The Issue The issue for consideration in this case is whether the Respondent's license as a viatical settlement provider in Florida should be disciplined because of the matters alleged in the Administrative Complaint dated June 29, 2000.
Findings Of Fact At all times relevant to the issues herein, the Petitioner, Department of Insurance (Department), was the state agency in Florida responsible for the licensing of viatical settlement providers and the regulation of the viatical settlement industry in this state. The Respondent, Accelerated Benefits Corporation (ABC), was licensed as a viatical settlement provider in Florida. Pursuant to an investigative subpoena issued by the Department, in November and December 1999, investigators of the Department examined the records of the Respondent, as well as other viatical settlement providers operating within the state, looking into the viatical settlement industry's practices in Florida. As a part of the investigation, Janice S. Davis, an examiner/analyst with the Department, copied records of the Respondent relating to at least six individual viatical settlement transactions in which the Respondent was involved. These files relate to Counts 5 through 7 and 9 through 11 of the Administrative complaint. Ms. Davis also obtained from the Respondent the information regarding the location of several other cases, the files for which had been confiscated by the Statewide Prosecutor as a part of an ongoing investigation into the viatical settlement industry, and subsequently obtained copies of those files from the office of the Statewide Prosecutor. Those files relate to Counts 1 through 4 and 8 of the Administrative Complaint. As outlined in Count Five of the Administrative Complaint, in May 1998, D.K. applied to The United States Life Insurance Company (US Life) for a $250,000 life insurance policy. As a part of the policy application, D.K. stated that he had not consulted with any physician or other practitioner within the five years prior to the application. On July 29, 1998, Life Benefit Services (LBS), a viatical settlement broker used by ABC, obtained a "Confidential Application Form" completed by D.K. which revealed that sometime in 1982, D.K. had been diagnosed as HIV positive. LBS prepared a "Policy Summary Sheet" regarding D.K.'s application on which it noted that D.K. had been diagnosed with HIV/AIDS. LBS also had records from D.K.'s physician reflecting that D.K. had been under a doctor's care during the preceding five years. The policy was issued to D.K. on or about August 1, 1998. Notwithstanding the information it had on hand, LBS brokered the sale of the instant policy to ABC. On or about August 25, 1998, D.K. and the Respondent entered into a contract which called for the Respondent to purchase D.K.'s $250,000 life insurance policy for $25,000. At that point, the policy was still contestable. As a part of the transaction, the Respondent gave D.K. written instructions not to contact his insurance company until advised to do so by ABC. The Respondent also had D.K. sign an addendum to the purchase contract in which he agreed to not advise US Life that he had sold his policy and acknowledged his recognition that his life insurance policy was still contestable. D.K. was also asked and agreed to sign an undated change of ownership form for use by ABC at the expiration of the period of contestability. While the policy was still contestable, an employee of the Respondent, Jennifer Grinstead, paid the annual premium on the policy out of her personal checking account. This served to conceal the fact that D.K. had sold the policy to the Respondent. Ms. Grinstead was reimbursed for the premium payment by American Title Company of Orlando. American Title was the Respondent's trustee. The Respondent did not report any of the information it had regarding D.K.'s actual health history to US Life or the Department. A review of the documentation related to this transaction reflected that the Respondent purchased the policy rights from D.K. after it knew, or with the exercise of reasonable diligence should have known, that D.K. had made material misrepresentations regarding his health to US Life, and nonetheless attempted to conceal those misrepresentation from US Life. With regard to Count Six, the evidence of record indicates that on May 4, 1997, W.E. applied for a $45,000 life insurance policy from Life USA Insurance Company (Life USA). On the application form he signed and submitted, W.E. specifically stated he had not received any medical or surgical advice or treatment within the preceding five years, had not been advised by a medical doctor that he had AIDS or ARC, and was not, at the time, taking any medication. Based on the representations made by W.E., the policy was issued on November 12, 1997. Notwithstanding the representations made by W.E. to Life USA, W.E. also advised United Viatical Settlements (UVS), the settlement broker used by the Respondent, on December 17, 1997, through a corollary application form, that he had been diagnosed with HIV "a few years ago," and several different other forms utilized by the Respondent reflect that the Respondent knew W.E. had AIDS or HIV, and was under a doctor's treatment for the condition during the preceding five years. Nonetheless, UVS brokered the sale of this policy to the Respondent. In late December 1997, at which time the policy was still contestable, the Respondent entered into a contract with W.E. for the purchase of the $45,000 policy for $4,914.25. As a part of the sales procedure, the Respondent issued to W.E. instructions not to contact his insurance company until instructed to do so by the Respondent's representative, and it also had W.E. sign an addendum to the purchase agreement in which W.E. acknowledged that the policy in issue was still contestable. W.E. was also asked to agree not to inform Life USA of the sale of the policy to the Respondent and to sign an undated change of ownership form for use by the Respondent to transfer ownership when the contestability period had expired. The arrangement between the Respondent and W.E. called for Jennifer Grinstead to pay the annual premium on the policy for W.E. from her personal account and to receive reimbursement for those payments from American Title Company, the Respondent's trustee. This arrangement served to conceal from Life USA the fact that W.E. had sold the policy to the Respondent. The Respondent did not report the fact that it had knowledge of W.E.'s medical condition to the Department. The evidence of record reflects that at the time of the purchase of W.E.'s policy, the Respondent knew or should have known that W.E. had made material misrepresentations regarding his medical state to Life USA on his application for life insurance from that company, and it thereafter took actions which served to conceal those material misrepresentations from the company. In the Case of Count Seven, on April 26, 1997, A.T. applied for a life insurance policy from Lincoln Benefit Life (Lincoln) in the amount of $48,000. On the application form, A.T. specifically stated that he had not been under medical observation or treatment within the preceding five years, and that he had not been diagnosed as having AIDS or ARC, or tested positively for HIV. The policy was issued by the company on or about June 2, 1997. Notwithstanding those representations, on January 14, 1998, Medical Escrow Society, a viatical broker used by the Respondent in its dealing with Lincoln, received an application form from A.T. on which A.T. indicated he had tested positive for HIV on August 8, 1989, had been diagnosed with AIDS ON August 10, 1994, and was under the care of a physician. Medical Escrow Society nonetheless brokered the sale of the policy to the Respondent. Shortly after the contestability period on this policy expired. On June 25, 1999, the owner of the policy, Ralph Cahall, entered into a contract with the Respondent whereby the Respondent bought Cahall's interest in the proceeds for $29,238.72. At the Respondent's request, ownership of the policy was changed from Cahall to American Title Company of Orlando, the Respondent's trustee without either Lincoln or the Department being informed of the transfer. The file relating to this policy indicates that the Respondent brought about the transfer from Cahall after it knew or, in the exercise of reasonable diligence should have known, that A.T. had made material misrepresentations regarding his health on the application to Lincoln, and that the Respondent, though it did not report what it knew to the Department, also thereafter undertook a course of action which was designed to conceal that information from Lincoln. With regard to Count Nine, the evidence indicates that on or about September 30, 1996, R.M. submitted an application for a $100,000 life insurance policy to Interstate Assurance Company (Interstate). On the application, R.M. indicated he had not been diagnosed with an immune system disorder within the preceding ten years, and the policy was issued on October 9, 1996. Notwithstanding that representation, on July 18, 1997, R.M. completed an application form for Benefits America, a broker used by the Respondent with regard to this policy, in which he stated he had been tested positive for HIV on February 11, 1994. A "Policy Acquisition Worksheet" utilized by the Respondent on or about July 22, 1997, when R.M. was dealing with Benefits America regarding the viatication of his life insurance policy, reflects that the company was aware at that time that R.M. had been diagnosed with HIV in 1994. Even with that knowledge, the Respondent went through with the viatication, and on July 31, 1997, while the policy was still within the contestability period, bought the policy for $15,430. On August 4, 1997, R.M. executed an addendum to the purchase agreement at the behest of the Respondent, wherein he recognized the policy was still contestable and agreed, among other things, not to contact his insurance company or tell them he had sold the policy to a viatical settlement provider. He also was asked to sign, and signed, an undated change of ownership agreement for use by the Respondent at the end of the contestability period. Jennifer Grinstead, an employee of the Respondent, paid R.M.'s annual premium on the policy during the contestibility period out of her personal checking account. This action, when done in conjunction with R.M.'s failure to advise the insurance company of the sale, served to conceal the transfer of ownership from R.M. to the Respondent. Ms. Grinstead was reimbursed for the premium payments by the Respondent's trustee. The Respondent did not report to Interstate or to the Department that R.M. had made material misrepresentations regarding his health in procuring the issuance of the policy even though it knew or, in the exercise of due diligence, should have known that the material misrepresentations had been made. As to Count Ten, on May 12, 1997, J.R. submitted an application to Interstate for a life insurance policy on his life in the amount of $980,000. On his application, J.R. indicated he had not been diagnosed with an immune system disorder within the preceding ten years, had not been treated by a member of the medical profession in the preceding five years, and was not, at the time, on medication or undergoing treatment or therapy. The policy was issued on May 19, 1997. Notwithstanding those representations, on July 9, 1997, J.R. filled out an application form for the Respondent's broker for this transaction, Life Benefit Services, on which he indicated he had been diagnosed as HIV positive in May 1996. A "Mortality Profile" provided to the Respondent by AVS indicated that J.R. was first diagnosed as being HIV positive in August 1995, nine months or so earlier than he admitted, and that he had been undergoing treatment by a doctor and receiving medications well within the five years preceding the application. On August 20, 1997, J.R. entered into a contract with the Respondent calling for the sale of this insurance policy to ABC for a net sum of $107,800. At this point, the policy was still contestable. At that time, the Respondent instructed J.R. in writing not to contact his insurance company until told to do so by the Respondent's representative. The Respondent also had J.R. sign an addendum to the purchase agreement in which he acknowledged the policy was still contestable, that he would not inform Interstate of the sale, and that he would sign an undated change of ownership form for use by ABC when the contestability period expired. Notwithstanding that the Respondent knew of the material misrepresentations made by J.R. as to his health when he procured the policy, it did not report what it knew to the Department, and took steps to insure Interstate was not informed of what was going on. With regard to Count Eleven, on May 16, 1996, the same J.R. applied to Massachusetts General Life Insurance Company, later, Conseco Life Insurance Company (Conseco), for a $99,900 life insurance policy. On his application, J.R. stated he had never had any medical tests or any known indication of diseases, conditions, or physical disorders which were not mentioned on the form. AIDS, ARC, and HIV positive were not mentioned on the form, and if known to have been present, should have been noted. About a year and three months later, on July 9, 1997, J.R. submitted an application form to Life Benefit Services, the broker used by ABC on this policy, on which he stated he had tested positive for HIV in May of 1996. By letter dated July 28, 1997, Life Benefit Services advised ABC that J.R. was terminally ill and had been on medication and undergoing treatment by a physician within the preceding five years. In addition to this information, the Respondent had available to it the information regarding J.R.'s condition discovered as a result of the purchase of the Interstate policy. Notwithstanding this knowledge, on September 17, 1997, while the policy was still contestable, ABC purchased the Conseco policy from J.R. for the net sum of $13,986. By letter dated September 17, 1997, the Respondent advised J.R. not to contact his insurance company until instructed to do so by Ms. Holman, the Respondent's Director of Contracts, and requested he execute an addendum acknowledging those instructions and that the Conseco policy was still contestable. He was also asked to agree to sign an undated change of ownership assignment for use by ABC after the contestability period had expired. While the policy remained contestable, the annual premiums due from J.R. were paid from her personal checking account by Ms. Grinstead, an ABC employee, who was reimbursed therefor by American Title, ABC's trustee. None of the above information was reported by the Respondent to Conseco or the Department even though it knew or, with the exercise of reasonable diligence should have known that J.R. had made material misrepresentations regarding his physical health in his application for life insurance to Massachusetts General Life Insurance company, and it appears the Respondent attempted to conceal those misrepresentations from Conseco.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Insurance enter a Final Order dismissing Counts One through Four and Eight of the Administrative Complaint, but finding the Respondent guilty of Counts Five though Seven and Nine through Eleven of the Complaint, and both revoking its license and its eligibility for licensure as a viatical settlement provider in Florida. DONE AND ENTERED this 28th day of December, 2000, in Tallahassee, Leon County, Florida. ___________________________________ ARNOLD H. POLLOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of December, 2000. COPIES FURNISHED: Michael H. Davidson, Esquire Department of Insurance 200 East Gaines Street 612 Larson Building Tallahassee, Florida 32399-0333 Mark K. Logan, Esquire Smith, Ballard & Logan, P.A. 403 East Park Avenue Tallahassee, Florida 32301 The Honorable Bill Nelson State Treasurer/Insurance Commissioner The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307
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 This is a license discipline case in which the Petitioner seeks to take disciplinary action against a licensee on the basis of alleged violations set forth in a one-count Administrative Complaint. It is alleged that the Respondent has violated numerous specified provisions of Chapters 626 and 631, Florida Statutes, by failing to satisfy a judgment entered against him in favor of the Department in its capacity as receiver for an insurance company.
Findings Of Fact At all times material to this case, the Respondent, Steven Peter Alicino, has been licensed to engage in the insurance business in the State of Florida. On or about December 21, 1993, a Consent Order was entered by the Circuit Court of the Second Judicial Circuit, in and for Leon County, Florida, appointing the Florida Department of Insurance as Receiver for General Insurance Company. On or about August 12, 1996, a Final Judgment was entered by the Circuit Court of the Second Judicial Circuit, in and for Leon County, Florida, in the amount of $2,377.40 in favor of the Department of Insurance as Receiver for General Insurance Company, and against Stephen Peter Alicino and Budget Insurance, jointly and severally. The judgment was for unearned insurance commissions retained by the Respondent and owed to General Insurance Company. On or about May 12, 1997, the Department of Insurance sent a certified letter to the Respondent demanding payment of the judgment described above. The Respondent received the letter on or about May 15, 1997. The judgment remains outstanding and unpaid.
Recommendation On the basis of all of the foregoing, it is RECOMMENDED that a Final Order be issued revoking the Respondent's license. DONE AND ENTERED this 22nd day of December, 1998, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH 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 22nd day of December, 1998. COPIES FURNISHED: Patrick Creehan, Esquire Department of Insurance Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Stephen Peter Alicino 634 Castilla Lane Boynton Beach, Florida 33435 Honorable Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Y. Sumner, General Counsel Department of Insurance and Treasurer The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300
The Issue The issues are (1) whether respondent's licenses as a life and health (debit) agent, life, health and variable annuity contracts agent, life agent, life and health agent, general lines agent and health agent should be disciplined for the reasons stated in the amended administrative complaint, and (2) whether respondent's applications for the issuance and renewal of a resident license should be granted.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: At all times relevant hereto, respondent, Stephen Schnur, was licensed and eligible for licensure as a life and health (debit) agent, life, health and variable annuity contracts agent, life agent, life and health agent, general lines agent - property, casualty, surety and miscellaneous lines, and health agent by petitioner, Department of Insurance and Treasurer (Department). When the events herein occurred, respondent was licensed as a property and casualty insurance agent for Clarendon National Insurance Company (CNIC) and had placed his license as a general lines agent with Devor Insurance Agency (DIA), an incorporated general lines insurance agency located at 6611 West Hillsborough Avenue, Tampa, Florida. He has been licensed by petitioner for approximately nineteen years. In August 1987 respondent was associated with Bill Ely Insurance (Ely) in Tampa, Florida. Because that firm was unable to write automobile insurance on young drivers, Schnur referred some of Ely's business to DIA, a firm owned by one Marcia Cline, who held no insurance licenses. In September 1987 Schnur received an offer from Cline of a weekly salary of $150 if he would place his property and casualty general lines agency license with DIA. After obtaining independent verification from petitioner that DIA had no pending "problems", and accepting Cline's representation, albeit false, that the firm had an errors and omissions policy, respondent accepted Cline's offer and placed his license with DIA effective that month. He continued to utilize his other licenses to sell insurance for Ely, his principal employer. It should also be noted that another unnamed general lines agent had placed her license at DIA during this same period of time. At first Schnur attempted to review all automobile insurance applications received by DIA. However, because of his duties at Ely, he was unable to devote more than a few hours per week to DIA. In view of this, he agreed to sign in blank applications and binders for Cline to use in his absence. In doing so, he relied upon Cline's honesty and integrity and assumed she would forward all applications and premiums to the insurance company and secure coverage for DIA's customers. Under this arrangement, Cline was considered to be an employee of DIA and operating under Schnur's direct supervision and control. In October 1987 five customers purchased various types of automobile insurance from Cline. 1/ Each customer gave Cline either cash or checks as payment for their policies. Although none of the customers met with or spoke with respondent, and dealt exclusively with Cline, each received a binder from Cline signed by respondent evidencing insurance with CNIC. In addition, Cline gave each customer a receipt of payment also carrying respondent's signature. As it turned out, Cline did not process the applications or forward them to CNIC. She also failed to remit any monies to the insurance company. Consequently, none of the customers received a policy from CNIC or any other insurance company. However, respondent had no reason to suspect anything since he periodically examined the office files during this period of time and found all documents in order. On January 3, 1988, respondent learned from other office personnel that there was a problem with Cline's handling of insurance applications. He immediately telephoned petitioner's Tampa district office the same day and advised that DIA applications were found unprocessed and in the waste basket. When Schnur asked if he should pull his license from DIA, he was told by petitioner's representative not to do anything. In the meantime, the other general lines agent at DIA pulled her license and left the state. On January 28, 1988 DIA sent a form letter to various customers, including the five who had purchased policies in October 1987. The letter read as follows: Dear We are writing you this letter concerning the insurance policy which you sought through our agency. Please consider this letter as official notification from our agency that you need to purchase insurance coverage from another agency or agencies as soon as possible. You have no insurance coverage on your vehicle or vehicles. Again, you must secure insurance on your vehicle or vehicles immediately, as in today!! Sincerely, Devor Insurance Agency It should be noted that none of the five customers received any refund of monies. In early February 1988 respondent pulled his license with DIA. Since then, he has worked full-time with Ely. Respondent has fully cooperated with the Department during the course of this investigation. At hearing, Schnur was can did and forthright and admitted he used extremely poor judgment in signing in blank the binders and receipts and relying on Cline's honesty. However, there was no intent on his part to violate the insurance code or otherwise harm the customers. He strongly desires to continue in the insurance profession, a field in which he has worked without a blemish for the last nineteen years. His present employer, Ely, has expressed complete trust and confidence in Schnur, allows him to handle all of the firm's money, and intends to reward him with a part ownership of that business. Other than the charges set forth in the pending amended administrative complaint, there is no basis upon which to deny the applications for renewal and issuance of a resident license.
Conclusions Paragraph 2 of Petitioner's exceptions takes exception to the Hearing Officer's Statement of the Issues, Preliminary Statement, Conclusions of Law, and Recommendation because none of these sections of the Recommended Order address the April 9, 1990 denial of the renewal of Respondent's resident license to represent C M Life Insurance Company as a life and health insurance agent. Petitioner filed a motion for consolidation regarding the April 9 denial on April 17, 1990. Although the record contains no Order ruling on-the last motion for consolidation, it appears that the parties agreed that the April 9 denial be considered together with the administrative complaint and the denial of Respondent's application to represent United States Life Insurance Company of NY as a life and health insurance agent (February 14, 1990) and the denial of Respondent's application to represent Acceleration Life Insurance Company as a life and health insurance agent (April 6, 1990). Because the three denials of Respondent's applications for licensure or renewal of licensure were based upon the allegations in the administrative complaint in this case, all three denials (February 14, April 6, and April 9, 1990) will be consolidated with the administrative complaint for disposition by this Final Order. Accordingly, Petitioner's exception numbered 2 is accepted. RULING ON PETITIONER'S EXCEPTION TO CONCLUSIONS OF LAW Paragraph 3 of Petitioner's Exceptions takes exception to the Hearing Officer's Conclusion of Law numbered 4 because that Conclusion of Law refers to Section 626.611(6), Florida Statutes, which was not alleged in the administrative complaint, and the Conclusion of Law does not refer to Section 626.611(7), Florida Statutes. Section 626.611(6), Florida Statutes addresses misrepresentations by insurance claims adjusters or agents in effecting claims settlements. Clearly, Section 626.611(6), Florida Statutes has no application to the instant case, and violation of that section was not charged in the administrative complaint. On the other hand, Section 626.611(7), Florida Statutes lists the demonstration of lack of fitness or trustworthiness to engage in the business of insurance as grounds for the-suspension or revocation of an insurance agent's license. This statute was included in the charges in each count of the administrative complaint. The hearing officer apparently considered Section 626.611(7), Florida Statutes, in his Conclusions of Law numbered 3 and 4. Accordingly, the citation to Section 626.611(6), Florida Statutes is deemed to be a typographical error and it is assumed that Section 626.611(7), Florida Statutes was the intended citation. In light of the foregoing, Petitioner's exception in Paragraph 3 is accepted. RULING ON PETITIONER'S EXCEPTION TO RECOMMENDATION Paragraph 4 of Petitioner's Exceptions takes exception to the Hearing Officer's Recommendation that Respondent's license be suspended for fifteen (15) days and that Respondent's applications for licensure be granted after the expiration of the fifteen-day suspension. After a complete evaluation of the record the hearing officer's recommended penalty of a 15-day suspension and acceptance of Respondent's applications after the 15-day suspension is hereby rejected for the following reasons: The Hearing Officer found, in Findings of Fact numbered 2, that Respondent accepted an offer to "place" his general lines insurance agent license with Marcia Cline, an unlicensed person. This finding is supported by the Respondent's testimony at hearing. (Tr. 71, 72) Respondent was compensated with a weekly salary of $150. (Tr. 72); The Hearing Officer found, in Findings of Fact numbered 3, that Respondent had signed, in blank, applications and binders for Cline to use in Respondent's absence. This finding is supported by Respondent's testimony at hearing. (Tr. 72, 79, 81); The Hearing Officer concluded, in Conclusions of Law numbered 4, that Cline wrongfully withheld premiums from the insurer, made willful misrepresentations to her customers, demonstrated a lack of trustworthiness, engaged in fraudulent and dishonest practices, and misappropriated monies belonging to others, as proscribed by sections 626.561(1), 626.611(5), 626.611(7), 626.611(9) and 626.611(10), Florida Statutes. The Hearing Officer further concluded that Respondent is responsible for Cline's wrongdoing pursuant to Section 626.734, Florida Statutes. (Concl. of Law #4); The Hearing Officer was of the opinion that Respondent was "the victim of circumstances which happened to place his license with the wrong person at the wrong time, and because of poor judgment, is now saddled with Cline's misconduct." (Concl. of Law #5). This circumstance, together with the facts that Respondent immediately notified the Department when he learned that Cline had misused his license (Finding of Fact #6) and that Respondent was candid and forthright under oath at the hearing of this matter and admitted that he used poor judgment (Finding of Fact *8), led the Hearing Officer to recommend the 15- day suspension. It should be noted that Respondent voluntarily "placed" his license with an unlicensed individual. (Tr. 71, 72). Not only was this "placing" of the license the result of poor judgment, but it is prohibited by Section 626.441, Florida Statutes. That section provides: 626.441 License or permit: transferability.--A license or permit issued under this part is valid only as to the person named and is not transferable to another person. S626.441, Fla. Stat. Accordingly, it is illegal to place an insurance agent's license on the wall of an agency in order to assist unlicensed persons in selling or servicing insurance policies in the absence of the licensed agent. However, because a violation of Section 626.441, Florida Statutes was not alleged in the Administrative Complaint, this final order does not rule on that issue. Additionally, agents are prohibited from supplying blank forms, applications and other supplies to unlicensed persons for use in soliciting, negotiating, or effecting contracts of insurance. S626.342, Fla. Stat. Respondent admitted that he signed blank applications and binders for Cline, an unlicensed individual, to use in his absence. (Fact Stipulation of March 5, 1990; Finding of Fact *3). Violation of Section 626.342, Florida Statutes was not alleged in the Administrative Complaint, and is not addressed by this Order. While Respondent was not charged with violation of Sections 626.342 and 626.441, Florida Statutes in the Administrative Complaint, his "poor judgment" in becoming involved in this illegal arrangement is an aggravating rather than a mitigating factor in this case. Accordingly, this aggravating factor should be considered together with the mitigating factors referred to by the Hearing Officer. The Hearing Officer concluded that Respondent is liable for the acts of Cline while his license and signature were used by Cline, and that therefore, Respondent is guilty of violating five subsections of Section 626.611, Florida Statutes. Section 626.611, Florida Statutes compels the Department of Insurance to deny, suspend, revoke, or refuse to renew or continue the license of any agent who commits any of the acts listed in Section 626.611, Florida Statutes. However, the mitigating factors found by the Hearing Officer in Conclusion of Law numbered 5, namely Respondent's immediate notification of the Department when he learned of possible wrongdoing and Respondent's cooperation in the investigation, make the 15-day suspension an appropriate, if lenient, penalty in this case. However, the aggravating factor of the improper situation entered into by Respondent in "placing" his license and supplying forms to Cline renders acceptance of Respondent's applications at the end of the 15-day suspension period inappropriate in this case. Petitioner's exception to the Hearing Officer's Recommendation is therefore accepted. IT IS THEREFORE ORDERED: That the Findings of Fact of the Hearing Officer are hereby adopted in toto as the Department's Findings of Fact. That the Conclusions of Law of the Hearing Officer are hereby adopted in toto with the exceptions noted above; That the recommendation of the Hearing Officer is hereby rejected for the reasons set forth in paragraph 4 above, Ruling on Petitioner's Exception to Recommendation; That Respondent is guilty of violating subsections 626.561(1), 626.611(1), 626.611(5), 626.611(7), 626.611(9), and 626.611(10), Florida Statutes; That as a result of Respondent's violations of the above referenced statutes, the licenses and eligibility for licensure of Respondent, Steven Schnur, are hereby SUSPENDED for a period of fifteen (15) days, effective upon the date of this Order. The denial letters dated February 14, 1990, April 6, 1990, and April 9, 1990 are hereby AFFIRMED. Upon expiration of the suspension period, Respondent is free to reapply for any insurance licenses, and the Department of Insurance shall not deny Respondent's applications based upon any of the facts and circumstances at issue in this action. Any party to these proceedings adversely affected by this Order is entitled to seek review of this Order pursuant to Section 120,68, Florida Statutes and Rule 9.110, Florida Rules of Appellate Procedure. Review proceedings must be instituted by filing a petition or notice of appeal with the General Counsel, acting as the agency clerk, at 412 Larson Building, Tallahassee, Florida 32399- 0300, and a copy of the same with the appropriate district court of appeal within thirty (30) days of the rendition this Order. ORDERED this 21 day of June , 1990. TOM GALLAGHER Treasurer and Insurance Commissioner Honorable Donald R. Alexander Hearing Officer Division of Administrative Hearings 1230 Apalachee Parkway Tallahassee, FL 32399-1550 Alan J. Kerben, Esquire 8814 Rocky Creek Drive Tampa, FL 33615 C. Christopher Anderson, III, Esquire Department of Insurance Division of Legal Services 412 Larson Building Tallahassee, FL 32399-0300
Recommendation Based on the foregoing findings of fact and conclusions of law, it is: RECOMMENDED that respondent be found guilty of violating subsections 626.561(1) and 626.611(5),(6),(9) and (10) that his licenses be suspended for fifteen days. The other charge should be dismissed with prejudice. It is further recommended that his applications for renewal and issuance of resident licenses be approved after the suspension is lifted. DONE AND ORDERED this 19 day of April, 1990, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administative 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 19 day of April, 1990.
Findings Of Fact At all times pertinent to this proceeding, Respondent was licensed in this state by the Petitioner as an insurance agent. Respondent was licensed, pursuant to the Florida Insurance Code (Chapter 626, Florida Statutes) as a general lines agent, a health insurance agent, and a residential property and casualty joint underwriting association representative. In February 1990, Maria del Carmen Comas, who was subsequently known as Maria del Carmen Diaz (hereinafter referred to as Maria Diaz), was licensed by Petitioner as an insurance agent. By Final Order entered September 20, 1994, the licensure of Ms. Diaz was revoked by the Petitioner. At all times pertinent to this proceeding, Respondent and Ms. Diaz maintained a close personal and professional relationship. On October 12, 1990, an entity known as The First Assurance, Inc., (hereinafter referred to as FIRST) was incorporated under the laws of the State of Florida. At all times pertinent to this proceeding, Respondent was the president and sole officer of FIRST, which is a Florida incorporated general lines insurance agency. FIRST operated out of offices located at 10680 Coral Way, Miami, Florida (hereinafter referred to as the Coral Way location) until June 1994, when Respondent moved the office of FIRST to 8780 Sunset Drive, Miami, Florida. On September 21, 1993, an entity known as The First Assurance of Miami, Inc., (hereinafter referred to as FIRST OF MIAMI) was incorporated under the laws of the State of Florida by Respondent and Maria Diaz. At all times pertinent to this proceeding, Respondent was the president and sole officer of FIRST OF MIAMI, a Florida incorporated general lines insurance agency doing business at 8780 Sunset Drive, Miami, Florida (hereinafter referred to as the Sunset Drive location). Respondent and Ms. Diaz were equal owners of FIRST OF MIAMI until that corporation ceased its operation in February 1995. On August 26, 1994, an entity known as Marlin Insurance Agency, Inc., (hereinafter referred to as MARLIN) was incorporated under the laws of the State of Florida. Respondent was the sole incorporator of MARLIN. At all times pertinent to this proceeding, Respondent was the president and sole officer of MARLIN, a Florida incorporated general lines insurance agency doing business at the Sunset Drive location where Respondent operated FIRST and FIRST OF MIAMI. MARLIN was originally incorporated for the purpose of purchasing the business of Rodal Insurance Agency in Hialeah, Florida. After the purchase of Rodal was rescinded by court order, MARLIN remained dormant until February 1995, when MARLIN began operating as a general lines insurance agency at the Sunset Drive location. At all times pertinent to this proceeding, Respondent was the supervising agent of MARLIN. As long as FIRST and FIRST OF MIAMI maintained separate offices, Respondent managed the day to day affairs of FIRST and Ms. Diaz managed the day to day affairs of FIRST OF MIAMI. After FIRST moved its offices into those of FIRST OF MIAMI, the separation of management became less distinct. At all times pertinent to this proceeding, Carlos Gonzalez was an employee of FIRST or of FIRST OF MIAMI. Mr. Gonzalez was hired and trained by Respondent and worked under his direct supervision. At no time pertinent to this proceeding did Mr. Gonzalez hold any license or appointment under the Florida Insurance Code. At all times pertinent to this proceeding, Alvaro Alcivar was an employee of FIRST OF MIAMI or of MARLIN. Mr. Alcivar acted under the supervision of either Maria Diaz or of Respondent. At no time pertinent to this proceeding did Mr. Alcivar hold any license or appointment under the Florida Insurance Code. At all times pertinent to this proceeding, Respondent had sole signatory authority of the FIRST's account number Number33080870-10 (the FIRST expense account) and of FIRST's account Number0303043975-10, both maintained at Ready State Bank in Hialeah, Florida. At all times pertinent to this proceeding, Respondent had joint signatory authority with Maria Diaz of the FIRST's account number Number33095150-10 maintained at Ready State Bank in Hialeah, Florida. At all times pertinent to this proceeding, Respondent had joint signatory authority with Maria Diaz of the FIRST OF MIAMI's account number Number33095630-10 maintained at Ready State Bank in Hialeah, Florida. At all times pertinent to this proceeding, Respondent had sole signatory authority of the FIRST OF MIAMI's account number Number0303116492-10 maintained at Ready State Bank in Hialeah, Florida. All premiums, return premiums and other funds belonging to insureds, insurers, and others received in transactions under his license were and remain trust funds held by Respondent in a fiduciary capacity. Respondent obtained a power of attorney from his customers as a routine business practice. Respondent has repeatedly issued checks in payment of fiduciary funds that have subsequently been dishonored by the bank because the account on which the checks were drawn had insufficient funds. ARCAMONTE TRANSACTION (COUNT ONE) On or about July 14, 1993, Susan Arcamonte of Miami, Florida, purchased a new car. Susan Arcamonte needed insurance for this automobile and discussed that need with Carlos Gonzalez, who was employed by FIRST. As a result of her discussions with Mr. Gonzalez, Ms. Arcamonte agreed to purchase a policy of insurance that would be issued by Eagle Insurance Company. The annual premium quoted by Mr. Gonzalez for this policy totaled $1,618.00. Mr. Gonzalez advised her that there would be additional charges if the premium was paid by a premium finance company. Because she did not have the funds to pay the lump sum annual premium and did not want to finance the premium, she had her parents, Edmond and Nancy Arcamonte, pay the annual premium. As instructed by Carlos Gonzalez, this check was in the amount of $1,618.00 and was made payable to "The First Assurance, Inc." This check was in full payment of the annual premium for the automobile insurance policy that was to be issued by Eagle Insurance Company. After receiving the check from Mr. and Mrs. Arcamonte, Mr. Gonzalez issued to Susan Arcamonte an insurance card containing the name "The First Assurance, Inc." and binder numbers 12873 and 931374 written across the top. Mr. Gonzalez represented to Ms. Arcamonte that this was a binder of the coverage they had discussed. Mr. Gonzalez thereafter delivered the check and the completed application for insurance to FIRST. Respondent reviewed the application for insurance and signed the application. The Arcamontes' check was thereafter deposited by Respondent into the FIRST expense account at Ready State Bank, Hialeah, Florida. In July 1993, Respondent or some person in his employ at FIRST and acting with his knowledge under his direct supervision and control, affixed the signature of Susan Arcamonte to a Century Premium Insurance Finance Co., Inc. (Century PFC) premium finance agreement and, in the space provided for her address, filled in the office address of FIRST. Ms. Arcamonte's signature was affixed to this agreement without her knowledge or consent. Respondent personally signed the premium fiance agreement that was sent to Century PFC. Because the address of FIRST was inserted on the premium finance agreement, Ms. Arcamonte did not receive payment coupons, cancellation notices, and other correspondence from Century PFC. Consequently, the existence of the premium finance agreement was concealed from Ms. Arcamonte. The original application for insurance signed by Susan Arcamonte contained a power of attorney purporting to grant Respondent the authority to sign Ms. Arcamonte's name to "applications or similar papers including premium finance contracts". There was no disclosure that the signature on the premium finance agreement was not that of Ms. Arcamonte or that FIRST was executing her signature pursuant to a power of attorney. Respondent contends that the premium finance agreement was executed pursuant to the power of attorney because the check from Mr. and Mrs. Arcamonte was inadvertently separated from her application for payment and erroneously deposited into the FIRST expense account. This contention lacks credibility and is rejected. The fact that Respondent deposited the check in his expense account, that the paperwork for the premium finance agreement contained the FIRST address, that Respondent took no action to rectify this alleged error even after receiving correspondence from the finance company, and that Ms. Arcamonte's signature was forged on the application belie Respondent's contention that this was an innocent mistake. On or about September 20, 1993, the Eagle Insurance policy that Ms. Arcamonte purchased was cancelled for nonpayment of premiums because Respondent, or persons acting under his direct supervision and control, failed to make a regular installment payment on the premium finance agreement. Ms. Arcamonte never received the 10 Day Notice of Cancellation Notices that Century PFC mailed to FIRST's address. It was not until October 1993 when she received a Notice of Cancellation from Eagle mailed September 27, 1993, that she learned that her policy had been cancelled effective September 20, 1993. As a result of Respondent's actions and those of Carlos Gonzalez, Susan Arcamonte failed to timely receive automobile insurance, suffered a finance charge for automobile insurance without her knowledge or consent, had her automobile insurance cancelled, and incurred higher premium charges for subsequent coverage because of a gap in her coverage. Following a criminal complaint filed against him by Ms. Arcamonte, Respondent was arrested and placed in a pretrial intervention program. It was only after this action was taken that Respondent made restitution to the Arcamontes for the $1,618.00 premium they paid. At no time during the transaction, did the Arcamontes deal with anyone from the FIRST other than Carlos Gonzalez. Mr. Gonzalez held himself out to be and acted as an insurance agent during this transaction. Specifically, Carlos Gonzalez did the following: Was introduced to the Arcamontes as an insurance agent and did not correct that misidentification. Interviewed Susan Arcamonte to gather the information necessary to determine level of coverage and to quote a premium for that coverage. Discussed coverage options and requirements including whether Ms. Arcamonte needed personal injury protection. Discussed deductible options and answered general questions about insurance. Selected an insurer for Ms. Arcamonte, quoted a premium for that coverage, and made representations as to the quality of the insurer. Offered to bind insurance coverage for the automobile Ms. Arcamonte was in the process of purchasing and sent a binder to her at the automobile dealership via fax. Personally completed the insurance application and related paperwork. Personally completed an insurance identification card, including binder numbers, as proof of insurance, and presented the identification card to Ms. Arcamonte. Presented Ms. Arcamonte with a business card that identified himself as a representative of FIRST. Respondent knew or should have known of the acts of Carlos Gonzalez. Respondent received from Mr. Gonzalez the application for insurance he had completed for Ms. Arcamonte so that all Respondent had to do was sign it. JOHNSON - MOREL TRANSACTION (COUNT TWO) On May 31, 1993, Linda E. Johnson and her husband, Miguel Morel, visited the residence of Wilfreido Cordeiro, an employee of FIRST who was acting on behalf of FIRST. As a result of their conversation with Mr. Cordeiro about their insurance needs, Mr. Morel and Ms. Johnson completed an application for automobile insurance from Armor Insurance Company (Armor) to be issued through FIRST. Mr. Cordeiro, who was not licensed by Petitioner for any purpose, held himself out to be an agent. He represented to these consumers that coverage with Armor was bound and gave them an identification card with the FIRST name on it that purported to be a binder of coverage. The FIRST insurance identification card was issued without authorization from Armor and in violation of the established policies and practices of Armor. Because Mr. Cordeiro was unlicensed, Respondent acted as the agent of record for this transaction. On or about May 31, 1993, Mrs. Linda E. Johnson tendered to Respondent, or persons acting with his knowledge and under his direct supervision and control, a check in the amount of $500.00 payable to FIRST as a premium down payment for the automobile insurance from Armor. On or about June 4, 1993, Respondent, or persons acting with his knowledge and under his direct supervision and control, deposited Mrs. Johnson's check in the FIRST expense account at the Ready State Bank. On or about June 29, 1993, Mrs. Johnson was contacted by her bank and informed that she had no automobile insurance. She immediately contacted Respondent who provided the bank with a certificate of insurance indicating coverage was placed with American Skyhawk Insurance (American Skyhawk) effective June 1, 1993. No authority to bind coverage had been extended by American Skyhawk prior to the submission of the application two and one-half months after the coverage effective date indicated on the certificate of insurance. On or about August 18, 1993, Respondent, or persons acting with his knowledge and under his direct supervision and control, completed a Century PFC and affixed thereto the signature of Mr. Morel without his knowledge or consent. This agreement reflected that Mr. Morel had paid the sum of $400.00 as a downpayment, despite the fact that Mrs. Johnson's check, in the amount of $500.00, had been received and deposited in the Respondent expense account. As a result of Respondent's action, Mrs. Johnson and Mr. Morel failed to timely receive automobile coverage; suffered a finance charge for automobile insurance without their knowledge or consent; and suffered the loss in at least the amount of $100.00. At no time during the transaction with FIRST did Mr. Morel or Mrs. Johnson knowingly execute a power of attorney. HWANG TRANSACTION (COUNT THREE) On August 29, 1992, Mr. Show Ming Hwang of Miami, Florida, purchased via telephone a policy of insurance for a car he was purchasing. Mr. Hwang called from a car dealership and spoke to an employee of FIRST who was acting under Respondent's direct supervision. Mr. Hwang tendered to FIRST a check in the amount of $869.00 as the full premium for this insurance, which was to be issued by an insurer named Security National. Respondent was the agen t of record for this transaction. Security National issued policy NumberSN00127048 providing insurance coverage for Mr. Hwang effective August 29, 1992. On December 22, 1992, Mr. Hwang asked FIRST to cancel his policy with Security National because he had moved and had secured other coverage. On January 15, 1993, Security National cancelled insurance policy NumberSN00127048 in response to Mr. Hwang's request. On January 26, 1993, Security National sent to Respondent its check Number216878 in the sum of $366.35 payable to Mr. Hwang. This check was a refund of the unearned premium for the cancelled policy. In addition to the unearned premium, Mr. Hwang was also entitled to a refund of the unearned commission from FIRST. The amount of the unearned commission was $64.55 and should have been paid by FIRST directly to Mr. Hwang. On February 8, 1993, Respondent, or an employee of FIRST acting under his direct supervision, endorsed the check from Security National in the name of Mr. Hwang and deposited that check in the FIRST expense account at Ready State Bank. Mr. Hwang was unaware that his name had been endorsed on the check and had not authorized such endorsement. This endorsement was not pursuant to a validly executed power of attorney. Mr. Hwang made repeated attempts to obtain the refunds to which he was entitled. Finally, he secured the intervention of the Petitioner. After that intervention, Respondent issued a FIRST check on December 17, 1993, payable to Mr. Hwang in the amount of $431.00 as payment of the refunds. Less than a month later, this check was dishonored because there were insufficient funds in the account on which it was drawn. After further intervention by the Petitioner, Respondent issued a cashier's check in the amount of $431.00 payable to Mr. Hwang. This check, dated March 22, 1994, was thereafter received and deposited by Mr. Hwang. Respondent failed to return the refunds to Mr. Hwang in the applicable regular course of business and converted the refund from Security National to his own use until the intervention of the Petitioner. As a result of Respondent's actions, Mr. Hwang failed to timely receive these refunds. MARIA DIAZ (COUNT FOUR) On September 20, 1994, the Petitioner entered a Final Order that revoked all licenses that it had previously issued to Maria Diaz (who was at that time known as Maria del Carmen Comas). In September 1994, Ms. Diaz, accompanied by Respondent, visited the Petitioner's office in Miami where she was told that the revocation of her license was forthcoming. After that information was given to them, Respondent and Ms. Diaz knew or should have known that the revocation of her licensure was imminent. There was insufficient evidence to establish when Ms. Diaz received a written copy of the order revoking her licensure. Ms. Diaz and Respondent assert that they did not know about the revocation until the end of January, 1995. The order entered in September 1994 prohibited Ms. Diaz from engaging in or attempting to engage in any transaction or business for which a license or appointment is required under the Insurance Code or directly owning, controlling, or being employed in any manner by any insurance agent or agency. After Respondent and Ms. Diaz had been told that the revocation of her licensure was imminent, Ms. Diaz engaged in transactions requiring licensure and acting in violation of the order revoking her licensure. This activity included applying to Seminole Insurance Company (Seminole) in December 1994 seeking appointment as a general lines insurance agent by Seminole, the submission of a large number of applications to Seminole, and the mishandling of an insurance transaction with Johannah Rexach in July and August 1995. Ms. Diaz began a business as a travel agent at the MARLIN office and continued to be present in the MARLIN office long after she had received written notice of the revocation of her licensure by Petitioner. At least on one occasion in May 1995, Ms. Diaz answered the MARLIN telephone by saying "insurance". Ms. Diaz continued to greet her former insurance customers and mailed out renewal notices after both she and Respondent had actual knowledge of the revocation of her licensure. Respondent knew or should have known of Ms. Diaz's activities. While there was insufficient evidence to establish that Ms. Diaz was formally on MARLIN's payroll, the evidence is clear and convincing that Respondent permitted Ms. Diaz to share office space while she attempted to develop her travel agency and that, in return, Ms. Diaz helped out at the MARLIN office. Respondent employed the services of Ms. Diaz and he placed her in a position to engage in transactions that required licensure after he knew or should have known that her licensure had been revoked. MARTINEZ TRANSACTION (COUNT FIVE) On April 23, 1994, Mr. and Mrs. Santiago Martinez of Miami, Florida, completed applications for automobile insurance from Fortune Insurance Company (Fortune) and Aries Insurance Company (Aries). The record is unclear as to whether the insurance was to be issued through FIRST or FIRST OF MIAMI. The individual with whom Mr. and Mrs. Martinez dealt was Alvaro Alcivar. This was during the time that FIRST and FIRST OF MIAMI maintained separate offices and it was before Respondent and Ms. Diaz had been told that her licensure was about to be revoked. The greater weight of the evidence established that Mr. Alcivar was, at that time, an employee of FIRST OF MIAMI and that he was working under the supervision of Maria Diaz. Succinctly stated, premiums paid by Mr. and Mrs. Martinez were deposited into a FIRST OF MIAMI bank account that showed First Assurance of Miami, Inc., d/b/a Complete Insurance as the owner of the account. The premium payment was not forwarded to the insurer. Because of this failure, Mr. and Mrs. Martinez did not receive insurance coverage for which they had paid. While Petitioner established that Mr. Alcivar and whoever was his supervising agent mishandled this transaction, there was insufficient evidence to establish that Respondent was aware of this transaction until Mr. and Mrs. Martinez demanded a refund of the premium they had paid. At that juncture, he attempted to resolve the problem. Consequently, it is found that the evidence failed to establish that Respondent was responsible for these violations of the Florida Insurance Code. ZAFRANI TRANSACTION (COUNT SIX) In July 1992, Mr. Issac Zafrani and his son, Ramon, of Miami, Florida, purchased automobile insurance with Oak Casualty Insurance Company (Oak) after dealing with Carlos Gonzalez. The various documents associated with this transaction refer to the agency issuing this policy as FIRST, FIRST OF MIAMI, or Rodal Insurance Agency. Mr. Gonzalez was an employee of FIRST and operated under the direct supervision of Respondent. The entire transaction was completed by Mr. Gonzalez at the automobile dealership where Mr. Zafrani was purchasing an automobile. All subsequent dealings by Mr. Zafrani was through Mr. Gonzalez by telephone or at locations other than the offices of FIRST. Mr. Gonzalez held himself out to be and acted as an insurance agent during this transaction. Specifically, Carlos Gonzalez did the following: Was introduced to the Zafranis as an insurance agent and did not correct that misidentification. Personally completed the insurance application and related paperwork. Discussed coverage and deductible options. Selected an insurer for the Zafranis, deter- mined the premium for the coverage, and accepted the payment for the premium. Personally completed an insurance identifi- cation card, including what purported to be proof of insurance, and presented the identification card to the Zafranis. Presented the Zafranis with a business card that identified himself as a representative of FIRST. The Zafranis paid for the renewal of their policy through FIRST each year on an annual basis. On September 1, 1994, the Zafranis tendered to Mr. Gonzalez their check in the amount of $1,748.00 as payment in full of the annual premium for the policy year 1994-95. This check was made payable to FIRST OF MIAMI and was deposited in the FIRST Expense Account at Ready State Bank ( Number0303080870- 10). Respondent was the only person with authority to sign on this account. On September 30, 1994, an employee of FIRST completed a premium finance agreement that purported to finance the Zafranis' premium for the Oak Casualty insurance and forged Issac Zafrani's signature to that agreement. This false document reflected that the total premium was $1,748.00 and that the Zafranis had made a downpayment of $524.00 and had an unpaid balance of $1,224.00. This action was taken without Issac Zafrani's knowledge or consent. Mr. Zafrani had not executed a power of attorney to authorize these acts. Respondent knew or should have known of this act. On September 30, 1994, Respondent, or an employee of FIRST working under his direct supervision, issued a premium finance draft from Artic to Oak in the amount of $1,485.80 based upon this false application. A few weeks after they paid the renewal premium, the Zafranis complained to Mr. Gonzalez that they had not received their renewal policy from Oak. Mr. Gonzalez advised them that the company had cancelled their policy in error. He promised that he would investigate the matter and take corrective action. On December 23, 1994, Respondent, or an employee of FIRST acting under his direct supervision, submitted an automobile insurance application to Seminole Insurance Company indicating that coverage had been bound for Issac Zafrani. On December 23, 1994, Respondent issued FIRST check Number1196 payable to Seminole in the amount of $1,681.65 in payment of the policy he was attempting to secure on behalf of the Zafranis. On or about December 27 1994, Mr. Gonzalez issued to the Zafranis a FIRST card with what purported to be a binder number from Seminole Insurance Company. No authorization to bind that coverage had been issued by Seminole. On January 3, 1995, Artic issued a cancellation notice on the Oak Casualty policy because of missed payments on the premium finance agreement. The Zafranis did not know about this premium finance agreement and Respondent failed to make the payments. In January 1995, FIRST check Number1196 that had been tendered to Seminole was dishonored by Respondent's bank because the account on which the check was drawn had insufficient funds to pay the check. As a result of these actions, the Zafranis failed to timely receive automobile insurance for which they had fully paid and suffered the loss of the sum of $1,748.00. Respondent knew or should have known of these actions. DEBT TO WORLD PREMIUM FINANCE COMPANY (COUNT SEVEN) On August 29, 1995, a final judgment was entered in a Dade County Court action brought by World Premium Finance Co., Inc. (World PFC) against FIRST OF MIAMI and the Respondent, individually, as defendants. This final judgment awarded damages against FIRST OF MIAMI in the sum of $7,203.03 and awarded damages against both defendants in the sum of $15,000 plus attorney's fees of $1,000. The World PFC complaint was based on worthless checks FIRST OF MIAMI and Respondent had issued in connection with premium finance contracts and included debts for unpaid downpayments and unearned commissions on premium finance contracts that had been cancelled. Respondent's assertion that these debts were the responsibility of Maria Diaz is rejected. While Ms. Diaz initially made the arrangements for FIRST OF MIAMI to finance through World PFC and was the agent responsible for some of these transactions, it is clear that Respondent was the agent for many of these underlying transactions. Further, some, if not all, of these worthless checks were drawn on accounts for which Respondent was the only person with signatory authority. The downpayments and unearned commissions constitute fiduciary funds for which Respondent is responsible. Respondent has failed to pay these fiduciary funds to World PFC after repeated demands for payments. GUTIERREZ TRANSACTION (COUNT EIGHT) On October 11, 1993, Ms. Madalina N. Gutierrez of Miami, Florida, completed an application for automobile insurance. Aries Insurance Company was the insurer for this policy and FIRST was the insurance agency. The premium for this policy was to have been $574.00. The person with whom Ms. Gutierrez dealt with was Carmen "Mela" Babacarris, an employee of FIRST OF MIAMI. Ms. Babacarris has never held any license or appointment under the Florida Insurance Code. Ms. Gutierrez paid to FIRST the sum of $287.00 on October 11, 1993, when she applied for this insurance. On that date, Ms. Babacarris gave to Ms. Gutierrez an insurance card that purported to bind coverage with Aries. She returned on November 1, 1993, and paid to FIRST the balance owed of $287.00. Both of these payments were tendered to and received by Ms. Babacarris on behalf of FIRST. The sums paid by Ms. Gutierrez for this insurance coverage were not remitted by the FIRST to Aries or to any other insurer. As a consequence, Ms. Gutierrez did not receive the insurance coverage for which she had paid. Ms. Gutierrez was unable to obtain a refund of the sums that she had paid to FIRST. Respondent knew or should have known of the acts pertaining to this transaction by Ms. Babacarris since the transaction was processed through the FIRST, the agency for which Respondent was the sole supervising agent. RICO TRANSACTION (COUNT NINE) On June 27, 1994, Mr. Rafael Rico of Miami, Florida, completed an application for automobile insurance from Aries Insurance. It is unclear from the documents whether this insurance was to be issued through FIRST or through FIRST OF MIAMI. This confusion in the record is attributable to the fact that the persons involved in this transaction and associated with these two agencies made little distinction between the two agencies. This application was completed at the automobile dealership from which Mr. Rico was purchasing the vehicle to be insured. The individual with whom Mr. Rico dealt was Alvaro Alcivar. At all times during the transaction with Mr. Rico, Mr. Alcivar held himself out to be and acted as an insurance agent. Specifically, Mr. Alcivar did the following: Personally completed the insurance application and related paperwork. Discussed coverage and deductible options and answered Mr. Rico's general insurance questions. Selected the insurer for Mr. Rico's coverage. Personally completed an insurance identification card, including a policy number, as proof of insurance and provided it to Mr. Rico. Indicated that coverage was bound immediately and gave to him a card that purported to be a Florida Automobile Insurance Identification Card indicating that Mr. Rico had insurance coverage through Aries. Developed the premium and downpayment. Accepted payment from Mr. Rico. Presented Mr. Rico with a business card identifying himself as a representative of FIRST OF MIAMI. Mr. Alcivar was the only representative of the FIRST or of the FIRST OF MIAMI with whom Mr. Rico dealt. On June 27, 1994, Mr. Rico tendered to Mr. Alcivar the sum of $947.00 as payment for this insurance with the sum of $500.00 being paid in cash and the balance being charged to Mr. Rico's Mastercard. This Mastercard entry was processed through the account of the FIRST, not that of the FIRST OF MIAMI. Despite the payments by Mr. Rico, the premium to which Aries was entitled for this coverage was not remitted by FIRST or by FIRST OF MIAMI. As a result of this failure, Aries cancelled the binder that had been issued to Mr. Rico. Mr. Rico was damaged as a result of this failure. He lost the premium he had paid and the lending institution that financed his vehicle placed insurance on the vehicle at a higher premium than that charged by Aries. Based on the relationship between FIRST and FIRST OF MIAMI, the relationship between Respondent and Ms. Diaz, the repeated references to FIRST in the documentation of this transaction, and the deposit of at least $447.00 in the Mastercard account of FIRST, it is concluded that Respondent knew or should have known about this transaction. CHERI TRANSACTION (COUNT ELEVEN) On November 19, 1994, Mr. Dieuseul Cheri of Miami, Florida, completed an application for automobile insurance that was to be issued by Seminole Insurance Company as the insurer. The application for insurance reflects that Maria Diaz was the agent for this transaction, but the name of the agency is FIRST, not FIRST OF MIAMI. Likewise, the premium finance agreement pertaining to this transaction reflects that FIRST is the producing agency. The entire transaction was handled by Alvaro Alcivar at an automobile dealership where Mr. Cheri was purchasing a vehicle and occurred after Ms. Diaz had been told in September that the revocation of her licensure was imminent. Mr. Cheri gave to Mr. Alcivar the sum of $205.00 in cash as the downpayment for the premium for this Seminole policy. At all times Mr. Alcivar held himself out to be and acted as an insurance agent. Specifically, Mr. Alcivar: Was introduced to Mr. Cheri as an insurance agent and did not correct that misidentification. Personally completed the insurance application and related paperwork. Discussed coverage and deductible options and answered Mr. Cheri's general insurance questions. Selected the insurer for Mr. Cheri's coverage. Personally completed an insurance identification card, including a policy number, as proof of insurance and provided it to Mr. Cheri. Completed a named driver exclusion agreement for Mr. Cheri's policy, which had a significant effect on the coverage provided under the policy, and completed a vehicle inspection. Developed the premium and downpayment. Accepted payment from Mr. Cheri on behalf of FIRST OF MIAMI. Presented Mr. Cheri with a business card identifying himself as a representative of FIRST OF MIAMI. Mr. Alcivar was the only representative of the FIRST or of the FIRST OF MIAMI with whom Mr. Cheri dealt. FIRST OF MIAMI failed to bind coverage with Seminole on Mr. Cheri's behalf until November 22, 1994. As a result, there was a lapse in Mr. Cheri's coverage from November 17 until November 22, 1994. On November 19, 1994, FIRST OF MIAMI submitted a premium finance agreement on Mr. Cheri's insurance policy to World Premium Finance Co., Inc. (World PFC). The World PFC contract as well as the application were signed by Maria Diaz. Ms. Diaz never met Mr. Cheri. The premium finance agreement submitted to World PFC by FIRST OF MIAMI indicated that he had made a premium downpayment of only $105.00 despite the fact that Mr. Cheri had made a downpayment of $205.00. The evidence is not clear that Respondent knew or should have known of this transaction because of the involvement of Ms. Diaz. Instead, this is an example of the Respondent permitting Ms. Diaz to continue to participate in insurance transactions that require licensure after Respondent and Ms. Diaz had been told in September 1994 that revocation was imminent. ALVARO ALCIVAR (COUNT TWELVE) Petitioner established by clear and convincing evidence that Alvaro Alcivar performed acts and made representations to consumers that require licensure pursuant to the Florida Insurance Code. Petitioner also established that Respondent knew or should have known of these acts and that he aided and abetted these violations by Mr. Alcivar. CARLOS GONZALEZ (COUNT THIRTEEN) Petitioner established by clear and convincing evidence that Carlos Gonzalez performed acts and made representations to consumers that require licensure pursuant to the Florida Insurance Code. Petitioner also established that Respondent knew or should have known of these acts and that he aided and abetted these violations by Mr. Gonzalez.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order that adopts the findings of fact and conclusions of law contained herein. It is further recommended that Petitioner revoke all licensure and appointment held by Respondent pursuant to the Florida Insurance Code and that it impose against Respondent an administrative fine in the amount of $10,000.00. DONE AND ENTERED this 15th day of April 1996 in Tallahassee, Leon County, Florida. 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 15th day of April 1996. APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-0317 The following rulings are made as to the proposed findings of fact submitted by Petitioner. The proposed findings of fact in paragraphs 1, 2, 3, 4, 5,6, 7, 8, 9, 11, 12, 13, 14, 15, 16, 18, 19, 20, 21, 22, 23, 27, 25, 27, 28, 29, 30, 31, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 73, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 123, 125, 126, 127, 139, 140, 141, and 142 are adopted in material part by the Recommended Order. The proposed findings of fact in paragraph 2 are adopted in part by the Recommended Order. The testimony at the formal hearing that the office was moved in June 1994. The proposed findings of fact in paragraphs 10, 17, and 81 are adopted in part by the Recommended Order, but are rejected to the extent they are contrary to the findings made. The proposed findings of fact in paragraphs 26, 32, 72, 74, 75, 76, 83, 129, 130, 131, 136, 137, 143, and 144 are subordinate to the findings made. The proposed findings of fact in paragraphs 46, 61, 82, and 124 are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraphs 77, 78, 79, 80, 128, 132, 133, 134, 135, and 136 are rejected as being contrary to the findings made. The following rulings are made as to the proposed findings of fact submitted by Respondent. The proposed findings of fact in paragraphs 1, 3, 4, 5, 7, 8, 9, 13, 15, 17, 18, 19, 20, 23, 26, 32, 33, 34, 35, 36, 37, 40, 41, 49, 50, 53, 54, 55, 64, 72, and 73 are adopted in material part by the Recommended Order. The proposed findings of fact in paragraph 3 are adopted in part by the Recommended Order, but are rejected in part since Respondent moved the offices of the FIRST from Coral Way to Sunset Drive at a time pertinent to this proceeding. The proposed findings of fact in paragraphs 6 and 52 are adopted in part by the Recommended Order, but are rejected to the extent they are contrary to the findings made. The proposed findings of fact in paragraphs 10, 11, 21 and 27 are rejected as being unsubstantiated by credible evidence. The evidence that supports these proposed findings lacks credibility. The proposed findings of fact in paragraphs 12 and 31 are adopted in part by the Recommended Order, but are rejected to the extent the proposed findings mischaracterize the evidence. The proposed findings of fact in paragraphs 16 are adopted in part by the Recommended Order, but are rejected to the extent they are unnecessary to the conclusions reached. The proposed findings of fact in paragraph 24 are adopted in part by the Recommended Order, but are rejected to the extent they are contrary to the finding that they knew that the revocation of Ms. Diaz's licensure was imminent. The proposed findings of fact in paragraphs 25, 28, 30, 38, 39, 40, 45, 46, 47, 51, 56, 58, 59, 60, 61, 62, 65, 66, 67, 69, 71, 74, 75, 76, 77, and 78 are rejected as being contrary to the findings made. The proposed findings of fact in paragraphs 29 and 57 are subordinate to the findings made. The proposed findings of fact in paragraph 31 are rejected since they contain an inference that Respondent told Ms. Diaz to move as soon as he knew of her interaction with insurance customers. The proposed findings of fact in paragraph 42 are rejected as being a mischaracterization of the evidence. The proposed findings of fact in paragraphs 48, 63, 68, and 70 are rejected as being unnecessary to the conclusions reached. COPIES FURNISHED: John R. Dunphy, Esquire Department of Insurance and Treasurer Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0333 Charles J. Grimsley, Esquire Charles J. Grimsley and Associates, P.A. 1880 Brickell Avenue Miami, Florida 33129 Honorable Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner, Acting General Counsel Department of Insurance The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue presented is whether Respondent, a licensed insurance agent, is guilty of violating the statutes regulating the conduct of an insurance agent, and if so, what disciplinary action should be taken against him, if any.
Findings Of Fact At all times material hereto, Respondent has been eligible for licensure and licensed as a life and health insurance agent and as a dental health care contract salesman. For many years, Respondent had also been licensed to solicit general lines -- property, casualty, surety, and miscellaneous lines -- insurance in this state. Respondent was unaware that this license expired on March 24, 1987. At all times material hereto, Respondent was, however, eligible for licensure as a general lines agent. At all times material hereto, Respondent was one of the officers of Johnson's Model City Insurance Agency #1, Inc., a Florida corporation. That corporation was involuntarily dissolved on November 4, 1988. On December 30, 1986, Respondent telephoned Petitioner to discuss the propriety of an insurance agent charging a consulting fee. Following that telephonic conversation, an attorney for Petitioner directed correspondence to Respondent confirming that telephone conversation, advising that a consulting fee could legally be charged under certain circumstances. Those circumstances included the use of a separate consulting contract between the agent and the insured so that the insured would fully understand that he or she was entering into a separate contract and paying a separate consideration in advance of the performance of consulting services. Additionally, the services rendered must be other than those normally provided by an insurance agent. Further, if a separate consulting contract were effectuated, an agent could set up a separate consulting corporation to enter into such contracts. Hartford Insurance Company sells automobile insurance in the State of Florida by use of a toll-free telephone number. People who know the telephone number can call Hartford directly, obtain a quote for automobile insurance, and purchase a policy directly from Hartford. Hartford has no insurance agents in the State of Florida and pays no commissions to insurance agents in Florida for the obtaining of automobile insurance customers. A person can obtain a quote in writing from the Hartford in advance of purchasing a policy. Sometimes, the quotation card and the policy are issued and mailed simultaneously by Hartford to its new insureds. On September 20, 1987, Patricia Moss telephoned J. M. C. Insurance Consultants pursuant to an ad in the telephone yellow pages. She inquired about obtaining automobile insurance to replace her current policy which would expire on September 22, 1987. She spoke with an employee named Betty who advised her that she could obtain replacement insurance at a cost of $927. Since the cost quoted to her was substantially lower than the prices she had been quoted by the other agencies she had consulted, Moss went to the offices of J. M. C. on September 21, 1987. Betty presented Moss with a number of documents to sign. She signed a Power of Attorney appointing Johnson's Model City Insurance, Inc., doing business as JMC Insurance Consultants as her attorney-in-fact to obtain insurance for her, specifically ratifying and confirming actions taken on her behalf by J. L. Johnson- consultant. She also executed an Agreement with Consultant specifying the services that JMC Insurance Consultants would perform on her behalf. She signed a further statement which provided that: "I understand that JMC Insurance is acting as Consultants for my insurance placement and is entitled to any and all consultation fees." She also signed a document written in boldfaced type which states: IMPORTANT NOTICE THIS LETTER IS TO INFORM YOU THAT JMC INSURANCE CONSULTANTS ARE NOT AGENTS NOR DO WE REPRESENT HARTFORD INSURANCE COMPANY IN ANY WAY WHATSOEVER. WE REPRESENT "YOU" THE CLIENT AND WE ACT IN YOUR BEHALF WITH THE RIGHT THAT YOU GIVE US THROUGH A POWER OF ATTORNEY. WE ENDEAVOR TO PLACE YOUR AUTO INSURANCE FOR YOU ON YOUR BEHALF. WE ARE YOUR CONSULTANT. IF YOU HAVE A PROBLEM PLEASE CALL US WE ARE HERE TO HELP AND ACT IN YOUR BEHALF. CALL US FIRST. LET US HANDLE IT. CLIENT. I HAVE READ AND I UNDERSTAND. Moss gave JMC Consultants a check in the amount of $262.50 for which she was given a receipt which carried the specific notation that the money she had paid was for an insurance consultant's fee. She was also given a small card entitled Insurance Identification Card on which Betty filled in information showing that she would be insured by Hartford effective on the following day and specifically describing the coverage provided, the automobile insured, and the name and address of Moss. Within a week she received directly from the Hartford an insurance policy for the benefits which she sought. The policy itself reflected that the premium for the policy was $632 and that she would be receiving a bill from Hartford for that amount. She telephoned Betty, demanding a refund of her $262.50, which demand was refused. Betty explained to her that the amount was for the consultant's fee for obtaining the low- cost coverage for Moss. Hartford's direct marketing program does allow people to purchase insurance on someone else's behalf utilizing a Power of Attorney. Although Hartford's records do not reflect a Power of Attorney from Moss to J. M. C. Consultants or Respondent, Hartford's records regarding their policyholder Moss are not accurate. For example, they erroneously reflect that they quoted a rate to Moss on September 15, a week before they received any contact on her behalf. Although Moss testified that Betty told her the $262.50 was the down payment on her insurance premium, her testimony is not credible in view of the numerous documents that she signed stating that she fully understood that Respondent was not an agent for Hartford, that Respondent would be acting on her behalf pursuant to the Power of Attorney and Consultant's Agreement which she had signed, and the other documents reflecting that the $262.50 was a consultant's fee which she was paying to Respondent to act on her behalf. Her testimony that she did not understand is refuted by the documents she signed saying that she did. There is no allegation that Moss, a retired registered nurse, was unable to read. Rather, it is concluded that Moss voluntarily chose to pay the Hartford premium plus Respondent's consulting fee since the total price for the two charges was still substantially less than she could have obtained insurance for from other sources. Allstate Insurance Company is an insurer which sells insurance policies through their agents in the State of Florida. It also has a division which participates in Florida's Joint Underwriting Association (hereinafter "FJUA"), a program through which high-risk drivers who cannot obtain insurance in the regular voluntary insurance market can obtain automobile insurance. Prior to the time that his general lines agent license expired, Respondent participated in that program and was assigned to write insurance for Allstate for policyholders participating in the program. The Producers Contract entered into between Respondent and the FJUA, which assigned him to Allstate Insurance Company, provided that it would automatically terminate if an agent's general lines license expired. On July 22, 1988, James Tillie came to the office of J. M. C. to procure automobile insurance for the van that he used in his business. After meeting with Respondent, Tillie gave Respondent a check in the amount of $204 as a down payment on an automobile insurance policy. The check was endorsed and deposited into the business bank account of J. M. C. Respondent gave James Tillie an automobile insurance binder which reflected that his insurance policy was to be issued through Allstate Insurance Company. Under the terms of Respondent's contract with the FJUA, Respondent was required to submit James Tillie's application and premium to Allstate within 24 hours. The FJUA application acts as a binder. Once the application is completed and the premium is paid to the agent, the insured has automatic coverage for 30 days during which time the carrier, Allstate in this case, can act on the application. There is no evidence as to when Respondent forwarded James Tillie's application to Allstate; however, Allstate has no record of ever receiving the application. Respondent did tell James Tillie that within a couple of months he would receive from Allstate his policy and instructions for payment of the balance of his premium. After a month or two had elapsed, James Tillie became concerned since he had not yet received his insurance policy. He contacted Respondent who assured him that he did have insurance coverage. Shortly thereafter, James Tillie received in the mail from Respondent a card entitled Insurance Identification Card. On that card information had been filled in showing a policy number, the effective date, the insurance company as Allstate Insurance Company, a description of the insured vehicle, and the name and address of James Tillie. This is not an official Allstate identification card, and no one purported it to be such. An official Allstate Insurance card is issued by Allstate as part of the policy issued by it. On September 23, 1988, Sina Tillie, James' mother, visited J. M. C. for the purpose of purchasing automobile insurance for her new automobile. Sina Tillie is an elderly person who had never before owned an automobile or possessed a driver's license. She wished to purchase insurance on a brand- new automobile. Sina Tillie gave Respondent $1,828 in cash as full payment of the policy's annual premium. Respondent gave her an insurance binder which reflected that her insurance was placed with Allstate. Allstate has no record of receiving Sina Tillie's application and premium from Respondent. Subsequently, Sina Tillie became concerned when she had not yet received her insurance policy. She asked her daughter to contact Respondent. Respondent advised her daughter not to worry. He then mailed to Sina Tillie an Insurance Identification Card similar to the one which he had provided to James Tillie reflecting James' coverage. He also telephoned Sina Tillie to assure her that if anything happened, all she would need to do would be to show the card saying that she was covered and to contact him. Since neither he nor his mother had received a policy from Allstate, James Tillie called Allstate. He did not know that there were, in effect, two Allstates. The Allstate office which he contacted was a regular Allstate office which markets insurance to customers who call or come in, and not an office affiliated with the FJUA program. The person with whom he spoke told him that neither he nor his mother were insured by Allstate and that the policy numbers reflected on the Insurance Identification Cards given by Respondent to James and his mother were not Allstate policy numbers, but rather were binder numbers. James Tillie then contacted Respondent who consistently maintained that both James and Sina were insured. Respondent contacted Allstate regarding James' and Sina's policies. James Tillie came to the office of J. M. C. and met with Respondent. He advised Respondent that he and his mother had obtained insurance elsewhere and requested refunds of the premiums that he and his mother had paid. Respondent told Tillie that he could not refund the premiums since both James and his mother were insured in exchange for those premiums. Respondent eventually told James Tillie that he would refund the premiums if the Tillies would sign releases. James Tillie maintained that he would sign releases only after he had received the refund of the premiums. The meeting ended in stalemate. James Tillie contacted Petitioner, and Petitioner contacted Respondent. Respondent maintained that he would refund the premiums in exchange for a release. Petitioner forwarded a copy of Respondent's letter to James Tillie. Respondent eventually made arrangements with James and his mother to refund the premiums in monthly payments since he did not have the money to refund the premiums in full. By the time of the final hearing in this cause, Respondent had only refunded the total amount of $600 to the Tillies. At the time that Respondent's general lines agent license with Integrity Insurance Company was cancelled on March 24, 1987, he believed that he was being re-licensed by Fortune Insurance Company. However, he never received a license for or from Fortune and never checked to ascertain why.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondent guilty of statutory violations as set forth in this Recommended Order and suspending Respondent's licensure and eligibility for licensure for a period of 60 days from the date of the Final Order entered in this cause. DONE and ENTERED this 13th day of June, 1990, at Tallahassee, Florida. LINDA M. RIGOT, 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 13th day of June, 1990. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1-3, 7-9, 14-19, 21-26, and 28-32 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 4-6, 10, 11, 13, 20, and 27 have been rejected as not being supported by the weight of the credible evidence in this cause. Petitioner's proposed finding of fact number 12 has been rejected as being unnecessary for determination of the issues in this cause. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance and Treasurer Division of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Johnny L. Johnson 17120 Northwest 27th Avenue Opa Locka, Florida 33056 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell, General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 =================================================================
The Issue Whether Michael McIntosh (Mr. McIntosh) and/or Phoenix Financial Solutions, Inc. (Phoenix Solutions) (collectively, Respondents) committed the offenses alleged in the Amended Notice of Intent to Issue Cease and Desist Order (Amended Notice) filed by the Department of Financial Services (Petitioner) and, if so, the penalties that should be imposed.
Findings Of Fact Mr. McIntosh is not currently licensed, and at all times relevant to this proceeding, was not licensed, as a life insurance agent in the State of Florida. Mr. McIntosh is currently licensed, and at all times relevant to this proceeding, was licensed, as a title insurance agent in the State of Florida. Mr. McIntosh's title insurance agent license is E099115. Mr. McIntosh's title insurance agency, Phoenix Title & Escrow, Inc., has been licensed by Petitioner, but the license was not active as of June 2010. Phoenix Solutions is not currently licensed, and at all times relevant to this proceeding, was not licensed, as an insurance agency in the State of Florida. Bishop Jose Decena (Bishop Decena), an individual, is the owner of Bishop Decena Ministries, Inc. (Decena Ministries), a Florida corporation. Mr. McIntosh was the president of Operations for Decena Ministries. Mr. McIntosh was also a signatory on bank accounts in the name of Decena Ministries. Bishop and Decena Ministries created "The Benevolent Ministries Program" (Program). The Program was a comprehensive insurance plan. There was no evidence that the Program actually secured any insurance policy for any member of a church or other organization. The following is a description of how the Program was designed and what Respondents agreed to do. The Program is no longer in existence.3 Respondents are no longer associated with the Program. In late 2008, Respondents entered into an agreement with Bishop Decena and Decena Ministries to perform the services described below. Respondents and Decena Ministries created separate websites to describe and promote the Program. While there was no contract introduced into evidence, the information posted on Respondents' website detail Respondents' duties and responsibilities. Respondents were to be paid $375,000.00 per year for five years. Respondents terminated their agreement with Bishop Decena and Decena Ministries on September 21, 2010. The Program was designed to put individual insurance plans in place for members of churches and other organizations. The Program was designed to provide life insurance and funeral benefits at no cost to "Members" of the Program. The Program contemplated the use of a "Trustee," whose duties will be discussed below. Bishop Decena was to serve as the Trustee. The website formerly maintained by Respondents to provide information as to the Benevolent Ministries Program to prospective members contained a letter from Bishop Decena that included the following: The Trustee recognizes the amount of efforts [sic] made by church leaders to find identifying [sic] ways which can ease the pain of unfortunate situations when they arise. As a result, the Trustee offers all Pastors and their members an opportunity to leave an inheritance to break the bondage of poverty. We know that countless ministries and other faith-based organizations provide vital services. Therefore, the Trustee has designed a finance system to develop funding for various projects to release the burden on the churches with respect to funeral expenses for its members. The churches also have a financial option with this program to help benefit the church. (example: [sic] build a church, help with the churches [sic] financial needs, [and] help its members) The Trustee has initiated a special Comprehensive Insurance Plan for your members. The plan will include life insurance and funeral benefits at no cost to you. The policy will be owned by the Trustee, the church and/or organization is the primary beneficiary and you [,] the member [,] will designate your own beneficiary. The member and the church and/or organization will be required to sign an acknowledgment and hold harmless agreement agreeing to the terms and conditions under which the Trustee will be applying for life insurance on your life. [Emphasis is in the original.] The Program contemplated that the church or other organization would become enrolled in the Program as an eligible organization. The members of an eligible organization would then be eligible to become Members of the Program after the church or organization: (1) submits a "Program Organization Set-up Form;" (2) pays a $1,000.00 fee to Decena Ministries or to Bishop Decena; and (3) signs an "Acknowledgement and Hold Harmless Agreement." To become a Member of the Program, a member of the eligible church or other organization were required to: (1) file a "Pre-Qualification Form for the Benevolent Ministries Program;"4; (2) pay a $20.00 processing fee to Decena Ministries or to Bishop Decena; and (3) sign an Acknowledgment and Hold Harmless Agreement, agreeing to the terms and conditions under which the Trustee will apply for life insurance on the Member's life. Individuals seeking to become Members were also referred to as the "Proposed Insured." All Pre-Qualification Forms for the Benevolent Ministries Program and all Program Organization Set-up Forms were to be sent directly to Phoenix Solutions. The $1,000.00 fee associated with the Program Set-up Form and the $20.00 fee associated with the Pre-Qualification Form were to be sent directly to Phoenix Solutions. Phoenix Solutions was to collect these sums on behalf of Bishop Decena and/or Decena Ministries. Respondents were not to keep any portion of either fee. Respondents were not to receive any commission for any insurance policy that was to be sold. A prospective Member was required to complete a "General Client Information Form" that contained the letterhead of Phoenix Solutions and required the Member to designate the type of life insurance wanted, other insurance on the Member's life, and the name and address of the writing insurance agent. The form requested detailed medical information and a list of the available insurance carriers. Church or organizations members seeking to become a Member of the Program were to sign an "Authorization" form that authorized the release of the prospective Member's medical information and provide the following as to the use of otherwise confidential medical information: . . . This protected health information is to be disclosed under this Authorization so that Phoenix Financial Solutions may: 1) underwrite my application for coverage, make eligibility, risk rating, policy issuance, enrollment determinations; 2) obtain reinsurance; 3) administer claims and determine or fulfill responsibility for coverage and provisions of benefits; 4) administer coverage; and 5) conduct other legally permissible activities that relate to any coverage I have or have applied for with Phoenix Financial Solutions. The "Authorization" form also contained the following acknowledgment: I further understand that if I refuse to sign this authorization to release my complete medical record, Phoenix Financial Solutions may not be able to process my pre- qualification. Phoenix Solutions was to forward a Member's information to an insurance carrier for processing. There was conflicting information on Respondents' website as to the entity that would apply for the life insurance. Some material reflected that the Trustee would be the entity applying for insurance on the Member's life. Other material reflected that the eligible church or other organization would be the entity to apply for insurance on the Member's life. A licensed insurance agent was to fill out the insurance application for each Member. Phoenix Solutions was to coordinate with the insurance carrier a physical examination for a Member. Any life insurance policy issued on a Member's life was to be owned by the "Trust", which was owned by Bishop Decena, and was to be controlled by the "Trustee" (Bishop Decena). Decena Ministries was to pay to the insurance company all premium payments related to a life insurance policy issued on a Member's life. The eligible church or other organization was to be considered the primary beneficiary of the insurance policy on a Member's life. The eligible church or other organization was to only receive $8,000.00 of a $250,000.00 policy; only $16,000.00 of a $500,000.00 policy; and only $30,000.00 of a $1,000,000.00 policy. A Member may also designate his or her own secondary beneficiary. The eligible church or other organization was to instruct the Trustee to allocate to the secondary beneficiary only $100,000.00 of a $250,000.00 policy; only $250,000.00 of a $500,000.00 policy; and only $400,000.00 of a $1,000,000.00 policy. There was no guarantee that the Member's designated secondary beneficiary would obtain any benefits. The Acknowledgment and Hold Harmless Agreement that a prospective Member would be required to sign includes the following provision in paragraph 4: 4. Assuming you qualify for coverage medically and financially, neither you nor your heirs will have any control or stake in the policy insuring your life under the Program once it has been issued to the trust. . . . At your death, if the policy remains in force, The Insurance Company will not pay any of the policy proceeds to your heirs. Paragraph 7 of the Acknowledgment and Hold Harmless Agreement includes the following: 7. The trust may require third party financing in order to pay some or all of the Premiums needed to keep the life insurance policy on you [sic] life in force. Thus, a substantial portion of proceeds payable upon you [sic] death may be used to retire the debt on funds borrowed from such lender. Paragraph 9 of the Acknowledgment and Hold Harmless Agreement includes the following: 9. The Trust will upon you [sic] death, administer and be responsible for taking care of your final burial arrangements in accordance with you [sic] written wishes. The Trust will also assume responsibility for your named beneficiaries and do there [sic] utmost to take care of their needs whether it is completion of education, welfare or day to day care [sic]. Paragraph 11 of the Acknowledgment and Hold Harmless Agreement includes the following: 11. The Trust, as owner of the policy, is responsible for premium payments. Interest rates, morality [sic] charges, monthly deductions, and other administrative charges may very [sic] which can have a negative impact on policy performance and cause the policy to lapse unless additional premiums are paid. Phoenix Solutions was to receive the proceeds of Members' life insurance policies from the Trustee and distribute those proceeds to various parties as directed by the Trustee. Because there was no life insurance policy issued pursuant to the program described in this Recommended Order, Respondents did not actually do many of the tasks they agreed to do. For example, they never managed any of the insurance proceeds because there were none. It is clear that Mr. McIntosh went to various churches to promote the Program, sometimes with an insurance agent and sometimes without an insurance agent. At least 31 individuals submitted a "Pre-Application for Proposed Insured" form, which was required to be submitted with the $20.00 fee described above. It is also clear that Respondents collected fees from churches and from prospective Members. Mr. McIntosh testified, credibly, that when asked questions about an insurance policy, he would advise that he was not an insurance agent and would refer the person or persons to an insurance agent. Bishop Decena, as Trustee of the Program, did not have an insurable interest in the lives of individual members of churches or other organizations. Information on Respondents' website that the Trustee would apply for life insurance on a Member's life was misleading. While the Trustee may submit such an application, the Trustee would not be able to lawfully obtain the life insurance.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order finding Respondents guilty of the violations alleged in Count II of the Amended Notice and not guilty of the violations alleged in Counts III, IV, and VI. It is further recommended that the Final Order impose against Respondents an administrative fine in the total amount of $5,000.00 payable jointly and/or separately. DONE AND ENTERED this 3rd day of October, 2011, in Tallahassee, Leon County, Florida. S CLAUDE B. ARRINGTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of October, 2011.
