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 make the following relevant factual findings: Respondent, William R. Daniels, has been a farm labor contractor since 1949. Respondent retained the services of Edward J. Smith to assist him in fruit harvesting activities during the 1987 season. On February 18, 1988, Tommy L. Sumpter, a Compliance Officer employed by Petitioner, performed a compliance check on fruit harvesting activities located off 66th Avenue in Vero Beach, Florida. The compliance check by Sumpter revealed, that Edward J. Smith was supervising citrus workers on behalf of Respondent. Smith transported workers to the citrus field in Vero Beach in van owned by Respondent. Smith displayed his Federal Certificate of Registration which was valid through December 1988. Smith displayed his State Certificate which expired in December 1987. A confirmation check of Smith's Florida Certificate of Registration reveals that his certificate, in fact, expired on December 31, 1987. Smith registered at the Petitioner's Fort Pierce Job Service Office on February 23, 1988. Mr. Smith was cited for failing to register as required by section 450.30, Florida Statutes. Respondent submitted a verification of employment form which indicates that Smith was employed by him on October 15, 1987, and was paid $75.00 minus social security contributions, per truck load of citrus harvested by Smith's workers. By letter dated May 3, 1988, Respondent was issued the subject Administrative Complaint and notified that a civil money penalty was being assessed against him in the amount of $500.00 on the basis that he contracted for the employment of farm workers with a farm labor contractor before that contractor displayed a current certificate of registration issued by Petitioner. When Respondent retained the services of Smith, as a farm labor contractor, Smith's Florida Certificate of Registration was expired and he therefore could not have displayed a current certificate of registration to Respondent before he was employed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Petitioner enter a final order imposing a $500.00 civil penalty against Respondent payable within thirty days of the issuance of its final order, for contracting for the employment of farmworkers with a farm labor contractor before the farm labor contractor displayed to him a current certificate of registration issued by Petitioner. DONE and ORDERED this 19th day of January, 1989, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Oakland Building 2900 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of January, 1989. COPIES FURNISHED: Moses E. Williams, Esquire Department of Labor and Employment Security Suite 117, Montgomery Building 590 Executive Center Circle East Tallahassee, Florida 32399-2152 William R. Daniel 227 Sterrett Circle Port St. Lucie, Florida 33395 Hugo Menendez, Secretary Department of Labor and Employment Security 206 Berkeley Building 2590 Executive Center Circle, East Tallahassee, Florida 32399-2152 Kenneth Hart General Counsel Department of Labor and Employment Security 131 Montgomery Building 2562 Executive Center Circle, East Tallahassee, Florida 32399-2152
The Issue The issue is whether respondent should have a $1,000 civil penalty imposed for allegedly violating Section 450.30, Florida Statutes (1989) and Rule 38H-11.003, Florida Administrative Code (1989) by acting as a farm labor contractor without a certificate of registration.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: This controversy arose on May 1, 1989, when Don R. Symonette, who is a compliance officer with petitioner, Department of Labor and Employment Security, Division of Labor, Employment, and Training (Division), made an inspection of a farm owned by Ovid Barnett some seven or eight miles east of Immokalee, Florida. The testimony as to what transpired during the course of the inspection is sharply in dispute. In resolving these conflicts, the undersigned has accepted the more credible and persuasive testimony, and that testimony is embodied in the findings below. As Symonette drove by the farm that day, he observed a crew of approximately eighteen workers picking bell peppers in a field. Thereafter, Symonette drove his vehicle onto the premises for the purpose of determining if pertinent statutes and Division rules were being followed. He initially observed respondent, Abel Flores (Abel), standing by a pickup truck in the same field where the laborers were harvesting the peppers. The two were acquainted from several meetings over the prior years. Symonette asked respondent what he was doing, and respondent answered that he was helping his brother, Alfredo, who is a registered farm labor contractor. Respondent also volunteered that he was being paid by his brother and received approximately $40 per day in compensation. Abel further acknowledged, and the Division records show, that he is not certified as a farm labor contractor. At that point, Symonette decided to give Abel the benefit of the doubt and to interview respondent's brother, Alfredo, who was supervising a crew in an adjacent field. During the course of the interview, Alfredo advised Symonette that he (Alfredo) was the supervisor in charge of the crew and it was he who had contracted with the farm to supply the workers. Even so, Symonette concluded that because Abel was the only person standing in the other field, he was "supervising" the other crew and was doing so without a certificate of registration. Accordingly, Symonette filled out a summary of violations which cited Abel for failing to register as a contractor. After discussing the summary with Abel, Symonette had Abel sign the document. He also prepared a site review and inspection check list which Abel reviewed and signed. On April 27, 1990, or almost a year later, the Division issued an administrative complaint charging Abel with acting as a farm labor contractor without having a certificate of registration. On June 7, 1990, Symonette sent by mail a form to Ovid Barnett requesting information regarding Abel's employment. On an undisclosed date, the form was returned to Symonette and contains what purports to be Barnett's signature. However, the contents of the completed form are hearsay in nature and cannot serve as the basis for a finding of fact. Moreover, even if the response was not hearsay, it fails to disclose the nature of Abel's employment with the farm and whether the hourly compensation allegedly given Abel was being paid at the time the form was completed in June 1990 or when the inspection occurred thirteen months earlier. In this regard, it is noted that at hearing Abel produced pay stubs from April and May 1989 which indicate that his salary was either $4.325 per hour or $5.00 per hour, depending on whether he was driving a tractor in the fields or a truck from the fields to the packing house. The former amount is the same as was being paid a number of other farm workers whose job responsibilities were not disclosed. Abel's testimony on compensation is accepted as being credible and comports with the statement made by Abel to Symonette that he was being paid around $40 per day for a full day's work. All compensation received by Abel was from his employer, Ovid Barnett. In some cases, he was paid by check from the farm, and in other cases, he was paid by his brother who had in turn been paid by the farm. To the extent the allegation is relevant, there is insufficient evidence to establish that Abel received double compensation during May 1989 by being paid by both his brother and Barnett at the same time. To bolster Abel's contention that he was not acting as a farm labor contractor on May 1, 1989, a supervisor at Barnett's farm established that Abel was driving trucks between the field and the packing house when the inspection occurred, and as such, it was necessary for Abel to stand by his truck while the workers loaded the truck with produce. As a driver, Abel had the responsibility of overseeing the loading of produce on his truck and, when necessary, to direct the workers on how to properly do so. It is noted that at hearing, Symonette did not describe the activities being performed by Abel except that Abel was simply "standing" around his truck and "appeared" to be supervising the work crew. Accordingly, it is found that Abel was not performing the duties of a farm labor contractor on May 1, 1989.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered dismissing the administrative complaint, with prejudice. DONE and ENTERED this 20th day of August, 1990, in Tallahassee, Florida. DONALD ALEXANDER 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 20th day of August, 1990. APPENDIX Petitioner: 1-3 Partially adopted in finding of fact 2. 4. Partially adopted in finding of fact 4. Note - Where a finding has been partially used, the remainder has been rejected as being irrelevant, cumulative, a conclusion of law, unnecessary, subordinate, or not supported by the evidence. Copies Furnished: Hugo Menendez, Secretary Department of Labor and Employment Security 307 Hartman Building 2012 Capital Circle, S.E. Tallahassee, FL 32399-0658 Moses E. Williams, Esquire 307 Hartman Building 2012 Capital Circle, S. E. Tallahassee, FL 32399-0658 Abel Flores P. O. Box 1611 Immokalee, FL 33934 Steven D. Barron, Esquire 307 Hartman Building 2012 Capital Circle, S. E. Tallahassee, FL 32399-0658
The Issue Should the Department of Insurance (now known as the Department of Financial Services, Office of Insurance Regulation) (Department) approve three insurance endorsement forms that State Farm Florida Insurance Company (State Farm) filed on November 15, 2001?
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: State Farm is a domestic insurance company that the Department has licensed to transact property and casualty insurance in the State of Florida. The Department is the state agency charged with the duty to regulate insurers doing business in the State of Florida. State Farm offers five types of homeowners' policies that have been approved for use in Florida, an FP-7921 (HO1), FP-7923 (HO3), FP-7924 (HO4), FP-7925 ( HO5-Extra), and FP-2926 (HO6). The HO1 is a "named perils" policy and provides coverage only for those perils specifically named in the policy. This policy is not offered in other states, and in Florida accounts for less than one percent of all of all policies in force. The HO3, HO5, and HO6 policies are known as "open perils" policies providing coverage for all risks unless specifically excluded by the policy. Although similar to HO3, the HO5 policy provides somewhat broader coverage with respect to settlement provisions. The HO6 policy is specifically geared toward condominium owners and the HO4 policy is the policy form that applies to renters. Of all the policies offered in Florida, the HO3 is the most widely used policy form and will be quoted from and used as the exemplar in this Recommended Order. The HO3 policy contains introductory provisions entitled "Declarations" and "Definitions," and is then divided into two coverage sections, Sections I and II. Section I refers to property coverage and with Section II referring to liability coverage. Section I is divided into a number of subcategories including the following: Coverage A (Dwelling), Coverage B (Personal Property), Section C (Loss of Use), Additional Coverage, Losses Insured, Losses Not Insured, and Conditions. Following the Section II provisions there are additional sections entitled "Section I and II-Conditions" and a section entitled "Optional Provisions." The HO3 policy provides coverage under Coverage A (Dwelling) for all risks of loss unless it is a "loss not insured." As stated in the policy: "We insure for accidental direct physical loss to the property described in Coverage A, except as provided in SECTION I - LOSSES NOT INSURED." (Emphasis in the original.) However, coverage for personal property (Coverage B) does not provide such "open perils" coverage. Rather, it provides coverage only for 16 named perils, contains a number of limitations on personal property that it does cover, and reflects a number of personal property items that it does not cover. All of State Farm's homeowners' policies currently provide some limited coverage relating to mold. Although the policies exclude mold as a covered peril, they provide some limited coverage for mold-related losses resulting from covered perils, such as a covered water loss that causes mold-related damage. Historically, there have been exclusions in property insurance for ordinance of law, earth movement, flood, war, the neglect of the insured, and nuclear hazard. Mold that resulted from a covered peril has historically not been excluded. On November 15, 2001, State Farm filed three proposed endorsement forms (Fungus (Including Mold) Exclusion Endorsement): (1) FE-5397 for use with HO1 policies; (2) FE- 5398, for use with HO3, HO5, and HO6 policies; and (3) FE-5399 for use with HO4 policies. The homeowners' policies, which the endorsements were to apply, had been previously approved by, and were on file with the Department, in accordance with Section 627.410, Florida Statutes. The goal of the endorsements was to eliminate mold coverage from State Farm's existing homeowners policies in Florida. State Farm's current rates do not include the cost of providing the mold coverage that the endorsements seek to exclude. However, there is insufficient evidence to establish facts to show that State Farm would need to substantially raise its rates to include those costs. Before filing the mold-exclusion endorsements, State Farm entered into discussions with the Department about giving policyholders the choice of buying back some of the to-be- excluded mold coverage through buy-back endorsements (buy- backs). State Farm filed its buy-backs in June 2002, after failing to work out a solution with the Department that would have allowed for their approval. Although the Department disapproved the buy-backs in December 2002, State Farm has committed itself to provide policyholders with the optional buy-backs, if the exclusions are approved. If the exclusion endorsements are approved along with the buy-back provisions, any cost increase would be restricted to those policyholders who choose to purchase mold coverage through a buy-back. State Farm's filings of mold-exclusion endorsements are consistent with a nationwide effort by State Farm Fire & Casualty Insurance Company, an affiliate of State Farm to eliminate mold coverage in homeowners policies. In Florida, State Farm's endorsements accomplish the complete elimination of mold coverage chiefly through the addition of a new exclusion for fungus, including mold, within "SECTION I - LOSSES NOT INSURED." (Emphasis in the original.) The endorsements, when coupled with the underlying policy, state in relevant part as follows: 2. We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as result of any combination of these: * * * g. Fungus. (Emphasis in the original.) (The text of the endorsement is underlined.) The endorsements delete all references to the term mold found in SECTION 1 - LOSSES INSURED. (Emphasis in the original.) The endorsements define fungus as follows: "fungus" means any type or form of fungus, including mold, mildew, mycotoxins, spores, scents or byproducts produced or released by fungi. (Emphasis furnished.) This total exclusion of mold coverage, using language clearly encompassing all manner of causation and occurrence, replaces the mold exclusions in the existing policies that do not use such broad language. The difference between the post- and pre-endorsement policies can be seen from comparing the above-quoted endorsement as incorporated into HO3 policy on the one hand, with the mold exclusions as they currently exist in the HO3 policy on the other hand. While the endorsements totally exclude coverage for fungus (mold), and deny payment for mold damage historically provided to insureds, the endorsements are not ambiguous, notwithstanding the testimony offered by the Department to the contrary, which lacks credibility. The endorsements do not add coverage. Instead, the endorsements eliminate coverage for mold that currently exists. However, this fact alone does not render the endorsements inconsistent, misleading, or deceptive when the endorsements are read in their entirety along with the remaining provisions of the policies. State Farm's endorsements were initially deemed approved pursuant to Section 627.410, Florida Statutes, which provides that an endorsement filed with the Department is deemed approved if it is not approved or disapproved within 30 days, or 45 days if there has been an extension, of its filing.. By letter dated June 28, 2002, the Department withdrew its deemed approval of the three endorsements and notified State Farm of its basis for disapproval. The Department's original disapproval letter cites three bases for disapproval. The Department asserts that State Farm's endorsements: (1) contain ambiguities in violation of Section 627.411(1)(b), Florida Statutes; (2) deceptively affect the risk purported to be assumed in the general coverage of the contract, also in violation of Section 627.411(1)(b), Florida Statutes; and (3) deny policyholders the right to obtain "comprehensive coverage" as that term is used in Section 626.9641(1)(b), Florida Statutes, which is part of the policyholders' bill of rights. On December 4, 2002, the Department moved for leave to amend its original disapproval letter. The motion was granted. The Department's amended disapproval letter, which the Department back-dated to June 28, 2002, reiterates the previously alleged bases for disapproval and cites two additional bases for disapproval: (1) the alleged violation of Section 626.9641(1)(b), Florida Statutes, itself constitutes a violation of Section 627.411(1)(a), Florida Statutes; and (2) the endorsements, because they exclude coverage that "through custom and usage has become a standard or uniform provision" in Florida, violate Section 627.412(2), Florida Statutes. There is insufficient evidence to establish facts to show that the provision for mold coverage has, through custom and usage, become a standard or uniform provision. Likewise, there is insufficient evidence to establish facts to show that there is a "natural association between mold and water." In the fall of 2001, the Department began receiving a large influx of filings seeking to exclude or severely limit coverage for mold. Including State Farm's filing, the Department received between 400 and 450 filings representing between 200 and 250 insurers primarily between October 1, 2001, through the end of 2002. In the face of the inordinate number of filings, the Department sought input from all sectors of the public. The Department met with insurers and other interested persons and held four public forums around the state to determine the impact the filings would have on insurance contracts, the industry, and the market place. In the mean time, the Department routinely sought waivers from the insurers of the statutory review period set forth in Section 627.410(2), Florida Statutes, and additionally requested that insurers withdraw their filings. Insurers were advised by the Department that failure to waive the statutory review period or to withdraw their filings would result in the filing being disapproved. The Department initially approved the endorsements to limit or exclude mold coverage of three insurers: USAA, Maryland Casualty, and American Strategic. However, the Department withdrew its approval for each of these companies in letters dated September 18, 2002. The Department asserts that it does not have a policy to disapprove filings simply because they discuss mold or seek to limit or exclude coverage for claims involving mold damage. The Department admits that it is required to examine all filings based upon the statutory scheme. However, the Department has not approved a single one of the over 450 filings, regardless of the language or structure of the endorsements. The simple fact is that the Department had a policy from the fall of 2001 through December 16, 2002, imposing a moratorium on the exclusion or limitation of mold coverage. The Department altered that policy on December 17, 2002, when it entered into a settlement with Florida Farm Bureau General Insurance Company (Farm Bureau), wherein Farm Bureau's endorsement was approved allowing a reduction in mold coverage from policy limits to a sub-limit of $10,000.00 per occurrence, $20,000.00 annual aggregate. The Department's previous position that policies offered to Florida's consumers should not be significantly reduced was abandoned at that time. There was insufficient evidence to establish facts to show that the $10,000.00 coverage was a reasonable amount of coverage for the vast majority of claims for mold damage. The endorsements seek to limit or exclude coverage for mold that has existed for decades. There is scant Florida experience to support the need for limitations or exclusions on mold coverage. Even so, the Department cannot disapprove endorsement forms without authority to do so. There is no statutory authority mandating mold coverage to the extent of policy limits or otherwise in order for policyholders to have comprehensive coverage. Beginning September 15, 2001, the Department did not approve a single mold endorsement seeking to exclude or limit coverage for mold as a resulting loss from a covered peril until December 17, 2002, when it approved a filing by Farm Bureau as a part of a settlement of an administrative proceeding in which the parties were awaiting ruling after a final hearing.
Recommendation Based on the foregoing Findings of Fact and conclusions of Law, it is RECOMMENDED that the Department enter a final order approving the endorsements filed with the Department by State Farm on November 15, 2001. DONE AND ENTERED this 5th day of June, 2003, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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 5th day of June, 2003. COPIES FURNISHED: S. Marc Herskovitz, Esquire Division of Legal Services Department of Financial Services Office of Insurance Regulation 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Anthony B. Miller, Esquire Division of Legal Services Department of Financial Services Office of Insurance Regulation 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 C. Ryan Reetz, Esquire Jim Toplin, Esquire Amie Riggle, Esquire Greenberg Traurig, P.A. 1221 Brickell Avenue Miami, Florida 33131 Vincent J. Rio, III, Esquire State Farm Florida Insurance Company 315 South Calhoun Street, Suite 344 Tallahassee, Florida 32301 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact Respondent is currently a registered farm labor contractor with Social Security Number 248-92-9496 and certificate number 4-92-9496-G87R. On or about February 11, 1986, Respondent acted as a farm labor contractor without a certificate of registration which was in full force and effect, and in her possession. While acting as a farm labor contractor in February, 1986, she failed to display prominently at the site where work was to be performed, and also failed to display on all vehicles she used to transport employees, a written statement in the workers' language showing the rate of compensation she received from the grower, and the rate of compensation she was paying her employees. In connection therewith, Respondent also failed to submit evidence to Petitioner that each vehicle she used to transport employees complied with the requirements of Chapters 316 or 320, Florida Statutes, prior to transporting farmworkers, or in lieu thereof, bore a valid inspection sticker showing the vehicle had passed the inspection in the state in which it was registered. She also failed to submit proof that she had taken out a policy of insurance to insure against liability for damage to persons or property arising out of the operation or ownership of a vehicle she used in February, 1986, to transport workers in connection with her acting as a farm labor contractor. Respondent failed to prominently display a copy of her application for a certificate of registration at the site where work was being performed in February, 1986 and also on all vehicles she used to transport employees. Prior to contracting for the employment of farmworkers, Respondent did not insure that the farm labor contractor displayed to her a current certificate of registration issued by Petitioner.
Recommendation Based on the foregoing, it is RECOMMENDED that Petitioner enter a Final Order assessing an administrative penalty of $2600.00 against Respondent. DONE AND ENTERED this 8th day of June, 1987, in Tallahassee, Leon County, Florida. DONALD CONN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 904/488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of June, 1987. COPIES FURNISHED: Moses E. Williams, Esquire Department of Labor and Employment Security 2562 Executive Center Circle East Montgomery Building Tallahassee, Florida 32399-2152 Mary L. White 13 Garvey Lane Frostproof, Florida 33843 Hugo Menendez, Secretary Department of Labor and Employment Security 206 Berkeley Building 2590 Executive Center Circle East Tallahassee, Florida 32399-2152 Kenneth Hart, Esquire General Counsel Department of Labor and Employment Security 131 Montgomery Building 2562 Executive Center Circle East Tallahassee, Florida 32399-2151
The Issue The issue is whether respondent should have a $1,000 civil penalty imposed for allegedly violating Section 450.30, Florida Statutes (1989) and Rule 38H-11.003, Florida Administrative Code (1989) by contracting for the employment of an unregistered farm labor contractor.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: This controversy arose on May 1, 1989, when Don R. Symonette, who is a compliance officer with petitioner, Department of Labor and Employment Security, Division of Labor, Employment, and Training (Division), made an inspection of a farm owned by Ovid Barnett on State Road 846 some seven or eight miles east of Immokalee, Florida. The testimony as to what transpired during the course of the inspection is sharply in dispute. In resolving these conflicts, the undersigned has accepted the more credible and persuasive testimony, and that testimony is embodied in the findings below. As Symonette drove by the farm that day, he observed a crew of approximately eighteen workers picking bell peppers in a field. Thereafter, Symonette drove his vehicle onto the premises for the purpose of determining if pertinent statutes and Division rules were being followed. He initially observed one Abel Flores (Abel) standing by a pickup truck in the same field where the laborers were harvesting the peppers. Abel is the brother of respondent, Alfredo Flores (Alfredo). Symonette and Abel were acquainted from several meetings over the prior years. Symonette asked Abel what he was doing, and Abel answered that he was helping his brother, Alfredo, who is a registered farm labor contractor. Abel also volunteered that he was being paid by Alfredo and received approximately $40 per day in compensation. Abel further acknowledged, and the Division records show, that he is not certified as a farm labor contractor. At that point, Symonette decided to give Abel the benefit of the doubt and to interview respondent, who was supervising a crew in an adjacent field. During the course of the interview, Alfredo advised Symonette that he (Alfredo) was the supervisor in charge of the crew and it was he who had contracted with the farm to supply the workers. Even so, Symonette concluded that because Abel was the only person standing in the other field, he was "supervising" the other crew and was doing so without a certificate of registration. Accordingly, Symonette cited Alfredo for using an unregistered contractor. On April 27, 1990, or almost a year later, the Division issued an administrative complaint charging Alfredo with using an unregistered farm labor contractor. On June 7, 1990, Symonette performed a "payroll audit" by sending by mail a form to Ovid Barnett requesting information regarding Abel's employment. On an undisclosed date, the form was returned to Symonette and contains what purports to be Barnett's signature However, the contents of the completed form are hearsay in nature and cannot serve as the basis for a finding of fact. Moreover, even if the response was not hearsay, it fails to disclose the nature of Abel's employment with the farm and whether the hourly compensation allegedly given Abel was being paid at the time the form was completed in June 1990 or when the inspection occurred thirteen months earlier. All compensation received by Abel was from his employer, Ovid Barnett. In some cases, he was paid by check from the farm, and in other cases, he was paid by his brother who had in turn been paid by the farm. To bolster the contention that Abel was not acting as a farm labor contractor on May 1, 1989, a supervisor at Barnett's farm established that Abel's job was to drive trucks between the field and the packing house when the inspection occurred, and as such, it was necessary for Abel to stand by his truck while the workers loaded the truck with produce. As a driver, Abel had the responsibility of overseeing the loading of produce on his truck and, when necessary, to direct the workers on how to properly do so. It is noted that at hearing, Symonette did not describe the activities being performed by Abel except that Abel was simply "standing" around his truck and "appeared" to be supervising the work crew. Accordingly, it is found that Alfredo was not using an unregistered farm labor contractor on May 1, 1989.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered dismissing the administrative complaint, with prejudice. DONE and ENTERED this 20th day of August, 1990, in Tallahassee, Florida. DONALD ALEXANDER 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 20th day of August, 1990. Copies Furnished: Hugo Menendez, Secretary Department of Labor and Employment Security 307 Hartman Building 2012 Capital Circle, S.E. Tallahassee, FL 32399-0658 Moses E. Williams, Esquire 307 Hartman Building 2012 Capital Circle, S. E. Tallahassee, FL 32399-0658 Alfredo Flores P. O. Box 1611 Immokalee, FL 33934 Steven D. Barron, Esquire 307 Hartman Building 2012 Capital Circle, S. E. Tallahassee, FL 32399-0658
The Issue The issues are whether (a) respondent, Medardo G. Soto, should have a $1,500 civil penalty imposed for allegedly violating Sections 450.33(5) and and 450.35, Florida Statutes (1989), and (b) whether respondent, Martin G. Soto, should have a $250 civil penalty imposed for allegedly violating Section 450.30, Florida Statutes (1989).
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: This controversy arose on the morning of January 29, 1990, when Larry Coker, a compliance officer with petitioner, Department of Labor and Employment Security, Division of Labor, Employment, and Training (Division), made an inspection of a citrus harvesting crew working in an orange grove on the Black Bay Citrus and Cattle Company on County Road 763 in DeSoto County, Florida. The purpose of the inspection was to determine whether the crew and its supervising contractor were in compliance with state regulations. Upon entering the premises, Coker observed a crew of eighteen workers harvesting fruit in a citrus grove. Respondent, Martin G. Soto (Martin), was operating a high lift at the work site. Coker approached Martin and asked him who was the farm labor contractor for the crew. Martin responded that his brother, Medardo G. Soto (Medardo), who is also a respondent in this cause, was the licensed farm labor contractor but he (Medardo) was in Immokalee. Martin acknowledged that he (Martin) was supervising the crew for his bother and was being paid $50 per day to do so. Division records reflect that Martin is not licensed by the State to perform that activity. Accordingly, it has been established through Martin's admissions and Coker's observations that Martin was acting as a farm labor contractor without a license. Martin was issued a citation that day which he read and signed. At the bottom of the citation Martin acknowledged that the charges contained therein were true. By allowing his brother to supervise a crew without a proper license, Medardo used an unregistered farm labor contractor in contravention of the law. Martin further acknowledged that he had driven the workers to the field that day in Medardo's 1986 Ford van. A search of Division records revealed that the 1986 Ford van did not have the required vehicle inspection or proof of liability insurance on file with Division offices. Agency rules require that evidence of such inspection and insurance be filed with the Division. Accordingly, it is found that Medardo operated a vehicle used to transport workers without furnishing the Division proof of the necessary vehicle inspection and insurance.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered finding that respondent Medardo G. Soto has violated Sections 450.33(5) and (9) and 450.35, Florida Statutes (1989) and that respondent Martin G. Soto has violated Subsection 450.30(1), Florida Statutes (1989). It is further recommended that Medardo and Martin Soto be fined $1,500 and $250, respectively, such fines to be paid within thirty days from date of the final order entered by the Division. DONE and ENTERED this 29th of October, 1990, in Tallahassee, Florida. DONALD ALEXANDER Hearing Officer Division of Administraive 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 29th day of October, 1990. COPIES FURNISHED: Francisco R. Rivera, Esquire 307 Hartman Building 2012 Capital Circle, S. E. Tallahassee, FL 32399-0658 Mr. Medardo G. Soto 1013 North 19th Street Immokalee, FL 33934 Mr. Martin Soto 1013 North 19th Street Immokalee, FL 33934 Hugo Menendez, Secretary Dept. of Labor and Employment Security 307 Hartman Building 2012 Capital Circle, S. E. Tallahassee, FL 32399-0658 Stephen D. Barron, Esquire 307 Hartman Building 2012 Capital Circle, S.E. Tallahassee, FL 32399-0658
The Issue The issue is whether Petitioner has shown by a preponderance of the evidence that an indicated rate increase of percent, or, in the alternative, a requested rate increase of 47.1 percent, is not excessive, inadequate, or unfairly discriminatory within the meaning of Subsections 627.062(2)(b), paragraphs 1, 2, 5, 8, 10 through 12, and 14; 627.062(2)(e), paragraphs 1, 3, 6, and 10; 627.062(2)(j); 627.0628; 627.0629; and 627.06291, Florida Statutes (2008).1
Findings Of Fact The petitioner is State Farm Florida Insurance Company (State Farm Florida). Respondent is the state agency responsible for regulating insurance rates in the state. State Farm Florida is a wholly-owned subsidiary of State Farm Mutual Automobile Company (State Farm Mutual). State Farm Mutual is the parent company of four wholly-owned subsidiaries. The four siblings are State Farm Florida; State Farm Fire and Casualty (Fire & Casualty); State Farm Lloyds, Inc. (Lloyds); and State Farm General Insurance Company (General). The parent and siblings are an affiliated group, for purposes of federal and state income taxes, and file a consolidated tax return. State Farm Mutual writes property and casualty insurance, including homeowners insurance, through Fire & Casualty in 47 states. In Florida, Texas, and California, State Farm Mutual conducts the business of insurance through State Farm Florida, Lloyds, and General, respectively. State Farm Florida filed a request for a rate increase of 47.1 percent (the requested rate). The request is a “rate filing” defined in Subsection 627.0621(1)(a). The rate filing is intended to be effective for new business on December 1, 2008, and for renewals on March 1, 2009. The rate filing indicates that a rate increase of 67.6 percent is the actual rate indicated by the documentation in the rate filing (the indicated rate). However, State Farm Florida reduced the indicated rate during the administrative hearing to 67.0 percent to reflect approximately 7,000 policies that State Farm Florida renewed without wind coverage, so-called “ex-winded” policies. State Farm Florida reduced the indicated rate from 67.0 percent to the requested rate of 47.1 percent in an effort to obtain quick approval of the rate filing because State Farm Florida is allegedly, “Losing money every day.” The Notice of Intent states the grounds for denying the rate filing in 23 numbered paragraphs. Respondent dismissed the grounds stated in paragraph number 14. The Findings of Fact refer to the original numbers in the Notice of Intent but address only paragraphs numbered 1 through 13 and 15 through 23. This Recommended Order makes no further reference to the grounds stated in paragraph number 14 of the Notice of Intent. The Notice of Intent and the grounds stated therein constitute proposed agency action. This Recommended Order constitutes recommended agency action. Neither form of agency action may go beyond the powers, functions, and duties delegated by the Legislature in Chapter 627 without constituting an invalid exercise of delegated legislative authority defined in Subsection 120.52(8).2 To that end, the ALJ required the witness for Respondent to identify the statutory authority that Respondent relies on for each numbered ground in the Notice of Intent. The ALJ also required each witness for Petitioner to specify the paragraph number of the ground in the Notice of Intent which his or her testimony addressed. The Notice of Intent relies on Sections 627.062, 627.0628, 627.0629, and 627.06291 as statutory authority for the numbered grounds in the Notice of Intent. Each ground and the corresponding statutory authority is listed as follows: Ground Statutory Authority 1 §§ 627.062(2)(b)8., 627.0628, 627.0629, and 627.06291; 2 § 627.062(2)(b)8.; 3 § 627.062(2)(b)11. and 12.; 4-5 § 627.062(2)(b)11.; 6-8 § 627.062(2)(b)12.; 9-11 § 627.062(2)(b)2.; 12 § 627.062(2)(b)11.; 13 § 627.062(2)(b)2.; 15-16 § 627.062(2)(b)2.; 17 § 627.062(2)(b)10. and 11.; 18 § 627.062(2)(e)1.-3. and 10.; 19 § 627.062(2)(b)8.; 20 § 627.062(2)(b)5.; 21 § 627.062(2)(b)8. and 11.; 22 § 627.062(2)(b) and (2)(e)6.; and 23 § 627.062(2)(j). Respondent has not determined that the rate filing is excessive, inadequate, or unfairly discriminatory within the meaning of Subsection 627.062(1). Rather, Respondent proposes final agency action determining that the information provided by State Farm Florida is insufficient for Respondent to independently determine whether either the indicated or requested rate in the rate filing is excessive, inadequate, or unfairly discriminatory. Respondent asserts that the fact-finder’s determination of the sufficiency of the evidence submitted by State Farm Florida is limited to the information that State Farm Florida submitted with the initial filing. Respondent claims that the fact-finder may not rely on any information submitted by State Farm Florida during the final hearing if that information was not submitted with the initial filing. Respondent relies on the statutory requirement in Subsection 627.062(9)(a) for an insurer to certify, in relevant part, that the initial rate filing does not omit any material fact and fairly presents in all material respects the basis for the rate filing. The ALJ rejects the agency’s conclusion that the certification requirement in Subsection 627.062(9)(a) limits the evidence in the final hearing to the information that State Farm Florida submitted with the initial rate filing. Neither the Legislature nor Respondent has promulgated any explicit standards that prescribe the information that must be included in a rate filing. Other reasons for rejecting the agency’s proposed interpretation of Subsection 627.062(9)(a) are discussed in the Conclusions of Law. The fact-finder has weighed all of the evidence admitted during the final hearing, including information submitted after the initial filing (post-filing evidence). The Findings of Fact are based on evidence of circumstances as they existed through the conclusion of the final hearing. A brief discussion of the history preceding the current rate filing provides context for this proceeding. State Farm Mutual incorporated State Farm Florida in 1998 with an initial capitalization of $607,500,000.00. The hurricanes of 2004 wiped out the surplus of State Farm Florida. In 2004, State Farm Mutual recapitalized State Farm Florida with a loan of $750,000,000.00 so that State Farm Florida could continue doing business in Florida. State Farm Florida obtained an approval from Respondent for a prior rate filing of 52.7 percent. The rate increase became effective November 1, 2006. In November and December 2006, premiums on renewals increased significantly. Beginning sometime in the middle of 2007, average premium began to decline. The direct written premium for State Farm Florida that had been $1,889.00 in November and December 2006 declined to $1,350.00. In the first quarter of 2008 and the third quarter of 2008, direct written premium rose slightly to $1,399.00. The decline in premium revenues is the moving force behind the current rate filing. The Legislature has found in Subsection 627.062(2)(e)3. that rates are inadequate if they are insufficient, together with investment income attributable to them, to sustain projected losses and expenses in the class of business to which the rates apply. The reasons for the reduction in premium revenue are undisputed. State Farm Florida has non-renewed some policies; excluded wind from the covered risk of other policies, a process described by the parties as ex-winding; provided discounts to policyholders who improved covered property with wind-mitigation features identified in Subsection 627.0629(1), identified by the parties as wind-mitigation discounts; and allegedly incurred an increase in costs, not the least of which is the cost of reinsurance for excess losses. State Farm Florida asserts that the decline in premium revenue caused by non-renewals, ex-winding, wind-mitigation discounts, and increased costs such as the cost of reinsurance justifies a rate increase equal to the indicated rate of 67.0 percent or the requested rate of 47.1 percent. The Legislature requires, in Subsection 627.062(2)(g), Petitioner to show by a preponderance of the evidence that either the indicated or requested rate is not excessive, inadequate, or unfairly discriminatory. The fact-finder is unable to determine from a preponderance of the evidence that the indicated and requested rates are not excessive, inadequate, or unfairly discriminatory. This is not a finding that the indicated and requested rates are excessive, inadequate, or unfairly discriminatory. Rather, the evidence of circumstances as they existed through the final hearing is either variable or ambiguous, and therefore neither credible nor persuasive to the fact-finder; or the evidence is insufficient for the fact-finder to make the findings statutorily required to approve either the indicated or requested rate. A preponderance of the evidence does show that State Farm Florida determined the factors used in the rate filing in a manner that is consistent with standard actuarial techniques or practices and that those factors are based on reasonable actuarial judgment within the meaning of Subsection 627.0612(2)(a). However, a finding of actuarial reasonableness does not end the inquiry. The principal purpose of statutory review is to facilitate an independent determination of whether indicated or requested rates which are formulated in accordance with standard actuarial techniques are nevertheless excessive, inadequate, or unfairly discriminatory. Several evidential issues of credibility or insufficiency prevent the fact-finder from determining from a preponderance of the evidence that the indicated and requested rates are not excessive, inadequate, or unfairly discriminatory. The relevant evidential issues are discussed in paragraphs 23 through 65. Non-renewal of policies by State Farm Florida is one reason for a decline in premium revenue. State Farm Florida is voluntarily limiting new property insurance business in the state to in-state transfers of business to inland locations (transfer business). The fact-finder is unable to determine from a preponderance of the evidence whether the portion of the indicated or requested rate which is attributable to transfer business is excessive or reasonable. State Farm Florida has not quantified the number of policyholders that the transfer business entails. For one year, beginning in March 2008, State Farm Florida will decline to renew (non-renew) policyholders. State Farm Florida will also ex-wind renewed policies. The fact-finder is unable to determine from a preponderance of the evidence whether the portions of the indicated or requested rates which are attributable to non- renewal and ex-winding is excessive or reasonable. Evidence of the number of non-renewed and ex-winded policies is ambiguous. After Petitioner submitted the rate filing, the number of non- renewed and ex-winded policies increased from 50,000 to 85,000 through the administrative hearing. Such variability in the evidence is neither credible nor persuasive to the fact-finder. The number of non-renewals and ex-winded policies is important because much of the requested rate increase is based upon forecasts of lower direct written premium. Fewer policyholders and less coverage will naturally generate lower premium. Another “significant contributing factor to the indicated rate need” is the number of policyholders receiving wind-mitigation discounts. Petitioner asserts that wind- mitigation discounts are greater than loss outputs. The fact-finder is unable to determine from a preponderance of the evidence the amount of wind-mitigation discounts. The cross-examination of rebuttal testimony offered by State Farm Florida illustrates the evidential ambiguity. Q. Where in the filing or supplemental materials can I find that the discounts are greater than the loss output? A. Exhibit 5 develops the savings associated with the wind-mitigation discounts. They are part of our projected hurricane losses, and the premium savings are part of our projected premiums that were outlined in Exhibit 2. Q. Can I find them stated separately, or you are saying they are part of this exhibit and part of the other exhibit you mentioned? A. State separately? Q. That the discounts are greater than the losses. Can you show me a place where the discounts are greater? A. There is not a specific statement that says that. It does not say that premium – our premium decline is due to – it discusses several things with regard to wind mitigation discounts. . . . It is implied in the statement that premium is declining due to application of the mitigation discounts. If the reduction in losses were equivalent to the decline in premium, there wouldn’t be a need to increase the premiums to reflect the fact that the savings do not match those discounts. Transcript (TR) at 828-829. As with non-renewals, evidence of the number of policyholders receiving wind-mitigation discounts and the dollar amount of the discounts is variable and less than credible and persuasive to the fact-finder.3 Although State Farm Florida identified wind-mitigation discounts as the “primary cause of reduction in premium per policy,” the evidence does not credibly quantify the discounts. The fact-finder is unable to determine from a preponderance of the evidence whether the rate filing is based on a calculation of wind-mitigation for premiums that is different than the calculation of wind-mitigation discounts for losses. Wind-mitigation discounts must be equal for premiums and losses to avoid being unfairly discriminatory. State Farm Florida gives a discount of 65.0 percent for the hurricane portion of the premium but realizes only a 28.0 percent savings. State Farm Florida may be recovering what it claims to be losing on the wind-mitigation discounts by charging all policyholders equally even though a significantly larger portion of those policyholders do not qualify for the wind-mitigation discounts. To raise rates for all policyholders may negate the savings the discounts were intended to create. By Consent Order dated September 9, 2008, State Farm Florida conceded that it had failed to implement necessary procedures to comply with statutory and administrative rule requirements. State Farm Florida implemented refunds and credits to 98,000 current and former policyholders in the amount of $120 million and paid an additional $1.02 million to the Regulatory Trust Fund. The fact-finder cannot determine from a preponderance of the evidence whether the cost of reinsurance is reasonable or excessive within the meaning of Subsection 627.0612(2)(c). State Farm Florida purchased reinsurance coverage for a probable maximum loss (PML) equal to the difference between $9.25 billion and a retained risk by State Farm Florida of $175 million. Non-renewals, ex-winded policies, and loss savings from wind-mitigation improvements to covered property decreased the PML to $7.1 billion. However, State Farm Florida increased the amount of catastrophe reinsurance that it purchased to cover PML from $7.4 billion in the previous rate filing to $9.25 billion in the current rate filing. State Farm Florida is paying a significant portion of the PML premium to its parent, State Farm Mutual. State Farm Florida retained approximately $175 million of the $9.25 billion in PML. State Farm Florida purchased reinsurance coverage for the remainder of the PML from State Farm Mutual, other private re-insurers, the Florida Hurricane Catastrophe Fund (the Cat Fund), and the temporary increase in coverage limit (TICL).4 State Farm Florida also paid State Farm Mutual $12.8 million for a credit risk provision. The credit risk provision will pay losses that the Cat Fund is contracted to pay but may be unable to pay. The Cat Fund announced in October 2008 that it anticipated a bonding shortfall of $14.5 billion in the event the Cat Fund were called upon to pay all of its reinsurance obligations. State Farm Florida would receive only one-half of the reinsurance coverage it purchased from the Cat Fund in the event of a $14.5 billion bonding shortfall. State Farm Florida paid $842 million for reinsurance coverage. State Farm Florida paid $142 million for reinsurance coverage from the Cat Fund and TICL layer provided by the state and paid approximately $700 million for reinsurance coverage by private re-insurers, including State Farm Mutual.5 Of the total $700 million paid to private re-insurers, State Farm Florida paid approximately $151 million to private re-insurers other than State Farm Mutual. State Farm Florida paid $549 million to its parent company, State Farm Mutual. It is undisputed that the $151 million State Farm Florida paid to private re-insurers other than State Farm Mutual is reasonable. Payments to unrelated private re-insurers represent arms-length transactions between a willing buyer and willing seller of reinsurance coverage. However, the fact- finder is unable to determine from a preponderance of the evidence whether either the cost of reinsurance purchased from State Farm Mutual or the cost of the credit risk provision purchased from State Farm Mutual is excessive or reasonable within the meaning of Subsection 627.0612(2)(c). The economic reality is that State Farm Florida is merely the legal form in which State Farm Mutual chooses to do business in Florida. State Farm Mutual and its wholly-owned subsidiaries, including State Farm Florida, comprise a "group or combination" that the Legislature defines as a "person" in Subsection 1.01(3) or a joint underwriting association defined as a person in Section 624.04 (See 1976 Fla. Atty. Gen, Lexis 130). Transactions between State Farm Mutual and State Farm Florida for reinsurance and credit risk provisions totaling approximately $561.8 million, when viewed in the light of economic reality, Subsection 1.01(3), or Section 624.04, may be transactions which State Farm Mutual engages in with itself and which lack any independent economic significance.6 Transactions with no independent economic significance would be sham transactions which may distort the economic costs of the reinsurance and credit risk provisions purchased from State Farm Mutual. Such economic distortions may enable the group to derive a rate advantage from the legal form in which State Farm Mutual chooses to do business in Florida.7 The reinsurance and credit risk provision which State Farm Florida purchased from State Farm Mutual for approximately $561.8 million may be the economic equivalent of a retained risk amount by State Farm Mutual or the group. The fact-finder cannot determine from a preponderance of the evidence whether the economic cost attributable to a retained risk by State Farm Mutual or the group is more or less than the amount State Farm Mutual charged State Farm Florida for the reinsurance and credit risk coverages. Even if State Farm Florida and State Farm Mutual were distinct persons, State Farm Florida exists for the convenience of State Farm Mutual. State Farm Mutual conducted business in Florida, either directly or through some other member of the group, before State Farm Florida emerged from State Farm Mutual in 1998 with an initial capitalization of $607,500,000.00. State Farm Mutual re-capitalized State Farm Florida with $750,000,000.00 in loans after the 2004 hurricane season. State Farm Mutual owns all of the stock of State Farm Florida. There is no economic, or legal, impediment to State Farm Mutual liquidating State Farm Florida at the convenience of State Farm Mutual and doing business in Florida as it did before it created State Farm Florida in 1998. State Farm Mutual has sustained an annual loss from the reinsurance sold to State Farm Florida from 1998 through 2007. State Farm Mutual can easily end the losses, as well as the costs to State Farm Florida, by liquidating State Farm Florida and doing business in Florida directly. Issues of variability, ambiguity, and credibility pertaining to the reasonableness of the cost of reinsurance is illustrated in testimony during cross-examination of one of the witnesses for State Farm Florida. Q. Am I assuming correctly, then, that, I mean, it’s described on the page. But is there something in this page that indicates to you that it’s a reasonable coverage limit, other than it’s there? A. It would be other than that it’s there, and State Farm [Florida] has chosen that level as a limit that they deem to be reasonable. Q. Okay. So your opinion that it’s a reasonable coverage limit is informed by State Farm [Florida] believing it’s a reasonable coverage limit? A. I suppose that’s the way to say it, yes. Q. You don’t have any independent reason to think it’s either reasonable or unreasonable, other than State Farm [Florida] has it on the page that describes it such as it is? A. I would say that’s correct. TR at 555-556. Another issue of variability, ambiguity, and credibility emerges from the hurricane models used by State Farm Mutual to project PML. State Farm Florida used hurricane models identified in the record as WORLDCAT™, RISKLINK™ and CLASIC™/2 to project both hurricane losses and PML.8 Each model is approved by the Florida Commission on Hurricane Loss Projection Methodology (the Commission) pursuant to Section 627.0628. However, State Farm Florida projected hurricane losses using storm sets identified in the record as “cold water” or “long term” storm sets and projected PML using storm sets identified in the record as “warm water” or “short term” storm sets. It is undisputed that the use of warm water storm sets increases the estimated storm frequency and risk. For example, State Farm Florida justified the requested rate of 47.1 percent, in relevant part, by using cold water storm sets to reduce stated PML by approximately $1.65 billion. State Farm Florida utilized three hypothetical adjustments to reduce the indicated rate of 67.0 percent to the requested rate of 47.1 percent. First, State Farm Florida calculated the impact on the cost of private reinsurance, including that provided by State Farm Mutual, based on the non- renewal and ex-winding activity. That adjustment reduced PML from $9.25 billion to $7.8 billion. Wind-mitigation discounts reduced PML another $700 million to $7.1 billion. The use of cold water, or long term, storm sets to project PML reduced PML another $1.65 billion to $5.45 billion. State Farm Florida is actually purchasing $9.25 billion in re-insurance coverage, less the retained risk by State Farm Florida in the amount of $175 million. If the actual cost of private reinsurance were to justify an indicated rate of 67.0 percent, a requested rate of 47.1 percent would appear to be inadequate, and State Farm Florida would soon return with an additional rate filing. State Farm Florida argues that the use of warm water, or short term, storm sets to determine the actual PML of $9.25 billion is appropriate. The evidence is clear that the global reinsurance market demands and uses warm water models to evaluate risk and to price reinsurance. Warm water storm sets may be the gold standard for re-insurers, but it is also axiomatic that use of the gold standard increases the price of re-insurance and the resulting profit to re-insurers. A preponderance of the evidence does not enable the fact-finder to independently determine that the use of warm water storm sets to project PML is not excessive, inadequate, or unfairly discriminatory. The issue of whether Florida is in a warm water cycle or cold water cycle is not resolved by a preponderance of the evidence. Moreover, State Farm Florida did not provide Respondent with the near term frequency storm set used by State Farm Florida to project PML. Respondent could not independently evaluate the storm sets utilized by State Farm Florida. State Farm Florida argues, in relevant part, that the use of warm water models to estimate PML is justified because the Commission has previously evaluated hurricane models for the sole purpose of estimating hurricane losses, has never evaluated hurricane models for the purpose estimating PML, and legislative authority in Subsection 627.0628(3)(b) for the Commission to evaluate hurricane models used to project PML was not enacted until July 1, 2008. Respondent has a different statutory interpretation. Respondent interprets its legislative authority to mean that the absence of the Commission’s approval of a warm water model to project hurricane losses requires State Farm Florida to use cold water, or long term, storm sets to project PML. Any doubt as to an agency’s statutory authority to act in a manner that accepts warm water storm sets to project PML should be resolved in favor of refusing to exercise the questionable authority. Moreover, the use of storm sets in hurricane models is a matter within the substantive expertise of Respondent. A statutory interpretation involving a matter within an agency’s substantive expertise is entitled to great deference when, as in this proceeding, the agency explicates in the record reasons for such deference. State Farm Florida includes an overall rate of return of 12.2 percent in the rate filing. The fact-finder is unable to determine from a preponderance of the evidence whether the factor used by State Farm Florida for underwriting profit and contingency is reasonable or excessive within the meaning of Subsection 627.0612(2)(b). The Legislature gave the fact-finder authority in Subsection 627.0612(2)(b) to determine whether a factor for underwriting profit and contingencies (a profit factor) is reasonable or excessive. However, the evidence from State Farm Florida is expressed in terms of a rate of return rather than a statutorily authorized profit factor. The rate filing includes a profit of 5.0 percent, a contingency of 2.0 percent, and a retained risk factor of 9.0 percent for a total profit factor of 16.0 percent, but the rate filing uses a rate of return of 12.2 percent. Testimony elicited by counsel for State Farm Florida during the cross-examination of Respondent’s witness illustrates the variability between a 16.0 percent profit factor and 12.2 percent rate of return. Q. Whether it is called retained risk or it is included in profit and contingency, you get the same rate of return, isn’t that correct? A. The rate of return – rate of return or rate indication – Q. Rate of return. A. Rate of return, I would say yes to that. Q. And the placement in the filing has no effect whether the rates are excessive, isn’t that correct? A. That’s correct. Q. The issue of excessiveness is determined by the overall rate of return, not the particular derivation of the 9 percent retained risk, isn’t that right? A. That’s one of the items. Q. Is that a yes? A. Yes. TR at 793-794. The profit factor contemplated by the Legislature and the rate of return utilized by State Farm Florida are distinct investment concepts. Paragraph 72 of the PRO filed by State Farm Florida states that when the income on investments is taken into account the rate of return is 12.2 percent, effectively amending the statutory reference to a profit factor in Subsection 627.0612(2)(b), which is 16.0 percent in this case.9 The Legislature has found in Subsection 627.062(2)(e)2. that rates are excessive if, among other things: [T]he rate structure established by a stock insurance company provides for replenishment of surpluses from premiums, when the replenishment is attributable to investment losses. The retained risk of 9.0 percent by State Farm Florida is a “retained hurricane risk.” State Farm Florida claims the retained risk is a necessary cost of writing homeowners insurance in Florida. However, State Farm Florida applies the 9.0 percent factor to the entire premium, not just the portion of the premium attributable to a retained hurricane risk. Moreover, legislation identified in the record as Senate Bill 2860 (SB 2860) removed from former Subsection 627.062(2)(b)11., now 627.062(2)(b)12., expresses authority for a “retained risk” provision. The fact-finder is unable to determine from a preponderance of the evidence whether State Farm Florida passed along to policyholders premium savings attributable to an expansion of the Cat Fund from $16 billion to $28 billion. The Legislature intends in HB 1A that all premium savings resulting from the expansion of the Cat Fund are to be passed along to policyholders. State Farm Florida assumed a zero net-cost of reinsurance purchased from the state. The net-cost of reinsurance, including previously discussed private re- insurance, takes into account the premium paid, the amount of coverage, and the expected recoveries. State Farm Florida paid approximately $700 million for reinsurance from State Farm Mutual and private re-insurers and determined that expected recoveries would amount to slightly more than $106 million. The cost of coverage provided by the Cat Fund and the expected recoveries from the Cat Fund were not included in the determination of the net-cost of reinsurance. The fact-finder is unable to determine from a preponderance of the evidence whether the failure to include the cost of coverage minus the expected recoveries from the Cat Fund led to a cost of that reinsurance which is greater than the services rendered in violation of Section 627.062. Because the Cat Fund makes no profit, has minimal expenses, and has a very large investment income credit due to its tax exempt status, recoveries may, in certain circumstances, be significantly higher than the premiums paid to the Cat Fund. The fact-finder is unable to determine from a preponderance of the evidence whether expenses attributable to agent commissions are reasonable or excessive. State Farm Florida assumes a 13.0 percent commission based on historical commission ratios. However, historical ratios may not accurately predict future costs because State Farm Florida is reducing business through non-renewals and reducing coverage through ex-winding and wind-mitigation discounts. Agent services are rendered either to obtain new business or to service existing policyholders. The voluntary limitation of new business to transfer business may reasonably be expected to reduce agent services attributable to new business. The fact-finder is unable to determine from a preponderance of the evidence whether costs attributable to advertising and marketing are reasonable or excessive. State Farm Mutual advertises for “branding purposes” and allocates a portion of those costs to State Farm Florida. The benefit of advertising for “branding purposes” is the retention of business and the acquisition of new business. However, State Farm Florida is limiting new business to transfer business, and it is unclear what portion, if any, of the cost of branding incurred by State Farm Mutual is misallocated to new business that State Farm Florida is not creating. State Farm Florida made adjustments to hurricane models including the averaging of three models. A preponderance of evidence shows that averaging, by itself, did not materially affect the rate filing because averaging reduced variability between the models. The rate filing includes a factor identified in the record as a sinkhole presumed factor. State Farm Florida corrected a deficiency in the original filing by providing in Petitioner’s Exhibit 11 the calculation required by Respondent. The rate filing included a 10.0 percent loss adjustment factor for hurricane losses. The information included in the initial filing did not support the 10.0 percent factor, but the factor is supported by a preponderance of the post-filing evidence. Respondent’s PRO discusses several alleged violations of Florida Administrative Code Rules 69O-170.0135, 69O-170.014, and 69O-170.003. However, the ALJ concludes that Respondent has the burden of proving the affirmative allegation that State Farm Florida violated an administrative rule.10 Respondent’s insistence on confining the evidence to that submitted with the initial filing makes it unclear whether Respondent disputes the issue of whether the post-filing evidence cures any violations in the initial filing. The fact-finder cannot determine from a preponderance of the evidence as a whole whether Petitioner violated any administrative rule.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order determining that State Farm Florida did not show by a preponderance of the evidence that either the indicated rate or requested rate in the rate filing is not excessive, inadequate, or unfairly discriminatory. DONE AND ENTERED this 12th day of December, 2008, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 12th day of December, 2008.
The Issue Whether the Department may revoke and/or refuse to renew Mr. Moore's Certificate?
Findings Of Fact During 1982, 1983, 1984, part of 1985 and 1986, Mr. Moore acted as a farm labor contractor as those terms are defined in Section 450.28(1), Florida Statutes, and Rule 38B-4.02, Florida Administrative Code. Mr. Moore also acted as a crew leader as defined in Section 443.036(12), Florida Statutes, with a crew of approximately 16 to 20 farm workers. During 1982 through 1986 Mr. Moore failed to file quarterly unemployment compensation tax reports with the Department. When questioned by the Department about why he was not filing quarterly reports Mr. Moore would begin filing them. He would not continue filing them, however, and he paid no taxes due with the reports he filed. During 1982 through 1986 Mr. Moore failed to pay unemployment compensation taxes which totalled $6,831.27, including penalties, interest and filing fees, as of February 1, 1988. This amount will increase every month after January, 1988, that the debt is not paid because of the accrual of interest. By letter dated August 18, 1987, the Department gave Mr. Moore notice that it intended to revoke his Certificate. By letter dated December 16, 1987, the Department gave Mr. Moore notice that it intended to refuse to renew the Certificate. The Department gave Mr. Moore an opportunity to explain why he should be allowed to retain his Certificate. The Department also attempted to work with Mr. Moore to give him an opportunity to pay the delinquent taxes. At least two representatives of the Department have discussed the payment of delinquent taxes with Mr. Moore in the past. Mr. Moore would agree to make payments to the Department as a result of these discussions. For a while Mr. Moore would make payments. Within a short period of time after beginning payments, Mr. Moore would stop.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a final order revoking and refusing to renew Mr. Moore's Certificate. DONE and ENTERED this 22nd day of March, 1988, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of March, 1988. COPIES FURNISHED: MOSES E. WILLIAMS, ESQUIRE STATE OF FLORIDA DEPARTMENT OF LABOR AND EMPLOYMENT SECURITY MONTGOMERY BUILDING, ROOM 117 2562 EXECUTIVE CENTER CIRCLE TALLAHASSEE, FLORIDA 32399-0658 ROBERT L. MOORE P. O. BOX 61 HASTINGS, FLORIDA 32045 ROD WILLIS, BUREAU CHIEF BUREAU OF AGRICULTURAL PROGRAMS P. O. BOX 1698 TALLAHASSEE, FLORIDA 32302-1698 HUGO MENENDEZ, SECRETARY 206 BERKELEY BUILDING 2590 EXECUTIVE CENTER CIRCLE, EAST TALLAHASSEE, FLORIDA 32399-2152 KENNETH HART GENERAL COUNSEL 131 MONTGOMERY BUILDING 2562 EXECUTIVE CENTER CIRCLE, EAST TALLAHASSEE, FLORIDA 32399-2152
Findings Of Fact Based upon the oral and documentary evidence adduced at the hearing, as well as the stipulations of facts as to the accounting figures received into evidence as respondents' Exhibit D, the following relevant facts are found: Petitioner supplied cucumbers and cubanelle peppers to the respondents for the purpose of selling such produce for petitioner. Petitioner received a check in the amount of $1200.00 from the respondents. Frank Hause, who was involved in a joint venture with the petitioner, received another check from the respondents in the amount of $1500.00. Petitioner was not made aware of the Hause payment until a later date. With the exception of one shipment which does not appear on the accounting records involved in this proceeding, respondents received all their cucumbers from petitioner or Frank Hause. Due to the fact that the market for cucumbers was so depressed at the time, respondents neither needed nor received cucumbers from any other source. The accounting figures stipulated as being correct by both petitioner and respondents illustrate that respondents owed petitioner $905.39 for the sale of cucumbers and a figure of minus (-) $681.45 for the sale of peppers. The net amount due petitioner from the respondents for the sale of cucumbers and peppers was $223.94.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the petition and/or complaint filed by the petitioner against the respondents be DISMISSED. Respectfully submitted and entered this 29th day of July, 1982, in Tallahassee, Florida. DIANE D. TREMOR 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 29th day of July, 1982. COPIES FURNISHED: Jerry Wilkinson Post Office Box 86 Webster, Florida 33597 Eric Ruff, Esquire Post Office Drawer TT Plant City, Florida 33566 Charles B. Lawton, Jerry Lawton and J. P. Sizemore d/b/a Dixie Growers Post Office Box 1686 Plant City, Florida 33566 Robert A. Chastain General Counsel Department of Agriculture and Consumer Services Mayo Building Tallahassee, Florida 32301 Florida Farm Bureau Mutual Ins. Co. Post Office Box 730 Gainesville, Florida 32602 Mr. Earl Peterson, Chief Bureau of Licensing & Bond Department of Agriculture Room 416 Mayo Building Tallahassee, Florida 32301
