Findings Of Fact At all times material hereto, Respondent, Pedro Luis Hereu, was licensed and eligible for licensure as a life and health and general lines insurance agent by Petitioner, Department of Insurance. Respondent also served as President and registered agent of P.H. Insurance, Inc. P.H. Insurance, Inc. was an incorporated life, health, and general lines insurance agency engaged in the business of selling life, health and general lines insurance products through Respondent and other agency personnel acting under the supervision and control of Respondent. Respondent was licensed to represent Union Bankers Insurance Company as a health insurance agent. Sometime prior to October 17, 1989, Respondent applied to become a resident agent for U.S. Security Insurance Company. On or around February 21, 1986, Respondent assisted Mr. Pablo Beade in the preparation of an application for health insurance for Mr. Beade and his family through Union Bankers Insurance Company. Mr. Beade is not fluent in English, and the application is written in English. Respondent, however, speaks Spanish which is Mr. Beade's native language, and with Mr. Beade's permission read the application in Spanish to Mr. Beade and completed the form in English in Mr. Beade's presence. The form consists primarily of "yes" and "no" questions. Mr. Beade answered "no" to all but one question regarding medical treatment in the previous five years. Mr. Beade told Respondent that during that time he had visited a Dr. Gualberto Navarro for a regular checkup only. Respondent noted the information on the form. In his testimony, Mr. Beade, however, stated that he informed Respondent that he had been treated for ulcers in addition to his regular checkup with Dr. Navarro. Respondent disagrees. Considering that Respondent was aware that the Union Bankers would verify Mr. Beade's health history prior to issuing the policy, that Respondent supplied the company with Dr. Navarro's telephone number and address and Respondent's demeanor at the hearing, Respondent's testimony is found to be credible. During his visit with Mr. Beade, Respondent explained to Mr. Beade that the application did not assure that his coverage would be approved by the company. Then, after completing the application, reviewing it with Mr. Beade, and witnessing the execution of it by the Beade's, Respondent collected $3,093.99 in premium dollars from Mr. Beade. Although it is Respondent's custom to collect funds in the form of a check payable to the insurer, Mr. Beade preferred to pay him in cash. Respondent accepted the cash and issued a receipt to Mr. Beade for it. Respondent returned to the P.H. Insurance and gave the cash and the application to his secretary for deposit and processing. According to Respondent, his secretary deposited the cash in the agency trust account and forwarded the application and a deposit to Union Bankers. Respondent's agent's contract with Union Bankers and the regular course of business, which Respondent admitted, obligate him to submit all money collected on behalf of Union Bankers to it immediately upon receipt. Union Banker's attempted to obtain more information from Dr. Navarro concerning Mr. Beade's health, and Respondent attempted to contact Dr. Navarro on behalf of Union Bankers. However, Union Bankers did not receive a response from Dr. Navarro and issued its policy, excluding Mr. Beade. Since coverage of Mr. Beade was excluded from the policy, the premium owed by Mr. Beade required adjustment. Respondent, however, had left Miami during the Summer of 1986 and did not return until October, 1986. It was not until then that he became aware of the company's refusal to insure Mr. Beade. On several occasions Respondent tried to telephone Mr. Beade to discuss the premium adjustment and return of a portion of the premium. His attempts were unsuccessful. On January 30, 1987, he wrote Mr. Beade, but the letter was returned. He physically went to the last known address which Respondent had for Mr. Beade, but no one was home. Respondent has not personally been contacted by Mr. Beade since Respondent's return to Miami. Mr. Beade did, however, file suit against Union Bankers and Respondent; however, the relevant evidence did not indicate the allegations or the judgment, if any, in the litigation. Meanwhile the funds remained in the non-interest bearing trust account. In May, 1989, Petitioner filed the instant complaint against Respondent, and on September 14, 1989, Respondent issued a check in the amount of $1,982.56 to Mr. Beade from the trust account. On October 17, 1989, Petitioner issued its letter demonstrating its intent to deny Respondent's application to become a registered agent for U.S. Security Insurance Company. The instant claim represents the first and only complaint filed with Petitioner against Respondent.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Insurance enter a final order which dismisses the administrative complaint against Respondent, Pedro Luis Hereu, and approves the subject application. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 22 day of March 1990. JANE C. HAYMAN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22 day of March 1990. APPENDIX TO THE RECOMMENDED, ORDER IN CASE NO. 89-4931 The following rulings are made on the proposed findings of fact submitted by Petitioner: The proposed findings of fact in paragraph 1 are adopted in material part by paragraph 1 of the Recommended Order. The proposed findings of fact in paragraph 2 are adopted in material part by paragraph 1 of the Recommended Order. The proposed findings of fact in paragraph 3 are adopted in material part by paragraph 2 of the Recommended Order. The proposed findings of fact in paragraph 4 are adopted in material part by paragraph 2 of the Recommended Order. The proposed findings of fact in paragraph 5 are adopted as subordinate to paragraph 6 of the Recommended Order. The proposed findings of fact in paragraph 6 are adopted in material part by paragraph 2 of the Recommended Order. The proposed findings of fact in paragraph 7 are adopted in material part in paragraphs 3. The proposed findings of fact in paragraph 8 are adopted in material part in paragraphs 3. The proposed findings of fact in paragraph 9 are adopted in material part by paragraphs 5 of the Recommended Order. The proposed findings of fact in paragraph 10 are adopted in material part by paragraph 9 of the Recommended Order. The proposed findings of fact in paragraph 11 are adopted in material part by paragraph 6 of the Recommended Order. The proposed findings of fact in paragraph 12 are adopted in material part by paragraph 6 of the Recommended Order. The proposed findings of fact in paragraph 13 are adopted in material part by paragraph 6 of the Recommended Order. The proposed findings of fact in paragraph 14 are rejected as a conclusion of law. The proposed findings of fact in paragraph 15 are adopted in material part by paragraphs 8-10 of the Recommended Order. The following rulings are made on the proposed findings of fact submitted by Respondent: The proposed findings of fact in paragraph 1 are adopted in material part in paragraph 1 of the Recommended Order. The proposed findings of fact in paragraph 2 are adopted in material part in paragraph 2 of the Recommended Order. The proposed findings of fact in paragraph 3 are adopted in material part in paragraphs 3-5 of the Recommended Order. The proposed findings of fact in paragraph 4 are adopted in material part in paragraph 4 the Recommended Order. The proposed findings of fact in paragraph 5 are adopted in material part in paragraph 5 of the Recommended Order. The proposed findings of fact in paragraph 6 are adopted in material part in paragraph 6. The proposed findings of fact in paragraph 7 are adopted in material part in paragraph 7 of the Recommended Order. The proposed findings of fact in paragraph 8 are adopted in material part in paragraph 7. The proposed findings of fact in paragraph 9 are rejected as irrelevant. The proposed findings of fact in paragraph 10 are adopted in material part in paragraph 8 of the Recommended Order. The proposed findings of fact in paragraph 11 are adopted in material part in paragraph 8 of the Recommended Order. The proposed findings of fact in paragraph 12 are adopted in material part in paragraph 8 of the Recommended Order. The proposed findings of fact in paragraph 12 are adopted in material part in paragraph 10 of the Recommended Order. COPIES FURNISHED: Christopher Anderson, Esquire Office of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Thomas F. Woods, Esquire Alex D. Barker, Esquire GATLIN, WOODS, CARLSON & COWDERY 1709-D Mahan Drive Tallahassee, Florida 32308 Don Dowdell General Counsel The Capitol Plaza Level Tallahassee, Florida 32399-0300 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 =================================================================
The Issue The issues are whether Respondents offered and sold securities in Florida, in violation of the registration requirements of Section 517.07(1), Florida Statutes; offered and sold securities in Florida while Respondents were unregistered, in violation of Section 517.12(1), Florida Statutes; or committed fraud in the offer, sale, or purchase of securities in Florida, in violation of Section 517.301(1)(a), Florida Statutes. If so, an additional issue is the penalty to be imposed.
Findings Of Fact At all material times, Respondent James A. Torchia (Respondent) held a valid life and health insurance license. Respondent was the president and owner of Respondent Empire Insurance, Inc. (Empire Insurance), a now-dissolved Florida corporation. Empire Insurance was in the insurance business, and Respondent was its sole registered insurance agent. At no material time has Respondent or Empire Insurance held any license or registration to engage in the sale or offer for sale of securities in Florida. At no material time were the investments described below sold and offered for sale by Respondent or Empire Insurance registered as securities in Florida. These cases involve viaticated life insurance policies. A life insurance policy is viaticated when the policy owner, also known as the viator, enters into a viatical settlement agreement. Under the agreement, the viator sells the policy and death benefits to the purchaser for an amount less than the death benefit--the closer the viator is perceived to be to death, the greater the discount from the face amount of the death benefit. The viatical industry emerged to provide dying insureds, prior to death, a means by which to sell their life insurance policies to obtain cash to enjoy during their remaining lives. As this industry matured, brokers and dealers, respectively, arranged for the sale of, and bought and resold, life insurance policies of dying insureds. Prior to the death of the viator, these viaticated life insurance policies, or interests in such policies, may be sold and resold several times. In these cases, viators sold their life insurance policies to Financial Federated Title & Trust, Inc. (FinFed). Having raised money from investors, American Benefit Services (ABS) then paid FinFed, which assigned viaticated policies, or interests in the policies, to various trusts. The trusts held the legal title to the policies, and the trust beneficiaries, who are the investors from whom ABS had obtained the funds to pay FinFed, held equitable title to the policies. Sometimes in these cases, a broker or dealer, such as William Page and Associates, intervened between the viator and FinFed. At some point, though, ABS obtained money from investors to acquire policies, but did not pay the money to FinFed to purchase viaticated life insurance policies. The FinFed and ABS investment program eventually became a Ponzi scheme, in which investor payouts were derived largely, if not exclusively, from the investments of other investors. ABS typically acquired funds through the promotional efforts of insurance agents, such as Respondent and Empire Insurance. Using literature provided by ABS, these agents often sold these investments to insurance clients. As was typical, Respondent and Empire Insurance advertised the types of claims described below by publishing large display ads that ran in Florida newspapers. Among the ABS literature is a Participation Disclosure (Disclosure), which describes the investment. The Disclosure addresses the investor as a "Participant" and the investment as a "Participation." The Disclosure contains a Participation Agreement (Agreement), which provides that the parties agree to the Disclosure and states whether the investor has chosen the Growth Plan or Income Plan, which are described below; a Disbursement Letter of Instruction, which is described below; and a Letter of Instruction to Trust, which is described below. The agent obtains the investor's signature to all three of these documents when the investor delivers his check, payable to the escrow agent, to purchase the investment. The Disclosure states that the investments offer a “High Return”: “Guaranteed Return on Participation 42% at Maturity.” The Disclosure adds that the investments are “Low Risk”: “Secured by a Guaranteed Insurance Industry Receivable”; “Secured by $300,000 State Insurance Guarantee Fund”; “Short Term Participation (Maturity Expectation 36 Months)”; “Principal Liquid After One Year With No Surrender Charge”; “State Regulated Participation”; “All Transactions By Independent Trust & Escrow Agents”; and “If policy fails to mature at 36 months, participant may elect full return of principal plus 15% simple interest.” The Disclosure describes two alternative investments: the Growth Plan and Income Plan. For the Growth Plan, the Disclosure states: “At maturity, Participant receives principal plus 42%, creating maximum growth of funds.” For the Income Plan, the Disclosure states: “If income is desired, participation can be structured with monthly income plans.” Different rates of return for the Growth and Income plans are set forth below. For investors choosing the Income Plan, ABS applied only 70 percent of the investment to the purchase of viaticated life insurance policies. ABS reserved the remaining 30 percent as the source of money to "repay" the investor the income that he was due to receive under the Income Plan, which, as noted below, paid a total yield of 29.6 percent over three years. The Disclosure states that ABS places all investor funds in attorneys’ trust accounts, pursuant to arrangements with two “bonded and insured” “financial escrow agents.” At another point in the document, the Disclosure states that the investor funds are deposited “directly” with a “financial escrow agent,” pursuant to the participant’s Disbursement Letter of Instruction. The Disbursement Letter of Instruction identifies a Florida attorney as the “financial escrow agent,” who receives the investor’s funds and disburses them, “to the order of [FinFed) or to the source of the [viaticated insurance] benefits and/or its designees.” This disbursement takes place only after the attorney receives “[a] copy of the irrevocable, absolute assignment, executed in favor of Participant and recorded with the trust account as indicated on the assignment of [viaticated insurance] benefits, and setting out the ownership percentage of said [viaticated insurance] benefits”; a “medical overview” of the insured indicative of not more than 36 months’ life expectancy; confirmation that the policy is in full force and effect and has been in force beyond the period during which the insurer may contest coverage; and a copy of the shipping airbill confirming that the assignment was sent to the investor. The Disclosure states that the investor will direct a trust company to establish a trust, or a fractional interest in a trust, in the name of the investor. When the life insurance policy matures on the death of the viator, the insurer pays the death benefits to the trust company, which pays these proceeds to the investor, in accordance with his interest in the trust. Accordingly, the Letter of Instruction to Trust directs FinFed, as the trust company, to establish a trust, or a fractional interest in a trust, in the name of the investor. The Letter of Instruction to Trust provides that the viaticated insurance benefits obtained with the investor's investment shall be assigned to this trust, and, at maturity, FinFed shall pay the investor a specified sum upon the death of the viator and the trustee's receipt of the death benefit from the insurer. The Disclosure provides that, at anytime from 12 to 36 months after the execution of the Disclosure, the investor has the option to request ABS to return his investment, without interest. At 36 months, if the viator has not yet died, the investor has the right to receive the return of his investment, plus 15 percent (five percent annually). The Disclosure states that ABS will pay all costs and fees to maintain the policy and that all policies are based on a life expectancy for the viator of no more than 36 months. Also, the Disclosure assures that ABS will invest only in policies that are issued by insurers that are rated "A" or better by A.M. Best "at the time that the Participant's deposit is confirmed." The Disclosure mentions that the trust company will name the investor as an irrevocable assignee of the policy benefits. The irrevocable assignment of policy benefits mentioned in the Disclosure and the Disbursement Letter of Instruction is an anomaly because it does not conform to the documentary scheme described above. After the investor pays the escrow agent and executes the documents described above, FinFed executes the “Irrevocable Absolute Assignment of Viaticated Insurance Benefits.” This assignment is from the trustee, as grantor, to the investor, as grantee, and applies to a specified percentage of a specific life insurance policy, whose death benefit is disclosed on the assignment. The assignment includes the "right to receive any viaticated insurance benefit payable under the Trusts [sic] guaranteed receivables of assigned viaticated insurance benefits from the noted insurance company; [and the] right to assign any and all rights received under this Trust irrevocable absolute assignment." On its face, the assignment assigns the trust corpus-- i.e., the insurance policy or an interest in an insurance policy--to the trust beneficiary. Doing so would dissolve the trust and defeat the purpose of the other documents, which provide for the trust to hold the policy and, upon the death of the viator, to pay the policy proceeds in accordance with the interests of the trust beneficiaries. The assignment bears an ornate border and the corporate seal of FinFed. Probably, FinFed intended the assignment to impress the investors with the "reality" of their investment, as the decorated intangible of an "irrevocable" interest in an actual insurance policy may seem more impressive than the unadorned intangible of a beneficial interest in a trust that holds an insurance policy. Or possibly, the FinFed/ABS principals and professionals elected not to invest much time or effort in the details of the transactional documentation of a Ponzi scheme. What was true then is truer now. Obviously, in those cases in which no policy existed, the investor paid his money before any policy had been selected for him. However, this appears to have been the process contemplated by the ABS literature, even in those cases in which a policy did exist. The Disbursement Letter of Instruction and correspondence from Respondent, Empire Insurance, or Empire Financial Consultant to ABS reveal that FinFed did not assign a policy, or part of a policy, to an investor until after the investor paid for his investment and signed the closing documents. In some cases, Respondent or Empire Insurance requested ABS to obtain for an investor a policy whose insured had special characteristics or a investment plan with a maturity shorter than 36 months. FinFed and ABS undertook other tasks after the investor paid for his investment and signed the closing documents. In addition to matching a viator with an investor, based on the investor's expressed investment objectives, FinFed paid the premiums on the viaticated policies until the viator died and checked on the health of the viator. Also, if the viator did not die within three years and the investor elected to obtain a return of his investment, plus 15 percent, ABS, as a broker, resold the investor's investment to generate the 15 percent return that had been guaranteed to the investor. Similarly, ABS would sell the investment of investors who wanted their money back prior to three years. The escrow agent also assumed an important duty--in retrospect, the most important duty--after the investor paid for his investment and signed the closing documents; the escrow agent was to verify the existence of the viaticated policy. Respondent and Empire Insurance sold beneficial interests in trusts holding viaticated life insurance policies in 50 separate transactions. These investors invested a total of $1.5 million, nearly all of which has been lost. Respondent and Empire Insurance earned commissions of about $120,000 on these sales. Petitioner proved that Respondent and Empire Insurance made the following sales. Net worths appear for those investors for whom Respondent recorded net worths; for most, he just wrote "sufficient" on the form. Unless otherwise indicated, the yield was 42 percent for the Growth Plan. In all cases, investors paid money for their investments. In all cases, FinFed and ABS assigned parts of policies to the trusts, even of investors investing relatively large amounts. On March 21, 1998, Phillip A. Allan, a Florida resident, paid $69,247.53 for the Growth Plan. On March 26, 1998, Monica Bracone, a Florida resident with a reported net worth of $900,000, paid $8000 for the Growth Plan. On April 2, 1998, Alan G. and Judy LeFort, Florida residents with a reported net worth of $200,000, paid $10,000 for the Growth Plan. In a second transaction, on June 8, 1998, the LeForts paid $5000 for the Growth Plan. In the second transaction, the yield is 35 percent, but the Participation Agreement notes a 36-month life expectancy of the viator. The different yields based on life expectancies are set forth below, but, as noted above, the standard yield was 42 percent, and, as noted below, this was based on a 36-month life expectancy, so Respondent miscalculated the investment return or misdocumented the investment on the LeForts' second transaction. On April 29, 1998, Doron and Barbara Sterling, Florida residents with a reported net worth of $250,000, paid $15,000 for the Growth Plan. In a second transaction, on August 14, 1998, the Sterlings paid $100,000 for the Growth Plan. The yield for the second transaction is 35 percent, and the Participation Agreement notes that the Sterlings were seeking a viator with a life expectancy of only 30 months. When transmitting the closing documents for the second Sterling transaction, Respondent, writing ABS on Empire Insurance letterhead, stated in part: This guy has already invested with us (15,000) [sic]. He gave me this application but wants a 30 month term. Since he has invested, he did some research and has asked that he be put on a low T-cell count and the viator to be an IV drug user. I know it is another favor but this guy is a close friend and has the potential to put at least another 500,000 [sic]. If you can not [sic] do it, then I understand. You have done a lot for me and I always try to bring in good quality business. If this inventory is not available, the client has requested that we return the funds . . . In a third transaction, on February 24, 1999, the Sterlings paid $71,973 for the Growth Plan. The yield is only 28 percent, but the Participation Agreement reflects the typical 36-month life expectancy for the viator. Although the investors would not have received this document, Respondent completed an ABS form entitled, "New Business Transmittal," and checked the box, "Life Expectancy 2 years or less (28%). The other boxes are: "Life Expectancy 2 1/2 years or less (35%)" and "Life Expectancy 3 years or less (42%)." On May 4, 1998, Hector Alvero and Idelma Guillen, Florida residents with a reported net worth of $100,000, paid $6000 for the Growth Plan. In a second transaction, on October 29, 1998, Ms. Guillen paid $5000 for the Growth Plan. In a third transaction, on November 30, 1998, Ms. Guillen paid $5000 for the Growth Plan. For this investment, Ms. Guillen requested an "IV drug user," according to Respondent in a letter dated December 1, 1998, on Empire Financial Consultants letterhead. This is the first use of the letterhead of Empire Financial Consultants, not Empire Insurance, and all letters after that date are on the letterhead of Empire Financial Consultants. In a fourth transaction, on January 29, 1999, Ms. Guillen paid $15,000 for the Growth Plan. On April 23, 1998, Bonnie P. Jensen, a Florida resident with a reported net worth of $120,000, paid $65,884.14 for the Growth Plan. Her yield was 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On May 20, 1998, Michael J. Mosack, a Florida resident with a reported net worth of $500,000, paid $70,600 for the Income Plan. He was to receive monthly distributions of $580.10 for three years. The total yield, including monthly distributions, is $20,883.48, which is about 29.6 percent, and the Participation Agreement reflects a 36-month life expectancy. On May 27, 1998, Lewis and Fernande G. Iachance, Florida residents with a reported net worth of $100,000, paid $30,000 for the Growth Plan. On June 3, 1998, Sidney Yospe, a Florida resident with a reported net worth of $1,500,000, paid $30,000 for the Growth Plan. The yield is 35 percent, and the Participation Agreement reflects a 30-month life expectancy. On June 12, 1998, Bernard Aptheker, with a reported net worth of $100,000, paid $10,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 10, 1998, Irene M. and Herman Kutschenreuter, Florida residents with a reported net worth of $200,000, paid $30,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 9, 1998, Daniel and Mary Spinosa, Florida residents with a reported net worth of $300,000, paid $10,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 5, 1998, Pauline J. and Anthony Torchia, Florida residents with a reported net worth of $300,000 and the parents of Respondent, paid $10,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 29, 1998, Christopher D. Bailey, a Florida resident with a reported net worth of $500,000, paid $25,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. In a second transaction on the same day, Mr. Bailey paid $25,000 for the Growth Plan. Petitioner submitted documents concerning a purported purchase by Lauren W. Kramer on July 21, 1998, but they were marked "VOID" and do not appear to be valid. On July 22, 1998, Laura M. and Kenneth D. Braun, Florida residents with a reported net worth of $150,000, paid $25,000 for the Growth Plan, as Respondent completed the Participation Agreement. However, the agreement calls for them to receive $205.42 monthly for 36 months and receive a total yield, including monthly payments, of 29.6 percent, so it appears that the Brauns bought the Income Plan. In a second transaction, also on July 22, 1998, the Brauns paid $25,000 for the Growth Plan. On January 20, 1999, Roy R. Worrall, a Florida resident, paid $100,000 for the Income Plan. The Participation Agreement provides that he will receive monthly payments of $821.66 and a total yield of 29.6 percent. On July 16, 1998, Earl and Rosemary Gilmore, Florida residents with a reported net worth of $250,000, paid $5000 for the Growth Plan. In a second transaction, on February 12, 1999, the Gilmores paid $20,000 for the Growth Plan. The yield is 28 percent, but the Participation Agreement reflects a 36-month life expectancy. The New Business Transmittal to ABS notes a life expectancy of two years or less. On July 14, 1998, David M. Bobrow, a Florida resident with a reported net worth of $700,000 on one form and $70,000 on another form, paid $15,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. In a second transaction, on the same day, Mr. Bobrow paid $15,000 for the Growth Plan. On July 27, 1998, Cecilia and Harold Lopatin, Florida residents with a reported net worth of $300,000, paid $10,000 for the Growth Plan. On July 30, 1998, Ada R. Davis, a Florida resident, paid $30,000 for the Income Plan. Her total yield, including monthly payments of $246.50 for three years, is 29.6 percent. In a second transaction, on the same day, Ms. Davis paid $30,000 for the Income Plan on the same terms as the first purchase. On July 27, 1998, Joseph F. and Adelaide A. O'Keefe, Florida residents with a net worth of $300,000, paid $12,000 for the Growth Plan. On August 5, 1998, Thurley E. Margeson, a Florida resident, paid $50,000 for the Growth Plan. On August 19, 1998, Stephanie Segaria, a Florida resident, paid $20,000 for the Growth Plan. On August 26, 1998, Roy and Glenda Raines, Florida residents, paid $5000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. The New Business Transmittal to ABS notes a life expectancy of 30 months or less. In a second transaction, on the same day, the Raineses paid $5000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy, although, again, the New Business Transmittal notes the life expectancy of 30 months or less. On November 24, 1998, Dan W. Lipford, a Florida resident, paid $50,000 for the Growth Plan in two transactions. In a third transaction, on January 13, 1999, Mr. Lipford paid $30,000 for the Growth Plan. On December 1, 1998, Mary E. Friebes, a Florida resident, paid $30,000 for the Growth Plan. On December 4, 1998, Allan Hidalgo, a Florida resident, paid $25,000 for the Growth Plan. On December 17, 1998, Paul E. and Rose E. Frechette, Florida residents, paid $25,000 for the Income Plan. The yield, including monthly payments of $205.41 for three years, is 29.6 percent. On December 26, 1998, Theodore and Tillie F. Friedman, Florida residents, paid $25,000 for the Growth Plan. On January 19, 1999, Robert S. and Karen M. Devos, Florida residents, paid $10,000 for the Growth Plan. On January 20, 1999, Arthur Hecker, a Florida resident, paid $50,000 for the Income Plan. The yield, including a monthly payment of $410.83 for 36 months, is 29.6 percent. On February 11, 1999, Michael Galotola, a Florida resident, paid $25,000 for the Growth Plan. In a second transaction, on the same day, Michael and Anna Galotola paid $12,500 for the Growth Plan. On November 3, 1998, Lee Chamberlain, a Florida resident, paid $50,000 for the Growth Plan. On December 23, 1998, Herbert L. Pasqual, a Florida resident, paid $200,000 for the Income Plan. The yield, including a monthly payment of $1643.33 for three years, is 29.6 percent. On December 1, 1998, Charles R. and Maryann Schuyler, Florida residents, paid $10,000 for the Growth Plan. Respondent and Empire Insurance were never aware of the fraud being perpetrated by FinFed and ABS at anytime during the 38 transactions mentioned above. Respondent attempted to verify with third parties the existence of the viaticated insurance policies. When ABS presented its program to 30-40 potential agents, including Respondent, ABS presented these persons an opinion letter from ABS's attorney, stating that the investment was not a security, under Florida law. Respondent also contacted Petitioner's predecessor agency and asked if these transactions involving viaticated life insurance policies constituted the sale of securities. An agency employee informed Respondent that these transactions did not constitute the sale of securities.
Recommendation RECOMMENDED that Petitioner enter a final order: Finding James A. Torchia and Empire Insurance, Inc., not guilty of violating Section 517.301(1), Florida Statutes; Finding James A. Torchia guilty of 38 violations of Section 517.07(1), Florida Statutes, and 38 violations of Section 517.12(1), Florida Statutes; Finding Empire Insurance, Inc., guilty of 38 violations of Section 517.07(1), Florida Statutes, and 38 violations of Section 517.12(1), Florida Statutes, except for transactions closed on or after December 1, 1998; Directing James A. Torchia and Empire Insurance, Inc., to cease and desist from further violations of Chapter 517, Florida Statutes; and Imposing an administrative fine in the amount of $120,000 against James A. Torchia. DONE AND ENTERED this 19th day of May, 2003, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 19th day of May, 2003. COPIES FURNISHED: Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Fred H. Wilsen Senior Attorney Office of Financial Institutions and Securities Regulation South Tower, Suite S-225 400 West Robinson Street Orlando, Florida 32801-1799 Barry S. Mittelberg Mittelberg & Nicosia, P.A. 8100 North University Drive, Suite 102 Fort Lauderdale, Florida 33321
Findings Of Fact The Respondent, Teresa Jean Watson, at all times material to this proceeding was licensed as an ordinary life agent, a disability insurance agent and a general lines insurance agent. She was the only general lines agent licensed to sell insurance at the T. J. Watson Insurance Agency, Inc. and all insurance sold by that firm at times pertinent hereto was sold and issued under authority of her license. During times material to this proceeding, Teresa Jean Watson sold insurance coverage under authority of her general lines license either as direct agent for various insurance companies for whom she was general agent or, on behalf of MacNeill and Son, Inc. (MacNeill), her managing agency, which represented various insurance companies for whom the Respondent wrote coverage. Between February 1st and February 15, 1982, a homeowner's insurance policy was sold to Tony and Martha Williams by the Respondent's agency under the authority of the Respondent's general lines insurance agent's license. That homeowner's policy required a premium of $211.00. The policyholder, Tony Williams, wrote two checks to the T. J. Watson Agency dated January 22, 1982 and February 12, 1982. Those two checks totalled $174.00. The checks were cashed by the Respondent's agency on January 26, 1982 and on February 6, 1982. The Independent Fire Insurance Company issued the policy to Tony and Martha Williams and on August 4, 1982 a representative of the Independent Fire Insurance Company wrote the Respondent to advise her that she owed that company a balance of $179.35, as of May 1982. Petitioner asserts that the $179.35 represents the amount of Tony Williams' premium owed to the insurer, less the Respondent's commission, which if added together would equal the $211.00 premium on the Williams' policy. Although it was established that $179.35 was owed by the Respondent to the Independent Fire Insurance Company, and never paid, it was not established that it represented the premium due specifically for the Williams' policy as was charged in count 1 of the Administrative Complaint. For instance, the checks paid by the Williamses to the Watson Agency total $174.00 and therefore there is a discrepancy between the total of those checks and the $179.35 amount Independent Fire Insurance company was owed by the Respondent. This fact coupled with the fact that the dates on the checks from the Williamses (January and February) substantially predate the May 1982 billing date to Respondent from Independent Fire, renders it unproven that the checks written to the Watson Agency which Respondent negotiated and retained the benefit of, related to the amount of unremitted premium owed by Respondent to the Independent Fire Insurance Company. In short, it was established that $174.00 was paid the Respondent and her agency by the Williamses. But, it was not established that the premium paid by the Williamses became misappropriated fiduciary funds converted by the Respondent to her own use and benefit. It was merely established that as of May 1982 the Respondent owed the Independent Fire Insurance Company $179.35 as a past-due account It was not established that the Williamses ever suffered a lapse of insurance coverage or were otherwise harmed by the Respondent's failure to pay Independent Fire the $179.35. Indeed, the $179.35 figure was not proven to be more than a mere debt owed by Respondent to Independent Fire Insurance Company. The figure was not shown to have been related to any particular policy. The Respondent and her insurance agency in the regular course of business wrote insurance coverage for companies represented by MacNeill and Son, Inc., the Respondent's managing agency. The regular business practice between the Respondent and MacNeill was for the Respondent to write coverage on behalf of insurers represented by MacNeill and to remit on a regular open account" basis insurance premiums due MacNeill on behalf of its insurance company principals on a monthly basis. The Respondent became delinquent in submitting premiums to MacNeill and Son in November 1981. After unsuccessful efforts to collect the delinquent premium funds from the Respondent, MacNeill and Son, Inc. suspended T. J. Watson Insurance Agency and the Respondent from writing further coverage for companies they represented in January 1982. The Respondent purportedly sold her agency to one Thomas Zinnbauer in December 1981, but had already fallen into a pattern of failing to remit insurance premiums over to MacNeill before that time. In any event, the purported sale to Thomas Zinnbauer was a subterfuge to avoid collection of delinquent premiums inasmuch as the Respondent held herself out, in correspondence with MacNeill, (See Petitioner's Exhibit 4) to be the president of the agency at least as late as April 1982 and, at that time and thereafter, the agency continued to sell insurance under the aegis of the Respondent's license. After the Respondent made up the delinquency in premium remissions to the MacNeill Agency that agency restored her underwriting authority in January 1982. Shortly thereafter however, the Respondent and the T. J. Watson Agency again became delinquent in remitting insurance premiums to the MacNeill Agency and followed a quite consistent pattern of failing to forward these fiduciary funds to MacNeill for some months. Ultimately the Respondent and her agency failed to forward more than $6500.00 in premium payment funds to MacNeill and Son, Inc. as was required in the regular course of business. MacNeill and Son, Inc. made repeated futile attempts to secure the misappropriated premium payments from the Respondent and her agency. MacNeill made several accountings of the amount of the acknowledged debt to the Respondent. The Respondent communicated with MacNeill concerning the delinquent premium payments and acknowledged the fact of the debt, but sought to reach an amicable arrangement for a repayment schedule. Re- payment was never made, however, and ultimately the Petitioner agency was informed of the deficiencies and prosecution resulted. The Respondent knew that the premiums had been collected by herself and her agency and had not been forwarded to those entitled to them. She knew of and actively participated in the improper withholding of the premium payments. This withholding and diversion of premium payments from the agency and companies entitled to them was a continuing pattern of conduct and Respondent failed to take action to halt the misappropriation of the premium payments. Further, it is established by the testimony of Matthew Brewer, who investigated the delinquent premium accounts for MacNeill, that Ms. Watson failed to advise MacNeill of the purported sale of her agency until November of 1982, almost a year after it is supposed to have occurred and then only in response to Brewer's investigation. When confronted by Mr. Brewer concerning the ownership of her agency Ms. Watson refused to tell him to whom she had sold the agency. When Mr. Brewer learned that Thomas Zinnbauer had apparently bought the agency from the Respondent Mr. Brewer conferred with him and he refused to release the agency records unless Ms. Watson gave her permission. This fact, together with the fact that Ms. Watson held herself out as president of the agency some four months after she had purportedly sold the agency to Zinnbauer, establishes that Respondent, by representing to Brewer and other personnel of MacNeill and Sons, Inc. that she had sold her agency, was attempting to evade liability for failure to forward the fiduciary premium funds obtained under the authority of her agent's license. As a result of the failure to forward the above- mentioned premium payments some of the insureds who had paid those premiums suffered lapses in coverage and cancellations of policies because MacNeill and Company and the insurers they represented believed that no premiums had ever been paid. Ultimately, MacNeill and Company learned that the premiums had been paid by the policyholders, but not remitted by the Respondent and her agency and undertook steps to reinstate coverage, but those policyholders in some instances had substantial periods of time when their coverage was lapsed due to the Respondent's failure to remit the premium funds to the managing agency and the insurance companies involved. MacNeill and Company ultimately reimbursed the appropriate insurers and insureds at its own expense, incurring substantial financial detriment as a result of the Respondent's failure to have premium payments obtained under her licensed authority properly forwarded. Had the insureds who had their policies cancelled suffered losses for which claims could have been filed during the period of the lapses of coverage, they could have encountered substantial financial difficulty.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is therefore recommended that the General Lines Insurance Agent's license of Respondent Teresa Jean Watson be revoked. DONE and ORDERED this 27th day of December, 1985, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 FILED with the Clerk of the Division of Administrative Hearings this 27th day of December, 1985. APPENDIX RULING OF PETITIONER'S PROPOSED FINDINGS OF FACT: Accepted. Accepted, although the amount represented by the two subject checks totalled $174.00 instead of $175.00. Accepted. Rejected as not comporting with the competent, substantial credible evidence adduced. Rejected inasmuch as it was not established that the amount of $179.35 owed the Independent Fire Insurance Company represented the premium on the Williamses' insurance policy. Accepted. Accepted. Accepted. Accepted, although the last sentence in that Proposed Finding constitutes, in reality, mere argument of counsel. Accepted. Rejected as not comporting with the competent, substantial credible testimony and evidence actually before the Hearing Officer. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. RULINGS ON RESPONDENT'S PROPOSED FINDINGS OF FACT: Respondent submitted a post-hearing document entitled "Proposed Findings of Fact." There are few actual Proposed Facts in that one-and-a-half page pleading which is interlaced throughout with argument of counsel. However, to the extent the six paragraphs of that document contain Proposed Findings of Fact they are ruled on as follows: This Proposed Finding is rejected, but for reasons delineated in the above Conclusions of Law, Count 1 has been recommended to be dismissed anyway. This Finding is accepted but is immaterial and irrelevant to, and not necessary to, the Findings of Fact reached herein and the Conclusions of Law based thereon. Paragraph Number 3 does not really constitute a Proposed Finding of Fact or even multiple Proposed Findings of Fact in the same paragraph. In reality, it constitutes argument of Respondent's counsel concerning admissibility of certain documents into evidence which have already been ruled to be admissible by the Hearing Officer during the course of the hearing. To the extent that the last two sentences in the third paragraph of the Respondent's Proposed Findings of Fact are proposed findings of fact, they are accepted, but are immaterial, irrelevant and unnecessary to the findings of fact made herein and the conclusions predicated thereon and recommendation made herein. Rejected as not being in accordance with the competent, substantial credible testimony and evidence adduced. Rejected as constituting mere argument of counsel and not being in accordance with the competent, substantial, credible evidence adduced. Rejected as not in accordance with the competent, substantial, credible evidence presented as to Count 2. In reality, counsel obviously intended to refer to the two checks referenced in Count 1 of the complaint which has been recommended to be dismissed anyway. COPIES FURNISHED: Dennis Silverman, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 Mark A. Steinberg, Esquire Post Office Box 2366 Ft. Myers, Florida 33902 Bill Gunter Insurance Commissioner and Treasurer The Capitol Tallahassee, Florida 32301
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: At all times pertinent to the allegations of the First Amended Administrative Complaint, respondent Dennis Victor Daniels was licensed as an Ordinary Life including Disability Agent in Florida and was employed by Gulf Health/Life, Inc. in St. Petersburg, Florida. On or about January 14, 1980, Julie Stratton (then Julie Marzec) contacted respondent at the offices of Gulf Health/Life, Inc. for the purpose of purchasing health insurance. She and respondent discussed different insurance policies, and respondent informed her that if she joined the American Benevolent Society (ABS) she could obtain a lower rate for her policy and obtain the best policy for her money. Mrs. Stratton could not remember if respondent informed her of the exact amount of money she would save on her insurance if she joined the ABS. She was informed that other benefits and discounts from area businesses would be available to her as a member of the ABS. Mrs. Stratton joined the ABS in order to obtain less expensive insurance. She wrote two checks -- one in the amount of $15.00 payable to the ABS and the other in the amount of $54.26 payable to CNA Insurance Company. She obtained two insurance policies. The form numbers on these policies were 51831 and 52176. Based upon a referral from an agent with Allstate Insurance Company, John Valentine and his wife went to the offices of Gulf Health/Life in order to obtain hospitalization and surgical insurance coverage. Before moving to Florida, Mr. Valentine was covered by a group policy through his place of employment. Respondent informed Mr. Valentine that members of the ABS could obtain a policy at group rates which entailed a lesser premium than individual rates. Mr. Valentine wrote two checks -- one in the amount of $178.73 payable to CNA Insurance Company and the other in the amount of $25.00 payable to the ASS. Mr. Valentine received two policies from CNA -- one bearing form number 51831 and the other bearing form number 52176. He also received a brochure listing the places of business from which he could receive discounts as a member of the ABS. Gulf Health/Life, Inc. was a general agent for CNA. During the relevant time periods involved in this proceeding, CNA had different policies for health insurance. Policies with a form number of 51831 required the policyholder to be a member of an organization endorsing CNA in order to purchase that policy. Form 51831 policyholders paid a lesser premium for their policies. The difference in premiums between the group or organization policy and an individual policy with the same coverage is approximately $10.00. To obtain the policy bearing form number 52176, there is no requirement that the policyholder be a member of a group or an organization. Ms. Watkins, a secretary employed with Gulf Health/Life, Inc. between December of 1978 and June of 1979 observed a device known as a "light box" on the premises of Gulf Health/Life. This was a square-shaped plywood box with a slanted glass top and a high-intensity lightbulb within the box. On from a half-dozen to a dozen occasions on Fridays between January and April, 1979, Ms. Watkins observed respondent bent over the light box with a pen in his hand tracing a signature onto an insurance application. She could not produce any documents or recall any names of any insurance applicant whose signature was traced or copied by the respondent.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the First Amended Administrative Complaint filed against the respondent on April 29, 1982, be DISMISSED. Respectfully submitted and entered this 10th day of September, 1982, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of September, 1982. COPIES FURNISHED: Curtis A. Billingsley, Esquire Franz Dorn, Esquire 413-B Larson Building Tallahassee, Florida 32301 William A. Patterson, Esquire Masterson, Rogers, Patterson and Masterson, P. A. 447 Third Avenue North St. Petersburg, Florida 33701 Honorable Bill Gunter Insurance Commissioner The Capitol Tallahassee, Florida 32301
Findings Of Fact At all times pertinent to this hearing, Petitioner held a license issued by the Florida Department of Insurance as a general lines insurance agent. On or about April 3, 1979, Steven B. Atkinson entered the Okeechobee Insurance Agency in West Palm Beach, Florida, from whom he had purchased his auto insurance for approximately three years. His intention at this time was to purchase only that insurance necessary to procure the license tags for his automobile, a seven-year-old Vega. He told the person he dealt with at that time at the insurance agency that this was all he wanted. He did not ask for auto club membership, did not need it, and did not want it. He asked only for what he needed to get his tags. However, he was told by a representative of the agency that he needed not only "PIP" insurance, but also auto club membership and accidental death and dismemberment insurance. Of the $144 premium, $31 was for the required "PIP" coverage, $75 was for auto club membership (not required), and $38 was for accidental death and dismemberment (AD&D) (not required). Representatives of the agency told him that he needed all three to get the tags and, though he knew what he was getting and knew he was purchasing all three, he agreed because he was told by the agency representatives that he needed to have all three in order to get his tags. 3 Diane Phillipy McDonald contacted the Okeechobee Insurance Agency in April, 1979, because she had heard on the radio that their prices were inexpensive. All she wanted was personal injury protection (PIP), which was what she thought the law required to get tags on her automobile. When she first called the agency and asked how much the coverage she wanted would be, she was told she could pay a percentage down and finance the rest. When she entered the agency, she was waited on by a man whose name she cannot remember. However, she did not ask for auto club coverage or accidental death and dismemberment coverage, nor did those subjects ever come up in the conversation. She asked only for PIP, and she paid a $50 deposit on her coverage. In return for her deposit, she was given a slip of paper that reflected that she had purchased PIP coverage. She was not told she was charged for auto club membership or accidental death and dismemberment. The forms that she signed, including those which reflect a premium for all three coverages in the total amount of $137, bear her signature, and though she admits signing the papers, she denies having read them or having them explained to her before she signed them. In fact, she cannot recall whether they were even filled out when she signed them. In regard to the papers, the premium finance agreement signed by the witness on April 3, 1979, reflects in the breakdown of coverage total premium of $137. However, immediately below, the total cash premium is listed as $158, $21 more than the total of the individual premiums for the three coverages, and the financing charge is based on that amount1 less the down payment. Marvin W. Niemi purchased his auto insurance from the Okeechobee Insurance Agency in March, 1979, after he heard their advertisement on the radio and went in to get the insurance required by the State in order to get his license tags. When he entered the agency, he asked personnel there for the minimum insurance required to qualify for tags because he was strapped for money at the time and could not afford anything else. He definitely did not want auto club membership. In fact, discussion of that did not even arise, nor did he want the accidental death policy. When he left the agency, he thought he was only getting what he had asked for; to wit, the PIP minimum coverage. All the forms that he signed were blank when he signed them. This application process took place very quickly during his lunch hour from work. He admits giving his son's (David Robert) name as the beneficiary on his insurance, but did not realize at the time that he was purchasing coverage other than the minimum coverage required. His rationale for giving his son's name as beneficiary was that agency personnel asked and the witness felt if there was any money involved, it should go to his son. In fact, Mr. Niemi was sold not only the PIP, but membership in an auto club and PIP coverage with an $8,000 deductible. Again, the total premium was $137, when the actual premium for the coverage he asked for was only $24. Frank Johnson purchased his insurance from Okeechobee Insurance Agency in April, 1979, because he had heard and seen their advertisement on radio and television and it appeared to be reasonable. He wanted only PIP coverage as required by law sufficient to get his license tags. When he entered the agency, he spoke with a man whose name he does not know, who after consulting the books came up with the premium for the coverage to be purchased. During this meeting, the question of motor club or AD&D coverage was not mentioned. His signature does not appear on the statement of understanding, which outlines the coverage and the premium therefor. In this case, because Mr. Johnson had had some prior traffic tickets, his total premium came to $243. His coverage, however, included bodily injury liability, property damage liability, PIP, and auto club. After paying a $50 down payment, he made two additional payments which totaled approximately $50, but thereafter failed to make any additional payments. On August 1, 1980, Marguerite and Steven von Poppel entered the Federal Insurance Agency in Lake Worth, Florida, to purchase their automobile insurance coverage. They purchased policies which included bodily injury and property damage liability, PIP coverage, and comprehensive and collision coverage. The PIP coverage had a deductible of $8,000, and the comprehensive and collision coverage both had $200 deductibles. Mrs. von Poppel indicates that it was not their intention to have such large deductibles on their coverage. In any event, on that day, they gave a check for down payment in the amount of $320 and advised the employee of the agency that upon billing for the balance due of the $915 total premium, they would send the check. Neither Mrs. von Poppel nor Mr. von Poppel desired to finance the balance due of $595, and Mrs. von Poppel did not affix her signature to an application for premium financing with Devco Premium Finance Company dated the same day which bears the signature of Kevin D. Cox as agent. This premium finance agreement lists a cash premium of $966, as opposed to $915. The receipt given to the von Poppels initially reflects a down payment of $320, which is consistent with the receipt, and an amount financed of $646, as opposed to $595, which would have been the balance due under the cash payment intended and desired by the von Poppels. Somewhat later, Mrs. von Poppel received a premium payment booklet from Devco in the mail. When she received it, she immediately went to the Federal Insurance Agency, told them she did not desire to finance the payments, and that day1 September 3, 1980, gave them a check in the amount of $595, which was the balance due on their insurance coverage. This check was subsequently deposited to the account of Federal Insurance Agency and was cashed. This did not end the von Poppel saga, however, as subsequently the von Poppels were billed for an additional amount of $116.18, which reflects the interest on the amount ostensibly financed. When the von Poppels received this statement, they contacted the Federal Insurance Agency and were told that there was some mistake and that the matter would be taken care of. They therefore did not make any further payments, except a total payment of $20, which they were told was still owing. This $20 payment was made on May 29, 1981, after their insurance had been cancelled for nonpayment of the balance due on the finance agreement. The policy was, however, subsequently reinstated, back-dated to the date of cancellation, after the von Poppels complained. Their complaints, however, did nothing to forestall a series of dunning letters from a collection agency to which Devco had referred the von Poppels' account. It is obvious, therefore, that Federal Insurance Agency did not notify Devco of the fact that the amount due and payable had been paid, and did not clear the von Poppels with Devco or with the collection agency thereafter. As a result, the von Poppels filed a complaint with the Insurance Commissioner's office. That terminated their difficulty on this policy. On September 15, 1980, Federal Insurance Agency submitted a check in the amount $595, the amount paid to them by the von Poppels in full settlement of their account, to Devco. There appears to have been no additional letter of explanation, and though Devco credited this amount to the von Poppel account, it did not know to cancel the finance charges since the von Poppels' decline to finance their premium. Of the total amount of the von Poppel premium, the majority, $636, was attributable to the basic insurance in the amount of $10,000-$20,000 liability written by American Risk Assurance Company of Miami, Florida. The supplemental liability carrying a premium of $180 and covering $40,000-$80,000 liability was written by Hull and Company, Inc., out of Fort Lauderdale for Empire Fire and Marine Insurance Company. The third portion of the coverage carrying a charged premium in the amount of $150 covered the AD&D covered by Reliance Standard Life Insurance Company (RSLIC) of Philadelphia, Pennsylvania. This coverage, in the principal sum of $10,000 in the case of Mr. von Poppel and $5,000 in the case of Mrs. von Poppel, was included without the knowledge or the cosnet of the von Poppels. The policies, numbered 10753 R and 10754 R, were never delivered to the von Poppels as, according to an officer of RSLIC, they should have been, but are in the files of the Federal Insurance Agency. Further, the von Poppels were overcharged for the coverage. Respondent, however, did not remit any of the premium to Reliance Standard Life Insurance Company Instead, on August 1, 1980, the same day the von Poppels were in to purchase their insurance, he issued a sight draft drawn on Devco Premium Finance Company to Reliance Standard Life in the amount of $150. Reliance Standard Life was not the same company as Reliance Standard Life Insurance Company, was not controlled by Reliance Standard Life Insurance Company, and in fact had no relation to Reliance Standard Life Insurance Company. Reliance Standard Life was a corporation duly organized and existing under the laws of the State of Florida in which Kevin D. Cox was president and Howard I. Vogel was vice president-secretary. Of the $150 premium, 90 percent was retained by Respondent or his company as commission and 10 percent was transmitted to Nation Motor Club along with a 10 percent commission on policies written for other individuals. Nation Motor Club would then transmit the bona fide premium of 24 cents per $1,000 coverage to RSLIC. More than a year later, on October 16, 1981, Federal Insurance Agency reimbursed the von Poppels with a check for $42.50, representing the unearned portion of the unordered AD&D coverage. Clifford A. Ragsdale went to the Federal Insurance Agency in Lake Worth on April 19, 1982, to purchase his auto insurance because after calling several agencies by phone and advising them of the coverage he wanted, this was the least expensive. To do this, he would read off the coverage from his old policy and get a quote for the identical coverage. After getting this agency's quote, he went to the office where, after talking with two different ladies to whom he described the coverage he desired, he got to the person with whom he had talked on the phone and read his current coverage, and who already had some of the paperwork prepared. During all his discussions with the agency's employees on the phone and in person, he did not speak of, request, or desire auto club membership. He has been a member of AAA since 1977, and his membership there covers all the contingencies he is concerned with. Additional auto club membership in another club would be redundant. He gave the agency representative a check for $247 as a down payment and agreed to finance the balance due through Premium Service Company. Though he was given a receipt for the $247 deposit, the premium finance agreement he signed that day at the Federal Insurance Agency reflected a cash down payment of only $147, thus falsely inflating the balance due to be paid by the client. The $100 difference was refunded to Mr. Ragsdale by Federal Insurance Agency on October 25, 1982, some six months later after he complained to the Insurance Commissioner's office and was told that the $100 difference was for membership in a motor club that he did not desire or agree to. As late as December 29, 1982, over eight months later, the agency had still not remitted the $147 to Premium Service Company, who then added this deposit already paid by the client back to the account balance. Mr. Ragsdale did not read all the documents he signed at the agency, and he never received the policy he ordered. He was told he was signing an application for insurance and signed several instruments in blank at the request of the personnel at Federal Insurance Agency. He was told they would later fill in what wad needed. Respondent was the general lines agent of record for the Okeechobee Insurance Agency, located at 1874 Okeechobee Boulevard, West Palm Beach, Florida, during March and April, 1979, and at the Federal Insurance Agency, 3551 South Military Trail, Lake Worth, Florida, during the period which included August, 1980, and April, 1982. In each agency, he had instructed his' personnel how to serve and handle customers who came to the agency requesting the lowest minimum required insurance in which the agency specialized and which the agency, through its advertising program, purported to offer. As testified to by Linda Holly, an employee of Federal Insurance Agency, and as admitted by Respondent, when a prospective customer entered the agency requesting the minimum required coverage, the agent was to ask if the customer knew what the minimum was. The agent would then explain what was required and quote a premium which included not only the minimum required insurance, but also some additional service which, depending on the time, could be AD&D, towing, motor club, or the like, none of which was required by the State of Florida. Respondent instructed his employees to do this on the rationale that the premiums and commissions on the minimum required insurance were so low that the agency could not make sufficient profit on the sale of it, alone, to stay in business.
Recommendation Based on the foregoing, it is RECOMMENDED: That Respondent's license as a general lines agent in the State of Florida be revoked. RECOMMENDED this 3rd day of August, 1983, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings Department of Administration 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of August, 1983 COPIES FURNISHED: Daniel Y. Sumner, Esquire William W. Tharpe, Jr., Esquire Department of Insurance Legal Division 413-B Larson Building Tallahassee, Florida 32301 Mr. Kevin Denis Cox 1483 S.W. 25th Way Deerfield Beach, Florida 33441 The Honorable Bill Gunter State Treasurer and Insurance Commissioner The Capitol Tallahassee, Florida 32301
Findings Of Fact Respondent, Kathryn Genevieve Saviak, did business as J & J Insurance Agency at all times pertinent to these proceedings. As a general lines insurance agent, she maintained five offices at one time or another in Dade, Broward and Hillsborough counties, for the sale of automobile insurance. Respondent did not deal with customers directly herself. She visited her offices occasionally, perhaps once a month, and spoke to the office managers more frequently by telephone. Some of her employees travelled among offices. Respondent authorized her employees to write insurance policies on behalf of the FJUA under an arrangement with the United States Fidelity and Guaranty Company (USF&G), a servicing carrier for the FJUA. Prior to December, 1978, respondent was the only licensed agent with the J & J Insurance Agency assigned to USF&G. Agents like respondent who represented the FJUA were required to forward to the servicing carrier money thee received in payment of premiums on the date received or, at the latest, on the following day. An agent need not require payment of the entire premium in order to write an insurance policy, so long as the agent collected a specified minimum deposit. Any money actually collected above the amount of the minimum deposit, however, was to be forwarded to the servicing carrier daily. E.R. Milbourne, Jr., the USF&G employee with direct charge of FJUA operations, personally apprised respondent at various times, including prior to 1978, of the requirement that monies be forwarded upon receipt. Agents were first advised of this requirement in writing on or about September 17, 1973. Respondent is one of approximately 250 agents for whom USF&G has been designated the servicing carrier by FJUA. Respondent's offices wrote 60 to 70 policies a month as compared to USF&G's 25,000 FJUA policies a year. The FJUA policies respondent's offices wrote became effective on the date they were written. USF&G then had thirty days in which to issue the policy. In its last audit before the final hearing began, USF&G determined that two percent of its private passenger vehicle policies and four percent of its commercial vehicle policies had not been issued within the thirty-day period. Routinely, USF&G issued a notice of termination if the premium for a policy had not been paid in full within thirty days, but, in some cases, as many as sixty days might have elapsed from the date of application before USF&G issued a notice of termination. On March 30, 1978, Carlene Grigg made application for automobile insurance at respondent's Ft. Lauderdale Office. She made payment of $309.00 at that time. USF&G received the application on May 15, 1978, accompanied by only $200.00. In late July, Carlene's husband, Marvin, received a notice of termination from USF&G dated July 26, 1978, stating that USF&G was owed $188.00. Petitioner's exhibit No. 5. In September, Mr. and Mrs. Grigg paid an additional $73.00 to respondent's Ft. Lauderdale office. On or about November 6, 1978, USF&G received an additional $139.00 from respondent's Ft. Lauderdale office. Together with the initial $200.00, this constituted full payment of the premium for the policy Ms. Grigg applied for on March 30, 1978 (which has subsequently been revised to eliminate physical damage coverage, resulting in a decrease in premium.) (Count I) On August 14, 1978, Constantine A. Ronca made application for an automobile insurance policy at respondent's Ft. Lauderdale office and paid $257.00. USF&G received Mr. Ronca's application later in August, accompanied by $100.00. USF&G sent a notice of termination dated October 26, 1973, to be effective November 9, 1978, for the stated reason of unpaid premium. (Count II) On June 27, 1978, Antonio Vettorazzi purchased automobile insurance at respondent's Ft. Lauderdale office. Against a total premium of $437.00, Mr. Vettorazzi made a down payment of $153.00. The balance of the premium, $284.00, was financed. USF&G received Mr. Vettorazzi's application from respondent's Ft. Lauderdale office accompanied by a check for $284.00. Thereafter Mr. Vettorazzi received a notice of termination from USF&G dated November 15, 1978, threatening to terminate the policy effective November 29, 1978, for alleged nonpayment of a premium balance of $153.00. In late November or early December of 1978, USF&G received a check for $153.00 from respondent's Ft. Lauderdale office. Although Mr. Vettorazzi made his payments to the premium finance company, he made no additional payments directly to respondent after June 27, 1978. (Count III) Also on June 27, 1978, Linda Diane Moray Blair purchased automobile insurance from respondent's Ft. Lauderdale office. Against a total premium of $308.00 she made a cash down payment of $112.00, for which she received a receipt. Petitioner's exhibit No. 2 attached to petitioner's exhibit No. 3. The balance of the premium was financed by Capitol Premium Plan, Inc. Ms. Blair made monthly payments of $29.20 to Capitol Premium Finance in a timely fashion. Subsequently she received a notice from J & J Insurance that another $10.00 was due. In September of 1978, Ms. Blair sent a $10.00 money order to respondent's Ft. Lauderdale office. Thereafter, Ms. Blair received from USF&G a notice of termination dated October 12, 1978, stating that a balance was owed the company of $122.00. On October 27, 1978, USF&G received from respondent's Ft. Lauderdale office a check in the amount of $122.00. (Count IV) On October 18, 1978, David G. Fuerst purchased automobile insurance at respondent's Ft. Lauderdale office. He wrote a check for $210.00, half the annual premium. On November 21, 1978, Mr. Fuerst wrote another check in favor of J & J Insurance for the remainder of the premium in the amount of $210.00. Petitioner's exhibit No. 8. When USF&G received Mr. Fuerst's application, respondent's check in the amount of $150.00 accompanied the application. Eventually USF&G issued a notice of termination dated December 18, 1978, advising Mr. Fuerst that his policy would be terminated on account of an unpaid balance of $270.00. Petitioner's exhibit No. 9. Shortly after receiving the notice of termination, Mr. Fuerst received from respondent's Ft. Lauderdale office a form "Special Notice" stating that the cancellation of the policy "was due to a computer error. Petitioner's exhibit No. 10. On January 9, 1979, USF&G received the $270.00 balance from respondent's Ft. Lauderdale office. (Count XXVIII) On October 30, 1978, William Patrick Pete went into respondent's Ft. Lauderdale office. He purchased an automobile insurance policy for which he paid the entire premium of $170.00. Additionally, he purchased membership in an automobile club for which he paid $30.00. USF&G received Mr. Pete's application on November 8, 1978, accompanied by respondent's check for $50.00. On December 26, 1978, USF&G sent Mr. Pete a notice of termination for the stated reason that he owed $120.00 toward his premium. On January 9, 1979, USF&G received $120.00 from respondent's Ft. Lauderdale office. (Count XXIX) On October 3, 1978, Linda J. Brown purchased insurance from respondent's Ft. Lauderdale office. On that date she made a do payment of $96.00 against a total premium of $275.00. She financed the remainder of the premium, $179.00, under an agreement with Time Premium Company. Petitioner's exhibit No. 15. USF&G received Ms. Brown's application on October 18, 1978, accompanied by a check for $179.00. On December 11, 1978, USF&G directed a notice of termination to Ms. Brown for the stated reason that she owed $96.00 on her premium. Petitioner's exhibit No. 16. On January 2, 1979, USF&G received from respondent a check in the amount of $96.00. (Count xxx) 12. In July, 1978, Robert Charles Oberheim purchased insurance from respondent's Ft. Lauderdale office. He made a down payment of $249.00 against a quoted premium of $711.00. He financed the balance of $462.00, and made regular monthly payments of $63.00. When USF&G issued Mr. Oberheim's policy, it adjusted the premium downward by $40.00 so that the total premium was in fact $671.00. On October 2, 1978, USF&G issued a notice of termination for the stated reason of a balance owing by Mr. Oberheim of $209.00. Thereafter, some time before October 16, 1978, USF&G received respondent's check in the amount of $209.00. Not until August 1, 1979, did J & J Insurance draw a check in favor of Mr. Oberheim in the amount of $40.00, representing the refund he was owed. Petitioner's exhibit No. (Count XXXI) On November 4, 1977, Jean L. Snyder, wife of Paul Snyder, purchased automobile insurance from respondent's Miami office. She was quoted a premium of $1,153.00 and wrote a check for the full amount on November 16, 1977. Petitioner's exhibit No. 20. USF&G received this application on February 13, 1978, accompanied by a check in the amount of $400.00. (Count XXXII) On February 9, 1978, Joseph J. Guido purchased automobile insurance from respondent's Ft. Lauderdale office. He made a down payment of $221.00 against a total premium of $631.00, and financed the balance of $410.00 under an agreement with Time Premium Company. Petitioner's exhibit No. 25. He subsequently sold the vehicle he had insured and, on August 8, 1978, cancelled the policy. On August 28, 1978, Time Premium Company received a $490.00 refund check from USF&G. Brooksie Peeples, Time Premium Company's manager, deposited this check against Mr. Guido's account. The check was enough to pay off Mr. Guide's indebtedness to Time Premium Company in its entirety, with $207.73 remaining. This balance was forwarded to respondent's Ft. Lauderdale office on September 13, 1978. Petitioner's exhibit No. 26. The check was deposited on September 19, 1978. Beginning in November of 1978, Mr. Guido and his wife made repeated demands for the refund. Finally, when Mr. Guide refused to leave the premises until the check was written, on March 29, 1979, the manager of respondent's Ft. Lauderdale office wrote Mr. Guide a check for $207.73. (Count XXXIV) On December 7, 1978, Shirley Payne purchased automobile insurance from respondent's Ft. Lauderdale office. On that date she made a down payment in the amount of $300.32 against a quoted premium of $682.32. She was told she would receive her policy within thirty days, along with a bill for the balance due. In fact, she received her policy in March of 1979. She paid respondent another $100.00 on March 20, 1979, petitioner's exhibit No. 28, and the final $282.00 on March 28, 1979. Petitioner's exhibit No. 29. USF&G received Ms. Payne's application on February 28, 1979, accompanied by a check in the amount of $214.00. (Count XXXVI) Lena Sabel accompanied her daughter, Sylvia Robbins, to purchase automobile insurance at respondent's Hollywood office on July 25, 1978. On that date Ms. Sabel wrote a check in the amount of $556.23 in favor of J & J Insurance Agency. Petitioner's exhibit No. 22. The total premium for the policy she purchased was $406.00. When USF&G received the Robbins' application from respondent it was accompanied by a check in the amount of $150.00. On October 23, USF&G issued a notice of termination for the stated reason that $256.00 was owed for the premium. On receipt of this notice, Ms. Robbins' son sent USF&G a check for $256.00. It arrived shortly after a check in the same amount that respondent's office sent. Having received duplicate checks, USF&G wrote a refund check to the order of Sylvia Robbins in the amount of $256.00 and forwarded the check to respondent. Sylvia Robbins' endorsement was forged and the check was deposited to the J & J Insurance Premium account at the Commercial Bank and Trust Company in Miami. About two weeks before the final hearing began, Ms. Sabel received a refund check in the amount of $256.00. (Count XXXVIII) USF&G drew Check No. 111558 in favor of Robert K. Kaganac in the amount of $44.00 on December 11, 1978, and forwarded the check in care of respondent's Hollywood office. Mr. Kaganac's endorsement was forged and the check was deposited to J & J Insurance Premium account at Commercial Bank and Trust Company in Miami. (Count XXXIX) On December 1, 1978, USF&G drew a check to the order of J. Bruce Garland in the amount of $54.00 and forwarded it to respondent's Ft. Lauderdale office. There Mr. Garland's endorsement was forged and the check was deposited to the J & J Insurance Premium account at the Commercial Bank & Trust Company in Miami. On August 1, 1979, respondent mailed Mr. Garland a check in the amount of $24.00. (Count XLI) Guillermo Citelli purchased automobile insurance at respondent's Hollywood office. On November 22, 1978, USF&G drew its check No. F110271 in favor of Mr. Citelli in the amount of $91.00 and forwarded it to respondent's Hollywood office. Mr. Citelli's endorsement was forged and the check was deposited to the J & J Insurance Premium account at the Commercial Bank & Trust Company in Miami. (Count XLIII) On October 11, 1978, Kevin B. McGuire purchased automobile insurance at respondent's Hollywood office. On that day he paid a premium of $108.00. He later requested that the policy be cancelled. On December 5, 1975, USF&G drew its check No. F110568 in favor of Kevin B. McGuire in the amount of $53.00 and forwarded the check to respondent's Hollywood office. Mr. McGuire's endorsement was forged and the check was deposited to the J & J insurance Premium account at the Commercial Bank & Trust Company in Miami. In January, 1979, Mr. McGuire received a refund from respondent in the amount of $53.00. (Count XLIV) In each instance in which it was shown that USF&G had cancelled a policy for which respondent had failed to forward the entire premium, USF&G later reinstated the policy, effective retroactively to the date of cancellation. Paula Davis, who managed respondent's Hollywood office from March of 1978, until January of 1979, was instructed by respondent to forge endorsements on refund checks and did so. This practice antedated Ms. Davis' employment at the Hollywood office. Marie Vernon, also employed by respondent at her Hollywood office, forged endorsements on refund checks, believing respondent had directed that this be done. Before each forgery, a photostat of the refund check was made and attached to the pertinent file against the possibility that the payee might make demand for the refund. Deborah Goldberg's testimony on this and other points has not boon credited. With respect to certain classes of insurance, respondent instructed Ms. Davis to forward to USF&G only a specified minimum deposit even when the office received more than the minimum deposit toward payment of the premium. With respect to these policies, respondent gave Ms. Davis standing instructions to forward the premium balances only upon receipt of notices of termination from USF&G. These instructions were followed, and monies belonging to USF&G were diverted to a separate account. Respondent also represented an Alabama insurance company to whom she forwarded premiums as promptly as that company required. Many of her employees engaged in no improper conduct of any kind and were completely unaware of what was going on. Both parties have furnished proposed findings of fact which have been considered in preparation of the foregoing findings of fact. Proposed findings of fact inconsistent with the foregoing are hereby expressly rejected.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That petitioner revoke respondent's license and her eligibility for licensure. DONE and ENTERED this 16th day of April, 1980, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Patrick F. Maroney, Esquire S. Strom Maxwell, Esquire Department of Insurance The Capitol Tallahassee, Florida 32301 Edward S. Jaffry, Esquire. S. Jack Carrouth, Esquire Suite 300, Barnett Bank Building Tallahassee, Florida 32302
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
The Issue Whether Respondents committed the violations alleged in the Administrative Complaints, and, if so, what penalties should be imposed on either or both of them.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: Respondent, Eduardo Enrique Mendez ("Mendez"), at all times material to this matter, was a licensed insurance agent subject to the regulatory jurisdiction of the Petitioner. Petitioner issued Mendez license number A176292. Mendez is licensed as a 2-18 life and health agent and a 2-20 general lines agent for the sale of property and casualty. Mendez first started in the insurance business in 1969 while in Panamá. He came to the United States in 1988. In South Florida, he has been known as "Mr. Panama" in the insurance industry for approximately 20 years. Respondent, Insurance Resources of the Americas, Inc. ("Insurance Resources"), is and was, at all times material in this matter, a corporation registered as a Florida insurance agent subject to the regulatory jurisdiction of Petitioner, having been issued license number R054007. Mendez is the corporation's owner and president. Insurance Resources typically handles all kinds of property and casualty insurance, but for approximately the last six years has specialized in the used car dealer business by providing bonds for the car dealers to open their operation. Bass Underwriters ("Bass") is a managing general agent which works with insurance agents who purchase insurance for their customers. Bass has no direct relationship with the customers only with the retail agent who is responsible for collecting the premium. On January 22, 2003, Insurance Resources, as producer, and Bass signed a producer agreement which allowed Insurance Resources to sell insurance through Bass or certain carriers that Bass obtains as a wholesaler. Insurance Resources received commissions as compensation under the agreement. The agreement contained a provision which guaranteed the collection of additional premiums that might arise as a result of an audit of the insurance customers. The provision provided in relevant part: Producer shall be liable to Bass Underwriters, Inc. for the full amount of premium, fees and applicable sum taxes, less commission, including additional and/or adjustable premiums developed under audits or applicable rating plan on every insurance contract placed by Producer through Bass Underwriters, Inc. Producer shall remit Twenty Five Percent (25%) of the premium upon binding. The full amount of premium, fees and applicable state taxes, less commission is due to Bass Underwriters, Inc. not later than the 15th day of the first (1st) month after the effective date of such contract, audit, rating plan, or other adjustment. During the term of the producer agreement, three policies were issued that Bass determined additional premiums were owed by Insurance Resources. On June 29, 2005, Bass notified Insurance Resources by invoice that an additional premium was owed for the insured, L. Boulevard Café, in the amount of $6,955.00. L. Boulevard Cafe, a restaurant, obtained a Century Surety policy through Insurance Resources effective November 15, 2004. In making the application, the restaurant declared a certain amount of projected sales. The premium was based upon the total sales recorded by the customer. Century Surety did a self audit and determined that the amount of sales was significantly more than the coverage. Subsequently, the carrier went back and assessed additional premiums to make up the difference between the amount of coverage represented and the self reported amount, which totaled $6,955.00. Around August 2005, after receiving the Bass invoice with the additional premiums, Insurance Resources notified L. Boulevard Café about the invoice and explained that the additional insurance premium of $6,955.00 was owed because of the difference in the amount calculated from the audit. Mendez notified Rafael Garcia, prior owner of L. Boulevard Café, about the additional insurance premium but L. Boulevard Cafe was having financial problems. L. Boulevard Café never made the additional premium payment. On July 1, 2005, Bass notified Insurance Resources by invoice that an additional premium was owed for the insured, Winner's Circle, in the amount of $418.00. Winner's Circle obtained a XL Specialty Insurance Company policy through Insurance Resources effective May 23, 2005. An inspection was performed after the policy quote was bound and issued. The subsequent inspection concluded that the construction code of the building was different from the construction code represented on the application. The difference triggered a premium increase of $418.00. When Insurance Resources found out about the additional premium for Winner's Circle, Mendez sent an invoice explaining the increase and requesting payment. Winner's Circle refused to pay the amount because the policy was issued under a lower premium. Winner's Circle decided not to keep the policy when Respondent requested that they make payment of the additional premium amount and the balance of the premium on the policy. Payment was never made. The policy was cancelled. The account was credited and the final total owed was $160.40, which Bass became responsible for with the carrier. On July 11, 2005, Bass notified Insurance Resources by invoice that an additional premium was owed for the insured, Venecar, Inc., in the amount of $1,298.00. Venecar, a small used car dealership, obtained a Century Surety policy through Insurance Resources effective July 18, 2004. The insurance inspectors did an inspection after the policy was issued and determined that one more employee and driver than had been represented in the application existed and that employee generated a change in the rating for the premium, which Bass ultimately decided was an additional premium of $1,298.00. After Insurance Resources learned about the results of the inspection, Mendez called Bass and told Ms. Rodriguez, the accountant, that the premium increase of $1,298.00 was too high and could not be the proper rate for one driver because one driver should be around $400.00. Bass ignored Mendez's proposition. Subsequently, Mendez told Venecar about the outstanding premium amount owed and they refused to pay. Insurance Resources followed up and contacted Venecar several more times requesting the additional premium payment to no avail. Soon thereafter, Venecar closed. Mendez reported his efforts to Bass while he tried to collect the three changed premium amounts. Insurance Resources never collected the additional premium from L. Boulevard Café, Winner's Circle, or Venecar even though Mendez repeatedly sought to get the outstanding premiums from all three insured customers. Despite Respondents best efforts, they never received any of the additional premiums that accrued. Bass still expected Insurance Resources to pay the additional premiums pursuant to the producer agreement. On May 1, 2006, Bass sent Insurance Resources a statement of account. The invoice statement informed Insurance Resources that the premium due for the three different accounts totaled $8,021.39. The statement outlined the amount owed from each insured. After Bass made several demands for the three accounts, Bass submitted the account to collections and the matter ultimately ended in litigation. On November 5, 2007, a final judgment was entered against Insurance Resources in favor of Bass for the principal of $8,021.39, costs of $275.00, and prejudgment interest of $1,298.14, for a total of $9,594.53. The judgment remains unsatisfied. On February 15, 2008, Insurance Resources paid $1,919.00 on the judgment. On February 29, 2008, Insurance Resources paid $640.00 on the judgment. There is a balance owed of $7,035.53. Insurance Resources also had a relationship with AAPCO, a premium finance company that financed the balance of what an insured could not pay. Respondent Insurance Resources was an authorized entity to accept premium finance contracts utilizing AAPCO premium finance. Insurance Resources had the authority to write check drafts on AAPCO's bank account for the entire premium amount owed on a customer's insurance policy and remit it to the insurer. Respondent would then submit the policy application together with the premium down payment received from the consumer to AAPCO, which would finance the rest of the policy premium. In 2009, Insurance Resources was having problems financially. Mendez approached Mrs. Blanco, AAPCO's office manager, and told her Insurance Resources sales had dropped fifty percent. Mendez, on behalf of Insurance Resources requested to make a payment arrangement.1 Blanco refused to make any type of arrangements. She insisted that Insurance Resources pay everything up front. Mendez approached her several more times but she would not negotiate. At one point, Mendez even requested that AAPCO place the $4,000.00 in producers fees owed to Insurance Resources against the monies owed and she refused to pay Respondent the $4,000.00 In 2009, Mendez submitted three checks to AAPCO's as down payments for insureds' accounts. Check number 1347 was for $10,228.47. The check was from account number 2000034377804 Mr. Panama Inc.'s account. Check number 1342 was from the same account in the amount of $2,828.15. However, check number 159 was for $3,368.44 from Insurance Resources account number 2000040742805. Checks 1347, 1342, and 159 totaled approximately $16,425.00. The funds were intended to be premium down payments on insurance policies purchased by Florida insurance consumers. Insurance policies were issued for each of the checks for down payments for insured's accounts Insurance Resources submitted. AAPCO deposited the three checks and they were submitted to the bank for negotiation. Each check was returned for insufficient funds. AAPCO attempted to collect the money for the three checks that were returned for non-sufficient funds. AAPCO demanded payment of the funds and even called Mendez in an effort to collect the funds. Mendez admitted at hearing that the three checks bounced because he had used the funds for his business operating account since the business was doing bad financially. Insurance Resources had not yet repaid AAPCO their monies owed for the three checks. AAPCO has suffered a financial loss due to nonpayment. After nonpayment, AAPCO turned the matter over to AAPCO's legal department. After an investigation, Petitioner charged Respondents with numerous violations by separate Administrative Complaints dated April 21, 2010. The Charges: In Count I of the Administrative complaint filed against Mendez, Petitioner charges Mendez with violations of sections 626.561(1), 626.611(7), (9), (10), and 626.621(4), Florida Statutes, for failing to remit all premiums due to Bass. In Count II, Petitioner charges Mendez with violations of sections 626.561(1),626.611(7), 626.611(9) and (10), and 626.621(4) for submitting the three checks to AAPCO in payment of the policy down payment premiums that were returned for insufficient funds and not repaid after demand. In Count I of the Administrative complaint filed against Insurance Resources, Petitioner charges Insurance Resources with violation of sections 626.561(1),626.6251(5)(a),(d),(f),(j), and (k) for failing to remit all premiums due to Bass.2 In Count II Petitioner charges Insurance Resources with violations of sections 626.561(1), and 626.6251(5)(a),(d), (f),(j), and (k) for remitting three checks to AAPCO in payment of the policy down payment premiums that were returned for insufficient funds and not repaid after demand.
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 that: (a) finds Respondents not guilty as charged in Count I, of the Administrative Complaints; (b) finds Respondents guilty in Count II; (c) suspends Respondent Mendez's license for 12 months with reinstatement conditioned upon repayment to AAPCO; and (d) suspends Respondent Insurance Resources' license for three months with reinstatement conditioned upon repayment to AAPCO. DONE AND ENTERED this 28th day of February, 2011, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of February, 2011.
The Issue The issue for determination is what amount of attorney's fees and costs should be awarded to Petitioner for costs incurred in prosecuting the rule challenge case, Security Mutual Life Insurance Company of Lincoln, Nebraska vs. Department of Insurance and the Treasurer, DOAH Case No. 97-1132RU.
Findings Of Fact On March 11, 1997, Security Mutual Life Insurance Company, filed a Petition challenging three statements of Respondent, the Department of Insurance and the Treasurer, as unpromulgated rules. See Security Mutual Life Insurance of Lincoln, Nebraska vs. Department of Insurance and Treasurer, DOAH Case No. 97-1132RU. According to the Petition, the first statement concerned the Department's requiring that annuity contracts contain a table of guaranteed values. The second statement alleged to be an unpromulgated rule was that the Department disapproved contract forms labeled as "single premium annuity" contracts which permit additional contributions after the initial premium is made. The third statement challenged by Security Mutual as an unpromulgated rule involved a requirement of the Department that annuity contracts include a demonstration of compliance with Actuarial Guideline 33 to avoid form/rate denial. Throughout the proceeding below and in the Final Order issued pursuant thereto, the second and third challenged agency statements were referred to as the "Single Premium Statement" and the "Guideline 33 Statement." At the commencement of the final hearing in the proceeding below, pursuant to a stipulation, Security Mutual withdrew its challenge to the Department's alleged statement requiring that annuity contracts contain a table of guaranteed values. On May 19, 1997, the Final Order in the proceeding below, dismissed Security Mutual's petition as to the "Single Premium Statement," but determined that the "Guideline 33 Statement" should have been adopted by the rulemaking process. See Security Mutual Life Insurance of Lincoln, Nebraska vs. Department of Insurance and Treasurer, DOAH Case No. 97-1132RU. In the proceeding below, Security Mutual was represented by Sharon A. DiMuro, Esquire, of Ganger, Santry, Mitchell, and Heath, P.A. (law firm). The hourly rate of Ms. DiMuro and one other lawyer who worked on the rule challenge case was $175.00. The hourly rate of two other lawyers in the firm who worked on the case was $150.00. Ms. DiMuro expended a total of 180 hours in prosecuting the underlying rule challenge case; 172.2 of these hours were expended on issues on which Security Mutual prevailed. The remaining 7.8 hours were spent on matters related to the "Single Premium Statement" on which Security Mutual did not prevail. Thus, these 7.8 hours are deducted from Ms. DiMuro's total number of hours. The three other attorneys in the law firm expended a total of 12.7 hours on the underlying proceeding, all of which were attributable to work related to the "Guideline 33 Statement," the issue on which Security Mutual prevailed. The attorney, other than Ms. DiMuro, who earned $175.00 an hour worked on the rule challenge case 4.1 hours. The two attorneys, whose hourly rate was $150.00, worked a combined 8.6 hours on the case. With respect to its successful claim in the underlying case, the law firm expended a total of 184.9 hours. Of the total hours expended, 176.3 were billed at $175.00 an hour, and 8.6 were billed at $150.00 an hour. The $150.00 and $175.00 are reasonable hourly rates for the attorneys. Likewise, the time expended in prosecuting the underlying proceeding, 184.9, is reasonable. Based on the foregoing, Security Mutual incurred attorney's fees of $32,142.50 in maintaining and prosecuting the claim on which it succeeded. Security Mutual also incurred reasonable costs of $1,270.29 in connection with the underlying rule challenge proceeding. Moreover, in the instant proceeding, Security Mutual incurred taxable costs in the amount of $1,051.50 for the preparation and hearing time of its expert witness, Kenneth Oretel, of the law firm of Oretel, Hoffman, Fernandez and Cole, P.A. These costs were reasonable and necessary.