The Issue The issue presented is whether Petitioner is eligible to participate in the State of Florida's group health insurance plan.
Findings Of Fact Petitioner Judy Stahl began her employment with the State of Florida as a public assistance specialist with the Department of Children and Families on October 4, 1991. She began participating in the State's group health insurance program on December 1, 1991. Petitioner voluntarily terminated her employment by the State on November 28, 2002, for personal reasons. In her letter of resignation she stated that it was her intention to again seek employment with the State after the personal situation which caused her to resign was concluded. Premiums for the State's group health insurance are paid one month in advance. Therefore, Petitioner's coverage under the State's group health insurance program continued through the end of December 2002. In January 2003, the State's Division of State Group Insurance notified Petitioner of her right to elect continuation coverage under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) and the federal Public Health Services Act (PHSA). Petitioner so elected and continued her participation in the State's group health insurance under COBRA for the maximum period of 18 months that was available to her. Her continuation coverage expired June 30, 2004. In May 2004 the State's Division of State Group Insurance notified Petitioner that her continuation coverage would soon expire and further advised her of her right to convert her insurance coverage to a private, individual policy. Petitioner exercised her option to convert to a private policy, effective July 1, 2004. In March 2005 the Florida Division of Retirement sent Petitioner an Estimate of Retirement Benefits. The Estimate contained the comment that: "As a result of a review of accounts for terminated members, it was determined that you are eligible for retirement benefits." The Estimate form was accompanied by a pamphlet explaining the Florida Retirement System Pension Plan. It was also accompanied by information on the State Employees' Preferred Provider Organization (PPO) health plan. The retirement pamphlet included the information that health insurance was available to retirees; however, the health insurance information advised that health insurance was only available to certain retirees. Petitioner concluded that if she retired, she could obtain cheaper health insurance from the State than from her private provider. This was the first time that Petitioner considered the possibility of retirement. Petitioner thereafter made many telephone calls to the Department of Children and Families, to the Division of Retirement, to the Division of State Group Insurance, and to People First, inquiring about retirement and insurance. These telephone inquiries were the first time she mentioned to any State employee or representative that she was interested in retiring. At the end of March 2005 she made the decision to retire and submitted her application for retirement benefits. Her effective retirement date was April 1, 2005. At the time Petitioner filed her application for retirement, she was no longer participating in the State's group health insurance program. At the time she filed her application for retirement, she was no longer participating in continuation coverage pursuant to COBRA. She was insured under a private policy. At the time of her initial enrollment in the State group health insurance program, Petitioner signed a new enrollee form that, inter alia, advised her that eligibility and enrollment were governed by the provisions of Florida Administrative Code Rule 22K-l. During her employment she also enrolled in supplemental dental insurance. That enrollment application form notified Petitioner that any changes in enrollment or coverage are governed by the federal Internal Revenue Code and the Florida Administrative Code. Throughout her employment and at the time that she terminated her employment, she completed Annual Benefits Open Enrollment forms, which also notified her that any changes in enrollment or coverage are governed by the Internal Revenue Code and the Florida Administrative Code. While employed by the Department of Children and Families, Petitioner was provided with copies of the State of Florida Employees Group Health Self Insurance Plan Booklet and Benefit Document. Those booklets describe eligibility for participation to include employees, certain retirees, and COBRA participants. They also describe termination of coverage due to termination of employment and describe continuation coverage and conversion coverage. At the time Petitioner retired, she was not a State employee; she was a former State employee.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Petitioner is not eligible to participate in the State's group health insurance program. DONE AND ENTERED this 19th day of January, 2006, in Tallahassee, Leon County, Florida. S LINDA M. RIGOT Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of January, 2006. COPIES FURNISHED: Mark J. Berkowitz, Esquire Mark J. Berkowitz, P.A. 524 South Andrews Avenue, Suite 200N Fort Lauderdale, Florida 33301 Sonja P. Matthews, Esquire Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399-0950 Tom Lewis, Jr., Secretary Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 Alberto Dominguez, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
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 Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: At all times relevant to this proceeding, respondent William J. Hartnett, Sr. was licensed as an ordinary life including disability, general lines, surplus lines and disability insurance agent. He has been in the insurance business since 1942 and was first licensed in 1947. Respondent originally organized the Southern American Fire Insurance Company. For the first year or so, he was its sole employee on a nonsalary basis and was nonsalaried for the first ten years of the company's operation. From 1965 on, respondent did not hold a 220 lines license with Southern American, as he did with other insurance entities. Respondent did not sign policies as agent for Southern American. With Southern American, respondent acted as a general agent and was authorized by the board of directors to receive a five percent override commission on the total volume of business. On or about October 27, 1975, a seizure order was entered by the Circuit Court of Leon County which directed the Florida Department of Insurance to take over the business and financial affairs of Southern American. This company has since gone into liquidation pursuant to Chapter 631, Florida Statutes. The Southern American March 31 and June 30, 1975, quarterly statements were prepared by Mr. R.L. Huard, the then assistant treasurer of Southern American, were signed by the respondent, and were filed with the Department of Insurance. The work papers for those statements had been approved by the respondent. Mr. Huard had been instructed by respondent when he was first hired in 1972 not to show on the quarterly statements the over 90-day old balances because they would all be "cleaned up" at the end of the year. Such balances had, in fact, been paid at the end of each of the two years that Mr. Huard was with the company up until the time the Department took over in 1975. It was the respondent's testimony that had the seizure order not been entered, the agencies' lines of credit would still have been open and that all balances could have been collected through September of 1975. The March 31, 1975, and June 30, 1975, quarterly statements of Southern American filed with the Department of Insurance reflected a substantial amount of agents' balances that at the time of reporting were over 90 days old. The elimination of such balances from those two statements would have left Southern American impaired under usual insurance accounting practices as reflected in the Florida Statutes. The over-90 day old agents' balances were due from agencies in which respondent had an interest as an officer, director or stockholder. In 1969, various officials of the Department of Insurance had discussions with the respondent regarding agents' balances which were over ninety days old. On or about December 28, 1973, respondent did deposit the proceeds of certain reinsurance treaties in the amount of $13,218.98 into the account of Southern American. This findings is determined from the testimony of respondent and from a copy of the check and a deposit slip received into evidence as Exhibit M. The deposit slip illustrates that the $13,218.96 check was one of two checks comprising a total deposit of $30,857.12. As a result of information made available to the parties shortly before the hearing, it was stipulated that there never was a direct reinsurance treaty between Southern American and Cottonbelt Insurance Company. It was further stipulated that Southern American did submit single risk policies on a facultative basis through General Aviation Insurance Brokers for Southern American to D.O. Howell and Company, Ltd., in London, England, which in turn placed policies so submitted with Cottonbelt through other brokers. The Department offered no other evidence concerning the checks amounting to $16,600.00 referred to in Count V. As noted above, respondent was authorized by the board of directors to receive as general agent for Southern American a five percent override on all premiums. He was also authorized to receive an annual salary and certain bonuses. For the years 1974 and 1975, respondent did not receive his total annual salaries. The total premium written in Southern American through North Star Insurance Agency from 1968 through 1975 was approximately $700,000.00. Monies owed Southern American by North Star were paid by checks made payable to the respondent, as agent. In his capacity as general agent of Southern American, respondent did receive funds in the approximate amount of $45,000.00 from subagent North Star in payment of premiums due Southern American on policies of insurance issued by Southern American through North Star. Such funds were not deposited into the account of Southern American by respondent, but were instead retained by respondent as an offset against commissions end salary due him from Southern American. This occurred in 1975. When the seizure order was entered in October of 1975, the monies due Southern American from North Star were carried on the books of Southern American as accounts receivable.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is RECOMMENDED that the licenses of respondent to engage in the business of insurance be suspended for a period of six (6) months. Respectfully submitted and entered this 10th day of July, 1979, in Tallahassee, Florida. COPIES FURNISHED: Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol Tallahassee, Florida 32301 S. Strom Maxwell, Esquire Department of Insurance Suite 428-A, Larson Building Tallahassee, Florida 32301 Robert J. Kelly, Esquire Rogers, Towers, Bailey, Jones and Gay Post Office Box 1872 Tallahassee, Florida 32302 DIANE D. TREMOR 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 10th day of July, 1979.
The Issue Whether, upon proof of eligibility, pursuant to Sections 624.401 and 624.404, Florida Statutes, Petitioner may be granted a Certificate of Authority to transact business as a property and casualty insurer in the State of Florida.
Findings Of Fact Petitioner Dallas National Insurance Company (Dallas National) is a Stock Insurance Company, domiciled in Texas, with headquarters in Dallas, Texas. It writes predominantly small business liability insurance and workers’ compensation insurance, both of which fall in the property and casualty classification of insurance, generally. Respondent Office of Insurance Regulation (OIR) is the State Agency responsible for licensing and regulating insurance in Florida. Absent a Florida license, Petitioner Dallas National cannot legally write or sell insurance in this state. Dallas National is a successor in interest to Dallas Fire Insurance Company (Dallas Fire) and California Indemnity Insurance Company (California Indemnity). California Indemnity was previously licensed to do business in Florida. Its license to do business in Florida was revoked by OIR in 2006, while Dallas Fire and California Indemnity were transitioning into Dallas National, as more fully described infra. In 2006, Petitioner Dallas National filed an application for a certificate of authority as a foreign property and casualty insurer to write lines of workers' compensation and employer’s liability insurance in Florida. That application was denied on December 1, 2006. Petitioner reapplied for a Florida license in 2008, and was denied by a letter from Respondent, dated September 17, 2008. It is this letter and present application and denial that are at issue herein. The September 17, 2008, denial letter incorporated parts of the earlier December 1, 2006, denial letter. (See Preliminary Statement). Dallas Fire was a property and casualty insurer authorized to do business in Texas and Oklahoma, which was acquired by Charles David Wood in July 2002. In December 2003, Dallas Fire, by consent of Mr. Wood and its Board of Directors, was placed under administrative supervision by the Texas Office of Insurance Regulation. By mutual agreement, the Texas regulatory agency’s oversight was not made public, and Mr. Wood continued to manage the company through his own staff, while taking instruction and advice from the Texas regulator. Texas lifted its oversight after approximately 19 months. During this period of time, and for years before and after, Betty Patterson was a Texas Deputy Commissioner of Insurance. At about the same time in 2002, that Mr. Wood accepted Texas’ regulatory oversight, a search was conducted and Chris Nehls was ultimately selected as a replacement corporate president for the company that ultimately became Dallas National. Mr. Nehls continues as president of Dallas National and has final responsibility for all operations, underwritings, claims handling, profits and losses, accounting and finance, and any of the operation and technical functions within the company. He had oversight of Dallas National’s successive license applications to OIR in 2006 and 2008. In 2005-2006, Mr. Wood, with approval by the Texas and California insurance regulatory agencies, acquired California Indemnity, a property and casualty insurer licensed in the State of California and 30 other states. When purchased, California Indemnity had a number of old regulatory actions pending against it by California’s Department of Insurance. California’s insurance regulator’s agreement/acquiescense in Mr. Wood’s purchase of California Indemnity was conditioned on (1) Mr. Wood’s transferring California Indemnity to Texas, where it would be merged with Dallas Fire to become Dallas National; (2) Dallas National’s removing the word “California” from its corporate name by December 31, 2005; and (3) the re-domesticated company’s not writing any insurance in California until California’s insurance regulatory agency approved. This agreement has kept Dallas National under California regulatory scrutiny since that time. Dallas National continues to invite California to inspect its offices, its books, and its business activities, but Dallas National has yet to formally petition for a license in California.1/ On January 2, 2006, effective December 31, 2005, the merger of Dallas Fire and California Indemnity into Dallas National Insurance Company was approved by the Texas Department of Insurance. This effected the name change in a timely manner under Dallas National’s agreement with California. However, Dallas National did not fulfill the letter of its agreement with the California regulator, because the paperwork for finally divesting itself of the word “California” was not completed and filed with California until September 12, 2007. California has neither prosecuted nor fined Dallas National for this delay, and despite a 2003, California violation by Dallas Fire, continues to be willing to work with Dallas National towards California licensure. (Cf. Findings of Fact 66-70). At the present time, Dallas National is licensed as a property and casualty insurer in 39 states and the District of Columbia. Respondent correctly points out that because Dallas National acquired approximately 30 states’ licenses at the same time it re-domesticated California Indemnity and renamed Dallas Fire, Dallas National and Mr. Wood have not proven themselves in the same way as if Dallas National had acquired 30 new licenses on its own. Even so, it appears that, since 2003, at least six states have found Dallas National, and derivatively Mr. Wood, to be honest, competent, and trustworthy enough for licensing purposes. In direct contrast, OIR has pronounced Mr. Wood and Dallas National not sufficiently honest, competent, and trustworthy to be licensed to write insurance in Florida. (See Preliminary Statement). After forming Dallas National in 2002-2003, its principals concentrated on a business model wherein Dallas National would provide workers’ compensation insurance coverage for the “employee staff leasing companies” a/k/a “professional employer organizations” (PEOs) owned by Mr. Wood. Petitioner’s business theory is that Dallas National benefits from more timely and effective underwriting and claims processing because of its access to a PEO’s payroll and computer systems and otherwise benefits from close communication with staff leasing personnel. Mr. Wood owns PEOs operating in many of the states in which Dallas National does business. He opened his first PEO in 1991, and his first PEO in Florida in 1998. AMS Staff Leasing, Inc., AMS Staff Leasing II, Inc., and Equity Group Leasing I, Inc., are PEOs catering to different types of small businesses and authorized and licensed to do business in Florida. They are all owned 100 per cent by Mr. Wood. AMS Staff Leasing, Inc., does most of the staff leasing business in Florida. (Hereafter, AMS Staff Leasing Inc., and AMS Staff Leasing II, Inc., will be referred to as “AMS” and Equity Group Leasing I, Inc., will be referred to as “Equity.”) Companion Property and Casualty Insurance Company (Companion) is domiciled in South Carolina and is an OIR- authorized property and casualty insurer in Florida. Companion currently provides workers’ compensation coverage to Mr. Wood’s Florida PEOs, AMS and Equity. At the present time, DNIC Insurance Holdings, Inc., a holding company owned 100 per cent by Mr. Wood, owns Jefferson Life Insurance Company and, through another entity, owns Petitioner herein, Dallas National Insurance Company. At the present time, Aspen Administrators, Inc. (Aspen), is a Florida-licensed “third party administrator.” Aspen is owned 100 per cent by Mr. Wood. Aspen now processes workers’ compensation claims for Companion in Florida. Previously, it processed claims for Providence Property and Casualty Insurance Company (Providence) in Florida. Aspen also handles workers’ compensation claims on behalf of Dallas National in a number of other jurisdictions. Dallas National or Companion can cease to do business with Aspen and hire another third party administrator at any time. However, due to Mr. Wood’s and Dallas National’s preferred business model, that is an unlikely prospect for Dallas National. Florida PEOs provide a valuable service for small business owners. A PEO can obtain affordable workers’ compensation coverage for a large group of employees and lease those employees to several small businesses which otherwise could not operate. PEOs, like other employers, frequently contract for provided bundled services by third party administrators who perform all the claims handling, payroll tax, human resources services, and other personnel services for the PEO-employer. In Florida, as in most states, a PEO or staff leasing company must obtain workers’ compensation coverage through a master policy covering all employees the PEO employs and then leases to small businesses. California has no PEO/staff leasing law, and individual workers’ compensation policies must be purchased by the PEO to cover each entity to whom the PEO leases employees. This difference has caused both California and Dallas Fire/Dallas National some problems in the past. (See Finding of Fact 67). Although common ownership of an insurer and affiliated PEOs is not prohibited by Florida statute or rule, and although Lion Insurance Company, Southern Eagle Insurance Company, and Frank Crum Insurance Company are all licensed in Florida as property and casualty insurers providing workers’ compensation coverage to employers located in Florida, and although each of these companies, like Petitioner Dallas National, is owned by a single person or entity and is affiliated with a PEO which the 100 per cent individually-owned insurer insures in the State of Florida, OIR is concerned about the inter-relationships of the various entities in this case and with the fact that, as 100 per cent shareholder of all of those entities, Mr. Wood is the “controlling shareholder.” OIR witnesses testified that the Agency views it as critical that a PEO and its insurer be separated so that claims are handled and reported properly. OIR also asserted that all three of the other similarly structured companies and affiliates differ from Dallas National because they use unaffiliated third party administrators, but that was demonstrated only as to one such insurer, a start-up company with no compliance history. PEOs obtain their own Florida licenses, subject to regulatory oversight. (See §§ 468.524—468.535, Fla. Stat.). Third party administrators obtain their own Florida licenses, subject to regulatory oversight. (See §§ 626.8805 and 626.891, Fla. Stat.). Insurance companies obtain their own Florida licenses, subject to regulatory oversight. (See Conclusions of Law). No Florida statute or rule prohibits 100 percent ownership of the stock of an insurance company by a single individual. In short, there is no Florida statute or rule that prohibits Petitioner’s business model, but it is clear from the testimony, and the candor and demeanor of OIR’s witnesses while testifying, that although the Legislature has authorized PEOs/staff leasing companies, OIR’s in-house witnesses see them as opportunities for abuse, and they simply do not like the concept of PEOs, which have been a legitimate business model in Florida since the 1990’s. Having eliminated those statements attributed to Agency employees in the course of litigation settlement negotiations and relying only upon their testimony at the instant hearing and statements made during the course of the two licensing processes related to this particular Petitioner, which statements reasonably constitute either Agency admissions against interest or the Agency’s rationale in the licensing process, it is clear that Respondent’s reviewers are holding any entity associated with Mr. Wood or with PEOs to a higher, or at least different, standard than other applicants for a Florida workers’ compensation insurance carrier’s license.2/ OIR’s Property and Casualty Financial Oversight Division’s review of the current Dallas National application raised concerns about Dallas National’s relationship with its affiliated PEOs. OIR wants assurance that there are sufficient checks and balances between the affiliated entities. “An adequate firewall,” was the term repeatedly used. What the desired “firewall” is supposed to accomplish was explained only to the extent that the Agency wanted to be certain that injured workers’ compensation claimants (employed by AMS) would be timely and correctly paid their workers’ compensation (indemnity), that their medical bills (medical) would be timely and correctly paid to their medical practitioners, and that Dallas National’s underwriting practices must provide sufficient reserves to cover the “long tail” of workers’ compensation injuries.3/ However, there is no OIR or Division of Workers’ Compensation rule defining an adequate “firewall.” The Agency just believes it is safer, or at least easier, to deny an out-of-state application than it is to monitor a questionable non-domiciliary carrier after licensing, even though Florida can, and does, audit out-of- state insurers. In 2006, Florida cancelled California Indemnity’s license to do business in Florida and required that Dallas National re-apply in its own name, which Dallas National promptly did. On December 1, 2006, Respondent OIR denied Petitioner Dallas National’s first application for Florida licensure. A formal proceeding under Section 120.57(1), Florida Statutes, ensued, and Petitioner Dallas National ultimately dismissed that proceeding and withdrew its 2006 application on the belief that if Dallas National reconstituted its Board of Directors with persons who were not already employees of Dallas National, OIR would grant its next application for a certificate of authority.4/ In 2007, Dallas National reconstituted its Board of Directors. All current members are highly qualified in the field of insurance. None have any adverse criminal or regulatory history. Five-ninths of the Board (a majority) are not Dallas National employees and not previously associated with any Wood enterprise. These new members are Laura Wehrle, Mike Pickens, Mick Thompson, Marta Prado Butterworth, and Betty Patterson. Ms. Wehrle was a senior vice-president of Liberty Mutual Insurance Company, which at the time of her service there had the largest book of workers’ compensation business in Florida. Ms. Wehrle’s area of expertise within Liberty Mutual was PEOs. Mike Pickens is the former Arkansas Commissioner of Insurance, who described Petitioner’s prior problems in that state as extremely minor. (In 2002, while Mr. Pickens was Arkansas Insurance Commissioner, Arkansas disciplined AMS for operating without a license for eight months). Mick Thompson is the current Oklahoma Commissioner of Banking. Marta Prado Butterworth is a successful, self-made business-woman in the health care industry. Betty Patterson was the Texas Deputy Commissioner of Insurance who oversaw Dallas National and who graduated Dallas National from that agency’s oversight. Ms. Patterson and Mr. Pickens have been accredited, active members of the National Association of Insurance Commissioners (NAIC) for many years. Ms. Patterson is a consistent award-winner in that society of state regulators. Both Patterson and Pickens joined Dallas National’s Board quite some time after the end of their terms of office in their respective states (after retirement for Ms. Patterson) and well after Dallas National had been returned to “business as usual” by their respective regulatory agencies. Charles David Wood is Chairman of the Board of Dallas National, but he is currently semi-retired and has been semi- retired from all of his businesses since early 2006. Neither he, the new five Board members, nor Mr. Nehls, who also currently sits on the Board, has ever declared bankruptcy or been arrested, indicted, or convicted of any crime. There also is no evidence that either of the other two members of the Board, who have personal and business relationships with Mr. Wood, has any adverse bankruptcy, criminal, or regulatory history. The Board members who testified herein vigorously defended their own integrity and that of Mr. Wood. All described Mr. Wood as the equivalent of a member emeritus or a supportive, but non-initiating, member of the Board who attends meetings on an irregular basis. All agreed that, with the exception of Mr. Wood, Dallas National now has a dynamic Board that has considerable regular “hands on” expertise and involvement in making Dallas National a better insurer, which is compliant with all regulatory agencies in each of the 39 different regulatory environments where Dallas National operates. None has found that any information has been withheld from the Board by any of Mr. Wood's enterprises. None has found it difficult to get any information sought from Dallas National employees. Except for Mr. Wood’s presence on the Board, the credentials and integrity of the new Board members are apparently not an issue for OIR, but OIR’s regulators are concerned because Dallas National’s by-laws permit removal of any director by a majority vote of the shareholders (that is, unilaterally by Mr. Wood) at any special meeting of the Board called for that purpose. There is no reason to suppose this is a situation unique to Dallas National. (See Finding of Fact 25). OIR also considers it “problematic” that several of Mr. Wood’s companies are housed on several floors of the same building at the same corporate address in Dallas Texas. Of particular concern were the first-hand observations of Susan Bernard, Bureau Chief of the San Francisco and Sacramento Offices of the Field Examination Division of the California Department of Insurance. She observed that administrators for Aspen were located in an open area of the same floor (or perhaps two floors below) Dallas National’s offices; that AMS employees were on the same floor as Dallas National; and that all shared the same computer systems. Added to other factors, Ms. Bernard and OIR interpret the foregoing as amounting to “comingling" and interactions not at “arm’s-length.” The portion of Aspen or AMS located in the same Dallas office building with Dallas National probably is more than just AMS’s and Aspen’s Texas operations, (see infra) but clearly, AMS and Aspen have offices in Florida and in other states in which they do business. Both Ms. Bernard and Stephen Yon, Senior Management Analyst II with the Florida Division of Workers’ Compensation, now part of OIR, testified that it was hard to distinguish where Aspen or AMS left off and Dallas National began in the various computer functions in the Dallas offices, but obviously, both regulators were eventually able to make distinctions, because each prepared reports based on doing so, and Mr. Yon was able to assess Florida fines accordingly. (See Findings of Fact 53-56). That said, computers undoubtedly link Dallas National with all its affiliates in every state, and there is no reason to suppose that computers do not link other insurance companies, to some degree at least, with the employers they insure, with their insured PEOs (such as AMS) if they have them, and possibly with the third party administrators (such as Aspen) for those PEOs. Aspen’s past reporting problems are a big part of OIR’s denial letter for Dallas National’s current application, as are violations of the Florida Workers’ Compensation Statute by both AMS and Aspen (see Findings of Fact 52-56), but no significant comparison was made at hearing between Aspen’s historical past errors and omissions and the historical accuracy of any other third party administrators. Also, no significant comparison was shown with regard to AMS’ past errors and omissions and those of any other PEOs. Another of OIR’s reasons for denying Dallas National’s current application was the alleged incompetency, untrustworthiness and/or “bad faith” performance of Mr. Wood in relation to a 16 days' gap of workers’ compensation coverage of AMS in Florida which occurred in 2002. Over the years, AMS has sequentially obtained workers’ compensation coverage in Florida from several insurance companies, among them Reliance National Insurance Company, CNA Insurance Company (CNA), Insurance Companies of America (ICA), Providence, and Companion. Relevant to OIR’s mistrust of Mr. Wood and its concerns with the 2002 gap of AMS coverage, were a one-million dollar deductible workers’ compensation policy for AMS issued by CNA prior to Mr. Wood's acquisition of Dallas Fire in July 2002. In the last quarter of 2001, CNA had advised AMS that CNA was preparing to stop insuring PEOs but that AMS’ CNA policy would be renewed for the period of September 1, 2001, through September 1, 2002, without cancellation during that period, but without renewal at its end. Nonetheless, in late February, or in March 2002, CNA issued a 30-day cancellation notice to AMS. AMS sued CNA, and the suit was settled with an agreement for CNA to continue workers’ compensation coverage in Florida for AMS through the end of June 2002. To eliminate any potential for a gap in coverage, AMS attempted to arrange for a replacement policy to be issued by Bankers Insurance Company (Bankers), based in St. Petersburg, Florida. At all times material, Bankers was a Florida insurer licensed by OIR. As part of this 2002 transaction, Bankers essentially mortgaged or pledged a stock it owned to Mr. Wood as security or collateral for a five-million dollar loan from him, and in turn, Bankers was to provide workers’ compensation coverage to AMS as of June 20, 2002, so that AMS would have no gap in coverage when CNA pulled out. However, Bankers never issued a workers’ compensation policy to AMS, and OIR submits that a “handshake deal” with Bankers demonstrated Mr. Wood's bad business judgment.5/ AMS next attempted to obtain its workers’ compensation coverage from Guerling Insurance Company. Guerling required a five-million dollar down payment of premium to issue a certificate of insurance to AMS for a policy to take effect at midnight on June 20, 2002. The down payment was made, but after relying for two weeks on the certificate of coverage obtained, AMS (in the persons of Mr. Wood and his personal attorney Mr. Reid) discovered that the certificate, purportedly from Guerling, was a fake.6/ As a result of the fake certificate of insurance, AMS had operated in Florida during a 16-day gap in its workers’ compensation coverage, so even though Mr. Wood personally paid all workers’ compensation claims which arose during the gap, AMS, as the employer of those workers’ compensation claimants, was required to cease business in Florida under a Division of Workers’ Compensation “stop work order” until AMS had obtained new Florida workers’ compensation coverage from yet another source and also had to pay a mandatory $189,000, fine to the Division of Workers’ Compensation, based on one-and-a-half times the premium AMS would have had to pay if it had been covered. Dallas National was not a party to any of the “gap” events. Settlements were reached with CNA and a lawsuit recovered Mr. Wood’s money from Bankers. Dallas National was not a party to any of the lawsuits. All of the foregoing events involving CNA, Bankers, Guerling Insurance, and Mr. Wood (with the exception of the ultimate recovery of Mr. Wood’s money) occurred in June-July 2002. The Texas regulatory agency did not approve Mr. Wood’s acquisition of Dallas Fire until later. See supra. Given the timing of events and the extraordinary efforts of AMS and Mr. Wood to ensure uninterrupted workers’ compensation coverage for AMS, plus Mr. Wood's covering AMS’ losses to workers’ compensation claimants out of his own pocket, the undersigned is not persuaded that AMS, Dallas National, Mr. Wood, or Mr. Reid evidenced any untrustworthiness, bad faith, or incompetence as alleged by OIR in relationship to these 2002, events. In 2005, while Providence was AMS’ workers’ compensation carrier, the third party administrator, Aspen, which was not then incorporated and licensed to adjust claims in Florida, illegally adjusted claims for Providence. Stephen Yon, Senior Management Analyst II, is aware that Aspen is now a Florida-licensed third party administrator servicing several workers’ compensation insurance carriers doing business in Florida. However, Mr. Yon’s 2005 audit of Aspen’s processing of claims for Providence showed a “no license” period and also showed late filings of various workers’ compensation forms with the Division and late payments to claimants. A mandatory fine was imposed. The same situation with late form filings and late payments was found by Mr. Yon’s audits of Aspen, working for Providence and then Companion in 2007, and fines were again paid. Although efforts have been made in 2007-2008, by Dallas National, through Board member Ms. Wehrle, to create a diary system that would reduce these timeliness errors, there has been little improvement to date. Apparently, there were 10 filings that were only one day late out of 68 filed, but other reportage and/or payments were more delayed and the Agency views all these activities as “hazardous practices.” Florida law requires that the employer (PEO) be active and participating in some of the reportage, and the essence of a third party administrator system is that the errors and omissions of the third party administrator relate back to the insurance carrier. In all of the foregoing incidents, AMS was the employer and Aspen was handling claims for either Providence or Companion, not Dallas National. Insurance carriers’ failures to file forms timely or to pay benefits timely as previously related are common in the processing of Florida workers’ compensation insurance claims. Workers’ compensation claimants are supposed to receive their first indemnity checks within 14 days, and some reports must be filed within seven days, and others within 21 days, of the injury, not just within a period following a formal claim (see Section 440.185, Florida Statutes) and the Division requires 95 percent accuracy. (See § 440.20 (8)(b), Fla. Stat.). Fines on these bases are mostly mandatory, but the Division of Workers’ Compensation may distinguish between willful and non-willful violations. (See § 440.525, Fla. Stat.). It is unclear which type of fine(s) were imposed on Aspen, and thus the respective insurance companies, for the foregoing failures. That said, it appears that, contrary to Mr. Yon’s testimony that the only way to discipline an insurer, PEO, or third party administrator is with a fine, other disciplinary action might be available against Aspen (see §§ 626.8805 and 626.891, Fla. Stat.), but Florida did not take any other disciplinary action, even though AMS/Aspen has never met the statutory goal of 95 per cent timely payments and has vacillated between 70 and 80 per cent for three years. The failure to pursue any regulatory remedy against AMS and/or Aspen, such as revoking their licenses, suggests that these errors are not truly significant to the Agency. Companion is PEO/Employer AMS’ current workers’ compensation carrier. AMS, while insured by Companion, paid some first day medical claims, because Texas allows an employer to pay on-site first aid claims, and the company’s operatives assumed that such payments were also permitted in Florida. They were wrong. Florida actually requires that all workers’ compensation claims be paid by the insurance carrier from the first day. AMS stopped its illegal procedure when informed of the violation by the Florida Division of Workers’ Compensation. Companion was assessed a fine of only $2500, based on the claims adjusted by AMS. Mr. Yon agreed it was acceptable to the Agency to move licensed AMS adjusters to Aspen, so as to resolve the illegal adjusting problem. There have been no violations of this sort for two years. Companion now pays all medical bills. OIR asserts that Messrs. Wood and Nehls, personally, and Dallas National as a corporate applicant, have lied to OIR in each of the two successive application processes. With regard to the 2006 application, OIR conducted an evidentiary hearing. The transcript thereof is in evidence and although there is a question-and-answer format in which Mr. Wood, Mr. Nehls, and others answered questions, most of the “hearing” is more in the nature of a formalized marathon conversation, which moves from topic to topic with several people chiming in to clarify what OIR’s hearing officer was seeking by a question or to answer the question, or with the hearing officer trying to clarify what Dallas National’s witnesses meant by their answers. Under these circumstances, someone not involved in a company’s day-to-day operation might reasonably fail to answer some questions correctly or fail to correct or elaborate on his answers as the proceeding moved on. Nonetheless, clearly, Mr. Wood incorrectly answered some questions put to him at that hearing by Florida regulators. He testified that with regard to any and all S&P companies with which he was affiliated (1) they had not failed to hold an annual shareholders’ meeting; (2) had not charged unapproved rates; (3) had not operated in any state without a license; (4) had not continued in business after losing workers’ compensation coverage; (5) had not paid claims from collateral funds; and (6) had not become a party to any service agreement including re-insurance, which was not reported to the state of domicile on the appropriate state licensure. At the instant hearing herein, it was shown that at some point before, or while, Dallas National was under Texas oversight in 2002-2003, Mr. Wood, indeed, did not, as required by law, meet with himself for regular shareholders’ meetings, so his answer to question (1) should have been “yes.” It was shown that with regard to the situation with CNA, Bankers, and Guerling, in 2002 (see Findings of Fact 45-51) his answers to questions (3), (4) and (5) should have been “yes.” (See also Findings of Fact 34, 52, and 67, as to reasons that question (3) should have been answered “yes.”) However, the instant hearing did not demonstrate that his answers to questions (2) and (6) were clearly wrong. OIR attributed all six negative answers to lack of trustworthiness. Although Mr. Wood unilaterally and voluntarily submitted an affidavit attempting to correct some of his hearing testimony a couple of weeks after the evidentiary hearing, his affidavit does not really clarify or alter his wrong answers to these questions, and it was a serious omission for Mr. Wood to have not acknowledged the problems that Dallas Fire, AMS, and Aspen have had, if he was aware of them, even though they were remote in time. OIR also construes the business plan submitted with Dallas National’s 2006 application to be suspect. The application required that Mr. Wood list all the companies he owns, but he failed to list Aspen, third party administrator for AMS and Equity, on a chart and may have failed to list either Aspen or Equity, one of his Florida PEOs, in the space provided on another page. Mr. Wood testified herein that the omission was an oversight. Mr. Nehls, Petitioner’s president, who prepared both applications, testified that the oversight was probably his, and the evidence as a whole supports a finding that Mr. Wood had no current “hands on” administration of either Aspen or Equity in relation to the time of either of Dallas National’s applications to OIR and did not prepare either voluminous application, both of which went back and forth with supplements to OIR for a period of time till each was pronounced “complete.” Because he signed both applications, OIR views the omission(s) of the companies as a material misrepresentation, reflective of Mr. Wood’s lack of trustworthiness, but given the fact that all the companies were listed somewhere in the application papers; the parties’ past history, which meant that OIR knew of these companies’ probable affiliation with Dallas National and indeed asked questions about them; the due diligence known to be Florida regulators’ hallmark; and the testimony of OIR’s witnesses that failure to list a company is not an absolute bar to licensing, it is unreasonable to suppose that any plot existed within Dallas National, with Mr. Woods, or with Mr. Nehls to hide these companies or Mr. Wood’s affiliations therewith from Florida regulators. OIR also faults Mr. Wood personally for a portion of the current 2008 application, which discusses Dallas National’s plans to expand into the California insurance market, claiming that this was also a material misrepresentation since California has not yet approved Dallas National to write insurance in that state. Recognizing that Dallas National remains licensed in California, but is not yet authorized to write insurance there, a situation impossible under Florida’s law, and that Mr. Nehls placed discussion of what Dallas National planned to do in California under a heading of the 2008 application which equates with “future business plans,” this information was not a material misrepresentation. OIR has doubts about Dallas National’s underwriting parameters. For this aspect of the case, OIR relied heavily on the testimony of Susan Bernard. Ms. Bernard was accepted as an expert in California financial and regulatory examinations. Unlike Florida, California does not license PEOs, but like Florida’s OIR, California’s regulatory agency mistrusts insurers affiliated with PEOs, even though Ms. Bernard was not able to represent that such an affiliation offended California’s insurance code. California requires that a PEO obtain a separate workers’ compensation policy for each employer to whom it leases employees. (See Finding of Fact 24). In July 2003, Dallas National was not permitted to sell insurance in California, but Mr. Wood’s company, AMS, secured, through another entity, what a California corporation that leased employees from AMS was led to believe was a valid Dallas Fire workers’ compensation policy. The policy was disavowed by Dallas Fire, and therefore, the small employer who leased employees from California AMS suffered a gap in coverage in violation of California’s Labor Code and its leased employees also were without workers’ compensation coverage for that same period. Someone at AMS or at Dallas Fire apparently described the invalid policy or binder as a “test certificate,” and California’s Insurance Department issued a scathing letter of admonishment to Dallas Fire with the promise of a cease and desist order if Dallas Fire ever again issued such a disingenuous document or wrote insurance in California without Agency approval to do so. Based on the timing of the transitioning of Dallas Fire into Dallas National, it is hard to be sure what really happened in this situation, but so far as this record is concerned, neither Dallas Fire nor Dallas National has done anything similar since. Ms. Bernard, a Certified Financial Examiner, has performed three onsite visits to Dallas National’s Texas headquarters to consider recommending licensure of Dallas National by California. These visits were in August 2006, August 2007, and December 2007. She testified that, based on a reasonable sample in August 2006, Dallas National’s compliance with its own underwriting guidelines was non-existent. Her sampling in August 2007, produced only minimally better adherence to Dallas National’s own guidelines, and on that occasion, Dallas National’s own accountants, Ernst & Young, also found significant underwriting flaws, while the Texas Department of Insurance approved the underwriting at that time. Her sampling in December 2007, using Dallas National’s new underwriting guidelines, again was only slightly better than the last time, but Ms. Bernard conceded that at the same time she audited Dallas National on that occasion, the Texas Department of Insurance was also present and again found Dallas National’s underwriting compliance in December 2007, to be acceptable. Ms. Bernard’s report at the close of her examination in December 2007, was partially affected by her concern over the proximity of AMS and Dallas National’s offices being in a single building and using the same computers (see Findings of Fact 39- 41), and her speculation that a 2007 sports event disaster involving a different Wood company could deplete the reserves of Dallas National and all Wood corporations. However, on the basis of Dallas National’s failure, at that time, to consistently apply its own underwriting guidelines, Ms. Bernard recommended that California not license Dallas National until Dallas National met all its own underwriting guidelines. Due to California’s time and budget constraints, Ms. Bernard has not returned to audit Dallas National since December 2007, despite urgings by Dallas National’s Board to do so. In 2008, a Board-authorized underwriting committee spear-headed by Ms. Patterson and Ms. Wehrle completely overhauled Dallas National’s underwriting guidelines. Ms. Bernard has not reviewed Dallas National’s new underwriting guidelines, and Ms. Wehrle did not elaborate on them in detail. However, there is no current information that these guidelines are not adequate nor that they are not being followed. Since effective underwriting plays into the overall financial picture of an insurance company, the current reports of actuaries and accountants for Dallas National (see infra) would seem to suggest that Dallas National’s underwriting is currently adequate. Since Petitioner Dallas National was created out of the merger of California Indemnity and Dallas Fire, Dallas National has employed Milliman, Inc., a prominent, independent actuarial firm with 60 years of experience and a credible reputation. Milliman, Inc., has advised Dallas Fire from the time Mr. Wood purchased Dallas Fire in 2002, and has given Dallas National a “responsible” rating (essentially a “clear” financial rating) each year since 2003. Dallas National uses A-rated reinsurance partners and independent accountants and auditors. One of its independent accountants is Ernst & Young. Dallas National uses independent investment advisors to maintain a conservative and profitable investment portfolio. Dallas National relies heavily on opinions of all these advisers with regard to loss reserves and collateral. OIR faults Dallas National in two technical compliance categories. First, OIR claims that Companion is “fronting” for Dallas National in violation of Subsections 624.404(4)(a) and (b), Florida Statutes. Second, by citing what OIR asserts is an illegal re-insurance agreement with Companion, OIR charges that Dallas National has set up insufficient loss reserves. Section 624.404, Florida Statutes, provides, in pertinent part, as follows: 624.404 General eligibility of insurers for certificate of authority.--To qualify for and hold authority to transact insurance in this state, an insurer must be otherwise in compliance with this code and with its charter powers and must be an incorporated stock insurer, an incorporated mutual insurer, or a reciprocal insurer, of the same general type as may be formed as a domestic insurer under this code; except that: (4)(a) No authorized insurer shall act as a fronting company for any unauthorized insurer which is not an approved reinsurer. (b) A "fronting company" is an authorized insurer which by reinsurance or otherwise generally transfers more than 50 percent to one unauthorized insurer which does not meet the requirements of s. 624.610(3)(a), (b), or (c), or more than 75 percent to two or more unauthorized insurers which do not meet the requirements of s. 624.610(3)(a), (b), or (c), of the entire risk of loss on all of the insurance written by it in this state, or on one or more lines of insurance, on all of the business produced through one or more agents or agencies, or on all of the business from a designated geographical territory, without obtaining the prior approval of the office.(Emphasis supplied) No case law has developed around Florida’s “fronting” statute. When OIR advised Dallas National’s new Board of Directors that the Agency viewed Dallas National’s relationship with Companion as a “fronting” situation, the Board, including the former state regulators, closely reviewed the statute. The Board members collectively could not discern how Florida’s “fronting” statute could be applied to Dallas National’s situation with Companion, and sought advice from Companion, Ernst & Young, and Milliman, Inc. Relying on consistent advice from all these entities that Florida’s “fronting” statute did not apply, Dallas National’s Board proceeded to administrative hearing. Mr. Wood's PEOs have been issued high deductible workers’ compensation policies by Companion. Companion and Dallas National have a re-insurance agreement which starts with a million-dollar deductible, whereby Companion agrees to pay the first million dollars per claim by each employee of the PEO. Thereafter, Companion must seek reimbursement from the policyholder, the PEO. Dallas National re-insures claims between one and five million dollars. Other reinsurance coverage for Companion is provided by other companies for claims between five and 30 million dollars, and Companion is the direct writer above 30 million dollars. OIR witnesses who had never reviewed the actual reinsurance agreement in this case were not helpful by their opinions that a “fronting” situation exists, and those opinions are discounted. Steve Szypula currently is the Chief Analyst in OIR’s Property and Casualty Oversight Unit. He was accepted as an expert in financial regulation, accounting, and regulation examination, and testified that the providing of reinsurance coverage by Dallas National to Companion for workers’ compensation coverage written by Companion for AMS constituted an unlawful “fronting” arrangement in violation of Subsections 624.404(4)(a) and (b). However, Mr. Szypula’s area of practice is not specifically workers’ compensation, and he has no background in reinsurance, specifically. Mr. Szypula found no fault with the Milliman Inc. December 31, 2008, report, including reserves or its calculations and agreed that, with or without a high deductible, Companion is always required to pay workers’ compensation claims from the first dollar. However, his “fronting” theory requires that the statutory phrase, “entire risk of loss” be read as the single word, “premium,” and that the million-dollar deductible in the subject insurance policy be equated with a “credit risk." By his interpretation, Mr. Szypula opined that more than 50 percent of Companion’s risk was being ceded to Dallas National because the premium was a simple “pass through.” Ray Neff is a Member of the American Academy of Actuaries; the former Director of the Florida Division of Workers’ Compensation, when the Division was housed in the Department of Labor; and a former Bureau Chief of the Florida Department of Insurance Bureau of Rates. Mr. Neff is an actuary and certified Reinsurance Arbitrator, and was accepted as an expert with special knowledge regarding re-insurance arrangements and interpretation of re-insurance agreements and insurance in general. Mr. Neff agreed with Mr. Szypula that, under the re- insurance agreement between Dallas National and Companion, Companion takes the risk of loss on the entire claim and is liable from the first dollar, due to the nature of workers’ compensation insurance, as compared with other types of insurance/re-insurance. He further testified that the insurer must pay the deductible first and may only seek reimbursement from its re-insurers later. Therefore, Companion is liable for, and must first pay, all claims, regardless of whether there is, or is not, eventual reimbursement by re-insurers. Concentrating on the phrase “entire risk of loss” as used in Section 624.404(4)(b), Florida Statutes, Mr. Neff opined that an unlawful “fronting” arrangement did not exist between Companion and Dallas National by the terms of their re-insurance agreement in this case. By that agreement, Dallas National agrees to insure between one million and five million dollars in liability. The one million dollar deductible policy issued to AMS by Companion does not mean that Companion does not assume the risk of the first million dollar loss, because via Florida Administrative Code Rule 69O-189.006,7/ the insurer is always responsible for first paying the injured claimant directly, regardless of any deductible, and only thereafter may seek reimbursement. Mr. Neff maintains that, unlike those other types of casualty insurance which are Mr. Szypula’s forte, reinsurance of workers’ compensation policies is only a reimbursement mechanism and not a true deductible. Because of his education, training, and experience, his clarity of explanation, and particularly his use of the actual language of the “fronting” statute analyzed, Mr. Neff is the more credible witness over Mr. Szypula. OIR presented the testimony of Joseph Boor, who reviews general lines, commercial, intangible and surety rate filings for OIR. Mr. Boor has special experience in hurricane losses. He is an esteemed actuary, a member of the Casualty Actuarial Society, and the first person in the United States to have achieved the “Senior Professional of Insurance Regulation” designation by NAIC. However, Mr. Boor does not review workers’ compensation rate filings. He was accepted as an expert in actuarial science, loss reserving, and large deductible business practices. Even though he did not point to any errors in Milliman Inc.’s December 31, 2008, annual actuarial report, Mr. Boor used that report to conclude that Dallas National is deficient in loss reserves by plus or minus 42 million dollars. Mr. Boor was brought on relatively late in Respondent’s preparation of the case and purely for purposes of litigation testimony. Accordingly, he had to revise his figures several times. To his credit, in the highest standards of his profession, Mr. Boor pro-actively disclosed his mathematical errors to all concerned. Milliman, Inc., conducted an independent loss reserve analysis of Dallas National as of December 31, 2008,8/ on both a gross and net basis with respect to reinsurance and rendered its year-end statement of actuarial opinion on the held reserves of Dallas National. Two fully credentialed actuaries (both Fellows of the Casualty Actuarial Society) performed the work, including a review of the company’s entire claim liability, which went through two peer reviews, one of which was “firm-wide,” before Milliman, Inc., issued its final opinion. Robert Meyer, a principal and consulting actuary of that firm, is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. He was accepted as an expert actuary in the field of property and casualty insurance. He explained Dallas National’s loss reserving process and critiqued Mr. Boor’s methodology and conclusions, to the effect that Mr. Boor used reserves in place of collateral so as to overstate collateral; had suggested reserves be posted before a loss occurred; and made unreasonable assessments on claims now and in the future. Vastly simplified, Mr. Meyer’s defense of Milliman Inc.’s report, approving Dallas National’s loss reserves as reasonable, is more credible than Mr. Boor’s opinion for the foregoing reasons, and most particularly because Mr. Boor skewed loss development factors on the basis of his choice of an industry database, and his adjustment thereof, which overestimated the claim liability of Dallas National and Companion.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of Insurance Regulation enter a Final Order issuing the license for which Petitioner Dallas National Insurance Company has applied. DONE AND ENTERED this 3rd day of February, 2010, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of February, 2010.
Findings Of Fact The Petitioner is an agency of the State of Florida charged with licensing insurance agents of all types, regulating the licensure status and enforcing the practice standards of licensed agents within the ambit of the powers granted it by the Legislature in Chapter 26, Florida Statutes. The Respondent at times pertinent hereto was a licensed health insurance agent in the State of Florida licensed and regulated as to her insurance agency practice by the Petitioner in accordance with the provisions of Chapter 626, Florida Statutes, and related rules. The Respondent, Ms. Blair, at times pertinent hereto was employed as a licensed health insurance agent by National Health Agency Associates, Inc. On June 25, 1985, Ms. Blair went to the home of Marguerite J. Kozloski in Gainesville, Florida, ostensibly for the purpose of delivering a United General Life Insurance Company hospital indemnity policy (number 0981039). That policy had been sold to Ms. Kozloski by a former National Health Agency Associates, Inc. agent, Mr. Donald Johnson. In the course of meeting with Ms. Kozloski, Ms. Blair informed her that she did not really need the particular policy that the Respondent had come to deliver (policy number 0979258) which had previously been sold to her by agent Johnson. Instead, the Respondent indicated to Ms. Kozloski that she really needed a different health insurance policy or program and took a new application for that insurance from Ms. Kozloski, a different policy. Upon taking the application for the new policy which she was selling to Ms. Kozloski, the Respondent collected Ms. Kozloski's check payable to "National Health Agency" in the amount of $781. That check represented the initial annual premium payment for the policy the Respondent was selling to Ms. Kozloski. Upon concluding this arrangement, Ms. Blair informed Ms. Kozloski that she would have policy number 0979258 and number 0981039 cancelled (the policies sold to Ms. Kozloski by agent Johnson) and would have the full premiums for those policies refunded to Ms. Kozloski. Later that same day the Respondent returned to her office and attempted to submit the application for the policy she sold to Ms. Kozloski to the insurer. Upon attempting to submit the application to the insurer, she was informed by an official of National Health Agency Associates, Inc. that the application could not be submitted to the insurer because it duplicated coverage on Ms. Kozloski. After being informed that the application would not be accepted, the Respondent filled out and executed, without Ms. Kozloski's knowledge or consent, two applications for supplemental medical-surgical expense insurance to be issued by the insurer, Atlantic American Life Insurance Company. She forged Ms. Kozloski's signature on these applications. The Respondent also indicated on these applications certain representations including that Ms. Kozloski did not have existing coverage and that the applied-for policy was not intended to replace existing insurance. These representations were false and the Respondent knew at the time of making them that they were false. She was also aware that in forging Ms. Kozloski's signature on the applications that Ms. Kozloski had no knowledge and had not consented to her placing her name on the applications for insurance, nor consented to the alternative applications being filled out and submitted. Ms. Blair never returned any refund or return premium to which they were entitled to the Kozloskis. She engaged in this scheme to seek to have the policies originally sold by Donald Johnson cancelled and to have the policies she attempted to sell to the Kozloskis replace the outstanding coverage in order for her to obtain the sales commissions attributable to them. The second "Kozloski application" was executed and forged by the Respondent when she learned from the insurer, (on July 8, 1985), that a second application to Atlantic American Life Insurance Company would be necessary to obtain the coverage requested in the first "replacement application" which had been completed by the Respondent and forged on June 25. The Respondent again falsely represented on that application that Ms. Kozloski had no existing or pending applications for Medicare supplement, hospital, medical or surgical insurance although the Respondent knew that to be a false representation. The Respondent also falsely represented, as to that second application, that the policy applied for would not replace any accident or sickness insurance presently applied for or already in force, although she knew that to be a false statement. Further, the Respondent failed to request that the original United General Life Insurance Company policy number 0979258 originally sold by Donald Johnson, be cancelled despite her representation to Ms. Kozloski that she would make such a request, which event would have entitled the policy holder to a refund of premium, which Ms. Kozloski never received. On April 5, 1985, the Respondent went to the home of George A. and Jewel C. Terwilliger in High Springs, Florida, for the purpose of selling Ms. Terwilliger a nursing home care insurance policy. On that occasion, Ms. Terwilliger informed the Respondent that she could not afford to buy more insurance and that her husband refused to pay for any more insurance. The Respondent, after discussing the matter with the Terwilligers, nevertheless obtained an unsigned check from George A. Terwilliger (check number 1314) and persuaded Ms. Terwilliger to sign an application for insurance. Thereafter, without the Terwilligers' knowledge or consent, the Respondent forged George A. Terwilliger's signature on that check and made the check out in the amount of $678. The Respondent thereafter submitted the check, together with Jewel C. Terwilliger's application, to National Health Agency Associates, Inc. The Respondent engaged in this scheme and transaction for the purpose of monetary benefit in the form of a sales commission she expected to earn for selling the Terwilligers the insurance policy based upon her misrepresentations.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is, therefore RECOMMENDED that a Final Order be entered by the State of Florida, Department of Insurance and Treasurer revoking the Respondent's licensure. DONE and ORDERED this 7th day of October, 1987, in Tallahassee, Florida. P. MICHAEL RUFF 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 7th day of October, 1987 COPIES FURNISHED: Wilbur W. Anderson, Esquire Richard E. Turner, Esquire Office of Legal Services Department of Insurance and Treasurer 413-B Larson Building Tallahassee, Florida 32399-0300 Theresa Gerarda Blair 4390 Northeast Second Court Ocala, Florida 32670 Honorable William Gunter Commissioner Department of Insurance and Treasury The Capitol, Plaza Level Tallahassee, Florida 32399-0300
Findings Of Fact Petitioner became employed by the Department of Transportation, Bureau of Weights, on November 5, 1982. Upon being accepted for employment Petitioner completed and submitted to proper authorities the forms necessary to be covered by the State's group health insurance program and authorized the appropriate deductions from his salary to cover the premiums. On several occasions, he and his wife inquired through the Department of Transportation regarding their failure to receive an insurance card. Each time they were told the insurance card would be forthcoming and only administrative delays in processing the application were causing the delay. During this time no deductions were being taken from Petitioner's pay. In June, 1983 Petitioner incurred two doctor bills for his wife and son (Exhibit 1) in the total amount of $50, of which he paid $10 with the remainder forwarded to Blue Cross and Blue Shield who administers the state's health insurance plan. Blue Cross and Blue Shield had no record of Petitioner's insurance and the claim was denied. Petitioner paid the additional $40 charges. Although evidence was not submitted to show why Petitioner's application was not properly processed or what finally got this application back on track, the proper steps were finally taken and Petitioner was credited with having been covered with health insurance in accordance with his application from December 1982 and billed for premiums due from that date. This resulted in the assessment by the state of $436.14 for back premiums. Since he was not on the Blue Cross register in June 1983, Petitioner contests the assessment as a condition to remaining a participating member in the state health insurance program.
The Issue The issue for consideration is whether Respondent's license or eligibility for licensure as an insurance agent in Florida should be disciplined because of the Administrative Complaint filed herein, and whether Respondent should be denied a resident license to represent various insurance companies in this state because of the misconduct alleged in the Administrative Complaint.
Findings Of Fact At all times pertinent to the allegations contained herein, Michael Eugene Best was either licensed or eligible for licensure as a life insurance agent, a life and health insurance agent, and a health insurance agent in the State of Florida, and was engaged in the sale and brokerage of insurance, doing business as M. E. Best Investments. The Department of Insurance is the state agency responsible for the monitoring and regulation of the insurance business in this state. Ms. Dorothy Clark, a 73 year old woman, has known and done business with Mr. Best in the insurance area for approximately ten years. In August, 1988, she met with him to discuss her possible purchase of some kind of insurance. She cannot recall what kind of insurance it was. She gave him some money to pay for the insurance in question, which was to be procured from some insurance company, the name of which she could not initially remember, but subsequently recalled to be American Sun Life Insurance Company. The premium payment which she gave to Mr. Best was in the amount of $1,200.00, but she cannot recall whether he was obliged to use that money for the purchase of insurance from that particular company, or whether he had the option to place the insurance with another company. To the best of her limited recollection, Mr. Best did get a policy for her from American Sun Life Insurance Company, but she cannot recall if she kept that policy or if it was changed to another company. She does not recall requesting him to change companies, however, but does recall that she ultimately received a policy issued by United American Life Insurance Company and that Mr. Best was the agent who procured it for her. At hearing she denied ever attempting to cancel the United American policy though she claims she did not want it. She claims that she never received a refund check from United American, however, a check payable to her in the amount of $799.90 was issued to her by that company with address shown as her home of record. The check bears what purports to be her endorsement on the back thereof, followed by the endorsement of Mr. Best's company, but at first she claimed she did not place it there. When shown the check at the hearing, however, she admitted the signature on the endorsement was hers and that she most likely signed it. This check was issued as a result of her unremembered direction to Mr. Best to cancel the policy. She claims she did not authorize Mr. Best to take the money it represented and use it for his purposes. She claims that the check was subsequently deposited by her to her account and that Mr. Best never got possession of it or the money. This is patently wrong, however, inasmuch as Mr. Best admits that he did have the check and placed his company's endorsement on it. He subsequently used the check, with her agreement, to apply toward a policy with another company, and to his recollection, she voluntarily endorsed the check to him. Ms. Clark also purchased a $30,000.00 annuity policy through Mr. Best with another company, the name of which she cannot recall, at about the same time as the first policy mentioned herein. To get this policy she issued a check to Mr. Best in the amount of $30,000.00. When the policy was issued, she requested that it be cancel led because by the time she received it, she had reconsidered and determined that she did not want it. She notified Mr. Best of her desires that the policy be cancelled, but claims she never communicated directly with the company. The company has a letter reputedly from her, however, which complains of Respondent's purported trickery and deceit. It is found that this latter letter was prepared for her signature by someone else. When Ms. Clark told Mr. Best she did not want the policy, and requested him to cancel it, he asked her to wait awhile, for some reason which was unclear to her. Instead, she indicated to him then that she did not want to do so but wanted her money back. Some time after this discussion, but before the policy was cancelled, Mr. Best came to see her and though she cannot recall if he got her to sign anything, she identified her signature on a letter to the company which had issued the annuity policy in question , which indicated that she was satisfied with the policy and withdrawing her request to cancel. She recalls Mr. Best requesting that she sign the letter, but cannot recall what he said at the time. As she remembers, he appeared normal when he came to see her, and she voluntarily signed the letter of her own free will. It is obvious, however, that Ms. Clark did not understand what was being said to her or what she was signing because, she claims, she still wanted the policy cancelled. Her recollection of the incident is shaky - and unsure. She cannot recall if Mr. Best made her sign the letter, and she cannot recall where she signed it. It may have been at her home or at some other location, but she does not know for certain. In addition, she cannot recall if the letter was typed when she signed it, or if the paper was blank. Though she contends Mr. Best tried to keep her from cancelling this annuity policy, at this time she cannot recall what he told her; what reasons he gave her; or why he wanted her to wait. Whenever she dealt with Mr. Best, he was not rude to her. She did not feel she was being forced by him to take out any insurance from him or to do any of the things or sign any of the documentation that she did. Ms. Clark filed the complaint against Mr. Best because she was told by someone that he had forged her name on a check. At the time she signed the complaint, and at the time of the hearing, she did not know whether he did it or not, nor does she know which check he is supposed to have forged. In fact, Ms. Clark finds it difficult to recall much of what had happened and is not sure of any of the facts to which she testified. She does know, and it is found, that all the money she paid to Mr. Best was reimbursed to her and she has lost nothing as a result of her dealing with him. Ms. Clark recalls that about this time, upon the advice of her attorney, Mr. Kanetsky, she engaged in dealings with another insurance agent who advised her to cancel the annuity policy and, in fact, wrote the letter of cancellation to the insurance company for her. Mr. Kanetsky, an attorney practicing in Venice, Florida, has worked with Ms. Clark for approximately ten years, primarily in the area of estate planning for her and her sister. Over the years, he has discussed with Ms. Clark various insurance policies and other financial products, and is aware of the insurance dealings involved in this case which he learned about from his discussions with his client. He claims that in August or September, 1988, Ms. Clark called his office and solicited advice from him as to how she could get rid of an insurance policy she did not want. He advised her to come in with all her papers to discuss it and at their first meeting, found that she had purchased the $30,000.00 annuity on the life of a niece, and also a health policy, from Respondent. The annuity policy was a single premium annuity, and the health policy had a $1,200.00 premium, for both of which, she had written checks. During this discussion Ms. Clark was quite sure that she did not want to keep the annuity policy. She was somewhat confused about the health policy, but was also satisfied that she didn't want it, though she could not elaborate why. Due to Ms. Clark's conditions, both financial and otherwise, Mr. Kanetsky felt she would be better off in a liquid position rather than having such a large annuity outstanding, and since she apparently wanted to cancel both policies, he agreed to help her. To do so, he first contacted an individual in the insurance business who was aware of Mr. Best and his operation. Upon advice of this individual, Mr. Kanetsky then contacted the insurance company on which the annuity policy had been written and requested that it be cancelled. Mr. Kanetsky also referred Ms. Clark to another insurance agent to get the health policy cancelled and a new policy issued. He also contacted Mr. Best to have him refund the $400.20 difference between the $1,200.00 which Ms. Clark had paid in as a premium on the health policy, and the $799.80 which had been refunded to her by the company when the first policy was cancelled. There is some misunderstanding as to how that first $799.80 check was handled. On its face, the check reflects it was sent to Ms. Clark who, in turn, endorsed it over to Mr. Best to be applied toward another policy. Mr. Kanetsky, on the other hand, indicates the check, though addressed to Ms. Clark, was actually sent to Mr. Best, who had Ms. Clark endorse it and who applied it to another policy. In any event, since Ms. Clark wanted that policy cancel led and apparently intended to do no further business with Mr. Best, Mr. Kanetsky requested that Best refund all monies paid. Mr. Best immediately issued his check for $400.20. The insurance company, apparently concluding it had sent the first check to Mr. Best by mistake, issued another check to Ms. Clark in the amount of $799.80, which represents the actual premium cost, with the balance being the agent's legitimate commission. Since Mr. Best had already forwarded his check for $799.80, when the second insurance company check was received it was immediately refunded to Mr. Best. The $30,000.00 paid in for the annuity policy was refunded to Ms. Clark directly by the insurance company. Mr. Kanetsky contends that notwithstanding he had written to Mr. Best to advise him to stay away from Ms. Clark, there is some indication that Best thereafter came to Ms. Clark's residence to discuss the annuity policy with her. Mr. Best does not deny having gone to Ms. Clark's home on several occasions; once to talk to her about the health and accident policy, and another time, to talk about the annuity. In both cases, however, this is a standard practice in the insurance industry, suggested by the company, to attempt to "conserve" the business by making a follow-up call in an effort to dissuade a policy holder from cancelling. It is found that no improper pressure was applied by Mr. Best in his efforts to conserve his sales. Over his years of experience with Ms. Clark, Mr. Kanetsky has found that she confuses easily, and though she is competent, she is extremely limited in business experience and understanding. She does not have a guardian of her property, but is clearly not equipped emotionally to handle many of her financial affairs. It is found that her recollection of the incidents in question here is so poor as to render her testimony almost irrelevant and without merit, and though she is quite sure she did not want the insurance she bought, and attempted to cancel it, she is totally unsure of the circumstances surrounding her relationship with Respondent and the details of any conversations and transactions she may have had with him. Consequently, her testimony, the only direct testimony regarding the issue of what transpired between her and Mr. Best, is, for all purposes here, worthless. Mr. Best denies threatening Ms. Clark or attempting to coerce her into purchasing insurance from him. When he saw her in August, 1988, it was the first time he had seen her for a while and had, in fact, forgotten about her until she came into his office to file a claim. At that point, he made an appointment with her for a review of her policy status. At that time Ms. Clark had no Medicare coverage, (she does now), and he offered to attempt to get her medical coverage, to which she agreed. She wrote a check for a policy to be issued by American Sun Life Insurance Company which, subsequently, rejected her. When the rejection came through, Mr. Best immediately notified her of that fact and told her then he would convert to another company, to which she agreed. Mr. Best is satisfied Ms. Clark understood he would apply the refund check he received from American Sun to the second policy issued by United American Life, and he did this. She thereafter cancelled that policy. After Mr. Best received notice of the cancellation, he went to her home to explain everything to her. At no time, however, did he threaten her, a fact to which she agrees. He claims she had received the initial refund from united American for $799.80, which she agreed he could apply toward a policy with another company, and she voluntarily endorsed the check over to him. She also cancelled this second policy. With regard to the annuity policy, when she notified the company that she was cancelling it, he received notice of this from the home office which suggested he do what he could to conserve the business. When he went to see her about it, she agreed, he claims, that she would keep the policy. At that time he wrote out, by hand, a note to be signed by her indicating her satisfaction with the policy and her desire it be maintained. When the company thereafter indicated it preferred a typed statement to that effect, he went to her with a typed notice which said the same thing, and which Ms. Clark signed. No threats were made, and Ms. Clark agrees to this. Mr. Best also sold an insurance policy to an Ann Ward, which she cancelled for a reason totally unrelated to the Respondent. When Mr. Best found out she had cancelled the policy, he went to see her to inquire as to her reasons. At that time, as in all her dealings with him over a period of time, he was not, and she has never found him to be, overbearing, unprofessional, or coercive. In all their transactions together, he has always fully explained his product, and on the basis of their relationship, she would be happy to deal with him again. When Ms. Ward cancelled her policy, the company wrote to Mr. Best and advised him of this fact and that he must refund a portion of the premium which it had paid to him as a commission. When he received this letter, he called the company and authorized it to withhold from the amount owed to him for renewal commissions, any amount the company claimed as reimbursement. He claims to have believed this procedure, a standard action within the industry, satisfied his obligation to the company. He was, therefore, quite surprised when the company complained and he immediately wrote a check to the company to cover the balance due it which is now paid in full. However, the evidence of record shows he was sent several notices of delinquency, even several for the balance after he authorized the company to take his earned commissions, without his taking any action and the company ultimately, on December 22, 1988, terminated his agency. His failure to pay over is found to be more negligent than willful, however. Mr. Best has been in the insurance business since 1979 and claims he has had no prior administrative complaints filed against him since that time. The Department showed none.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that Counts I and II of the Administrative Complaint relating to the Respondent, Michael Eugene Best, be dismissed; and that as to Count III, he pay an administrative fine of $500.00. It is further RECOMMENDED that Mr. Best's applications to represent World Insurance Company, Travellers Life Insurance Company, and American Integrity Insurance Company be denied, such denial to be without prejudice to re-filing of the applications at a later time to be set by the Department. RECOMMENDED this 15th day of February, 1990, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of February, 1990. APPENDIX TO RECOMMENDED ORDER The following constitutes my specific rulings pursuant to S 120.59(2), Florida Statutes, as to all of the Proposed Findings of Fact submitted in this case. FOR THE PETITIONER; 1. - 3. Accepted and incorporated herein. Accepted and incorporated herein. -10. Accepted and incorporated herein. 11.-14. Accepted and incorporated herein. 15.&16. Accepted and incorporated herein. 17. Accepted and incorporated herein, with the understanding that the failure to deal with American Sun Life was not due to any misconduct of Respondent but because of the Company's rejection of Ms. Clark. 18.-20. Rejected as not supported by the evidence. 21.-24. Accepted and incorporated herein. 25.-27. Rejected as not supported by the evidence. 28.-31. Accepted and incorporated herein. 32.&34. Accepted and incorporated herein. 35. Accepted and incorporated herein. COPIES FURNISHED: C. Christopher Anderson, III, Esquire Office of Legal Services Department of Insurance 412 Larson Building Tallahassee, Florida 32399-0300 Michael E. Sweeting, Esquire Pflaum, Dannheisser and Sweeting, P. A. 100 Wallace Avenue, Suite 210 Sarasota, Florida 34237 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue The issue to be resolved in this proceeding concerns whether the Petitioner Donna Danzis is a retired state employee and is entitled to reinstatement of her policy of State Life Insurance Plan.
Findings Of Fact The Petitioner was an employee of the Florida Department of Children and Family Services (DCF) through October 28, 2005. On October 28, 2005, she voluntarily terminated her employment. At the time she terminated employment she had been covered under the Plan. The Plan is made available to state employees and retirees through the DSGI, in accordance with Section 110.123, Florida Statutes (2006). The terms and conditions of employee participation in the plan are provided for in Florida Administrative Code Rule Chapter 60P-3. The Petitioner was a cancer patient at times pertinent hereto and that may have played a role in her decision to terminate her employment. In any event, her employment termination was voluntary and occurred during a time apparently when she was undergoing chemical therapy concerning her cancer issues. Prior to the time she terminated her employment on October 28, 2005, the Petitioner did not discuss her plans to retire with DCF Human Resources Personnel. She had, however, apparently applied for disability retirement, although that disability retirement status had not yet been determined or granted at the time she terminated her employment. After termination of employment, on or about November 24, 2005, the Petitioner contacted DCF personnel office and spoke with Mr. Harvey Whitesides. During that conversation, Mr. Whitesides determined that the Petitioner had had deductions from her paycheck to cover premiums for three types of insurance coverage: state health insurance, a group life insurance plan, as well as state security insurance. The later type of insurance is an optional supplemental life insurance that is not a part of the Plan. In that November 24, 2005, conversation with Mr. Whitesides, the Petitioner told him that she had terminated her employment with the state but did not inform him that she had applied for disability retirement. During their conversation she told Mr. Whitesides that she wanted refunds that she was entitled to from the state health insurance and group life insurance plans. Mr. Whitesides was supervisor of payroll for DCF and its predecessor agency from 1993 through 2002. In that position his duties included management of the benefit section and retirement operations within the DCF. While her performed his duties as supervisor he would commonly assist employees in their preparation of the forms necessary to affect retirement. Mr. Whitesides retired in 2003, but returned to DCF as an employee in March 2004. Beginning in June 2004, he assumed the duties of DCF personnel services specialist. In July 2005, his position and duties were transferred to the Agency for Persons With Disabilities. Since returning to state employment in March 2004, Mr. Whitesides duties have been substantially the same as those he performed from 1993 through 2002. These included the processing of benefits and retirement requests submitted by employees. In the course of performing those operations he has always assisted employees in the completion of the form required to apply for retirement. Since 1993, Mr. Whitesides has used a "continuation/termination form," for retiring employees who upon retirement wished to continue their state group life insurance. Beginning in March 2004 when he returned to state employment, Mr. Whitesides had access to and used that same continuation/termination form. He did not offer the form to the Petitioner during their conversation on November 24, 2004, however, because the Petitioner did not then inform him that she had applied for retirement. Mr. Whitesides did not learn that the Petitioner had applied for retirement until he received a letter from the Division of Retirement (DMS) dated December 14, 2005, which asked that the DCF provide information and data necessary to calculate Ms. Danzis retirement benefits. Mr. Whitesides provided the date requested by DMS, including the "Florida Retirement System Pension Plan Salary Certification." Prior to the receipt of the letter dated December 14, 2005, the Petitioner had not informed anyone in the DCF personnel office that she had applied for disability retirement. Florida Administrative Code Rule 60P-3.014 requires that an employee who retires and is covered under the life insurance plan must elect one of the following options: (1) submit a request to continue coverage during retirement accompanied by a personal check or money order for one full month's premium, which must be received by the employee's former agency and forwarded with the original application no later than 31 calendar days after the last day of employment; or (2) that the retiring employee must submit a request to terminate coverage under the life insurance plan no later than 31 calendar days after the employee's last day of employment. That rule goes on to provide that an employee who applies for disability retirement and has not received approval of that prior to his last day of employment but who is covered under the life insurance plan on that last day of employment has the option to continue coverage in the life plan pending such retirement disability approval or rejection by submitting a request to continue coverage in accordance with Florida Administrative Code Rule 60P-3.014(1)(a) and by paying the full premium for each month's coverage by personal check or money order to his or her former personnel office. Concerning employees or retirees off the payroll, if it is determined that none of the required contribution by the end of the coverage month the coverage will be cancelled and the retirees coverage will be terminated effective the first day of that month. A retired employee whose coverage is terminated in accordance with subsection (1) or (2) of Rule 60P-3.010 may not re-enter the Plan. The Petitioner did not submit a continuation/termination form within 31 days of the date of her termination of employment stating that she wished to continue her participation in the plan, and provide the other information required by Florida Administrative Code Rule 60P-3.014(1)(a). The Petitioner did not submit a month's premium for life insurance within 31 days after the last date of her employment. The only notice that Ms. Danzis gave, or attempted to give, was notice that she was voluntarily terminating her employment and that her last date of work would be October 28, 2005. Because she did not elect to continue her participation in the life insurance plan through the proper procedure and filing, the Agency canceled her life insurance, thus generating the subject dispute.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Management Services, Division of State Group Insurance determining that the Petitioner failed to properly elect to remain a covered retiree of the State Life Insurance Plan, and that the Petition be dismissed. DONE AND ENTERED this 4th day of April, 2007, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF 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 Clerk of the Division of Administrative Hearings this 4th day of April, 2007. COPIES FURNISHED: Donna Danzis 7744 State Road 100 Keystone Heights, Florida 32656 Sonja P. Mathews, Esquire Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 260 Tallahassee, Florid 32399-0950 Sarabeth Snuggs, Director Division of Retirement Department of Management Services Post Office Box 9000 Tallahassee, Florida 32315-9000 John Brenneis, General Counsel Division of Retirement Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
Findings Of Fact Petitioner is the state agency charged with licensing insurance agents of all types, regulating licensure status, and enforcing the practice standards of licensed agents within the powers granted by the Legislature in Chapter 626, Florida Statutes. At all times material to the disciplinary action, Respondent Mahle was licensed as an insurance agent in the following areas: Life and Health Insurance and Health Insurance. During the last quarter of the year 1988, New Concept Insurance, Inc. mailed brochures to residents of Naples, Florida, which stated that representatives of the company were willing to provide information about long- term care insurance, including nursing facility benefits, to interested parties. Those who wanted to learn more about the insurance were asked to return their name, address and telephone number to the company on an enclosed card. Eleanor Drown responded to the advertisement, and an appointment was arranged for Thomas DiBello and Respondent Mahle to meet with her regarding the insurance program. On November 10, 1988, Thomas DiBello and Respondent Mahle met with Ms. Drown and discussed the benefits of a long-term care policy with a nursing facility daily benefit of one hundred dollars ($100.00). After the discussion, Ms. Drown completed an application for the insurance and gave it to Respondent Mahle, along with a check for five thousand one hundred and eighty-three dollars and forty-nine cents ($5,183.49). During the insurance transaction on November 10, 1988, Ms. Drown was given a receipt which states: This receipt is given and accepted with the express understanding that the insurance you applied for will not be in force until the policy is issued and the first premium is paid in full. If your application cannot be approved, we will promptly refund your money. Application is made to the company checked (/) on this receipt. On another area of the receipt, it is clearly written, as follows: If Acknowledgement of Application does not reach you within 20 days, write to: Mutual Protective Insurance Company, 151 South 75th Street, Omaha, Nebraska 68124. The Respondent Mahle did not forward the application and the check completed by Ms. Drown to Mutual Protective Insurance Company. The check issued by Ms. Drown to Mutual Protective Insurance Company was deposited into the account of New Concept Insurance, Inc. A cashier's check for the same amount of money was issued by New Concept Insurance, Inc. to Ms. Drown on March 7, 1989. The letter from New Concept that was mailed with the check represented that the check was the refund of the money paid to Mutual Protective Insurance Company by Ms. Drown. Mitigation An application for long-term care insurance from a different insurance company was sent to Ms. Drown by Respondent Mahle on March 2, 1989. Although this course of conduct was not directly responsive to the duties owed by the Respondent to Mutual Protective Insurance Company or his customer, Ms. Drown, it does demonstrate a concern about the insurance needs requested by the customer. This conduct also reveals that there was no intention to convert the funds received to the Respondent's own use, and it explains some of the delay in the return of the premium funds to the customer. The Respondent has been an insurance agent for twenty years. This was the only complaint against the Respondent the Hearing Officer was made aware of during the proceedings. The allegations in the Complaint involve a single insurance transaction.
Recommendation Accordingly, it is RECOMMENDED: That the Respondent be found guilty of one violation of Section 626.561(1), Florida Statutes, and one violation of Section 626.611(7), Florida Statutes, during a single insurance transaction. That the Respondent pay an administrative penalty of $500.00 for the two violations of the Insurance Code within thirty days of the imposition of the penalty. That the Respondent be placed upon six month's probation. During this probation period, he should file a report with the Department demonstrating the manner in which he intends to keep accurate business records which assure him, the insurance company, and the customer that he is continuously accounting for premium funds and promptly carrying out his fiduciary responsibilities. That the Respondent's requests for licensure dated October 10, 1989 and May 18, 1990, be granted. DONE and ENTERED this 12th day of September, 1990, in Tallahassee, Leon County, Florida. VERONICA E. DONNELLY 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 12th day of September, 1990. APPENDIX TO RECOMMENDED ORDER IN CASE No. 89-6040 The Petitioner's proposed findings of fact are addressed as follows: Accepted. See HO #2. Accepted. See HO #2. Accepted. Accepted. See HO #5. Accepted. See HO #5. Accepted. See HO #5. Accepted. See HO #5. Rejected. Conclusion of Law. Rejected. See HO #6. Accepted. See HO #7. Accepted. See HO #7. Accepted. See HO #7. Accept that Ms. Drown's funds remained in the insurance agency's financial accounts for four months. Reject that the interest bearing ability of these funds is relevant in any manner to this case. Respondent's proposed findings of fact are addressed as follows: Accepted. See HO #3 and #4. Accepted. See HO #5. Accepted. See HO #5. Accepted. See HO #5. Accepted. Rejected. This testimony was rejected by the hearing officer as self serving. It was not found to be credible. Rejected for the same reasons given immediately above. Accepted, but not particularly probative. Rejected. Contrary to the testimony of Ms. Drown which was believed by the hearing officer. Accepted. Rejected. Contrary to the testimony of Ms. Drown which was believed by the hearing officer. Accept that an application for Penn Treaty Insurance was sent to Ms. Drown on this date. Accepted. Rejected. Contrary to the testimony of Ms. Drown which was believed by the hearing officer. Rejected. Self serving. Not believed or found to be credible by the hearing officer. Accepted. See HO #9. COPIES FURNISHED: C. Christopher Anderson III, Esquire Department of Insurance Division of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Mark P. Smith, Esquire GOLDBERG, GOLDSTEIN & BUCKLEY, P.A. 1515 Broadway Post Office Box 2366 Fort Myers, Florida 33902-2366 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell, Esquire Department of Insurance The Capitol, Plaza Level Tallahassee, Florida 32399-0300 =================================================================
