The Issue Whether Respondent committed the acts alleged in the Administrative Complaint in violation of Chapter 626, Florida Statutes.
Findings Of Fact At all times pertinent to the dates and occurrences referred to or alleged in these proceedings, Respondent was licensed and eligible for licensure as a nonresident life and health insurance agent in this state. During the period from January 22, 1987 to April 1, 1988, Respondent was licensed as a nonresident life and health insurance agent with United American Insurance Company. On March 19, 1987, Respondent completed and filled out an application for medicare supplement insurance with United American on behalf of Aldon D. Cosson, who could not read and write. Mr. Cosson resided in DeFuniak Springs, Florida, where Respondent completed the application. Said application, referred to in paragraph 3 above, contained, as question 11, the following: "Within the past year, have you had, or been treated for, internal cancer?" At the time that Respondent was completing the application, Mr. Cosson and Ms. Rose Heiter, who was present and witnessed the events, responded' to the question regarding internal cancer by telling Respondent that Mr. Cosson had inoperable lung cancer. At the time of the taking of said application, Respondent completed and filled in a "no" response to question 11. The response to question 11, completed and filled in by Respondent, was in direct conflict with the responses given by Mr. Cosson and Ms. Heiter. On April 1, 1987, United American Insurance Company issued its policy, numbered 4997216, to Aldon D. Cosson, based upon the information provided to it in said application. United American Insurance Company would not have issued the above- mentioned policy, nor any other medicare supplement product, if the answer to question 11 regarding internal cancer had been answered "yes". Said application contained, as question 4, a request for a listing of Mr. Cosson's existing medicare supplement insurance policies. Said application indicated that Mr. Cosson has existing medicare supplement insurance in the form of a policy, numbered 1026302, with Associated Doctors Health and Life Insurance Company. At the time of said application to United American Insurance Company, Mr. Cosson's existing coverage with Associated Doctors Health and Life Insurance Company was paying his medicare supplement claims. The policy for which Mr. Cosson applied was to replace the existing medicare supplement coverage which Mr. Cosson had with Associated Doctors Health and Life Insurance Company. The policy from Associated Doctors was cancelled; however, United American did not pay any benefits, electing to return all premiums tendered by Mr. Cosson. This left Mr. Cosson without insurance coverage, and his estate suffered the expenses of his last illness. Cancellation of a medicare supplement insurance policy, which is not subject to the exclusions for preexisting conditions of adverse health, is not in the best interest of a potential applicant who has those preexisting conditions of adverse health.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the license of Respondent be revoked, as required by Section 626.611, Florida Statutes. DONE AND ORDERED this 14 day of March, 1990, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14 day of March, 1990. COPIES FURNISHED: Mr. Tom Gallagher State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 Don Dowdell, Esq. General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 Clyde W. Galloway, Jr., Esq. Division of Legal Affairs 200 East Gaines Street 412 Larson Building Tallahassee, FL 32399-0300 Mr. John Matt Early, pro se 8841 Lott Road Route 2, Box 95-B Wilmer, AL 36587
The Issue The ultimate issue in this case is whether Respondent's proposed Florida Administrative Code Rule 69O-149.022(3), which would incorporate by reference Form OIR-B2-2112, constitutes an invalid exercise of delegated legislative authority. Before that issue may be reached, however, it is necessary to determine whether Petitioners have standing to challenge the proposed rule.
Findings Of Fact The Financial Services Commission ("Commission") is a four-member collegial body consisting of the governor and cabinet. The Office of Insurance Regulation ("Office") is a structural unit of the Commission. Giving rise to this case, the Office initiated rulemaking and made recommendations to the Commission concerning an amendment to rule 69O-149.022, which would incorporate by reference Form OIR-B2-2112, titled "Consumer Notice [Regarding] The Impact of Federal Health Care Reform on Health Plan Costs" ("Form 2112"). Whenever the Commission or the Office engages in rulemaking, the members of the Commission serve as the agency head. The Commission thus has the ultimate responsibility for approving and adopting the proposed rule. CHAIN is a nonprofit corporation which operates solely within the state of Florida. CHAIN is subject to the oversight of a voluntary board of directors. As a health-care advocacy organization, CHAIN is exempt from taxation under section 501(c)(3) of the Internal Revenue Code and derives its income primarily from grants and contributions. CHAIN provides services to low- and moderate-income individuals who lack health insurance coverage or perceive their coverage to be unaffordable or inadequate. CHAIN provides health insurance purchased through Florida's small-group health insurance market to each of its five full-time employees. Greg Mellowe is a full-time employee of CHAIN who receives health insurance coverage through such employment. During the 2013 regular session, the Florida Legislature passed a bill, which the governor approved, enacting section 627.410(9), Florida Statutes. This section requires that insurers provide to policyholders of individual and small-group nongrandfathered plans a notice that describes the estimated impact of the federal Patient Protection and Affordable Care Act ("PPACA")——popularly and more commonly known as Obamacare——on monthly premiums.1/ An insurer that issues a nongrandfathered plan must give this notice one time——when the policy is issued or renewed on or after January 1, 2014——on a form established by rule of the Commission. (A "nongrandfathered" plan is a health insurance plan that must comply with all of Obamacare's requirements. For ease of reference, such plans will be referred to as "compliant plans.") Having been directed to act, the Office commenced rulemaking to establish the form of the notice to be sent to persons insured under compliant, individual and small-group plans, eventually proposing to adopt Form 2112. The Commission approved this form at a hearing on August 6, 2013. Form 2112 fills a single, one-sided page2/ and looks like this: CHAIN will receive the Obamacare notice when it renews its small-group health insurance plan, or purchases a new plan, on or after January 1, 2014.
The Issue The issue in this case is whether the Department of Insurance should discipline the Respondent on charges contained in the Administrative Complaint filed June 1, 1994. The Administrative Complaint charges that the Respondent failed to accurately disclose certain aspects of the true physical condition of two applicants for health insurance and failed to disclose to the applicants the existence of certain deductibles and a six-month waiting period for preexisting conditions.
Findings Of Fact The Respondent, Blair John Reuther, is eligible for licensure and is licensed in Florida as an insurance agent. At the times referred to in this case, the Respondent was licensed to solicit health insurance on behalf of National States Insurance Company (National States). Some time prior to April, 1993, National States solicited health insurance from Earl and Jessie Lane, an elderly couple who lived in Ft. Pierce, Florida, and invited them to return a postcard in order to express their interest in more information about health insurance policies National States had to offer. They sent in the postcard, and their names were referred to the Respondent. Without an additional contact with the Lanes, the Respondent went to their home during the week preceding April 3, 1993, and asked to be permitted to talk with them about National States health insurance policies in which they had expressed an interest. The Lanes invited him in, and the Respondent discussed their existing coverage. At the time, the Lanes had a Level A Medicare Supplement policy, which carried the standard deductibles for such a policy. After some additional discussion, the Respondent promised to return with his proposals and with applications. On Saturday, April 3, 1993, the Respondent returned to the Lane home and proposed to sell each of them a National States Level A Medicare Supplement policy and a limited benefit medical expense policy. It is found, contrary to the Lanes' testimony, that the Respondent did not tell the Lanes that the National States policies would "cover everything," that the Respondent told the Lanes that the National States Medicare Supplement policies had deductibles (just like their previous Level A Medicare Supplement policies), and that there was a six-month waiting period for preexisting conditions under the National States limited benefit medical expense policies. (There was no waiting period for preexisting conditions under any of the Medicare Supplement policies.) After discussing the proposal, the Lanes decided to apply for the National States policies being proposed by the Respondent. It is found that the Respondent went over the applications for the National States policies with the Lanes and filled out the applications in accordance with the information given to him by the Lanes. As to the medical questions on the applications, it is found that the Respondent read the questions aloud and recorded the answers given to him by the Lanes. Specifically, question 5 on the Medicare Supplement applications asked, in pertinent part: Does the Applicant have or had within the past 5 years any of the following: (Underline condition) Tumor, cancer, malignancy or growth of any kind? * * * c. High or low blood pressure, varicose veins or disorder of the heart or circulatory system? * * * Amputation, because of sickness, paraplegia, disease of the back or spine? Disease of the rectum or intestine, stomach, kidney, prostate, urinary bladder, liver, gall bladder? Question 6.b. asked, "Has the Applicant been confined in a hospital in the last five years? The Lanes answered, "no," to all of the questions set out in the preceding paragraph. They also signed the applications, which state in part: "I agree that all answers above are true and complete to the best of my knowledge." Effective April 14, 1993, National States issued the limited benefit medical expense policies for which the Lanes had applied; the Medicare Supplement policies were issued with effective dates of April 18, 1993. All four policies were delivered on April 22, 1993. The Respondent returned to the Lane home on April 30, 1993, to go over the policies with the Lanes and answer any questions they had. During the review of the policies after delivery, the Lanes never expressed to the Respondent any dissatisfaction with any of the policies. To the contrary, they both signed a statement that they had reviewed their policies with the Respondent, who had explained them in full. Jessie Lane contends that she told the Respondent that she "had had a heart problem, a small heart problem." She testified that, at the time of her deposition, she had a pace maker but that, at the time of the application, she "wasn't that bad . . . I was just having--missing heart beats." She also testified that she has: "a light case of arthritis. . . . Not bad." She also testified that she had been hospitalized during the five years preceding the applications: "That's when I had my heart problem too." Earl Lane contends that he told the Respondent that he had a back injury that required hospitalization several times, but he did not testify that he told the Respondent that he was hospitalized, or that he continued to have back problems, within the five years preceding the application. He testified that he had a swollen prostate that required surgery, but he did not testify that the surgery was within the five years preceding the application. He testified that he had skin cancer "at one time," but that it "was successfully treated" and "didn't amount to nothing." He did not testify that the cancer or the treatment was within the five years preceding the application. He contended for the first time in his deposition testimony that he had a "rupture," but not that he had it within the five years preceding the application. He testified during his deposition: "I've been in the hospital in the last five years." Later during his deposition, he was asked: "How many times have you been in the hospital in the last five years?" He answered: "Just once, I guess, before he was here." He did not clearly testify that he had been hospitalized within the five years preceding the application. Earl Lane also contended for the first time in his deposition testimony that he told the Respondent that he had varicose veins, but he did not testify that they were not surgically removed or that he still had them within the five years preceding the application. The Lanes also filed a complaint listing other alleged violations by the Respondent: (1) that the Respondent misrepresented that the National States policies covered dental and eyeglasses; (2) that these coverages duplicated policies the Lanes already had; (3) that the National States policies were more expensive than policies the Lanes already had; (4) that the National States policies did not pay skilled nursing; and (5) that the Respondent tricked the Lanes into signing a bank draft agreement. The Department chose not to charge those alleged violations, presumably either because there was insufficient evidence that they were true or because they were not violations. It appears that someone helped the Lanes draft their requests for refunds from National States and their initial list of complaints against the Respondent. Although the evidence was not clear who helped, it may well have been the insurance agent whose Medicare Supplement policies were replaced by National States and who was trying to recover the business. In response to the Lanes' request, dated May 7, 1993, to cancel the policies, National States cancelled the Medicare Supplement policies as if the request had been made within the 30 day cancellation period and refunded all but 5 percent of the premium, which was retained as a processing fee. In their cancellation request, the Lanes' alleged: "Our health conditions were not accurately written on the applications by agent Blair Reuther and we will not take any chances on not being paid on future medical bills for misrepresentations by this agent." Nonetheless, National States refused to cancel the limited benefit medical expense policies. They remained in full force and effect until they lapsed a year later for failure to pay the premium when next due. There is no evidence that National States investigated the Lanes' true health status. During the year that the National States limited benefit medical expense policies were in effect, National States paid out more in claims under the policies than the Lanes paid in premiums.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Insurance and Treasurer enter a final order dismissing the Administrative Complaint in this case. RECOMMENDED this 1st day of February, 1995, in Tallahassee, Florida. J. LAWRENCE JOHNSTON 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 1st day of February, 1995. APPENDIX TO RECOMMENDED ORDER To comply with the requirements of Section 120.59(2), Fla. Stat. (1993), the following rulings are made on the Department's proposed findings of fact (the Respondent not having filed any): 1.-2. Accepted and incorporated. Accepted and incorporated; however, the Respondent was responding to a "lead" given to him by his employer after the Lanes returned a postcard expressing interest. Accepted and incorporated. Rejected as not proven. (It was not clear from the evidence what the Respondent was told.) Accepted and incorporated; however, it is not clear from the evidence whether the Respondent should have answered the medical history questions on the application differently based on the information given to him by the applicants. First sentence, rejected as not proven. Second sentence, accepted but subordinate and unnecessary. First sentence, accepted and incorporated. Second sentence, rejected as not proven that there were health conditions that should have been disclosed; otherwise, accepted and incorporated. Last sentence, accepted and incorporated. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance 412 Larson Building Tallahassee, Florida 32399-0300 Blair John Reuther 8535 Blind Pass Drive, #202 Treasure Island, Florida 33706 Honorable Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner, Esquire Acting General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300
Findings Of Fact Petitioner resigned from State Government on July 23, 1987. At the time of his resignation, Petitioner was covered under the Florida State Group Health Insurance Plan. His wife, who is a diabetic, was also covered under Petitioner's insurance. Upon termination Petitioner was eligible for continuation of coverage benefits under the federal COBRA Act. However, prior to receiving any notice of his COBRA rights, Petitioner elected to continue his State Employees' Insurance for two months from July 1, 1987 and then begin coverage under his new employer's insurance plan. 2/ Petitioner made advance payment on the 2 months additional coverage. The payments carried his State Employees' health insurance through September 1, 1987 when it was terminated. DOA notified Petitioner on August 27, 1987, of his right to elect continuation of coverage under the COBRA Act. This notice complied with the notice requirements under the COBRA Act. COBRA provides continued health insurance coverage for up to (18) months, after a covered employee leaves employment. However, coverage does not continue beyond the time the employee is covered under another group health plan. COBRA simply fills the gap between two different employers group health insurance plans so that an employee's group health insurance does not lapse while the employee changes jobs. Petitioner's new employer's health coverage began around September 1, 1987. After Petitioner had begun coverage under his new insurance plan, he discovered that his wife's preexisting diabetic condition would not be covered. However, no evidence was presented that Petitioner, within 60 days of September 1, 1987 requested the Division of State Employee's Insurance to continue his insurance coverage pursuant to COBRA. Moreover, Petitioner's COBRA rights terminated when he began his coverage under his new employer's health plan.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Administration enter a Final Order denying Petitioner's request for continuation of coverage under COBRA. DONE and ENTERED this 5th day of April, 1989, in Tallahassee, Florida. DIANE CLEAVINGER 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 5th day of April, 1989.
The Issue Should discipline be imposed by Petitioner against Respondent's insurance agent licenses as, Life (2-16), Life and Health (2-18), and Health (2-40), held pursuant to Chapter 626, Florida Statutes?
Findings Of Fact The Parties Petitioner was created in accordance with Section 20.13, Florida Statutes. Petitioner has been conferred general power by the Legislature, to regulate the insurance industry in Florida, in accordance with Section 624.307, Florida Statutes. Chapter 626, Florida Statutes, grants Petitioner the authority to license and discipline insurance agents doing business in Florida. Petitioner issued Respondent license No. A140590. At times relevant to the inquiry, Respondent has been licensed in Florida as agent for insurance in Life (2-16), and Life and Health (2-18). On December 2, 1992, Respondent had been issued a Health (2-40) license, but that license is no longer valid having been voluntarily cancelled. The cancellation occurred at a time previous to December 18, 2003, when a license history document was prepared, Petitioner's Exhibit numbered 1. Respondent conducts business as an insurance agent under the name Business Insurance Cafeteria. The business is located at 828 Hamilton Avenue, St. Augustine, Florida. Respondent has been licensed as an insurance agent for over 50 years, 44 years of which have been in Florida. Acting as an insurance agent has been Respondent's principal occupation. During that time the emphasis in his business has been on health insurance. TRG Affiliation In April 2001, an acquaintance and insurance agent Ellen Averill introduced Respondent to Robert Trueblood, Sr. Respondent understood that Mr. Trueblood was the Managing General Agent for TRG. Mr. Trueblood, at the time, was from Hobe Sound, Florida. Mr. Trueblood gave information to Respondent about TRG pertaining to its involvement in the insurance business. Mr. Trueblood told Respondent that individuals within TRG were personal friends of Mr. Trueblood. In turn, Respondent made a call to Petitioner at the end of April or first part of May 2001. Someone that he spoke to, whose identity and position within the Petitioner's hierarchy was not established in the record, made a comment which cannot be established as fact given its hearsay nature. Nonetheless, following this conversation, Respondent became affiliated with the TRG organization which Respondent understood to be an ERISA program, not subject to Petitioner's oversight. At that time, Respondent's knowledge of what an ERISA program entailed was based upon reading he had done in the past. Respondent was of the impression that the ERISA program was under the auspices of the federal government, as opposed to the state government. Respondent had never taken specific courses concerning the ERISA program before his engagement with TRG. Respondent's involvement with TRG was his first effort to market what he considered to be ERISA program insurance. When Respondent commenced his participation with TRG, he believed that an ERISA program was instituted by a document filed with the Department of Labor outlining insurance benefits and that TRG had put up reserves associated with the ERISA program. Respondent did not obtain anything in writing from the Department of Labor concerning TRG as an ERISA program. To begin with, Respondent believed that ERISAs had to involve 51 or more lives in being before coverage could be obtained. Again, this was not a market that Respondent had worked in but he understood that ERISAs involved coverage of that number of individuals. From conversations with Mr. Trueblood and Tom Dougherty, another managing General Agent for TRG, of Cocoa Beach, Florida, Respondent became persuaded that ERISAs could be marketed to companies with a single life being insured or two to three lives in a small group market. Respondent relied on Mr. Trueblood when Mr. Trueblood told Respondent that ERISA, as a federal program did not have to be licensed by the state. Mr. Dougherty made a similar comment to Respondent. Ms. Averill also commented to Respondent concerning her impression about TRG as an ERISA program. From this record, Respondent was not officially told by persons within the Petitioner's agency, that the TRG program was an ERISA program that did not have to be licensed in Florida. TRG provided Respondent marketing material. Respondent was impressed with the "very professional" appearance of that material. Respondent's Exhibit numbered 1 admitted into evidence is constituted of material provided to Respondent by TRG. It refers to the TRG health plan under "the Redwood Group." It refers to marketing under an organization identified as Premier Financial Group USA, Inc. It describes PPO networks available with the TRG products. The document refers to the TRG/USA health plan (the Redwood Group, L.L.C./USA Services Group, Inc.) and various versions of employer health and welfare benefit plans and a client fee schedule effective May 1, 2001, for enrollees in the 80/60 plan and 90/70 plan. Participant co- pays for physician office visits are related. Those plans identified in the material describe the amount of deductibles according to age groups and participation by members and additional family participants. The TRG document speaks of benefits attributable to the 80/60 and 90/70 health plans. This information contained comments about the Redwood Companies- Corporate Overview. Respondent's Exhibit numbered 1 comments upon the ERISA program and the provision of health benefits for employees through self-funded employee health and welfare benefit plans as a means, according to the document, to exempt those plans from state insurance regulation. Respondent's Exhibit numbered 1 touts what it claims are savings to be derived compared to current health insurance plans held by prospective purchasers. Respondent's Exhibit numbered 1 contains an associate application agreement setting forth policies and procedures that Respondent would be obligated to meet as an associate with TRG acting as an independent contractor. Respondent's Exhibit numbered 1 contains an application format for prospective enrollees in the TRG preferred provider plans to execute in applying for coverage. Respondent's Exhibit numbered 1 refers to Robert W. Trueblood, Sr., as being affiliated with Premier Financial Group, USA Inc., under the TRG banner. Mr. Trueblood sent Respondent's Exhibit numbered 1 to Respondent. Respondent began his contacts with TRG in May 2001 and wrote his first enrollment contract in association with TRG in August or September 2001. Beyond that time, Respondent was notified on November 27, 2001, that effective November 30, 2001, a cease and desist order had been issued against TRG's offering its health coverage in Florida. The commissions earned by Respondent in selling the TRG health insurance product ranged from five to seven percent. Respondent earned less than $1,000.00 in total commissions when selling TRG health insurance products. The persons who participated with TRG in its preferred provider plan were referred to the claims administrator of USA Services. Participants in the TRG preferred provider plan sold by Respondent received information outlining the benefits. Participants received medical I.D. cards. This information was provided directly to the participants. Respondent was aware of the information provided to the participants. An example of this information is set out in Respondent's Exhibit numbered 2. In offering the TRG health coverage, Respondent told his customers that this plan was not under the purview of the Department of Insurance in Florida, that this was an ERISA program. Respondent told his customers that any problems experienced with the program could be addressed through resort to the federal court. Respondent did remind the customers that making the Florida Department of Insurance aware of their claims could create a record in case they went to federal court. Respondent is familiar with the prohibition against acting as an insurance agent for companies not authorized to transact business in Florida. But he held to the opinion that TRG was an ERISA program under the federal auspices and not subject to Petitioner's control. At the inception, Respondent believed that offering the TRG health insurance coverage would be an acceptable choice. That proved not to be true. When it was discovered that TRG would not pay claims related to health coverage for policies Respondent sold to his customers, Respondent made an attempt to find replacement coverage. To this end, Respondent had received information reflected in Respondent's Exhibit numbered 5. The document discussed the prospect that insurance would be provided from the Clarendon Insurance Company (Clarendon), using the provider Network Beechstreet, with Baftal/Quik Quote Insurance Brokers in Plantation, Florida, being involved in the process to substitute coverage for TRG. Baftal is the shorthand reference for Bertany Association for Travel and Leisure, Inc. Baftal is an insurance agency. Respondent made some explanation to his customers insured through TRG of the prospect of using Clarendon to take over from TRG, which had not honored any of the claims for reimbursement made by Respondent's customers. A copy of this December 28, 2001, correspondence from Respondent to TRG's insureds who had been sold policies through Respondent, is reflected in Respondent's Exhibit numbered 6. As described in Respondent's Exhibit numbered 7, Baftal sent information concerning health care coverage to business owners, to include Respondent's customers, as described in the Amended Administrative Complaint. This correspondence indicated that the benefit plan would become effective December 1, 2001, upon condition that the insured meet applicable underwriting standards. This communication was made following receipt of premiums paid by the insured. Reimbursement for claims were to be processed through Advancement Administration in Maitland, Florida. Baftal did not assume the claims that had not been honored by TRG, and Clarendon did not become the insurer for those customers. Baftal did not follow through with the offer to provide health benefits to Respondent's customers who had begun with TRG. On February 11, 2002, as evidenced by Respondent's Exhibit numbered 8, Baftal wrote the customers to advise that health benefits would not be provided. That exhibit mentions American Benefit Plans through a Mr. David Neal and some intention for Mr. Neal's organization to provide a benefits program, including insurance through Clarendon, as administered through Advanced Administration. The Baftal communication goes on to say that Baftal had learned that Clarendon was not an insurer on the program, that the only insurer on the program was an offshore insurance company about which Baftal had not received credible information. The letter remarks that premiums paid to Baftal by the customers were being returned. On April 4, 2002, as related in Respondent's Exhibit numbered 9, TRG wrote to persons who were identified as health plan participants, to include Respondent's customers who are the subject of the Amended Administrative Complaint. The letter stated that due to a problem with USA Services Group, the claims administrator on November 30, 2001, when the TRG plan ended, claims were not being paid. The correspondence remarks about difficulties with USA Services experienced by TRG, promising that TRG would fulfill obligations to the customers who were participants in the health plan. Contrary to this promise, TRG has not honored claims for those customers who are the subject of the Amended Administrative Complaint. On December 12, 2001, as reflected in Respondent's Exhibit numbered 4, Petitioner had written consumers who had enrolled in the TRG health plan to advise that the Petitioner did not consider the TRG health plan to be an ERISA program. Under the circumstances, the correspondence indicated that TRG should have sought authorization from Petitioner to sell health plans in Florida, which had not been done. The correspondence refers to some acknowledgement by TRG that it was not an ERISA program and needed to be licensed in Florida to conduct business. The correspondence advises the consumer to cease payment of any further premiums to TRG, to include the cancellation of automatic bank drafts for payment of premiums. The correspondence advises the consumer to obtain replacement insurance through Florida licensed insurance companies or HMOs. The letter goes on to remind the consumer of certain plans that were not licensed in Florida to conduct business because they were perceived to be illegitimate companies. The communication urged the consumer not to enroll in those health insurance plans. Respondent was made aware of this communication. Count I: Vicki Brown Vicki Brown has a business known as Rainbows End Ranch located in St. Johns County, Florida. This is a one-person business involving boarding and training of horses. Ms. Brown was interested in obtaining permanent health insurance, in that her COBRA policy was expiring. As a consequence, she was referred to Respondent by a friend. Respondent met Ms. Brown at her place of business. She explained to him her health insurance needs. Respondent suggested obtaining health insurance through TRG. Ms. Brown agreed. Ms. Brown paid $165.00 to TRG by check to cover the premium for September 2001. Two additional amounts of $165.00 were withdrawn from her checking account to pay premiums to TRG for the months that followed. Subsequently, Ms. Brown received Petitioner's December 12, 2001, letter informing her that TRG was not allowed to conduct business in Florida, Petitioner's Exhibit numbered Beyond that point, Ms. Brown had difficulties in her attempt to be reimbursed for her medical treatment, presumably covered by the TRG plan, by seeking reimbursement through another insurance firm other than by TRG. That process was pursued through Baftal in relation to insurance offered by Clarendon. Ms. Brown made Respondent aware that she had problems with reimbursement and of the receipt of Petitioner's letter. Respondent told her not to worry about the situation, that things were going to be taken care of by Clarendon taking over where TRG left off. Ms. Brown received Respondent's form correspondence dated December 28, 2001, explaining the switch from TRG to Clarendon, Petitioner's Exhibit numbered 6. Ms. Brown also received information from Advancement Administration concerning Clarendon as the insurance company, Beechstreet as the provider network, mentioning Baftal/Quik Quote Insurance as brokers, Petitioner's Exhibit numbered 7. Following her difficulties with TRG, on January 2, 2002, Ms. Brown wrote a check to the Baftal Escrow Account in the amount of $513.40 for premiums in relation to Clarendon. As can be seen, the payment to Clarendon represented an increase in premium compared to TRG. The check for $513.40 had been written out to LPI Clarendon and changed by Respondent to reflect the Baftal Escrow Account. In January 2002, Ms. Brown called Respondent and was told that the paperwork he was filling out was wrong and that he needed to complete new forms for Baftal "Insurance Brokers." According to Respondent, that explained why the coverage through Baftal had not gone into effect. Ms. Brown had received Petitioner's Exhibit numbered 11, the communication from Baftal calling for additional information as a prerequisite to obtaining insurance benefits effective December 1, 2001. Information provided in the document concerning issues related to her coverage was not useful to Ms. Brown when she made inquiry consistent with the instructions contained in the document. Concerning her claims for reimbursement, Ms. Brown had a health problem with her throat. In addressing the condition, she was told by her primary care doctor, that when trying to arrange for a specialist to attend her care through the Beechstreet Provider Network, which was part of the health care offered through the Baftal Agency, it was reported that Beechstreet was bankrupt. Then Ms. Brown called Respondent to ask his advice. Respondent told her he was not sure how to respond "right now things are in a haywire." Beyond that point Ms. Brown found out that Clarendon, part of the Baftal arrangement was not going to insure her business. In particular, Ms. Brown received the February 11, 2002, communication from Baftal commenting that insurance would not be provided through Baftal, remarking that Clarendon was not an insurer. This communication is Petitioner's Exhibit numbered 12. After the TRG and Baftal experiences, Ms. Brown tried to be placed on her husband's health insurance policy but had trouble getting a certificate to allow her to obtain that coverage. This was in relation to the need for the existence of continuing coverage before being placed on the husband's policy. Fortunately, Ms. Brown was eventually able to get insurance through her husband's policy. Ms. Brown was dismayed by the difficulty experienced in obtaining health insurance when she discovered that TRG and Baftal would not meet her health insurance needs. From the evidence, it has been determined that the TRG plan purchased by Ms. Brown was the 80/60 plan with the $1,000.00 deductible. Although Ms. Brown testified that her medical bills in the period in question would total close to $1,000.00, the evidence found in Petitioner's Exhibit numbered 8, constituted of medical bills around that time do not approximate than amount. Ms. Brown had received a TRG benefit handbook and membership card, Petitioner's Exhibits numbered 9 and 10, associated with her participation in the 80/60 plan with a $1000.00 deductible and co-pay of $10.00 for a physician office visit and $20.00 for a specialist office visit. In summary, none of the companies from whom Ms. Brown purchased insurance through Respondent, commencing with TRG, have paid for any of her claims for reimbursement for medical care during the relevant time period. In addition to not receiving a reimbursement for premiums paid to TRG, Ms. Brown did not receive the return of her premium paid to Baftal either. Count II: Alicia Moore Alicia Moore at one time was employed by Respondent. The position Alicia Moore held with Respondent's insurance agency was that of general office clerk. Ms. Moore has never been licensed in any capacity by Petitioner, related to the sale of insurance and has not taken courses to educate herself about the insurance business. In addition to her employment with Respondent, she purchased health insurance through Respondent with TRG around September 2001. Ms. Moore purchased the TRG health insurance policy in the interest of her husband's subchapter S corporation, small business. Her husband's name is Randy Moore. The name of the company operated by the husband is M-3 Enterprises, Inc. The husband's company has one employee, Randy Moore. The Moores resided in St. Augustine, Florida, at times relevant to the inquiry. The husband's business had been insured for health coverage by Humana, until Humana determined that it was not willing to provide health insurance for the company and the Moores decided that the individual policies offered by Humana in substitution for the group policy were too expensive. The Moores chose TRG for health insurance after Respondent had discussed several health insurance plans including individual or group policies. The reason for the choice was the premium price. On September 19, 2001, Randy Moore paid $434.00 for the health insurance premium to Redwood Group, in the interest of obtaining health insurance from TRG. On November 2, 2001, an additional $434.00 was debited from the checking account for M-3 Enterprises, to TRG for premiums related to the health insurance coverage. Ms. Moore recalls Respondent telling her that the TRG health plan was an ERISA plan but she has no knowledge about ERISA plans being regulated under federal law. In that connection, Ms. Moore commented in a statement given by affidavit, that Respondent told her that TRG was not regulated by Petitioner. Respondent explained to Ms. Moore that the premium payments to TRG were lower in costs because TRG was an ERISA program. TRG sent correspondence to the Moores as participants in the health plan. This is found as Petitioner's Exhibit numbered 15. It enclosed a membership issued to Randy Moore setting forth the $10.00 co-pay for a physician visit, $20.00 co-pay for a specialist office visit, and $50.00 co-pay for emergency room visits associated with the participation in Plan 8033. The nature of the plan that the Moores had was a member- plus family. The cover letter listed the telephone number for the claims administrator USA Services to address claims or customer services questions. Ms. Moore also received a packet from TRG explaining the process of filing claims for health care. After obtaining the TRG health coverage, Ms. Moore and her son received treatment for medical conditions contemplated under the terms in the TRG plan. Notwithstanding the submission of information for reimbursement related to the charges, the charges were not paid under the TRG plan. The total of these claims was approximately $727.00. That $727.00 was less co- payments already made for the medical services. Ms. Moore made the Respondent aware that TRG was not reimbursing her for medical bills. Respondent gave Ms. Moore the telephone number for Tom Dougherty, Managing General Agent for TRG, expecting Mr. Dougherty to be able to assist Ms. Moore in dealing with outstanding medical bills. Ms. Moore called Mr. Dougherty several times, but this did not lead to the payment of the medical bills. Ms. Moore also sent TRG a certified letter in August 2002 concerning bills outstanding since October 2001, attaching the bills and information concerning payment of premiums for the coverage. This is reflected in Petitioner's Exhibit numbered 18. Petitioner's Exhibit numbered 21 is a compilation of information concerning the outstanding medical bills, and a statement from Medical Accounts Services, Inc. (Medical Accounts) concerning a current balance on June 17, 2002, of $229.00. The Moores had to make an arrangement to repay the money which was being collected through Medical Accounts. It is not clear from the record the exact nature of the member with family plan that had been purchased by the Moores. Consequently, the deductible in force when claims were submitted for reimbursement is not readily apparent. Ms. Moore in her testimony was unable to recall the amount of the deductible for the policy issued from TRG. It does appear from a review of the fee schedule associated with the 80/60 plan and the 90/70 plan offered by TRG, that the premium payments made did not entitle the Moores to coverage associated with a $500.00 deductible or $250.00 deductible. The other possible amount for the deductible, by process of elimination is $1,000.00. The Moores received correspondence dated November 28, 2001, sent to Randy Moore as a TRG enrollee, indicating that the coverage would end effective November 30, 2001, and reminding Mr. Moore that, according to the correspondence, he would have to find other health coverage as of December 1, 2001. This correspondence, as with other similar correspondence that has been discussed, promised to continue to process claims for covered services incurred before the coverage ended. The TRG letter terminating coverage for the Moores was received by the Moores five days after the date upon which the correspondence indicated that the coverage would no longer be in effect. This circumstance was very disquieting to Ms. Moore. The claims by Ms. Moore and her child were within the covered period for the TRG policy as to their dates. The letter received from TRG is Petitioner's Exhibit numbered 17. Ms. Moore spoke to Respondent about obtaining coverage when TRG discontinued its coverage. Respondent suggested that the Moores affiliate with Baftal. The Moores made a premium payment to Baftal but within a week of being accepted for coverage, Baftal wrote to advise that coverage had been declined. Beyond that time, the Moores obtained coverage from Medical Savings Insurance, a company that they still use for health insurance. Concerning Baftal, by correspondence dated February 11, 2002, Baftal wrote the Moores as a member, the form letter that has already been described, in which the Moores were told that they would not be provided health benefits. Given the problem described with Clarendon Insurance Company, the letter noted the return of the premium paid for coverage through Baftal. A copy of the letter sent to the Moores is Petitioner's Exhibit numbered 19. Baftal did not reimburse the Moores for the outstanding claims totaling approximately $727.00. Count III: Bruce Chambers Bruce Chambers was another customer who bought TRG health insurance from Respondent. Mr. Chambers was a Florida resident at the time he purchased the TRG coverage. Mr. Chambers and his wife moved to Florida from Georgia earlier in 2001. When they moved, the prior health insurance coverage that the Chambers held carried a high premium given Ms. Chambers diabetic condition. Moving from one state to the next also increased that premium. Under the circumstances, the Chambers agreed to purchase the TRG Health Plan. At one time related to the transaction promoted by Respondent, Mr. Chambers believed that TRG was licensed in Florida. He held this belief even in the instance where Respondent had commented that TRG was an ERISA program. Mr. Chambers also executed a coverage disclaimer in November 2001, upon a form from Respondent's agency noting that the health, welfare program applied for was not under the auspices of the Florida Department of Insurance. This is found as Petitioner's Exhibit numbered 36. After purchasing the TRG policy, the wife developed an illness, and costs were incurred for services by the family's personal physician and for hospitalization. In addition Mr. Chambers had medical expenses. Exclusive of co-pays and the deductibles that are applicable, Mr. Chambers paid $7,478.46 for the health care he and his wife received. None of that amount has been reimbursed through TRG as expected under the terms of the TRG coverage. Mr. Chambers paid $487.00 a month, plus $18.00 in other fees, for two months related to coverage effective October 1, 2001, extending into November 2001, a total of $1,010.00 in premiums and fees paid to TRG. No premiums and fees paid to TRG have been reimbursed. The amount of premium paid by Mr. Chambers corresponds under the client fee schedule in effect May 1, 2001, associated with the TRG Health Plan, as pertaining to an 80/60 plan for a member and family with a $1,000.00 deductible. Petitioner's Exhibit numbered 26 is constituted of the calculation of the expenses, $7,478.46 and attaches billing information, some of which is for services and care received prior to December 1, 2001, and some of which is for services and care beyond that date. When Mr. Chambers discovered that TRG was not reimbursing the costs which it was obligated to pay for health care received by the Chambers, he contacted the Respondent and TRG to gain satisfaction. He also contacted Petitioner. When Mr. Chambers enrolled in the TRG plan he received the transmittal letter enclosing his benefits card, Petitioner's Exhibit numbered 23. The membership card identified his participation in plan 8033, with a co-pay for physician office visits of $10.00, specialty office visits of $20.00, and emergency room visits of $50.00. Mr. Chambers received notice from the Petitioner, presumably the December 12, 2001, notification concerning the lack of authority for TRG to business in Florida and the advice that CHEA (Consumer Health Education Association) was not authorized to do business in Florida either. On December 20, 2001, the Chambers wrote Respondent concerning the unavailability of insurance through TRG and CHEA. The Chambers asked Respondent to give them advice about a list of "small group market carriers" they understood to offer health plans. This letter to Respondent is found within Petitioner's Exhibit numbered 25. Also, within Petitioner's Exhibit numbered 25 was a copy of the letter from Respondent to TRG insureds dated December 28, 2001, which made mention of Clarendon as an alternative to TRG. Within that same exhibit is correspondence dated January 21, 2002, from the Respondent to enrollees in the TRG plan, to include the Chambers, discussing Baftal and the prospect that the latter company might honor TRG claims. Finally, Petitioner's Exhibit numbered 25 contains an August 21, 2002, letter from Mr. Chambers to TRG asking TRG to pay for its portion of the medical expenses as reimbursement. Petitioner's Exhibit numbered 27 is the December 1, 2001, application by Mr. Chambers to obtain medical benefits through CHEA. The application also refers to EOS Health Services. This predates Petitioner's warning about CHEA and EOS being licensed to do business in Florida. On December 1, 2001, Mr. Chambers paid $487.00 for premium payments to EOS Health Services and provided a voided check for future payments for premiums by automatic withdrawal from his account. This effort was made as a follow on to obtain health coverage when TRG no longer provided health insurance to the Chambers. To obtain health coverage, Mr. Chambers paid $1,465.88 to the Baftal Escrow Account. This payment was made by a check dated January 14, 2002. That money was refunded by Baftal on January 12, 2002, and no coverage was offered through that company for health insurance. Mr. Chambers had been provided information about the opportunity to obtain insurance from Baftal as reflected in Petitioner's Exhibit numbered 31. Respondent had also suggested that Mr. Chambers apply for health insurance from American Benefit Plan, following the discontinuance of the TRG coverage. Mr. Chambers applied for that coverage by documents dated February 18, 2002, in the interest of his company, Bruce A. Cambers, CFP. Information concerning that application is found in Petitioner's Exhibit numbered 32. American Benefit Plans was listed by Petitioner as an entity not allowed to conduct business in Florida in the December 12, 2001, letter of advice to insurance consumers following the problem with TRG. Mr. Chambers wrote two checks, one in the amount of $628.60 to Independent Managers Association and one for $799.68 to the Association of Independent Managers, Petitioner's Exhibits numbered 35 and 33 respectively. The two checks were written on February 18, 2002. Those checks were voided in relation to payment for monthly insurance premiums and association dues. The effect was to not accept those checks for premium payments to obtain health insurance. On March 5, 2002, ACH Corporation of America wrote Mr. Chambers stating that because of incorrect procedures, or untimely submission, health coverage would not be extended, pertaining to an application for Ultra Med Choice EPO. Ultra Med was another health insurance business which Petitioner in its December 12, 2001, correspondence to health care consumers had been identified as unlicensed to conduct health insurance business in Florida. The letter declining coverage from ACH and application information for a policy sought to become effective December 1, 2001, is found within Petitioner's Exhibit numbered This application was in relation to Bruce Chambers, CFP as employer. Mr. Chambers remains out of pocket for payments he had to make for health care extended, principally to his wife, for which TRG was obligated to provide reimbursement in part. None of the other policies that Mr. Chambers attempted to obtain worked out to substitute for the TRG obligation for reimbursement for health care claims. Eventually the Chambers were able to obtain health insurance. At present the Chambers have a two-man group policy through Mr. Chambers' business to provide health coverage. Because of the problem with health insurance coverage, Ms. Chambers was required to return to work. Her employment was outside Mr. Chambers' company, as well as within his company. As a result of Ms. Chambers' failure to make payments to Flagler Hospital, where Ms. Chambers had received care, under terms that should have involved TRG providing reimbursement for costs, the bills were turned over to a collection agency compromising the credit standing of the Chambers. For the most part, the credit problems have been resolved. Due Diligence As established by testimony from Linda Davis, Analyst II in Petitioner's Jacksonville Office, there is a means to determine whether an insurance company has the necessary certificate of authority to conduct insurance business in Florida. This is accomplished by resort to the electronic data base maintained by Petitioner. A certificate of authority is an indication that the insurance company has completed the necessary requirements to be licensed or authorized to sell insurance in Florida. As established through Petitioner's Exhibit numbered 39, TRG/USA Health Plans, TRG Marketing L.L.C. was not authorized to do business in Florida. An insurance agent licensed in Florida, to include the time frame envisioned by the Amended Administrative Complaint, would have had access to the data base identifying whether an insurance company had the necessary certificate of authority to conduct insurance business in Florida and could properly have been expected to seek this information before engaging in the sale of products from a company such as TRG. Rather than avail himself of that opportunity, Respondent made some form of inquiry to Petitioner on the subject of TRG, while apparently ignoring the more fundamental consideration of whether TRG had been granted a certificate of authority to conduct its business in Florida, which should have been pursued. Ascertaining the existence or nonexistence of a certificate of authority, constitutes "due diligence" incumbent upon an agent before engaging in the sale of insurance from a prospective insurance company. Respondent's Disciplinary History Petitioner has not taken disciplinary action against Respondent before this case.
Recommendation Upon the consideration of the facts found and the conclusions of law reached, it is RECOMMENDED: That a Final Order be entered finding Respondent in violation of Sections 624.11, 626.611(7) and (8), 626.621(2) and (6), 626.901(1), Florida Statutes (2001); suspending his licenses for nine months; placing Respondent on two-years probation; and requiring attendance at such continuing education classes as deemed appropriate. DONE AND ENTERED this 2nd day of April, 2004, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of April, 2004. COPIES FURNISHED: David J. Busch, Esquire Department of Financial Services Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Joseph O. Stroud, Jr., Esquire Rogers Towers, P.A. 1301 Riverplace Boulevard, Suite 1500 Jacksonville, Florida 32207 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
The Issue Whether Respondent committed the offenses alleged in the Administrative Complaint and, if so, the penalties, if any, that should be imposed.
Findings Of Fact At the times pertinent to this proceeding, Respondent, WANDA DIRKS, was licensed in the State of Florida as a health insurance agent and was authorized to solicit health insurance policies on behalf of National States Insurance (National States) and on behalf of American Integrity Insurance Company (American Integrity). John Rickard was born March 18, 1905, and, at the times pertinent to this proceeding, lived in Fort Pierce, Florida. On February 25, 1988, Respondent sold to Mr. Rickard a Medicare supplement policy and a nursing home insurance policy, both issued through National States. On March 28, 1988, Respondent sold to Mr. Rickard a cancer insurance policy and a medical expense insurance policy, both issued through National States. In December 1988, Mr. Rickard suffered a stroke which left him partially paralyzed and which resulted in his having a colostomy. Following his hospitalization he was placed in a rehabilitation center. In February 1989, Mr. Rickard was transferred from the rehabilitation center to the Fort Pierce Care Center, which is a nursing home. Mr. Rickard was a continuous resident of that nursing home (except for a brief hospitalization which is not pertinent to the disposition of the issues herein) from the date of his admission to his death on December 22, 1989. Friends took Mr. Rickard on day trips away from the nursing home on occasion. From February 1989 until his death, Mr. Rickard was confined to a wheelchair and required assistance with his activities of daily living. Mr. Rickard had poor vision, but he could occasionally read with the assistance of a large magnifying glass. Prior to his admission to the nursing home, Mr. Rickard resided in his mobile home located at 164 Port St. Lucie Boulevard, Fort Pierce, Florida. Dee James was a friend and former coworker of Mr. Rickard who assisted him with the payment of his bills. Ms. James was the primary beneficiary of Mr. Rickard's estate. In April 1989, Ms. James' grandson and his girlfriend were living in Mr. Rickard's mobile home. On April 18, 1989, National States cancelled all of its policies of insurance that Respondent had sold to Mr. Rickard. The letter of cancellation provided, in pertinent part, as follows: During the course of routine investigation into your claims, it has come to our attention that the health history portions of the applications for your coverage are inaccurate and incomplete. Specifically, health history was not shown on the application. Had we been aware of your medical conditions we would not have issued this coverage. Consequently, we have no alternative but to rescind your coverage as of its effective date and to make full premium refund. Accordingly, we are enclosing our check in the amount of $4,005.80. Between April 18, 1989, and April 24, 1989, Respondent was contacted by Ms. James and advised of the cancellation of Mr. Rickard's policies of insurance by National States. Ms. James, at the request of Mr. Rickard, asked Respondent for her assistance and set up a meeting between Respondent and Mr. Rickard. On April 24, 1989, Respondent met with Mr. Rickard and prepared an application for a Medicare supplement policy of insurance to be issued by American Integrity. The application for the American Integrity policy contained the following caveat: "IF THE ANSWER TO ANY OF THE FOLLOWING QUESTIONS IS 'YES', THE APPLICANT IS NOT ELIGIBLE FOR COVERAGE". All of the questions that followed pertained to the medical history of the applicant and were answered in the negative. Respondent answered the questions on the application form based on information given to her by Mr. Rickard. The following were among those questions: Are you presently confined to a hospital or nursing home, or have you been hospitalized 4 times or more in the past 2 years? Are you presently bedridden or wheelchair confined? The location of this meeting between Respondent and Mr. Rickard is in dispute. Petitioner contends that the meeting occurred at the nursing home. This contention is based on evidence that Mr. Rickard was a continuous resident of the nursing home from the date of his admission except for the brief hospitalization. If Petitioner's contention is accepted, it follows that Respondent knew that Mr. Rickard was in the nursing home when she filled out the application. Respondent contends that the meeting occurred at Mr. Rickard's residence at 164 Port St. Lucie Boulevard, Fort Pierce and that she had no knowledge that Mr. Rickard was a nursing home patient when she filled out the application. Her contention is supported by evidence that friends took Mr. Rickard from the nursing home on occasion and by Respondent's testimony. The dispute is resolved by finding that Petitioner failed to establish by clear and convincing evidence that the meeting between Respondent and Mr. Rickard on April 24, 1989, occurred at the nursing home. Respondent's version of the meeting is accepted, and it is concluded that the meeting between Respondent and Mr. Rickard occurred at the mobile home Mr. Rickard owned at 164 Port St. Lucie Boulevard, Fort Pierce. It is further concluded that the evidence failed to establish that Respondent had actual knowledge that Mr. Rickard was residing in the nursing home when she filled out the American Integrity application. Ms. James set up the meeting between Respondent and Mr. Rickard, but neither she nor anyone other than Mr. Rickard was present when Respondent arrived at Mr. Rickard's mobile home on April 24, 1989. Respondent reviewed the American Integrity policy with Mr. Rickard and filled out the application that was submitted. Both Respondent and Mr. Rickard signed the application and he paid for the premium in the amount of $1,045.00 with a check that had been given to him by Ms. James. On April 24, 1989, Mr. Rickard was unable to ambulate and was confined to a wheelchair. He was unable to come to the door when Respondent knocked and he remained in a wheelchair during the meeting. It should have been apparent to Respondent when she completed the application for the American Integrity policy that Mr. Rickard was confined to a wheelchair. She knew or should have known that the application contained a false representation as to Mr. Rickard's physical condition and that he was not eligible to purchase this policy. The following appears on the application form above the Respondent's signature: I hereby certify that I have (1) accurately recorded the information supplied by the applicant; and (2) given an Outline of Coverage for the policy applied for and a Medicare Supplement Buyer's Guide to the applicant. Respondent testified that she read the questions on the application to Mr. Rickard, that he answered the questions, and that she wrote his answer on the application. She further testified that he reviewed the completed application with the use of his magnifying glass. The American Integrity policy would not have been issued had Respondent answered question 10 of the application in the affirmative. The American Integrity policy was subsequently issued. It was rescinded on November 11, 1989, after Ms. James notified American Integrity that Mr. Rickard resided in a nursing home, and Mr. Rickard received a full refund of the premium he had paid. Mr. Rickard and Ms. James filed no complaint with the Petitioner regarding Respondent. Neither blamed Respondent for the cancellation of the National States policies and both appreciated her efforts to be of assistance. The investigation into Respondent's actions was triggered by a complaint that Mr. Rickard, with the assistance of Ms. James, filed against National States. There was no evidence that Respondent's licensure had been subject to discipline prior to this proceeding. Respondent has a favorable reputation for service to her community and to her clients.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered which finds that Respondent violated the provisions of Section 626.621(6), Florida Statutes, and which suspends her licensure and her eligibility for licensure for a period of three months. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 29th day of April, 1991. CLAUDE B. ARRINGTON 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 29th day of April, 1991. APPENDIX TO THE RECOMMENDED ORDER The following rulings are made on the proposed findings of fact submitted on behalf of the Petitioner. The proposed findings of fact in paragraphs 1-8 and 10-12 are adopted in material part by the Recommended Order. The proposed findings of fact in the first sentence of paragraph 9 are adopted in material part by the Recommended Order. The remaining proposed findings of fact in paragraph 9 are rejected as being unsubstantiated by the evidence and as being contrary to the findings made. The following rulings are made on the proposed findings of fact submitted on behalf of the Respondent. The proposed findings of fact in paragraphs 1-3, 5-6, 9, and 18 are adopted in material part by the Recommended Order. The proposed findings of fact in paragraphs 4, 7, 14, 26-27, 29, 33-34, 36- 37, 39, 41-42, 45-52, 58-61 are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraphs 8, 10, 13, 15, and 17 are adopted in part by the Recommended Order and are rejected in part as being either subordinate to the findings made or as being unnecessary to the conclusions reached. The proposed findings of fact in paragraphs 11-12, 16, 19-22, 24-25, 28. 35, and 53 are rejected as being either unnecessary to the conclusions reached or as being subordinate to the findings made. The proposed findings of fact in paragraph 23 are rejected as being argument and as being unnecessary to the conclusions reached. The proposed findings of fact in paragraphs 43 and 44 are rejected as being argument and as being subordinate to the findings made. The proposed findings of fact in paragraphs 30 and 40 are rejected as being contrary to the findings made. The proposed findings of fact in paragraphs 31 and 32 are rejected as incomplete recitations of testimony. The proposed findings of fact in paragraph 57 are rejected as being argument based on unsubstantiated facts. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance and Treasurer Division of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Wanda Sue Dirks 25 North Causeway Drive Ft. Pierce, Florida 34946 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil General Counsel The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue Whether the charges contained in the Administrative Complaint, which is the subject of Case Number 01-2295, reflect statements of agency policy which should have been adopted as rules pursuant to Chapter 120, Florida Statutes.
Findings Of Fact The Parties United is a foreign insurer, domiciled in the State of Wisconsin holding a certificate of authority from the Department to transact the business of insurance in this state. It is a wholly-owned subsidiary of American Medical Securities Group, Inc. The Department, through its agency head, the Treasurer and Insurance Commissioner, has regulatory jurisdiction over United in connection with certain matters set forth in the Complaint. The regulatory scheme for out-of-state health insurance companies Health insurance companies operating pursuant to in-state regulatory schemes are subject to oversight regulation of the corporate entity including financial solvency and market conduct. Rates are required to be filed and approved prior to being used in the state. The review process involves a review of the rates to determine if they are reasonable in relation to the benefits provided. In regard to this, the Department has rules which it has adopted pursuant to Chapter 120, Florida Statutes, which it uses to determine the standards and formulae for making that determination. Certain out-of-state health insurers, such as United, are not subject to such stringent regulation. No review of premium rates is conducted by the Department in the case of these insurers, but it would be incorrect to state that they are not subject to regulation by the Department at all. Approximately 40 percent of the health insurance market in Florida is written through out-of-state group arrangements that do not provide policyholders consumer protections afforded to policyholders holding in-state policies regulated by the Department. United is required by Florida law to provide certain types of coverage. United must also ensure that certificates of coverage provided to residents of Florida contain the following language: The benefits of the policy providing your coverage are governed primarily by the law of a state other than Florida. Indent Background At all times pertinent, American Medical Security, Inc. (AMS), was a Florida-licensed administrator authorized to market and administer United's out-of-state group health insurance plans in Florida. AMS, like United, is a wholly-owned subsidiary of American Medical Securities Group, Inc. In May 1993, United, through AMS, filed for approval with the Department pursuant to Section 627.5515(2), Florida Statutes (1993), as an out-of-state group health insurer who would provide policies to be offered through an Alabama entity called the Prescription For Good Health Trust, which was formed primarily for the purpose of providing group insurance. The Department approved this filing. On March 2, 1995, the Department participated by conference call in a Regulatory Task Force of the National Association of Insurance Commissioners. The mission of the task force was to attempt to address a number of problems facing the insurance market. One of the problems discussed was rate protection for consumers when faced with "tier rating" or "tier blocking." The two terms are synonymous and mean, as to group health insurance, reclassifying insureds subsequent to having been initially placed in a class. This practice will be discussed in more detail below. In 1996, United made a filing for the Prescription For Good Health Trust which proposed tier rating. Sometime during 1996, after the Department objected to the filing, United withdrew it. The Department had never seen such a filing previously. United is the only health insurer to assert before the Department that reclassification by movement between classes would be permissible under the Florida Insurance Code. Section 627.6515(1), Florida Statutes, provides that a group health insurance policy issued or delivered outside this state under which a resident of Florida is provided coverage, shall comply with the provisions of Part VII, of Chapter 627, Florida Statutes, in the same manner as health policies issued within the state. Part VII of Chapter 627, Florida Statutes, provides for a comprehensive regulatory scheme for group health insurance. Section 627.6515(2), Florida Statutes, however, sets forth a number of exemptions. Section 627.6515(2), Florida Statutes, provides an exemption for an insurer like United, which provides health insurance through an association formed for a purpose other than that of offering insurance, which provides the language referred to in paragraph 5, supra, on the face of the certificate, and which offers the bundle of coverages provided in Subsection (c). This exemption applied to the Prescription For Good Health Trust. The Department concedes that it has no authority to set premium rates for out-of-state insurers like United. In November 1996, United through AMS, filed with the Department, pursuant to Section 627.6515(2), Florida Statutes, a request for approval of an out-of-state group health insurance policy termed the "MedOne Choice" plan. This plan was to be offered through an Ohio association called the Taxpayers' Network, Inc. (TNI). The association was formed primarily for purposes other than providing insurance. In January, 1997, the filing was accepted by the Department as meeting the requirements of Section 627.6515(2), Florida Statutes. Chapter 96-223, Laws of Florida, created Section 627.6425, Florida Statutes, effective May 25, 1996. When created, the section only addressed the renewability of individual coverage. Chapter 97-179, Laws of Florida, substantially amended Section 627.6425, Florida Statutes, effective May 30, 1997. Subsequent to the amendment, the section addressed certificates of coverage offered to individuals in the state as part of a group policy. This statute, along with Sections 627.6571 and 627.6487, Florida Statutes, implemented the federal Health Insurance Portability and Accountability Act (HIPAA). The basic theory of the HIPAA legislation is that an insurance company cannot simply cancel a health insurance policy without providing other options. On or about September 25, 1998, United, through AMS, notified all Prescription For Good Health Trust certificate holders that the policy forms through which their coverage had been provided were being discontinued, effective as of each certificate holder's 1999 renewal date. Upon discontinuance of the Prescription For Good Health Trust Plans, the only United health insurance plans available in Florida were the MedOne Choice plans offered through TNI. Membership in TNI was available to anyone upon submitting an application form and paying the membership fee. Membership in TNI was a prerequisite to continuance of a persons' health insurance coverage under United's MedOne Choice plan. United guaranteed each certificate holder, upon joining TNI, that upon request, they would be issued coverage under the Classic Benefit Plan (one of the TNI MedOne Choice plans) without regard to their health status. However, there was no guarantee that premiums would not rise. Certificate holders were also advised that if they desired coverage under a MedOne Choice plan other than the guaranteed issue Classic Benefit plan, they could apply for any of the other TNI plans. Only if the applicant met the underwriting guidelines for the plan for which they applied, would they be issued coverage under another MedOne Choice plan. Between October 1998 and early January 1999, United responded to questions and concerns raised by the Department about the decision to discontinue the Prescription For Good Health Trust plan, and whether the plan of discontinuance was in compliance with Section 627.6425, Florida Statutes. Specifically, discussions were had concerning the movement of insureds from the class in which they were originally assigned to another class at the time of renewal. United entered an agreement with the Department on January 14, 1999, whereby United would offer to certificate holders an additional guaranteed issue TNI plan and would cap the rate for the guaranteed issue plans at no more than twice the premium then currently being paid for the discontinued Prescription For Good Health Trust plan. In accordance with this agreement, United notified certificate holders of the additional guaranteed issue option available to them. Later in 1999, United discontinued the trust plan in accordance with their agreement with the Department. During the process of discontinuance, no certificate holder requested conversion coverage under Section 627.6675, Florida Statutes. Section 627.6675, Florida Statutes, provides that an insured may assert his or her right to a "converted policy," which provides for certain health insurance continuation rights. The Department determined that United's rate for the conversion policy, pursuant to the agreement, was within 200 percent of the standard risk rate and that the notice of the conversion privilege was contained in the certificate of coverage issued to Florida residents. Thus, the Department concluded that United was in compliance with the agreement of January 14, 1999. On May 19, 1999, a Department letter informed a consumer that the discontinuance of her coverage by United did not mean she was being discriminated against because the policy had been terminated for all members. The letter further recited that the Department did not have the ability to regulate United because it was not domiciled in Florida and her insurance was being provided to a group, referring to TNI, that was not registered in Florida. On July 27, 1999, a Department letter informed a consumer that United had an obligation to offer a replacement policy but that United had the right to underwrite the policy and charge additional premium. This statement also referred to TNI. Section 627.6425(1), Florida Statutes, provides that "except as otherwise provided in this section, an insurer that provides individual health insurance coverage to an individual shall renew or continue in force such coverage at the option of the individual." For the purpose of the aforementioned Section, the term "individual health insurance" means health insurance coverage, as described in Section 627.6561(5)(a)2, Florida Statutes, offered to an individual in the state, "including certificates of coverage offered to individuals in the state as part of a group policy issued to an association outside this state. " As noted earlier, Section 627.6425, Florida Statutes, is one of the statutes enacted in Florida which implemented HIPAA. HIPAA provides for continuation of health insurance of an insureds health policy but does not limit the premiums which an insurer can charge for coverage. Although Section 627.6425, Florida Statutes, does not have the words "guaranteed renewable" contained within the statute, the gist of the statute is that if a person has a health policy, the person has the right to continued coverage. The Department contends that the statute also means that there can be no reclassification or movement between classes at the time of renewal. On March 30, 2000, the Department notified United that it believed the discontinuance of Prescription For Good Health Trust plan, in accordance with the January 1999 agreement, may have violated Section 627.6425, Florida Statutes. A Department publication dated January 4, 2001, entitled, "The Florida Health Insurance Market, Issues and Possible Market Reform Measures," noted that there are "an increasing number of carriers attempting to establish HIPAA eligible individuals as a separate rating class with premium charges ranging from 300 to 500 percent of standard rates. While the Department has found such a rating practice to be in violation of the Florida Insurance Code, many carriers have continued to protest this interpretation. Carriers contend the surcharge practice is both actuarially sound and interpreted as a HIPAA permissible practice by other states." In the 2001 legislative session, the Department sought additional regulatory authority concerning out-of-state group insurers, such as United, along with numerous other changes to the Florida Insurance Code which are unrelated to the issues addressed in this Order. The Florida Legislature failed to approve the requested legislation. Tier rating When a group health policy is underwritten, the members of the group may be divided into classes. The classes are based on risk, which is a function of the probability of claims and the cost of claims. Classes may be denominated, for example, as preferred, manual, and substandard. Very healthy persons are put in the preferred class and pay lower premiums relative to other classes. Average persons are put in the manual class because the likelihood and cost of claims may be average. Persons who for actuarial reasons are determined to have an above-average likelihood of claims and whose claims are apt to be costly, are placed in the substandard class. It, perhaps, goes without saying that the individuals in the substandard class must pay higher premiums for the same coverage as others in the group. If the group health policy is guaranteed renewable, certificate holders may continue their coverage. However, premiums within a class can be increased. It is general industry practice to increase the premiums by class when the time for renewal occurs, if the loss experience is such that there is a requirement to increase premiums. As earlier noted, the Department asserts that only by raising premiums for an entire class may premiums be raised. The Department insists that this requirement is part of the definition of "guaranteed renewable." It became United's practice to move insureds between classes. Therefore, for instance, if a person in the group who had been a member of the preferred class experienced the need for costly medical services, then that person might be moved to the manual or substandard class. This would inevitably result in that person paying an increased premium. On the other hand, a person in the substandard class, who was subsequently determined to be a good risk, might be moved to the preferred or manual class and experience reduced premiums as a result. When a substandard class becomes populated with persons who cause the payment of costly claims, premiums increase within that class. Premiums may increase to the point where persons egress the plan, which leaves the class with fewer and sicker members. Eventually, under such a plan, there will be no members, because the premiums will inflate to the point that the benefits, in relation to the amount of the premium, will render the plan uneconomical. This sequence of events is often referred to as the health insurance "death spiral." One of the asserted evils which the Department seeks to combat in the Complaint is the "death spiral." HIPAA eligibles In 1996, when HIPAA became law and Florida enacted laws to implement it, a practice sometimes referred to as "rating up" occurred among some carriers in the industry. As noted earlier, HIPAA and the state statutes implementing it, guarantee that an individual, who through no fault of his own, loses his or her group health insurance coverage has the opportunity to obtain substitute health insurance. A person in this category is referred to as HIPAA eligible. Companies providing insurance under these laws are cognizant of the fact that persons in good health generally decline to purchase this type of insurance but that persons who are in bad health, and who will, therefore, likely have costly claims, will purchase it if they can afford it. This results in a desire on the part of insurers, to charge higher premiums for HIPAA eligible persons than they might charge persons in a comparable, non-HIPAA plan. It is a permissible underwriting practice to take into consideration age, health, and a myriad of other actuarial considerations when developing premium rates for HIPAA eligibles. If an insurer factors in the knowledge that unhealthy persons are more likely than healthy persons to obtain a policy based on HIPAA and charge higher premiums as a result, then "rating up" occurs. The Department contends in its Complaint that "rating up" is discriminatory and, therefore, forbidden by the Unfair Insurance Trade Practices Act (UITPA), Section 626.951, et seq., Florida Statutes. United allegedly arrives at rates for HIPAA eligibles solely based on the fact that the individuals are HIPAA eligible which if true, would be "rating up." Immediately prior to April 30, 1998, the Department received a memorandum from the federal Health Care Financing Administration addressing three general problems with insurance practices regarding HIPAA eligibles. One of the three problems addressed in the memorandum was the practice of "rating up." In response, the Department issued Informational Memorandum 98-103M on April 30, 1998, addressing the three problems. The Department announced that it had concerns similar to that of the Health Care Financing Administration, and would address them in administrative rules implementing HIPAA and Chapter 97-179, Laws of Florida. However, no rules addressing these concerns have been adopted. Insurance carriers disagree with the Department as to whether "rating up" is unfairly discriminatory and therefore a violation of the UITPA. The Department is addressing these differences on a case-by-case basis in the course of market conduct examinations. The evidence adduced at the hearing did not elucidate exactly what "addressing these differences on a case-by-case basis in the course of market conduct examinations" means. Count Three in the Complaint represents the first time an administrative action has been brought against an insurer addressing this practice. The definition of guaranteed renewable Chapter 4-149, Florida Administrative Code, is entitled "Filing of Forms and Rates for Life and Health Insurance." Rule 4-149.006(4)(o)3, Florida Administrative Code, provides for a definition of "guaranteed renewable." However, Chapter 4-149, Florida Administrative Code, does not address out-of-state group health insurers, such as United, because the Department has no authority to require the filing of forms and rates in the case of out-of-state health insurers like United. A life and health insurance treatise written by Black and Skipper states that the definitions of the categories of renewable health insurance policies are not uniform among the states. It is the Department's position that Section 627.6425, Florida Statutes, applies to out-of-state trusts, such as United's Prescription For Good Health Trust, even though the word "trust" is not used in the statute. It is apparent that if there is no limit on the amount of premium a health insurer can charge at the time of renewal, a guarantee of renewal can be meaningless. This fact is ameliorated by rate-setting in the case of highly regulated health insurers such as domestic insurers. In the context of this case, it is not the renewability of a policy that is the gist of the problem. Rather, it is whether rates can be increased on persons through the movement of insureds from one class to another. The allegations of the Complaint In order to determine which statements are alleged to be unadopted rules, it is necessary to refer to Counts Two through Seven of the Complaint. These counts will be summarized, in seriatim. Count Two alleges that persons who continued their participation in TNI were unlawfully and unfairly discriminated against because some members were reclassified based on their health status present at that time (1999), rather than being retained in the class in which they resided when the policy was initially issued. The Petition alleges, inter alia, that this practice violated Section 626.9541(1)(g)2., Florida Statutes, which is a section in the UITPA. This statement is alleged in the Petition to be a statement of general applicability. Count Three alleges that all of those individuals formerly covered through the Prescription For Good Health Trust who were at the time of their discontinuance HIPAA eligible, were, arbitrarily and without regard to health status, assigned a premium rate of either three or five times the base rate for TNI as a whole. Count Three alleges that this assignment unfairly discriminated against the HIPAA eligible individuals who were of the same actuarially supportable class and essentially the same hazard. Count Three further alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes. This statement is alleged in the Petition to be a statement of general applicability. Count Four alleges that the enactment of Section 627.6425, Florida Statutes, in 1996, as amended in 1997, statutorily determined that the Prescription For Good Health Trust plan was "guaranteed renewable" as that term is used and understood in the insurance industry. It further alleged that the term "guaranteed renewable” means that once an insurer classifies an individual as a member of an actuarially supportable class for rate and premium applicable to the specified coverage, that individual may not thereafter be charged a premium which is different from any other member of the same class and cannot be moved to another class. The complaint states that United unlawfully moved insureds from one class to another. Count Four additionally alleged that when United discontinued the Prescription For Good Health Trust, the prerequisite for individuals to obtain renewed health insurance coverage was reclassification of some of those individuals to different actuarially supportable classes based on their health status then pertinent to those individuals. It was further alleged that higher premiums were charged to approximately 70 percent of those who renewed or continued, and that premium increases of 200 percent to 300 percent were experienced. Count Four asserted that Section 627.6425(3), Florida Statutes, prohibits such reclassification. Count Four also alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes, because such reclassification was discriminatory. This statement is alleged in the Petition to be a statement of general applicability. Count Five alleges that on the one year anniversary of renewal with TNI, United unlawfully reclassified additional individuals which resulted in a premium increases of up to 60 percent. Count Five alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes, because this action was discriminatory. This statement is alleged in the Petition to be a statement of general applicability. Count Six alleges that within the tier blocks described in Count Two, United unlawfully established numerous sub- classifications based on health related factors pertinent to each individual within that class. It is alleged in the Complaint that these sub-classifications resulted in individuals within the same class being charged a different premium than are other members of the class. Count Six alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes, because this action was discriminatory. This statement is alleged in the Petition to be a statement of general applicability. Count Seven alleges that United used a point debit system where an arithmetic number of points are assigned to a corresponding health hazard. The higher the cumulative debit score, the higher the premium. United will decline to insure at all if the cumulative debit score gets sufficiently high. Count Seven alleges that the assignment of points with no criteria for decision-making results in arbitrary and discriminatory point scores. Count Seven alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes. This statement is alleged in the Petition to be a statement of general applicability. In summary, the three statements alleged to be rules are: Practicing tier rating is discriminatory and violates the UITPA. Placing HIPAA-eligible individuals in a premium classification solely on the basis of their HIPAA eligible status is discriminatory and violates the UITPA. The term "guaranteed renewable" prohibits the classification of individuals in a health insurance group at a time other than at the inception of coverage.
The Issue At issue in this proceeding is whether respondent committed the offenses alleged in the amended administrative complaint and, if so, what disciplinary action should be taken.
Findings Of Fact Respondent, Harold Sydney Rose (Rose) was, at all times material hereto, licensed in the State of Florida as a life and health insurance agent and health insurance agent. During all such times, Rose did business as the Harold Rose Insurance Agency, an unincorporated business, in Dade County, Florida. Here, petitioner has filed an amended administrative complaint against Rose which charges him with certain misconduct which was alleged to have arisen while he was an agent for Union Bankers Insurance Company (Union Bankers) and United American Insurance Company (United American). Count I of the complaint concerns allegations that Rose failed to remit premiums and applications solicited on behalf of Union Bankers, and misappropriated and converted such monies to his own use and benefit or unlawfully withheld such monies from the insurer and insured. Counts II-V of the complaint allege similar conduct which purportedly occurred during the course of his agency relationship with United American. The Union Bankers transaction Pertinent to Count I, Rose's agent's contract with Union Bankers, dated September 27, 1984, provided: 5. SOLICITATION The agent is hereby authorized to solicit and procure applications for individual life insurance, accident and health annuity policies and to promptly deliver such applications to this Company. The Company shall have the right at all times to reject any application submit- ted for insurance without specifying any reason for rejection. * * * 11. COLLECTION OF MONEY The Agent is not authorized to receive any money due or to become due to the Company ex- cept the initial first-year premiums on appli- cations obtained by/or through him in exchange for the Conditional Receipts furnished by the Company. Any and all monies or securities re- ceived by the Agent for and on behalf of the Company shall be securely held by the Agent in a fiduciary capacity and shall not be used by the Agent for any personal or other purposes whatsoever, but shall be immediately paid over to the Company. While the literal terms of his agreement with Union Bankers would imply that Rose was required to hold all premiums in trust and immediately remit them to the company, his agreement with the company actually permitted him to retain his commission from the first-year premium and remit the balance (referred to as the "net") to the company, along with the application, within ten days of receipt. If the company declined to issue the policy, then Rose's account was debited for the amount he had retained. During early 1992, as a consequence of complaints from applicants, Union Bankers became concerned that Rose was not timely submitting applications and premiums due the company on policies he solicited. As a consequence, by letter of April 3, 1992, Union Bankers terminated Rose's agency agreement, effective April 18, 1992. Subsequently, following repeated demands by Union Bankers that Rose submit to it all applications and premiums he had received on behalf of the company, the Rose Agency submitted new business reports, together with applications and partial premium payments to the company. This information was received about the end of June or early July 1992, and reflected significant delays in forwarding applications and premiums to Union Bankers. Regarding such delays, the competent proof demonstrated the following: On March 16, 1992, Rose solicited an application on behalf of Union Bankers from Dennis Rehman, as well as an application from his wife Gail, for health insurance, and received two checks from them, one for $1,073 and the other for $409, representing the first year premium. These checks were deposited to the account of the Harold Rose Agency at Florida International Bank on March 18, 1992. Notwithstanding, Rose did not forward the application to Union Bankers until June 1992, and then only upon complaint of the applicants and demand by Union Bankers. When submitted, the application was accompanied by a check from the Harold Rose Agency to Union Bankers for $787.00, the correct net premium, and the policies were issued in July 1992. On March 23, 1992, Rose solicited an application on behalf of Union Bankers from Clarence Medlin for home health care insurance, and received a check in the sum of $953.00, representing the first year premium. Notwithstanding, Rose did not forward the application to Union Bankers until on or about June 25, 1992, and then only upon complaint of the applicant and demand by Union Bankers. When submitted, the application was accompanied by a check from the Harold Rose Agency to Union Bankers for $142.95, which was significantly less than the net commission of $333.55 that was due. Nevertheless, Union Bankers underwrote the application. On April 1, 1992, Rose solicited an application on behalf of Union Bankers from Sally Goldhirsch for home health care insurance, and received from her the sum of $1,033.00, representing the first year premium. Notwithstanding, Rose did not forward the application to Union Bankers until on or about June 25, 1992, and then only following demand by Union Bankers. When submitted, the application was accompanied by a check from the Harold Rose Agency to Union Bankers for $206.60, which was significantly less than the net commission of $361.55 that was due. The ultimate disposition of the Goldhirsch application does not appear of record. On April 7, 1992, Rose solicited an application on behalf of Union Bankers from Morris Olkes for home health care insurance, and received a check in the sum of $1,986, representing the first year premium. The check was deposited to the account of the Harold Rose Agency at Florida International Bank on April 13, 1992. Notwithstanding, Rose did not forward the application to Union Bankers until on or about June 25, 1992, and then only upon complaint of the applicant and demand by Union Bankers. When submitted, the application was accompanied by a check from the Harold Rose Agency to Union Bankers for $397.20, which was significantly less than the net commission of $695.10 that was due. Nevertheless, Union Bankers underwrote the application and delivered a policy to Mr. Olkes. Upon review of the policy Mr. Olkes declined to accept it, and Union Bankers refunded his $1,986 premium. On April 3, 1992, Rose solicited an application on behalf of Union Bankers from Cora Burghard for a home health care insurance policy, and received from her the sum of $1,033, representing the first year premium. Notwithstanding, Rose did not forward the application to Union Bankers until on or about June 25, 1992. When submitted, the application was accompanied by a check drawn on the Harold Rose Agency account for $206.00, which was significantly less than the net commission of $361.55 that was due. The ultimate disposition of the Burghard application does not appear of record. On May 1, 1992, Rose solicited an application on behalf of Union Bankers from Daisy Schumann for a home health care insurance policy, and received from her the sum of $557.00, representing the first year premium. Notwithstanding, Rose did not forward the application to Union Bankers until on or about June 29, 1992. When submitted, the application was accompanied by a check drawn on the Harold Rose Agency account for $111.40, which was significantly less than the net commission of $194.95 that was due. The ultimate disposition of the Schumann application does not appear of record. On April 15, 1992, Rose solicited an application on behalf of Union Bankers from Grace DuMond for a home health care policy, and received from her the sum of $1,075.00, representing the first year premium. Notwithstanding, Rose did not forward the application to Union Bankers until on or about June 29, 1992. When submitted, the application was accompanied by a check drawn on the Harold Rose Agency Account for $215.00, which was significantly less than the net commission of $376.25 that was due. The ultimate disposition of the DuMond application does not appear of record. On April 24, 1992, Rose solicited an application on behalf of Union Bankers from Bernard Bernard for a home health care policy and received from him the sum of $1,588.00, representing the first year premium. Notwithstanding, Rose did not forward the application to Union Bankers until on or about June 29, 1992. When submitted, the application was accompanied by a check drawn on the Harold Rose Agency account for $317.60, which was significantly less than the net commission of $555.80 that was due. The ultimate disposition of the Bernard application does not appear of record. Finally, in August 1992, Union Bankers received an inquiry on behalf of Mr. and Mrs. Anthony Feanny regarding the status of applications they had made for Union Bankers health insurance through the Harold Rose Agency. In this regard, the proof demonstrates that the Feannys were solicited by Allen James, an agent with the Harold Rose Agency, who secured applications for health insurance from them on three occasions, and received checks for the first year premium. The first check was for $2,021.00, dated February 20, 1991, and deposited to the Harold Rose Agency account on February 20, 1991; the second check was for $3,521.00, dated February 28, 1991, and deposited to the Harold Rose Agency account on March 8, 1991; and the third check was for $1,929.67, dated September 23, 1991, and deposited to the Harold Rose Agency account on October 3, 1991. According to Mr. James, the Feannys agreed for the agency to delay sending their applications to Union Bankers until a claim pending with another insurance company had been resolved. Whether that claim was ever resolved does not appear of record; however, the record does demonstrate that none of the three applications or any premiums were ever submitted to Union Bankers, and that, considering the balances maintained in the Harold Rose Agency account discussed infra, those premium funds were not maintained in trust. In August 1992, Union Bankers refunded the Feannys the premiums they had entrusted to the Harold Rose Agency. The premium refunds and premium credits made by Union Bankers to various applicants or insureds were, along with other transactions, reflected on Rose's account current statement with the company. As of August 31, 1991, Rose's statement reflected a debit balance of $21,534.48, and as of January 31, 1994, through the company's application of renewal commissions due Rose to the debit, a debit balance of $11,491.98. Absent additional debits, Rose's account with Union Bankers will be current within 15 to 18 months by applying his renewal commission to the outstanding debt. United American and the Rosenbaum, Jaffer, Lichtman and Rutkin transactions (Counts II-V) Counts II-V of the amended administrative complaint allege that Rose failed to remit premiums and applications solicited on behalf of United American from Fannie Rosenbaum (Count II), Adah S. Jaffer (Count III), Arnold Lichtman (Count IV) and Judith and Norman Rutkin (Count V), and misappropriated and converted such monies to his own use and benefit or unlawfully withheld such monies from the insurer and insured. Pertinent to these counts, the proof demonstrated that on November 19, 1991, United American and Rose, as agent, entered into a vested commission contract. That contract provided: APPOINTMENT AND RELATIONSHIP The Agent shall be a General Agent of the Com- pany and is authorized to solicit in person or through Sub-agents, applications for Insurance. Such applications are subject to Company ap- proval. The Agent may collect only the initial premium payments due on such applications. The relationship between the Agency, or any Sub-agent, and the Company shall be that of an independent contractor only, and not a rela- tionship of employer and employee. Any initial premiums collected by the Agency, or any Sub- agent, shall be held in trust by the Agent, on behalf of the Company, and the Agent shall have a duty to promptly remit the premiums to the Company, less applicable commissions due the Agent. The general transactions of busi- ness including eligibility requirements of ap- plicant will be governed by Company rules which may be changed, altered, or amended from time to time by the Company. COMMISSION COMPENSATION The Agent shall receive as full compensation for any expenses, as well as all services pro- vided by the Agent, the commissions on pre- miums paid on policies issued on applications secured by the Agent or any Sub-agents, as specified and set forth in the Schedule(s) of Commissions shown below. The Agent shall im- mediately remit to the Company all premiums collected by the Agent, or any Sub-agents, less the Agent's initial commission thereon. The Company may discontinue any plan or policy and/or change commissions on existing or new policies, but such change shall not affect any commissions due Agent on policies issued prior to the effective date of the change. The Com- pany shall determine the commission on any policy which is determined to be a replacement or conversion of any existing policy. * * * SCHEDULE OF COMMISSIONS - FLORIDA HEALTH PLANS: First Year Commissions Medicare Supplements - 34 percent, except no commissions will be paid on any portion of the premium for Part B deductible coverage. Other Health Plans - 54 percent, plus re- gistration fee (less $1 on monthly and quar- terly modes). Renewal Years Commissions Medicare Supplements - 17 percent, except renewal years commission will not include any portion of rate increases and no commissions will be paid on any portion of the premium for Part B deductible coverage. Other Health Plans - 12 percent Here, like Rose's agreement with Union Bankers, his agreement with United American permitted him to retain his commission from the first-year premium and remit the net to the company, along with the application. If the company declined to issue the policy, then Rose's account was debited for the amount he had retained. As to Count II, the proof demonstrates that on May 28, 1992, Rose received from Fannie Rosenbaum of Miami Beach, Florida, a check made payable to United American in the sum of $1,637.00 as payment of the initial premium on a United American health insurance policy Rose had solicited. This check was deposited to the account of the Harold Rose Agency at Florida International Bank on May 29, 1992, but no application or premium was remitted to United American. Following inquiry regarding the status of her application and proof of payment of the premium to Rose, and consistent with Ms. Rosenbaum's request of June 22, 1992, United American credited her account with the sum of $1,617.00 to renew a preexisting policy and refunded $20.00 to her. Subsequently, Ms. Rosenbaum requested the return of the balance of the premium ($1,617.00) and it was refunded to her by United American. By letter of July 10, 1992, United American demanded of Rose the premium he had been paid on its behalf by Ms. Rosenbaum, as well as an explanation for its non remittance. On September 22, 1992, United American received from the Rose Agency a partially completed application on Ms. Rosenbaum, but has yet to receive any part of the premium or any explanation for Rose's failure to timely remit the application and premium. As to Count III, the amended administrative complaint alleges that on or about June 9, 1992, Rose solicited and sold to Adah S. Jaffer a United American Health insurance policy, and received from Adah S. Jaffer a check made payable to United American in the sum of $3,475.00 as payment of the initial premium on the policy. The complaint further alleges that Rose failed to remit any premium or submit the application to United American, but misappropriated and converted the funds to his own use. At hearing, the deposition testimony of Adah S. Jaffer, marked as petitioner's exhibit 3, was not received into evidence. Notwithstanding, the testimony of Rose demonstrates that he took an application for insurance from the Jaffers, although its nature does not appear of record, and other competent proof demonstrates that a check dated June 9, 1992, drawn by Harold G. Jaffer and payable to United American in the sum of $3,425 was deposited to the account of the Harold Rose Agency at Florida International Bank on June 10, 1992. Moreover, the proof demonstrates that in September 1992, United American received an inquiry from the Jaffers regarding the status of their application and, upon review, discovered that no application or premium had been received by the company. Upon inquiry, the Rose Agent sent United American an incomplete application on the Jaffers, which was received September 22, 1992, but no premium. Subsequently, United American refunded the Jaffers $3,425, but Rose, despite demand, has failed to remit any part of the Jaffer premium to United American. As to Count IV, the proof demonstrates that on July 10, 1992, Rose received from Arnold Lichtman of Miami Beach, Florida, a check made payable to United American in the sum of $1,352 as payment for the first year premium on a United American Medicare Supplemental Insurance policy Rose had solicited. This check was deposited to the account of the Harold Rose Agency on July 15, 1992, but no application or premium was remitted to United American. Following inquiry by Mr. Lichtman on September 11, 1992, regarding the status of his application, United American discovered that no application or premium had been received by the company. Upon inquiry, the Rose Agency forwarded a partially completed application for Mr. Lichtman to United American on September 22, 1992, but no premium. In the interim, United American refunded Mr. Lichtman $1,352. Notice of the refund and request for reimbursement was mailed to Rose, but he has failed to remit any part of the premium to United American. As to Count V, the proof demonstrates that on July 23, 1992, Rose received from Judith Rutkin of Miami, Florida, a check made payable to United American in the sum of $1,352 as payment for the first year premium on a United American ProCare Plan F Medicare Supplemental insurance policy Rose had solicited. This check was deposited to the account of the Harold Rose Agency at Florida International Bankers on July 27, 1992, but no application or premium was submitted to United American. Mr. Rutkin, who became increasingly concerned about nondelivery of his wife's policy, and lack of communication from Rose, called United American on September 29, 1992, only to learn that no application or premium had been submitted to them. At United American's request, Mr. Rutkin wrote them a letter on October 9, 1992, explaining the circumstances and enclosing a copy of his wife's cancelled check. On October 15, 1992, United American reimbursed Mrs. Rutkin for her premium deposit. Notice of the refund and a request for reimbursement was mailed to Rose, but he has failed to remit any portion of the premium to United American. United American terminated Rose's agency agreement September 2, 1992, for his failure to remit premiums, and demanded reimbursement of the policy premiums. To date, Rose has failed to reimburse United American for the premium refunds it made. Unlike his account with Union Bankers, Rose's account with United American has no outstanding policies upon which Rose could receive renewal commissions and against which United American could apply the debt due it from Rose. The Harold Rose Agency bank account The Harold Rose Agency bank account at Florida International Bank is described as a business checking account, and Harold S. Rose is designated as the owner and sole signatory. As of June 31, 1992, the account had a negative balance (overdrawn) of $798.53, as of July 31, 1992, a positive balance of $1,092.11, as of August 31, 1992, a negative balance of $1,165.55, and as of the date of hearing a positive balance of $2.62. Rose's response According to Rose, he has delegated all office duties at his agency to two secretaries, and they are responsible for processing all applications, handling all finances (bank deposits, check writing, and review of bank statements), responding to inquiries from insurance companies, or anything else that has to do with office operations. Moreover, although he is the sole signatory on the agency bank account, Rose has authorized his secretaries to sign his name and, according to Rose, they sign all the checks on that account. Essentially, Rose suggests he has absolutely nothing to do with any office duties, but restricts his activities to selling and servicing his agents, and that when he takes an application and premium from a client he merely turns it in for processing with his secretaries like any other agent working for him. Rose further averred that he never intentionally withheld applications from the companies and never took any part of a premium that was not his. Notwithstanding, Rose offered no cogent or credible explanation for why the subject applications and premiums were not submitted to Union Bankers and United American in the regular course of business, why client inquiries repeatedly went unanswered, why repeated demands from the insurance companies were necessary to get the applications, why the net premiums due the companies were not held in his account, in trust, until disbursed according to law, or why the premiums have not been paid to the companies on demand or at any time to date. Under the circumstances, Rose's explanation and attempt to distance himself from responsibility for the operations of his agency are rejected as improbable and lacking credibility, and he is found to have intentionally deferred submitting applications and premiums to Union Bankers and United American, and to have diverted premiums entrusted to his agency for other than their intended purposes. 1/ But for the instant case, no complaint has been filed regarding Rose since his licensure as an insurance agent in the State of Florida in 1950, and no prior disciplinary action has been initiated by the Department of Insurance.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered which revokes respondent's licenses and eligibility for licensure in the State of Florida. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 6th day of April 1994. WILLIAM J. KENDRICK 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 6th day of April, 1994.
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
