The Issue The issue to be determined is whether Respondent, Gary L. McKinley (Respondent or McKinley), violated sections 626.611(5), (7), (8), (9), or (13); 626.621(2) or (6); 626.9521; 626.9541(1)(e)1.; or 627.4554, Florida Statutes (2007-2010), or Florida Administrative Code Rules 69B-215.210 or 69B-215.230 as alleged in the Administrative Complaint. If it is found that Respondent violated any or all of these provisions as alleged, then it must be determined what penalty should be imposed.
Findings Of Fact At all times relevant to these proceedings, Respondent was licensed as an insurance agent in the State of Florida. Respondent has served as the president, owner, managing member, and agent in charge of McKinley and Associates, LLC, 6622 Southpoint Drive South, Suite 350, Jacksonville, Florida 32216-6188. Respondent has been licensed as a life insurance agent, variable annuity and health agent, variable annuity agent, and a life and health agent, since April of 1988 and at all times relevant to this proceeding. McKinley was at one time registered with the Financial Industry Regulatory Authority (FINRA) as a broker representative with Intervest International Equities Corporation (Intervest) from May 2008 until November 2010, and was an associated person with other entities including The Leaders Group, Inc., from November 2006 through February 2008. Prior to the incidents giving rise to this case, Respondent was the subject of a complaint of misconduct related to the purchase of an annuity. As a result, and without admitting the allegations in that case, he agreed to a 30-day suspension of his FINRA credentials and a fine. Thereafter, he signed agreements with the Office of Financial Regulation (OFR) on March 8, 2007, September 24, 2007, and October 21, 2007, agreeing to strict supervision with respect to the sale of securities. During the period relevant to these proceedings, the brokers who filled the role as supervisor were Bill Beck and David Arnold. Neither gentleman supervised any of Respondent’s insurance responsibilities except with respect to the sale of variable annuities. Mr. McKinley has been appointed as an agent for various insurance companies, including John Hancock Life Insurance Company (Hancock), ING USA Annuity and Life Insurance Company (ING), Pacific Life Insurance Company (Pacific Life), Lincoln National Life Insurance Company (Lincoln), Reliastar Life Insurance Company (Reliastar), Government Personnel Mutual Life Insurance Company (GPM), Aviva Life and Annuity Company (Aviva), Nationwide Life and Annuity Insurance Company (Nationwide), West Coast Life Insurance Company (West Coast), Transamerica Life Insurance Company (Transamerica), and Metropolitan Life Insurance Company (Metlife). The Vaughn Family Merie Vaughn is a widow with two married sons and five grandchildren. She was born November 18, 1934, and is currently 81 years old. Mrs. Vaughn grew up in and lived in Jackson County, Florida, where she met and married her husband, Rufus Vaughn. She graduated from high school in Jackson County, took some post-secondary business courses, and worked in a variety of places while Mr. Vaughn attended college. Mr. Vaughn worked in the banking industry, and by his retirement had risen to the position of bank president of the Regions Bank in Marianna, Florida. During Mr. Vaughn’s banking career, Mrs. Vaughn sometimes worked as a teller at various banks that he managed. Mr. Vaughn retired in the ‘90s and died in 1997. Mr. Vaughn was a financially-savvy gentleman and believed in saving. During his lifetime, he and Mrs. Vaughn set up several trusts for the management of the funds they had accumulated during their life together. At the time of his death, there was a family trust and a marital trust, as well as an IRA. The trusts were administered by Regions Bank out of Birmingham, Alabama. At the time of Rufus Vaughn’s death in 1997, Ms. Vaughn’s assets were worth approximately $2 million. They were heavily invested in bank stocks. Mrs. Vaughn has two sons, David and Terry. David is approximately ten years older than Terry, is married to Yvette (Lori) Day, and they have four children: Avery, Carly, Chloe, and Dawson, who are 25, 22, 14, and 9 years old, respectively. David and his family live in the Jacksonville area. Terry Vaughn is married to Stephanie Vaughn, and they have one son, Connor, born February 1, 2008. The family lives in Tallahassee, Florida. Toward the end of 2008, Connor was diagnosed with mild autism. Terry has a congenital heart condition that may require valve replacement in the future. In approximately October 2001, Ms. Vaughn moved from Marianna to the Jacksonville area because it was easier for her to receive treatment at Mayo Clinic for an ongoing health problem. Her funds, however, remained with Regions Bank in Birmingham, which served as trustee for the trusts in effect at that time. By 2007, approximately 10 years after her husband’s death, Mrs. Vaughn’s assets had grown to between $7 million and $8 million. In addition to the trusts and an IRA, Mrs. Vaughn’s holdings included a lake-side home in Jackson County, 135 acres of undeveloped land, her home in the Jacksonville area, a car, and a boat. Mrs. Vaughn monitored her holdings on a computer software system purchased for her by one of her sons. At some time in 2007, Mrs. Vaughn became dissatisfied with the trustee at Regions Bank, because she wanted to buy a new car and he would not permit her to withdraw enough funds to do so. In addition, having the trusts handled in Birmingham while she was living in the Jacksonville area was cumbersome for her. She decided that moving the trusts to somewhere closer to her made sense. Around this time, Mrs. Vaughn’s son David introduced her to Respondent. David had met McKinley through his daughter Avery’s soccer team, for which McKinley was a coach. David had talked with McKinley about rolling over some IRAs after an employment change, and had purchased two annuities from him as a result. David met John Crawford, a well-respected, board- certified, estate planning attorney who worked with the law firm Marks Gray. The parties stipulated that Mr. Crawford is a well- respected expert in the field who works with one of Jacksonville’s pre-eminent and well established law firms. Mrs. Vaughn first met with both McKinley and John Crawford in approximately May of 2007. There were a series of meetings with Mrs. Vaughn beginning in May or June 2007, through the end of Mr. McKinley’s relationship with her in October 2010.3/ These meetings were, according to Mrs. Vaughn, generally 30 to 40 minutes long. Among the initial suggestions made to Mrs. Vaughn by Mr. McKinley, with the concurrence of investment planner Bill Beck and attorney John Crawford, was that Mrs. Vaughn diversify her investments. At the time of their initial meetings, Mrs. Vaughn was almost exclusively invested in banking stocks. Mrs. Vaughn followed this advice, which was timely, given the downturn in the stock market and damage to the banking industry that occurred the following year. With each meeting Mr. McKinley prepared an agenda for discussion purposes that he shared with Mrs. Vaughn or whoever attended the meeting. The handwritten notes on the agendas admitted into evidence have been disregarded, as no evidence was presented to demonstrate who made the notations and whether they were made in preparation of the meeting, during the meeting, or in an effort to summarize what was actually discussed. While Mrs. Vaughn did not remember some of the specific details reflected on the meeting agendas, she acknowledged that McKinley discussed in detail many of the specific items that were referenced in the agendas. Moreover, she acknowledged that there was ample opportunity to ask questions about any item mentioned on an agenda that was not initially covered. The focus of many of these meetings, especially the early ones, was creating an estate plan for Mrs. Vaughn that would meet her stated goals: to provide for herself during her lifetime; to provide for her children and grandchildren, and possibly future generations; and to reduce any estate taxes that might be due at her passing. Mr. Crawford’s role in these early meetings was as Mrs. Vaughn’s attorney. As is discussed in more detail below, Mr. McKinley, John Crawford, and Mrs. Vaughn agreed to an investment and estate planning strategy that involved the creation of several Irrevocable Life Insurance Trusts (ILITs), with John Crawford acting as trustee for them. Mr. McKinley assisted with the purchase of life insurance policies on the lives of Mrs. Vaughn, David Vaughn and Yvette Day, Terry and Stephanie Vaughn, and Avery, Carly, Chloe, and Dawson Vaughn. An educational trust fund was also created, as well as a special needs trust for the benefit of Connor Vaughn. Over the course of 2007 through 2010, a number of life insurance policies were purchased, and some of the policies originally purchased were either surrendered or allowed to lapse as other policies were purchased to replace them. At some point late in 2010, Mrs. Vaughn became dissatisfied with the amount of funds being used to purchase life insurance, and she terminated Mr. McKinley’s services. She voiced some of her concerns to David Arnold, who advised her to get an attorney.4/ She has since directed that several of the policies that were in place be terminated, and has filed a civil suit against Mr. McKinley. It is the propriety of the creation of the insurance trusts and the purchase of the life insurance policies contained in those trusts that gives rise to these disciplinary proceedings. Factors to Consider with the Purchase of Life Insurance Generally, the purchase of life insurance requires consideration of several factors, including but not limited to the purchaser’s financial goals, insurability, capacity, and the sustainability of the planned purchase. Life insurance can be used for a variety of purposes, including the traditional goal of providing for one’s family in the event of the one’s death. In addition, life insurance can be used to provide a source for the payment of estate taxes, to create capital and to create liquidity for one’s estate. For purposes of both estate planning and the purchase of insurance in general, it is imperative that all professionals in the process consider which of these uses are consistent with the client’s goals. Here, as stated above, Mrs. Vaughn’s goals were to provide for herself during her lifetime; to provide for her children and grandchildren, and perhaps future generations; and to reduce any estate taxes that might be due at her passing. In 2007, when Mrs. Vaughn began meeting with Gary McKinley and John Crawford, the exemption for estate taxes was $2 million, leaving approximately $5 million of her assets subject to a 45 percent tax rate, which would result in a tax bill estimated at anywhere from $1.8 to $2.25 million upon her death. There have been some dramatic changes in the tax law from 2007 to 2015: in 2011, Congress increased the estate tax exemption to $5 million, but the increase was originally only for two years, when it was scheduled to sunset. As of 2015, the exemption is $5,430,000, and indexed for inflation. However, at the time of most of the events in this case, the exemption remained at $2 million. Accordingly, during the time at issue in this proceeding, reduction of estate taxes for Mrs. Vaughn was an acceptable, realistic goal, in addition to the goals of providing for herself and her family. The insurability of the proposed insured must also be considered. There are many factors that can affect a person’s insurability, such as one’s age; health; habits, such as smoking or alcohol use; and lifestyle or potentially dangerous hobbies, such as skydiving, international travel, reckless driving, or other activities that increase the risk of death or injury. Questions about one’s health history and lifestyle are included on insurance applications, and usually a medical exam, including blood work, is required by underwriting. The questions regarding one’s health can be pretty extensive, and most insurance companies will not issue a policy without a physical given by a physician or a paramedic. There are some instances where an insurance company will insure a person with health problems or a riskier lifestyle, but the policy will be “rated,” meaning that the premium will be higher than the standard premium for the same coverage. With respect to some of the policies in this case, rating is reflected as, for example, 1.75 while others reflect the same rating as 175 percent. Both indicate that the premium would be 1.75 times the standard premium for the same coverage. In this case, two of the insureds had issues that caused a higher rating with respect to insurance premiums: Merie Vaughn was in her early 70s when she started meeting with McKinley and purchasing life insurance. She also had some health conditions, such as high cholesterol and blood sugar issues that caused some of her policies to be rated. Similarly, as noted above, Terry Vaughn has a congenital heart condition that resulted in higher-rated policies. Also to be considered is the insured’s capacity to buy the proposed insurance: in other words, how much insurance can the insured afford to purchase? According to Mike Saunders, while each carrier has different rules, most insurance companies will insure someone for 20 times the person’s income, or up to the person’s net worth. If a policy is a replacement policy, that can expand the person’s capacity. Insurance companies will not generally issue life insurance for more than they think is financially reasonable, unless there are special circumstances that are disclosed. Using Mr. Saunders’ numbers, Mrs. Vaughn’s capacity in terms of coverage would have been approximately $6-7 million. Mr. Saunders did not believe that Mrs. Vaughn was over-insured, and saw no indication that any carrier considering a policy application ever indicated that she was over-insured. Finally, an important consideration is whether the person seeking to purchase life insurance can realistically afford the premiums. Common sense dictates that one should only consider buying something that they can continue to afford to pay. There are allegations in the Administrative Complaint contending that McKinley’s purpose in purchasing so many life insurance policies was to waste Mrs. Vaughn’s estate and earn more commissions for himself. However, it does not appear, from the evidence presented, that it was the purchase of life insurance that caused the wasting of Mrs. Vaughn’s estate. Count I: Creation of the ILITs After numerous discussions over the course of several months with Mr. McKinley, John Crawford, and Tim McFarland, an estate planning attorney with John Hancock, Mrs. Vaughn agreed to the proposed strategy of creating a series of ILITs. An ILIT is an accepted estate planning strategy used to shield income from creditors and to reduce estate taxes upon a client’s passing. It is an irrevocable trust designed to hold life insurance policies, and is a common strategy used with the idea of removing the death benefit of an insurance policy from someone’s taxable estate. The ILIT must be set up so that the settlor has no incidents of ownership over the trust, or the proceeds will not be removed from the estate. ILITs are a commonly used and entirely appropriate vehicle in an estate plan in order to shift the client’s wealth from what the client owns to irrevocable trusts for the benefit of the settlor’s family. They are a management vehicle for wealth that protects that wealth from creditors, and allows assets to pass from the settlor to the trust, outside the estate, straight to the beneficiaries without being subject to estate tax. For a client with assets such as Mrs. Vaughn, the use of ILITs was an appropriate and beneficial estate planning tool. An essential element of an ILIT is the removal of the incidents of ownership from the settlor to the trustee. With respect to each of the ILITs discussed below, Merie Vaughn agreed to appoint John Crawford as the trustee. What this meant in practical terms, is that while Merie Vaughn funded each of the ILITs by paying the premiums for the life insurance policies purchased for the ILITs out of her assets (or those of the trusts for which she was the beneficiary), she relinquished ownership and control of the trust (and its contents) to John Crawford, as the trustee. Moreover, as trustee, John Crawford was considered the owner of the life insurance policies in each ILIT that was created, regardless of whose life was insured. As trustee, it was his responsibility to make the decisions regarding the purchase of insurance policies, and the payment of the premiums on those policies. Before the creation of the ILITs, McKinley showed Merie Vaughn multiple estate planning diagrams to illustrate the overall plan. He also made Mr. Crawford available for any questions she might have. When asked, Merie Vaughn acknowledged that she had multiple opportunities to ask questions, and that did not believe that McKinley was trying to hide anything from her. As a result of the estate planning strategy presented to Merie Vaughn, with which she agreed, the Rufus C. Vaughn Revocable Trust and the Merie M. Vaughn Revocable Trust from Birmingham, with Regions Bank as the trustee, were moved to Jacksonville, and John Crawford was appointed as the successor trustee. In addition, several ILITs were created between September 2007 and March 2010, also naming John Crawford as trustee. Mr. Crawford explained the various trust documents to Merie Vaughn during this process. The trusts created for Merie Vaughn’s estate plan are as follows: the Merie M. Vaughn Irrevocable Insurance Trust, executed September 25, 2007; the Merie Vaughn Retained Annuity Trust, executed October 23, 2007; the David C. Vaughn Irrevocable Insurance Trust, executed October 31, 2007; the Terry R. Vaughn Irrevocable Insurance Trust, executed October 20, 2007; the Stephanie Eller Vaughn Irrevocable Insurance Trust, executed May 21, 2009; the Yvette L. Day Irrevocable Insurance Trust, executed April 18, 2009; the Merie M. Vaughn Trust F/B/O Connor E. Vaughn, executed March 30, 2010; and the Vaughn Family Education Trust, executed March 30, 2010. With the exception of the Merie Vaughn Retained Annuity Trust, for which Merie Vaughn is the trustee, all of the other trusts, i.e., all of the ILITs, name John Crawford as trustee. With respect to each ILIT, the following provision, or one substantially similar to the following provision, is found at Article II, Section 2, of the trusts: I anticipate, but do not require, that the Trustees will purchase one or more policies of insurance on my life with any cash amount contributed to this trust, and I authorize the Trustees to so apply for insurance on my life (or on the life of anyone else other than a Trustee), in amounts and under terms that the Trustees, in their sole discretion, deem advisable and proper. All incidents of ownership in and to all insurance policies transferred to or purchased by the Trustees shall be vested in the Trustees, and the insured under any such policy shall not participate in any right or benefit respecting such policies or any other right under this trust, including a power of withdrawal hereunder, either individually, as guardian, custodian, trustee or in any other capacity.[5/] Likewise, all of the ILITs contained a provision at Article II, Section 1, providing, I, the undersigned Grantor, have this day absolutely and irrevocably transferred, assigned and delivered to the Trustees, and to their successors and assigns as Trustees hereunder (all being hereinafter referred to as the “Trustees”), in trust, certain policies of insurance as set forth in a receipt signed by the Trustees. Those policies, as well as any other cash or property that may be received by the Trustees from me or any other source, shall be administered by the Trustees under this agreement. Stephanie Vaughn and Yvette Day did not testify at hearing. Gary McKinley and John Crawford also did not testify. Both David and Terry Vaughn testified that they fully understood the terms of the trust agreements. Merie Vaughn testified that she did not understand the effect of the trust, but she acknowledged that she had ample opportunity to ask questions of both McKinley, and of John Crawford, the attorney she retained. She also acknowledged that she never told John Crawford that she did not understand the ILITs, and while McKinley offered to take as much time as she needed to review the estate plan, including the ILITs, with her, she did not take advantage of his offer. Count I of the Administrative Complaint, at paragraph 29, alleges that “[y]ou, Gary L. McKinley, completed a new account form on behalf of Mrs. Vaughn for the Leaders Group. On that form, you listed Mrs. Vaughn as being an experienced investor, her net worth as $8 million, her liquid net worth as $3 million and her annual income as $250,000. You knew or should have known that these representations were false.” While the investment application was shown to Mrs. Vaughn at hearing, she did not testify regarding the completion of the form, and did not identify who was responsible for the estimation of her net worth. There is simply no evidence as to who completed the form. Moreover, the estimation of her assets at $8 million, considering both her securities and her real property, is a reasonable estimate. The record does not include evidence as to what amount of her income is considered liquid.6/ However, Mrs. Vaughn testified that at the beginning of this process with Gary McKinley, she decided to take a monthly withdrawal of $12,500 to meet her expenses. She also received a minimum distribution on her IRA account, according to David Arnold, of approximately $80,000 a year. A monthly withdrawal of $12,500, plus her Social Security benefit of $1,204 monthly, and the minimum distribution provides annual income along the lines listed in the application. Ironically, there was similar information on a form David Arnold had Mrs. Vaughn complete. He testified that he did not ask her where the liquid assets were, he simply had Mrs. Vaughn complete the form. The more persuasive and compelling evidence presented did not establish that the trusts established as a part of Mrs. Vaughn’s estate plan, and the resultant sales of life insurance policies, were beyond Mrs. Vaughn’s estate planning needs. Likewise, the evidence did not demonstrate that the life insurance policies were not in her best interests or the best interests of her family members. The evidence also did not demonstrate that the insurance policies were sold for the sole purpose of obtaining fees and commissions. Contrary to the allegations in the Administrative Complaint, the evidence did not demonstrate that McKinley engaged in willful misrepresentations or deceptive acts and practices. In fact, Mrs. Vaughn testified that she did not believe that McKinley was trying to hide anything from her, and consistently offered to spend more time if necessary to explain anything she did not understand. The Administrative Complaint also alleges at paragraph 33 that McKinley wrote a total of 10 life insurance policies on Mrs. Vaughn with death benefits totaling $10,111,052 and premiums totaling $467,024.97. What the Administrative Complaint omits is that some of these policies replaced other policies, resulting in lower overall premium costs to Mrs. Vaughn at higher benefits. The annual cost of the premiums on the life of Mrs. Vaughn was significantly lower than that alleged in the Administrative Complaint. Mike Saunders, the only person represented as an expert in the practice of selling life insurance,7/ testified credibly that replacing policies with more “efficient” policies is an acceptable practice that benefits the client. Count II: ING Policies on the Life of Merie Vaughn Count II of the Administrative Complaint deals with the purchase of ING policy number 1624559 (ING 59). Mrs. Vaughn applied for this policy on August 17, 2007, and it was issued on or about November 7, 2007, with a death benefit of $375,323 and an annual premium of $20,000. The owner of the policy is the Merie Vaughn ILIT. This policy is one of the first policies purchased as part of the estate plan, and contains a signed acknowledgment that the premium is higher than usual, as the insured is rated at 1.75. There is a policy delivery receipt signed by John Crawford dated November 20, 2007, as well as an amendment changing the death benefit to $452,000. However, Respondent is correct that the policy contained in evidence appears to be incomplete: for example, the revised illustration delivered with the policy indicates that it is 16 pages long, but only six of those pages are included. While the Department alleges in the Administrative Complaint, and asserts in its PRO, that Gary McKinley earned a commission of $14,997.80 for the sale of ING 59, it points to no exhibit or testimony to support this proposed finding. Even assuming that this amount is correct, the credible, competent evidence at hearing established that the commissions received by McKinley were not improper. Competent, credible evidence at hearing established that the ING 59 policy was a good policy from a good company. Petitioner asserts that, had Mrs. Vaughn lived to her life expectancy of approximately 14 years, she would have paid $280,000 in premiums. Under those circumstances, the trust would have received a death benefit of $452,000, meaning that the trust would have received $152,000 more than it paid. An amendment to the policy application indicates that the original application was submitted on September 28, 2007, while the application itself reflects the August 17, 2007, date. In any event, Mrs. Vaughn met with McKinley on August 14, September 17, and September 25, 2007. Insurance applications are listed as agenda items for two of these meetings, and the ING application is specifically listed for the September 17, meeting. Mrs. Vaughn was and is a competent adult who had exhibited the capacity to track her investments and understand her assets. There is no competent, credible testimony to support the notion that Mr. McKinley used undue influence to convince her to purchase this policy. Count III: John Hancock Policies on the Life of Merie Vaughn Count III of the Administrative Complaint addresses the purchase of two John Hancock policies. Petitioner’s Exhibit 27 is the application for Hancock policy number 93541373 (Hancock 73), but the actual policy, including the receipt for the policy, is not included in the exhibits for this hearing.8/ The policy specifications at Petitioner’s Exhibit 28 indicate that Hancock 73 had a death benefit of $578,000, an annual premium of $20,000, and was owned by the Merie Vaughn ILIT. The application was also submitted August 17, 2007, and the policy issued November 16, 2007. There is no indication that the policy is rated higher than standard, non-smoking rates. It is difficult to tell if a complete copy of the second policy, John Hancock policy number 94331410 (Hancock 10), is in evidence. However, from the information presented, this policy had a death benefit of $828,518, required an annual premium of $30,000, and the policy was in force beginning in January 1, 2009. It also appears to be issued at the standard non-smoking rate. The policy receipt was signed by John Crawford on December 31, 2008, and the owner of the policy was the Rufus Vaughn Family Trust, with John Crawford as trustee. Both policies enjoyed very respectable rates of return and were considered to be good policies. The more persuasive and compelling evidence established that the policies were part of an acceptable and appropriate estate plan for Mrs. Vaughn. No evidence was presented to establish that the policies were purchased for the sole purpose of generating commissions for McKinley. The two policies lapsed in June and July 2010, respectively. Contrary to the allegations in the Administrative Complaint, however, absolutely no evidence was presented to support the allegation that “you, Gary McKinley, knew the importance of maintaining life insurance policies and not allowing them to lapse, but you allowed them to lapse because you desired to generate larger commissions on new replacement sales rather than settle for receiving smaller residual commissions on extent policies.” Under the express terms of the Merie Vaughn ILIT, the ultimate decision with respect to purchasing, paying for, or surrendering life insurance policies was to be made by the trustee, John Crawford, not by McKinley. Respondent did not have the authority to pay the premiums. Neither John Crawford nor Respondent testified in this proceeding, so little if anything is included in the record of this case regarding the decision-making related to allowing these policies to lapse. However, the record indicates that these two policies were meant to be replaced by Transamerica policies in 2010. The application for Transamerica 65140389 (Transamerica 89) specifically lists the John Hancock 73 policy, the ING 59 policy, and the Lincoln 09 and 28 policies as policies that may be replaced, while the application for Transamerica 65144360 (Transamerica 60) lists the John Hancock 10 policy as intended for replacement. While the John Hancock policies had a respectable rate of return, the rate for the Transamerica policies was better. The more compelling and persuasive testimony established that allowing a policy to lapse is the proper method for dealing with the policy when it is going to be replaced by a more efficient policy. No competent, persuasive evidence of any willful misrepresentations or deceptive acts or practices was presented. Count IV: GPM Policies on the Life of Merie Vaughn Count IV deals with the application process and issuance of three GPM policies, referred to as GPM 25, GPM 30, and GPM 39. On October 21, 2007, McKinley submitted an application for a GPM universal life insurance policy which would become GPM policy 758825 (GPM 25). The illustration for the policy indicates a death benefit of $500,000, with an annual premium of $20,000. The actual application lists under the plan for insurance a benefit of $330,123. The Administrative Complaint alleges that the application for GPM 25 was filled out by Gary McKinley, but no evidence was actually presented with respect to this allegation. The application is signed by both Mrs. Vaughn and Mr. McKinley. The application asks GPM to contact the agent with an offer, and lists the insured as Merie Vaughn, and the owner as a trust, with the trustee as payor.9/ The Administrative Complaint alleges that the application was incomplete in that none of the general information (pages 3 and 4) was completed, and that the application indicated that no other life insurance was in force on Mrs. Vaughn. With respect to the general information on pages 3 and 4 of the application, those pages are in fact blank in the initial submission. However, the Amendment of Application and Policy Delivery Receipt found at Petitioner’s Exhibit 45, page 258, states that “the answers on pages 3 and 4 were given by the proposed insured(s), age 15 and older, by telephone to GPM’s tele-underwriter, who typed in the answers.”10/ Further, contrary to the allegations in the Administrative Complaint, at page 238 of Petitioner’s Exhibit 43, the application amendment contains a listing of three insurance policies for Merie Vaughn. While the application listed the proposed owner as a trust, the policy was issued listing Merie Vaughn as both the owner and insured. All of this becomes irrelevant because, according to the records supplied to the Department by GPM, Mrs. Vaughn decided she did not want a universal life policy, but wanted a whole life policy. The documentation from GPM states: Policy No. 758825 was a universal life policy issued on the life of Merie Vaughn with an effective date of January 1, 2009, and a planned premium of $30,000 annually. Mrs. Vaughn did not accept this policy as issued, having decided she wanted whole life coverage instead. Our administrative system builds multiple screens for universal life policies that we are unable to change to accommodate a different plan of insurance. For administrative purposes only, we terminated the records for Policy No. 758825 as “not taken” and issued a new Policy No. 760030 for the whole life plan with an effective date of January 1, 2009. The $30,000 premium for Policy No. 788525 was reversed, along with all associated commissions, and re-applied as the initial premium of $29,999.97 for the whole life Policy No. 760030. As noted, GPM 30 was issued January 1, 2009, based on an application dated October 21, 2008, with a death benefit of $348,819 and a planned annual premium of $29,999.97. The policy was rated at 150 percent. Mrs. Vaughn did not remember a discussion related to whole life as opposed to universal life. However, whether such a discussion actually took place is also irrelevant. GPM 30 was owned by the Rufus Vaughn Family Trust, for which John Crawford was serving as trustee. The application for GPM 25 also listed the proposed owner of the policy as a trust, not as Merie Vaughn. Article XI, paragraph (k)(1) and (2) of the trust document specified: (k)(1) Unless the Grantor has been declared incapacitated (either legally or by the terms of this agreement), the Grantor may contribute or direct the Trustee to purchase insurance policies on the life of the Grantor and hold each such policy of insurance purchased by or contributed to the Trustee. . . . The Trustee shall be under no obligation to invest any cash value accumulated in any life insurance policy owned by the Trust regardless of investment yield on such value within the policy as compared to the net investment yield which could be obtained outside the policy. (2) The Trustee shall be under no obligation to pay the premiums which may become due and payable under the provisions of any policies of insurance that may be held in this trust, or to make certain that the premiums are paid by the Grantor or others, or to notify any persons of the non- payment of premiums. Upon notice at any time during the continuance of this trust that the premiums due upon any policy are in default, or that premiums to become due will not be paid, the Trustee, in its sole discretion, may apply any dividends or cash values attributable to the policy to the purchase of paid-up insurance or of extended insurance, or may borrow upon the policy for the payment of premiums, or may accept the cash values of the policy upon its forfeiture, with notice to the Grantor or beneficiaries of the trust or any other person . . . . Clearly, the decision-maker with regard to the purchase of and continued vitality of these policies was John Crawford, who did not testify in this proceeding. There was no evidence presented as to his thought process or any actions taken by him with respect to these policies. Further, the only person who testified at any length as to the standard process for submitting life insurance applications was Mike Saunders. Mr. Saunders described the process in detail, and stated that it is not at all uncommon to submit incomplete applications in order to get the process started. Applications are “scrubbed,” both by the insurance agent’s office and by the insurance company, and there are often amendments to the applications during the process. Mr. Saunders also testified that it was not uncommon to have a client just sign the signature page on an application (something done with several of the policies in this case), because there are going to be multiple “looks” at the application and multiple opportunities to amend as additional information is garnered. In fact, many of the amendment forms in evidence actually include a statement that information included in the amendment will be treated as if it was included on the original application. The failure to have the policy application completely filled out when first submitted is not clear and convincing evidence of a false statement. Mr. Saunders’ testimony, which is unrebutted, is accepted. There is no credible, persuasive evidence that demonstrates that the termination of GPM 25 and issuance of GPM 30 was as a result of McKinley’s “lack of reasonably adequate knowledge and technical competence.” Moreover, no evidence was presented to establish what standard represents “adequate knowledge and technical competence,” or how Respondent may have violated that standard. GPM 30 was terminated as of January 1, 2010, for non- payment of premium. As noted above, payment of premium was in the sole discretion of the Trustee. No testimony was presented as to why the premium was not paid, but it was not within McKinley’s authority to pay it. In any event, McKinley assisted in the process of having the policy reinstated. The application for reinstatement of GPM 30 contained information on all of the outstanding policies on the life of Mrs. Vaughn, which was, at this time, at or near the highest point in terms of both death benefit and premium costs. Clearly, the insurance company made the decision to reinstate the policy with full knowledge of the amount of life insurance held on her life at that time. As found above, life insurance “capacity” is a measure used by insurance companies to determine the maximum amount of insurance a company is willing to write on an individual. If Merie Vaughn was over-insured at this point, it is unlikely that the insurance company would have reinstated the policy. Indeed, at no point during the purchase of any of the policies does it appear that any insurance company refused to issue a policy based on lack of capacity. Paragraphs 61 through 65 of the Administrative Complaint reference events that occurred after McKinley’s services were terminated by Mrs. Vaughn. While the exact date of this termination is not in the record, testimony by Mrs. Vaughn and Mr. Arnold place it at late September or early October 2010. Moreover, these paragraphs allege actions by John Crawford as trustee, not actions by McKinley. Paragraph 64 of the Administrative Complaint alleges that John Crawford requested Michael Halloran to replace McKinley “due to your multiple failures to assist in the maintenance of GPM 30.” No evidence was presented regarding John Crawford’s rationale for requesting Mr. Halloran to be reflected as agent of record, although it can be inferred that he was honoring Mrs. Vaughn’s wishes to no longer do business with McKinley. The Department did not present evidence of multiple failures by McKinley regarding the maintenance of GPM 30. The Administrative Complaint also takes issue with the application, issuance, and monitoring of GPM Policy 751339 (GPM 39). The application was originally submitted for GPM 39 in June of 2007, very early in Mrs. Vaughn’s relationship with McKinley.12/ A letter from McKinley dated June 21, 2007, referencing the policy number, states: Please find the enclosed application for Merie Vaughn. As we discussed, trusts will be executed over the next 2-6 weeks and ownership, beneficiaries and FEIN tax ID’s will be re-faxed upon completion. We may place some or all of this premium and death benefit with a standard offer from GPM. Likewise, the Agent’s Report found with the application indicated that McKinley planned to submit the case to other companies, and named John Hancock or best offer. As found above, the fact that the application is not complete is not clear and convincing evidence of a false statement. Moreover, when all of the documents are read together, it is clear that this application was a work in progress. There is no evidence to support the allegation that the policy was “sold” as a million dollar policy but only issued for $221,440. The reference to one million dollars is a reference to the insurance plan. At the point the application was completed, that was the target amount, and McKinley’s letter clearly states that they would place “some or all” of the death benefit with the company, depending on the offer. GPM 39 was issued October 16, 2007, listing Merie Vaughn as the owner, with a death benefit of $221,440 and an annual premium of $19,999.18. The policy was rated at 150 percent. While the portion of the policy included in Exhibit 39 indicates that the policy has 29 pages, only six pages are included in the exhibit. There is an amendment and policy receipt signed by John Crawford as trustee and by McKinley as agent on October 23, 2007, with a second amendment and policy receipt signed by Merie Vaughn as owner on October 29, 2007. The policy receipt showed the beneficiary of the policy to be the trust. However, without the entire policy with all amendments being included in the exhibits, no finding can be made that any type of material error occurred with respect to this policy. Finally, paragraph 58 of the Administrative Complaint alleges that in November 2009, Gary McKinley directed that GPM change GPM 30, GPM 39, and GPM 84, which will be discussed in more detail below, to paid-up policies with no further premiums to be paid. While this is so, the Administrative Complaint does not allege, and the evidence did not demonstrate, why this action was not in Mrs. Vaughn’s best interests. Further, the Administrative Complaint did not allege and the evidence did not demonstrate whether McKinley made these instructions independently, in consultation with others, or solely at the behest of John Crawford or Mrs. Vaughn. The more persuasive and compelling evidence established that the policies were part of an acceptable and appropriate estate plan for Mrs. Vaughn. No evidence was presented to establish that the policies were purchased for the sole purpose of generating commissions for McKinley. Count V: Lincoln Policies on the Life of Merie Vaughn Count V of the Administrative Complaint addresses the purchase of three policies from Lincoln: Lincoln Policy JJ7061061 (Lincoln 61); Lincoln Policy JJ7085909 (Lincoln 09); and Lincoln Policy JJ7085928 (Lincoln 28). The exhibits related to these three policies are Petitioner’s Exhibits 59 through 69. They are, however, incomplete and somewhat confusing. Petitioner’s Exhibit 59 is a copy of the application for Lincoln 28. However, it appears to be a reiteration of Petitioner’s Exhibit 60, with the word MODIFIED stamped on several of its pages. The application is dated April 26, 2009, but the fax legend for this modified document is dated April 28, 2009. With respect to question 50, no policy is listed, but the box to answer “no” is not checked. The exhibit also includes a Lincoln “appropriateness verification form,” used when the policy applied for is going to be used as a replacement policy. It appears that the document is incomplete, however: the fax legend indicates that there were 36 pages faxed, but the exhibit only includes pages 7-16, with one page bearing no legend. Petitioner’s Exhibit 60 also purports to be an application submitted April 26, 2009. The application also appears to be incomplete. For example, the fax legend at the top of the page reflects that there were 17 pages faxed. The exhibit only contains pages 2, 7-10, 13, 14, and 15. Similarly, the numbering on the application pages are 1 of 5, 2 of 5, 3 of 5, 3A of 5, 3D of 5, 4 of 5, and 5 of 5. For question 10 of the health summary, the application says “see attached,” but no attachment is included in the exhibit. Petitioner’s Exhibit 61 is part, but not all, of Lincoln Policy 28, issued July 28, 2009. The policy is owned by the Rufus Vaughn Family Trust, has a death benefit of $1,250,028, with a premium of $13,000, and is rated at 1.75 for the first 20 years. The exhibit includes a July 15, 2009, amendment to the application, but references an application date of May 7, 2009, as opposed to April 26, 2009, referenced above. The amendment supplies the identifying features of six policies in force for Mrs. Vaughn at that time. Petitioner’s Exhibit 62 is a mixture of documents related to Lincoln Policies 61 and 28. The first part of the exhibit appears to be an application for insurance for Lincoln 61, signed November 21, 2008. Like the application at Petitioner’s Exhibit 60, there are references in the application that say, “see attached,” with no attachments included. Following the application there is what appears to be part of the policy issued for Lincoln 61, listing the schedule of benefits with a death benefit at $912,388, an issue date of January 28, 2009, an annual premium of $30,000, and the use of standard rates. The portion of the policy included begins with page 3, and includes pages 4A-F only. Petitioner’s Exhibit 62 then reverts to documents related to Lincoln 28. It includes a schedule of benefits for that policy, indicating it was issued on July 28, 2009; includes an amendment to the application that references the application as being dated May 7, 2009 (as opposed to April 26, 2009); repeats some of the documents contained in Petitioner’s Exhibit 61; and includes a policy endorsement page and policy receipt for Lincoln 28, reflecting a premium of $60,000 as opposed to $13,000. Petitioner’s Exhibit 64 appears to be a modified application for Lincoln 61, dated January 13, 2009, whereas the original application was dated November 21, 2008. It also refers to attachments that are not included. There is a letter dated January 21, 2008 (although the fax legend reflects January 23, 2009), notifying Lincoln that from the time of application, two additional policies were placed in the Rufus Vaughn Family Trust. There are two copies of an endorsement page for Lincoln 61, identifying the date of coverage as January 28, 2009, and two copies of an amendment to the application, providing additional information for questions 19, 20, and 21. Petitioner’s Exhibit 66 is an application for Lincoln 09, marked as modified, and also dated April 26, 2009. It appears to duplicate the application at Petitioner’s Exhibit 59. Similarly, Petitioner’s Exhibit 67 is also an application dated April 26, 2009, which appears to duplicate Petitioner’s Exhibit 60. At page 430 of Petitioner’s Exhibit 67 is an endorsement for Lincoln 09 that actually references the April 26, 2009 application, as opposed to the May 7, 2009 application referenced (but not supplied) in Petitioner’s Exhibit 62. There is also a Policy receipt for Lincoln 09 dated and signed July 15, 2009, and an unsigned amendment for the policy. Finally, Petitioner’s Exhibit 69 contains a Schedule of Benefits for Lincoln 09, but not the policy in its entirety. The Schedule of Benefits reflects an issue date of July 29, 2009, for a policy with a death benefit of $832,853, with a premium of $40,000. The policy is rated at 1.75 for the first 20 years, then reverts to standard rates. The Schedule of Benefits is the only part of the policy included, and reflects pages 3, and 4A through 4F only. This mishmash of partial applications and partial policies undermines any confidence that the documents represent the whole of what took place with respect to the application and issuance process for these three policies. All that can be said is that Lincoln 61 was issued on January 28, 2009, with a death benefit of $912,388 and an annual premium of $30,000, with a standard rating. The owner of the policy was the Rufus Vaughn Family Trust. On July 28, 2009, Lincoln 09 and Lincoln 28 were issued. Lincoln 09 was owned by the Merie Vaughn Revocable Trust, had a death benefit of $832,853.00, an annual premium of $40,000, and a 1.75 rating. Lincoln 28 was owned by the Rufus Vaughn Family Trust, had a death benefit of $1,250,028, a $60,000 annual premium, and 1.75 rating. Any initial omissions with respect to the applications appear to have been resolved through amendments to the application, consistent with the process described by Michael Saunders. After issuance of Lincoln 61 and before the issuance of Lincoln 09 and Lincoln 28, Mrs. Vaughn signed a letter to McKinley dated April 1, 2009, confirming the strategy of replacing some of her life insurance policies with policies that had more efficient terms. The letter states in part: Gary: Please take all necessary steps to lower my premiums for the life insurance where I am the insured to consider getting the same insurance for a lower premium or leveraging and lowering my premiums to increase Death Benefits. Please check the financials of each company and do your best to confirm the company is indeed solvent and one of the top companies. I understand John Hancock and Lincoln will be the initial and possibly the carriers of choice. The reason I’m doing this is I have noticed and as you have pointed out, my most recent policy with Lincoln for 30k of premium bought me almost $100,000.00 more of death benefit and with the economical environment, it would be helpful if we can lower premiums by some 30k or 50k total this year and going forward, I would like the opportunity to do this. Even with the over 5 Mil saved, I must be prudent in times like this. I realize the initial calculations are that I might save approximately 30k to 50k annually and still be able to increase my Death Benefit by 500k to 1 mil dollars. This is certainly worth us considering consolidation and savings and I appreciate your monitoring my insurance portfolio regularly looking for these types of arbitrage. As of April 29, 2013, Lincoln 61 remained an active policy. Both Lincoln 09 and Lincoln 28 lapsed on January 3, 2011, several months after Mrs. Vaughn terminated McKinley’s services. The Administrative Complaint charges that McKinley failed to provide information in the applications on all in- force life insurance policies on Mrs. Vaughn’s life, specifically listing ING 59, Hancock 73, GPM 30, and GPM 39. As noted above, the applications were updated through the amendment process, which unrefuted evidence indicates is an accepted practice in the insurance industry. While the documents are incomplete, it appears that all necessary information was supplied. While the Administrative Complaint states that “Lincoln later added amendments to L 61, L 09 and L 28 to add the insurance coverage information that you, Gary McKinley, should have included when the applications were originally submitted to Lincoln,” there was no testimony at hearing to demonstrate who supplied the information for the amendments (McKinley or the insurance company), and with documents as incomplete as these, to make any conclusions regarding the source of the information would be speculative. The responsibility for the lapsing of two of the policies cannot be laid at the feet of McKinley: not only was he not responsible for paying the premiums with respect to these policies, but he was no longer working with Mrs. Vaughn at the time the policies lapsed. Moreover, no persuasive, competent evidence was presented to demonstrate that the purchase of these policies was inappropriate and without demonstrable benefit to Mrs. Vaughn. Rather, the more persuasive evidence indicates that the purchase of these policies was part of an integrated strategy to reduce premiums, increase death benefit, and continue the overall goals of reducing Mrs. Vaughn’s taxable estate while still preserving her wealth. Likewise, no evidence was presented from which it could be found that the policies were sold for the “sole purpose of obtaining a fee, commission, money or other benefit for [McKinley] and for John Crawford,” or for the premise that McKinley’s intention was to generate larger commissions on new replacement sales rather than settle for receiving smaller commissions on existing residual policies. Count VI: Transamerica Policies on the Life of Merie Vaughn Count VI of the Administrative Complaint deals with Transamerica 89 and Transamerica 60. Mrs. Vaughn signed an application for the Transamerica 89 policy on May 26, 2010. The policy issued on August 6, 2010, with a death benefit of $3,882,000 and an annual premium of $130,000. The owner of the policy was the Merie Vaughn ILIT, and the policy was issued at the standard rate. The policy application for Transamerica 89 indicated that four policies would be replaced by Transamerica 89: Hancock 73, with a death benefit of $578,006 and annual premium of $20,000; ING 59, with a death benefit of $452,000 and annual premium of $20,000; Lincoln 09, with a death benefit of $832,853 and annual premium of $40,000; and Lincoln 28, with a death benefit of $1,250,028 and annual premium of $60,000. In other words, the purchase of Transamerica 89 to replace these four other policies meant an increase in death benefit (from $3,112,887 to $3,882,000), with a reduction in annual premium (from $140,000 to $130,000). Transamerica 60 was issued August 13, 2010, with the owner as the Rufus Vaughn Family Trust. The death benefit was $805,000 with a $27,000 annual premium, calculated at the standard rate. It replaced Hancock 10, which had a death benefit of $828,518, and an annual premium of $30,000. McKinley received commissions on the sale of both policies. Mike Saunders described the Transamerica policies as very efficient. According to the rate of return analysis prepared by John Linnehan, whose testimony is accepted as credible and persuasive, the internal rate of return for these policies was excellent, ranging from 17.1 percent should Mrs. Vaughn live to life expectancy, to a return of 207 percent should she die at the third anniversary of the policy.11/ The same rates applied for both policies. These rates of return far exceed what would be expected as an acceptable rate of return on life insurance policies, and was higher than the rate of return for the policies that they replaced. The more persuasive and compelling evidence demonstrated that the purchase of these policies was intended to and did provide a benefit to Mrs. Vaughn and was appropriate, given her financial circumstances and estate planning goals. Paragraphs 81 and 83 of the Administrative Complaint allege details regarding the cancellation of these policies, at a time when McKinley was no longer working with Mrs. Vaughn. Moreover, John Crawford, as trustee, is the person with the discretion and authority to make decisions with respect to the maintenance or surrender of any and all of the life insurance policies held by the various trusts. No evidence was presented to indicate that McKinley participated in any way with respect to the decisions to surrender or cancel these policies. Likewise, no evidence was presented from which it could be found that the policies were sold for the “sole purpose of obtaining a fee, commission, money or other benefit for [McKinley] and for John Crawford,” or for the premise that McKinley’s intention was to generate larger commissions on new replacement sales rather than settle for receiving smaller commissions on existing policies. Count VII: Hancock Long-Term Care Policy In Count VII, the Department takes issue with McKinley’s sale of a Hancock long-term care policy. Merie Vaughn applied for the policy on November 20, 2009, and John Hancock policy 7222784 (Hancock LTC 84) was issued December 29, 2009. Hancock LTC 84 was a policy with a five-year benefit period, and a policy limit of $396,000. The long-term care benefit was for $6,600 per month, and had an annual premium of $12,262.50. Other features of the policy are described in Petitioner’s Exhibit 91, but are not necessary for purposes of this discussion. The Department charges, “[y]ou, Gary McKinley, being both a licensed insurance agent and a securities broker, knew or should have known that the sale of the Hancock long term care policy, in addition to all of the life insurance policies you sold her, was beyond Mrs. Vaughn’s needs, was not in Mrs. Vaughn’s best interests, was neither necessary nor appropriate for a person her age and financial circumstances, was without demonstrable benefit to her, served to waste her estate and was done for the sole purpose of obtaining a fee, commission, money or other benefit for yourself and for John Crawford.” The only factual evidence in the record regarding the purchase of this policy is from Merie Vaughn. She testified that she wanted this policy, and told Gary McKinley that if he could find some long-term care coverage, she would be interested in it. Long-term care coverage was something she wanted. There is no credible, persuasive evidence to demonstrate that McKinley sold this policy just to get a commission. There is no evidence as to what advice McKinley gave Mrs. Vaughn about this type of policy: whether he advised that she obtain it or whether she insisted on buying against his advice. There is no evidence to prove the allegations in the Administrative Complaint. Count VIII: The ING Annuities Count VIII of the Administrative Complaint deals with the purchase of three ING annuities: one purchased with funds from Merie Vaughn’s IRA, one purchased by the Rufus Vaughn Family Trust, and one purchased by the Rufus Vaughn Marital Trust. On September 30, 2007, Mrs. Vaughn’s IRA account was worth approximately $795,972.43. On October 29, 2007, she applied for ING annuity 90275251 (ING Annuity 51), and on December 4, 2007, a one-time premium of $712,037.78 was paid from the assets in Merie Vaughn’s IRA to fund ING Annuity 51. ING Annuity 51 was issued on December 10, 2007, with a five- percent bonus on premium. A bonus is defined in the policy as “an amount equal to a percentage of the Single Premium, as stated on the Contract Data Page, that we add to the Contract’s Accumulation Value on the Contract Date. The Bonus is elected to the Strategies in the same ratio as you elect the Single Premium.” On August 4, 2008, John Crawford, as Trustee of the Rufus Vaughn Family Trust, applied for ING Annuity 90295107 (ING Annuity 07). On August 18, 2008, $500,000 was paid from the assets of the Rufus Vaughn Family Trust for the single premium of $500,000, and on August 19, 2008, ING Annuity 07 was issued with a five-percent bonus on the single premium. On August 4, 2008, John Crawford also applied for ING Annuity 90295108 (ING Annuity 08) as trustee for the Rufus Vaughn Marital Trust.13/ This annuity also had a single premium of $500,000, which was paid from trust proceeds on August 18, 2008. The ING Annuity 08 also issued on August 19, 2008, with a five-percent bonus on the single premium. While the Administrative Complaint alleges that “upon the advice and at the direction of you, Gary McKinley, . . . Ameritrade Clearing issued a check in the amount of $500,000.00 made payable to ING as the single premium” with respect to both annuities purchased by John Crawford as trustee, no evidence was presented to identify who arranged for payment of the annuities. Likewise, the Administrative Complaint alleges with respect to ING Annuities 07 and 08 that “you, Gary McKinley, with the cooperation of lawyer/trustee Crawford, gave your directions or consent . . . to having the [trust] disgorge $500,000.00 for funding the ING annuity,” there is no competent, credible evidence regarding the decision-making with respect to the purchase of these two annuities. Annuities are designed to provide a lifetime income from an initial investment of funds, or can be used to guarantee a certain identified rate of return over a fixed period. There are limitations on how much can be withdrawn from an annuity without incurring surrender fees. In the case of ING Annuity 51, Merie Vaughn withdrew $40,209.19 on December 22, 2008, and $69,675.89 on December 11, 2009. Both amounts were less than the 10 percent allowed annually without incurring surrender fees. From the dates of purchase until March 2012, each of the three annuities earned investment profits of approximately $75,000, for a total profit for the three annuities at $226,206.41. While the annuities have each made a significant profit, as of March 2012, they were not worth as much as they were when they were purchased, because of the amount withdrawn. However, no evidence was presented to identify who made the decision for distributions from the annuities or who decided how much those distributions would be. Moreover, the evidence suggests that with respect to ING Annuity 51, the IRA from which the funds were taken for its purchase was an IRA heavily invested in bank stocks. As noted previously, no one has questioned the advice to diversify those holdings and the testimony was uniform that diversification prior to the recession in 2008 was a positive development for the preservation of Mrs. Vaughn’s assets. There is no evidence as to what the return would have been had the IRA assets been left undisturbed. The returns offered by ING Annuity 51, as well as the other two annuities, were generally higher than that afforded by the market in general, and protected the assets from creditors. The Department did not prove what income would have been generated by the Rufus Vaughn Marital Trust and the Rufus Vaughn Family Trust had the annuities not been purchased for them and the trusts had remained with the mix of assets they each contained prior to the annuity purchases. The Administrative Complaint did not identify and the evidence did not reveal what, if any, willful representations or deceptive acts or practices McKinley committed with respect to the purchase of any of the ING annuities. McKinley earned commissions on the purchase of all three annuities. There was no testimony that the amount of commission was unusual for the products sold. Count IX: Policies on the Life of Terry Vaughn Count IX deals with those policies sold on the life of Terry Vaughn. Three of the policies were held in the Terry Vaughn ILIT, while the fourth was held in the Merie M. Vaughn Trust F/B/O Connor E. Vaughn. The four policies are Hancock 46300489 (Hancock 89), Aviva IL01198680 (Aviva 80), Lincoln 180003841 (Lincoln 41), and Lincoln 180004324 (Lincoln 24). Hancock 89 was taken out on Terry Vaughn’s life and held in the Terry R. Vaughn ILIT. While there was confusion as to when Terry Vaughn signed the application, in all probability he signed it on or about February 25, 2008, and the policy issued on March 6, 2008. The death benefit was $1,694,226, and the policy called for annual premiums of $25,000 for 10 years. The policy appears to be rated at 200 percent. Petitioner’s Exhibit 118, the policy specifications, references supplement dates of October 2, 2007; November 13, 2007; and January 28, 2008, but those supplements are not included in the record. On June 25, 2008, John Crawford, as trustee, applied for additional life insurance on Terry Vaughn’s life through Aviva, which became the basis for the Aviva 80 policy. The application was amended in August 2008, yet the policy reflects that it was issued July 23, 2008, with a death benefit of $1,588,310 and an annual premium of $25,000. The rating is not clearly indicated in the exhibits provided. The application indicates that the Aviva policy would be replacing a West Coast Life policy with a death benefit of $1,298,238. However, Terry Vaughn was unaware of the existence of that policy, which is listed as “personal,” and no other evidence regarding a West Coast Life policy is contained in the record. On October 26, 2009, John Crawford, as trustee of the Terry R. Vaughn ILIT, applied for a policy with Lincoln that became the Lincoln 41 policy. The application was also signed by Terry Vaughn as the insured and by McKinley. The application includes the question, “Please list amounts of all inforce life insurance on your life, including any policies that have been sold. (Please list in the box below.).” The application lists the Aviva policy, but indicates that it was issued in September of 2008 with a death benefit of $1.6 million. The Lincoln application also indicates with respect to the Aviva policy that there will be a replacement or change of policy. At the time of this application, the Hancock 89 policy was still in force, but there is no listing of that policy on the application. The Lincoln 41 policy was issued December 2, 2009, and then its issue date was changed to December 17, 2009. An endorsement to the policy states that Lincoln received all information necessary to issue the policy, but does not specify what information was received, other than the premium of $35,000, and no amendments or medical reports are included in the exhibit. There is also no signed policy receipt. The death benefit for the Lincoln 41 policy is $2,219,885. The policy was rated at two times the standard rate for the first 27 years. If there was certainty that the documents contained in the exhibits with respect to Lincoln 41 were in fact the complete documents submitted with respect to this policy, the undersigned would have no hesitation in finding that by failing to list the Hancock 89 policy as a policy on Terry Vaughn’s life, Respondent had misrepresented the amount of insurance outstanding at that time. However, there is no certainty regarding the completeness of the exhibits. As noted previously, the certification of records from Lincoln is a stand-alone exhibit, not attached to any particular document. (Petitioner’s Exhibit 89). Moreover, that document does not really certify much of anything. The form includes the following language: Pursuant to sections 90.803(6), and/or 90.902(11), Florida Statutes, I hereby certify the following: that as part of my regular duties I maintain custody and control of the records of the Company; that the attached documents consisting of pages, reflects entries of information that were made at or near the time of the occurrence of the matters set forth by, or from information transmitted by a person having knowledge of those matters; that it is the regular practice of the Company to make, keep and maintain the attached data and/or records during the course of regular conducted business; that the attached documents were made as a regular practice in the course of the regularly conducted activity; and that the attached documents are a true and correct copy of the original record contained in the Company’s business records. The space to indicate the number of pages supplied with the certification is left blank. There is no assurance that all of the documents received from this, or any insurance company, are included in the exhibits provided. No one at hearing testified that the records provided were complete, and Terry Vaughn testified that he signed a lot of documents, but often did not see the entire application. Given the unrefuted testimony that initial applications are often incomplete and errors and omissions are cleared up through amendments, without some assurance that the information in Petitioner’s Exhibit 122 and 123 comprise the entire application and insurance policy issued as a result, which they clearly do not, there is not clear and convincing evidence that McKinley made misrepresentations with respect to Lincoln 41. On April 1, 2010, John Crawford, as trustee, applied for additional insurance on the life of Terry Vaughn for the Merie M. Vaughn Trust F/B/O Connor E. Vaughn. The amount of the insurance for which he applied was $3 million, with an annual premium of $35,000. Both Terry Vaughn and McKinley also signed the application, which became the basis for Lincoln 24. The application for Lincoln 24 lists the Lincoln 41 policy as being in force on Terry Vaughn’s life. It does not list the Aviva 80 policy, but that omission is consistent with the stated intention in the Lincoln 41 policy application to replace the Aviva policy with the Lincoln 41 policy. The application does not list the Hancock 89 policy, which remained in force at that time, and there is some indication in the record that ultimately the Aviva 80 policy remained in force. Petitioner’s Exhibit 125, which represents those portions of the application in evidence, includes an appropriateness verification statement, which is included when the applied-for insurance is meant to replace some other insurance. The Lincoln 24 policy was issued April 7, 2010. The death benefit was $3 million, the amount for which the trust applied, with an annual premium of $35,000. The premium was rated at 2.5 for the first 27 years. Petitioner’s Exhibits 126 and 127 are parts of the Lincoln 24 policy. Petitioner’s Exhibit 126 includes the schedule of benefits and premiums at pages 3 and 4A-4F. Petitioner’s Exhibit 127 provides what appears to be most of the rest of the policy, but only includes page 17 of 17 of the illustration and, while it includes something called an indexed signature page, it does not include a policy receipt. In short, this policy, like Lincoln 41, does not appear to be complete. Like Lincoln 41, given the unrefuted testimony that initial applications are often incomplete and errors and omissions are cleared up through amendments, and given the incomplete nature of the documents related to Lincoln 41, the evidence is not clear and convincing that Respondent misrepresented information in the application by omitting reference to Hancock 89 and Aviva 80. There was some testimony regarding the appropriateness of establishing the trust fund for the benefit of Connor Vaughn. Merie Vaughn testified that she was very concerned with Connor’s future, and much of her time after his diagnosis in late 2008 was spent working with Connor. A special needs trust permits funds to be used for a disabled individual without jeopardizing the individual’s ability to receive governmental assistance. Even Petitioner’s expert noted that a special needs trust would be an option that he would have wanted Mrs. Vaughn to consider with respect to Connor. The Department has not demonstrated that establishing the special needs trust was not in Mrs. Vaughn’s or her family’s best interest. Clearly, Terry Vaughn did not believe that $3 million dollars was necessary to fund any of Connor’s future needs. He had received assistance through a program at Florida State University at little to no cost to the family. However, he was unaware of what research his mother may have done with respect to programs for autism, and acknowledged that there are many costly programs available for autism should someone want to avail themselves of such a program. The Administrative Complaint alleges that on June 7, 2011, John Crawford, as trustee, directed the cancellation of Hancock 89 and requested the return of any cash value. The policy was canceled and on June 21, 2011, Hancock remitted a check for $35,114.29. The cancellation of this policy was several months after McKinley was no longer providing services to the Vaughn family at Mrs. Vaughn’s behest. Likewise, the Administrative Complaint alleges that Lincoln 41 and Lincoln 24 lapsed and were canceled on January 20, 2011, and September 8, 2011, respectively. Both events occurred several months after Mrs. Vaughn had terminated McKinley’s services. Moreover, as stated previously, it is the trustee, and not McKinley, that is responsible for the payment of insurance policies held by the various trusts. The record in this proceeding contains no evidence regarding what Mr. Crawford considered in making the decisions to retain or cancel various policies owned by the trusts. The Administrative Complaint also charges that McKinley “willfully avoided underwriting protections designed to prevent the wasting of Vaughn family assets.” There is no persuasive evidence to support this allegation. Mr. Saunders testified that there is a master insurance bureau that has a database which includes negative information on insurance applicants. If one company has negative information about an applicant, a second company with which the applicant files an application would have access to that information. Here, Terry Vaughn’s policies were rated because of his health condition. There was no testimony from any insurance company that they issued a policy without sufficient information or based on false information provided by McKinley. Count X: Policies on the Life of David Vaughn Count X of the Administrative Complaint addresses two insurance policies purchased for the David C. Vaughn ILIT: GPM Policy 000753784 (GPM 84), and ING Policy 7218635 (ING 35). On November 2, 2007, an application for insurance was submitted to GPM. The proposed insured was David Vaughn, and the application indicates that a trust was to be established that would be both owner and beneficiary of the policy. The application is signed by Merie Vaughn as trustee, David Vaughn as the insured, and McKinley as the agent.14/ GPM 84 was issued December 1, 2007, as a whole life policy with a death benefit of $1,601,233 and an annual premium of $37,192, calculated at standard rates. While Petitioner’s Exhibit 137 indicates that the policy issued on December 1, 2007, the policy illustration included was prepared February 6, 2008. No policy receipt or amendments are included in the exhibit. On March 25, 2010, John Crawford, as trustee, wrote GPM requesting that the policy be changed to paid-up status. No evidence was presented to explain what Mr. Crawford considered in making the request to change the policy to paid-up status. While the change meant that no more premiums would be paid, it also meant that the death benefit was reduced, effective June 2, 2010, to $22,612. Sometime in late December 2007, McKinley submitted an application for ING 35. While the application has the date December 25, 2007, it is unclear which signature the date purports to signify, and David Vaughn did not execute the document on that day. The insured for this policy application is David Vaughn. The owner and beneficiary is the David C. Vaughn ILIT. A Verification of Coverage document as of December 12, 2010, indicates that ING 35 issued April 10, 2008, with a death benefit of $731,000 and an annual premium of $12,807. The rating is listed as “Super Preferred non smoker.” The documents in Petitioner’s Exhibit 145 include an undated and unsigned policy receipt and a premium notice dated April 11, 2011. On June 7, 2011, John Crawford, as trustee, requested the cancellation of ING 35, with any surrender value to be forwarded to him. No evidence was presented to explain what Mr. Crawford considered in making the request to cancel the policy. His request is copied to Merie Vaughn. As a result of his request, ING forwarded a check to John Crawford for $3,893.57, representing the surrender value of ING 35. While the Administrative Complaint alleges that McKinley violated the public trust by the sale of these two life insurance policies, there is no allegation describing what about the sale of these two policies actually violated that trust. There is no allegation that David Vaughn was over-insured or that the policies were not in his best interest. Count XI: Vaughn Family Education Trust Policies Count XI of the Administrative Complaint deals with policies purchased for the Vaughn Family Education Trust (Education Trust). The Administrative Complaint asserts that there were seven policies originally issued, but applications for and partial copies of only three policies are included in Petitioner’s exhibits. Merie Vaughn testified that the Education Trust was something she agreed to, although she told Gary McKinley to fund it from something other than her IRA. The life insurance purchased was consistent with the plan she agreed to with John Crawford. She also acknowledged at hearing that providing life insurance benefits to her grandchildren is valuable to them. Likewise, Mike Saunders testified that purchasing life insurance on children is “absolutely appropriate,” and is done to plan for the future. His testimony is accepted. Buying life insurance at this age is a good idea because insurability can change quickly, and having a policy in place before any change in insurability occurs is wise. It also allows for the buildup of cash value over time, and the ability to borrow against the policy. Included in Petitioner’s exhibits is an application for life insurance with Metlife on the life of Avery Elizabeth Vaughn, David Vaughn’s oldest daughter. She was 19 years old at the time of the application. The application is for a whole life policy and the amount of insurance listed on the application is $580,650. Avery Vaughn signed the application as the insured, John Crawford signed as trustee for the Education Trust, and McKinley signed as the insurance agent of record. The application was signed on April 22, 2010. While this application is included with a policy numbered 210238538A1 (Metlife 38), it does not appear to be the application that led to the issuance of Metlife 38. For instance, while the application is signed April 22, 2010, Metlife 38 was issued February 7, 2010, two months before the application was submitted. Moreover, while the application referenced $580,650 in death benefits, the issued policy was for $990,000, with a total premium of $8,118.50. No policy receipt or amendments are included. Metlife 38 was surrendered on or about October 14, 2011, after McKinley was no longer acting as Mrs. Vaughn’s insurance agent, and $79.39 was paid to the trust. Similarly, on April 20, 2010, John Crawford, as trustee, applied for life insurance on the life of Chloe Lorraine Vaughn, David Vaughn’s second daughter, who was nine years old at the time. The application was signed by McKinley, John Crawford, and, inexplicably, Terry Vaughn. The amount of requested coverage identified in the application was $946,611. Metlife Policy 210275718A (Metlife 18) was issued September 1, 2010, listing Chloe Vaughn as the insured and the Education Trust as the owner. Metlife 18 had a $9,000 annual premium and a death benefit of $2,528,249. No amendments or policy receipt are included in Petitioner’s exhibits, as well as no explanation of how the death benefit changed so dramatically. The policy was surrendered in June 2011, after McKinley was no longer acting as Mrs. Vaughn’s insurance agent. There is also a Metlife application submitted by John Crawford, as trustee for the Education Trust on the life of Dawson Caldwell Vaughn, David Caldwell’s then-4-year-old son. The application is also signed by Terry Vaughn as opposed to David Vaughn, and is signed by John Crawford as trustee and by McKinley. The application is for a whole life policy with a death benefit of $1,136,250, and a proposed premium of $5,999.83. The policy in Petitioner’s exhibits on the life of Dawson Vaughn is Metlife 210275676A (Metlife 76), a policy issued September 1, 2010, with a death benefit of $2,594,204 and an annual premium of $9,000. The portion of the policy in the record contains no amendments and no policy receipt, and thus no explanation as to how or why the death benefit and premium were changed. No testimony was presented to explain the difference. The policy was surrendered in June 2011, after McKinley was dismissed as Mrs. Vaughn’s insurance agent. Contrary to the allegations in the Administrative Complaint, competent, persuasive evidence was presented to show that purchasing life insurance on children is an accepted practice. While the amounts of the life insurance policies seem extravagant, the only person testifying who regularly sells life insurance did not believe that McKinley encouraged the purchase of too much life insurance. Further, while the Administrative Complaint alleges “by willful misrepresentations and deceptive acts and practices,” Respondent caused the wasting of Vaughn family assets, the Administrative Complaint does not identify just what “willful misrepresentation” or “deceptive act and practices” Respondent committed with respect to the purchase of these policies. Count XII: Policies on the Life of Stephanie Eller Vaughn As noted above, Stephanie Eller Vaughn is married to Terry Vaughn, and they live in Tallahassee, Florida. Terry and Stephanie married on March 31, 2007, and Stephanie gave birth to their son, Connor, on February 1, 2008. At some point in 2008, Terry and Stephanie met with a financial planner who had suggested it would be prudent for Stephanie to have life insurance. Contrary to the allegations in the Administrative Complaint, no evidence was presented to demonstrate that McKinley “convinced” Merie Vaughn and Stephanie Vaughn to buy the Sun Life policy discussed below. Purchasing life insurance was already something contemplated by Terry and Stephanie Vaughn, before meeting with McKinley. Terry and Stephanie met with McKinley to begin discussions regarding a life insurance policy for Stephanie in May of 2008. Stephanie Vaughn applied for a Sun Life policy on January 6, 2009. She is listed as both the insured and the owner of the policy, and Terry Vaughn is listed as the beneficiary. The application proposes a $1.5 million death benefit, with a proposed monthly premium of $712.50. Stephanie Vaughn paid $1,425.00 for two months of premium with the insurance application. Sun Life Policy 003016889 (Sun Life 89) was issued on April 3, 2009, for a $1 million death benefit and a monthly premium of $487.34. The premium appears to be computed using standard rates for a non-smoker. The record includes a revised illustration signed by Stephanie Vaughn on March 10, 2009, and a signed, undated request for alteration of application changing the death benefit to the amount ultimately issued, as well as including a charitable benefits rider, also included in the policy issued. The policy receipt for Sun Life 89 is signed by Stephanie Vaughn on April 9, 2009. Terry Vaughn testified that while he and his wife made the initial premium payment, premiums were taken over by his mother, and Terry and Stephanie were reimbursed for the premiums they originally paid on the policy. In May of 2009, McKinley’s office requested that the premiums be changed from monthly to yearly, and forms were sent to accomplish that. On June 5, 2009, John Crawford made a payment of $4,423.06 from his trust account for the remainder of the annual premium, and in September 2009, a request for the appropriate paperwork was submitted to change the ownership of the policy from Stephanie Vaughn to the Stephanie Vaughn ILIT. However, while payments were made by John Crawford, and McKinley requested that all payment invoices and correspondence be sent to John Crawford, it is unclear whether that change of ownership ever occurred. According to Terry Vaughn, Sun Life 89 is still in force, but currently no payments are being made on the policy. It is paid up to some point, and he understands that it has some value, so they opted not to cancel it. While the Administrative Complaint alleges that McKinley made a commission of $19,269.42, that amount is not clear from the record in this case. There are statements regarding commissions for many of the policies. However, on many of these statements, including the statement for Sun Life, there are columns labeled as commissions and columns labeled as overrides. No one testified as to how these statements are interpreted, and it is not clear on the face of the statements how much of the commission goes to the individual agent and how much goes to the agency for whom he works. It is clear that McKinley did indeed earn a commission (and that is how insurance agents are generally compensated), but it is not clear how much or that the amount was inappropriate. Stephanie Vaughn also applied for a life insurance policy with Nationwide. She submitted an application on March 9, 2009, with herself listed as the insured. The application contains a notation requesting that Nationwide contact the agent when preparing to issue the policy to see if the policy will be owned by Stephanie Vaughn or to a trust. The application contemplated a death benefit of $750,000, and was amended to include a long-term care supplement of $300,000 on June 19, 2009. On June 22, 2009, Nationwide Policy number B500118060 (Nationwide 60) was issued, listing Stephanie Vaughn as the insured and as the owner. The policy had a death benefit of $750,000, as requested, and an annual premium of $5,914, using non-tobacco standard rates. Terry Vaughn wrote a personal check for $1,762.08 for a premium payment on Nationwide 60 on July 15, 2009, and Stephanie Vaughn signed both the policy receipt and an amendment reflecting the long-term care rider that same day. John Crawford also wrote a check from his firm’s trust account for $5,000 on July 21, 2009. McKinley’s office requested that the overpayment of $838.08 be refunded to Stephanie Eller Vaughn at her address in Tallahassee. John Crawford also paid the $5,914 premium on May 25, 2010, and McKinley had requested earlier that year that John Crawford receive the invoices, as he was the one paying the premiums. As was the case with the Sun Life 89 policy, the premium payment made by Terry and Stephanie Vaughn was reimbursed by Terry’s mother, Merie Vaughn. Stephanie Vaughn requested cancellation of Nationwide 60 on July 5, 2011, because she and her husband did not want to continue paying for it. They did not receive any cash value for the policy. The Administrative Complaint alleges that Nationwide 60 was never placed in the Stephanie Vaughn ILIT. However, there is no allegation, nor proof, that McKinley was ever instructed to arrange for the transfer of the policy to the trust, nor is there any evidence indicating that there was a discussion of any kind regarding its ownership after it was issued. McKinley earned a commission on the sale of the Nationwide 60 policy. No evidence was presented to indicate that there was anything unusual about the commission earned. The Administrative Complaint alleges that by selling these two policies to Stephanie Vaughn, McKinley violated a public trust in violation of Florida Administrative Code Rule 69B-215.210. There is no indication in the Administrative Complaint as to how the sale of these two policies is a violation of the public trust, and no proof of such a violation was presented. Count XII: Policies on the Life of Yvette L. Day Finally, Count XII of the Administrative Complaint deals with the policies sold on the life of Yvette L. Day, the wife of David Vaughn. Those policies are Pacific Life Policy VP65887630 (Pacific Life 30) and John Hancock Policy 82233941 (Hancock 41). On April 15, 2009, Yvette Lori Day applied for a Pacific Life universal life insurance policy, which resulted in the issuance of Pacific Life 30. While the Administrative Complaint alleges that McKinley “convinced” Mrs. Vaughn and Ms. Day to purchase the policy, David Vaughn testified his wife actually insisted on picking the insurance company for the policy. The application lists Yvette Day as the insured, and the Yvette L. Day ILIT as the owner and beneficiary of the policy. The proposed coverage on the application is $137,447, with a planned premium of $5,000. The application is signed by Yvette Day, John Crawford, and McKinley. The policy issued on April 1, 2009, being backdated to take advantage of a lower premium. Pacific Life 30 was issued for the amount applied for and for the suggested premium of $5,000, and Ms. Day was considered a preferred non-smoker for rating purposes. An amendment to the policy was signed by both John Crawford and McKinley on September 14, 2009, as was the delivery receipt. Checks for $5,000 were issued from the Marks Gray trust account by John Crawford for premiums on September 1, 2009, and May 25, 2010. On June 7, 2011, John Crawford requested cancellation of Pacific Life 30, and return of any cash surrender value. Pacific Life responded by outlining the options to consider as alternatives to surrender, and advised that the tax loss upon surrender at this point would be $6,263.23. Mr. Crawford confirmed the intent to seek surrender, and on June 10, 2011, a check representing the surrender value of $3,760.90 was issued to the Yvette Day ILIT. A commission of $5,223.83 related to the policy was paid to Intervest, who in turn paid the premium to McKinley. Yvette Day also applied for a policy with John Hancock on April 15, 2009, with Yvette Day listed as the insured and the Yvette L. Day ILIT as the owner and beneficiary. The policy was issued on October 7, 2009, with a death benefit of $415,959 and a premium of $5,000. Yvette Day was listed as a preferred non-smoker for purposes of rating. John Crawford, as trustee, paid $5,000 in premium from his Marks Gray trust account on October 12, 2009. The policy receipt was signed by John Crawford on October 26, 2009, along with a form documenting that the policy would be backdated to April 17, 2009. Also completed on that day is an amendment answering a series of questions that were not answered on the original application, including questions related to the financing of the policy. The Administrative Complaint alleges that “when you, Gary L. McKinley, were asked by Hancock underwriting to respond to questions 10(a) and (b), you and attorney/trustee Crawford answered by providing Hancock with an application supplement dated October 26, 2009, stating that the premium payments would be coming from the insured’s income and ‘No’ as whether any entity other than the insured would be funding the premiums. Both answers were false.” In fact, however, McKinley did not sign the application supplement at all. The form is signed by Yvette Day and John Crawford. No evidence was presented to show that McKinley even knew about answers contained in the amendment. Moreover, contrary to the Department’s statement in its Proposed Recommended Order, the language on the amendment that “it is agreed that [the additions, corrections and amendments] are to be of the same effect as if contained in the application” does not transform a statement made by Yvette Day and John Crawford into a false statement by McKinley. The most logical meaning of this phrase, consistent with the testimony of Mike Saunders, is that the information provided by amendment is treated as if it was part of the original application. It does not mean that somehow Respondent’s signature on the original application embraces statements he did not make, but were in fact made by others in subsequent amendments. On June 7 and 11, 2011, John Crawford, as trustee, sent letters to Hancock requesting cancellation of Hancock 41 and the return of any cash value. Because of a discrepancy related to the identified date of the trust, a third letter was sent on August 8, 2011, correcting the listing of the trust date and providing a copy of the trust. Accordingly, on August 24, 2011, Hancock forwarded to John Crawford a check for $282.85, representing the unused premium for Hancock 41. McKinley received $5,336.23 in commissions related to the sale of Hancock 41. No person testified that the amount of the premium earned on this policy was unusual. Of the policies discussed above, 15 of them either lapsed or were canceled or surrendered after October 2010, when Respondent was no longer working with the Vaughns at Mrs. Vaughn’s direction. It cannot be determined what cash value would have been created had some or all of the policies remained in place. The most that could be said, based on the evidence that was presented, is that McKinley participated in the creation of an ambitious estate plan with a lot of moving parts. He replaced policies with more efficient policies, and while it may appear at first blush that he did so too quickly, the more persuasive evidence indicates that he did so to take advantage of changes in insurability while the opportunity to do so existed. There is no question that Respondent consulted with Mrs. Vaughn numerous times and made every effort to help her understand not only the overall plan but the specifics of the plan as well. Moreover, McKinley did not act alone. The trusts were established based on the recommendations of the estate planning team, which included Mrs. Vaughn, McKinley, and various other professionals and advisors. Attorney and trustee John Crawford, as well as attorney Tim McFarland, provided legal advice regarding the implications of the creation of the trusts, and the team considered a number of relevant factors in advising Mrs. Vaughn to establish these trusts. Once the decision was made to go forward with the identified estate plan, Respondent worked with Crump and Capitas insurance organizations, as well as representatives from various nationally-recognized and state- certified insurance companies, to obtain appropriate products to effectuate the goals established by the team. It is also clear that, while a significant amount of money was spent on life insurance premiums, the replacement of policies was undertaken with the goal of reducing the amount used for premium and increasing the death benefit, a course of action which Mrs. Vaughn approved in writing. Financial expert John Linnehan testified that the products purchased provided benefits to Mrs. Vaughn and her family, and that there were sufficient assets to sustain the premiums incurred for life insurance, even assuming her stated living expenses. His testimony is credited. Moreover, the reduction in Mrs. Vaughn’s assets was in large part caused by something other than the payment of insurance premiums. When asked where the rest of her money went, she answered, “I don’t know. It’s just gone.”
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 dismissing the Administrative Complaint. DONE AND ENTERED this 4th day of April, 2016, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 4th day of April, 2016.
Findings Of Fact During 1977, while licensed as an insurance agent, Mr. Yesnes engaged in a scheme to fraudulently obtain sales commissions from various insurance companies. He submitted applications for insurance coverage without the prior consent of the purported applicants. He obtained the data to fill in their application forms from information contained in previous policy records. This scheme was admitted by Mr. Yesnes when he appeared before a Department of Insurance investigator, Eugene Petree, III, to explain consumer complaints against him related to the bogus applications. On February 24, 1977 Mr. Yesnes, while registered with the Department as a non-resident agent, sold a $50,000 decreasing term life insurance policy to a 65 year old widow, Mrs. Inez Cameron. This sale was made in Pensacola, Florida, where both Mr. Yesnes and Mrs. Cameron were living at the time. The beneficiary of the policy was designated as "the estate of Inez Cameron." When that designation was made, Mr. Yesnes was the legatee of Mrs. Cameron's will. Mr. Yesnes later requested the company issuing the policy, United Presidential Life Insurance Company, to change the beneficiary of the policy to himself by name, but the company refused to make the change. Under the foregoing circumstances it is contrary to the standards of the insurance industry for an agent to sell a policy in which he is made the beneficiary. Mrs. Cameron was a widow and had no known living close relatives. She had established a personal "mother-son" relationship with Mr. Yesnes and for a period of time they lived together. For the last year and a half Mr. Yesnes has been a pizza wholesaler in the Pensacola area. He contracts for a supplier to manufacture the pizzas which Mr. Yesnes then sells to bars and small restaurants who cannot economically produce their own pizzas. According to his present supplier Mr. Yesnes sells a product of a much higher quality than the purchasers should expect to get for their cost. His present supplier, Mr. Meehan, has known Mr. Yesnes for eight to nine months. In his opinion Mr. Yesnes is trustworthy and reliable. He pays his bills on time and keeps his obligations. Mr. Secchiari, the owner of Genos Pizza in Pensacola, is Mr. Yesnes' former supplier. He too believes him to be trustworthy and reliable. In his opinion as an insurance consumer he believes that if licensed, Mr. Yesnes would be better than some life insurance agents and not as good as others. Mr. Yesnes has always been prompt in paying his bills with Mr. Secchiari. Mr. Yesnes was initially licensed as an insurance agent in Florida in February 1965. Three years later he moved to Atlanta, Georgia. He later moved to Pensacola in 1976 where he was employed by the Franklin Life Insurance Company. During that employment he was supervised by Michael Howard, an area manager. Mr. Howard had contact with Mr. Yesnes for a period of eighteen months. On the basis of that experience Mr. Howard is of the opinion that Petitioner is ethically unfit to be in the insurance business. Respondent offered testimony from Ms. Dorothy Dale Godwin and Ms. Sarah Dawson in the form of their opinion of Petitioner's character. This testimony is not accepted as credible. It lacks an adequate foundation because the witnesses contact with Mr. Yesnes was fleeting. Due to their relationship with Mrs. Cameron they are also found to be biased against Mr. Yesnes. On his pending application for licensure Mr. Yesnes gave 804 Royce Street, Pensacola, Florida 32503 as his address for the past five years. In fact, during that time he lived in Atlanta, Georgia; Mobile, Alabama; and at different addresses in Pensacola. He gave the 804 Royce Street address because that is where his father lives. At times Petitioner has lived there and he considers it his permanent address. At no time during these proceedings has Petitioner expressed regret for any past unprofessional actions. He has also not expressed any commitment not to engage in unprofessional behavior in the future, if licensed to sell insurance in the State of Florida.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Respondent, Department of Insurance and Treasurer, enter a final order denying the application of Ivan Yesnes for a license as a life agent in the State of Florida. DONE and RECOMMENDED this 14th day of July, 1981, in Tallahassee, Florida MICHAEL PEARCE DODSON 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 14th day of July, 1981.
The Issue Should discipline be imposed by Petitioner against Respondent's insurance agent licenses alleged as life including variable annuity (2-14), general lines (2-20), and health (2-40), pursuant to Chapters 624 and 626, Florida Statutes?
Findings Of Fact Petitioner issued license E125386 to Respondent. At present the license is valid in the following categories: life including variable annuity (2-14) and general lines (2-20). At present Respondent has appointments with American Family Life Assurance Company of Columbus in the categories life including variable annuity and health (2-15) and general lines (2-20). February 9, 2005, is the relevant date in this case. On that date Respondent held a license in categories (2-14) and (2-20). The category (2-14) was for an appointment with Direct Life Insurance Company. The category (2-20) was an appointment with Direct General Insurance. At the time Respondent worked at an office in Tallahassee, Florida, referred to as the Case Register Insurance Agency, that sold life insurance offered by Direct Life Insurance Company, among other products. On February 9, 2005, Denise Daley Turnbull worked at Case Register. She was a customer representative category (4- 40), appointed by Direct General Insurance Agency, Inc. Respondent worked with Ms. Turnbull. On February 9, 2005, Patrician Ann Brown came to the Cash Register Insurance Agency to purchase personal injury protection (PIP) automobile insurance mandated by the State of Florida. Ms. Turnbull dealt with the customer. In doing so, Ms. Turnbull followed a script which in relevant part stated: * * * How did you hear about Cash Register? Are you currently insured? Have you had the policy for at least 6 months with no more than a 7-day lapse in coverage? If they say yes, say . . . Great! We will need you to bring in a copy of your renewal offer or a letter from your current company when we write the policy. This will make you eligible for a discount. Are you buying, leasing or do you own your vehicle? Is the vehicle registered or titled in your name? * * * What coverage will you be purchasing with us? Inform the customer about the work loss option. Under the mandatory Personal Injury Protection, there is a work loss option should you be involved in an accident that will pay up to 60% of your lost wages. Would you like to include this option? Quote only PIP/PD unless the client asks for BI. Always quote $750.00 deductible for Comp/Coll and $1000 deductible NI or NIRR for PIP. Other deductibles are available upon request. * * * What is your date of birth? Are you married or single? If married, get spouses information) What tickets, accidents, or suspensions have you had in the last 3 years? (Do you need an SR-22?) Who else living in your household is 14 years or older? Are there other drivers who do not live in the house? * * * What is the year, make and model of your vehicle? Does it have air bags, anti-lock brakes or an anti-theft device? Is the vehicle used for personal, business or commercial use? Is your vehicle customized in any way? (remember, we do not cover any customization) Mr/Mrs. I have quoted you with the State Mandatory liability limits up to $10,000 dollars Property Damage, Personal Injury Protection up to $10,000 dollars with a $1,000 deductible, Comprehensive and Collision with $750 deductibles and offered with this quote are the optional policies for Accident Medical Coverage, Rental Reimbursement and a $10,000 term life benefit. You will need only $ to start your policy and have 12 payments of only $ . How does that sound? (Always quote 20/27 day pay plan-can offer 10 day plan when client comes into office) (emphasis added) How does that compare to other quotes you have received? * * * Mr./Mrs. , Direct is now offering to our customers, a Direct Visa Debit Card for a special low price of only $699. This requires no bank account, no credit check and is valid wherever Visa is accepted! Only $699, so be sure to bring that amount in with your down payment so you can take advantage of this special offer. Ms. Patricia M. Brown purchased automobile insurance from Direct General Insurance Company, including PIP and property damage liability (PD) totaling $848.00 with fees assigned. In addition, Ms. Brown purchased a policy through American Banking Travel Protection Plan for one year. The cost for that policy was $60.00. Ms. Brown purchased from Lloyds Accident Medical Protection Plan an individual accident medical protection plan. The cost was $110.00. Ms. Brown bought life insurance with a one-year period, that was renewable, $10,000.00 coverage, with a premium charge of $108.00. In making her purchases, Ms. Brown signed a form titled Explanation of Policies, Coverages and Cost Breakdown (including non-insurance products). The total cost for all purchases was $1,133.99. Ms. Brown signed a form that referred to American Bankers Insurance Company of Florida, Travel Protection Plan- Florida Declarations. That form was counter-signed by Ms. Turnbull. Ms. Brown signed another form referred to as American Bankers Insurance Company Optional Travel Protection Plan. Ms. Brown and Ms. Turnbull signed a form entitled Accident Medical Protection Plan Application. Ms. Brown signed a related form referred to as 100% Certain Underwriters @ Lloyds/London (DB/33) ACCIDENT MEDICAL PROTECTION PLAN. Ms. Turnbull signed a page referred to as a Scan Cover Sheet Life Policy Policy No. FLAD162704741:1627016705. In that connection Ms. Brown completed an application for life insurance with Direct Life Insurance Company by initialing information in the application form about her insurability for such things as heart trouble or high blood pressure, cancer, tumors, etc. Ms. Brown signed the application. Although Respondent had no direct participation with Ms. Brown in relation to the details of the life insurance policy, leaving the task to explain the policy to Ms. Turnbull, Respondent placed his name on the application in two places. He printed his name as agent and wrote his license ID number E125386 and he signed it with his agent signature on that same page. In conversation, Ms. Turnbull asked Ms. Brown about possible medical problems such as high blood pressure or stroke or seizure as part of the process of initialing those questions on the application form. Ms. Turnbull told Ms. Brown that the life insurance policy was optional and that it was a $10,000.00 term life benefit.
Recommendation Upon consideration of the facts found and the conclusions of law reached, it is RECOMMENDED: That Petitioner enter a final order suspending Respondent's license for six months for the violations. DONE AND ENTERED this 27th day of March, 2007, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS 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 27th day of March, 2007.
The Issue The issue in this proceeding is whether Respondent’s certificate of authority to transact life insurance in the State of Florida should be revoked, suspended, or otherwise disciplined.
Findings Of Fact Respondent, Liberty National Life Insurance Company, is a foreign insurer licensed to transact life insurance in Florida under a Certificate of Authority issued by the state. The application for life insurance used by LNL is form A-250. This application is used for all regular and batch life insurance applications, except Career Life Plus and Group Term life insurance policies, which are not at issue in this proceeding. Form A-251 is the application used to apply for life insurance riders on an applicant's spouse or children. Both applications are used in multiple states and are intended to elicit information that may or may not be relevant or used in the state relevant to any given applicant. For instance, Question 16 in form A-250 asks, "Is the Proposed Insured a Citizen of the United States? (If "No" complete and attach A- 282-2.") Form A-282-2 is titled "Residency Questionnaire." The form elicits information related to whether an applicant is a legal resident of the United States, whether the applicant intends to remain a resident of the United States and what citizenship the applicant holds. Like the applications, the residency form is used in multiple states and is intended to elicit information that may or may not be relevant or used in the state relevant to any given applicant. For instance, the questionnaire asks whether the proposed insured has traveled outside the United States during the last 12 months. The applicant's response to the travel question was not intended to be used for underwriting purposes in Florida after it enacted a law prohibiting the denial of insurance based solely on an applicant's past travel or future travel plans. See § 626.9541(1)(dd)1., Fla. Stat. Importantly, Florida does not prohibit any insurer from asking about such travel and such inquiry does not violate Florida law. Each application, along with any required or additional information, is submitted by an agent to LNL's centralized underwriting department and is assigned to an individual underwriter. The underwriter reviews the application for completeness. If the application is not complete or if there are questions about the application, the underwriter either requests the information from the agent or requests a telephone interview be done. Activity on the application is entered into LNL's electronic processing system which maintains the electronic application file. How much detail support information is entered on any given application file varies by underwriter. None of the underwriters who made entries in the application files at issue in here testified in this proceeding. LNL's policy is to process most applications within two weeks, with some few applications taking up to 30 days. Pending applications are maintained on a pending applications list which is reviewed by upper management for compliance with LNL's processing policy. LNL’s underwriting guidelines for persons of foreign national origin residing in the United States were instituted in 2003 or 2004 over concerns the company had regarding the reliability of documents from certain countries and the potential for fraud based on such unreliable documents. Towards that end, LNL categorized foreign nations into four groups: “A,” “B,” “C,” and “D.” The basis for the categorization was the long-time, actuarially-recognized standard in the life insurance industry and the re-insurance industry that mortality risks are severe in “D” countries, somewhat severe in “C” countries, and moderate in “A” and “B” countries. In part, these mortality risks are derived based on the political stability of a country, crime rates, law enforcement, and access to good quality medical care and treatment in a given country. In general, C and D countries possess one or more of the factors that contribute to severe mortality risks. Additionally, political instability causes the authenticity and availability of birth and death records to be unreliable. These country code classifications are used throughout the life insurance industry. Importantly, these country codes are sustained by mortality statistics generally regarded as reliable by life insurance actuaries, and by the professional opinion of Mr. Himmelberger, the only expert life insurance actuary who testified at final hearing. LNL's underwriting guidelines for foreign nationals or foreign risks were reflected in a memorandum dated July 26, 2004, and sent to all of the company's district managers for dissemination. The memorandum stated as follows: If the proposed insured is from a country classified as A or B you should follow normal underwriting procedures. If a proposed insured is from a country classified as C or D, you must submit the following information. If the proposed insured is a U.S. Citizen: A copy of citizenship documents or A notarized statement verifying that the proposed insured is a citizen and providing the date citizenship was acquired. An IBU (Interview by Underwriter) is required on all cases. If the proposed insured is not a U.S. Citizen: Form A-282-2 . . . is required on all A-250/A-251 or batch applications. Copies of W-2 forms from the last three years are required. The ultimate face amount issued (if any) will be limited to the income for the most recent year. Attach a cover letter indicating the number of consecutive years the proposed insured has been in the United States (subject to rejection if less than 10 years, depending on other information submitted). An IBU . . . is required on all cases. Minor children of non-citizen parents will be underwritten as non-citizens. Applications for $100,000 and above will be reviewed on a case-by-case basis. The information above is required for all cases regardless of face amount. These guidelines were also incorporated into the company’s instruction manual for its agents. The goal of these underwriting guidelines and the use of the country codes are to try to assess the risk of a person who was born outside of the United States permanently returning to their country of origin where, depending on the country, there may be a higher risk of mortality. An applicant’s connection to the United States, as evidenced by steady employment or family, and desire to permanently stay in this country, as evidenced by naturalization or length of legal residency, lowers the actuarial risk underwritten by LNL. The evidence demonstrated that these criteria were actuarially supported. Therefore, applicants who are foreign nationals born in “A” or “B” countries with lower mortality risks, and who legally reside in the United States or are naturalized United States citizens at the time they apply for insurance are underwritten using the same underwriting criteria as applied to United States citizens. The only extra information required is proof of residency or citizenship and a confirming interview by the underwriter (IBU) or by an outside subcontractor through a rapid interview process. Life insurance applications by foreign nationals from “C” or “D” countries who have become naturalized United States citizens at the time they apply for insurance are underwritten using the same underwriting criteria that LNL applied to United States citizens and require the same information as those from “A” or “B” countries. Applicants who are foreign nationals from “C” or “D” countries and who are not naturalized United States citizens, but reside in the United States at the time of application for insurance, are required to provide proof of legal residency for 1 year and annual income for three years. Both of these factors indicate a stronger connection to the United States and desire not to return to live in a country with a higher mortality risk. These applicants are also required to complete a telephone interview to confirm this information. Additionally, applicants from “C” or “D” countries who are legal residents in the United States at the time of application for insurance may be declined for coverage or have the coverage limited to the amount of the applicant’s income. However, whether the application is declined depends on other information (such as employment history and income) that shows a stronger connection to the United States. There is no requirement that the underwriter decline to issue or limit the amount of insurance to such an applicant simply because the person has not resided in the United States continuously for 10 years. Clearly, LNL’s underwriting guidelines do not cause LNL to refuse to issue insurance to applicants from “C” or “D” countries based solely on the applicant’s national origin. Rather, these underwriting rules and guidelines incorporate the political, social and economic climate of a country which leads to instability, crime and poor access to health care and relatively higher or lower risks of mortality. Additionally, these guidelines require the length, nature, and quality of the applicant’s residency in the United States to be considered to determine the strength, quality, and duration of the applicant’s ties to the United States. The additional underwriting information required for such applicants is designed to gather evidence of such matters so that LNL’s underwriters may make informed underwriting judgments about the underwriting risks associated with issuing insurance. These underwriting guidelines are consistent with the actuarial risks posed by higher mortality risks in “C” or “D” countries and the risk that applicants will voluntarily or involuntarily return to his or her country of origin to again take up residence there, and thereby be subjected to the high mortality risks associated with residing in a “C” or “D” country. The evidence demonstrated that these guidelines are consistent with generally accepted actuarial principles of risk classification. The limitation of coverage amount to the applicant’s most recent year’s income is likewise consistent with generally accepted actuarial principles of risk classification and risk management for life insurers. Indeed, there was no expert actuarial evidence offered by OIR to the contrary. Additionally, there was no substantive evidence that demonstrated LNL had an informal policy or practice of refusing to issue life insurance to applicants who are persons of “C” or “D” countries solely because of their national origin. The evidence clearly showed that LNL had issued policies to such applicants given the number of applications reviewed by OIR in its examination of LNL. On July 1, 2006, Florida’s “Freedom to Travel Act,” Section 624.9541(1)(dd), Florida Statutes, became effective. Around July 6, 2006, LNL sent a memorandum to its underwriters informing them of the passage of Florida’s “Freedom to Travel Act” and instructing them to comply with the act. The memorandum also informed the underwriters that they could no longer use an applicant’s past travel or future travel plans to underwrite life insurance on Florida applicants. However, as indicated earlier, the multi-state residency questionnaire asks about an applicant’s past travel. Such information is not used for underwriting purposes by LNL on Florida applications. After notification of Florida’s “Freedom to Travel Act,” it has been LNL’s policy, in respect to applications for life insurance from Florida residents, not to refuse life insurance or limit life insurance coverage based solely on the individual's past lawful foreign travel or future travel plans. Additionally, it should be noted that the term travel had a variety of meanings during the hearing. At times it referred to short-term travel and at other times it referred to an applicant’s more permanent return to a country to reside in that country. From June 23, 2008 through November 14, 2008, OIR conducted a "market conduct" examination of LNL pursuant to Section 624.3161, Florida Statutes. A market conduct examination is a review of the business practices and records of an insurer. The examination is designed to monitor marketing, advertising, policyholder services, underwriting, rating, and claims practices. The LNL examination covered the period from January 1, 2004, through March 31, 2008, and was conducted by Examination Resources, LLC, at the offices of LNL in Birmingham, Alabama. The purpose of the examination was to verify compliance by the company with the Florida Unfair Trade Practices Act, Section 626.9541, Florida Statutes. Examination Resources assembled a team of examiners to conduct the survey. Some members were more experienced than others were in examining records of a company and in performing a market conduct survey. At least two of the team members, Terry Corlett and Todd Fatzinger, were certified financial examiners (CFE), certified insurance examiners (CIE) and fellows of the Life Management Institute (FMLI). One member of the examination team was a certified life underwriter (CLU). During the examination period, LNL’s underwriters reviewed approximately 1,500 life insurance applications per week from Florida, in addition to applications from other states. As a consequence, LNL received 101,461 applications for life insurance. Approximately 40,000 applications out of the total applicant pool were batch processed. Batch-processed applications are standard applications (A-250 and A-251) that are processed through an automated computer system with no further underwriting review and are either approved or disapproved based on information in the application for life insurance. The evidence indicated that some applications from applicants born outside of the United States were batch-processed applications. However, the batch process does not capture any information based on an applicant's country of birth or travel in the electronic file system used by LNL. Since the batch process does not capture country of birth or travel information, these applications were not reviewed by the examiners in the market conduct survey of LNL's records. Because these applications were not reviewed, it is unknown how many of these applicants were born outside of the United States. Out of the approximately remaining 61,000 applications, the team reviewed 7,040 life insurance applications received by LNL during the period of January 1, 2004 through March 31, 2008, that LNL identified as being from an applicant born outside the United States. No one member of the examination team reviewed all of the files. There was some evidence that the criteria or standards of review and interpretation of files by each examiner was not consistent during the exam process. Very few of the examiners conducted any interviews or took testimony from the people who made entries in or handled a particular file that was reviewed. More importantly, the evidence did not demonstrate that the information sought during these rare interviews of unidentified underwriters on an unidentified file had any relevancy to the issues or allegations involved in this case. The only testimony regarding these few and unknown underwriters was that they generally did not recall anything about the file beyond what was in the electronic records of LNL. Such generalizations do not otherwise provide support for the interpretation of data or information in these files by the examiners or the failure to adduce such evidence by going to the human source of the data or information contained in the electronic records of LNL. Moreover, conspicuously absent from the examination process was an expert in statistical analysis and sampling of data from a universal pool of applicants. Given this lack of expertise, there is no evidence which demonstrated that the group of 7,040 applications reviewed by the examiners was a valid sample of all the applications processed during the examination period. Examination Resources submitted their draft report of examination to OIR around mid-November 2008. The report contained a number of statistics and conclusions drawn from those statistics. However, because of the absence of any reliable or valid statistical analysis of the information gathered by the examiners, none of the statistics or conclusions drawn from such statistics that were contained in the draft report is probative of any of the alleged violations contained in the Petitioner's Order in this matter. In short, other than to list the electronic records of LNL that were examined, the market conduct study and report provide no credible or substantive evidence that demonstrates LNL violated any provision of Florida law. The report may have formulated a basis that warranted OIR to investigate LNL further, but it is insufficient on its own to establish by any evidentiary standard that any violations occurred. The evidence did not demonstrate that a draft report from the examiners was finalized by Examination Resources or OIR. However, no further examination of the files of LNL was done after the draft report was completed. Likewise, no further analysis of the data was completed after the submission of the draft report to OIR. Both of these facts indicate that the draft report was the final report. In any event, as a consequence of OIR's perception of the report as a draft, OIR did not furnish a copy of the draft examination to LNL and did not afford LNL the opportunity for an informal conference concerning the draft examination report’s allegations or an opportunity to correct any of the alleged violations referred to in the order. Such a conference would have been required by Section 624.319, Florida Statutes, and Florida Administrative Code Rule 69N-121.066 if the report had been finalized with the Office. Instead, OIR used the report to issue its Order to suspend or revoke LNL's certificate of authority and required LNL to cease and desist from engaging in unfair trade practices as defined in Section 626.9541(1)(g)1., (x)1. and (dd), Florida Statutes, based on 35 counts involving 35 separate applications. Counts 17 (insurance issued to a 34-year-old Haitian- born female), 18 (insurance issued to an 18-year-old Haitian- born male), and 29 through 35 charged that LNL knowingly discriminated "between individuals of the same actuarially supportable class and equal expectation of life,” in violation of Subsection 626.9541(1)(g)1., Florida Statutes. These “actuarially supportable class” charges are addressed as a group. The remainder of the charges involving violations of Subsections 626.9541(1)(x)1. and 626.9541(1)(dd), Florida Statutes, are addressed below per each count. As to the actuarially-supportable class charges, OIR offered no competent substantial evidence defining or establishing what the actuarially supportable class consisted of or who the members of that class were. The only references to the alleged class were unsupported statements by OIR representatives and unqualified witnesses that the actuarial class was the whole world. Moreover, there was no evidence in the record that demonstrated that these members had the same life expectancy. Indeed, the only evidence in the record about the actuarial class was the testimony of Mr. Himmelberger who stated that the alphabetical classifications of countries established actuarial classes for persons born in those countries and that persons born in “C” or “D” countries residing in the United States are not in the same actuarially-supportable class as persons who are United States citizens (including United States citizens born in “C” or “D” countries), or as persons born in “A” or “B” countries residing in the United States. OIR presented no evidence to contradict Mr. Himmelberger's testimony. Even assuming arguendo that Mr. Himmelberger's testimony is not accepted, the fact remains that no other qualified actuarial expert provided this statutorily crucial evidence. Given these facts, OIR has not established that LNL violated Subsection 626.9541(1)(g)1., Florida Statutes, in Counts 17, 18, and portions of Counts 29 through 35 that pertain to Subsection 626.9541(1)(g)1., Florida Statutes, and those counts should be dismissed. COUNT 1 Count 1 of the OIR Order alleged that, in June 2004, LNL refused to issue a $100,000 life insurance policy to a 23- year-old female born in Haiti and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. At the time of the application, the applicant had resided in the United States for less than 10 years. The unrefuted evidence demonstrated that this applicant was declined insurance because she had no income. LNL’s underwriting rules limited the amount of insurance that could be issued to the prior year’s income. Since she had no income, the application was denied. However, in April 2006, when the applicant filed another application for life insurance and demonstrated that she had income, LNL issued a life insurance policy to her. OIR offered no competent evidence that LNL refused to insure this applicant solely on the basis of her national origin since it had an independent basis for its action based on its underwriting guidelines. As discussed above, these guidelines have several actuarially-sound underlying factors that are not related to the particular national origin of an applicant. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 2 Count 2 of the OIR Order alleged that, in June 2004, that LNL refused on two separate occasions to issue life insurance policies to a 65-year-old male born in Haiti and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. The applicant had originally applied for an $82,000 policy (A005491299) with his wife in April 2004. Later, in June 2004, the applicant applied for a $15,000 policy (A0050974020). At the time of the applications, the applicant had resided in the United States for less than 10 years. The first application required medical tests to be performed prior to approval. These tests included a paramedical examination, EKG, blood profile and urine sample. None of the medical tests were completed and no medical information was supplied prior to the time the underwriting decision to decline the application was made. Similarly, the medical underwriting information was not submitted with the second application. The evidence showed that LNL had a standard underwriting procedure that a second application cannot be processed unless all missing underwriting information required for a previous application is submitted with the second application. If such information is not submitted with the second application, the application is not processed and is closed or cancelled. As indicated, the second application was not submitted with the medical underwriting information required for the first application. Clearly, LNL did not refuse to issue insurance to this applicant solely because of his national origin. Its decision to decline to issue insurance on the first application was based on the lack of required medical information. The second application was not processed because the required medical information was not submitted with the second application. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 3 Count 3 alleged that, in June 2004, LNL refused to issue a $15,000 life insurance policy to a 23-year-old female born in Haiti and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. At the time of the application, the applicant had resided in the United States for less than 10 years. No proof of income was submitted with the application. Vague underwriting notes in the file indicate the underwriter referred to this application as a “Haiti case.” However, the underwriter did not testify as to what was meant by this reference. Ms. Saxon, the Chief Underwriter for LNL, testified that she interpreted the reference to be the underwriter’s shorthand method of noting that the underwriting guidelines for “C” and “D” countries applied to this application. OIR argues, without evidence, that the quoted phrase means that the underwriter based the decision to decline this application on the applicant’s national origin. Given the vagueness of this phrase, its presence in the file does not support a conclusion that LNL refused to issue insurance to this applicant based solely on national origin. The better evidence demonstrated that this applicant was declined insurance on her application because she had not resided in the United States for 10 consecutive years, and had provided no proof of income at the time the underwriting decision was made. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 4 Count 4 charged that, in May 2004, LNL refused to issue a $21,000 life insurance policy to a 32-year-old Haitian- born female who was residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. At the time of the application, the applicant had resided in the United States for less than 10 years and was a homemaker. The application file reflected the application was declined because the applicant failed to meet LNL underwriting rules after review by LNL’s legal department. No further explanation is contained in the file regarding the reason the application was declined. However, the evidence demonstrated that this applicant had also applied for a “critical illness policy” at the same time she applied for the $21,000 life insurance policy. The application was batch processed and the “critical illness policy” was issued to the applicant, indicating national origin was not a consideration for LNL. On the other hand, OIR, who has the burden of proof on this issue, offered no competent or convincing evidence that LNL refused to insure this applicant solely because of national origin. To conclude that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, from the lack of information in the file is pure conjecture and inappropriate especially given that this file was underwritten in 2004. Given these facts and the lack of convincing evidence, OIR failed to establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 5 Count 5 in the OIR Order alleged that, in May 2004, LNL refused to issue a $50,000 life insurance policy to a 27- year-old female born in Haiti and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. At the time of the application, the applicant had resided in the United States for over 10 years, but had recently started her own business. The uncontradicted evidence demonstrated that this application was declined because proof of recent income was not supplied at the time of the underwriting decision. The applicant had supplied an affidavit from her former employer showing her income for 2002 and 2003. However, there was no information regarding her income since she had started her own business, leaving her ability to pay the premium in doubt. Again, OIR offered no competent evidence that LNL refused to insure this applicant solely because of national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 6 Count 6 charged that, in May 2004, LNL refused to issue a $20,000 life insurance policy to a 63-year-old Haitian- born male who resided in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. At the time of the application, the applicant had resided in the United States for more than 10 years and was retired. The unrefuted evidence showed that the application was cancelled and not processed by LNL because there was no documentation by the immigration authorities of the applicant’s legal residency status in the United States. Similarly, no proof of income was provided by the applicant. There was a notation in the file which read, “non[-]receipt of W2.” However, this phrase does not demonstrate that the applicant did not receive a W-2 or some other employer proof of retirement income or that LNL had any knowledge that the applicant was unable to provide such a document. In fact, in July 2004, the applicant submitted a second application for which a policy of life insurance was issued. Clearly, LNL did not refuse to insure this applicant solely because of national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 7 Count 7 alleged that, in April 2004, LNL refused to issue a $25,000 life insurance policy to an 18-year-old Haitian- born female who resided in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. The applicant had been in the United States for at least 12 months and was a student. A notation in the file indicated that the agent was requested to ask the applicant to provide information on how long she had been in the United States. However, for unknown reasons, the requested information was not provided. As a consequence, the file was not processed and was cancelled for incompleteness. Such cancellation does not demonstrate that LNL refused to issue insurance but that the processing of the application was stopped due to incomplete information. Handwritten notes in the file indicated that the application would be declined if the applicant had not been in the United States for more than 10 years. However, the note writer did not testify at the hearing. This handwritten note does not support the conclusion that LNL based its decision solely on the basis of the applicant’s national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 8 Count 8 of the OIR Order alleged that, in May 2004, LNL refused to issue a $50,000 life insurance policy to a 39- year-old Haitian-born female who resided in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. The evidence demonstrated that this application was the applicant’s second application (A005491240). At the top of the computer information screen that summarizes actions taken on this file, there was a handwritten note, “Haiti.” At the bottom of this screen, by the initialing dates on the screen, there was a handwritten note “cancel.” There was no evidence that the two notes are associated with each other or were entered at the same time. Whoever wrote the notes did not testify at the hearing regarding these, otherwise vague, notes. The uncontradicted evidence demonstrated that the first application (A005458685), dated February 14, 2004, was not processed because the applicant did not provide proof of income and other underwriting information. The application was cancelled on March 15, 2004. Likewise, the second application, dated April 18, 2004, was not processed and was canceled for failing to submit an acceptable proof of income that was required on the first application. In this case, the applicant provided with the second application an affidavit from her employer that she had been employed since December 2003 and was paid $7.00 an hour. However, the employer’s affidavit was considered insufficient as proof of income because it did not show how many hours she worked. Such information was critical in calculating income for this applicant and the application was cancelled. Such cancellations do not constitute a refusal to insure by LNL, but only reflect that the application cannot be processed without the required or requested information. Later, in August 2005, the applicant applied for life insurance a third time (A006467227) and was issued a policy of insurance. Clearly, LNL did not refuse to issue insurance to this applicant solely because of national origin since the applicant’s national origin had not changed and they later issued such insurance. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 9 Count 9 of the OIR Order alleged that, in May 2004, LNL refused to issue a life insurance policy to a 52-year-old Haitian-born female who resided in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. The evidence demonstrated that processing of this application was canceled because a telephonic interview to explore unclear and questionable written information submitted by the applicant was not completed and because proof of income was not submitted. Indeed, the file reflected that the telephone number for the applicant was disconnected when the telephone interview was attempted. The file also reflected that the person paying the premium did not have the same last name as the applicant which raised legitimate questions regarding the payor’s interest in the policy and the relationship between the payor and the applicant. It was appropriate for LNL to seek to clarify these discrepancies. The applicant's file, also, contained an “Underwriter Support Summary” computer screen. The screen contained handwritten notes stating, “Haiti, Cancel-unemployed, non-US citizen.” Again, the writer of these vague notes did not testify at the hearing and the notes do not support a conclusion that LNL refused to issue insurance to this applicant based solely on her national origin. As indicated, necessary underwriting information was not submitted by the applicant and processing of the application was stopped, and the application was cancelled. OIR offered no competent evidence that LNL either refused to insure this applicant or that such alleged refusal was solely because of national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 10 Count 10 of the OIR Order alleged that, in March 2004, LNL refused to issue a $50,000 life insurance policy to a 34- year-old Haitian-born male who resided in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. The evidence demonstrated that the applicant had lived in this country for more than 10 years, was a permanent resident and was a self- employed taxi driver. The application file reflected that processing of this application was cancelled because additional information that the agent was requested to obtain was not returned. Additionally, no proof of income was submitted by the applicant. The file was not clear whether the additional information being sought was related to proof of income or medical issues. Later, blood work information was received that indicated this applicant had some medical risks that were outside of LNL’s underwriting guidelines. OIR offered no competent evidence that LNL either refused to insure this applicant or that such alleged refusal was solely because of national origin. Given these facts and the general lack of evidence in this applicant’s file, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 11 Count 11 of the OIR Order charged that, in May 2004, LNL refused to issue a $20,000 life insurance policy to a 61- year-old Haitian-born female who resided in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. The applicant had resided in the United States for more than 10 years and had high blood pressure. She had applied for United States citizenship, but was unemployed. Her sister was listed as the person paying the premiums on the policy. The file also reflected that the applicant was single and that she was supported by her husband. This inconsistent information legitimately needed to be clarified in order for the underwriting process to continue. The underwriter requested an IBU. The request for the IBU was sent to a company that performs such interviews for LNL. The application file does not reflect whether the company attempted to perform the interview. However, information from that request was never submitted to LNL and processing of the applicant’s file was stopped, resulting in the cancellation of the application. As with other cancellations, terminating the processing of a file and cancellation of the application for lack of legitimate underwriting information was not a refusal by LNL to insure the applicant. The process simply could not move forward without the requested information. OIR offered no competent evidence that LNL either refused to insure this applicant or that such alleged refusal was solely because of national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 12 Count 12 alleged that, in February 2004, LNL refused to issue a $50,000 life insurance policy to a 47-year-old male born in Haiti and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. However, the evidence demonstrated that this application was declined due to the applicant’s announced foreign travel plans. At the time of this application, Florida’s “Freedom to Travel Act,” Subsection 626.9541(1)(dd), Florida Statutes, had not been passed and would not be enacted until July 1, 2006, some two years later. The Act has no retroactive effect. Therefore, declining to insure a Florida applicant for such plans before the effective date of the “Freedom to Travel Act” was not prohibited at the time of the underwriting action on this application. OIR argues that the absence of a specific notation in the file that it was declined based on foreign travel plans demonstrated that LNL refused to issue insurance based solely on national origin. However, this argument ignores OIR’s burden of proof in this case. The lack of such notation demonstrates nothing and does not provide either a clear or convincing basis to draw any inferences from the absence of such notations. Additionally, such an inference ignores the unrefuted testimony in this case that the application was declined based on the applicant’s foreign travel plans. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 13 Count 13 alleged that, in January 2004, LNL refused to issue a $100,000 life insurance policy to a 45-year-old female born in Haiti and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. Information in the file reflected that the applicant was a United States citizen. The evidence demonstrated that this application was declined because the applicant did not furnish proof of her United States citizenship. Additionally, the required telephonic interview was not completed. Again, OIR argues that the absence of specific notations in the file that the application was cancelled based on the missing information demonstrates that LNL refused to issue insurance based solely on national origin. As noted above, this argument ignores OIR’s burden of proof in this case. The lack of such notations does not provide a clear or convincing basis to draw any inferences to support OIR’s position. Additionally, OIR’s argument ignores the unrefuted testimony in this case that the application was cancelled based on the fact that required information was not supplied. Finally, the evidence demonstrated that this application was cancelled, not declined. As with other cancelled applications, such cancellations do not constitute a refusal to insure and OIR offered no other competent evidence that LNL refused to insure this applicant solely because of national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 14 Count 14 alleged that, in January 2004, LNL refused to issue a $50,000 life insurance policy to a 31-year-old female born in Haiti and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. At the time of the application, the applicant had not resided in the United States for more than 10 years. The applicant had also recently had a baby and was unemployed. As a consequence, the applicant’s mother was the person who would be paying the premium on the policy. The evidence demonstrated that LNL declined to issue insurance on this application because the applicant was not employed and had no income. As discussed earlier, LNL’s underwriting rules limit the amount of coverage that may be issued to an amount equal to the applicant’s annual income for the preceding year. Since the applicant reported no income, LNL’s underwriting rules did not permit the issuance of coverage. However, on April 10, 2006, the applicant submitted a second application (A007241169) that met OIR’s underwriting rules and LNL issued insurance to the applicant. Clearly, LNL did not refuse to issue insurance solely based on national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 15 Count 15 alleged that, in February 2004, LNL refused to issue a $25,000 life insurance policy to a 41-year-old male born in Haiti and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. The evidence showed that a telephonic interview was required to be completed under LNL’s underwriting rules. Handwritten notes in the file state, “IBU ordered due to client being Haitian. Canceled-IBU not received.” Again, the writer of these handwritten notes did not testify at the hearing and they do not support a conclusion that LNL refused to issue insurance based on national origin. The evidence did demonstrate that because the telephonic interview was not completed as required, the application could not be processed further and the application was cancelled. Such a cancellation is not a refusal to insure. OIR offered no competent evidence that LNL refused to insure this applicant solely because of national origin. There was no evidence that the IBU request was a ruse by LNL to cover up its alleged desire to refuse insurance based on national origin. Even in some of the Counts contained in this case, the evidence showed that LNL issued insurance to Haitian applicants when they met its underwriting rules. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 16 Count 16 alleged that, in February 2004, LNL refused to issue a $25,000 life insurance policy to a 63-year-old male born in Haiti and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. The evidence demonstrated that processing of this application was canceled because the applicant had not completed a required telephonic underwriting interview. A handwritten notation on the file stated, “Find a way to cancel/decline.” The note was from the person who reviewed pending files that had not been handled within the timeframe established by LNL for life insurance applications. This application had exceeded those timeframes since it had been pending for six weeks. The note was intended to finalize the processing of the file and remove it from the pending files list. There was no evidence that the note demonstrated an intention to refuse to issue insurance based solely on the applicant’s national origin. Moreover, the evidence demonstrated that LNL reinstated a life insurance policy previously issued to this applicant after that policy had lapsed. Clearly, LNL did not refuse to insure this applicant solely because of national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 19 Count 19 alleged that, in June 2004, LNL refused to issue a $100,000 life insurance policy to a 26-year-old male born in Colombia and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. Colombia was listed as a “D” country under the country code classifications used by LNL for underwriting purposes. A residency questionnaire was also submitted with the application. The questionnaire revealed that the applicant was employed and had an annual income of $40,000. The application also indicated that the applicant was a permanent resident of the United States, but had lived in the United States for less than 10 years. The residency questionnaire reflected that the applicant was unsure of his VISA number and that it had either expired or was about to expire. The applicant hoped to have it reinstated next year. Additionally, the official Immigration and Naturalization Service residency status documentation that was provided with the application showed that the applicant’s residency status had expired. The applicant, therefore, had not submitted the required documentation that he was a current legal resident of the United States. However, because the application was for a $100,000 policy, LNL’s underwriting rules required that the application be submitted to a re-insurance company to insure the risk. Direct insurance companies often utilize re-insurance companies to shift the risk of an insurance application to the re- insurance company. Such companies follow their own underwriting rules to determine whether they will issue insurance on an application. This application was forwarded to one of the re- insurance companies that LNL utilizes for re-insurance. The re- insurance company declined to issue insurance on the application and returned the application to LNL. Thereafter, LNL declined to issue insurance on this application because the documentation submitted with the application showed that the applicant’s legal residency status in the United States had expired and the re- insurance provider utilized by LNL declined to re-insure the applicant. OIR offered no competent evidence that LNL refused to insure this applicant solely because of national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 20 Count 20 of the OIR Order alleged that, in May 2004, LNL refused to issue a $25,000 life insurance policy to a 20- year-old female born in South Africa and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. At the time of the application, South Africa was listed as a “D” country under the country code classifications used by LNL for underwriting purposes. The applicant in this case was the daughter of an LNL insurance agent. At the time of the application, she was a full-time student, unemployed and had no income. The evidence showed that LNL’s underwriting rules limited the amount of coverage to an amount equal to the applicant’s annual income for the preceding year. Since the applicant had no income, LNL’s underwriting rules did not permit the issuance of coverage and the policy was declined. OIR offered no competent evidence that LNL refused to insure this applicant solely because of national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. Count 21 Count 21 of the OIR Order alleged that, in April 2004, LNL refused to issue a $100,000 life insurance policy to a 42- year-old male born in Colombia and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. The evidence demonstrated that the applicant had lived in the United States for less than 10 years, but was a resident because he had received political asylum in the United States. Political asylum is a non-permanent status that could result in the resident being returned to his or her country of origin. Political asylum status was considered by LNL’s underwriters to constitute too tenuous a residency status in the United States to warrant undertaking the risk of issuing insurance to an individual who may at any time be returned to residency in his country of origin, with its attendant severe mortality risks. However, because the application was for a $100,000 policy, LNL sent the application to one of the re-insurance companies that it uses for re-insurance. The re-insurance company declined to issue insurance on the application based on the temporary nature of the applicant’s residency status and returned the application to LNL. Thereafter, LNL declined to issue insurance to this applicant because he had resided in the United States for less than 10 years and his residency in the United States was based on political asylum status. OIR offered no evidence to refute LNL’s position on political asylum and offered no competent evidence that LNL refused to insure this applicant solely because of national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. Count 22 Count 22 of the OIR Order alleged that, in April 2004, LNL refused to issue a $25,000 life insurance policy to a 17- year-old male born in Ghana and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. Ghana is listed as a “D” country under the country code classifications used by LNL for underwriting purposes. The evidence showed that the applicant had indicated on his application that he had a work visa which permitted him to remain a resident of the United States. However, the applicant, also, indicated he was a full-time high school student. The file also indicated that his sister, who is a contingent beneficiary, paid the initial application amount. On the other hand, the application indicated that the applicant’s fiancée would be the person responsible for payment of the insurance premium. Because of these inconsistencies, a telephonic interview was requested, but, for unknown reasons, was not completed. Because the interview was not completed, LNL declined to issue insurance on this application because the information that would have been supplied in a telephone interview was not provided before the underwriting decision was made. Again, OIR argues that the absence of specific notations in the file that it was cancelled based on missing documentation demonstrates that LNL refused to issue insurance based solely on national origin. This argument ignores OIR’s burden of proof in this case. The lack of such notations does not provide either a clear or convincing basis to draw any inferences regarding the reason for not issuing a policy. Additionally, OIR’s argument ignores the unrefuted testimony in this case that the application was declined based on the lack of information that would have been supplied if the required telephone interview had been completed. Other than its argument, OIR offered no competent evidence that LNL refused to insure this applicant solely because of national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 23 Count 23 of the OIR Order alleged that, in August 2004, LNL refused to issue a $100,000 life insurance policy to a 27-year-old male born in Colombia and residing in the United States solely because of the applicant’s national origin in violation of Subsection 626.9541(1)(x)1., Florida Statutes. The evidence showed that the applicant was a temporary resident based on a grant of political asylum he received in 2000. As with Count 21, LNL sent the application to one of the re-insurance companies that it uses for re-insurance. The re-insurance company declined to issue insurance on the application based on the temporary nature of the applicant’s residency status and returned the application to LNL. Thereafter, LNL declined to issue insurance to this applicant because he had resided in the United States for less than 10 years and his residency in the United States was based on political asylum status. Again, political asylum status is considered by LNL’s underwriters to constitute too tenuous a residency status in the United States to warrant undertaking the risk of issuing insurance to an individual who may at any time be returned to residency in his country of origin, with its attendant severe mortality risks. OIR offered no competent evidence that LNL refused to insure this applicant solely because of national origin. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(x)1., Florida Statutes, and the Count should be dismissed. COUNT 24 Count 24 of the OIR Order alleged that LNL refused to issue life insurance or limited the amount, extent, or kind of life insurance coverage to a 59-year-old male applicant who was born in Guyana and resided in the United States based solely on past lawful foreign travel experience or future lawful travel plans, in violation of Subsection 626.9541(1)(dd)2., Florida Statutes. Guyana was listed as a “D” country under the country code classifications used by LNL for underwriting purposes. The unrefuted evidence demonstrated that underwriting review of this application (A007302898) was postponed because the applicant was going to be out of the country on a mission trip to Liberia and could not complete a required paramedical examination requested by the paramedical examination company until his return to the United States. For unknown reasons, the applicant’s agent submitted a new application (A007313656) when the applicant returned from his trip. Medical tests were completed which revealed the applicant had prostate cancer and abnormal blood lab results. The original application was cancelled and the second application was denied based on the medical risk posed by the applicant. Clearly, neither cancellation of the first application nor denial of the second application was based on the applicant's travel. OIR offered no competent evidence that LNL refused to insure this applicant, or limited the amount, extent, or kind of life insurance coverage available to them, based solely on past lawful foreign travel or future lawful travel plans. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(dd)1. or 2., Florida Statutes, and the Count should be dismissed. COUNT 25 Count 25 of the OIR Order alleged that in January 2007, LNL refused to issue life insurance or limited the amount, extent, or kind of life insurance coverage to a 23-year-old male applicant who was born in Palestine and resided in the United States based solely on past lawful foreign travel experience or future lawful travel plans, in violation of Subsections 626.9541(1)(dd)1. and 2., Florida Statutes. Palestine was listed as a “D” country under the country code classifications used by LNL for underwriting purposes. The evidence demonstrated that the applicant applied for a $100,000 insurance policy. The applicant indicated that he traveled to Palestine every few years. The insurance policy was issued but contained a policy endorsement excluding coverage for foreign travel. The policy was also issued with a rate above what would be normally charged for the type of insurance issued. Clearly, LNL did not refuse to issue insurance based on this applicant’s past travel or future travel plans. However, LNL did limit the insurance issued because of the applicant’s future travel plans when it issued the policy with a foreign travel endorsement. This underwriting decision was made after the effective date of Florida’s “Freedom to Travel Act.” In this case, the application was submitted to one of the re-insurance companies used by LNL. The re-insurance company only agreed to re-insure the application if the policy included a foreign travel exclusion endorsement. LNL’s underwriting department was under the mistaken belief that LNL’s re-insurers were underwriting their risks according to the same Florida “Freedom to Travel Act” restrictions imposed by Florida on direct insurers such as LNL. Since the re-insurer to whom this application was submitted required a foreign travel exclusion endorsement, LNL assumed the exclusion was consistent with Florida travel underwriting requirements, and issued the policy with the foreign travel exclusion endorsement. The mistake was admitted by LNL and seems to be an underwriting error due to the inexperience of LNL’s underwriter’s in regard to the relatively new “Freedom to Travel Act.” There was no evidence that LNL’s decision was willful. However, LNL's decision was a violation of the Act. COUNT 26 Count 26 of the OIR Order alleges that in February 2007, LNL refused to issue life insurance or limited the amount, extent, or kind of life insurance coverage to a 44-year-old male applicant who was born in Haiti and was a citizen of the United States based solely on past lawful foreign travel experience or future lawful travel plans, in violation of Subsections 626.9541(1)(dd)1. and 2., Florida Statutes. The applicant had applied for a $150,000 policy and indicated in his telephone interview that he traveled to Haiti one or two times a year. The evidence demonstrated that Ms. Saxon’s underwriting unit processes approximately 1,500 applications from Florida a week, in addition to applications from other states. Ms. Saxon admitted that, when she processed this application, she missed the fact that this application was from Florida and subject to the “Florida Freedom to Travel Act.” She issued an ALX policy for $15,000. An ALX policy limits benefits to a return of premiums should an insurable event occur during the first three years of the policy. There was no evidence that Ms. Saxon willfully violated Florida’s “Freedom to Travel Act,” but made a mistake in processing this application. However, LNL did limit the kind or extent of insurance based solely on this applicant’s travel plans, contrary to the Florida “Freedom to Travel Act.” COUNTS 27 AND 28 Count 27 and 28 of the OIR Order alleges around July or August 2006, LNL refused life insurance to or limited the amount, extent, or kind of life insurance coverage on two insureds who were married, filed applications at the same time and were born in Haiti based solely on their past lawful foreign travel experience or future lawful travel plans, in violation of Subsections 626.9541(1)(dd)1. and 2., Florida Statutes. The applications were submitted to LNL on June 12, 2006, prior to the effective date of the “Freedom to Travel Act.” The decisions to issue the policies were made on July 6, 2006, five days after the Act's effective date on July 1, 2006. However, the policies were made effective retroactively to July 1, 2006, the same day the Act came into effect. The insurance policies were issued at a reduced face amount of $33,000 due to the underwriting rule that limited the amount of a policy to an applicant's annual income. Additionally, and more importantly for these Travel Act charges, the policies were issued with a foreign travel endorsement required. Once the underwriting decisions were made, the applicants' files were sent to the issuance department of LNL for finalization of the paperwork on the policies. This process is the standard process used by LNL for the insurance policies it writes. No one from the issuance department testified at the hearing and the evidence was not clear whether part of the policy had been finalized or placed with the insured. However, on July 20, 2006, the foreign travel policy endorsements for the policies were sent to the branch office. Again, the evidence was not clear what the branch office was to do with these endorsements, but it appears that the expectation was to have the endorsements signed by the applicants and returned to the issuance department. The travel endorsements were not accepted or returned by the applicants and the policies were eventually cancelled by LNL. Again, the evidence was not clear why the endorsements were not returned. Based on these facts, the evidence was clear that LNL limited the kind or extent of insurance based solely on these applicants’ travel plans contrary to the Florida “Freedom to Travel Act.” However, the evidence did not demonstrate that these violations were willful given the timeframes involved in the files. COUNT 29 Count 29 of the OIR Order alleges that in June 2006, LNL refused to issue life insurance or limited the amount, extent, or kind of life insurance coverage to a 54-year-old female applicant who was born in Honduras and was residing in the United States based solely on past lawful foreign travel experience or future lawful travel plans, in violation of Subsections 626.9541(1)(dd)1. and 2., Florida Statutes. Honduras was listed as a "D" country on the country code classifications used by LNL for underwriting purposes. In this Count, the applicant applied for a $50,000 policy. Her telephone interview reflected that her most recent annual income was $6,000. She, also, indicated that she might travel to Honduras in the future for Christmas. The unrefuted evidence demonstrated that the policy was issued at a reduced amount of $6,000 based on the income of the applicant. As discussed earlier, this reduction was in compliance with LNL's underwriting rules for the risks posed by non-citizen applicants who were born in a "C" or "D" country. There was no competent evidence that this reduction was related to the applicant's future travel plans. Based on these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(dd)1 or 2., Florida Statutes, and the Count should be dismissed. COUNT 30 Count 30 of the OIR Order alleges that in August 2006, LNL refused to issue life insurance or limited the amount, extent, or kind of life insurance coverage to a 47-year-old male applicant who was born in Haiti and was residing in the United States based solely on past lawful foreign travel experience or future lawful travel plans, in violation of Subsections 626.9541(1)(dd)1. and 2., Florida Statutes. As found earlier, Haiti is listed as a "D" country on the country code classifications used by LNL for underwriting purposes. The applicant had applied for a $50,000 policy. His most recent (2005) tax return reflected an annual income close to $11,000. His telephone interview reflected a current income of 36,000. However, this income was not in line with either of the applicant's 2003 or 2004 tax returns which reflected income closer to the 2005 tax return. Indeed, the evidence indicates that the $36,000 income reported in the telephone interview reflected business income prior to subtracting any business expenses. The applicant also indicated that he had returned to Haiti for a three-month period approximately four years prior to the date of his application to visit his family, but had no travel plans to visit Haiti in the future. The better evidence demonstrated that this policy was issued at a reduced amount of $17,000 based on the best estimate of the most recent annual income of the applicant. As discussed earlier, this reduction was in compliance with LNL's underwriting rules for the risks posed by a non-citizen applicant who was born in a "C" or "D" country. There was no competent evidence that this reduction was related to the applicant's past or future travel plans. Based on these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(dd)1 or 2., Florida Statutes, and the Count should be dismissed. COUNT 31 Count 31 of the OIR Order alleges that in August 2006, LNL refused life insurance to or limited the amount, extent, or kind of life insurance coverage to a 30-year-old female applicant who was born in Haiti and residing in the United States based solely on past lawful foreign travel experience or future lawful travel plans, in violation of Subsections 626.9541(1)(dd)1. and 2., Florida Statutes. The applicant had applied for a $100,000 policy. Her W-2 statements reflected an annual income of $42,000. She also indicated that she had traveled to Haiti approximately two years prior to the application, but had no future plans to travel. The unrefuted evidence demonstrated that the policy was issued at a reduced amount of $42,000 based on the income of the applicant. As discussed earlier, this reduction was in compliance with LNL's underwriting rules for the risk posed by non-citizen applicants who were born in a "C" or "D" country. There was no competent evidence that this reduction was related to the applicant's future travel plans. Based on these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(dd)1 or 2., Florida Statutes, and the Count should be dismissed. COUNT 32 Count 32 of the OIR Order alleges that in September 2006, LNL refused life insurance to or limited the amount, extent, or kind of life insurance coverage to a 60-year-old female applicant who was born in Colombia and was a resident of the United States based solely on past lawful foreign travel experience or future lawful travel plans, in violation of Subsections 626.9541(1)(dd)1. and 2., Florida Statutes. Colombia was listed as a "D" country on the country code classifications used by LNL for underwriting purposes. The applicant had applied for a $35,000 policy. The applicant indicated she had an annual income of $25,000. Her most recent W-2 showed income slightly under $24,000. The applicant also indicated that she traveled to Colombia within the 12 months preceding her application and that she traveled there about every 5 years. The unrefuted evidence demonstrated that the policy was issued at a reduced amount of $25,000 based on the income of the applicant. As discussed earlier, this reduction was in compliance with LNL's underwriting rules for the risk posed by non-citizen applicants who were born in a "C" or "D" country. There was no competent evidence that this reduction was related to the applicant's past travel or future travel plans. In fact, the file contains a specific handwritten note from LNL's legal department on a copy of the OIR's official notification regarding the effective date of the Travel Act that indicated the underwriter could not take adverse actions on the application based on the applicant's travel plans. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(dd)1 or 2., Florida Statutes, and the Count should be dismissed. COUNT 33 Count 33 of the OIR Order alleges that in September 2006, LNL refused life insurance to or limited the amount, extent, or kind of life insurance coverage to a 36-year-old female applicant who was born in Thailand and was a resident of the United States based solely on past lawful foreign travel experience or future lawful travel plans, in violation of Subsections 626.9541(1)(dd)1. and 2., Florida Statutes. Thailand was listed as a "D" country on the country code classifications used by LNL for underwriting purposes. The applicant applied for a $75,000 policy. Her most recent income tax return reflects income of $40,000. She also indicated that she regularly travels to Thailand for one week about every five years and intends to continue to travel there. The unrefuted evidence demonstrated that the policy was issued at a reduced amount of $40,000 based on the income of the applicant. As discussed earlier, this reduction was in compliance with LNL's underwriting rules for the risk posed by non-citizen applicants who were born in a "C" or "D" country. There was no competent evidence that this reduction was related to the applicant's past travel or future travel plans. As with Count 32, the file contains a specific handwritten note from LNL's legal department on a copy of the OIR's official notification regarding the effective date of the Travel Act. The note indicated that the underwriter could not take adverse actions on the application based on the applicant's travel plans. Given these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(dd)1 or 2., Florida Statutes, and the Count should be dismissed. COUNT 34 Count 34 of the OIR Order alleges that in November 2007, LNL refused life insurance to or limited the amount, extent, or kind of life insurance coverage to a 41-year-old male applicant who was born in India and was a resident of the United States based solely on past lawful foreign travel experience or future lawful travel plans, in violation of Subsections 626.9541(1)(dd)1. and 2., Florida Statutes. India was listed as a "D" country on the country code classifications used by LNL for underwriting purposes. The applicant had applied for a $100,000 policy. His most recent W-2 showed income of slightly more than $12,000. The applicant, also, indicated that he traveled to India every few years and had plans to travel there in the future. The evidence demonstrated that this application was submitted to one of the re-insurance companies used by LNL because the application was for a $100,000 policy. The re- insurance company declined to re-insure the risk based on the travel plans of the applicant and returned the application to LNL. However, LNL recognized that it could not decline the application for the reason the re-insurance company declined the re-insurance. LNL reviewed the policy based on its underwriting guidelines for applicants from "C" or "D" countries. The policy was issued at a reduced amount of $15,000 based on the income of the applicant and rated for a person with diabetes. This reduction was in compliance with LNL's underwriting rules for the risk posed by non-citizen applicants who were born in a "C" or "D" country. Additionally, the rating for diabetes was in line with LNL's underwriting guidelines for medical conditions. There was no competent evidence that either the reduction or rating were related to the applicant's past travel or future travel plans. Based on these facts, the evidence did not establish that LNL violated Subsection 626.9541(1)(dd)1. or 2., Florida Statutes, and the Count should be dismissed. COUNT 35 Count 35 of the OIR Order alleges that in March 2007, LNL refused life insurance to or limited the amount, extent, or kind of life insurance coverage to a 34-year-old male applicant who was born in Nepal and was a resident of the United States based solely on past lawful foreign travel experience or future lawful travel plans, in violation of Subsections 626.9541(1)(dd)1. and 2., Florida Statutes. Nepal was listed as a "D" country on the country code classifications used by LNL for underwriting purposes. The applicant had applied for a $200,000 policy. His most recent W-2 showed income around $10,000. The telephone interview reflected annual income of about $30,000 since he was self-employed. The applicant, also, indicated that he traveled to Nepal about every two years and had plans to travel there in the future. The evidence demonstrated that this application was submitted to one of the re-insurance companies used by LNL because the application was for over $100,000 policy. The re- insurance company declined to re-insure the risk based on the travel plans of the applicant and returned the application to LNL. Again, LNL recognized that it could not decline the application for the reason the re-insurance company declined the re-insurance. The policy was issued at a reduced amount of $30,000 based on the income of the applicant. This reduction was in compliance with LNL's underwriting rules for the risk posed by a non-citizen applicant who was born in a "C" or "D" country. There was no competent evidence that this reduction was related to the applicant's past travel or future travel plans. Based on these facts, the evidence did not establish that LNL violated Subsection 626.9541 (1)(dd)1. or 2., Florida Statutes, and the Count should be dismissed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that Counts 1 through 24 and 29 through 35 of OIR’s June 3, 2009, Order be dismissed. As to Counts 25, 26, 27, and 28 of OIR’s June 3, 2009, Order it is further RECOMMENDED that OIR enter a Final Order finding four violations of Section 626.9541(1)(dd), Florida Statutes, imposing an administrative fine of $1,000 per violation and ordering Respondent to underwrite the applications of the four affected individuals, and to offer to issue coverage to them from the date the policies were declined in such amount as is consistent with LNL’s underwriting guidelines, in compliance with the underwriting restrictions in Section 626.9541(1)(dd), Florida Statutes. It is further RECOMMENDED that OIR issue a cease and desist order to LNL regarding violations of Section 626.9541, Florida Statutes. DONE AND ENTERED this 9th day of November, 2010, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER 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 9th day of November, 2010. COPIES FURNISHED Amanda Allen, Esquire Elenita Gomez, Esquire Office of Insurance Regulation Larson Building 200 East Gaines Street Tallahassee, Florida 32399 Daniel C. Brown, Esquire Carlton Fields, P.A. Post Office Drawer 190 Tallahassee, Florida 32302-0190 Kevin M. McCarty, Commissioner Office of Insurance Regulation Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0305 Steve Parton, General Counsel Office of Insurance Regulation Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0305
The Issue The issues to be resolved in this consolidated proceeding concern whether the Petitioner, Abraham Maida's applications to represent certain life insurance companies should be denied based upon his alleged unlawful failure to forward premium funds from insureds to the insurers during the applicable regular course of business. Also at issue are the charges in the Administrative Complaint in the related penal proceeding which concerns the same factual conduct involving the Respondent's alleged failure to forward premiums to the insurers involved in the policy contracts at issue.
Findings Of Fact The Petitioner, Abraham George Maida, is licensed in Florida as a life insurance agent, a life and health insurance agent and a dental health care contract salesman. The Department is an agency of the State of Florida charged with licensing life, health and other types of insurance agents, with regulating their licensure and practice and with enforcing the licensure and practice standards embodied in the statutes cited hereinbelow. Abraham Maida engaged in the business of selling insurance coverage to various employees of the City of Jacksonville. The premium payments for this coverage were collected by payroll deduction from the employees, and lump sum premium checks were remitted over to the Petitioner/Respondent, Mr. Maida, by the appropriate personnel of the City of Jacksonville. Mr. Maida, in turn, was required by his contractual arrangements with the underwriting insurance companies involved and by the Florida Insurance Code, Chapter 626, Florida Statutes, with timely remitting those premium funds over to the insurers who underwrote the risk for the employees in question. Mr. Maida failed to timely remit the premium funds which he collected from the City of Jacksonville to the relevant insurers for the months of February, March and April of 1990, in the case of policy contracts written on behalf of Loyal American Life Insurance Company. Additionally, Mr. Maida failed to timely remit the premium funds received from the City of Jacksonville, after it received them by payroll deduction from its employees, for the months of March, April and May of 1990, with regard to the premium funds due in contracts involving the ITT Life Insurance Company, in accordance with his contract with that company. Mr. Maida failed to timely remit the insurance premiums of James E. Daniels to the ITT Life Insurance Company, as well. The Petitioner/Respondent's contracts with these insurance companies required him to remit premium funds which he received from insureds, within thirty (30) days of receipt, to the insurance company underwriting the risk involved. This the Petitioner/Respondent failed to do for the companies involved in the above Findings of Fact and for those months of 1990 delineated above. In the case of most of the delinquent premium funds due these companies, Mr. Maida authorized them to debit his commission and/or renewal accounts with those companies, which were monies due and owing to him from the companies, in order to make up the premiums which he had not remitted over to the companies involved at that point. That procedure did not defray all of the delinquent premium amounts, however. in the case of ITT Life Insurance Company and the monies owed that company by Mr. Maida, it was established that $10,554.21 of delinquent premium amounts were owing to that company and not timely paid by Mr. Maida. Although he paid the portion of that figure representing the March premium funds due the company for March of 1990, he did not directly pay the premium funds due for April and May of 1990 but, rather, suffered the company to charge those delinquencies, for those months, to his agent's commission account. This procedure still left $4,877.54 unpaid, as of the time of hearing. It was established by witness, Steven Heinicke of that company, that Mr. Maida is their most consistently delinquent agent, in terms of timely remission of premium funds due the company for insurance business which Mr. Maida has written. It has also been established however, that Mr. Maida made a practice of always paying premium funds due the companies for which he wrote insurance in the precise amounts owing, regardless of whether the billing statements to him from those companies had inadvertently understated the amounts which they were due. It was also established that his failure to timely remit the insurance premium funds in question was not due to any intent to defraud those companies of the funds involved or to permanently convert the funds to his own use. Rather, it was established that Mr. Maida's difficulty in timely payment of the premium funds was due to misappropriation of the funds because of financial problems which he was suffering at tee times in question, due at least in part to federal income tax difficulties he was experiencing. There has been no shoring in this record that Mr. Maida is not a competent insurance agent in terms of his abilities and qualifications to fairly and effectively obtain and contract for insurance business with insureds on behalf of the insurance companies he represents. There was no showing that he lacks reasonably adequate knowledge and technical competence to engage in the transactions authorized by the licenses or permits which he presently holds or which he seeks in the licensure application involved in this proceeding.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is, therefore RECOMMENDED: That the Petitioner be found guilty of the violations found to have been proven in the above Conclusions of Law portion of this Recommended Order and that his licenses and eligibility for licensure with the insurers for which license application was made be suspended for a period of three (3) months. DONE and ENTERED this 5th day of June, 1991, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk the Division of Administrative Hearings this 6th day of June, 1991. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-6670 Respondent/Department's Proposed Findings of Fact: 1-7. Accepted. COPIES FURNISHED: Tom Gallagher, State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, Esq. General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Norman J. Abood, Esq. Willis F. Melvin, Jr., Esq. 1015 Blackstone Building Alan J. Leifer, Esq. Jacksonville, FL 32202 Department of Insurance and Treasurer 412 Larson Building Tallahassee, FL 32399-0300
