that coercion by financial institutions in the sale of insurance products is a substantial problem. Neither the cited research nor the related testimony by the Department's witnesses was persuasive. The greater weight of the evidence, including the testimony of Dr. Michael White, establishes that there is little empirical evidence of coercion in the sale of insurance products by financial institutions. As additional support for the rule, the Department offered testimony related to the existence of other regulatory disclosure rules and of model language adopted by the National Association of Insurance Commissioners. Neither the other rules or the model language establish that the proposed coercion rule meets the current requirements of law. Other disclosure regulations were adopted prior to recent amendments to Chapter 120, Florida Statutes, the Administrative Procedures Act (APA), which altered the "reasonableness" standard under which such rules could have been appropriate. The relevant model language of the NAIC has not been adopted by the Florida legislature. Rule 4-224.013 (Remedies) Proposed Rule 4-224.013 provides as follows: 4-224.013 Remedies Any person violating the provisions of the Insurance Code implemented by this rule chapter shall be subject to the issuance of a Cease and Desist Order in accordance with the provisions of Sections 624.310(3) and 626.9581, Florida Statutes, and to the imposition of an administrative penalty pursuant to Sections 624.310(5) and 626.9521, Florida Statutes, and to such other sanctions or proceedings as are authorized by the Florida Insurance Code. If the majority owner, partner, manager, director, officer or other person who manages or controls an insurance agency violates any provision of the Insurance Code or any department rule, or knowingly permits violation of any requirement of these rules by an agent or employee of the agency, the agency must obtain a license as an insurance agency in accordance with the provisions of Section 626.112(8), Florida Statutes. As identified in the published rule proposal, Proposed Rule 4-224.013, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.310, 624.4211, 646.418, 626.5715, 626.051, 626.112, 626.9521 and 626.9581. Section 624.308, Florida Statutes, provides the Department with general rulemaking authority. Section 624.310, Florida Statutes, provides the Department with enforcement and prosecutorial powers for violations of the Insurance Code, including cease and desist orders, administrative fines, and removal of "affiliated parties." Section 624.4211, Florida Statutes, provides for imposition of administrative fines in lieu of other disciplinary penalties. Section 624.418, Florida Statutes, provides suspension or revocation of certificates of authority for certain violations and other conditions. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.051, Florida Statutes, provides a definition of "life agent." Section 626.112, Florida Statutes, provides for licensure of agencies, agents and other representatives. Section 626.9521, Florida Statutes, prohibits and penalizes unfair methods of competition and unfair or deceptive acts or practices which are statutorily defined or determined pursuant to Sections 626.951 and 626.9651, Florida Statutes. Section 626.9581, Florida Statutes, provides the Department with the ability to issue cease and desist orders related to the commission of unfair or deceptive acts or practices or the unlawful transaction of insurance, and states as follows: 626.9581 Cease and desist and penalty orders.--After the hearing provided in s. 626.9571, the department shall enter a final order in accordance with s. 120.569. If it is determined that the person charged has engaged in an unfair or deceptive act or practice or the unlawful transaction of insurance, the department shall also issue an order requiring the violator to cease and desist from engaging in such method of competition, act, or practice or the unlawful transaction of insurance. Further, if the act or practice is a violation of s. 626.9541 or s. 626.9551, the department may, at its discretion, order any one or more of the following: Suspension or revocation of the person's certificate of authority, license, or eligibility for any certificate of authority or license, if he or she knew, or reasonably should have known, he or she was in violation of this act. Such other relief as may be provided in the insurance code. The Department presented no evidence with respect to Proposed Rule 4-224.013. The Department asserts only that the proposed rule is intended to provide notice to non-traditional sellers of insurance that a violation of the Insurance Code will subject them to the penalties set forth in the Insurance Code. Proposed Rule 4-224.013 is an invalid exercise of delegated legislative authority because it is redundant and unnecessary. The rule does not implement, interpret or make specific any provision of Florida law. There is no competent substantial evidence which establishes the validity of the proposed rule. Rule 4-224.014 (Confidential Information) Proposed Rule 4-224.014 provides: 4-224.014 Confidential Information Obtaining confidential information for a stated purpose unrelated to the transaction of insurance when it is known that the information will or may be used for purposes of marketing insurance, and when the insurance-related purpose is not disclosed, constitutes a deceptive statement or omission and is an unfair and deceptive act or practice under the provisions of the Unfair Insurance Trade practices Act, Part X, Chapter 626, Florida Statutes. (2)(a) Any entity which is a non-insurance transaction obtains confidential information concerning an individual or entity where it is known the information will be used by an affiliate insurance agent or agency for purposes of marketing insurance, or where it is known or reasonably should be known that there is a present intent or plan to use such information in such a manner, shall conspicuously and clearly disclose that fact to the person at the time the information is obtained and the consumer should be afforded an opportunity to object to the utilization of such information. (b) If the disclosure is not provided on a separate form, it must be made on a document signed by the person, in which case the disclosure shall be made in a larger type size than that used elsewhere in the document, or in a manner that is otherwise clearly distinguishable from the remaining text of the document, and must appear immediately adjacent to the person's signature. If the disclosure is made on a separate form and if information obtained as a result of future transaction may be used for marketing purpose; The disclosure shall clearly reflect such fact, and After a period of three years a new disclosure form must be provided if additional confidential information is secured and this paragraph is not complied with. (3)(a) Insurance agents and insurance companies are prohibited under the Insurance Code from engaging in practices which are injurious to policyholders or the public. (b) Use of confidential information concerning any person for purposes of marketing insurance when the person has directed that the information not be used for such purposes entails conduct which is injurious to policyholders or the public. (4) For purposes of this rule 4-224.014, confidential information is information pertaining to an individual or entity that is generally not available, provided that in no event shall the name, address, or telephone number or any person be considered confidential. As identified in the published rule proposal, Proposed Rule 4-224.013, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.418(1)(b), 626.5715, 626.621(6), 626.9541(1), 626.9611 and 626.964(1), Florida Statutes. Section 624.308, Florida Statutes, provides the Department's general rulemaking authority. Section 624.418, Florida Statutes, provides suspension or revocation of certificates of authority for certain violations and other conditions. Subsection (1)(b) specifically provides for such penalties where the insurer is using such methods and practices in the conduct of its business as to render its further transaction of insurance in this state hazardous or injurious to its policyholders or to the public. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.621(6), Florida Statutes, sets forth grounds for denial or suspension of licensure, and provides as follows: 626.621 Grounds for discretionary refusal, suspension, or revocation of agent's, solicitor's, adjuster's, customer representative's, service representative's, managing general agent's, or claims investigator's license or appointment.--The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, solicitor, adjuster, customer representative, service representative, managing general agent, or claims investigator, and it may suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal is not mandatory under s. 626.611: * * * (6) In the conduct of business under the license or appointment, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part X of this chapter, or having otherwise shown himself or herself to be a source of injury or loss to the public or detrimental to the public interest. Section 626.9541, Florida Statutes, addresses "unfair methods of competition and unfair or deceptive acts" and is set forth herein. Section 626.9611, Florida Statutes, provides the Department's authority to adopt rules pursuant to Section 120, Florida Statutes, which specifically identify prohibited methods of competition, but limits such rules to those acts prohibited under Sections 626.9541 and 626.9551. Section 626.9641(1), Florida Statutes, is the "Policyholder's Bill of Rights" and is set forth herein. Proposed Rule 4-224.014 is an invalid exercise of delegated legislative authority because it exceeds the Department's grant of rulemaking authority. The evidence fails to establish that the cited statutes provide the Department with the authority to prohibit the collection or utilization of information. The proposed rule exceeds the Department's specific grant of rulemaking authority which is limited in this case to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. Proposed Rule 4-224.014 is an invalid exercise of delegated legislative authority because it is vague, fails to establish adequate standards for agency decisions and vests unbridled discretion in the agency. The rule states that collection of information "when it is known that the information will or may be used for purposes of marketing insurance, and when the insurance-related purpose is not disclosed, constitutes a deceptive statement or omission. " The phrase "when it is known that the information...may be used" is vague and requires a post-collection determination of the intent of the data collector at the time the information was gathered. Further, proposed definition of "confidential information" as that which is "generally not available" is vague. The vagueness of the rule results in a lack of adequate standards for decision making and vests unbridled discretion in the Department. Proposed Rule 4-224.014 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. The testimony related to this proposed rule consisted primarily of an analysis of the statutory support for the rule. The evidence is insufficient to establish that the undisclosed collection of information which may be used at some time in a non-insurance setting constitutes an unfair or deceptive trade practice. There is no statutory provision which prohibits or restricts the sharing of information between a financial institution and an affiliated insurance agency. There is evidence that such prohibition as the Department intends to impose by this rule may violate the federal Fair Credit Reporting Act, 12 U.S.C. 1681t(b)(2), and the state Banking Code, Section 655.059(2)(b), Florida Statutes.
The Issue Whether or not Petitioner's application for examination as a general lines agent should be approved.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received, and the entire record compiled herein, I hereby make the following relevant factual findings: On or about September 2, 1989, Petitioner, Kimberly L. Strayer, formerly known as Kimberly Lindsay, filed an application for examination as a general lines agent with Respondent, Department of Insurance. Since January 1988, Petitioner has been the sole owner and president of Central Florida Insurance Agency (Central). On or about December 28, 1989, Respondent informed Petitioner, by letter, that her application for examination as a general lines agent was denied for the following reasons: Petitioner operated Central Florida Insurance Agency without a licensed general lines agent in the full-time active charge of that agency from January 1, 1988 through August 31, 1988. During January 1988 Petitioner accepted applications and down payments from the following insureds: Robert Smallwood, Annelle Jones, Mickey Lawson, Donald Johnson, Thomas Jones, Manning O'Callahan and Christopher Stevens. Petitioner issued a binder and an automobile identification card for each insured indicating that coverage was bound with State Farm Mutual Insurance Company, as servicing carrier for the Florida Joint Underwriting Association (FJUA). At the time Petitioner had no authority to accept either applications or premiums on behalf of State Farm. Petitioner failed to forward such applications and premiums to the insurer until April 12, 1988. During January 1988, Petitioner accepted an application and premium payment of $274.00 from Tammy Clay. Petitioner issued a binder indicating that coverage was bound with State Farm and Union American Insurance Companies. Petitioner failed to forward either the application or the premium payment to any insurer. Petitioner issued a fictitious policy number to Ms. Clay and after nearly four months, submitted a money order to State Farm payable to Tammy Clay, on or about May 1989. At the hearing, Petitioner admitted that she did not have a licensed general lines agent in full-time active charge of her agency; that she accepted applications and premium payments from the above-named insureds for auto insurance to be bound with State Farm Mutual Insurance Company and that she accepted an application for premium payment for automobile insurance from Tammy Clay in the amount of $274.00 for coverage to be bound by State Farm Mutual Insurance Company. Petitioner was first employed in the insurance sales industry during the summer of 1987. At the time, she was only seventeen years old and had completed the eleventh grade. Petitioner's first employment in the insurance industry was with Friendly Auto Insurance (Friendly) which had several offices throughout Polk County, Florida. Friendly was owned by Petitioner's now husband, Larry Lindsay when she was hired. Petitioner formed Central during late 1987 and began operating Central on or about January 1, 1988. Petitioner received her supervision and training while employed with Friendly, primarily through on the job experiences. During late 1987, Petitioner's husband encountered problems with one of his business partners which resulted in strained relations. The resultant strained relations prompted Petitioner to organize Central. Central purchased several of Friendly's agencies of which her now husband had an interest, with Petitioner paying a nominal amount for the "book of business" that Friendly had generated. When Central commenced operations during January of 1988, Bob Seese was the licensed insurance agent who was authorized under the rules of the FJUA to accept applications and bind coverage through one of the FJUA servicing carriers, State Farm. Friendly and its successor, Central, generated a substantial volume of so-called high risk auto insurance business for drivers who could not obtain insurance through the regular market. Bob Seese had been associated with and served as the licensed agent for the Friendly agency in Lakes Wales which Central purchased in January 1988. At the time Petitioner commenced operating Central, she hired Bob Seese as the licensed general lines agent. She considered that Central was authorized to accept applications and continue to bind FJUA insurance coverage through State Farm. Petitioner forwarded all of the FJUA insurance applications which were bound by Bob Seese to State Farm within a period ranging from one week to approximately one month. State Farm refused to accept the applications submitted by Petitioner based on its contention that initially, Bob Seese was not authorized to bind coverage through Central, as he had not transferred his license to Central and Seese could only operate out of the Friendly agency of Lake Wales. 1/ Bob Seese was formally authorized by State Farm to conduct business through Central during February 1988. As a result of that authorization, all of the above-named insureds obtained insurance and none of the insureds suffered any monetary loss as a result of Seese's belated authorization. All of the premium payments that Petitioner received were, in time, forwarded to the respective carriers. Petitioner properly gave new insureds binder numbers which were serially dispensed in the order that premium payments were received. During January 1988, Petitioner accepted an application and premium payment for auto insurance from Tammy Clay for coverage to be bound by State Farm. Petitioner submitted Clay's application and premium payment to State Farm and it was returned on one occasion based on the fact that a facsimile stamp was used by the purported licensed agent (Seese). Petitioner resubmitted it and State Farm again returned it based on State Farm's contention that Seese was not authorized to conduct business through Central. Petitioner has now completed the required formal educational courses to demonstrate her eligibility to sit for the general lines agent's examination. Petitioner is now knowledgeable about insurance matters and is aware of the proper procedures for operating as a general lines agent. When Petitioner formed Central, she had less than one year's experience in the insurance business and was ineligible to sit for the general lines agent exam as she was not of majority age.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Respondent enter a Final Order granting Petitioner's application for examination as a general lines insurance agent. DONE and ENTERED this 31st day of October, 1990, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL 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 31st day of October, 1990.
The Issue Whether the Petitioner's application for licensure as a nonresident general lines insurance agent and a nonresident surplus lines insurance agent should be approved or denied.
Findings Of Fact On August 4, 2006, the Petitioner filed an application for licensure as a "09-20" nonresident general lines insurance agent and a "91-20" nonresident surplus lines insurance agent. By Notice of Denial dated December 11, 2006, the Respondent denied the Petitioner's application for licensure. The Notice of Denial, in material part, sets forth the factual basis for the denial as follows: You, Brian D. Boneck, at all times pertinent to the facts set below, were licensed in this state as a resident general lines insurance agent. You, Brian D. Boneck, at all times pertinent to the facts set forth below, were the owner of Brooke Agency Services of Bradenton, Florida. You, Brian D. Boneck, at all times pertinent to the facts set forth below, were the President and owner of Sierra Insurance Underwriters, Inc. On or about the last week of December, 2005, Christopher Waters of Port Charlotte, Florida, called the Brooke Agency in Bradenton, Florida, and spoke to you, Brian D. Boneck, regarding the renewal of a commercial general liability insurance policy for Waters Developers, LLC. On or about, January 4, 2006, Mr. Waters delivered a check to you in the amount of $809.30, payable to Sierra Underwriters. This check was to pay the down payment on the premium for renewal of Mr. Waters' general liability policy. Sometime in April 2006, Mr. Waters was notified by Mid-Continental [sic] Casualty Company that the policy was cancelled for non-payment of premium. You, Brian D. Boneck, failed to submit the money paid to you by Mr. Waters to the insurer, Mid-Continental [sic] Casualty Company, or to the insurer's general agent, Florida Homebuilders Insurance Agency, Inc. You, Brian D. Boneck, misappropriated the down payment made to you by Mr. Waters. To this date, you have not returned the money to Mr. Waters or paid the money to Mid- Continental [sic] Casualty Company, or to the Florida Homebuilders Insurance Agency, Inc. Your ownership of Brooke Agency Services of Bradenton, Florida, was through a franchise agreement with Brooke Franchise Corporation. Brook Insurance and Financial Services is a subsidiary corporation that manages business for Brooke Franchise Corporation. Pursuant to this relationship, you, Brian D. Boneck, were required to pay a share of the commissions received by Brooke Agency Service of Bradenton to Brooke Insurance and Financial Services and were required to provide information on insurance sales to Brooke Insurance and Financial Services. According to a sworn affidavit by Marian Ann Eupizi, who was formerly employed by you at Brooke Agency Services, you, Brian D. Boneck, also misappropriated premium payments made to you by other customers whose insurance was written by you or other agents of Brooke Agency Services of Bradenton, Florida, through the Florida Homebuilders Insurance Agency. You, Brian D. Boneck, did this by having customers write premium checks payable to your other company, Sierra Insurance Underwriters, Inc. By doing so, Brooke Insurance and Financial Services was unaware of your actions and you also misappropriated commissions owed to them. Also according to Ms. Eupizi, you, Brian D. Boneck, in mid- 2005, misappropriated a refund check issued for a policy on Callis Construction in the amount of approximately $1200. The Respondent offered no reliable evidence at the hearing to support the allegations which served as the factual basis for the denial. As to the allegation that Christopher Waters delivered the check to the Petitioner, the Respondent offered only the sworn affidavit of Mr. Waters and various attachments in support of the allegation. At the hearing, the Petitioner testified that he did not accept premium checks from customers and that the office staff accepted and processed premium checks. The Respondent offered no credible evidence to the contrary, and, for purposes of this Order, the Petitioner's testimony is credited. The Petitioner testified that the Waters account was one of 35 transferred to the corporate franchisor when the Petitioner sold the agency back to the Brooke Agency Services. Negotiations for the sale occurred over a period of time and concluded with a bill of sale executed in August 2006. Although the Petitioner's testimony regarding the chronology of the sale was poorly defined, there was no evidence that the Waters account was not included within those transferred. As to the allegation that the premium was misappropriated and not forwarded to Mid-Continent Casualty Insurance Company, the Respondent offered a copy of a sworn statement wherein a Mid-Continent Casualty representative alleged that the company's investigation indicated that the Waters premium was never forwarded through the Brook Agency to the Florida Homebuilders Insurance Agency, which initially issued and then ultimately cancelled the policy. Additionally, the Respondent offered a copy of an email to the Respondent's investigator from a representative of Florida Home Builders Insurance, Inc., wherein the representative restates information provided to the email writer from unidentified representatives of the Brooke Agency and AmGro Premium Finance Company (with whom the remaining premium due from Mr. Waters had been financed). The Respondent also offered banking records apparently provided in response to a subpoena that indicate the Waters check was deposited into the Sierra Insurance Underwriters Account, to whom the check was made payable. The Respondent offered no credible evidence that the deposit of the Waters check into the Sierra account was improper. As to the allegation that no money had been refunded to Mr. Waters as of the December 11, 2006, Notice of Denial, the Petitioner testified that the money was refunded by a check to Mr. Waters and had a check to Waters Developers from Sierra Underwriters, Inc., dated July 24, 2006, for $1,471 admitted into evidence. It is unclear why the refund amount exceeded the initial premium amount, but there is no evidence contrary to the Petitioner's testimony that the check was issued as a premium refund. As to the allegations related to the ownership structure of the Petitioner's agency, the Respondent offered no credible evidence regarding the interrelationship between the Brooke entities or how the Brooke entities operated with the Petitioner’s Sierra Underwriters, Inc. Regarding the allegations attributed to sworn affidavit of Marian Ann Eupizi, the Petitioner testified that Ms. Eupizi was a customer service representative who was not involved in the fiscal operation of the agency and whom he had fired for falsification of documents. There was no credible evidence contrary to the Petitioner's testimony, and it is credited. Ms. Eupizi’s affidavit has been disregarded in its entirety. There was no credible evidence to support the assertion in the affidavit that the Petitioner misappropriated premium payments from other customers, misappropriated commissions due to Brooke Insurance and Financial Services, or misappropriated a refund check to an entity identified as Callis Construction.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order granting the application of Brian D. Boneck for licensure as a nonresident general lines insurance agent and a nonresident surplus lines insurance agent. DONE AND ENTERED this 18th day of September, 2007, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 September, 2007. COPIES FURNISHED: Brian D. Boneck 70 East Horizon Ridge Parkway, No. 140 Henderson, Nevada 89002 William Gautier Kitchen, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol Plaza Level 11 Tallahassee, Florida 32399-0307
