Findings Of Fact Respondent, Kathryn Genevieve Saviak, did business as J & J Insurance Agency at all times pertinent to these proceedings. As a general lines insurance agent, she maintained five offices at one time or another in Dade, Broward and Hillsborough counties, for the sale of automobile insurance. Respondent did not deal with customers directly herself. She visited her offices occasionally, perhaps once a month, and spoke to the office managers more frequently by telephone. Some of her employees travelled among offices. Respondent authorized her employees to write insurance policies on behalf of the FJUA under an arrangement with the United States Fidelity and Guaranty Company (USF&G), a servicing carrier for the FJUA. Prior to December, 1978, respondent was the only licensed agent with the J & J Insurance Agency assigned to USF&G. Agents like respondent who represented the FJUA were required to forward to the servicing carrier money thee received in payment of premiums on the date received or, at the latest, on the following day. An agent need not require payment of the entire premium in order to write an insurance policy, so long as the agent collected a specified minimum deposit. Any money actually collected above the amount of the minimum deposit, however, was to be forwarded to the servicing carrier daily. E.R. Milbourne, Jr., the USF&G employee with direct charge of FJUA operations, personally apprised respondent at various times, including prior to 1978, of the requirement that monies be forwarded upon receipt. Agents were first advised of this requirement in writing on or about September 17, 1973. Respondent is one of approximately 250 agents for whom USF&G has been designated the servicing carrier by FJUA. Respondent's offices wrote 60 to 70 policies a month as compared to USF&G's 25,000 FJUA policies a year. The FJUA policies respondent's offices wrote became effective on the date they were written. USF&G then had thirty days in which to issue the policy. In its last audit before the final hearing began, USF&G determined that two percent of its private passenger vehicle policies and four percent of its commercial vehicle policies had not been issued within the thirty-day period. Routinely, USF&G issued a notice of termination if the premium for a policy had not been paid in full within thirty days, but, in some cases, as many as sixty days might have elapsed from the date of application before USF&G issued a notice of termination. On March 30, 1978, Carlene Grigg made application for automobile insurance at respondent's Ft. Lauderdale Office. She made payment of $309.00 at that time. USF&G received the application on May 15, 1978, accompanied by only $200.00. In late July, Carlene's husband, Marvin, received a notice of termination from USF&G dated July 26, 1978, stating that USF&G was owed $188.00. Petitioner's exhibit No. 5. In September, Mr. and Mrs. Grigg paid an additional $73.00 to respondent's Ft. Lauderdale office. On or about November 6, 1978, USF&G received an additional $139.00 from respondent's Ft. Lauderdale office. Together with the initial $200.00, this constituted full payment of the premium for the policy Ms. Grigg applied for on March 30, 1978 (which has subsequently been revised to eliminate physical damage coverage, resulting in a decrease in premium.) (Count I) On August 14, 1978, Constantine A. Ronca made application for an automobile insurance policy at respondent's Ft. Lauderdale office and paid $257.00. USF&G received Mr. Ronca's application later in August, accompanied by $100.00. USF&G sent a notice of termination dated October 26, 1973, to be effective November 9, 1978, for the stated reason of unpaid premium. (Count II) On June 27, 1978, Antonio Vettorazzi purchased automobile insurance at respondent's Ft. Lauderdale office. Against a total premium of $437.00, Mr. Vettorazzi made a down payment of $153.00. The balance of the premium, $284.00, was financed. USF&G received Mr. Vettorazzi's application from respondent's Ft. Lauderdale office accompanied by a check for $284.00. Thereafter Mr. Vettorazzi received a notice of termination from USF&G dated November 15, 1978, threatening to terminate the policy effective November 29, 1978, for alleged nonpayment of a premium balance of $153.00. In late November or early December of 1978, USF&G received a check for $153.00 from respondent's Ft. Lauderdale office. Although Mr. Vettorazzi made his payments to the premium finance company, he made no additional payments directly to respondent after June 27, 1978. (Count III) Also on June 27, 1978, Linda Diane Moray Blair purchased automobile insurance from respondent's Ft. Lauderdale office. Against a total premium of $308.00 she made a cash down payment of $112.00, for which she received a receipt. Petitioner's exhibit No. 2 attached to petitioner's exhibit No. 3. The balance of the premium was financed by Capitol Premium Plan, Inc. Ms. Blair made monthly payments of $29.20 to Capitol Premium Finance in a timely fashion. Subsequently she received a notice from J & J Insurance that another $10.00 was due. In September of 1978, Ms. Blair sent a $10.00 money order to respondent's Ft. Lauderdale office. Thereafter, Ms. Blair received from USF&G a notice of termination dated October 12, 1978, stating that a balance was owed the company of $122.00. On October 27, 1978, USF&G received from respondent's Ft. Lauderdale office a check in the amount of $122.00. (Count IV) On October 18, 1978, David G. Fuerst purchased automobile insurance at respondent's Ft. Lauderdale office. He wrote a check for $210.00, half the annual premium. On November 21, 1978, Mr. Fuerst wrote another check in favor of J & J Insurance for the remainder of the premium in the amount of $210.00. Petitioner's exhibit No. 8. When USF&G received Mr. Fuerst's application, respondent's check in the amount of $150.00 accompanied the application. Eventually USF&G issued a notice of termination dated December 18, 1978, advising Mr. Fuerst that his policy would be terminated on account of an unpaid balance of $270.00. Petitioner's exhibit No. 9. Shortly after receiving the notice of termination, Mr. Fuerst received from respondent's Ft. Lauderdale office a form "Special Notice" stating that the cancellation of the policy "was due to a computer error. Petitioner's exhibit No. 10. On January 9, 1979, USF&G received the $270.00 balance from respondent's Ft. Lauderdale office. (Count XXVIII) On October 30, 1978, William Patrick Pete went into respondent's Ft. Lauderdale office. He purchased an automobile insurance policy for which he paid the entire premium of $170.00. Additionally, he purchased membership in an automobile club for which he paid $30.00. USF&G received Mr. Pete's application on November 8, 1978, accompanied by respondent's check for $50.00. On December 26, 1978, USF&G sent Mr. Pete a notice of termination for the stated reason that he owed $120.00 toward his premium. On January 9, 1979, USF&G received $120.00 from respondent's Ft. Lauderdale office. (Count XXIX) On October 3, 1978, Linda J. Brown purchased insurance from respondent's Ft. Lauderdale office. On that date she made a do payment of $96.00 against a total premium of $275.00. She financed the remainder of the premium, $179.00, under an agreement with Time Premium Company. Petitioner's exhibit No. 15. USF&G received Ms. Brown's application on October 18, 1978, accompanied by a check for $179.00. On December 11, 1978, USF&G directed a notice of termination to Ms. Brown for the stated reason that she owed $96.00 on her premium. Petitioner's exhibit No. 16. On January 2, 1979, USF&G received from respondent a check in the amount of $96.00. (Count xxx) 12. In July, 1978, Robert Charles Oberheim purchased insurance from respondent's Ft. Lauderdale office. He made a down payment of $249.00 against a quoted premium of $711.00. He financed the balance of $462.00, and made regular monthly payments of $63.00. When USF&G issued Mr. Oberheim's policy, it adjusted the premium downward by $40.00 so that the total premium was in fact $671.00. On October 2, 1978, USF&G issued a notice of termination for the stated reason of a balance owing by Mr. Oberheim of $209.00. Thereafter, some time before October 16, 1978, USF&G received respondent's check in the amount of $209.00. Not until August 1, 1979, did J & J Insurance draw a check in favor of Mr. Oberheim in the amount of $40.00, representing the refund he was owed. Petitioner's exhibit No. (Count XXXI) On November 4, 1977, Jean L. Snyder, wife of Paul Snyder, purchased automobile insurance from respondent's Miami office. She was quoted a premium of $1,153.00 and wrote a check for the full amount on November 16, 1977. Petitioner's exhibit No. 20. USF&G received this application on February 13, 1978, accompanied by a check in the amount of $400.00. (Count XXXII) On February 9, 1978, Joseph J. Guido purchased automobile insurance from respondent's Ft. Lauderdale office. He made a down payment of $221.00 against a total premium of $631.00, and financed the balance of $410.00 under an agreement with Time Premium Company. Petitioner's exhibit No. 25. He subsequently sold the vehicle he had insured and, on August 8, 1978, cancelled the policy. On August 28, 1978, Time Premium Company received a $490.00 refund check from USF&G. Brooksie Peeples, Time Premium Company's manager, deposited this check against Mr. Guido's account. The check was enough to pay off Mr. Guide's indebtedness to Time Premium Company in its entirety, with $207.73 remaining. This balance was forwarded to respondent's Ft. Lauderdale office on September 13, 1978. Petitioner's exhibit No. 26. The check was deposited on September 19, 1978. Beginning in November of 1978, Mr. Guido and his wife made repeated demands for the refund. Finally, when Mr. Guide refused to leave the premises until the check was written, on March 29, 1979, the manager of respondent's Ft. Lauderdale office wrote Mr. Guide a check for $207.73. (Count XXXIV) On December 7, 1978, Shirley Payne purchased automobile insurance from respondent's Ft. Lauderdale office. On that date she made a down payment in the amount of $300.32 against a quoted premium of $682.32. She was told she would receive her policy within thirty days, along with a bill for the balance due. In fact, she received her policy in March of 1979. She paid respondent another $100.00 on March 20, 1979, petitioner's exhibit No. 28, and the final $282.00 on March 28, 1979. Petitioner's exhibit No. 29. USF&G received Ms. Payne's application on February 28, 1979, accompanied by a check in the amount of $214.00. (Count XXXVI) Lena Sabel accompanied her daughter, Sylvia Robbins, to purchase automobile insurance at respondent's Hollywood office on July 25, 1978. On that date Ms. Sabel wrote a check in the amount of $556.23 in favor of J & J Insurance Agency. Petitioner's exhibit No. 22. The total premium for the policy she purchased was $406.00. When USF&G received the Robbins' application from respondent it was accompanied by a check in the amount of $150.00. On October 23, USF&G issued a notice of termination for the stated reason that $256.00 was owed for the premium. On receipt of this notice, Ms. Robbins' son sent USF&G a check for $256.00. It arrived shortly after a check in the same amount that respondent's office sent. Having received duplicate checks, USF&G wrote a refund check to the order of Sylvia Robbins in the amount of $256.00 and forwarded the check to respondent. Sylvia Robbins' endorsement was forged and the check was deposited to the J & J Insurance Premium account at the Commercial Bank and Trust Company in Miami. About two weeks before the final hearing began, Ms. Sabel received a refund check in the amount of $256.00. (Count XXXVIII) USF&G drew Check No. 111558 in favor of Robert K. Kaganac in the amount of $44.00 on December 11, 1978, and forwarded the check in care of respondent's Hollywood office. Mr. Kaganac's endorsement was forged and the check was deposited to J & J Insurance Premium account at Commercial Bank and Trust Company in Miami. (Count XXXIX) On December 1, 1978, USF&G drew a check to the order of J. Bruce Garland in the amount of $54.00 and forwarded it to respondent's Ft. Lauderdale office. There Mr. Garland's endorsement was forged and the check was deposited to the J & J Insurance Premium account at the Commercial Bank & Trust Company in Miami. On August 1, 1979, respondent mailed Mr. Garland a check in the amount of $24.00. (Count XLI) Guillermo Citelli purchased automobile insurance at respondent's Hollywood office. On November 22, 1978, USF&G drew its check No. F110271 in favor of Mr. Citelli in the amount of $91.00 and forwarded it to respondent's Hollywood office. Mr. Citelli's endorsement was forged and the check was deposited to the J & J Insurance Premium account at the Commercial Bank & Trust Company in Miami. (Count XLIII) On October 11, 1978, Kevin B. McGuire purchased automobile insurance at respondent's Hollywood office. On that day he paid a premium of $108.00. He later requested that the policy be cancelled. On December 5, 1975, USF&G drew its check No. F110568 in favor of Kevin B. McGuire in the amount of $53.00 and forwarded the check to respondent's Hollywood office. Mr. McGuire's endorsement was forged and the check was deposited to the J & J insurance Premium account at the Commercial Bank & Trust Company in Miami. In January, 1979, Mr. McGuire received a refund from respondent in the amount of $53.00. (Count XLIV) In each instance in which it was shown that USF&G had cancelled a policy for which respondent had failed to forward the entire premium, USF&G later reinstated the policy, effective retroactively to the date of cancellation. Paula Davis, who managed respondent's Hollywood office from March of 1978, until January of 1979, was instructed by respondent to forge endorsements on refund checks and did so. This practice antedated Ms. Davis' employment at the Hollywood office. Marie Vernon, also employed by respondent at her Hollywood office, forged endorsements on refund checks, believing respondent had directed that this be done. Before each forgery, a photostat of the refund check was made and attached to the pertinent file against the possibility that the payee might make demand for the refund. Deborah Goldberg's testimony on this and other points has not boon credited. With respect to certain classes of insurance, respondent instructed Ms. Davis to forward to USF&G only a specified minimum deposit even when the office received more than the minimum deposit toward payment of the premium. With respect to these policies, respondent gave Ms. Davis standing instructions to forward the premium balances only upon receipt of notices of termination from USF&G. These instructions were followed, and monies belonging to USF&G were diverted to a separate account. Respondent also represented an Alabama insurance company to whom she forwarded premiums as promptly as that company required. Many of her employees engaged in no improper conduct of any kind and were completely unaware of what was going on. Both parties have furnished proposed findings of fact which have been considered in preparation of the foregoing findings of fact. Proposed findings of fact inconsistent with the foregoing are hereby expressly rejected.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That petitioner revoke respondent's license and her eligibility for licensure. DONE and ENTERED this 16th day of April, 1980, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Patrick F. Maroney, Esquire S. Strom Maxwell, Esquire Department of Insurance The Capitol Tallahassee, Florida 32301 Edward S. Jaffry, Esquire. S. Jack Carrouth, Esquire Suite 300, Barnett Bank Building Tallahassee, Florida 32302
Findings Of Fact Respondent holds a property and casualty insurance license, life and health insurance license, and life insurance license for the State of Florida. She has held her property and casualty license for about 20 years. In 1976, she was employed as an agent for the Orlando office of Commonwealth insurance agency, which she purchased in 1977 or 1978. She continues to own the Commonwealth agency, which is the agency involved in this case. Respondent has never previously been disciplined. In 1979 or 1980, Respondent was appointed to the board of directors of the Local Independent Agents Association, Central Florida chapter. She has continuously served on the board of directors of the organization ever since. She served as president of the association until September, 1991, when her term expired. During her tenure as president, the local association won the Walter H. Bennett award as the best local association in the country. Since May, 1986, Commonwealth had carried the insurance for the owner of the subject premises, which is a 12,000 square foot commercial block building located at 923 West Church Street in Orlando. In July, 1987, the insurer refused to renew the policy on the grounds of the age of the building. Ruth Blint of Commonwealth assured the owner that she would place the insurance with another insurer. Mrs. Blint is a longtime employee of the agency and is in charge of commercial accounts of this type. Mrs. Blint was a dependable, competent employee on whom Respondent reasonably relied. Mrs. Blint contacted Dana Roehrig and Associates Inc. (Dana Roehrig), which is an insurance wholesaler. Commonwealth had done considerable business with Dana Roehrig in the past. Dealing with a number of property and casualty agents, Dana Roehrig secures insurers for the business solicited by the agents. Dana Roehrig itself is not an insurance agent. In this case, Dana Roehrig served as the issuing agent and agreed to issue the policy on behalf of American Empire Surplus Lines. The annual premium would be $5027, excluding taxes and fees. This premium was for the above- described premises, as well as another building located next door. The policy was issued effective July 21, 1987. It shows that the producing agency is Commonwealth and the producer is Dana Roehrig. The policy was countersigned on August 12, 1987, by a representative of the insurer. On July 21, 1987, the insured gave Mrs. Blint a check in the amount of $1000 payable to Commonwealth. This represented a downpayment on the premium for the American Empire policy. The check was deposited in Commonwealth's checking account and evidently forwarded to Dana Roehrig. On July 31, 1987, Dana Roehrig issued its monthly statement to Commonwealth. The statement, which involves only the subject policy, reflects a balance due of $3700.86. The gross premium is $5027. The commission amount of $502.70 is shown beside the gross commission. Below the gross premium is a $25 policy fee, $151.56 in state tax, and a deduction entered July 31, 1987, for $1000, which represents the premium downpayment. When the commission is deducted from the other entries, the balance is, as indicated, $3700.86. The bottom of the statement reads: "Payment is due in our office by August 14, 1987." No further payments were made by the insured or Commonwealth in August. The August 31, 1987, statement is identical to the July statement except that the bottom reads: "Payment is due in our office by September 14, 1987." On September 2, 1987, the insured gave Commonwealth a check for $2885.16. This payment appears to have been in connection with the insured's decision to delete the coverage on the adjoining building, which is not otherwise related to this case. An endorsement to the policy reflects that, in consideration of a returned premium of $1126 and sales tax of $33.78, all coverages are deleted for the adjoining building. The September 30 statement shows the $3700.86 balance brought forward from the preceding statement and deductions for the returned premium and sales tax totalling $1159.78. After reducing the credit to adjust for the unearned commission of $112.60 (which was part of the original commission of $502.70 for which Commonwealth had already received credit), the net deduction arising from the deleted coverage was $1047.18. Thus, the remaining balance for the subject property was $2653.68. In addition to showing the net sum due of $944.59 on an unrelated policy, the September 30 statement contained the usual notation that payment was due by the 12th of the following month. However, the statement contained a new line showing the aging of the receivable and showing, incorrectly, that $3700.86 was due for more than 90 days. As noted above, the remaining balance was $2653.68, which was first invoiced 90 days previously. Because it has not been paid the remaining balance on the subject policy, Dana Roehrig issued a notice of cancellation sometime during the period of October 16-19, 1987. The notice, which was sent to the insured and Commonwealth, advised that the policy "is hereby cancelled" effective 12:01 a.m. October 29, 1987. It was the policy of Dana Roehrig to send such notices about ten days in advance with two or three days added for mailing. One purpose of the notice is to allow the insured and agency to make the payment before the deadline and avoid cancellation of the policy. However, the policy of Dana Roehrig is not to reinstate policies if payments are received after the effective date of cancellation. Upon receiving the notice of cancellation, the insured immediately contacted Mrs. Blint. She assured him not to be concerned and that all would be taken care of. She told him that the property was still insured. The insured reasonably relied upon this information. The next time that the insured became involved was when the building's ceiling collapsed in June, 1988. He called Mrs. Blint to report the loss. After an adjuster investigated the claim, the insured heard nothing for months. He tried to reach Respondent, but she did not return his calls. Only after hiring an attorney did the insured learn that the cancellation in October, 1987, had taken effect and the property was uninsured. Notwithstanding the cancellation of the policy, the October 31 statement was identical to the September 30 statement except that payment was due by November 12, rather than October 12, and the aging information had been deleted. By check dated November 12, 1987, Commonwealth remitted to Dana Roehrig $3598.27, which was the total amount due on the October 30 statement. Dana Roehrig deposited the check and it cleared. The November 30 statement reflected zero balances due on the subject policy, as well as on the unrelated policy. However, the last entry shows the name of the subject insured and a credit to Commonwealth of $2717 plus sales tax of $81.51 minus a commission readjustment of $271.70 for a net credit of $2526.81. The record does not explain why the net credit does not equal $2653.68, which was the net amount due. It would appear that Dana Roehrig retained the difference of $125.87 plus the downpayment of $1000 for a total of $1125.87. It is possible that this amount is intended to represent the earned premium. Endorsement #1 on the policy states that the minimum earned premium, in the event of cancellation, was $1257. By check dated December 23, 1987, Dana Roehrig issued Commonwealth a check in the amount of $2526.81. The December 31 statement reflected the payment and showed a zero balance due. The record is otherwise silent as to what transpired following the issuance of the notice of cancellation. Neither Mrs. Blint nor Dana Roehrig representatives from Orlando testified. The only direct evidence pertaining to the period between December 31, 1987, and the claim the following summer is a memorandum from a Dana Roehrig representative to Mrs. Blint dated March 24, 1988. The memorandum references the insured and states in its entirety: Per our conversation of today, attached please find the copy of the cancellation notice & also a copy of the cancellation endorsement on the above captioned, which was cancelled effective 10/29/87. If you should have any questions, please call. Regardless of the ambiguity created by the monthly statements, which were not well coordinated with the cancellation procedure, Mrs. Blint was aware in late March, 1988, that there was a problem with the policy. She should have advised the insured, who presumably could have procured other insurance. Regardless whether the June, 1988, claim would have been covered, the ensuing litigation would not have involved coverage questions arising out of the cancellation of the policy if Mrs. Blint had communicated the problem to the insured when she received the March memorandum. Following the discovery that the policy had in fact been cancelled, the insured demanded that Respondent return the previously paid premiums. Based on advice of counsel, Respondent refused to do so until a representative of Petitioner demanded that she return the premiums. At that time, she obtained a cashiers check payable to the insured, dated June 1, 1990, and in the amount of $2526.81. Although this equals the check that Dana Roehrig returned to Commonwealth in December, 1987, the insured actually paid Commonwealth $1000 down and $2885.16 for a total of $3885.16. This discrepancy appears not to have been noticed as neither Petitioner nor the insured has evidently made further demands upon Respondent for return of premiums paid. The insured ultimately commenced a legal action against Commonwealth, Dana Roehrig, and American Empire. At the time of the hearing, the litigation remains pending.
Recommendation Based on the foregoing, it is hereby recommended that the Department of Insurance and Treasurer enter a final order finding Respondent guilty of violating Sections 626.561(1) and, thus, 626.621(2), Florida Statutes, and, pursuant to Sections 626.681(1) and 626.691, Florida Statutes, imposing an administrative fine of $1002.70, and placing her insurance licenses on probation for a period of one year from the date of the final order. If Respondent fails to pay the entire fine within 30 days of the date of the final order, the final order should provide, pursuant to Section 626.681(3), Florida Statutes, that the probation is automatically replaced by a one-year suspension. RECOMMENDED this 5th day of February, 1992, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of February, 1992. COPIES FURNISHED: Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 James A. Bossart Division of Legal Affairs Department of Insurance 412 Larson Building Tallahassee, FL 32399-0300 Thomas F. Woods Gatlin, Woods, et al. 1709-D Mahan Drive Tallahassee, FL 32308
Findings Of Fact The Respondent, Robert Charles Anderson, currently is eligible for licensure and is licensed in this state as a life and health (debit) agent, life, health and variable annuity contracts agent, general lines property, casualty, surety and miscellaneous agent, and health insurance agent. The Respondent moved to Florida from Michigan in September, 1983. In January, 1984, the Respondent and a partner bought Guaranteed Underwriters, Incorporated, a corporate general lines insurance agency doing business as Security Insurance Agency (Security) in New Port Richey, Florida. The Respondent's background was primarily in the life and health insurance business; his partner's background was primarily in property and casualty insurance. They planned to divide responsibilities for Security's operations along the lines of their respective areas of expertise. However, the partnership dissolved, leaving to the Respondent responsibility for all of the operations of the agency. After the dissolution of the partnership, the Respondent delegated to unlicensed employees most of the day-to-day responsibilities for the property and casualty and workmen's compensation side of the agency's business. The Respondent was personally involved primarily in the day-to-day operations of the health and life insurance side of the business, as well as in selected large commercial accounts. The conduct of Security's business, as described above, went smoothly (there were no charges of any license violations) until two disruptive factors entered into the picture. One was financial in nature; the other was personal. In 1986, Security bought an existing insurance agency (Sunland Insurance Agency) in Holiday, merged it into Security, and attempted to operate it as part of Security's overall business. In 1987, Security bought another, large agency (Village Insurance Agency) and also merged it into Security and attempted to operate it as part of Security's overall business. At this point, the Respondent essentially was attempting to operate three insurance agencies, something he never attempted before. With the purchase of Sunland and Village, in addition to Security, the Respondent incurred significant debt which had to be met for his business to just break even. By approximately 1988, the Respondent owed approximately $150,000 still outstanding on the purchase of Security, $100,000 borrowed to finance the purchase of Village, $43,000 to three different relatives and $3,500 to the NCNB bank on loans made in connection with the business. Payments on these debts, together with payroll, rent and other business expense left Security with a monthly operating budget of almost $12,000. At this expense level, the business was losing money. In calendar year 1989, the business lost between approximately $12,600 and (counting unpaid bills outstanding at the end of the year) $17,900. At the end of 1988, severe personal problems added to the Respondent's financial woes. In December, 1988, the Respondent's wife had to be hospitalized in Tampa for eight weeks for treatment for symptoms of mental illness. During this time, in addition to trying to supervise the operations of Security, the Respondent was required to travel back and forth to Tampa (about an hour drive by car, each way) to visit his wife and also make arrangements for the care of his eighteen month old son (either by himself or by a baby-sitter). As if the Respondent's personal problems were not enough, when his wife was discharged from the hospital (with a diagnosis of a chemical imbalance), she informed him that she wanted a divorce. She took up a separate residence in Tampa where she lived pending the dissolution of the marriage. As a result of the his personal problems, the Respondent delegated more and more responsibility to his unlicensed employees. He would go to the office only for an hour or two a day. Sometimes he was not able to get into the office at all. Judy Nelson (Count V). Judy Nelson, who is self-employed doing business as Pedals 'N' Presents, used Security for her insurance needs since 1986. In January, 1989, she applied through Security for renewal of a special multi-peril (SMP) insurance policy with American Professional Insurance for another year beginning January 21, 1989. On January 10, 1989, she gave Security her check for $485 as partial payment for the coverage. The $485 was deposited into Security's general operating account which Security used to pay the operating expenses of the business. Security never processed Nelson's application or secured the coverage. On or about March 10, 1989, Nelson received notice from American Professional that no application for renewal of coverage or premium had been received and that coverage was being cancelled. Nelson immediately contacted Security regarding the notification, and one of the Respondent's unlicensed employees acknowledged an error on Security's part but assured Nelson that Security would correct the situation and have Nelson's coverage reinstated. Security never got the policy reinstated, and the policy was cancelled on March 21, 1989. On or about April 8, 1989, Nelson's business was burglarized, and Nelson made a claim on her MPS policy. At this point, in handling the claim, the Respondent realized that the policy had been cancelled and that Nelson had no coverage. But, instead of telling her the facts, the Respondent paid the claim himself. Nelson thought the claim was paid under the terms of her SMP policy and still thought she had coverage. Later, Nelson had a question about a signature on her policy and telephoned the Professional American to get her question answered. Professional American told her that she had no coverage. At about the same time, Nelson was contacted by a Department investigator, who asked her not to contact the Respondent yet as he would make arrangements for a refund for her. On or about December 6, 1989, after the Department investigator cleared it, Nelson telephoned the Respondent and asked for a refund. This time, the Respondent acknowledged that Nelson had no coverage and agreed to a refund. The Respondent paid Nelson the refund at the end of December, 1989, or the beginning of January, 1990. Nelson still does business with Security. She has in force workmen's compensation insurance through Security. Fred J. Miller (Count VI). On or about February 24, 1989, Fred J. Miller came into the Security offices to get commercial automobile insurance for the vehicles he uses in his recycling business. He dealt with one of the Respondent's unlicensed employees. Several application and other papers for coverage with Progressive American Insurance Companies were prepared and were signed by Miller. Miller also made a partial payment for the coverage in cash in the amount of $296, for which the employee gave Miller a receipt. As he left the office, the Security employee assured him that he had coverage. A few days later, on or about February 28, 1989, Security contacted Miller and told him an additional $606 was needed to obtain the coverage for which he had applied. Miller returned to Security and gave the employee he was dealing with an additional $606 cash, for which he was given another receipt. It was not proven, and is not clear, whether the cash received from Miller was placed in the Security operating account. Security never submitted Miller's application for insurance. Contrary to Miller's understanding, Miller had no insurance on his vehicles. As of April 6, 1989, Miller had neither a policy (or copy of one) nor an insurance identification card. On or about April 6, 1989, Miller bought a new vehicle and had to contact Security to get an insurance policy number in order to have the vehicle registered in his name. The Security employee speaking to Miller discovered that Miller's undated application still was in the "pending matters" file and told Miller he could not get the policy number at that time. Miller said he had to have the policy number immediately. At that point, the employee brought the problem to the Respondent's attention. The Respondent had the employee tell Miller they would call right back. Security then dated Miller's application April 6, 1989, telephoned Progressive American to secure coverage effective April 6, 1989, and called Miller back with the policy number he needed. Security then processed Miller's application to secure the coverage for a year, through April 6, 1990. Miller has renewed the Progress American coverage through Security and still has his vehicles insured under the policy. Donald E. Wilkins (Count IV). Donald E. Wilkins, President of Apple Paradise Landscaping, Inc., used Security for his general liability and automobile insurance needs. He has no complaint about, and no issue is raised in this proceeding, as to Security's handling of those coverages. (The evidence is that the coverages Wilkins applied for were placed in the normal course of business.) On or about March 9, 1989, Wilkins decided he wanted a workmen's compensation insurance certificate. He went to Security's office, and one of the Respondent's unlicensed employees completed an application for the insurance and for premium financing. Wilkins gave her a $250 check "just for the certificate." The check was deposited into Security's general operating account which Security used to pay the operating expenses of the business. On March 9, 1989, Wilkins also specifically requested that Security furnish to Hawkins Construction of Tarpon Springs, Florida, a certificate of insurance. In response to the request, Security furnished to Hawkins Construction a certificate that Apple Paradise with the "S. Atlantic Council on Workers Compensation." A policy number appears on the certificate, and the certificate states that coverage was effective March 13, 1989, to expire on March 13, 1990. There is no evidence that the Respondent personally was involved in providing this certificate of insurance. The evidence did not prove whether Wilkins ever got any workmen's compensation insurance. The Department proved that Security never processed the premium financing application, and Wilkins testified that he never got a payment book or other request for payment from any premium financing company. But the representative of the National Council on Compensation Insurance gave no testimony on Wilkins or Apple Paradise. Wilkins himself did not appear to have any complaint against the Respondent or Security. Theoharis Tsioukanaras (Count III). Theoharis (Harry) Tsioukanaras owned and operated Harry's Painting and Enterprises, Inc. He had been doing business with the Respondent to meet his business and personal insurance needs since the Respondent first bought Security (and did business with the prior owner for a year before that). He had his business and personal automobile insurance, as well as his workmen's compensation insurance through Security. In the normal course of their business relationship, either Harry would telephone Security when he had insurance needs or Security would telephone Harry when it was time to renew insurance. Harry would then drop by the office to complete the necessary paperwork and pay the premium. When Harry did not have the necessary premium money when it was time to buy or renew insurance, the Respondent regularly loaned Harry premium money and Harry would pay the Respondent back later. Harry usually dealt with the Respondent's unlicensed employees, not with the Respondent directly. On or sometime after July 7, 1989, Harry telephoned Security for proof of insurance on a 1987 Subaru so that he could avoid having to pay for lender insurance on the vehicle at a bank where he was seeking to obtain financing. One of the Respondent's unlicensed employees gave Harry a purported insurance identification card for "Progressive American," listing a purported insurance policy number and purported policy effective dates of July 7, 1989, to January 7, 1990. The lending institution did not accept the card. In fact, no Progressive American policy had issued on the vehicle. At some point, Harry came by the Security office and told the Respondent that he (Harry) was due a $640 refund for automobile insurance renewal premium money on a policy that never issued. By the Respondent's own admission, he checked with his records and his unlicensed employees and confirmed that Harry was owed the money. On September 28, 1989, he gave Harry a check for $640. 1/ Despite the circumstances that resulted in the false Progressive American insurance identification card, in Harry's need to buy Allstate insurance on a vehicle he thought was insured through Security, and in Harry's need for a $640 refund from Security, Harry continues to do his insurance business with the Respondent and Security and also refers friends to the Respondent for insurance needs. John Stuiso (Count I). On or about June 7, 1989, John Stuiso, a self-employed building contractor, applied for both general liability and workmen's compensation insurance through Security. (Stuiso had been insured through Security for the preceding four years with no apparent problems.) Stuiso paid Security $3,250 as partial payment of the premiums on the policies and also applied for premium financing through Security. At least $3,000 was paid by check; the evidence is not clear how the other $250 was paid. The $3,000 check was deposited into Security's general operating account which Security used to pay the operating expenses of the business. It is not clear what happened to the other $250. It was understood between Stuiso and Security that Security would have the applications processed and would inform Stuiso if there was any problem with coverage. Not having heard anything to the contrary, Stuiso believed he had the general liability and workmen's compensation insurance for which he had applied. In fact, Security never processed either application for insurance or either application for premium financing. In late July or early August, 1989, Stuiso requested that Security furnish a certificate of insurance for him to provide to a customer, APCO Building Systems of Oldsmar, Florida. On August 4, 1989, Security issued to APCO a certificate that Stuiso had both general liability insurance with American Professional Insurance Company and workmen's compensation insurance with "South Atlantic Council on Work Comp." Purported policy numbers also appeared on the certificate. When Stuiso never received a payment book for his premium financing, he became concerned about his coverage and was about to approach the Department for assistance when he received a telephone call from a Department investigator who had been investigating the Respondent (unbeknownst to the Respondent.) The investigator told Stuiso that he had no coverage. Stuiso then approached the Respondent and asked for a refund. The Respondent checked his records and asked his unlicensed employees about Stuiso's claim that he had paid for and applied for insurance that never issued. He learned for the first time the facts about Stuiso and immediately wrote Stuiso two refund checks, one for $3,000 and one for $250. Due to the financial problems the Respondent was having, his $3,00 check was returned for insufficient funds. The Respondent tried to borrow the money to cover the $3,000 check from a friend who declined on advice of counsel. Stuiso then went to the police and had the Respondent charged with writing a worthless check. The Respondent was advised of this and turned himself in to the police. He was given a week to make good on the check. The Respondent was able to borrow the money from another friend and paid Stuiso in full. However, his encounter with the police brought home to him the depths to which he had sunk. He decided to commit suicide by monoxide poisoning but changed his mind before it was too late. He telephoned his wife in Tampa to report what he had just done, and she initiated steps to have him committed involuntarily for treatment for mental illness under Florida's Baker Act. He spent four days in the Community Hospital in New Port Richey, Florida, where he was diagnosed as having "adjustment reaction." He was released to the custody of his wife and spent the next week to ten days with her in Tampa. After the Respondent recovered, he decided to do whatever was necessary to save his business and pay off his debts. He laid off office staff and, to take up the slack, himself assumed the responsibilities he had been delegating to his unlicensed employees. He also decided, in light of the Harry's and Stuiso matters, to himself investigate to see if there were any other Security customers who did not have insurance coverage for which they had paid. He found Wanda Mae Riley (Custom Plumbing of Pasco, Inc.). Wanda Mae Riley (Count II). In about August, 1988, the Respondent himself called on Wanda Mae Riley of Custom Plumbing of Pasco County to advise her that the company's general liability and automobile insurance policies for its fleet of four trucks were up for annual renewal on August 24, 1988. The Respondent filled out applications for renewal of the policies and for premium financing and accepted Riley's check in the amount of $3,244 as down payment for the renewal policies. The $3,244 was deposited into Security's general operating account which Security used to pay the operating expenses of the business. The Respondent telephoned American Professional Insurance Company to bind the coverage. He or his office also issued proof of insurance identification cards for Custom Plumbing. But, for reasons he cannot explain (having no recollection), he never processed the applications and the binders expired when the applications were not processed and policies were not issued in the normal course of business. Having had a lapse of memory as to the matter and as to Security's responsibilities to Custom Plumbing, the Respondent did not know and never told Riley or Custom Plumbing that the insurance policies were not renewed and that Custom Plumbing did not have the coverage it thought it did. Later in 1988, Security also arranged for workmen's compensation insurance for Custom Plumbing. The evidence did not prove that there were problems in the way Security obtained this coverage for Custom Plumbing. In approximately April, 1989, Custom Plumbing requested that Security furnish a certificate of insurance for him to provide to the Barnett Bank of Hernando County. On April 21, 1989, Security issued to the bank a certificate that Custom Plumbing had automobile insurance with American Professional Insurance Company. The expired binder number (which perhaps was the same as the policy number of the prior year's policy) appeared on the certificate as the purported policy number. There is no evidence that the Respondent personally was involved in providing this certificate of insurance. When, in approximately late October or early November of 1989, the Respondent discovered that Security had not obtained the coverages for which Custom Plumbing had made down payments in August, 1988, he telephoned Riley to inform her 2/ and tell her that he would refund the down payments Custom Plumbing had made in August, 1988. When the refund was not made promptly, Riley went to a lawyer to have a promissory note drawn for the Respondent's signature. The promissory note reflected the $3,244 the Respondent owed to Custom Plumbing, payable $500 a month. On or about December 9, 1989, the Respondent signed the note, which was paid in full in accordance with the terms of the note. (As previously found in Finding 14, by this time the Respondent also had heard from Nelson.)
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Petitioner, the Department of Insurance and Treasurer, enter a final order: (1) finding the Respondent, Robert Charles Anderson, guilty of the charges contained in Counts I, II, III, V and VI of the Administrative Complaint, as set forth in the Conclusions of Law, above; and (2) suspending the Respondent's licenses and eligibility for licensure for six months. RECOMMENDED this 28th day of May, 1991, in Tallahassee, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of May, 1991.
Findings Of Fact At all times material hereto Respondent was licensed as an Ordinary Life and General Lines Agent (Exhibit 1) and was the agent for Dixie Insurance Company at the Bartow office. As such, he had the authority to write policies binding the insurer. At all times relevant hereto, Respondent was president and principal stockholder of Friendly Insurance Companies of Bartow, Winter Haven, Lake Wales and Haines City. The corporate records (Exhibit 3 for Polk County) show this to be the same as Friendly Auto Insurance of Lake Wales, Inc. Respondent was the agent for Dixie Insurance Company only at the Bartow office. Dixie Insurance Company qualifies agents, not offices, to sell their policies. Respondent had no authority to act as agent for Dixie Insurance at any of these offices other than the Bartow office as the insurance company has but one agent per office. To support the allegations in count 34 of the Administrative Complaint, Edward Bland testified, and Exhibits 21 through 23 were admitted. Bland applied for automobile insurance at Friendly Auto Insurance at the Winter Haven office, which he paid for by check in the amount of $728 (Exhibit 23) as full payment for the one year premium. Subsequent thereto, a Premium Finance Agreement was prepared on which Bland's signature was forged showing $546 of the premium to be financed. This finance agreement was signed by T. R. Shaw as agent. Upon learning that the finance agreement had been issued on his coverage, Bland contacted the Winter Haven office manager, and after a few weeks of "run around" contacted the Department of Insurance and "got his money back." Bland never saw Shaw or Respondent. Rafael Gomez, M.D. purchased automobile insurance on his three cars from Friendly Auto Insurance of Winter Haven in December 1985 for which he paid $3452.71 for the annual premium. Subsequently thereto, he received a call from the Barnett Bank, which had financed one of the cars, to tell him that the bank needed evidence of insurance on the financed auto. Dr. Gomez contacted Ruth Kent, the office manager at the Winter Haven office, who assured him she would supply the bank with the necessary documentation. When the bank contacted Dr. Gomez later to again demand proof of insurance, Gomez went to the Winter Haven office and demanded to see his file. He made copies of certain documents which he took to the bank. Dr. Gomez subsequently learned that a finance agreement had been entered into on his behalf, but without his knowledge or consent, and that the address shown on the agreement under his name was that of Ruth Kent. Although when accosted by Dr. Gomez with this information, Ms. Kent denied such an intentional act, this would have allowed her to hold the finance coupons and get all information supplied by the finance company to the borrower without Dr. Gomez learning that the policy for which he had paid in full was subsequently financed. After learning of the subterfuge, Dr. Gomez contacted the Department of Insurance. Ruth Judd was office manager at the Friendly Insurance Agency of Haines City for a period of time ending in 1987 when she was terminated by Respondent. Ms. Judd contends she was only the office manager, and Respondent was the boss of the office and hired all employees. During the time she worked in the office, Ms. Judd testified several different people served as the licensed agent for the office, but they spent little time in the office with Donald Leroy Flentke, towards the end of his tenure, coming in only for his weekly paychecks. No evidence was presented from which a determination could be made that for a specific period of time any of the four offices were not being supervised by a licensed agent. Ms. Judd testified she was aware of one policy for which the insured had paid the premium in full being submitted for a premium finance agreement with forged documents. She also was aware that monthly financing payments were made by the Haines City office on some three or four other premium finance agreements. Ms. Judd testified on March 2, 1988, that she was presently unemployed. Respondent called one witness that testified and produced documentary evidence (Exhibits 24 through 26) that on March 2, 1988, this witness purchased insurance from Ms. Judd at New Horizons and was required to buy an accidental death policy in order to obtain PIP coverage. Exhibit 7 shows that an automobile insurance policy was issued to Jackie Bryan, the policy was sold through Friendly Insurance of Winter Haven, Inc., that the premium was financed, the borrower owed an additional $142.66 on the finance agreement, and the policy expired 2-26-86. Respondent acknowledged that his signature appears on the premium finance application. Some 5000 policies are sold by Respondent's agencies per year, and Respondent has no independent recollection of that finance agreement. Dixie Insurance Company issued a policy to Johnny Davis which was also financed through Envoy, but this application was signed by Shaw. Although Dixie Insurance Company had their own premium finance organization and, if the premium is financed, preferred to do the financing, Respondent testified that occasionally, if a client did not want to finance their premium through Dixie, the agency would go through another premium finance company such as Envoy. Exhibits 9, 10, 11 and 12 show premium finance agreements were contracted for on behalf of Raymond Scott, Mark Turner, Kathy Smith and Cathy Phillips, but no auto insurance policies were issued by Dixie Insurance Company to these individuals. Only one of these finance agreements (Exhibit 12) purports to be prepared at the Bartow office, and two of the drafts (Exhibits 9 and 12) purport to be signed by Respondent. Respondent testified he neither signed those drafts nor authorized someone else to sign for him. The forgery on both Exhibits 9 and 12 appear to have been perpetrated by the same person. Cathy Phillips, a friend of Ruth Kent, testified without contradiction that the signature purporting to be hers on Exhibit 12 was forged, that she never entered into a premium finance agreement with Envoy Finance Corporation, and that she had never seen Exhibit 14 until presented to her by the Petitioner's attorney. Ms. Phillips did receive a past-due notice on one occasion and called Ruth Kent who told her not to worry about it, that everything was taken care of. Subsequently, Ms. Phillips' husband wrote a letter to Envoy Finance Corporation denying any knowledge of any insurance policy written by Friendly Insurance of Bartow. Considerable testimony was submitted regarding the activities of Chuck Evans who was, at one time, employed by Respondent at the Winter Haven agency as a non-licensed employee with authority to write checks on the Trust Account. While the statements made by Evans to Department of Insurance officials contributed to the initiation of the investigation of Respondent's agencies, none of this testimony was relevant to the charges here at issue.
The Issue This case involves a dispute as to whether the Petitioner underpaid the premiums due on his health insurance coverage and, if so, what action should be taken by the Department of Administration as a result of any premium underpayments. By notice dated March 18, 1988, the Department of Administration notified the Petitioner that the Department records "show a total underpayment of $1,117.81 for the coverage periods 9/86 through 9/87." At the formal hearing, over the objection of the Petitioner, the Department was permitted to offer evidence regarding the Petitioner's premium history (both the amounts due and the amounts actually paid) for the entire period of the Petitioner's employment with the State of Florida, a period which runs from May 1978 until October 1988. At the formal hearing the Department of Administration presented the testimony of one witness and offered several exhibits, all of which were received. The Petitioner did not present any evidence, but did present oral argument on his own behalf. The parties were allowed 10 days from November 3, 1988, within which to file their post-hearing submissions with the Hearing Officer. The Department of Administration timely filed Proposed Findings Of Fact. Those findings are specifically addressed in the appendix to this recommended order. The Petitioner did not file any post-hearing submission.
Findings Of Fact Based on the evidence received at the formal hearing, I make the following findings of fact. From May 1, 1978, until August 1, 1978, the Petitioner requested and received family coverage under the State Group Health Self-insurance Plan. From November 1, 1978, until November 1, 1985, the Petitioner requested and received individual coverage under the State Group Health Self-Insurance Plan. From November 1, 1985, until the date of the hearing, the Petitioner requested and received family coverage under the State Group Health Self-Insurance Plan. From May 1, 198, until July 1, 1984, the Petitioner was a part-time employee of the State of Florida, working .25 of a full-time equivalent position. Accordingly, his premiums for health insurance coverage under the State Group Health Self-Insurance Plan during this period should have been paid on the basis of employment in a .25 full-time equivalent position. From July 1, 1984, until at least the date of the hearing, the Petitioner has been a part-time employee of the State of Florida, working .20 of a full-time equivalent position. Accordingly, his premiums for health insurance coverage under the State Group Self-Insurance Plan during this period should have been paid on the basis of employment in a .20 full-time equivalent position. During the period beginning May 1, 1988, and continuing through October of 1988, the amount by which the Petitioner underpaid his health insurance coverage premiums totals S1,116.36. 1/ During the period beginning March 1, 1986, and continuing through October of 1988, the amount by which the Petitioner underpaid his health insurance coverage premiums totals $861.74. During the thirteen-month period beginning with September 1986 and ending with (but including) September 1987, the amount by which the Petitioner underpaid his health insurance coverage premiums totals $258.36.
Recommendation Based on all of the foregoing, I recommend the entry of a Final Order to the following effect: Finding the Petitioner to be in debt to the State of Florida in the amount of $258.36 by reason of underpayment of premiums during the period of September 1986 through September 1987. Providing that the Petitioner's health insurance coverage under the State Group Health Self-Insurance Plan will be cancelled unless within thirty (30) days following the entry of the final order the Petitioner either pays the full amount of $258.36 or enters into an installment payment program consistent with Rule 22K-1.049(1)(a)2., Florida Administrative Code. DONE AND ENTERED this 23rd day of November, 1988, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of November, 1988.
The Issue Should Petitioner impose discipline against the licenses held by Respondent as a Life (2-16), Life and Health (2-18), General Lines, Property and Casualty Insurance (2-20), Health (2-40) and Legal Expense (2-56) agent pursuant to provisions within Chapter 626, Florida Statutes?
Recommendation Based on the facts found and the conclusions of law reached, it is RECOMMENDED: That a Final Order be entered finding Respondent in violation of Counts I through V pertaining to his obligations as a fiduciary set forth in Section 626.561(1), Florida Statutes, his violation of Section 626.611(7), (9) and (10), Florida Statutes, and his violation of Section 626.621(4), Florida Statutes, in effect when the violations transpired and that the various licenses held by Respondent be suspended for six months as suggested by counsel for Petitioner. DONE AND ENTERED this 2nd day of December, 2003, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of December, 2003. COPIES FURNISHED: James A. Bossart, Esquire Department of Financial Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 William Franklin Outland, III 10840 Northwest 100th Street Reddick, Florida 32686 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Lower Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact At all times pertinent to this proceeding Respondent, HOWARD P. HAUSER, was eligible for licensure and licensed in this state by the Florida Department of Insurance as a Life and Health Insurance Agent; General Lines Insurance Agent - Property, Casualty, Surety, and Miscellaneous Lines; and Legal Expense Insurance Agent. At all times pertinent hereto, Respondent was the registered agent and an officer or director of Hauser and Associates Insurance Agency, Incorporated of 7770 Davie Road Extension, Hollywood, Florida. Beginning on or about January 1, 1986, and continuing through August 31, 1987, Respondent represented to one of his clients that he had obtained insurance coverage for that client's three restaurants. This representation of coverage was false. Respondent received from the client insurance premium payments of $56,550.00, more or less, for the insurance of the client's three restaurants. These funds were obtained by Respondent under false pretenses. Respondent provided the mortgagee of one of the restaurants owned by his client with a document purporting to be a certificate of insurance on that restaurant from Scotsdale Insurance Company insuring the restaurant for the period December 11, 1985, to December 11, 1986. Respondent further provided the mortgagee with a declaration sheet stating that Protective Insurance Company would insure the restaurant from January 1, 1987, to January 1, 1990. Respondent falsified these declaration sheets. Respondent's client suffered no loss, other than the loss of his premium dollars, because of Respondent's misrepresentations as to coverage. Respondent was charged with one count of Grand Theft of the Second Degree, a second degree felony, based on the dealings with his client. Respondent entered a plea of nolo contendere to the charge of Grand Theft of the Second Degree. The Circuit Court, in and for Broward County, Florida, placed Respondent on probation for a period of three years and withheld adjudication of guilt. As a condition of the Order of Probation, the court required that Respondent make restitution to his client in the amount of $56,550.00 and further required that $15,000.00 be paid toward restitution on October 24, 1988, the date Respondent entered his plea of nolo contendere and the date the court entered the Order of Probation. Respondent made a restitution payment of $15,000.00 on October 24, 1988. Respondent has been licensed by Petitioner since April 1972. Although Petitioner has received other complaints about Respondent, no formal action has been previously taken against him. Respondent has been a good citizen, except for this misconduct, and a good family man. Respondent regrets his misconduct. Respondent timely requested a formal hearing after the Administrative Complaint was served upon him.
Recommendation Based on the foregoing findings of fact and conclusions of law it is RECOMMENDED that the Department of Insurance enter a final order which revokes all licenses issued by the Department of Insurance to Respondent, Howard Paul Hauser. DONE and ENTERED this 21st of July, 1989, 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 21st day of July, 1989. APPENDIX The proposed findings addressed as follows: of fact submitted on behalf of Petitioner are 1. Addressed in paragraph 1. 2. Addressed in paragraph 2. 3. Addressed in paragraph 6. 4. Addressed in paragraph 3. 5. Addressed in paragraph 4. 6. Addressed in paragraphs 3-4. The proposed findings of fact submitted on behalf of Respondent are addressed as follows: Addressed in paragraph 9. Addressed in paragraph 6. Addressed in paragraph 6. Rejected as being unnecessary to the conclusions reached. Addressed in paragraph 7. Addressed in paragraph 5. Addressed in part in paragraph 7. Rejected in part as being speculative. Rejected as being a conclusion of law and not a finding of fact. COPIES FURNISHED: Robert G. Gough, Esquire, (at the hearing) and Charles Christopher Anderson, Esquire, (on the proposed recommended order) Office of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Gary D. Weiner, Esquire, Glendale Federal Building Suite 209 901 Southeast 17th Street Fort Lauderdale, Florida 33316 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Don Dowdell, General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300
The Issue The issues are whether Respondent is guilty of various violations of the Insurance Code and, if so, what penalty should be imposed.
Findings Of Fact At all relevant times, Respondent has been licensed as a Life & Variable Annuity Agent (2-14), Life, Health and Variable Annuity Agent (2-15), Life Agent (2-16), Life and Health Agent (2-18), General Lines, Property and Casualty Agent (2-20), and Health Agent (2-40). Respondent holds license number A164221. Petitioner has disciplined Respondent on two prior occasions. By Consent Order filed November 28, 2000, Petitioner imposed an administrative fine of $7500 against Respondent and placed her licenses on probation for two years. The Consent Order arose out of allegations that Respondent failed to place insurance coverage and failed to supervise adequately her employees. By Consent Order filed April 30, 2002, Petitioner imposed an administrative fine of $2000 against Respondent. The Consent Order does not describe the underlying allegations. At all relevant times, Respondent has been a director, officer, and sole owner of AIA. She has owned the corporation since 1993. At all relevant times, Respondent was the only signatory on the AIA bank accounts. Customarily, Respondent markets the insurance and then sends customers to one of the AIA customer service representatives. A high-volume agency with over 15,000 active clients, AIA, which employs 10 persons, has issued about 50,000 policies since November 2001. For most, if not all, of the relevant period, AIA employed Tony Decambre as the primary agent, and customer service representatives performed much of the work in processing insurance applications. Petitioner attempted to prove that Respondent was the primary agent. Rather than produce copies of forms by which Respondent may have designated herself as the primary agent, Petitioner offered only copies of prints of screens of data maintained by Petitioner. The Administrative Law Judge excluded from evidence these data compilations. Respondent testified that Mr. Decambre was the primary agent. Petitioner's investigator testified that Respondent was the primary agent, at least the last time that he had checked. The investigator's testimony failed to establish by clear and convincing evidence that Respondent was the primary agent. On December 28, 2001, Fernando Gomez visited AIA to pay for a workers' compensation insurance policy to be issued by Florida United Businesses Association/Workers Compensation (FUBA). Respondent met with Mr. Gomez, who required the presence of another employee to translate into and from Spanish. As the producer, Respondent signed the application. FUBA bound the coverage on December 31, 2001. Among the three persons present on December 28, only Respondent testified. The application bears the date "December 28, 2001," although this handwriting is lighter than the remainder of the handwriting on the application and could have been written at a date subsequent to the date on which the application was taken. Petitioner contends that Respondent took the application on November 6, 2001, or somehow tried to bind FUBA as of November 6, 2001. The sole evidentiary basis for this contention is Petitioner Exhibit 9, which purports to be a certificate of liability insurance, bearing a date of December 28, 2001, but showing effective dates for general liability and workers' compensation coverage for Mr. Gomez of November 6, 2001. The certificate holder is stated to be Universal Drywall & Plastering, and the producer is stated to be AIA. The workers' compensation insurer is stated to be FUBA. Petitioner Exhibit 9 was admitted solely to prove what Universal Drywall & Plastering sent to FUBA to confirm the existence of Mr. Gomez's workers' compensation coverage. The certificate is false because it confirms workers' compensation insurance as of a date that neither FUBA nor AIA contends is correct. However, the failure to obtain testimony from Mr. Gomez, the AIA employee who translated, or an employee of Universal Drywall & Plastering who could explain how he or she obtained a copy of the certificate precludes a determination that Respondent is in any way responsible for the production or transmission of this false certificate. The certificate suggests that the person responsible for its preparation may not have had Respondent's presumed level of familiarity with FUBA. The person preparing the false certificate used a policy number that is not of a type used by FUBA to identify the workers' compensation policies that it issues. The false certificate bears an expiration date of November 6, 2002. In fact, the actual coverage issued by FUBA ended on April 1, 2002, because all of its workers' compensation policies expire each year on April 1. It appears that Universal Drywall & Plastering presented the false certificate to FUBA on January 2, 2002, so, as of that date, Mr. Gomez had workers' compensation coverage from FUBA. The record also fails to disclose why Mr. Gomez might have desired an earlier effective date. The information might have facilitated a determination of who was responsible for the fraudulent preparation of the certificate. Petitioner has failed to prove the material allegations of Count I. On October 25, 2002, AIA issued an Evidence of Property Insurance to Meryl Levin, showing an effective date of October 25, 2002 for homeowners and flood insurance in the amount of $114,000. The document states that "United" would provide the homeowners insurance at $910 per year and flood insurance at $247 per year. On October 30, 2002, AIA received a check in the amount of $910 from Stephen J. Allocco, P.A., and AIA deposited that check into its noninterest-bearing bank account at Wachovia Bank. On November 8, 2002, United Property & Casualty Insurance Company (United) sent Mr. Levin a notice that he owed $810 for his insurance policy, which bore an effective date of November 8, 2002. The due date is "upon receipt." On January 14, 2003, United canceled the insurance because it never had received the $810. United received a check for $810 on February 26, 2003, but the accompanying package failed to contain a "no loss" statement, which would have assured United that the insured had not suffered a loss between the purported coverage date and the date of receipt of the premium check. Absent such an assurance, United routinely declines to provide coverage because it will not cover losses retroactively. United thus returned the check. Mr. Levin did not testify as to this transaction, nor did anyone from AIA except Respondent, who disclaimed any direct involvement with the matter. There is no evidence of any loss suffered by Mr. Levin, nor is there any evidence of any intentional wrongdoing by Respondent. The determination as to whether Respondent negligently failed to satisfy all applicable duties imposed on her is frustrated by Petitioner's failure to call an expert witness who could have explained office practices in insurance agencies and proved what is reasonable and unreasonable to expect of Respondent. The record does not establish that United sent a copy of its November 8 statement to AIA. Count II portrays a single case in which AIA failed to pay a premium to an insurer for over three months--nothing more. The determination of whether Respondent has demonstrated unfitness for this omission is impossible absent a basis for determining an appropriate minimum standard of agency office practice. Petitioner has failed to prove the material allegations of Count II. On October 9, 2002, Respondent sent a letter to Gerald Kirby bearing the letterhead of AIA stating that "we" have reviewed your homeowner needs and "determined the best possible rate for you." Showing homeowners coverage of $518,000, as well as associated coverages, the letter quotes a total policy premium of $3278. The letter warns that "this quotation is an estimate and is not legally binding." At the bottom of the letter is: "Thanks!!!Joanne." The record reveals no other persons employed at AIA named "Joanne" besides Respondent. On the same date, AIA produced an evidence of property insurance, which shows homeowners and flood insurance with the same effective date of October 11, 2002, in the respective amounts of $518,000 and $250,000, and bearing respective premiums of $3278 and $411 annually. On October 11, 2002, AIA received a check in the amount of $3278 from Capital Abstract & Title and deposited that check into its noninterest-bearing bank account at Wachovia. AIA was to use these funds to purchase homeowners insurance from United, with coverage of $518,000 and an effective date of November 11, 2002 (according to the parties' stipulation, which misstates the year as "2001"). However, the premium for $518,000 of coverage from United was $1890 at the time. The proper amount of premium due for $518,000 of coverage was mooted by the fact that AIA, like all of United's agents at the time, lacked authority to bind United to more than $300,000 coverage without specific approval from a United representative. Such approval required, among other things, documentation of the value of the insured property. AIA sent United a check for $1777, which United received on November 12, 2002. This check was the proper premium for $300,000 of coverage. At the same time, AIA sent paperwork for the issuance of coverage to $587,000, but failed to send the documentation that United required. Thus, United issued only $300,000 of coverage, and Mr. Kirby was due a refund of $1501, which is the difference between the premium that he paid and the cost of the insurance that he received. AIA paid Mr. Kirby $1501 on February 24, 2003. After AIA or a United marketing representative submitted the required documentation, United approved on February 19, 2003, the increase of coverage to $518,000. It is unclear who paid the additional premium--AIA or Mr. Kirby. For the same reasons discussed in Count II, Petitioner has failed to prove the material allegations of Count III. Although AIA's handling of the Kirby transaction was flawed, again, the acts and omissions are not so stark as to eliminate the necessity of expert testimony to establish the minimum standard, against which to measure Respondent's performance of her duties. Mr. Kirby appears to have suffered no loss, and there is no evidence of intentional wrongdoing. Even though, as to this transaction, Respondent clearly had some personal involvement, it is impossible to determine her degree of responsibility for the uneven handling of the insurance transaction and short delay in sending the refund to Mr. Kirby or even whether these two aspects of the transaction demonstrate unfitness to transact insurance business. The remaining counts involve refunds from Pro Premium Finance Company (Pro Premium) to AIA and refunds from AIA to its customers. Pro Premium provides financing to persons purchasing insurance. Several customers of AIA borrowed money from Pro Premium to pay for insurance they were buying through AIA. For various reasons--typically, the cancelation of coverage--Pro Premium refunded portions of the premium to AIA, which subsequently refunded the unearned portion of the commission to the customer. Every two weeks, Pro Premium sends AIA refunds and statements, which clearly identify the insured, date of cancelation, amount of refund, and amount due the insured. The time that elapsed from when AIA received the refunds from Pro Premium to when AIA sent the customers their share of the refunds ranged from two to twelve months. AIA received the refunds from Pro Premium between April 15, 2003, and February 15, 2004, and AIA sent its customers their shares of the refunds between April 5, 2004, and May 12, 2004. The customer refunds are concentrated in a relatively short period of time because AIA discovered all of the unrefunded monies during a self-audit that it conducted during this six-week period. AIA performed the self-audit due to an audit underway at Pro Premium. Except as noted below, Respondent was not personally involved in any of these refund transactions. At the time of all of the Pro Premium transactions described in this recommended order, the policy of AIA was for the customer service representative to write the client within one week of receiving the refund from Pro Premium and ask for directions whether to apply the refund to new or existing insurance or to pay it to the customer. The customer service representatives were supervised by the agency manager, not Respondent. It is unclear what AIA's policy was if the customer did not respond. When AIA paid refunds, its policy at the time was for the agency manager to prepare the refund check, which Respondent would sign. In May 2004, AIA changed its handling of refunds by directing all Pro Premium refunds directly to the bookkeeper, who expedites the preparation of the refund checks, which can now be signed by Respondent or one of two other employees. As to Count IV, on April 15, 2003, Pro Premium sent AIA a check in the amount of $1361.03, which AIA deposited on May 7, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$117.21--represented unearned commission, which was due the insured, Erikna Guzman. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Guzman of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Ms. Guzman did not respond. On May 10, 2004, AIA sent Ms. Guzman a check for $117.21. Twelve months elapsed from when AIA received the refund and when it sent Ms. Guzman the money due her. As to Count V, on May 31, 2003, Pro Premium sent AIA a check in the amount of $1538.36, which AIA deposited on June 10, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$43.83--represented unearned commission, which was due the insured, Shannon Campbell. By letter sent after obtaining the Pro Premium refund, AIA informed Ms. Campbell of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Ms. Campbell did not respond. On April 17, 2004, AIA sent Ms. Campbell a check for $43.83. Ten and one-half months elapsed from when AIA received the refund and when it sent Ms. Campbell the money due her. As to Count VII, on an unspecified date, Pro Premium sent AIA a check in the amount of $720.38, which AIA deposited on July 8, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$347.35--represented unearned commission, which was due the insured, Marie Philippe. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Philippe of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Ms. Philippe did not respond. On April 5, 2004, AIA sent Ms. Philippe a check for $347.35. At least nine months elapsed from when AIA received the refund and when it sent Ms. Philippe the money due her. As to Count VIII, on June 30, 2003, Pro Premium sent AIA a check in the amount of $1729.80, which AIA deposited on July 8, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$380.40--represented unearned commission, which was due the insured, Fernando Garcia. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Mr. Garcia of the refund and asked him to instruct AIA as to whether to apply it to new insurance or send her a refund. The first letter was returned by the postal service as undeliverable. Mr. Garcia had sold his house and moved. However, on April 7, 2004, AIA sent Mr. Garcia a check for $380.40. Nine months elapsed from when AIA received the refund and when it sent Mr. Garcia the money due him. As to Count IX, on August 31, 2003, Pro Premium sent AIA a check in the amount of $1552.84, which AIA deposited on September 9, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$102.07--represented unearned commission, which was due the insured, Girline Reid. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Reid of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Ms. Reid instructed AIA to apply the refund to insurance issued to her husband, which AIA did. However, Respondent did not testify when AIA applied the refund to the account of Ms. Reid's husband. On May 7, 2004, AIA sent Ms. Reid a check for $102.07. Eight months elapsed from when AIA received the refund and when it sent Ms. Reid the money due her. As to Count X, on August 31, 2003, Pro Premium sent AIA a check in the amount of $1552.84, which AIA deposited on September 9, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$169.06--represented unearned commission, which was due the insured, Guillermo Diaz, who is a significant customer of AIA. Respondent spoke with him shortly after AIA received the refund, and he instructed her to apply the refund to other insurance issued to him. Again, Respondent did not testify when Mr. Diaz instructed her to apply the refund to other insurance, but, given his importance as a repeat customer, he probably spoke with her shortly after AIA received the refund. However, on April 17, 2004, AIA sent Mr. Diaz a check for $169.06, to which he may not have been entitled. Eight and one-half months elapsed from when AIA received the refund and when it sent Mr. Diaz the refund check. As to Count XI, on November 30, 2003, Pro Premium sent AIA a check in the amount of $4994.25, which AIA deposited on December 9, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$143.18--represented unearned commission, which was due the insured, Bernardo Archibald. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Mr. Archibald of the refund and asked him to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Mr. Archibald directed AIA to keep the money to apply to insurance for which he owed additional premium because he had not yet obtained a four-point inspection (heating, wiring, roofing, and plumbing) of an older home, so as to be entitled to a reduced premium. However, Respondent did not testify when AIA received this direction from Mr. Archibald, although only five months elapsed from AIA's receipt of the refund from Pro Premium to its issuance, on May 7, 2004, of a check to Mr. Archibald for $143.18. As to Count XII, on an unspecified date, Pro Premium sent AIA a check in the amount of $3881.67, which AIA deposited on January 13, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$488.83--represented unearned commission, which was due the insured, Danette Piscopo. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Piscopo of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that AIA sent a refund check, but Ms. Piscopo never cashed it. However, Respondent did not testify when it sent the earlier check, although only about three months elapsed from AIA's receipt of the refund from Pro Premium to its issuance on April 15, 2004, of a check to Ms. Piscopo for $488.83. As to Count XIII, on December 31, 2003, Pro Premium sent AIA a check in the amount of $1988.58, which AIA deposited on January 13, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$294.60--represented unearned commission, which was due the insured, Allam Masief. Respondent testified that AIA mistakenly issued two policies to Mr. Masief for the same coverage from two insurers and mistakenly paid Pro Premium twice, even though Mr. Masief paid only one premium. Both policies were canceled. Mr. Masief asked AIA to reinstate one policy, but it was unable to do so. Respondent did not testify when these discussions with Mr. Masief took place, but only four and one-half months elapsed from AIA's receipt of the refund from Pro Premium and to its issuance, on May 12, 2004, of a check to Mr. Masief for $294.60. As to Count XIV, on January 31, 2004, Pro Premium sent AIA a check in the amount of $3260.03, which AIA deposited on February 10, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$886.74--represented unearned commission, which was due the insured, Geraldine DeStefanis. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. DeStefanis of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Ms. DeStefanis "probably" asked AIA to try to reinstate the canceled policy, but AIA was unable to do so. On May 7, 2004, AIA sent Ms. DeStefanis a check for $886.74. Three months elapsed from when AIA received the refund and when it sent Ms. DeStefanis the money due her. As to Count XV, on an unspecified date, Pro Premium sent AIA a check in the amount of $4750.53, which AIA deposited on March 9, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$343.38--represented unearned commission, which was due the insured, Leslie Ramrattan. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Ramrattan of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Ms. Ramrattan asked AIA to try to reinstate the policy, but AIA was unable to do so. On May 7, 2004, AIA sent Ms. Ramrattan a check for $343.38. About two months elapsed from when AIA received the refund and when it sent Ms. Ramrattan the money due her. Petitioner has failed to prove the material allegations of Counts IV-V and VII-XV, with one exception each as to Counts VI, V, and VII. In general, there is no evidence of any intentional wrongdoing by anyone at AIA, nor is there evidence that Respondent should have known of the failure of her staff to promptly refund the monies due their insureds. In several of these transactions in which AIA held the customers' refunds for relatively long periods of time, the record demonstrates that this was in accordance with the customers' directions or otherwise justified. For the shorter periods-- five months or less--the record provides no basis for determining that Respondent should have known of this failure within this relatively short period of time. In several counts, AIA failed to meet its obligation, under Florida Administrative Code Rule 69O-196.010(2)(b), which is cited below, to refund or apply the unearned commissions within 15 days of receipt of the refund and statement from Pro Premium. These are Counts IV, V, VII, XIV, and XV. It is impossible to determine if AIA violated this rule in Count VIII, where the insured had moved; Counts IX-XI, where the insureds told AIA to apply the refunds to new or other insurance and presumably AIA did so, perhaps within the required 15 days; and Count XIII, where AIA appears to have paid for one policy out of its own funds and the insured may have received a windfall. As to Counts IV, V, VII, XIV, and XV, the question is whether Respondent is professionally responsible for the violations by AIA. These counts fall into two groups. In Counts IV, V, and VII, AIA wrongfully retained the refunds for long periods--12 months, 10 and one-half months, and at least nine months, respectively. In Counts XIV and XV, AIA wrongfully retained the refunds much shorter periods--less than three months and less than two months, respectively. Perhaps expert testimony could have established that Respondent should have detected, within a period of less than 90 days, the wrongfully retained funds, but, absent such testimony, an inference to this effect is impossible, especially when the standard is clear and convincing evidence. However, expert testimony is unnecessary to establish Respondent's professional responsibility for failing to detect this situation for 9-12 months. Given the long durations of time, the clarity of the Pro Premium's refund statements, the relatively small number of employees, Respondent's integral involvement in the daily operations of AIA as the only person authorized to sign checks, and the importance of restoring funds of customers to customers promptly, it is a reasonable inference that Respondent should have known that AIA staff had wrongfully failed to send these refunds to its customers for 9-12 months. Any suggestion by Respondent that the absence of a response from these customers justified retaining these moneys fails to account for the fact that AIA later sent the refund checks to the customers, even though they had still not contacted AIA, according to the record. Thus, for Counts IV, V, and VII, Petitioner has proved by clear and convincing evidence that Respondent has demonstrated her unfitness to transact insurance business.
Recommendation It is RECOMMENDED that the Department of Financial Services enter a final order dismissing Counts I-III and VIII-XV of the Administrative Complaint; finding Respondent guilty of three violations (Counts IV, V, and VII) of demonstrating unfitness to engage in the insurance business, in violation of Section 626.611(7), Florida Statutes; and suspending her insurance licenses for 30 days. DONE AND ENTERED this 15th day of November, 2006, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of November, 2006. COPIES FURNISHED: Honorable Tom Gallagher Chief Financial Officer Department of Financial Sevices The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carlos G. Muñiz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Robert Alan Fox Department of Financial Services Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Thompkins W. White White & Chang, P.A. 1650 Summit Lake Drive, Suite 1013 Tallahassee, Florida 32317
The Issue Whether proposed amendments to Rule 4-7.009, Florida Administrative Code, constitute an invalid exercise of delegated legislative authority. Specifically at issue in this proceeding are the proposed amendments to Rule 4-7.009 which restrict, under certain circumstances, compensation paid to sellers of credit insurance products and which require premium refunds to some purchasers of credit insurance.
Findings Of Fact Credit insurance is a form of group insurance marketed and sold to consumers by creditors or, in the case of motor vehicle financing, by vehicle dealers. The insurance can be purchased by a debtor at the time the debtor enters into a loan agreement. Credit insurance is purchased by debtors as protection against risk of loss caused by unexpected events occurring during the term of the insurance contract. Credit insurance provides for the payment of the balance of the debt upon the death or disability of the insured debtor. Otherwise stated, the benefit of such insurance to the debtor is the assurance that, if the debtor becomes unable, due to death or disability, to make the required periodic payments, the insurer will pay off the balance of a loan or other debt obligation. Sellers of credit insurance products are compensated in the form of commissions paid to sellers by insurers. Additional compensation is periodically paid by some insurers to sellers based upon the profitability of each seller's line of business. Beginning in late 1990, the Department of Insurance ("Department") proposed amendments to administrative rules relating to credit life and credit health and accident insurance products. The Petitioners have challenged the provisions of the proposed rule restricting the level of compensation paid to the sellers of credit insurance products and requiring insurers to make "experience refunds". As set forth in the Department's Notice of Change, published in the November 27, 1991 edition of the Florida Administrative Weekly (Vol. 17, No. 48), the proposed rule amendment provides in relevant part as follows: 4-7.009 Determination of Reasonableness of Benefits in Relation to Premium Charge General Standard. Under the Credit Insurance Law, benefits provided by credit insurance policies must be reasonable in relation to the premium charged. In determining whether benefits are reasonable in relation to premium, the Department shall consider loss experience, allocation of expenses, risk and contingency margins, and policy acquisition costs. This requirement is satisfied if the premium rate charged develops or may be reasonably expected to develop a loss ratio of not less than 1. (a) 55% for credit life insurance and 2. (b) 50% for credit accident and health insurance, and either the insurer does not pay compensation in excess of 30% of the net direct written premium based upon the applicable prima facie rates set forth in Rules 4-7.010 and 4-7.011, or the insurer demonstrates to the satisfaction of the Department that payment of compensation in excess of said 30% is actuarially sound. "Compensation" means money or anything else of value paid by the insurer and/or by any reinsurer to any agent, producer, creditor, or affiliated body. On the basis of relevant experience, uUse of rates not greater than those contained in Rules 4-7.010 and 4-7.011 ("prima facie rates") shall be deemed currently reasonable premium rates reasonably expected to develope the required loss ratio, subject to a later determination of experience refunds, if any, as described herein. An insurer may only file and use rates with such forms which are greater than the prima facie rates set forth in Rules 4-7.010 and 4-7.011 upon a satisfactory showing to the Department Commissioner that the use of such rates will not result on a statewide basis for that insurer of a ratio of claims incurred to premiums earned of less than the required loss ratio. Furthermore, the extent to which an actual rate is greater than that set forth may not exceed the difference between (a) claims which may be reasonably expected and (b) the product of the required loss ratio and the prima facie rates set forth in Rules 4-7.010 and 4-7.011 for the coverage being provided. (2) The Department Commissioner shall, on a triennial basis, review the loss ratio standards set forth in subsection (1), above, and the prima facie rates set forth in Rules 4-7.010 and 4-7.011 and determine therefrom the rate of expected claims on a statewide basis, compare such rate of expected claims with the rate of claims for the preceding triennium, determined from the incurred claims and earned premiums at prima facie rates reported in the annual statement supplement, and adopt the adjusted actual new statewide prima facie rates for Rules 4-7.010 and 4-7.011 to be used by insurers during the next triennium. The new rates will be set at levels that would have produced the loss ratios set forth in subsection (1), above. To make this comparison and redetermination, insurers shall report in the annual statement supplement format, each year, claims and earned premiums, separately, for business written with premiums based on Rules 4-7.010 and 4-7.011. * * * Insurers will calculate a dollar amount of loading each year based upon the insurer's earned credit life and credit accident and health premium in this state for the same year. Loading will be calculated as 45% of earned premium for life insurance and 50% of earned premium for credit accident and health insurance. For this calculation, earned premium shall be based on the rates set forth in Rules 4-7.010 and 4-7.011. Insurers shall calculate an Experience Refund Amount each year for credit life and credit accident and health insurance written in this state after the effective date of this rule. Experience Refunds can be positive or negative. Positive Experience Refunds are to be refunded in the following manner: Experience refunds are to be allocated to accounts which have positive Experience Refund Amounts in proportion to the ratio of each account's refund amount to the total of all positive refund amounts. For the purpose of this allocation, all individual policies are to be treated as one account. The Experience Refund Amount allocated to a particular account is to be refunded to all certificate holders or individual policyholders of such account in proportion to the premiums earned for each certificate holder or individual policyholder to the total of all premiums earned for such account. Earned premiums for Experience Refund purposes are to be equal to paid premiums for the calendar year less unearned premium reserves at the end of the calendar year plus unearned premiums at the beginning of the calendar year. Unearned premium reserves are to be calculated pro rata. Credit policies issued on a non-contributory basis are excluded. Non-contributory means that individual insureds pay no part of the insurance premium. Premiums are paid by the policyholder out of policyholder funds. Individual credit policies issued on a participating basis are to be excluded. All new loans insured after the effective date of this rule are subject to the Experience Refund calculation and distribution, if any. Individual refunds of less than $10 do not have to be made. Experience Refunds are to be determined for each calendar year as follows: Earned Premium, less Loading as determined above, less Incurred claims, less The sum of any carry forwards for the three previous years. An insurer that uses rates which are 10% or more below the rates set forth in Rules 4-7.010 and 4-7.011 shall not be required to calculate or make an Experience Refund. The Florida Bankers Association ("FBA") is the trade association of the Florida banking industry, many of whom sell credit insurance to their customers. The Florida Automobile Dealers Association ("FADA") is a trade association of franchised new car and truck dealers, approximately 65% of whom sell credit insurance. The Florida Recreational Vehicle Dealers Trade Association ("FRVDTA") is a trade association of recreational vehicle dealers, approximately 35% of whom sell credit insurance. The FBA, the FADA, and the FRVDTA are substantially affected by the proposed rule amendment at issue in this case. Specifically the FBA, the FADA, and the FRVDTA are substantially affected by the proposed regulation of compensation paid to sellers of credit insurance products and by the proposed requirement that, under some circumstances, refunds be made to credit insurance purchasers. The Consumer Credit Insurance Association ("CCIA") is a trade association of credit insurance companies, at least 50 of whom sell credit insurance in Florida. The CCIA is substantially affected by the proposed rule amendment provision related to premium refunds to some insureds. Credit insurance is priced and sold without regard to sex or age of the debtor. There is little underwriting of credit insurance risks. Due primarily to the age of the population and the effect of mandated coverages, Florida's credit insurance claims are higher than in other states. There are currently in excess of eighty million credit insurance policies in force in the United States. Credit insurance is sold under master policies issued by insurers to producers, such as banks and vehicle dealers. Producers sell the insurance product and maintain records of the credit insurance purchasers, who hold certificates issued under each master policy. Credit insurance premiums are based upon the amount financed by the debtor and are calculated according to rates established on a statewide basis by the Department. Credit insurers may not charge more than the prima facie rates for credit insurance, therefore, there is no benefit to consumers to "shop around" for credit insurance. Although credit insurers are not prohibited from charging less than the prima facie rates, there is no evidence that any insurer charges less than the Department's adopted rates. Since 1982, the Department-approved prima facie credit life premium rate was $.60 for every $100 financed. The rate was based on the Department's determination that a $.60 prima facie rate would result in insurers paying out approximately 60% of premium dollars in claims paid to insureds, and that a 60% "loss ratio" was reasonable. The "loss ratio" is the fraction of premium dollars paid out in claims. The $.60 prima facie rate did not yield a 60% loss ratio. The loss ratios for some insurers was substantially less that 60%. On September 1, 1991, the Department reduced the prima facie credit life and credit health and accident rates. In establishing new prima facie rates, the Department established a 55% loss ratio for credit life insurance and a 50% loss ratio for credit disability. The revised prima facie rates are based upon data from calendar years 1986, 1987 and 1988. Such data includes information related to paid claims, earned premium, and insurer administrative overhead expenses. The setting of such rates is an actuarial exercise intended to provide a reasonable projection of premium rates and loss ratios. There is no evidence that the revised prima facie rates result in premiums which are excessive in relationship to the amount of the loans insured. The revised prima facie rates are reasonably expected to yield the revised loss ratios. The rule provides a triennial review mechanism to ascertain whether the expected loss ratios are being met and to adjust prima facie rates if such is indicated. The review is a reasonable method of assuring that such loss ratios are met. Currently, commissions are paid by insurers to producers (i.e. banks and dealers) as compensation for selling the product. The amount of commission is determined by agreement between the insurer and producer. Commissions for the sale of credit insurance vary widely and, in some cases (generally involving the sale of credit insurance related to automobile purchases) may be as high as 60% of the premium paid by the consumer. In addition to payment of commissions, some insurers retrospectively compensate producers by periodically paying an amount based upon the profitability of each producer's business. Compensation levels largely determine which credit insurer's product a producer chooses to sell. The proposed rule limits total compensation levels, absent specific authorization by the Department, to 30% of the net direct written premium based upon the applicable prima facie rates. Compensation levels have no impact on the premiums charged to consumers purchasing credit insurance. Premiums charged are based on the Department's prima facie rates. The proposed rule permits a credit insurance company to exceed the 30% compensation restriction where the insurer can establish that the payment of compensation in excess of the 30% is "actuarially sound". The determination of whether payment of commission in excess of 30% is "actuarially sound" is left to the discretion of the Department. There is no statutory, rule, or commonly accepted definition of the term, although the Department's actuary stated that a product determined to be "actuarially sound" would be a "self-supporting" product, either profitable or "breaking even". He further opined that he would consider investment income in a determination of actuarial soundness, although the proposed rule does not require such consideration. The Department's purpose in enacting the proposed compensation restriction was to protect insurers from insolvency and financial instability. The commission restriction was not designed to protect against excessive charges in relation to the amount of the loan, duplication or overlapping of insurance, or the loss of a borrower's funds by short term cancellation of a policy. The commission restriction was not intended to, and will not, ensure that the loss ratios deemed reasonable by the Department will be met. In adopting a 30% compensation restriction, the Department calculated that, assuming the 55% loss ratio was met, $.55 of each premium dollar would be paid in claims. The Department assumed that $.15 of each premium dollar would cover overhead expenses and profit. According to the Department, the remaining $.30 is the most an insurer could pay as compensation to the producers without affecting the solvency of the insurer. In calculating the commission restriction, the Department did not consider the effect of an insurer's investment income on the ability to pay commission. There is no evidence that payment of commissions in excess of 30% of net direct written premiums has adversely affected the solvency of any credit insurer doing business in Florida. There is, in fact, no history of credit insurer insolvency in Florida. Nationwide, there has been little problem of insolvency in the credit insurer business, with no more than four insurers having become insolvent. In each of those cases, the insolvency resulted from poor management of assets, and was not related to payment of excess commissions to producers. The Department asserts that, absent such restrictions, insurers will pay excessive compensation in order to compete for producers, and that such excess compensation, coupled with administrative expenses and a 55% loss ratio, will threaten the solvency of the companies. The assertion is not supported by the greater weight of credible evidence. The proposed rule also requires insurers, under some circumstances, to make experience-based refunds to credit insurance purchasers. In determining whether a refund is required, an insurer first calculates whether the insurer has met or exceeded the 55% loss ratio for the prior year. If the loss ratio is met or exceeded, no refunds are required. If an insurer determines that the 55% loss ratio was not met, the insurer calculates the difference between targeted 55% loss ratio and the actual percentage of premium dollars paid out in claims. The insurer then identifies each producer account which had a loss ratio of less than 55%, determines the identity and location of each certificate holder (insured) in each producer's account, and makes a refund to each identified certificate holder. Individual refunds of less than $10 to an individual consumer are not required. The proposed rule permits insurers to carry excess losses forward for a period of three year, to offset years when the targeted loss ratio is not met. However, such excess losses may not be carried forward beyond the three year period. Whether a consumer receives a refund is unrelated to the premium paid by the consumer. An individual consumer ("A") purchasing a car and credit insurance at Dealer "A" may receive a refund, while a Consumer "B" purchasing the same car and credit insurance from Dealer "B" may not receive a refund, if Dealer A's line of business with the insurer meets the target loss ratio and Dealer B's line of business with the same insurer fails to meet the loss ratio. The benefit of the credit insurance is the assurance that, under certain conditions, the insurer will pay off the balance of a loan or other debt obligation. If Consumer A receives a refund and Consumer B does not, Consumer A pays more than Consumer B for the same insurance protection. The Department's purpose in enacting the proposed experience refund was to ensure that the 55% loss ratio would be met. However, the experience refund provision, combined with the three year limit for charging off excess losses, will eventually result in loss ratios which will exceed the 55% ratio which the Department has determined to be reasonable. There is no need for experience refunds when the prima facie rates established by the Department are appropriately set. Such rates are designed to produce an acceptable loss ratio. It is reasonable to believe that the Department's revised prima facie rates will result in acceptable loss ratios. The refund proposal was not designed to protect against excessive charges in relation to the amount of the loan, duplication or overlapping of insurance, or the loss of a borrower's funds by short term cancellation of a policy. The proposed rule provides that an insurer charging a premium based on rates at least 10% below the prima facie rates are not required to calculate the experience refund. There is no credible rationale supporting the use of 10% as the threshold under which an insurer escapes the refund calculation, although the resulting loss ratio likely approaches the 60% loss ratio suggested by the National Association of Insurance Commissioners. Of the actuaries testifying at hearing, one opined that a rate 10% less than the prima facie rate was viable, the other opined that it was not. Because the Department's revised prima facie rates are reasonably calculated to result in a 55% loss ratio, an insurer charging less than the prima facie rate will likely exceed the 55% loss ratio. In connection with the final version of the proposed rule, the Department did not prepare an economic impact statement. The Department did not estimate the costs of insurer compliance with the refund provisions. The expense required of insurers in order to establish experience refund payment systems is significant. Information management systems will require extensive modification to permit such data to be maintained. Substantial amounts of data, which is not currently provided to insurers, must be collected and accurately maintained to permit refunds to be made. Such costs were not included in administrative expenses considered by the Department when the revised prima facie rates were established. Presently, credit insurers maintain limited data related to insureds purchasing credit insurance in connection with installment loans. Although such data may be initially collected by producers, insurers are typically provided only with the name of the debtor and loan number. Data is transmitted to insurers either electronically or through paper files. In either case, data must be converted to usable form by insurers. In approximately seventy percent of credit insurance business, addresses of insureds are not transmitted to insurers. There is no credible evidence that current addresses of insureds are continuously maintained by either insurer or producer in installment debt insurance, since there is little need to question original data as long as periodic payments are being timely made. In a form of credit insurance known as "monthly outstanding balance" insurance, bulk accounts are received by insurers, who generally does not receive either names or addresses of insureds. Consumers whose monthly outstanding balance indebtedness is insured are more likely to provide producer/creditors with current addresses, but such data is not provided to insurers. As to credit insurers, although most insurers currently process refund checks, the additional expense of establishing or modifying systems capable of compliance with the proposed refund requirement could amount to as much as five percent of each premium dollar. One bank official estimated that, as to his bank, the expense of complying with the refund provisions would include an initial cost of $1.1 million and an annual cost of $350,000 to $500,000. A credit insurance information systems and processing executive estimated that the 31 producers writing business for his company would incur costs of $1,860,000 to comply with the rule, and that his own company's costs would be in the range of $4-5 million. The Department suggested that, rather than modify existing mainframe computer systems, such data could be maintained by insurers on personal computers and microcomputer networks. The Department asserted that such systems would be less expensive and require less modification than the process outlined by industry representatives. However, there is credible testimony establishing that significant resources would be involved in determining whether such conversion to microcomputers would be feasible or warranted. In any event, there is no evidence that such conversion could be accomplished in a timely manner permitting the insurers to comply with the proposed rule requirements. The greater weight of the evidence establishes that the expenses estimated by the industry representatives are reasonable based upon the existing management information systems maintained by the industry.
The Issue This is a license discipline proceeding in which the Petitioner seeks to take disciplinary action against the Respondent on the basis of allegations of misconduct set forth in an Administrative Complaint. The violations charged in the Administrative Complaint relate primarily to alleged mishandling of funds received on behalf of an insurer.
Findings Of Fact The Respondent, Louis Iannucci, is currently eligible for licensure and is licensed in this state as a life insurance agent, life and health insurance agent, and health insurance agent, and was so eligible and so licensed at all times relevant to these proceedings. At all times pertinent to these proceedings the Respondent was an officer and director of Certified Insurance Associates, Inc., an incorporated insurance agency doing business in Fort Lauderdale, Florida. At all times pertinent to these proceedings, the Respondent was a duly appointed agent in this state under contract with United American Insurance Company. At all times relevant to these proceedings, Respondent was the sole authorized signatory on his business bank account with Capital City Bank, now known as Union Planters Bank. On or about February 12, 1997, Respondent received a check from Gretchen Smith of Titusville, Pennsylvania, in the amount of $1,833.00 and made payable to United American Insurance Company. This sum was intended as the renewal premium payment of Mrs. Smith's United American Medicare supplement insurance policy. Respondent endorsed this check and deposited it into his business bank account on February 18, 1997. Even though the premium was due on or before March 1, 1997, the Respondent waited until April 14, 1997, to remit only $486.00 of the money received from Gretchen Smith to United American Insurance Company in payment of a quarterly premium on her policy. Respondent retained the remainder of the funds for his own use and benefit. A short while later it was brought to the attention of United American Insurance Company that Gretchen Smith had paid an annual, not quarterly, premium for the policy. United American Insurance Company wrote to Mrs. Smith and requested a copy of her cancelled check for $1,833.00 that she had given to the Respondent. Upon receiving Gretchen Smith's response and a copy of her premium check, the insurance company credited her account with payment of an annual premium and reversed out the quarterly payment that had been posted to her account. The Respondent was charged for the difference of $1,347.00. On or about September 6, 1996, Respondent received a check from Mr. and Mrs. Lew Kisver of Plantation, Florida, in the amount of $3,666.00 and made payable to United American Insurance Company. This sum was intended as the renewal premium payments of Mr. and Mrs. Kisvers' United American Medicare supplement insurance policies. Respondent endorsed this check and deposited it into his business account. The Respondent, on or about September 25, 1996, remitted only $1,894.00 of the money received from Mr. and Mrs. Kisver to United American Insurance Company in payment of a semi-annual premium on each Kisver policy. Respondent retained the remainder of the funds for his own use and benefit. On or about March 7, 1997, it was brought to the attention of United American Insurance Company by Mr. and Mrs. Kisver that they had paid an annual, not semi-annual, premium for each of their policies. United American requested Mr. and Mrs. Kisver to provide a copy of their cancelled check or receipt for their payment of the premium. In response, the Kisvers mailed to the insurance company a copy of their cancelled check for $3,666.00 that they had given to the Respondent to pay their policy premiums. Upon receiving the Kisvers' response and copy of their premium check, the insurance company credited their account with payment of annual premiums and reversed out the semi-annual payments that had been posted to their accounts. The Respondent was charged the difference of $1,894.00. By coincidence, at this same time in March 1997, Respondent remitted $1,894.00 to the insurance company in payment of the next semi-annual premium due on the Kisver policies. The insurance company subsequently credited the money to Mr. Iannucci's account as he had already been charged for the premiums. The Respondent's agency contract then in effect with United American Insurance Company provided in relevant part: The Agent shall immediately remit to the Company all premiums collected by the Agent or sub-agents in excess of the Agent's initial commission thereon. In addition, the contract limited the agent's authority to collect premiums by specifically providing that the Agent shall not "collect or receipt for premiums other than initial premiums with applications for insurance." At all times material, the United American Insurance Company had on file at the Capital Bank a letter of authorization. The letter of authorization read as follows, in pertinent part: This letter will authorize the captioned General Agent of United American Insurance Company [the Respondent] to endorse and deposit to the General Agent's account with your bank checks made payable to the United American Insurance Company for premiums collected at the time of application for insurance with this Company. The General Agent may also withdraw or disburse any such funds so deposited. Pursuant to both the agency contract and the letter of authorization on file with the bank, the Respondent lacked authority to deposit and cash checks received from customers in payment of their renewal premiums. Similarly, the Respondent lacked authority to hold premium funds in his bank account for lengthy periods of time. The Respondent was aware, or should have been aware, of these limitations on his authority. Between September 1996 and April 1997, the balance of Respondent's business bank account with Capital City Bank at the end of each month was less than the amount of the premium funds that Respondent had received from the Kisvers and Gretchen Smith but had not remitted to the insurance company. At the end of September and October 1996, Respondent's bank account had an ending balance of $1,659.91, and $1,589.82 respectively. At this time he should have been holding $1,894.00 of unremitted funds in trust on behalf of the Kisvers and the insurance company. In February 1997, the end of the month balance of the business account was only $71.19, even though Respondent should have been holding not only the $1,894.00 previously received from the Kisvers but also the $1,347.00 received from Gretchen Smith on February 12, 1997, but not remitted to the insurance company. Respondent had apparently applied the insurance premium payments received from the insureds for his own use and benefit, even though the funds were fiduciary in nature and were held in trust. At all times material to this case, it was the practice of United American Insurance Company to forward monthly statements to the Respondent. If the Respondent had a credit balance, the statement would be accompanied by a check in the amount of the credit balance. If the Respondent had a debit balance, the statement would request that the Respondent make "payment in full by return mail." Although the United American Insurance Company debited the Respondent's account for the portions of the Smith and Kisver funds that were not promptly forwarded to the insurance company, there is no clear and convincing evidence that the United American Insurance Company ever made demand on the Respondent to pay those specific amounts. There is no clear and convincing evidence that the Respondent had any fraudulent or dishonest intent in connection with his handling of the Smith and Kisver funds discussed above. The Respondent's handling of those funds does, however, demonstrate a lack of fitness to engage in the business of insurance as well as a lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by his license.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a Final Order to the following effect: Concluding that the Respondent violated Sections 626.611(7), 626.611(8), and 626.611(10), Florida Statutes, as charged in Count One and in Count Two of the Administrative Complaint; Concluding that the allegations that the Respondent violated Sections 626.611(9) and 626.621(4), Florida Statutes, should be dismissed for lack of clear and convincing evidence to establish those violations; and Imposing a penalty consisting of a suspension of the Respondent's License for a period of six months. DONE AND ENTERED this 18th day of November, 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 Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 1998.
